PASADENA, Calif., April 24,
2023 /PRNewswire/ -- Alexandria Real Estate Equities,
Inc. (NYSE: ARE) announced financial and operating results for the
first quarter ended March 31,
2023.
Key highlights
|
|
|
|
|
|
Operating results
|
1Q23
|
|
1Q22
|
|
|
Total
revenues:
|
|
|
|
|
|
In millions
|
$
700.8
|
|
$ 615.1
|
|
|
Growth
|
13.9 %
|
|
|
|
Net income (loss)
attributable to Alexandria's common stockholders –
diluted
|
|
In millions
|
$
75.3
|
|
$
(151.7)
|
|
|
Per share
|
$
0.44
|
|
$ (0.96)
|
|
|
Funds from operations
attributable to Alexandria's common stockholders – diluted, as
adjusted
|
|
In millions
|
$
373.7
|
|
$ 324.6
|
|
|
Per share (refer to
footnote 1 on page 9)
|
$
2.19
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$ 2.05
|
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|
An operationally excellent, industry-leading REIT with a
high-quality and diverse client base of over 850 tenants supporting
high-quality revenues, stable cash flows, and strong
margins
Percentage of total
annual rental revenue in effect from investment-grade or
publicly traded large cap tenants
|
49 %
|
|
|
|
Sustained strength in
tenant collections:
|
|
|
|
|
Tenant receivables as
of March 31, 2023
|
$
8.2
|
million
|
|
April
2023 tenant rent and receivables
collected as of April 24, 2023
|
99.7 %
|
|
|
|
1Q23 tenant rent and
receivables collected as of April 24, 2023
|
99.9 %
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|
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|
On March 10, 2023, we
held $108.3 million in letters of credit originally issued by
Silicon Valley Bank,
now a division of First Citizens Bank. As of April 24, 2023,
our tenants have transitioned $26.0 million
to new banks or new forms of lease security, $64.7 million are in
the process of transitioning to new
banks acceptable to us, and $17.6 million remain to be
transitioned.
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|
Occupancy of operating
properties in North America
|
93.6 %
|
|
|
|
Operating
margin
|
70 %
|
|
|
|
Adjusted EBITDA
margin
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69 %
|
|
|
|
Weighted-average
remaining lease term:
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|
|
|
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All tenants
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7.2
|
years
|
|
Top 20
tenants
|
9.5
|
years
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|
Continued strong leasing volume and rental rate
increases
- For 1Q23, rental rate increase of 48.3% represents the highest
quarterly rental rate growth in Company history.
- Strong leasing activity continued in 1Q23 with leasing volume
aggregating 1.2 million RSF, exceeding the 1.1 million RSF average
in quarterly leasing for the five-year period prior to 2021, with
85% generated from our client base of over 850 tenants.
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1Q23
|
|
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Total leasing activity
– RSF
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1,223,427
|
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|
Lease renewals and
re-leasing of space:
|
|
|
|
|
RSF (included in total
leasing activity above)
|
|
1,120,038
|
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Rental rate
increase
|
|
48.3 %
|
|
|
Rental rate increase
(cash basis)
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24.2 %
|
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Continued strong net operating income and internal
growth
- Net operating income (cash basis) of $1.8 billion for 1Q23 annualized, up $245.0 million, or 16.2%, compared to 1Q22
annualized.
- Same property net operating income growth:
-
- 3.7% and 9.0% (cash basis) for 1Q23 over 1Q22.
- Our 1Q23 same property growth outperformed our 10-year averages
of 3.6% and 6.6% (cash basis).
- 95% of our leases contain contractual annual rent escalations
approximating 3%.
Key updates to our 2023 sources and uses of capital
guidance
- $325 million reduction in total
uses of capital to $2.95
billion.
- $325 million reduction in sources
of capital to $2.95 billion.
-
- $950 million in net incremental
debt for 2023 ($1.0 billion of
unsecured senior notes payable issued in February 2023).
- $375 million in net cash provided
by operating activities after dividends.
- $1.625 billion in dispositions,
sales of partial interests, and future settlement of forward equity
sales agreements that were outstanding as of December 31, 2022.
-
- $965.4 million, or 59%, completed
or subject to executed letters of intent or purchase and sale
agreements, including $865.4 million
from dispositions and sales of partial interests and approximately
$100 million from forward equity
sales agreements that were outstanding as of December 31, 2022.
- $659.6 million of targeted
dispositions and sales of partial interests.
- $275 million of excess bond
offering proceeds to reduce debt capital for 2024.
Continued strong and flexible balance sheet with 13.4 years
of remaining term of debt
- Investment-grade credit ratings ranked in the top 10% among all
publicly traded U.S. REITs.
- $5.3 billion of liquidity.
- No debt maturities prior to 2025.
- 13.4 years weighted-average remaining term of debt.
- 96.1% of our debt has a fixed rate.
- Net debt and preferred stock to Adjusted EBITDA of 5.3x and
fixed-charge coverage ratio of 5.0x for 1Q23 annualized.
- Total debt and preferred stock to gross assets of 28%.
- In February 2023, we issued
unsecured senior notes payable aggregating $1.0 billion at 4.95% for average term of 21.2
years.
- $1.4 billion of expected capital
contributions from existing real estate joint venture partners from
2Q23 through 2026 to fund construction.
Continued strong and increasing dividends with a focus on
retaining significant net cash flows from operating activities
after dividends for reinvestment
- Common stock dividend declared for 1Q23 of $1.21 per common share, aggregating $4.78 per common share for the twelve months
ended March 31, 2023, up 24 cents, or 5%, over the twelve months ended
March 31, 2022.
- Dividend yield of 3.9% as of March 31,
2023.
- Dividend payout ratio of 55% for the three months ended
March 31, 2023.
- Average annual dividend per-share growth of 5.4% from 2019 to
1Q23 annualized.
Strong balance sheet management
Key metrics as of March 31, 2023
- $33.0 billion in total market
capitalization.
- $21.5 billion in total equity
capitalization, which ranks in the top 10% among all publicly
traded U.S. REITs.
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1Q23
|
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Goal
|
|
|
Quarter
Annualized
|
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Trailing
12 Months
|
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4Q23
Annualized
|
Net debt and preferred
stock to
Adjusted EBITDA
|
|
5.3x
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5.6x
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|
Less than or equal to
5.1x
|
Fixed-charge coverage
ratio
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5.0x
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5.0x
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4.5x to
5.0x
|
|
Key capital events
- In February 2023, we
opportunistically issued $1.0 billion
of unsecured senior notes payable with a weighted-average interest
rate of 4.95% and a weighted-average maturity of 21.2 years. The
unsecured senior notes include:
-
- $500.0 million of 4.75% green
unsecured senior notes due 2035; and
- $500.0 million of 5.15% unsecured
senior notes due 2053.
- As of 1Q23, we have outstanding forward equity agreements from
2022 aggregating 699 thousand shares of common stock with expected
net proceeds of $102.5 million.
- As of March 31, 2023, the
remaining aggregate amount available under our ATM program for
future sales of common stock was $141.9
million.
Investments
- As of March 31, 2023:
-
- Our non-real estate investments aggregated $1.6 billion.
- Unrealized gains presented in our consolidated balance sheet
were $336.8 million, comprising gross
unrealized gains and losses aggregating $459.3 million and $122.5
million, respectively.
- For 1Q23, investment loss of $45.1
million presented in our consolidated statements of
operations consisted of $20.7 million
of realized gains and $65.9 million
of unrealized losses/changes in fair value.
External growth and investments in real estate
Alexandria's value-creation
pipeline drives visibility for future growth aggregating over
$610 million of incremental net operating income
- Highly leased value-creation pipeline of current and four
near-term projects expected to generate greater than $610 million of incremental net operating income,
primarily commencing from 2Q23 through 1Q26.
-
- 6.7 million RSF of value-creation projects, 74% of which is
leased/negotiating.
- 79% of the leased RSF of our value-creation projects was
generated from our client base of over 850 tenants.
- During 1Q23, we placed into service development and
redevelopment projects aggregating 453,511 RSF across multiple
submarkets, resulting in $23 million
of incremental annual net operating income.
- Annual net operating income (cash basis) is expected to
increase by $41 million upon the
burn-off of initial free rent from recently delivered
projects.
Subsequent events
Sale of partial interest in consolidated real estate joint
venture
As of March 31, 2023, our investment in 15 Necco Street, a
development project aggregating 345,995 RSF located in our Seaport
Innovation District submarket, was held in a consolidated real
estate joint venture in which 90% was owned by us and 10% was owned
by our existing joint venture partner.
In April 2023, an investor
acquired a 20% interest in this joint venture, which consists of an
18% interest sold by us and a 2% interest sold by our existing
partner. The sales price of the 18% interest sold by us was
$66.1 million. Upon completion of the
sale, our ownership interest in the consolidated joint venture is
72% and our existing and new partners' noncontrolling interests are
8% and 20%, respectively. We retained control over this real estate
joint venture and therefore continue to consolidate it. We expect
our new joint venture partner to contribute capital aggregating
$119.0 million to fund construction
spending over time and to accrete its ownership interest in the
joint venture from 20% to 37%. Our ownership percentage is expected
to decline from 90% prior to this transaction to 57%.
Asset held for sale
In January 2020, we acquired a
three-building office campus aggregating 509,702 RSF in our Route
128 submarket. At the time of our acquisition, the campus was fully
occupied with a weighted-average remaining lease term of 6.1 years.
We had intended to convert the campus into office/laboratory space
through redevelopment upon the expirations of the acquired in-place
leases.
Since our acquisition, the macroeconomic environment and demand
for office space have deteriorated considerably. In April 2023, upon meeting the criteria for
classification as held for sale, we recognized a real estate
impairment charge of approximately $139
million to reduce our investment in this campus to its
current fair value less costs to sell from the book value of
$259 million. These buildings represent our only pure
operating office campus in the Greater
Boston market, and we expect to complete the sale in
mid-2023.
Industry and ESG leadership: catalyzing and leading the way
for positive change to benefit human health and society
- In March 2023, Alexandria was named one of Newsweek's
Most Trustworthy Companies in America. The Company was one of only
six S&P 500 REITs recognized based on three main public
touchpoints of trust: customer trust, investor trust and employee
trust.
- During 1Q23, Alexandria earned
several awards in recognition of excellence in operations, asset
management, development, and leasing across our regions:
-
- In our Greater Boston market,
Alexandria received two 2023 BOMA
Mid-Atlantic TOBY (The Outstanding Building of the Year) awards —
Corporate Facility of the Year for 225 Binney Street on our
Alexandria Center® at Kendall Square mega campus and
Building Under 100,000 SF for 700 Technology Square on our
Alexandria Technology Square® mega campus. The TOBY
Awards honor and recognize quality in commercial buildings and
reward excellence in building management.
- In our San Diego market,
Alexandria was selected for two
2023 CoStar Impact Awards: Commercial Development of the Year for
10055 Barnes Canyon Road on our SD Tech by Alexandria mega campus; and Lease of the Year
for a near-term development project on our Campus Point by
Alexandria mega campus. The CoStar
Impact Awards recognize exemplary commercial real estate
transactions and projects completed in 2022 that have significantly
influenced their communities.
- In our Research Triangle market, Alexandria earned three awards in the
Triangle Business Journal's 2023 SPACE Awards — Top Office
Development for 8 Davis Drive on our Alexandria Center®
for Advanced Technologies mega campus, Top Life Science/Laboratory
Lease at 7 Triangle Drive, and Top Flex Lease at our Alexandria
Center® for Life Science – Durham mega campus. The annual SPACE Awards
recognize the Research Triangle's top real estate developments and
transactions.
- In January 2023, Alexandria became a founding sponsor of the
International Institute for Sustainable Laboratories
(I2SL) new Labs2Zero program. As a founding sponsor, we
are helping drive the development of I2SL's new roadmap,
which aims to improve the energy and emissions performance of
existing and future laboratory buildings.
About Alexandria Real Estate Equities, Inc.
Alexandria
Real Estate Equities, Inc. (NYSE: ARE), an S&P 500®
company, is a best-in-class, mission-driven life science REIT
making a positive and lasting impact on the world. As the pioneer
of the life science real estate niche since its founding in 1994,
Alexandria is the preeminent and
longest-tenured owner, operator, and developer of collaborative
life science, agtech, and advanced technology campuses in AAA
innovation cluster locations, including Greater Boston, the San Francisco Bay Area, New York City, San
Diego, Seattle,
Maryland, and Research Triangle.
The trusted partner to over 850 tenants, Alexandria has a total market capitalization
of $33.0 billion and an asset
base in North America of 75.6
million square feet ("SF") as of March 31,
2023, which includes 41.9 million RSF of operating
properties and 5.5 million RSF of Class A properties undergoing
construction, 9.7 million RSF of near-term and
intermediate-term development and redevelopment projects, and 18.5
million SF of future development projects. Alexandria has a longstanding and proven track
record of developing Class A properties clustered in life science,
agtech, and advanced technology campuses that provide our
innovative tenants with highly dynamic and collaborative
environments that enhance their ability to successfully recruit and
retain world-class talent and inspire productivity, efficiency,
creativity, and success. Alexandria also provides strategic capital to
transformative life science, agrifoodtech, climate innovation, and
technology companies through our venture capital platform. We
believe our unique business model and diligent underwriting ensure
a high-quality and diverse tenant base that results in higher
occupancy levels, longer lease terms, higher rental income, higher
returns, and greater long-term asset value. For additional
information on Alexandria, please
visit www.are.com.
Guidance
|
March 31,
2023
|
(Dollars in millions)
|
|
Guidance for 2023 has
been updated to reflect our current view of existing market
conditions and assumptions for the year ending December 31, 2023.
There can be no assurance that
actual amounts will not be materially higher or lower than these
expectations. Also, refer to our discussion of "forward-looking
statements" on page 8 of this Earnings Press Release for
additional
details. Key updates to our 2023 guidance include the following
changes to the midpoints of our guidance ranges for our 2023 key
sources and uses of capital:
|
•
$325 million reduction in total uses of
capital to $2.95 billion.
• $325
million reduction in sources of capital to $2.95
billion.
• $950 million in net incremental debt for 2023 ($1.0
billion of unsecured senior notes payable issued in February
2023).
• $375 million in net cash provided by operating
activities after dividends.
• $1.625 billion in dispositions, sales of partial
interests, and future settlement of forward equity sales agreements
that were outstanding as of December 31, 2022.
• $965.4 million, or 59%,
completed or subject to executed letters of intent or purchase and
sale agreements, including $865.4 million from dispositions and
sales of
partial interests and
approximately $100 million from forward equity sales agreements
that were outstanding as of December 31, 2022.
• $659.6 million of targeted
dispositions and sales of partial interests.
• $275
million of excess bond offering proceeds to reduce debt capital for
2024.
|
|
|
|
2023 Guidance
|
Summary of key changes in guidance
|
|
As of 4/24/23
|
|
As of 1/31/23
|
EPS, FFO per share, and
FFO per share, as adjusted
|
|
Refer to page
5
|
Occupancy percentage in
North America as of December 31, 2023
|
|
94.6% to
95.6%(1)
|
|
94.8% to
95.8%
|
Rental rate
increases
|
|
28.0% to
33.0%
|
|
27.0% to
32.0%
|
Rental rate increases
(cash basis)
|
|
12.0% to
17.0%
|
|
11.0% to
16.0%
|
|
|
|
|
|
|
|
Midpoint
|
|
As of 4/24/23
|
|
Key Sources and Uses of Capital
|
|
As of 1/30/23
|
|
Key Changes
|
|
As of 4/24/23
|
|
Range
|
|
Midpoint
|
|
Sources of capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental
debt
|
|
$
700
|
|
$
(50)
|
|
$
650
|
|
$
575
|
|
$
725
|
|
$
650
|
|
Excess 2022 bond
capital held as cash at December 31, 2022
|
|
300
|
|
—
|
|
300
|
|
300
|
|
300
|
|
300
|
(2)
|
Net cash provided by
operating activities after dividends
|
|
375
|
|
—
|
|
375
|
|
350
|
|
400
|
|
375
|
|
Dispositions and sales
of partial interests (refer to page 7)
|
|
1,900
|
|
(275)
|
|
1,525
|
|
1,425
|
|
1,625
|
|
1,525
|
(3)
|
Future settlement of
forward equity sales agreements outstanding as of December 31,
2022
|
|
|
|
100
|
|
100
|
|
100
|
|
100
|
(4)
|
Total sources of
capital before excess cash expected to be held at December 31,
2023
|
|
$
3,275
|
|
$
(325)
|
|
$
2,950
|
|
2,750
|
|
3,150
|
|
2,950
|
|
Cash expected to be
held at December 31, 2023(5)
|
|
$
—
|
|
$
275
|
|
$
275
|
|
125
|
|
425
|
|
275
|
|
Total sources of
capital
|
|
|
|
|
|
|
|
$
2,875
|
|
$
3,575
|
|
$
3,225
|
|
Uses of capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction (refer to
page 47)
|
|
$
2,975
|
|
$
(250)
|
|
$
2,725
|
|
$
2,575
|
|
$
2,875
|
|
$
2,725
|
|
Acquisitions (refer to
page 6)
|
|
300
|
|
(75)
|
|
225
|
|
175
|
|
275
|
|
225
|
(6)
|
Total uses of
capital
|
|
$
3,275
|
|
$
(325)
|
|
$
2,950
|
|
$
2,750
|
|
$
3,150
|
|
$
2,950
|
|
Incremental debt (included
above):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of unsecured
senior notes payable
|
|
|
|
|
|
|
|
$
1,000
|
|
$
1,000
|
|
$
1,000
|
(7)
|
Unsecured senior line
of credit, commercial paper, and other
|
|
|
|
|
|
|
|
(425)
|
|
(275)
|
|
(350)
|
|
Net incremental
debt
|
|
|
|
|
|
|
|
$
575
|
|
$
725
|
|
$
650
|
|
|
|
(1)
|
Refer to footnote 4 on
the next page for additional details.
|
(2)
|
Represents $300.0
million of excess 2022 bond capital proceeds held as cash at
December 31, 2022 that was used to reduce our 2023 debt capital
needs.
|
(3)
|
As of April 24, 2023,
we have completed dispositions and pending transactions subject to
signed letters of intent or purchase and sale agreements
aggregating $865.4 million.
|
(4)
|
Represents outstanding
forward equity sales agreements entered into during the three
months ended December 31, 2022 to sell 699 thousand shares of
common stock under our ATM program.
|
(5)
|
Represents estimated
excess 2023 bond capital proceeds expected to be held as cash at
December 31, 2023, which reduces our 2024 debt capital
needs.
|
(6)
|
As of March 31, 2023,
we have completed acquisitions aggregating $171.9
million.
|
(7)
|
Represents $1.0 billion
of unsecured senior notes payable issued in February
2023.
|
Projected 2023 Earnings per Share and Funds From
Operations per Share Attributable to Alexandria's Common
Stockholders – Diluted
|
|
|
As of 4/24/23
|
|
As of 1/30/23
|
|
Key Changes
|
Earnings per
share(1)
|
|
$2.21 to
$2.31
|
|
$3.41 to
$3.61
|
|
|
Depreciation and
amortization of real estate assets
|
|
|
5.55
|
|
|
|
5.50
|
|
|
5-cent
increase
|
Impairment of real
estate – rental properties
|
|
|
0.81
|
|
|
|
—
|
|
|
(2)
|
Allocation to unvested
restricted stock awards
|
|
|
(0.04)
|
|
|
|
(0.05)
|
|
|
|
Funds from operations
per share(3)
|
|
$8.53 to
$8.63
|
|
$8.86 to
$9.06
|
|
|
Unrealized losses on
non-real estate investments
|
|
|
0.39
|
|
|
|
—
|
|
|
|
Allocation to unvested
restricted stock awards
|
|
|
(0.01)
|
|
|
|
—
|
|
|
|
Funds from operations
per share, as adjusted(3)
|
|
$8.91 to
$9.01
|
|
$8.86 to
$9.06
|
|
No change to
midpoint;
narrowed range by 10 cents
|
Midpoint
|
|
$8.96
|
|
$8.96
|
|
|
|
As of 4/24/23
|
|
As of 1/30/23
|
|
|
Key Assumptions
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Key Changes
|
Occupancy percentage in
North America as of December 31, 2023
|
|
94.6 %
|
|
95.6 %
|
|
94.8 %
|
|
95.8 %
|
|
20 bps
decline(4)
|
Lease renewals and
re-leasing of space:
|
|
|
|
|
|
|
|
|
|
|
Rental rate
increases
|
|
28.0 %
|
|
33.0 %
|
|
27.0 %
|
|
32.0 %
|
|
1.0%
increase
|
Rental rate increases
(cash basis)
|
|
12.0 %
|
|
17.0 %
|
|
11.0 %
|
|
16.0 %
|
|
Same property
performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income
increases
|
|
2.0 %
|
|
4.0 %
|
|
2.0 %
|
|
4.0 %
|
|
No Change
|
Net operating income
increases (cash basis)
|
|
4.0 %
|
|
6.0 %
|
|
4.0 %
|
|
6.0 %
|
|
Straight-line rent
revenue
|
|
$
130
|
|
$
145
|
|
$
130
|
|
$
145
|
|
General and
administrative expenses
|
|
$
183
|
|
$
193
|
|
$
183
|
|
$
193
|
|
Capitalization of
interest
|
|
$
342
|
|
$
362
|
|
$
342
|
|
$
362
|
|
Interest
expense
|
|
$
74
|
|
$
94
|
|
$
74
|
|
$
94
|
|
Key Credit Metrics
|
|
As of 4/24/23
|
|
As of 1/30/23
|
|
Key Changes
|
|
|
|
|
|
|
|
Net debt and preferred
stock to Adjusted EBITDA – 4Q23 annualized
|
|
Less than or equal to
5.1x
|
|
Less than or equal to
5.1x
|
|
No change
|
Fixed-charge coverage
ratio – 4Q23 annualized
|
|
4.5x to
5.0x
|
|
4.5x to
5.0x
|
|
|
|
(1)
|
Excludes unrealized
gains or losses after March 31, 2023 that are required to be
recognized in earnings and are excluded from funds from operations
per share, as adjusted.
|
(2)
|
Refer to "Subsequent
Events" on page 2 of our Earnings Press Release for additional
information.
|
(3)
|
Refer to "Funds from
operations and funds from operations, as adjusted, attributable to
Alexandria's common stockholders" in the "Definitions and
reconciliations" of our Supplemental Information for additional
details.
|
(4)
|
The decline of 20 basis
points in our 2023 guidance range for occupancy percentage in North
America as of December 31, 2023 relates to a two-building
value-creation project aggregating 201,499 RSF in our Greater
Houston submarket to convert office space to office/laboratory
space through redevelopment. One building aggregates 130,765 RSF
and is 36% leased, with initial occupancy expected to commence in
2023. In connection with our strategic review of projected 2023
construction spending, we temporarily paused construction work on
the second building, which aggregates 70,734 RSF, until further
lease-up of the 130,765 RSF building. As of March 31, 2023, the
vacant 70,734 RSF building was classified as an operating
property.
|
Acquisitions March 31, 2023
Dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
Square Footage
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions With Development/Redevelopment
Opportunities(1)
|
|
|
|
|
Property
|
|
Submarket/Market
|
|
Date of Purchase
|
|
Number of
Properties
|
|
Operating Occupancy
|
|
Future
Development
|
|
Active
Development/
Redevelopment
|
|
Operating With
Future
Development/
Redevelopment
|
|
Total(2)
|
|
Purchase Price
|
Completed in
1Q23:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
Canada
|
|
1/30/23
|
|
1
|
|
100 %
|
|
—
|
|
—
|
|
247,743
|
|
247,743
|
|
$
|
100,837
|
Other
|
|
Various
|
|
|
|
2
|
|
100
|
|
715,000
|
|
110,717
|
|
10,000
|
|
835,717
|
|
|
71,103
|
|
|
|
|
|
|
3
|
|
100 %
|
|
715,000
|
|
110,717
|
|
257,743
|
|
1,083,460
|
|
|
171,940
|
Other targeted
acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,060
|
2023 acquisitions
(midpoint)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
225,000
|
2023 guidance
range
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$175,000 –
$275,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
We expect to provide
total estimated costs and related yields for development and
redevelopment projects in the future, subsequent to the
commencement of construction.
|
(2)
|
Represents total square
footage upon completion of development or redevelopment of one or
more new Class A properties. Square footage presented includes RSF
of buildings currently in operation with future development or
redevelopment opportunities. Refer to "Definitions and
reconciliations" in our Supplemental Information for additional
details on value-creation square feet currently included in rental
properties.
|
Dispositions and Sales of Partial
Interests
|
March 31,
2023
|
(In thousands)
|
Property
|
|
Submarket/Market
|
|
Interest Sold
|
|
Sales Price
|
|
Completed in April
2023:
|
|
|
|
|
|
|
|
|
15 Necco
Street(1)
|
|
Seaport Innovation
District/Greater Boston
|
|
18 %
(1)
|
|
$
66,108
|
|
Pending transactions
subject to signed letters of intent or purchase and sale
agreements(2)
|
|
Various
|
|
N/A
|
|
799,333
|
|
|
|
|
|
|
|
|
865,441
|
|
Other targeted
disposition and sales of partial interests
|
|
|
|
|
|
|
659,559
|
|
2023 dispositions and
sales of partial interests (midpoint)
|
|
|
|
|
|
|
$
1,525,000
|
|
2023 guidance
range
|
|
|
|
$1,425,000 –
$1,625,000
|
|
|
|
(1)
|
Represents a
development project under construction aggregating 345,995 RSF, 97%
of which is leased to the Lilly Institute for Genetic Medicine. In
April 2023, an investor acquired a 20% interest in this joint
venture, which consists of an 18% interest sold by us and a 2%
interest sold by our existing partner. Upon completion of the sale,
our ownership interest in the consolidated real estate joint
venture is 72% and our existing and new partners' noncontrolling
interests are 8% and 20%, respectively. We retained control over
this real estate joint venture and therefore continue to
consolidate it. We expect our new joint venture partner to
contribute capital aggregating $119.0 million to fund construction
spending over time and to accrete its ownership interest in the
joint venture from 20% to 37%. Our ownership percentage is expected
to decline from 90% prior to this transaction to 57%.
|
(2)
|
Includes an office
campus classified as held for sale in April 2023. Refer to
"Subsequent events" on page 2 of our Earnings Press Release for
additional information.
|
|
|
Earnings Call Information and About the Company
March 31, 2023
We will host a conference call on Tuesday, April 25, 2023,
at 3:00 p.m. Eastern Time
("ET")/noon Pacific Time ("PT"),
which is open to the general public, to discuss our financial and
operating results for the first quarter ended March 31, 2023.
To participate in this conference call, dial (833) 366-1125 or
(412) 902-6738 shortly before 3:00 p.m.
ET/noon PT and ask the
operator to join the call for Alexandria Real Estate Equities, Inc.
The audio webcast can be accessed at www.are.com in the "For
Investors" section. A replay of the call will be available for a
limited time from 5:00 p.m.
ET/2:00 p.m. PT on Tuesday,
April 25, 2023. The replay number is (877) 344-7529 or (412)
317-0088, and the access code is 9991022.
Additionally, a copy of this Earnings Press Release and
Supplemental Information for the first quarter ended March 31,
2023 is available in the "For Investors" section of our website at
www.are.com or by following this link:
https://www.are.com/fs/2023q1.pdf.
For any questions, please contact Joel
S. Marcus, executive chairman and founder; Peter M. Moglia, chief executive officer and
co-chief investment officer; Dean A.
Shigenaga, president and chief financial officer;
Paula Schwartz, managing director of
Rx Communications Group, at (917) 633-7790; or Sara M. Kabakoff, vice president – strategic
communications.
About the Company
Alexandria Real Estate Equities, Inc. (NYSE: ARE), an
S&P 500® company, is a best-in-class, mission-driven
life science REIT making a positive and lasting impact on the
world. As the pioneer of the life science real estate niche since
its founding in 1994, Alexandria
is the preeminent and longest-tenured owner, operator, and
developer of collaborative life science, agtech, and advanced
technology campuses in AAA innovation cluster locations, including
Greater Boston, the San Francisco Bay Area, New York City, San
Diego, Seattle,
Maryland, and Research Triangle.
The trusted partner to over 850 tenants, Alexandria has a total market capitalization
of $33.0 billion and an asset base in
North America of 75.6 million SF
as of March 31, 2023, which includes 41.9 million RSF of
operating properties and 5.5 million RSF of Class A properties
undergoing construction, 9.7 million RSF of near-term and
intermediate-term development and redevelopment projects, and 18.5
million SF of future development projects. Alexandria has a longstanding and proven track
record of developing Class A properties clustered in life science,
agtech, and advanced technology campuses that provide our
innovative tenants with highly dynamic and collaborative
environments that enhance their ability to successfully recruit and
retain world-class talent and inspire productivity, efficiency,
creativity, and success. Alexandria also provides strategic capital to
transformative life science, agrifoodtech, climate innovation, and
technology companies through our venture capital platform. We
believe our unique business model and diligent underwriting ensure
a high-quality and diverse tenant base that results in higher
occupancy levels, longer lease terms, higher rental income, higher
returns, and greater long-term asset value. For additional
information on Alexandria, please
visit www.are.com.
***********
This document includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements include, without limitation,
statements regarding our 2023 earnings per share attributable to
Alexandria's common stockholders –
diluted, 2023 funds from operations per share attributable to
Alexandria's common stockholders –
diluted, net operating income, and our projected sources and uses
of capital. You can identify the forward-looking statements by
their use of forward-looking words, such as "forecast," "guidance,"
"goals," "projects," "estimates," "anticipates," "believes,"
"expects," "intends," "may," "plans," "seeks," "should," "targets,"
or "will," or the negative of those words or similar words. These
forward-looking statements are based on our current expectations,
beliefs, projections, future plans and strategies, anticipated
events or trends, and similar expressions concerning matters that
are not historical facts, as well as a number of assumptions
concerning future events. There can be no assurance that actual
results will not be materially higher or lower than these
expectations. These statements are subject to risks, uncertainties,
assumptions, and other important factors that could cause actual
results to differ materially from the results discussed in the
forward-looking statements. Factors that might cause such a
difference include, without limitation, our failure to obtain
capital (debt, construction financing, and/or equity) or refinance
debt maturities, lower than expected yields, increased interest
rates and operating costs, adverse economic or real estate
developments in our markets, our failure to successfully place into
service and lease any properties undergoing development or
redevelopment and our existing space held for future development or
redevelopment (including new properties acquired for that purpose),
our failure to successfully operate or lease acquired properties,
decreased rental rates, increased vacancy rates or failure to renew
or replace expiring leases, defaults on or non-renewal of leases by
tenants, adverse general and local economic conditions, an
unfavorable capital market environment, decreased leasing activity
or lease renewals, failure to obtain LEED and other healthy
building certifications and efficiencies, and other risks and
uncertainties detailed in our filings with the Securities and
Exchange Commission ("SEC"). Accordingly, you are cautioned not to
place undue reliance on such forward-looking statements. All
forward-looking statements are made as of the date of this Earnings
Press Release and Supplemental Information, and unless otherwise
stated, we assume no obligation to update this information and
expressly disclaim any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise. For more discussion relating to risks
and uncertainties that could cause actual results to differ
materially from those anticipated in our forward-looking
statements, and risks to our business in general, please refer to
our SEC filings, including our most recent annual report on Form
10-K and any subsequent quarterly reports on Form 10-Q.
This document is not an offer to sell or a solicitation to buy
securities of Alexandria Real Estate Equities, Inc. Any offers to
sell or solicitations to buy our securities shall be made only by
means of a prospectus approved for that purpose. Unless otherwise
indicated, the "Company," "Alexandria," "ARE," "we," "us," and "our"
refer to Alexandria Real Estate Equities, Inc. and our consolidated
subsidiaries. Alexandria®, Lighthouse
Design® logo, Building the Future of Life-Changing
Innovation®, That's What's in Our DNA®, At
the Vanguard and Heart of the Life Science Ecosystem™, Alexandria
Center®, Alexandria Technology Square®,
Alexandria Technology Center®, and Alexandria Innovation
Center® are copyrights and trademarks of Alexandria Real
Estate Equities, Inc. All other company names, trademarks, and
logos referenced herein are the property of their respective
owners.
Consolidated
Statements of Operations
March 31, 2023
(Dollars in thousands, except per share amounts)
|
|
|
Three Months Ended
|
|
|
3/31/23
|
|
12/31/22
|
|
9/30/22
|
|
6/30/22
|
|
3/31/22
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Income from
rentals
|
|
$
687,949
|
|
$
665,674
|
|
$
656,853
|
|
$
640,959
|
|
$
612,554
|
|
Other income
|
|
12,846
|
(1)
|
4,607
|
|
2,999
|
|
2,805
|
|
2,511
|
|
Total
revenues
|
|
700,795
|
|
670,281
|
|
659,852
|
|
643,764
|
|
615,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Rental
operations
|
|
206,933
|
|
204,352
|
|
201,189
|
|
196,284
|
|
181,328
|
|
General and
administrative
|
|
48,196
|
|
42,992
|
|
49,958
|
|
43,397
|
|
40,931
|
|
Interest
|
|
13,754
|
|
17,522
|
|
22,984
|
|
24,257
|
|
29,440
|
|
Depreciation and
amortization
|
|
265,302
|
|
264,480
|
|
254,929
|
|
242,078
|
|
240,659
|
|
Impairment of real
estate
|
|
—
|
|
26,186
|
|
38,783
|
|
—
|
|
—
|
|
Loss on early
extinguishment of debt
|
|
—
|
|
—
|
|
—
|
|
3,317
|
|
—
|
|
Total
expenses
|
|
534,185
|
|
555,532
|
|
567,843
|
|
509,333
|
|
492,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of
unconsolidated real estate joint ventures
|
|
194
|
|
172
|
|
40
|
|
213
|
|
220
|
|
Investment
loss
|
|
(45,111)
|
(1)
|
(19,653)
|
|
(32,305)
|
|
(39,481)
|
|
(240,319)
|
|
Gain on sales of real
estate
|
|
—
|
|
—
|
|
323,699
|
|
214,219
|
|
—
|
|
Net income
(loss)
|
|
121,693
|
|
95,268
|
|
383,443
|
|
309,382
|
|
(117,392)
|
|
Net income attributable
to noncontrolling interests
|
|
(43,831)
|
|
(40,949)
|
|
(38,747)
|
|
(37,168)
|
|
(32,177)
|
|
Net income (loss)
attributable to Alexandria Real Estate Equities, Inc.'s
stockholders
|
|
77,862
|
|
54,319
|
|
344,696
|
|
272,214
|
|
(149,569)
|
|
Net income attributable
to unvested restricted stock awards
|
|
(2,606)
|
|
(2,526)
|
|
(3,257)
|
|
(2,934)
|
|
(2,081)
|
|
Net income (loss)
attributable to Alexandria Real Estate Equities, Inc.'s common
stockholders
|
|
$
75,256
|
|
$
51,793
|
|
$
341,439
|
|
$
269,280
|
|
$ (151,650)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to Alexandria Real Estate Equities, Inc.'s
common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.44
|
|
$
0.31
|
|
$
2.11
|
|
$
1.67
|
|
$
(0.96)
|
|
Diluted
|
|
$
0.44
|
|
$
0.31
|
|
$
2.11
|
|
$
1.67
|
|
$
(0.96)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
of common stock outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
170,784
|
|
165,393
|
|
161,554
|
|
161,412
|
|
158,198
|
|
Diluted
|
|
170,784
|
|
165,393
|
|
161,554
|
|
161,412
|
|
158,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per
|
|
$
1.21
|
|
$
1.21
|
|
$
1.18
|
|
$
1.18
|
|
$
1.15
|
|
|
|
(1)
|
Our 1Q23 FFO per share
– diluted, as adjusted includes realized investment gains of $20.7
million, representing a decline of $4.5 million compared to the
average of the preceding four quarters of $25.2 million. Other
income for 1Q23 includes a $5.3 million leasing fee related to a
joint venture in our Seattle market. Other income for 1Q23 also
includes $4.4 million of interest income generated primarily by
excess cash held and was offset by a corresponding increase in
interest expense.
|
Consolidated Balance Sheets
|
March 31,
2023
|
(In thousands)
|
|
|
3/31/23
|
|
12/31/22
|
|
9/30/22
|
|
6/30/22
|
|
3/31/22
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Investments in real
estate
|
|
$
30,889,395
|
|
$
29,945,440
|
|
$
28,771,745
|
|
$
27,952,931
|
|
$
27,100,009
|
Investments in
unconsolidated real estate joint ventures
|
|
38,355
|
|
38,435
|
|
38,285
|
|
37,587
|
|
38,456
|
Cash and cash
equivalents
|
|
1,263,452
|
|
825,193
|
|
533,824
|
|
420,258
|
|
775,060
|
Restricted
cash
|
|
34,932
|
|
32,782
|
|
332,344
|
|
97,404
|
|
95,106
|
Tenant
receivables
|
|
8,197
|
|
7,614
|
|
7,759
|
|
7,069
|
|
7,570
|
Deferred
rent
|
|
974,865
|
|
942,646
|
|
918,995
|
|
905,699
|
|
881,743
|
Deferred leasing
costs
|
|
527,848
|
|
516,275
|
|
506,864
|
|
498,434
|
|
484,184
|
Investments
|
|
1,573,018
|
|
1,615,074
|
|
1,624,921
|
|
1,657,461
|
|
1,661,101
|
Other assets
|
|
1,602,403
|
|
1,599,940
|
|
1,633,877
|
|
1,667,210
|
|
1,801,027
|
Total assets
|
|
$
36,912,465
|
|
$
35,523,399
|
|
$
34,368,614
|
|
$
33,244,053
|
|
$
32,844,256
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities,
Noncontrolling Interests, and Equity
|
|
|
|
|
|
|
|
|
|
|
Secured notes
payable
|
|
$
73,645
|
|
$
59,045
|
|
$
40,594
|
|
$
24,986
|
|
$
208,910
|
Unsecured senior notes
payable
|
|
11,089,124
|
|
10,100,717
|
|
10,098,588
|
|
10,096,462
|
|
10,094,337
|
Unsecured senior line
of credit and commercial paper
|
|
374,536
|
|
—
|
|
386,666
|
|
149,958
|
|
—
|
Accounts payable,
accrued expenses, and other liabilities
|
|
2,479,047
|
|
2,471,259
|
|
2,393,764
|
|
2,317,940
|
|
2,172,692
|
Dividends
payable
|
|
209,346
|
|
209,131
|
|
193,623
|
|
192,571
|
|
187,701
|
Total
liabilities
|
|
14,225,698
|
|
12,840,152
|
|
13,113,235
|
|
12,781,917
|
|
12,663,640
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
|
44,862
|
|
9,612
|
|
9,612
|
|
9,612
|
|
9,612
|
|
|
|
|
|
|
|
|
|
|
|
Alexandria Real Estate
Equities, Inc.'s stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
1,709
|
|
1,707
|
|
1,626
|
|
1,615
|
|
1,614
|
Additional paid-in
capital
|
|
18,902,821
|
|
18,991,492
|
|
17,639,434
|
|
17,149,571
|
|
16,934,094
|
Accumulated other
comprehensive loss
|
|
(20,536)
|
|
(20,812)
|
|
(24,725)
|
|
(11,851)
|
|
(5,727)
|
Alexandria Real Estate
Equities, Inc.'s stockholders' equity
|
|
18,883,994
|
|
18,972,387
|
|
17,616,335
|
|
17,139,335
|
|
16,929,981
|
Noncontrolling
interests
|
|
3,757,911
|
|
3,701,248
|
|
3,629,432
|
|
3,313,189
|
|
3,241,023
|
Total equity
|
|
22,641,905
|
|
22,673,635
|
|
21,245,767
|
|
20,452,524
|
|
20,171,004
|
Total liabilities,
noncontrolling interests, and equity
|
|
$
36,912,465
|
|
$
35,523,399
|
|
$
34,368,614
|
|
$
33,244,053
|
|
$
32,844,256
|
Funds From Operations and Funds From Operations per
Share
|
March 31,
2023
|
(In thousands)
|
|
The following table
presents a reconciliation of net income (loss) attributable to
Alexandria's common stockholders, the most directly comparable
financial measure presented in accordance
with U.S. generally accepted accounting principles ("GAAP"),
including our share of amounts from consolidated and unconsolidated
real estate joint ventures, to funds from operations
attributable to Alexandria's common stockholders – diluted, and
funds from operations attributable to Alexandria's common
stockholders – diluted, as adjusted, for the periods
below:
|
|
|
Three Months Ended
|
|
|
3/31/23
|
|
12/31/22
|
|
9/30/22
|
|
6/30/22
|
|
3/31/22
|
Net income (loss) attributable to Alexandria's common
stockholders
|
|
$ 75,256
|
|
$ 51,793
|
|
$
341,439
|
|
$
269,280
|
|
$
(151,650)
|
Depreciation and
amortization of real estate assets
|
|
262,124
|
|
261,185
|
|
251,453
|
|
238,565
|
|
237,160
|
Noncontrolling share
of depreciation and amortization from consolidated real estate
JVs
|
|
(28,178)
|
|
(29,702)
|
|
(27,790)
|
|
(26,418)
|
|
(23,681)
|
Our share of
depreciation and amortization from unconsolidated real estate
JVs
|
|
859
|
|
982
|
|
795
|
|
934
|
|
955
|
Gain on sales of real
estate
|
|
—
|
|
—
|
|
(323,699)
|
|
(214,219)
|
|
—
|
Impairment of real
estate – rental properties
|
|
—
|
|
20,899
|
|
—
|
|
—
|
|
—
|
Allocation to unvested
restricted stock awards
|
|
(1,359)
|
|
(953)
|
|
1,002
|
|
—
|
|
—
|
Funds from operations attributable to Alexandria's
common stockholders – diluted(1)
|
|
308,702
|
|
304,204
|
|
243,200
|
|
268,142
|
|
62,784
|
Unrealized losses on
non-real estate investments
|
|
65,855
|
|
24,117
|
|
56,515
|
|
68,128
|
|
263,433
|
Impairment of non-real
estate investments
|
|
—
|
|
20,512
|
|
—
|
|
—
|
|
—
|
Impairment of real
estate
|
|
—
|
|
5,287
|
|
38,783
|
|
—
|
|
—
|
Loss on early
extinguishment of debt
|
|
—
|
|
—
|
|
—
|
|
3,317
|
|
—
|
Acceleration of stock
compensation expense due to executive officer
resignation
|
|
—
|
|
—
|
|
7,185
|
|
—
|
|
—
|
Allocation to unvested
restricted stock awards
|
|
(867)
|
|
(482)
|
|
(1,033)
|
|
(778)
|
|
(1,604)
|
Funds from operations attributable to Alexandria's
common stockholders – diluted, as adjusted
|
|
$
373,690
|
|
$
353,638
|
|
$
344,650
|
|
$
338,809
|
|
$
324,613
|
|
|
(1)
|
Calculated in
accordance with standards established by the Nareit Board of
Governors.
|
Funds From Operations and Funds From Operations per
Share (continued)
|
March 31,
2023
|
(In thousands, except per share
amounts)
|
|
The following table
presents a reconciliation of net income (loss) per share
attributable to Alexandria's common stockholders, the most directly
comparable financial measure presented in
accordance with GAAP, including our share of amounts from
consolidated and unconsolidated real estate joint ventures, to
funds from operations per share attributable to Alexandria's
common stockholders – diluted, and funds from operations per share
attributable to Alexandria's common stockholders – diluted, as
adjusted, for the periods below. Per share amounts
may not add due to rounding.
|
|
|
Three Months Ended
|
|
|
3/31/23
|
|
12/31/22
|
|
9/30/22
|
|
6/30/22
|
|
3/31/22
|
Net income (loss) per share attributable to
Alexandria's common stockholders – diluted
|
|
$
0.44
|
|
$
0.31
|
|
$
2.11
|
|
$
1.67
|
|
$
(0.96)
|
Depreciation and
amortization of real estate assets
|
|
1.38
|
|
1.41
|
|
1.39
|
|
1.32
|
|
1.36
|
Gain on sales of real
estate
|
|
—
|
|
—
|
|
(2.00)
|
|
(1.33)
|
|
—
|
Impairment of real
estate – rental properties
|
|
—
|
|
0.13
|
|
—
|
|
—
|
|
—
|
Allocation to unvested
restricted stock awards
|
|
(0.01)
|
|
(0.01)
|
|
0.01
|
|
—
|
|
—
|
Funds from operations per share attributable to
Alexandria's common stockholders – diluted
|
|
1.81
|
|
1.84
|
|
1.51
|
|
1.66
|
|
0.40
|
Unrealized losses on
non-real estate investments
|
|
0.39
|
|
0.15
|
|
0.35
|
|
0.42
|
|
1.67
|
Impairment of non-real
estate investments
|
|
—
|
|
0.12
|
|
—
|
|
—
|
|
—
|
Impairment of real
estate
|
|
—
|
|
0.03
|
|
0.24
|
|
—
|
|
—
|
Loss on early
extinguishment of debt
|
|
—
|
|
—
|
|
—
|
|
0.02
|
|
—
|
Acceleration of stock
compensation expense due to executive officer
resignation
|
|
—
|
|
—
|
|
0.04
|
|
—
|
|
—
|
Allocation to unvested
restricted stock awards
|
|
(0.01)
|
|
—
|
|
(0.01)
|
|
—
|
|
(0.02)
|
Funds from operations per share attributable to
Alexandria's common stockholders – diluted, as
adjusted
|
|
$
2.19
|
|
$
2.14
|
|
$
2.13
|
|
$
2.10
|
|
$
2.05
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
of common stock outstanding for calculation of:
|
|
|
|
|
|
|
|
|
|
|
Earnings per share –
diluted
|
|
170,784
|
|
165,393
|
|
161,554
|
|
161,412
|
|
158,198
|
Funds from operations,
diluted, per share
|
|
170,784
|
|
165,393
|
|
161,554
|
|
161,412
|
|
158,209
|
Funds from operations,
diluted, as adjusted, per share
|
|
170,784
|
|
165,393
|
|
161,554
|
|
161,412
|
|
158,209
|
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SOURCE Alexandria Real Estate Equities, Inc.