Ray Zhong

Ray Zhong inquired about the uses of funding for non-real estate investments, noting historical spending of $200-$250 million per year, and asked about expectations for moving towards a net neutral position.

Answer

Marc Binda, CFO, clarified that the net outflow for the fund was approximately $60-$70 million for the year and the prior year. He stated that Alexandria Real Estate Equities aims for the fund to be as close to neutral as possible, or at least a small net outflow, while remaining active in the space.

Ray Zhong asked about Alexandria Real Estate Equities' capital allocation priorities, specifically if debt reduction takes precedence over common stock repurchases, and when buybacks might be considered given current market conditions and excess cash. He also inquired about the historical annual spend on non-real estate investments and the company's expectations for this moving forward.

Answer

Marc Binda, CFO, stated that the priority is to get further along on the disposition program and pay down debt to maintain balance sheet health before considering buybacks, while remaining flexible. He explained that the company focuses on the net inflow/outflow for the non-real estate investment fund, aiming for it to be as close to neutral as possible, or at least a small net outflow (like the $60-$70 million seen in recent years), while remaining active in the space.

Ray Zhong inquired about the pro forma leverage following a potential insurance acquisition, the expected deal size, and the operational changes implemented since Pershing Square's increased involvement, including the future of the real estate portfolio mix.

Answer

Executive Chairman William Ackman and CIO Ryan Israel clarified that an acquisition would likely use the ~$1 billion in cash on hand, potentially supplemented by capital from Pershing Square affiliates for a larger deal, while maintaining control. Ackman affirmed no changes to the real estate strategy, while CEO David O'Reilly detailed how G&A savings were achieved by centralizing the development team, a plan initiated prior to the Pershing transaction. Israel added that the key change is a broader approach to capital allocation.