WEBVTT 00:00:00.000 --> 00:00:02.439 Welcome to the Deep Dives, where we tear through 00:00:02.439 --> 00:00:05.259 the research, the dense financial filings, and 00:00:05.259 --> 00:00:08.039 all that context to deliver the key insights 00:00:08.039 --> 00:00:10.580 straight to you. Our goal is to make sure you 00:00:10.580 --> 00:00:12.779 get a really deep understanding of complex topics. 00:00:13.390 --> 00:00:16.649 fast and today we are I think embarking on a 00:00:16.649 --> 00:00:18.969 really fascinating deep dive it's an area that 00:00:18.969 --> 00:00:20.989 is absolutely foundational to our future but 00:00:20.989 --> 00:00:23.489 is you know almost invisible to most people we're 00:00:23.489 --> 00:00:26.089 talking about the literal physical infrastructure 00:00:26.089 --> 00:00:29.649 that supports science and technology I mean if 00:00:29.649 --> 00:00:31.910 you think about any major breakthrough a new 00:00:31.910 --> 00:00:35.289 gene therapy AI hardware that discovery needed 00:00:35.289 --> 00:00:38.549 a home a very specialized home exactly we tend 00:00:38.549 --> 00:00:41.810 to think of innovation as this abstract thing 00:00:41.810 --> 00:00:43.710 that happens in the cloud or in someone's head. 00:00:43.829 --> 00:00:46.130 Yeah. But it's completely reliant on brick and 00:00:46.130 --> 00:00:47.929 mortar reality. And the company we're focusing 00:00:47.929 --> 00:00:50.210 on today basically provides that reality. That 00:00:50.210 --> 00:00:53.189 company is Alexandria Real Estate Equities Inc. 00:00:53.409 --> 00:00:56.390 or R. Now, when you hear real estate investment 00:00:56.390 --> 00:00:58.350 trust, your eyes might glaze over a little. You 00:00:58.350 --> 00:01:00.250 might just file it away as background noise. 00:01:00.549 --> 00:01:04.069 But this company is it's a whole different animal. 00:01:04.379 --> 00:01:06.959 It really is. So our mission today is to go way 00:01:06.959 --> 00:01:09.640 past that simple definition of a REIT and really 00:01:09.640 --> 00:01:12.200 examine how this company's highly specialized, 00:01:12.620 --> 00:01:16.640 deeply strategic investment model actually shapes 00:01:16.640 --> 00:01:19.219 the speed and direction of innovation itself. 00:01:19.480 --> 00:01:21.519 And the sources we're using for this dive give 00:01:21.519 --> 00:01:24.120 us a great overview. We're drawing on their 2024 00:01:24.120 --> 00:01:27.280 financials, a breakdown of their strategic locations, 00:01:27.659 --> 00:01:30.140 and a really fascinating look at who their tenants 00:01:30.140 --> 00:01:32.620 actually are. This is all about how physical 00:01:32.620 --> 00:01:35.760 strategy dictates scientific possibility. And 00:01:35.760 --> 00:01:38.719 here is the I think the most essential thing 00:01:38.719 --> 00:01:41.319 to grasp right from the start are. is not investing 00:01:41.319 --> 00:01:43.500 in, you know, your typical commercial real estate. 00:01:43.659 --> 00:01:45.859 They don't own strip malls or downtown office 00:01:45.859 --> 00:01:48.620 towers. No, not at all. Their portfolio is almost 00:01:48.620 --> 00:01:50.859 exclusively specialized office buildings and 00:01:50.859 --> 00:01:53.219 laboratories. These are high spec, incredibly 00:01:53.219 --> 00:01:55.640 complex facilities that are designed and leased 00:01:55.640 --> 00:01:57.980 for one purpose. For the life science and technology 00:01:57.980 --> 00:02:00.819 industries, they are, and this isn't an exaggeration, 00:02:00.879 --> 00:02:03.569 they are the landlords of modern discovery. It 00:02:03.569 --> 00:02:07.230 really forces you to redefine what critical infrastructure 00:02:07.230 --> 00:02:09.789 even means in the 21st century. We're used to 00:02:09.789 --> 00:02:12.050 thinking of, you know, power grids or bridges. 00:02:12.330 --> 00:02:14.729 Sure. But what about the secure, high capacity 00:02:14.729 --> 00:02:17.810 lab where a major discovery is made or where 00:02:17.810 --> 00:02:20.870 a billion dollar drug is developed? That physical 00:02:20.870 --> 00:02:24.229 space is, I would argue, just as critical to 00:02:24.229 --> 00:02:27.449 our future economic and public health. And their 00:02:27.449 --> 00:02:29.370 whole structure is built on understanding that. 00:02:29.530 --> 00:02:31.590 OK, so let's unpack this. Let's get right down 00:02:31.590 --> 00:02:34.569 to the foundation. What exactly is Alexandria 00:02:34.569 --> 00:02:38.349 Real Estate Equities, Inc.? How does its basic 00:02:38.349 --> 00:02:41.969 structure support this hyper -specialized mission? 00:02:42.210 --> 00:02:44.590 Well, at its financial core, Aravets operates 00:02:44.590 --> 00:02:47.490 as a real estate investment trust, a REIT. It's 00:02:47.490 --> 00:02:49.689 based in Pasadena, California. And for anyone 00:02:49.689 --> 00:02:51.689 who's a bit fuzzy on what a REIT is. It's basically 00:02:51.689 --> 00:02:54.210 a company that owns and often finances income 00:02:54.210 --> 00:02:56.569 producing real estate. The whole structure gives 00:02:56.569 --> 00:02:58.729 them certain tax advantages. But the main rule 00:02:58.729 --> 00:03:01.150 is they have to distribute most of their income, 00:03:01.370 --> 00:03:03.949 at least 90 percent to their shareholders as 00:03:03.949 --> 00:03:05.849 dividends. So it's designed for stable, predictable 00:03:05.849 --> 00:03:08.889 income? Exactly. Which is why they're so attractive 00:03:08.889 --> 00:03:10.930 to investors looking for that kind of dividend 00:03:10.930 --> 00:03:14.229 income. And R is a big one. It's publicly traded 00:03:14.229 --> 00:03:17.449 on NYSE. Ticker is R. And it's a component of 00:03:17.449 --> 00:03:20.069 the S &P 500. This is a very established, very 00:03:20.069 --> 00:03:22.669 large company. But why is that REIT structure, 00:03:22.990 --> 00:03:26.090 the one focused on dividends, so perfect for 00:03:26.090 --> 00:03:28.830 owning a portfolio of incredibly expensive labs? 00:03:29.409 --> 00:03:32.360 Why not just a normal corporation? It all comes 00:03:32.360 --> 00:03:34.599 down to the leases. The leases are everything 00:03:34.599 --> 00:03:36.900 in this space. I mean, think about it. Building 00:03:36.900 --> 00:03:39.539 a high containment biosafety level lab or installing 00:03:39.539 --> 00:03:42.580 floors that don't vibrate for sensitive microscopes. 00:03:42.639 --> 00:03:45.439 It's a huge upfront cost. A massive capital expenditure. 00:03:45.680 --> 00:03:47.699 So because of that cost and all the customization, 00:03:48.300 --> 00:03:50.500 life science leases are typically very, very 00:03:50.500 --> 00:03:53.599 long. We're talking 10, 15, sometimes 20 years. 00:03:53.759 --> 00:03:56.479 Oh, OK. And that long term, stable, predictable 00:03:56.479 --> 00:03:59.060 income stream is the perfect match for the REAP 00:03:59.060 --> 00:04:01.199 mandate. They get this reliable cash flow. that 00:04:01.199 --> 00:04:03.360 they can then distribute to investors. They don't 00:04:03.360 --> 00:04:05.360 have to worry about the constant churn you see 00:04:05.360 --> 00:04:07.360 in standard office space. And that stability 00:04:07.360 --> 00:04:09.740 comes from experience. They were founded back 00:04:09.740 --> 00:04:13.900 in January 1994. So as of 2025, that's what, 00:04:13.939 --> 00:04:17.160 31 years they've been in this very specific game? 00:04:17.300 --> 00:04:20.579 31 years. They've navigated economic booms, crashes, 00:04:20.819 --> 00:04:23.620 multiple biotech cycles. It really proves their 00:04:23.620 --> 00:04:25.899 investment thesis is durable. And that durability 00:04:25.899 --> 00:04:28.339 comes from that focus you mentioned. They are 00:04:28.339 --> 00:04:30.399 strictly in the business of office buildings 00:04:30.399 --> 00:04:33.160 and labs for life science and tech tenants. They're 00:04:33.160 --> 00:04:35.480 not dabbling in retail or anything else. No, 00:04:35.600 --> 00:04:38.259 it's a strategic concentration. Yeah. And it 00:04:38.259 --> 00:04:41.500 means their fate is, well, it's completely tied 00:04:41.500 --> 00:04:43.879 to the health and the funding of the life sciences 00:04:43.879 --> 00:04:46.420 sector. Now, here's a detail I found really interesting. 00:04:46.500 --> 00:04:48.720 It speaks to their whole philosophy. The company 00:04:48.720 --> 00:04:52.019 is named after Alexandria, Egypt. And that's 00:04:52.019 --> 00:04:54.579 not a random choice. Not at all. It's a powerful, 00:04:54.720 --> 00:04:57.000 very intentional name. It's meant to signal. 00:04:57.199 --> 00:05:00.519 a deep connection to not just history, but to 00:05:00.519 --> 00:05:02.560 historical intellectual achievement. You mean 00:05:02.560 --> 00:05:05.379 like the Library of Alexandria? Exactly. Ancient 00:05:05.379 --> 00:05:08.300 Alexandria was the undisputed scientific capital 00:05:08.300 --> 00:05:10.860 of the Hellenistic world. It was a hub for fundamental 00:05:10.860 --> 00:05:13.660 discovery in math, astronomy, and crucially in 00:05:13.660 --> 00:05:17.319 medicine. So by picking that name, they're signaling 00:05:17.319 --> 00:05:19.759 that they're not just collecting rent. They're 00:05:19.759 --> 00:05:22.639 trying to build a modern ecosystem for discovery 00:05:22.639 --> 00:05:26.519 to create that same kind of... Intellectual gravity. 00:05:26.779 --> 00:05:30.240 Precisely. They are branding themselves as the 00:05:30.240 --> 00:05:33.000 physical home for world -changing ideas. And 00:05:33.000 --> 00:05:35.339 this whole philosophy connects directly to their 00:05:35.339 --> 00:05:38.139 most important business strategy, the adjacency 00:05:38.139 --> 00:05:40.459 model. Or what we can call their location strategy. 00:05:40.600 --> 00:05:42.879 This is key. They don't just build labs anywhere. 00:05:43.160 --> 00:05:45.879 No. The core strategy, and it's very explicit 00:05:45.879 --> 00:05:48.720 in their materials, is locating properties immediately 00:05:48.720 --> 00:05:52.259 adjacent to or very near major world -class universities 00:05:52.259 --> 00:05:55.439 and research institutions. Why? To attract the 00:05:55.439 --> 00:05:57.620 best tenants. To attract the highest quality, 00:05:57.860 --> 00:06:00.879 research -focused tenants, yes. They are placing 00:06:00.879 --> 00:06:03.019 their infrastructure right next to the gravitational 00:06:03.019 --> 00:06:05.899 pull of academic talent and, very importantly, 00:06:06.180 --> 00:06:08.500 federal funding. So it's about more than just 00:06:08.500 --> 00:06:10.639 hiring interns from the university next door. 00:06:10.779 --> 00:06:13.300 Oh, much more. Universities provide the foundational 00:06:13.300 --> 00:06:16.079 research that fuels commercial innovation. They 00:06:16.079 --> 00:06:18.339 create a constant pipeline of new talent, and 00:06:18.339 --> 00:06:20.040 they're the starting point for so many spinoff 00:06:20.040 --> 00:06:22.500 companies. Right, the next big biotech startup 00:06:22.500 --> 00:06:24.819 could come right out of University Lab. And by 00:06:24.819 --> 00:06:28.399 locating right there, RE ensures their tenants 00:06:28.399 --> 00:06:31.120 have immediate access to all of it. The talent, 00:06:31.160 --> 00:06:33.620 the collaboration, sometimes even shared equipment. 00:06:33.720 --> 00:06:37.060 It's about maximizing efficiency and, you know, 00:06:37.079 --> 00:06:40.160 scientific serendipity. Let's talk a little more 00:06:40.160 --> 00:06:41.680 about the buildings themselves. You mentioned 00:06:41.680 --> 00:06:45.439 the high costs. What makes an RE lab so different 00:06:45.439 --> 00:06:48.060 from a standard office building? This is why 00:06:48.060 --> 00:06:50.600 we use the term critical infrastructure. We're 00:06:50.600 --> 00:06:52.459 talking about technical specs that you would 00:06:52.459 --> 00:06:55.240 just never find in a normal building for instance 00:06:55.240 --> 00:06:59.470 air handling The HVAC systems are enormous and 00:06:59.470 --> 00:07:02.310 complex, designed for specific biosafety levels. 00:07:02.550 --> 00:07:05.149 To prevent contamination. Exactly. They might 00:07:05.149 --> 00:07:08.189 require 10, 15, or even more air changes per 00:07:08.189 --> 00:07:11.250 hour. That requires huge mechanical floors and 00:07:11.250 --> 00:07:13.569 specialized duct work that costs a fortune. And 00:07:13.569 --> 00:07:15.750 the physical structure itself. Vibration control 00:07:15.750 --> 00:07:18.509 is a huge one. If you're using a super -sensitive 00:07:18.509 --> 00:07:21.089 electron microscope, a truck driving by outside 00:07:21.089 --> 00:07:23.310 could ruin your experiment. I never would have 00:07:23.310 --> 00:07:25.569 thought of that. So Ari builds these heavy - 00:07:25.800 --> 00:07:28.720 reinforced concrete structures with specialized 00:07:28.720 --> 00:07:32.480 floor plates to dampen any vibration. And then 00:07:32.480 --> 00:07:34.959 there's power. They need high -redundancy power 00:07:34.959 --> 00:07:37.879 systems, backup generators, secondary feeds. 00:07:38.220 --> 00:07:41.100 Losing power for an hour could destroy millions 00:07:41.100 --> 00:07:43.399 of dollars of research. So a standard office 00:07:43.399 --> 00:07:45.540 building just can't be converted easily. Not 00:07:45.540 --> 00:07:47.939 even close, which is why RE's properties are 00:07:47.939 --> 00:07:50.740 so essential and so expensive. And we can see 00:07:50.740 --> 00:07:52.980 this strategy perfectly in their flagship properties. 00:07:53.199 --> 00:07:56.339 The scale is just... Staggering. In Manhattan, 00:07:56.500 --> 00:07:58.379 they have the Alexandria Center for Life Science. 00:07:58.459 --> 00:08:02.199 It's, what, over 740 ,000 square feet? A massive 00:08:02.199 --> 00:08:04.480 scientific hub right in the middle of one of 00:08:04.480 --> 00:08:06.379 the most expensive real estate markets in the 00:08:06.379 --> 00:08:08.519 world. And it's right next to institutions like 00:08:08.519 --> 00:08:11.579 NYU Langone and Rockefeller University. But that's 00:08:11.579 --> 00:08:13.680 almost small compared to their presence in Boston. 00:08:13.800 --> 00:08:16.279 Oh, yeah. Greater Boston, specifically Cambridge, 00:08:16.540 --> 00:08:19.610 is the global epicenter for biotech. There, they 00:08:19.610 --> 00:08:21.589 own the Alexandria Center at Kendall Square, 00:08:21.790 --> 00:08:24.430 which is an enormous 2 .3 million square feet. 00:08:24.529 --> 00:08:27.170 2 .3 million. It's basically an innovation city 00:08:27.170 --> 00:08:29.730 within a city sitting right next to MIT. And 00:08:29.730 --> 00:08:32.029 that's not all. They also own Technology Square 00:08:32.029 --> 00:08:34.990 nearby in Cambridge, another huge asset at almost 00:08:34.990 --> 00:08:37.950 1 .2 million square feet. Right. So when you 00:08:37.950 --> 00:08:41.029 add those up, you realize RR isn't just a landlord 00:08:41.029 --> 00:08:43.690 in these areas. They are a foundational piece 00:08:43.690 --> 00:08:46.129 of the physical landscape of American science. 00:08:46.370 --> 00:08:48.509 And their involvement goes even deeper than just 00:08:48.509 --> 00:08:50.629 the buildings. They have a venture capital arm. 00:08:50.769 --> 00:08:53.490 Yes. Alexandria Venture Investments. This is 00:08:53.490 --> 00:08:56.610 a key detail that moves them way beyond being 00:08:56.610 --> 00:08:59.590 a simple landlord. They invest directly in these 00:08:59.590 --> 00:09:01.870 emerging life sciences firms. It's a brilliant 00:09:01.870 --> 00:09:05.850 strategic move. It creates this circular economy. 00:09:06.169 --> 00:09:09.509 By investing directly, they get equity in a company 00:09:09.509 --> 00:09:12.899 that, if it succeeds, will eventually need. Huge 00:09:12.899 --> 00:09:14.840 amounts of lab space. They're funding their own 00:09:14.840 --> 00:09:16.480 future tenants. They're funding their future 00:09:16.480 --> 00:09:19.480 tenants. A small biotech gets seed money from 00:09:19.480 --> 00:09:21.419 them. It moves through clinical trials. It needs 00:09:21.419 --> 00:09:23.179 to expand. Who are they going to lease from? 00:09:23.379 --> 00:09:25.960 It's an established relationship. It's an internal 00:09:25.960 --> 00:09:28.940 pipeline that minimizes their own leasing risk. 00:09:29.279 --> 00:09:32.360 But that specialized focus, as smart as it is, 00:09:32.460 --> 00:09:35.159 it must come with a major risk. And the company 00:09:35.159 --> 00:09:38.039 is pretty open about this. They are. Their critical 00:09:38.039 --> 00:09:41.669 dependency stems directly from this niche. The 00:09:41.669 --> 00:09:44.889 company is highly, highly dependent on the overall 00:09:44.889 --> 00:09:47.789 stability and, crucially, the funding environment 00:09:47.789 --> 00:09:50.409 of the life sciences industry. So if venture 00:09:50.409 --> 00:09:53.029 capital dries up or if the FDA starts rejecting 00:09:53.029 --> 00:09:55.809 a bunch of new drugs. Their tenant base suffers. 00:09:55.909 --> 00:09:58.590 Their ability to raise rents suffers. It's a 00:09:58.590 --> 00:10:01.210 direct impact. And it's even more specific than 00:10:01.210 --> 00:10:03.509 that. Because they're located near these big 00:10:03.509 --> 00:10:06.809 universities, they're dependent on funding for 00:10:06.809 --> 00:10:09.129 research from the United States government. This 00:10:09.129 --> 00:10:11.259 is where politics and property. really intersect. 00:10:11.460 --> 00:10:13.620 That's the crux of it. When we say federal funding, 00:10:13.740 --> 00:10:16.120 we're mostly talking about the budget for organizations 00:10:16.120 --> 00:10:18.779 like the National Institutes of Health, the NIH. 00:10:19.059 --> 00:10:22.039 NIH grants are the lifeblood of academic research. 00:10:22.259 --> 00:10:24.480 That research gets licensed to commercial tenants, 00:10:24.559 --> 00:10:26.759 and it also directly funds a lot of government 00:10:26.759 --> 00:10:29.980 adjacent research. So if a political shift leads 00:10:29.980 --> 00:10:32.539 to major cuts in the federal research budget, 00:10:32.740 --> 00:10:35.139 it directly impacts the financial stability of 00:10:35.139 --> 00:10:37.460 their tenants. Many of their tenants and even 00:10:37.460 --> 00:10:40.000 the government itself. It connects the financial 00:10:40.000 --> 00:10:43.100 success of this massive real estate company directly 00:10:43.100 --> 00:10:46.360 to the at times volatile political decisions 00:10:46.360 --> 00:10:49.580 made in Washington. It's a tangible sign of how 00:10:49.580 --> 00:10:51.539 intertwined private scientific infrastructure 00:10:51.539 --> 00:10:54.120 is with public funding. So let's shift to the 00:10:54.120 --> 00:10:55.919 sheer scale of this operation, the geographic 00:10:55.919 --> 00:10:58.419 footprint. The numbers here are just they're 00:10:58.419 --> 00:11:02.860 massive. As of the end of 2024. are owned or 00:11:02.860 --> 00:11:05.740 had investments in 391 properties containing 00:11:05.740 --> 00:11:10.519 a total of 44 .1 million square feet 44 million. 00:11:10.639 --> 00:11:12.399 Can you put that in perspective for us? Well, 00:11:12.419 --> 00:11:15.840 44 million square feet is roughly the equivalent 00:11:15.840 --> 00:11:18.159 of nine Empire State Buildings. But instead of 00:11:18.159 --> 00:11:20.299 offices, it's all spread out across these highly 00:11:20.299 --> 00:11:23.019 specialized, technologically complex labs. And 00:11:23.019 --> 00:11:25.720 while they don't chase the sheer size of, say, 00:11:25.759 --> 00:11:28.820 a massive industrial REIT, they absolutely dominate 00:11:28.820 --> 00:11:30.679 their niche. And if you look at the location 00:11:30.679 --> 00:11:33.600 data, it's clear they are executing a very deliberate 00:11:33.600 --> 00:11:35.559 strategy. You can see where the R &D capital 00:11:35.559 --> 00:11:38.279 is flowing. Exactly. It's not a scattered portfolio. 00:11:38.500 --> 00:11:41.000 It's highly, highly concentrated. And looking 00:11:41.000 --> 00:11:43.779 at their top 10 revenue markets really tells 00:11:43.779 --> 00:11:46.899 the story of where the center of gravity is in 00:11:46.899 --> 00:11:49.360 the life sciences world today. Let's do that 00:11:49.360 --> 00:11:51.899 because the dominance of the top three is really 00:11:51.899 --> 00:11:53.899 the headline here. It absolutely is. They function 00:11:53.899 --> 00:11:56.179 as the central nervous system of the entire company. 00:11:56.379 --> 00:11:58.759 So number one, Greater Boston, which of course 00:11:58.759 --> 00:12:01.379 includes Cambridge, that accounts for a colossal 00:12:01.379 --> 00:12:05.940 36 % of their 2024 revenue. 36 % Boston, anchored 00:12:05.940 --> 00:12:08.500 by MIT, Harvard, all the big teaching hospitals. 00:12:09.500 --> 00:12:13.259 It's just unmatched globally for biotech density. 00:12:13.620 --> 00:12:16.480 For RE to have over a third of its revenue coming 00:12:16.480 --> 00:12:18.980 from that one regional cluster that shows you 00:12:18.980 --> 00:12:20.740 everything about their conviction. It's their 00:12:20.740 --> 00:12:23.200 most critical bet. By far. It has the highest 00:12:23.200 --> 00:12:25.840 barrier to entry, the most expensive labor, and 00:12:25.840 --> 00:12:28.419 the highest concentration of R &D funding. Okay, 00:12:28.480 --> 00:12:30.340 then coming in second is the San Francisco Bay 00:12:30.340 --> 00:12:33.019 Area. That makes up 21 % of their revenue. Right. 00:12:33.139 --> 00:12:35.480 And the Bay Area brings in that crucial crossover 00:12:35.480 --> 00:12:38.279 with technology. It's where traditional biotech 00:12:38.279 --> 00:12:40.740 meets the immense capital and computing power 00:12:40.740 --> 00:12:44.159 of Silicon Valley. So a different flavor of research. 00:12:44.440 --> 00:12:46.840 A slightly different flavor. You see more computational 00:12:46.840 --> 00:12:50.440 biology, genomics, and a lot of AI -driven drug 00:12:50.440 --> 00:12:53.000 discovery there. It's a perfect complement to 00:12:53.000 --> 00:12:55.899 Boston's more traditional pharmaceutical heritage. 00:12:56.240 --> 00:12:58.519 And number three on the list is San Diego, counting 00:12:58.519 --> 00:13:02.279 for 16%. San Diego has always been a really strong, 00:13:02.419 --> 00:13:05.539 specialized hub. It's particularly known for 00:13:05.539 --> 00:13:08.720 genomics, diagnostics, medical devices. It's 00:13:08.720 --> 00:13:10.940 all clustered around institutions like UC San 00:13:10.940 --> 00:13:13.840 Diego and the Salk Institute. It gives them that 00:13:13.840 --> 00:13:16.360 third critical anchor on the West Coast. So if 00:13:16.360 --> 00:13:18.320 you just do the quick math, Boston, the Bay Area, 00:13:18.399 --> 00:13:21.279 and San Diego, those three markets alone account 00:13:21.279 --> 00:13:25.759 for a massive 73 % of ARE's total revenue. 73 00:13:25.759 --> 00:13:28.100 percent. That is an enormous concentration. It's 00:13:28.100 --> 00:13:30.279 the whole strategy in one number. It is. It's 00:13:30.279 --> 00:13:33.480 a calculated high conviction bet. They are saying 00:13:33.480 --> 00:13:35.460 we will put our incredibly expensive infrastructure 00:13:35.460 --> 00:13:38.220 exactly where the top talent and the top institutions 00:13:38.220 --> 00:13:40.960 already are. They are not speculating on what 00:13:40.960 --> 00:13:43.179 the next hub might be. They are doubling down 00:13:43.179 --> 00:13:45.220 on the current ones. But I have to ask, isn't 00:13:45.220 --> 00:13:47.799 that a huge vulnerability to have almost three 00:13:47.799 --> 00:13:50.820 quarters of your income tied to just three hyper 00:13:50.820 --> 00:13:53.809 expensive coastal regions? What about concentration 00:13:53.809 --> 00:13:57.289 risk? That is the essential challenge to the 00:13:57.289 --> 00:14:00.049 model. And the risks are real. I mean, geographically, 00:14:00.049 --> 00:14:02.990 you have environmental risks. Think about coastal 00:14:02.990 --> 00:14:05.750 flooding in Boston or seismic risk in California 00:14:05.750 --> 00:14:08.710 affecting these incredibly sensitive labs. And 00:14:08.710 --> 00:14:12.240 economically. They are highly exposed to wage 00:14:12.240 --> 00:14:15.000 inflation and labor costs. When the cost of living 00:14:15.000 --> 00:14:17.600 skyrockets in San Francisco, it drives up operating 00:14:17.600 --> 00:14:19.820 expenses for every single one of their tenants, 00:14:20.080 --> 00:14:22.200 which can put pressure on them. And what about 00:14:22.200 --> 00:14:24.259 the political side? They're reliant on the regulatory 00:14:24.259 --> 00:14:26.740 environments in California, Massachusetts. Absolutely. 00:14:27.100 --> 00:14:29.659 Those states tend to have stricter labor laws, 00:14:29.860 --> 00:14:32.940 more complex permitting processes than, say, 00:14:33.100 --> 00:14:34.940 a newer market in the middle of the country. 00:14:35.139 --> 00:14:37.100 So what's the bet they're making? The bet is 00:14:37.100 --> 00:14:39.500 that the intellectual gravitational pull of MIT, 00:14:39.919 --> 00:14:43.779 Harvard and Stanford is so powerful that no amount 00:14:43.779 --> 00:14:46.559 of increased cost or regulation will make a major 00:14:46.559 --> 00:14:49.720 pharmaceutical company leave. They are betting 00:14:49.720 --> 00:14:52.320 that the need for collaboration and talent outweighs 00:14:52.320 --> 00:14:54.559 the economic benefits of moving somewhere cheaper. 00:14:54.799 --> 00:14:57.139 OK, so let's look at the other markets. The remaining 00:14:57.139 --> 00:15:00.840 27%. Where is that distributed? Right. So after 00:15:00.840 --> 00:15:03.740 the big three, we see Maryland coming in at 7%. 00:15:03.740 --> 00:15:06.299 And that's vital because of its proximity to 00:15:06.299 --> 00:15:08.139 Washington, D .C. And all the federal research 00:15:08.139 --> 00:15:10.700 institutions. Not just the NIH, which provides 00:15:10.700 --> 00:15:13.399 the grants, but also the FDA, the Food and Drug 00:15:13.399 --> 00:15:15.799 Administration. Being close to the regulators 00:15:15.799 --> 00:15:18.159 is crucial for many of these companies. Then 00:15:18.159 --> 00:15:19.980 we have the Research Triangle in North Carolina, 00:15:20.220 --> 00:15:22.879 which accounts for 6%. Another major academic 00:15:22.879 --> 00:15:26.139 cluster anchored by Duke, UNC, and NC State. 00:15:26.340 --> 00:15:28.940 A very well -established hub. Seattle is next 00:15:28.940 --> 00:15:31.820 at 5%. Seattle is a bit like the Bay Area. It 00:15:31.820 --> 00:15:34.240 benefits from that strong tech sector crossover, 00:15:34.440 --> 00:15:37.039 and it has a well -established biomedical research 00:15:37.039 --> 00:15:40.559 scene, often focused on global health and immunology. 00:15:40.779 --> 00:15:43.299 New York City is on the list, but it only accounts 00:15:43.299 --> 00:15:46.080 for 4 % overall. This is surprising given that 00:15:46.080 --> 00:15:48.720 huge property we talked about. It really underscores 00:15:48.720 --> 00:15:51.440 how competitive and difficult that market is. 00:15:51.580 --> 00:15:54.600 It's growing fast as a life science hub, but 00:15:54.600 --> 00:15:56.980 converting a traditional Manhattan skyscraper 00:15:56.980 --> 00:16:00.139 into a high spec lab is incredibly complex and 00:16:00.139 --> 00:16:02.679 expensive. So it just hasn't reached the volume 00:16:02.679 --> 00:16:05.379 of Boston or San Francisco yet. And to round 00:16:05.379 --> 00:16:08.720 it out, Texas is at 2 percent, Canada at 1 percent 00:16:08.720 --> 00:16:11.500 and then other at 1 percent. Right. So this heavy 00:16:11.500 --> 00:16:13.440 concentration, it's almost like it creates a 00:16:13.440 --> 00:16:16.519 self -fulfilling prophecy for innovation. That's 00:16:16.519 --> 00:16:18.429 a great way. to put it. By concentrating all 00:16:18.429 --> 00:16:20.389 this specialized infrastructure in these places, 00:16:20.549 --> 00:16:23.990 AR is actively making them stickier, more dominant. 00:16:24.190 --> 00:16:26.330 It creates a network effect. More labs attract 00:16:26.330 --> 00:16:28.889 more talent, which attracts more venture capital. 00:16:29.009 --> 00:16:31.409 Which solidifies the dominance of those top three 00:16:31.409 --> 00:16:34.429 markets. They are physically cementing the current 00:16:34.429 --> 00:16:37.350 hierarchy of R &D, and that makes it much harder 00:16:37.350 --> 00:16:39.950 for other regions to emerge as serious competitors 00:16:39.950 --> 00:16:42.009 because they just don't have that critical mass 00:16:42.009 --> 00:16:44.830 of infrastructure. Okay, let's move on to the 00:16:44.830 --> 00:16:47.519 tenant ecosystem. This is where we stop talking 00:16:47.519 --> 00:16:49.259 about square footage and start talking about 00:16:49.259 --> 00:16:52.100 the actual companies and institutions driving 00:16:52.100 --> 00:16:55.200 the science inside these buildings. Looking at 00:16:55.200 --> 00:16:58.379 the list of their largest tenants is like a real 00:16:58.379 --> 00:17:01.700 -time snapshot of the global life science landscape. 00:17:02.110 --> 00:17:03.809 It really is. And it brings up this important 00:17:03.809 --> 00:17:06.410 question of stability versus disruption. What 00:17:06.410 --> 00:17:09.130 stands out immediately is the strategic balance 00:17:09.130 --> 00:17:11.569 Ari has created. You have these massive established 00:17:11.569 --> 00:17:14.029 pharma companies providing a financial bedrock. 00:17:14.029 --> 00:17:16.250 All right. And they're mixed perfectly with the 00:17:16.250 --> 00:17:18.569 cutting edge, high growth biotech firms. And 00:17:18.569 --> 00:17:21.069 then you have this interesting presence of government 00:17:21.069 --> 00:17:24.309 and pure tech giants. Let's go through the top 00:17:24.309 --> 00:17:27.049 10 ranked by their percentage of 2024 revenue. 00:17:27.269 --> 00:17:29.049 It really shows that mix you're talking about. 00:17:29.289 --> 00:17:31.529 So tied for the number one spot, each accounting 00:17:31.529 --> 00:17:34.869 for 4 .3 % of revenue, are Eli Lilly and Company 00:17:34.869 --> 00:17:37.829 and Moderna. That pairing right there is a perfect 00:17:37.829 --> 00:17:39.809 metaphor for the whole sector. On one hand, you 00:17:39.809 --> 00:17:42.109 have Eli Lilly, a century -old pharma titan. 00:17:42.109 --> 00:17:45.069 They represent stability, scale, long -term R 00:17:45.069 --> 00:17:47.160 &D. And then on the other hand, you have Moderna, 00:17:47.279 --> 00:17:50.279 the disruptive biotech star famous for its mRNA 00:17:50.279 --> 00:17:52.859 platform and its ability to move incredibly fast. 00:17:53.140 --> 00:17:55.960 They represent the high growth, high value future 00:17:55.960 --> 00:17:58.680 of biotech. So just those two, Lilly and Moderna, 00:17:58.799 --> 00:18:02.099 account for 8 .6 % of Aries revenue. They're 00:18:02.099 --> 00:18:04.720 the dual financial anchors. They absolutely are. 00:18:04.799 --> 00:18:07.059 And then right behind them, you see other major 00:18:07.059 --> 00:18:09.539 pharmaceutical players. You have Bristol -Myers 00:18:09.539 --> 00:18:13.920 Squibb at 3 .7%, then Taquita at 2 .3%, and Roche 00:18:13.920 --> 00:18:16.859 at 1 .8%. That's the core of the global pharmaceutical 00:18:16.859 --> 00:18:19.380 industry right there. That's the bedrock. These 00:18:19.380 --> 00:18:21.980 are companies with massive balance sheets, multi 00:18:21.980 --> 00:18:24.680 -year pipelines, and an absolute non -negotiable 00:18:24.680 --> 00:18:27.680 need for secure long -term lab leases. They provide 00:18:27.680 --> 00:18:29.880 the financial security blanket for Aerie's entire 00:18:29.880 --> 00:18:32.720 operation. Even if a dozen smaller companies 00:18:32.720 --> 00:18:35.339 fail, these high -credit tenants ensure the revenue 00:18:35.339 --> 00:18:37.799 stream stays incredibly stable. We also see some 00:18:37.799 --> 00:18:40.200 key specialized firms on the list. Illumina Inc. 00:18:40.400 --> 00:18:44.109 at 1 .7 % and 2 .7 % and Bio at 1 .6%. And those 00:18:44.109 --> 00:18:46.049 are important. Illumina is foundational. They 00:18:46.049 --> 00:18:48.589 make the gene sequencing technology that basically 00:18:48.589 --> 00:18:51.190 everyone else on that list uses. Their equipment 00:18:51.190 --> 00:18:53.630 is highly sensitive, so they need that specialized, 00:18:53.730 --> 00:18:56.970 controlled space. And 270Bio? They're focused 00:18:56.970 --> 00:18:59.609 on cell therapy. That means they're literally 00:18:59.609 --> 00:19:02.990 working with living cells. That requires incredibly 00:19:02.990 --> 00:19:06.190 complex, regulated, high containment facilities. 00:19:06.450 --> 00:19:08.990 It's a perfect example of a tenant that absolutely 00:19:08.990 --> 00:19:11.769 needs the kind of customized infrastructure that 00:19:11.769 --> 00:19:13.730 Archie provides. But the list gets really interesting 00:19:13.730 --> 00:19:15.789 when we get to the tech crossover and the government 00:19:15.789 --> 00:19:19.029 presence. Alphabet Inc., Google's parent company, 00:19:19.130 --> 00:19:23.049 is on here. 1 .7 % of revenue. This is a critical 00:19:23.049 --> 00:19:25.210 point. It's a clear sign of the convergence between 00:19:25.210 --> 00:19:28.140 traditional science and computing. Big tech firms 00:19:28.140 --> 00:19:30.799 are way past just providing cloud services to 00:19:30.799 --> 00:19:32.660 biotech. They're doing their own research. They're 00:19:32.660 --> 00:19:35.400 actively engaging in biomedical research, offering 00:19:35.400 --> 00:19:37.759 through subsidiaries focused on longevity or 00:19:37.759 --> 00:19:41.380 diagnostics or AI -driven drug design. And when 00:19:41.380 --> 00:19:43.799 Alphabet needs a sophisticated wet lab, they 00:19:43.799 --> 00:19:46.200 go to the market leader. It's a huge validation 00:19:46.200 --> 00:19:48.740 of our position. We also have cloud software 00:19:48.740 --> 00:19:52.430 group at 1 .4%. Which signals that even the software 00:19:52.430 --> 00:19:54.609 infrastructure providers need to be physically 00:19:54.609 --> 00:19:57.309 close to their clients in the biotech sector. 00:19:57.390 --> 00:20:00.230 They need to be part of that ecosystem. And then 00:20:00.230 --> 00:20:01.829 we come back to that point about dependency. 00:20:02.029 --> 00:20:04.450 But now we see it quantified. The United States 00:20:04.450 --> 00:20:08.289 government is listed as a major tenant, 1 .4 00:20:08.289 --> 00:20:11.130 percent of 2024 revenue. This is such a crucial 00:20:11.130 --> 00:20:13.509 detail. It's not just that federal funding affects 00:20:13.509 --> 00:20:15.930 their other tenants. The government itself is 00:20:15.930 --> 00:20:18.569 one of their biggest customers. So what kind 00:20:18.569 --> 00:20:21.490 of space is the government leasing from a private 00:20:21.490 --> 00:20:24.089 REIT? Generally, these are things like satellite 00:20:24.089 --> 00:20:26.829 research centers or specialized administrative 00:20:26.829 --> 00:20:30.509 offices for agencies like the NIH, the CDC, or 00:20:30.509 --> 00:20:32.230 even research units for the Department of Defense. 00:20:32.809 --> 00:20:35.890 They lease this space in Boston or San Diego 00:20:35.890 --> 00:20:37.930 for the exact same reason commercial companies 00:20:37.930 --> 00:20:40.089 do. They want their own researchers to be close 00:20:40.089 --> 00:20:41.910 to the academic partners and the private sector 00:20:41.910 --> 00:20:44.740 talent. Exactly. So R is effectively providing 00:20:44.740 --> 00:20:47.079 the infrastructure for federal research to be 00:20:47.079 --> 00:20:49.680 carried out in these premier locations. It makes 00:20:49.680 --> 00:20:52.220 them an indispensable part of the public research 00:20:52.220 --> 00:20:55.019 apparatus. And I have to imagine that having 00:20:55.019 --> 00:20:57.180 the U .S. government as a tenant, even for just 00:20:57.180 --> 00:21:00.319 1 .4%, provides enormous financial stability. 00:21:00.619 --> 00:21:02.960 Oh, absolutely. The U .S. government is considered 00:21:02.960 --> 00:21:06.279 the gold standard of credit risk. A lease signed 00:21:06.279 --> 00:21:08.319 by the government is long term, it's secure, 00:21:08.539 --> 00:21:11.380 and the risk of default is basically zero. It 00:21:11.380 --> 00:21:13.720 stabilizes their whole debt profile and helps 00:21:13.720 --> 00:21:16.119 them get financing at better rates. It's a very, 00:21:16.160 --> 00:21:18.579 very smart partnership for RE. So when you look 00:21:18.579 --> 00:21:21.440 at the whole mix, that strategy of having the 00:21:21.440 --> 00:21:24.029 big, stable... pharma companies alongside the 00:21:24.029 --> 00:21:27.109 disruptive biotech firms seems fundamental. It's 00:21:27.109 --> 00:21:29.089 the key takeaway. They have the bedrock from 00:21:29.089 --> 00:21:31.630 companies like Lilly and Bristol -Myers Squibb, 00:21:31.630 --> 00:21:34.269 which minimizes their risk. But then they have 00:21:34.269 --> 00:21:36.930 the exposure to massive growth from firms like 00:21:36.930 --> 00:21:39.349 Moderna. It ensures their revenue is resilient 00:21:39.349 --> 00:21:41.490 no matter what stage of the drug discovery lifecycle 00:21:41.490 --> 00:21:43.940 is currently in favor. All right. Let's pivot 00:21:43.940 --> 00:21:46.099 to the company's origins. Understanding the history 00:21:46.099 --> 00:21:47.859 really helps you appreciate the vision it took 00:21:47.859 --> 00:21:50.200 to create this specialized niche. What, over 00:21:50.200 --> 00:21:52.759 30 years ago now? This is not an obvious market 00:21:52.759 --> 00:21:56.380 back in the early 90s. Not at all. The origin 00:21:56.380 --> 00:21:59.380 story is one of incredible foresight. The idea 00:21:59.380 --> 00:22:02.839 was actually born in 1993, which was really early 00:22:02.839 --> 00:22:06.380 to commit an entire company solely to biotech 00:22:06.380 --> 00:22:08.420 infrastructure. And it started with a business 00:22:08.420 --> 00:22:10.539 plan. It started with a business plan titled 00:22:10.539 --> 00:22:14.500 Bioproperties Management Group, Inc. It was written 00:22:14.500 --> 00:22:17.380 by a man named Kendall R. Lang. And the plan 00:22:17.380 --> 00:22:20.359 was specific from day one. Highly specific. The 00:22:20.359 --> 00:22:22.779 goal was to form a real estate investment trust 00:22:22.779 --> 00:22:25.660 dedicated solely to funding and managing biotech 00:22:25.660 --> 00:22:29.059 properties. Lang really saw the coming wave of 00:22:29.059 --> 00:22:31.619 specialization in research long before the big 00:22:31.619 --> 00:22:33.940 boom hit. So he had the idea and the initial 00:22:33.940 --> 00:22:36.220 team. Right. The initial management team was 00:22:36.220 --> 00:22:38.740 supposed to be Lang, Alan Gold, Gary Kreitzer, 00:22:38.839 --> 00:22:40.960 and Stephen Stone. They were the industry pioneers 00:22:40.960 --> 00:22:43.319 who understood what these early biotech firms 00:22:43.319 --> 00:22:45.259 actually needed in a building. But, you know, 00:22:45.259 --> 00:22:46.740 they needed capital. And that's where Jacobs 00:22:46.740 --> 00:22:49.359 Engineering Group comes in. Exactly. The plan 00:22:49.359 --> 00:22:51.599 was presented to Jerry M. Sadarsky, who was a 00:22:51.599 --> 00:22:54.680 partner at Jacobs, a huge engineering firm. And 00:22:54.680 --> 00:22:57.359 Jacobs provided that crucial initial investment, 00:22:57.680 --> 00:23:00.099 $5 million, to get the venture off the ground. 00:23:00.480 --> 00:23:03.220 And with that investment came Joel S. Marcus. 00:23:03.440 --> 00:23:05.900 Yes. To protect their investment and oversee 00:23:05.900 --> 00:23:08.119 the management team, Jacobs brought in Joel Marcus. 00:23:08.380 --> 00:23:10.920 He was a lawyer and a CPA with deep experience 00:23:10.920 --> 00:23:13.700 in finance and corporate structuring. He was 00:23:13.700 --> 00:23:16.279 there to represent Jacobs' interests, and ultimately, 00:23:16.440 --> 00:23:19.259 he became the foundational executive. So the 00:23:19.259 --> 00:23:21.730 official founders... are listed as Joel Marcus 00:23:21.730 --> 00:23:24.430 and Jerry Sudarsky. It's that classic combination 00:23:24.430 --> 00:23:28.509 of industry vision, corporate backing and executive 00:23:28.509 --> 00:23:30.849 leadership. That's the perfect summary. You have 00:23:30.849 --> 00:23:32.990 Lang's team with the on the ground expertise, 00:23:33.410 --> 00:23:36.029 Sudarsky and Jacobs with the capital and Marcus 00:23:36.029 --> 00:23:38.369 with the financial and legal leadership to actually 00:23:38.369 --> 00:23:41.609 structure this complex new type of REIT. And 00:23:41.609 --> 00:23:43.069 they got to work right away. The first purchase 00:23:43.069 --> 00:23:45.880 was in San Diego. It was four buildings in that 00:23:45.880 --> 00:23:48.579 key hub of San Diego. And the sources note that 00:23:48.579 --> 00:23:50.900 deal was specifically negotiated and structured 00:23:50.900 --> 00:23:53.819 by Kendall Lang. So they put that core strategy 00:23:53.819 --> 00:23:56.400 go to a proven biotech cluster into practice 00:23:56.400 --> 00:23:58.680 from day one. That initial foundation set the 00:23:58.680 --> 00:24:01.559 stage for really rapid growth. By 1997, they 00:24:01.559 --> 00:24:04.119 went public. They did. They had an initial public 00:24:04.119 --> 00:24:08.839 offering, an IPO, and raised $155 million. And 00:24:08.839 --> 00:24:11.140 that IPO was really the inflection point. It 00:24:11.140 --> 00:24:13.000 gave them the capital they needed to scale up. 00:24:13.079 --> 00:24:15.799 It gave them access to the huge pools of public 00:24:15.799 --> 00:24:18.099 equity they needed to fund that aggressive expansion 00:24:18.099 --> 00:24:21.339 into Boston and San Francisco. Without that capital, 00:24:21.519 --> 00:24:23.460 they never could have built the dominant position 00:24:23.460 --> 00:24:25.779 that we see today. So let's fast forward to today. 00:24:26.039 --> 00:24:28.180 Let's look at the financial snapshot from the 00:24:28.180 --> 00:24:31.920 2024 data to really grasp. the modern scale of 00:24:31.920 --> 00:24:34.259 this operation. These numbers really define the 00:24:34.259 --> 00:24:37.000 sheer size of what they've built. In 2024, they 00:24:37.000 --> 00:24:40.960 reported revenue of $3 .116 billion. But like 00:24:40.960 --> 00:24:42.740 we said before, it's the assets that really tell 00:24:42.740 --> 00:24:46.480 the story. Their total assets stand at $37 .527 00:24:46.480 --> 00:24:50.180 billion. Almost $38 billion. That is the physical 00:24:50.180 --> 00:24:52.539 manifestation of their three -decade bet on life 00:24:52.539 --> 00:24:55.099 science, a massive investment in highly specialized, 00:24:55.319 --> 00:24:57.299 very expensive infrastructure. And their total 00:24:57.299 --> 00:25:01.220 equity is listed at $17 .889 billion. Right. 00:25:01.400 --> 00:25:04.019 These figures show that the financial market's 00:25:04.019 --> 00:25:07.319 view are as a cornerstone investment. It's a 00:25:07.319 --> 00:25:09.579 stable holder of critical physical infrastructure 00:25:09.579 --> 00:25:12.880 designed to generate long -term income. It's 00:25:12.880 --> 00:25:15.079 exactly what institutional portfolios look for. 00:25:15.299 --> 00:25:17.920 But there's another detail in here about their 00:25:17.920 --> 00:25:20.480 ownership that I found fascinating. It connects 00:25:20.480 --> 00:25:22.940 R to a whole different level of global finance. 00:25:23.200 --> 00:25:26.039 You're talking about Norges Bank. Yes. Norges 00:25:26.039 --> 00:25:27.900 Bank, which is the central bank in Norway, owns 00:25:27.900 --> 00:25:31.500 9 .54 % of the company. That is a colossal stake. 00:25:32.349 --> 00:25:35.210 For context, Norges Bank manages Norway's sovereign 00:25:35.210 --> 00:25:38.269 wealth fund. It's the largest in the world, financed 00:25:38.269 --> 00:25:40.710 by the country's oil and gas revenues, and its 00:25:40.710 --> 00:25:43.009 whole purpose is to preserve wealth for future 00:25:43.009 --> 00:25:45.349 generations. So the significance of them owning 00:25:45.349 --> 00:25:48.549 almost 10 % of R is? It's immense. It means the 00:25:48.549 --> 00:25:50.950 nation of Norway is placing a massive long -term 00:25:50.950 --> 00:25:53.470 strategic bet on the stability and growth of 00:25:53.470 --> 00:25:55.509 specialized American life science infrastructure. 00:25:55.930 --> 00:25:57.990 So why would a sovereign wealth fund with an 00:25:57.990 --> 00:26:01.009 almost infinite investment horizon pick a specialized 00:26:01.009 --> 00:26:03.160 REIT like this? For all the reasons we've been 00:26:03.160 --> 00:26:05.660 discussing stability and inflation resistance, 00:26:06.079 --> 00:26:09.279 life science real estate is seen globally as 00:26:09.279 --> 00:26:11.740 an essential asset class, almost like a utility. 00:26:12.039 --> 00:26:15.059 The long term leases with high credit tenants 00:26:15.059 --> 00:26:17.220 like Eli Lilly and the U .S. government make 00:26:17.220 --> 00:26:20.240 the cash flow incredibly predictable. And the 00:26:20.240 --> 00:26:22.339 buildings themselves are a hedge against inflation. 00:26:22.809 --> 00:26:25.509 A fantastic hedge because those highly specialized 00:26:25.509 --> 00:26:28.529 labs are nearly impossible to replicate quickly 00:26:28.529 --> 00:26:31.630 or cheaply. So they see this niche as a foundational 00:26:31.630 --> 00:26:34.029 piece of the future global economy. Absolutely. 00:26:34.269 --> 00:26:36.390 It's global confirmation that this isn't just 00:26:36.390 --> 00:26:38.970 a property management business. It's seen as 00:26:38.970 --> 00:26:41.670 essential financial infrastructure. It's a validation 00:26:41.670 --> 00:26:44.009 that the physical framework of future medicine 00:26:44.009 --> 00:26:47.009 is one of the safest long -term bets in finance. 00:26:47.289 --> 00:26:49.910 Global capital is lining up to get a piece of 00:26:49.910 --> 00:26:52.460 that physical landscape of discovery. let's bring 00:26:52.460 --> 00:26:54.380 this all together. Let's consolidate these findings 00:26:54.380 --> 00:26:56.779 for you, our listener. This deep dive really 00:26:56.779 --> 00:26:59.039 reveals that Alexandria Real Estate Equities, 00:26:59.059 --> 00:27:02.240 Inc. is fundamentally changing how we should 00:27:02.240 --> 00:27:05.900 think about the financing and the location of 00:27:05.900 --> 00:27:08.759 scientific discovery. It's so much more than 00:27:08.759 --> 00:27:11.839 a landlord. It's a critical, highly specific 00:27:11.839 --> 00:27:14.440 financial vehicle that is fueling the growth 00:27:14.440 --> 00:27:17.000 of life science. It does that by placing these 00:27:17.000 --> 00:27:20.559 high spec labs with all the complex HVAC and 00:27:20.559 --> 00:27:23.019 power systems we talked about exactly where the 00:27:23.019 --> 00:27:25.559 talent is. Right. reinforcing those existing 00:27:25.559 --> 00:27:28.519 global hubs in Boston, San Francisco, and San 00:27:28.519 --> 00:27:30.619 Diego. And their whole financial engine runs 00:27:30.619 --> 00:27:32.839 on that dual anchor strategy. You have the stability 00:27:32.839 --> 00:27:35.740 of big pharma like Eli Lilly, balanced by the 00:27:35.740 --> 00:27:38.319 high growth dynamism of firms like Moderna, and 00:27:38.319 --> 00:27:40.539 now even the convergence of tech giants like 00:27:40.539 --> 00:27:43.279 Alphabet. And that heavy concentration, 73 % 00:27:43.279 --> 00:27:45.799 of their revenue in just three markets. That's 00:27:45.799 --> 00:27:48.000 not a bug, it's a feature. It's a reflection 00:27:48.000 --> 00:27:50.240 of the strategy that density is what drives discovery. 00:27:50.730 --> 00:27:52.789 And because of that, the success of this single 00:27:52.789 --> 00:27:55.890 REIT with its nearly $38 billion in specialized 00:27:55.890 --> 00:27:59.210 assets is directly tied to global biotech trends, 00:27:59.349 --> 00:28:01.950 the cost of labor in three specific coastal cities, 00:28:02.069 --> 00:28:04.750 and critically to public policy, to the federal 00:28:04.750 --> 00:28:07.470 research budget. So it's a unique, concrete indicator 00:28:07.470 --> 00:28:10.069 for the physical future of biomedical research. 00:28:11.630 --> 00:28:14.069 Specialized real estate has become this prized 00:28:14.069 --> 00:28:17.049 strategic asset for even the world's largest 00:28:17.049 --> 00:28:19.269 sovereign wealth fund. Like Norges Bank. Yeah. 00:28:19.349 --> 00:28:21.730 Which leads us to our final provocative thought 00:28:21.730 --> 00:28:23.849 for you to consider as you wrap up this deep 00:28:23.849 --> 00:28:25.690 dive. Given that the U .S. government is one 00:28:25.690 --> 00:28:29.069 of ARRE's top tenants and that the company is 00:28:29.069 --> 00:28:31.309 explicitly dependent on federal research funding 00:28:31.309 --> 00:28:34.609 for its overall stability, consider this. How 00:28:34.609 --> 00:28:36.809 will the increasing privatization and consolidation 00:28:36.809 --> 00:28:39.410 of the physical infrastructure for science affect 00:28:39.410 --> 00:28:41.309 the government's own capacity in the future? 00:28:41.670 --> 00:28:45.309 I mean, if all the premier high spec labs are 00:28:45.309 --> 00:28:48.809 owned by a single profit driven entity, how tightly 00:28:48.809 --> 00:28:50.990 interwoven does the future of private scientific 00:28:50.990 --> 00:28:53.609 infrastructure become with the political decisions 00:28:53.609 --> 00:28:55.910 made about public research budgets? And what 00:28:55.910 --> 00:28:57.970 happens if that partnership, for whatever reason, 00:28:58.089 --> 00:29:00.569 falters? It's a foundational partnership between 00:29:00.569 --> 00:29:02.970 private real estate investors and public science 00:29:02.970 --> 00:29:06.019 funding. And that partnership is what's defining 00:29:06.019 --> 00:29:08.839 the physical landscape of discovery today. The 00:29:08.839 --> 00:29:10.779 science is only as strong as the foundation is 00:29:10.779 --> 00:29:13.240 built on. And in this case, that foundation is 00:29:13.240 --> 00:29:16.900 defined by $37 billion worth of specialized strategically 00:29:16.900 --> 00:29:18.359 placed laboratories.