Investments
We hold investments in publicly traded companies and privately held entities primarily involved in the life science, agtech, and technology industries. The tables below summarize components of our non-real estate investments and investment income. For additional information, refer to Note 7 – “Investments” to our unaudited consolidated financial statements under Item 1 of this report (dollars in thousands).
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| | Three Months Ended March 31, 2023 | | | | Year Ended December 31, 2022 |
Realized gains | | $ | 20,744 | | | | | | | $ | 80,435 | | |
Unrealized losses | | (65,855) | | | | | | | (412,193) | | |
Investment loss | | $ | (45,111) | | | | | | | $ | (331,758) | | |
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| | March 31, 2023 | | December 31, 2022 |
Investments | | Cost | | Unrealized Gains | | Unrealized Losses | | Carrying Amount | | Carrying Amount |
Publicly traded companies | | $ | 200,833 | | | $ | 63,308 | | | $ | (110,800) | | | $ | 153,341 | | | $ | 207,139 | |
Entities that report NAV | | 469,863 | | | 299,235 | | | (10,144) | | | 758,954 | | | 759,752 | |
Entities that do not report NAV: | | | | | | | | | | |
Entities with observable price changes | | 101,703 | | | 96,728 | | | (1,574) | | | 196,857 | | | 193,784 | |
Entities without observable price changes | | 401,350 | | | — | | | — | | | 401,350 | | | 388,940 | |
Investments accounted for under the equity method of accounting | | N/A | | N/A | | N/A | | 62,516 | | | 65,459 | |
March 31, 2023 | | $ | 1,173,749 | | (1) | $ | 459,271 | | | $ | (122,518) | | | $ | 1,573,018 | | | $ | 1,615,074 | |
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December 31, 2022 | | $ | 1,152,613 | | | $ | 506,404 | | | $ | (109,402) | | | $ | 1,615,074 | | | |
(1)Represents 2.8% of gross assets as of March 31, 2023. |
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Public/Private Mix (Cost) | | Tenant/Non-Tenant Mix (Cost) |
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Liquidity
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Liquidity | | Minimal Outstanding Borrowings and Significant Availability on Unsecured Senior Line of Credit | |
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$5.3B | | (in millions) | | |
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(In millions) | | |
Availability under our unsecured senior line of credit, net of amounts outstanding under our commercial paper program | $ | 3,625 | | |
Outstanding forward equity sales agreements(1) | 103 | | |
Cash, cash equivalents, and restricted cash | 1,298 | | |
Remaining construction loan commitments | 121 | | |
Investments in publicly traded companies | 153 | | |
Liquidity as of March 31, 2023 | $ | 5,300 | | |
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(1)Represents expected net proceeds from the future settlement of 699 thousand shares of common stock under forward equity sales agreements after underwriter discounts.
We expect to meet certain long-term liquidity requirements, such as requirements for development, redevelopment, other construction projects, capital improvements, tenant improvements, property acquisitions, leasing costs, non-revenue-enhancing capital expenditures, scheduled debt maturities, distributions to noncontrolling interests, and payment of dividends through net cash provided by operating activities, periodic asset sales, strategic real estate joint ventures, long-term secured and unsecured indebtedness, borrowings under our unsecured senior line of credit, issuances under our commercial paper program, and issuances of additional debt and/or equity securities.
We also expect to continue meeting our short-term liquidity and capital requirements, as further detailed in this section, generally through our working capital and net cash provided by operating activities. We believe that the net cash provided by operating activities will continue to be sufficient to enable us to make the distributions necessary to continue qualifying as a REIT.
For additional information on our liquidity requirements related to our contractual obligations and commitments, refer to Note 5 – “Leases” and Note 10 – “Secured and unsecured senior debt” to our unaudited consolidated financial statements under Item 1 of this report.
Over the next several years, our balance sheet, capital structure, and liquidity objectives are as follows:
•Retain positive cash flows from operating activities after payment of dividends and distributions to noncontrolling interests for investment in development and redevelopment projects and/or acquisitions;
•Maintain significant balance sheet liquidity;
•Improve credit profile and relative long-term cost of capital;
•Maintain diverse sources of capital, including sources from net cash provided by operating activities, unsecured debt, secured debt, selective real estate asset sales, strategic real estate joint ventures, non-real estate investment sales, and common stock;
•Maintain commitment to long-term capital to fund growth;
•Maintain prudent laddering of debt maturities;
•Maintain solid credit metrics;
•Prudently manage variable-rate debt exposure through the reduction of short-term and medium-term variable-rate debt;
•Maintain a large, unencumbered asset pool to provide financial flexibility;
•Fund common stock dividends and distributions to noncontrolling interests from net cash provided by operating activities;
•Manage a disciplined level of value-creation projects as a percentage of our gross real estate assets.
•Maintain high levels of pre-leasing and percentage leased in value-creation projects.
The following table presents the availability under our unsecured senior line of credit, net of amounts outstanding under our commercial paper program; outstanding forward equity sales agreements; cash, cash equivalents, and restricted cash; availability under our secured construction loan; and investments in publicly traded companies as of March 31, 2023 (dollars in thousands):
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Description | | Stated Rate | | Aggregate Commitments | | Outstanding Balance(1) | | Remaining Commitments/Liquidity |
Availability under our unsecured senior line of credit, net of amounts outstanding under our commercial paper program | | SOFR+0.835% | | $ | 4,000,000 | | | $ | 374,536 | | | $ | 3,625,000 | |
Outstanding forward equity sales agreements(2) | | | | | | | | 102,547 | |
Cash, cash equivalents, and restricted cash | | | | | | | | 1,298,384 | |
Remaining construction loan commitments | | SOFR+2.70% | | $ | 195,300 | | | $ | 72,996 | | | 121,156 | |
Investments in publicly traded companies | | | | | | | | 153,341 | |
Liquidity as of March 31, 2023 | | | | | | | | $ | 5,300,428 | |
(1)Represents outstanding principal, net of unamortized deferred financing costs, as of March 31, 2023.
(2)Represents expected net proceeds from the future settlement of 699 thousand shares of common stock under forward equity sales agreements after underwriter discounts.
Cash, cash equivalents, and restricted cash
As of March 31, 2023 and December 31, 2022, we had $1.3 billion and $858.0 million, respectively, of cash, cash equivalents, and restricted cash. We expect existing cash, cash equivalents, and restricted cash, net cash provided by operating activities, proceeds from real estate asset sales, sales of partial interests, strategic real estate joint ventures, non-real estate investment sales, borrowings under our unsecured senior line of credit, issuances under our commercial paper program, issuances of unsecured senior notes payable, borrowings under our secured construction loans, and issuances of common stock to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, such as regular quarterly dividends, distributions to noncontrolling interests, scheduled debt repayments, acquisitions, and certain capital expenditures, including expenditures related to construction activities.
Cash flows
We report and analyze our cash flows based on operating activities, investing activities, and financing activities. The following table summarizes changes in our cash flows for the three months ended March 31, 2023 and 2022 (in thousands):
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| Three Months Ended March 31, | | |
| 2023 | | 2022 | | Change |
Net cash provided by operating activities | $ | 305,570 | | | $ | 191,086 | | | $ | 114,484 | |
Net cash used in investing activities | $ | (1,039,665) | | | $ | (2,488,798) | | | $ | 1,449,133 | |
Net cash provided by financing activities | $ | 1,174,810 | | | $ | 2,752,570 | | | $ | (1,577,760) | |
Operating activities
Cash flows provided by operating activities are primarily dependent upon the occupancy level of our asset base, the rental rates of our leases, the collectibility of rent and recovery of operating expenses from our tenants, the timing of completion of development and redevelopment projects, and the timing of acquisitions and dispositions of operating properties. Net cash provided by operating activities for the three months ended March 31, 2023 increased by $114.5 million to $305.6 million, compared to $191.1 million for the three months ended March 31, 2022. The increase was primarily attributable to the following since January 1, 2022: (i) cash flows generated from our highly leased development and redevelopment projects recently placed into service, (ii) income-producing acquisitions, and (iii) increases in rental rates on lease renewals and re-leasing of space.
Investing activities
Cash used in investing activities for the three months ended March 31, 2023 and 2022 consisted of the following (in thousands):
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| Three Months Ended March 31, | | Increase (Decrease) |
| 2023 | | 2022 | |
Sources of cash from investing activities: | | | | | |
Sales of and distributions from non-real estate investments | $ | 49,385 | | | $ | 44,842 | | | $ | 4,543 | |
Change in escrow deposits | 9,366 | | | 100,635 | | | (91,269) | |
Return of capital from unconsolidated real estate joint ventures | — | | | 471 | | | (471) | |
| 58,751 | | | 145,948 | | | (87,197) | |
Uses of cash for investing activities: | | | | | |
Purchases of real estate | 177,543 | | | 1,903,800 | | | (1,726,257) | |
Additions to real estate | 873,366 | | | 666,364 | | | 207,002 | |
Investments in unconsolidated real estate joint ventures | 106 | | | 335 | | | (229) | |
Additions to non-real estate investments | 47,401 | | | 64,247 | | | (16,846) | |
| 1,098,416 | | | 2,634,746 | | | (1,536,330) | |
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Net cash used in investing activities | $ | 1,039,665 | | | $ | 2,488,798 | | | $ | (1,449,133) | |
The decrease in net cash used in investing activities for the three months ended March 31, 2023 when compared to the three months ended March 31, 2022 was primarily due to a decreased use of cash for purchases of real estate, partially offset by increased use of cash for additions to real estate. Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements under Item 1 of this report for additional information.
Financing activities
Cash flows provided by financing activities for the three months ended March 31, 2023 and 2022 consisted of the following (in thousands):
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| Three Months Ended March 31, | | |
| 2023 | | 2022 | | Change |
Borrowings from secured notes payable | $ | 14,428 | | | $ | 5,082 | | | $ | 9,346 | |
Repayments of borrowings from secured notes payable | — | | | (906) | | | 906 | |
Proceeds from issuance of unsecured senior notes payable | 996,205 | | | 1,793,318 | | | (797,113) | |
Borrowings from unsecured senior line of credit | 375,000 | | | 1,180,000 | | | (805,000) | |
Repayments of borrowings from unsecured senior line of credit | (375,000) | | | (1,180,000) | | | 805,000 | |
Proceeds from issuances under commercial paper program | 775,000 | | | 6,120,000 | | | (5,345,000) | |
Repayments of borrowings under commercial paper program | (400,000) | | | (6,390,000) | | | 5,990,000 | |
Payments of loan fees | (9,989) | | | (17,596) | | | 7,607 | |
Changes related to debt | 1,375,644 | | | 1,509,898 | | | (134,254) | |
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Contributions from and sales of noncontrolling interests | 79,337 | | | 819,610 | | | (740,273) | |
Distributions to and purchases of noncontrolling interests | (63,186) | | | (30,501) | | | (32,685) | |
Proceeds from issuance of common stock | — | | | 646,316 | | | (646,316) | |
Dividends on common stock | (209,131) | | | (183,847) | | | (25,284) | |
Taxes paid related to net settlement of equity awards | (7,854) | | | (8,906) | | | 1,052 | |
Net cash provided by financing activities | $ | 1,174,810 | | | $ | 2,752,570 | | | $ | (1,577,760) | |
Capital resources
We expect that our principal liquidity needs for the year ending December 31, 2023 will be satisfied by the multiple sources of capital shown in the table below. There can be no assurance that our sources and uses of capital will not be materially higher or lower than these expectations. Guidance for 2023 has been updated to reflect our current view of existing market conditions and assumptions for the year ending December 31, 2023. 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.
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Key Sources and Uses of Capital (In millions) | | Midpoint | | 2023 Guidance | |
| 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 | | (1) |
Net cash provided by operating activities after dividends | | 375 | | | $ | — | | | 375 | | | 350 | | | 400 | | | 375 | | |
Dispositions and sales of partial interests | | 1,900 | | | (275) | | | 1,525 | | | 1,425 | | | 1,625 | | | 1,525 | | (2) |
Future settlement of forward equity sales agreements outstanding as of December 31, 2022 | | | | 100 | | | 100 | | | 100 | | | 100 | | (3) |
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(4) | | $ | — | | | $ | 275 | | | 275 | | | 125 | | | 425 | | | 275 | | |
Total sources of capital | | | | | | | | $ | 2,875 | | | $ | 3,575 | | | $ | 3,225 | | |
Uses of capital: | | | | | | | | | | | | | |
Construction | | $ | 2,975 | | | $ | (250) | | | $ | 2,725 | | | $ | 2,575 | | | $ | 2,875 | | | $ | 2,725 | | |
Acquisitions | | 300 | | | (75) | | | 225 | | | 175 | | | 275 | | | 225 | | (5) |
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 | | (6) |
Unsecured senior line of credit, commercial paper, and other | | | | | | | | (425) | | | (275) | | | (350) | | |
Net incremental debt | | | | | | | | $ | 575 | | | $ | 725 | | | $ | 650 | | |
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(1)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.
(2)As of the date of this report, we have completed dispositions and pending transactions subject to signed letters of intent or purchase and sale agreements aggregating $865.4 million.
(3)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. Refer to Note 13 – “Stockholders’ equity” to our unaudited consolidated financial statements under Item 1 of this report for additional information.
(4)Represents estimated excess 2023 bond capital proceeds expected to be held as cash at December 31, 2023, which reduces our 2024 debt capital needs.
(5)As of March 31, 2023, we have completed acquisitions aggregating $171.9 million. Refer to “Acquisitions” within this Item 2 for additional information.
(6)Represents $1.0 billion of unsecured senior notes payable issued in February 2023. Refer to Note 10 – “Secured and unsecured senior debt” to our unaudited consolidated financial statements under Item 1 of this report for additional information.
The key assumptions behind the sources and uses of capital in the table above include a favorable capital market environment, performance of our core operating properties, lease-up and delivery of current and future development and redevelopment projects, and leasing activity. Our expected sources and uses of capital are subject to a number of variables and uncertainties, including those discussed as “Forward-looking statements” under Part I; and “Item 1A. Risk factors” and “Item 7. Management’s discussion and analysis of financial condition and results of operations” of our annual report on Form 10-K for the year ended December 31, 2022; as well as “Item 1A. Risk factors” within “Part II – Other information” of this quarterly report on Form 10-Q. We expect to update our forecast for sources and uses of capital on a quarterly basis.
Sources of capital
Net cash provided by operating activities after dividends
We expect to retain $350.0 million to $400.0 million of net cash flows from operating activities after payment of common stock dividends, and distributions to noncontrolling interests for the year ending December 31, 2023. For purposes of this calculation, changes in operating assets and liabilities are excluded as they represent timing differences. For the year ending December 31, 2023, we expect our recently delivered projects, our highly pre-leased value-creation projects expected to be delivered, and contributions from Same Properties and recently acquired properties to contribute increases in income from rentals, net operating income, and cash flows. We anticipate contractual near-term growth in annual net operating income (cash basis) of $41 million related to the commencement of contractual rents on the projects recently placed into service that are near the end of their initial free rent period. Refer to the “Cash flows” subsection of the “Liquidity” section within this Item 2 for a discussion of cash flows provided by operating activities for the three months ended March 31, 2023.
Debt
We expect to fund a portion of our capital needs for the remainder of 2023 from real estate dispositions, sales of partial interests, strategic real estate joint ventures, settlement of our outstanding forward equity sales agreements, cash on hand, issuances under our commercial paper program, borrowings under our unsecured senior line of credit, and borrowings under our secured construction loans.
Our unsecured senior line of credit has aggregate commitments of $4.0 billion and bears an interest rate of SOFR plus 0.835%. In addition to the cost of borrowing, the unsecured senior line of credit is subject to an annual facility fee of 0.14% based on the aggregate commitments outstanding. Based upon our ability to achieve certain annual sustainability targets, the interest rate and facility fee rate are also subject to upward or downward adjustments of up to four basis points with respect to the interest rate and up to one basis point with respect to the facility fee rate.
During the three months ended March 31, 2023, we achieved certain annual sustainability targets, as described in our unsecured senior line of credit agreement, which reduced the borrowing rate by four basis points for a one-year period to SOFR plus 0.835%, from SOFR plus 0.875%, and reduced the facility fee by one basis point to 0.14% from 0.15%. As of March 31, 2023, we had no outstanding balance on our unsecured senior line of credit.
We established a commercial paper program that provides us with the ability to issue up to $2.0 billion of commercial paper notes with a maturity of generally 30 days or less and with a maximum maturity of 397 days from the date of issuance. Our commercial paper program is backed by our unsecured senior line of credit, and at all times we expect to retain a minimum undrawn amount of borrowing capacity under our unsecured senior line of credit equal to any outstanding balance under our commercial paper program. We use borrowings under the program to fund short-term capital needs. The notes issued under our commercial paper program are sold under customary terms in the commercial paper market. They are typically issued at a discount to par, representing a yield to maturity dictated by market conditions at the time of issuance. In the event we are unable to issue commercial paper notes or refinance outstanding commercial paper notes under terms equal to or more favorable than those under the unsecured senior line of credit, we expect to borrow under the unsecured senior line of credit. The commercial paper notes sold during the three months ended March 31, 2023 were issued at a weighted-average yield to maturity of 5.08%. As of March 31, 2023, we had $374.5 million outstanding balance under our commercial paper program.
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 consisted of $500.0 million of 4.75% green unsecured senior notes due 2035 and $500.0 million of 5.15% unsecured senior notes due 2053.
The following table presents our average debt outstanding and weighted-average interest rate during the three months ended March 31, 2023:
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| | Three Months Ended March 31, 2023 | | | |
| | Average Debt Outstanding | | Weighted-Average Interest Rate | |
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Long-term fixed-rate debt | | $ | 10,673,206 | | | | | 3.57 | % | | | |
Short-term variable-rate unsecured senior line of credit and commercial paper program debt | | 86,314 | | | | | 5.39 | | | | |
Blended average interest rate | | 10,759,520 | | | | | 3.58 | | | | |
Loan fee amortization and annual facility fee related to unsecured senior line of credit | | N/A | | | | 0.11 | | | | |
Total/weighted average | | $ | 10,759,520 | | | | | 3.69 | % | | | |
Real estate dispositions, sales of partial interests, and issuances of common equity
We expect to continue to focus on the disciplined execution of select sales of operating assets. Future sales will provide an important source of capital to fund a portion of pending and recently completed opportunistic acquisitions and our highly leased value-creation development and redevelopment projects, and also provide significant capital for growth. We may also consider additional sales of partial interests in core Class A properties and/or development projects. For 2023, we expect real estate dispositions, sales of partial interests, and issuances of common equity ranging from $1.5 billion to $1.7 billion. The amount of asset sales necessary to meet our forecasted sources of capital will vary depending upon the amount of EBITDA associated with the assets sold.
As a REIT, we are generally subject to a 100% tax on the net income from real estate asset sales that the IRS characterizes as “prohibited transactions.” We do not expect our sales will be categorized as prohibited transactions. However, unless we meet certain “safe harbor” requirements, whether a real estate asset sale is a “prohibited transaction” will be based on the facts and circumstances of the sale. Our real estate asset sales may not always meet such “safe harbor” requirements. Refer to “Item 1A. Risk factors” of our annual report on Form 10-K for the year ended December 31, 2022 for additional information about the “prohibited transaction” tax.
Common equity transactions
During the three months ended March 31, 2023, we did not issue shares to settle our outstanding forward equity agreements. We expect to issue an aggregate of 699 thousand shares of common stock to settle all our outstanding forward equity sales agreements, and to receive net proceeds of $102.5 million. In addition, the remaining amount available under our ATM program for future sales of common stock aggregated $141.9 million as of March 31, 2023.
Other sources
Under our current shelf registration statement filed with the SEC, we may offer common stock, preferred stock, debt, and other securities. These securities may be issued, from time to time, at our discretion based on our needs and market conditions, including, as necessary, to balance our use of incremental debt capital.
Additionally, we, together with joint venture partners, hold interests in real estate joint ventures that we consolidate in our financial statements. These existing joint ventures provide significant equity capital to fund a portion of our future construction spend, and our joint venture partners may also contribute equity into these entities for financing-related activities. From April 1, 2023 to December 31, 2026, we expect to receive capital contributions of $1.4 billion from existing real estate joint venture partners to fund construction. During the year ending December 31, 2023, contributions from noncontrolling interests are expected to aggregate $746.0 million, of which approximately 73% represents expected funding from our existing joint venture partners and the remaining amount represents expected funding from partners in future real estate joint ventures.
Uses of capital
Summary of capital expenditures
One of our primary uses of capital relates to the development, redevelopment, pre-construction, and construction of properties. We currently have projects in our value-creation pipeline aggregating 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 in North America. We incur capitalized construction costs related to development, redevelopment, pre-construction, and other construction activities. We also incur additional capitalized project costs, including interest, property taxes, insurance, and other costs directly related and essential to the development, redevelopment, pre-construction, or construction of a project, during periods when activities necessary to prepare an asset for its intended use are in progress. Refer to “New Class A development and redevelopment properties: current projects” and “Summary of capital expenditures” subsections of the “Investments in real estate” section within this Item 2 for more information on our capital expenditures.
We capitalize interest cost as a cost of the project only during the period in which activities necessary to prepare an asset for its intended use are ongoing, provided that expenditures for the asset have been made and interest cost has been incurred. Capitalized interest for the three months ended March 31, 2023 and 2022 of $87.1 million and $57.8 million, respectively, was classified in investments in real estate in our consolidated balance sheets.
Property taxes, insurance on real estate, and indirect project costs, such as construction administration, legal fees, and office costs that clearly relate to projects under development or construction, are capitalized as incurred during the period an asset is undergoing activities to prepare it for its intended use. We capitalized payroll and other indirect costs related to development, redevelopment, pre-construction, and construction projects, aggregating $23.6 million and $20.4 million, and property taxes, insurance on real estate and indirect project costs aggregating $29.8 million and $21.8 million during the three months ended March 31, 2023 and 2022, respectively.
The increase in capitalized costs for the three months ended March 31, 2023, compared to the same period in 2022, was primarily due to an increase in our value-creation pipeline projects undergoing construction and pre-construction activities in 2023 over 2022. Pre-construction activities include entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building improvements. The advancement of pre-construction efforts is focused on reducing the time required to deliver projects to prospective tenants. These critical activities add significant value for future ground-up development and are required for the vertical construction of buildings. Should we cease activities necessary to prepare an asset for its intended use, the interest, taxes, insurance, and certain other direct and indirect project costs related to the asset would be expensed as incurred. Expenditures for repairs and maintenance are expensed as incurred.
Fluctuations in our development, redevelopment, and construction activities could result in significant changes to total expenses and net income. For example, had we experienced a 10% reduction in development, redevelopment, and construction activities without a corresponding decrease in indirect project costs, including interest and payroll, total expenses would have increased by approximately $11.1 million for the three months ended March 31, 2023.
We use third-party brokers to assist in our leasing activity, who are paid on a contingent basis upon successful leasing. We are required to capitalize initial direct costs related to successful leasing transactions that result directly from and are essential to the lease transaction and would not have been incurred had that lease transaction not been successfully executed. During the three months ended March 31, 2023, we capitalized total initial direct leasing costs of $28.7 million. Costs that we incur to negotiate or arrange a lease regardless of its outcome, such as fixed employee compensation, tax, or legal advice to negotiate lease terms, and other costs, are expensed as incurred.
Acquisitions
Refer to the “Acquisitions” section in Note 3 – “Investments in real estate” and to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements under Item 1 of this report, and the “Acquisitions” subsection of the “Investments in real estate” section within this Item 2 for information on our acquisitions.
Dividends
During the three months ended March 31, 2023 and 2022, we paid common stock dividends of $209.1 million and $183.8 million, respectively. The increase of $25.3 million in dividends paid on our common stock during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, was primarily due to an increase in the number of common shares outstanding subsequent to January 1, 2022 as a result of issuances of common stock under our ATM program and settlement of forward equity sales agreements, and partially due to the increase in the related dividends to $1.21 per common share paid during the three months ended March 31, 2023 from $1.15 per common share paid during the three months ended March 31, 2022.
Secured notes payable
Secured notes payable as of March 31, 2023 consisted of three notes secured by two properties. Our secured notes payable typically require monthly payments of principal and interest and had a weighted-average interest rate of approximately 7.56%. As of March 31, 2023, the total book value of our investments in real estate securing debt was approximately $243.0 million. As of March 31, 2023, our secured notes payable, including unamortized discounts and deferred financing costs, comprised approximately $649 thousand and $73.0 million of fixed-rate debt and unhedged variable-rate debt, respectively.
Unsecured senior notes payable and unsecured senior line of credit
The requirements of, and our actual performance with respect to, the key financial covenants under our unsecured senior notes payable as of March 31, 2023 were as follows:
| | | | | | | | | | | | | | |
Covenant Ratios(1) | | Requirement | | March 31, 2023 |
Total Debt to Total Assets | | Less than or equal to 60% | | 29% |
Secured Debt to Total Assets | | Less than or equal to 40% | | 0.2% |
Consolidated EBITDA(2) to Interest Expense | | Greater than or equal to 1.5x | | 20.8x |
Unencumbered Total Asset Value to Unsecured Debt | | Greater than or equal to 150% | | 334% |
(1)All covenant ratio titles utilize terms as defined in the respective debt agreements.
(2)The calculation of consolidated EBITDA is based on the definitions contained in our loan agreements and is not directly comparable to the computation of EBITDA as described in Exchange Act Release No. 47226.
In addition, the terms of the indentures, among other things, limit the ability of the Company, Alexandria Real Estate Equities, L.P., and the Company’s subsidiaries to (i) consummate a merger, or consolidate or sell all or substantially all of the Company’s assets, and (ii) incur certain secured or unsecured indebtedness.
The requirements of, and our actual performance with respect to, the key financial covenants under our unsecured senior line of credit as of March 31, 2023 were as follows:
| | | | | | | | | | | | | | | | | |
Covenant Ratios(1) | | Requirement | | March 31, 2023 |
Leverage Ratio | | Less than or equal to 60.0% | | 27.3% | |
Secured Debt Ratio | | Less than or equal to 45.0% | | 0.1% | |
Fixed-Charge Coverage Ratio | | Greater than or equal to 1.50x | | 4.31x | |
Unsecured Interest Coverage Ratio | | Greater than or equal to 1.75x | | 24.51x | |
(1)All covenant ratio titles utilize terms as defined in the credit agreement.
Estimated interest payments
Estimated interest payments on our fixed-rate debt are calculated based upon contractual interest rates, including interest payment dates and scheduled maturity dates. As of March 31, 2023, 96.1% of our debt was fixed-rate debt. For additional information regarding our debt, refer to Note 10 – “Secured and unsecured senior debt” to our unaudited consolidated financial statements under Item 1 of this report.
Ground lease obligations
Operating lease agreements
Ground lease obligations as of March 31, 2023 included leases for 41 of our properties, which accounted for approximately 9% of our total number of properties. Excluding one ground lease that expires in 2036 related to one operating property with a net book value of $6.2 million as of March 31, 2023, our ground lease obligations have remaining lease terms ranging from approximately 31 to 99 years, including available extension options that we are reasonably certain to exercise.
As of March 31, 2023, the remaining contractual payments under ground and office lease agreements in which we are the lessee aggregated $865.3 million and $33.1 million, respectively. We are required to recognize a right-of-use asset and a related liability to account for our future obligations under operating lease arrangements in which we are the lessee. The operating lease liability is measured based on the present value of the remaining lease payments, including payments during the term under our extension options that we are reasonably certain to exercise. The right-of-use asset is equal to the corresponding operating lease liability, adjusted for the initial direct leasing cost and any other consideration exchanged with the landlord prior to the commencement of the lease, as well as adjustments to reflect favorable or unfavorable terms of an acquired lease when compared with market terms at the time of acquisition. As of March 31, 2023, the present value of the remaining contractual payments aggregating $898.5 million under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $405.2 million, which was classified in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets. As of March 31, 2023, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 42 years, and the weighted-average discount rate was 4.6%. Our corresponding operating lease right-of-use assets, adjusted for initial direct leasing costs and other consideration exchanged with the landlord prior to the commencement of the lease, aggregated $554.9 million. We classify the right-of-use asset in other assets in our consolidated balance sheets. Refer to the “Lease accounting” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements under Item 1 in this report for additional information.
Commitments
As of March 31, 2023, remaining aggregate costs under contract for the construction of properties undergoing development, redevelopment, and improvements under the terms of leases approximated $2.9 billion. In addition, we may be required to incur construction costs associated with our future development projects aggregating 643,331 RSF in our Greater Boston market pursuant to an agreement whereby our counterparty may elect to execute future lease agreements on mutually agreeable terms.
We expect payments for these obligations to occur over one to three years, subject to capital planning adjustments from time to time. We may have the ability to cease the construction of certain projects, which would result in the reduction of our commitments. In addition, we have letters of credit and performance obligations aggregating $22.4 million primarily related to construction projects and an anticipated acquisition.
We are committed to funding approximately $419.2 million related to our non-real estate investments. These funding commitments are primarily associated with our investments in privately held entities that report NAV and expire at various dates over the next 12 years, with a weighted-average expiration of 8.5 years as of March 31, 2023.
Exposure to environmental liabilities
In connection with the acquisition of all of our properties, we have obtained Phase I environmental assessments to ascertain the existence of any environmental liabilities or other issues. The Phase I environmental assessments of our properties have not revealed any environmental liabilities that we believe would have a material adverse effect on our financial condition or results of operations taken as a whole, nor are we aware of any material environmental liabilities that have occurred since the Phase I environmental assessments were completed. In addition, we carry a policy of pollution legal liability insurance covering exposure to certain environmental losses at substantially all of our properties.
Foreign currency translation gains and losses
The following table presents the change in accumulated other comprehensive loss attributable to Alexandria Real Estate Equities, Inc.’s stockholders during the three months ended March 31, 2023 due to the changes in the foreign exchange rates for our real estate investments in Canada and Asia. We reclassify unrealized foreign currency translation gains and losses into net income as we dispose of these holdings.
| | | | | | | | |
(In thousands) | | Total |
Balance as of December 31, 2022 | | $ | (20,812) | |
| | |
Other comprehensive income before reclassifications | | 276 | |
Net other comprehensive income | | 276 | |
| | |
Balance as of March 31, 2023 | | $ | (20,536) | |
Inflation
As of March 31, 2023, approximately 93% of our leases (on an annual rental revenue basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Approximately 95% of our leases (on an annual rental revenue basis) contained effective annual rent escalations that were either fixed (generally ranging from 3.0% to 3.5%) or indexed based on a consumer price index or other indices. Accordingly, we do not believe that our cash flows or earnings from real estate operations are subject to significant risks from inflation. A period of inflation, however, could cause an increase in the cost of our variable-rate borrowings, including borrowings under our unsecured senior line of credit and commercial paper program, issuances of unsecured senior notes payable, and borrowings under our secured construction loans, and secured loans held by our unconsolidated real estate joint ventures.
In addition, refer to “Item 1A. Risk factors” within “Part II – Other information” in this quarterly report on Form 10-Q for a discussion about risks that inflation directly or indirectly may pose to our business.
Issuer and guarantor subsidiary summarized financial information
Alexandria Real Estate Equities, Inc. (the “Issuer”) has sold certain debt securities registered under the Securities Act of 1933, as amended, that are fully and unconditionally guaranteed by Alexandria Real Estate Equities, L.P. (the “LP” or the “Guarantor Subsidiary”), an indirectly 100% owned subsidiary of the Issuer. The Issuer’s other subsidiaries, including, but not limited to, the subsidiaries that own substantially all of its real estate (collectively, the “Combined Non-Guarantor Subsidiaries”), will not provide a guarantee of such securities, including the subsidiaries that are partially or 100% owned by the LP. The following summarized financial information presents, on a combined basis, balance sheet information as of March 31, 2023 and December 31, 2022, and results of operations and comprehensive income for the three months ended March 31, 2023 and year ended December 31, 2022 for the Issuer and the Guarantor Subsidiary. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. In presenting the summarized financial statements, the equity method of accounting has been applied to (i) the Issuer’s interests in the Guarantor Subsidiary, (ii) the Guarantor Subsidiary’s interests in the Combined Non-Guarantor Subsidiaries, and (iii) the Combined Non-Guarantor Subsidiaries’ interests in the Guarantor Subsidiary, where applicable, even though all such subsidiaries meet the requirements to be consolidated under GAAP. All assets and liabilities have been allocated to the Issuer and the Guarantor Subsidiary generally based on legal entity ownership.
The following tables present combined summarized financial information as of March 31, 2023 and December 31, 2022, for the three months ended March 31, 2023, and for the year ended December 31, 2022 for the Issuer and Guarantor Subsidiary. Amounts provided do not represent our total consolidated amounts (in thousands):
| | | | | | | | | | | | | | |
(in thousands) | | March 31, 2023 | | December 31, 2022 |
Assets: | | | | |
Cash, cash equivalents, and restricted cash | | $ | 940,093 | | | $ | 465,707 | |
Other assets | | 108,875 | | | 107,287 | |
Total assets | | $ | 1,048,968 | | | $ | 572,994 | |
| | | | |
Liabilities: | | | | |
Unsecured senior notes payable | | $ | 11,089,124 | | | $ | 10,100,717 | |
Unsecured senior line of credit and commercial paper | | 374,536 | | | — | |
Other liabilities | | 424,481 | | | 466,369 | |
Total liabilities | | $ | 11,888,141 | | | $ | 10,567,086 | |
| | | | |
| | | | | | | | | | | | | | |
(in thousands) | | Three Months Ended March 31, 2023 | | Year Ended December 31, 2022 |
Total revenues | | $ | 12,296 | | | $ | 33,052 | |
Total expenses | | (62,452) | | | (277,647) | |
Net loss | | (50,156) | | | (244,595) | |
Net income attributable to unvested restricted stock awards | | (2,606) | | | (8,392) | |
Net loss attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | | $ | (52,762) | | | $ | (252,987) | |
| | | | |
As of March 31, 2023, 421 of our 433 properties were held indirectly by the REIT’s wholly owned consolidated subsidiary, Alexandria Real Estate Equities, L.P.
Critical accounting estimates
Refer to our annual report on Form 10-K for the year ended December 31, 2022 for a discussion of our critical accounting estimates related to recognition of real estate acquired, impairment of long-lived assets, monitoring of tenant credit quality, and allowance for credit losses.
Non-GAAP measures and definitions
This section contains additional information of certain non-GAAP financial measures and the reasons why we use these supplemental measures of performance and believe they provide useful information to investors, as well as the definitions of other terms used in this report.
Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’s common stockholders
GAAP-basis accounting for real estate assets utilizes historical cost accounting and assumes that real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Nareit Board of Governors established funds from operations as an improved measurement tool. Since its introduction, funds from operations has become a widely used non-GAAP financial measure among equity REITs. We believe that funds from operations is helpful to investors as an additional measure of the performance of an equity REIT. Moreover, we believe that funds from operations, as adjusted, allows investors to compare our performance to the performance of other real estate companies on a consistent basis, without having to account for differences recognized because of real estate acquisition and disposition decisions, financing decisions, capital structure, capital market transactions, variances resulting from the volatility of market conditions outside of our control, or other corporate activities that may not be representative of the operating performance of our properties.
The 2018 White Paper published by the Nareit Board of Governors (the “Nareit White Paper”) defines funds from operations as net income (computed in accordance with GAAP), excluding gains or losses on sales of real estate, and impairments of real estate, plus depreciation and amortization of operating real estate assets, and after adjustments for our share of consolidated and unconsolidated partnerships and real estate joint ventures. Impairments represent the write-down of assets when fair value over the recoverability period is less than the carrying value due to changes in general market conditions and do not necessarily reflect the operating performance of the properties during the corresponding period.
We compute funds from operations, as adjusted, as funds from operations calculated in accordance with the Nareit White Paper, excluding significant gains, losses, and impairments realized on non-real estate investments, unrealized gains or losses on non-real estate investments, gains or losses on early extinguishment of debt, significant termination fees, acceleration of stock compensation expense due to the resignation of an executive officer, deal costs, the income tax effect related to such items, and the amount of such items that is allocable to our unvested restricted stock awards. We compute the amount that is allocable to our unvested restricted stock awards using the two-class method. Under the two-class method, we allocate net income (after amounts attributable to noncontrolling interests) to common stockholders and to unvested restricted stock awards by applying the respective weighted-average shares outstanding during each quarter-to-date and year-to-date period. This may result in a difference of the summation of the quarter-to-date and year-to-date amounts. Neither funds from operations nor funds from operations, as adjusted, should be considered as alternatives to net income (determined in accordance with GAAP) as indications of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as measures of liquidity, nor are they indicative of the availability of funds for our cash needs, including our ability to make distributions.
The following table reconciles net income to funds from operations for the share of consolidated real estate joint ventures attributable to noncontrolling interests and our share of unconsolidated real estate joint ventures for the three months ended March 31, 2023 (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 | | |
| Noncontrolling Interest Share of Consolidated Real Estate Joint Ventures | | Our Share of Unconsolidated Real Estate Joint Ventures |
| | | |
| | | | | | | |
Net income | $ | 43,831 | | | | | $ | 194 | | | |
Depreciation and amortization of real estate assets | 28,178 | | | | | 859 | | | |
| | | | | | | |
Funds from operations | $ | 72,009 | | | | | $ | 1,053 | | | |
| | | | | | | |
The following tables present a reconciliation of net income (loss) attributable to Alexandria Real Estate Equities, Inc.’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 attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, and funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted, and the related per share amounts for the three months ended March 31, 2023 and 2022. Per share amounts may not add due to rounding.
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
(In thousands) | | 2023 | | 2022 | | | | |
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic and diluted | | $ | 75,256 | | | $ | (151,650) | | | | | |
Depreciation and amortization of real estate assets | | 262,124 | | | 237,160 | | | | | |
Noncontrolling share of depreciation and amortization from consolidated real estate JVs | | (28,178) | | | (23,681) | | | | | |
Our share of depreciation and amortization from unconsolidated real estate JVs | | 859 | | | 955 | | | | | |
Allocation to unvested restricted stock awards | | (1,359) | | | — | | | | | |
Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted(1) | | 308,702 | | | 62,784 | | | | | |
Unrealized losses on non-real estate investments | | 65,855 | | | 263,433 | | | | | |
Allocation to unvested restricted stock awards | | (867) | | | (1,604) | | | | | |
Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted | | $ | 373,690 | | | $ | 324,613 | | | | | |
(1)Calculated in accordance with standards established by the Nareit Board of Governors.
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
(Per share) | | 2023 | | 2022 | | | | |
Net income (loss) per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | | $ | 0.44 | | | $ | (0.96) | | | | | |
Depreciation and amortization of real estate assets | | 1.38 | | | 1.36 | | | | | |
Allocation to unvested restricted stock awards | | (0.01) | | | — | | | | | |
Funds from operations per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | | 1.81 | | | 0.40 | | | | | |
Unrealized losses on non-real estate investments | | 0.39 | | | 1.67 | | | | | |
Allocation to unvested restricted stock awards | | (0.01) | | | (0.02) | | | | | |
Funds from operations per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted | | $ | 2.19 | | | $ | 2.05 | | | | | |
| | | | | | | | |
Weighted-average shares of common stock outstanding for calculation of: | | | | | | | | |
EPS – diluted | | 170,784 | | | 158,198 | | | | | |
Funds from operations – diluted, per share | | 170,784 | | | 158,209 | | | | | |
Funds from operations – diluted, as adjusted, per share | | 170,784 | | | 158,209 | | | | | |
Adjusted EBITDA and Adjusted EBITDA margin
We use Adjusted EBITDA as a supplemental performance measure of our operations, for financial and operational decision-making, and as a supplemental means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation, and amortization (“EBITDA”), excluding stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, impairments of real estate, and significant termination fees. Adjusted EBITDA also excludes unrealized gains or losses and significant realized gains or losses and impairments that result from our non-real estate investments. These non-real estate investment amounts are classified in our consolidated statements of operations outside of total revenues.
We believe Adjusted EBITDA provides investors with relevant and useful information as it allows investors to evaluate the operating performance of our business activities without having to account for differences recognized because of investing and financing decisions related to our real estate and non-real estate investments, our capital structure, capital market transactions, and variances resulting from the volatility of market conditions outside of our control. For example, we exclude gains or losses on the early extinguishment of debt to allow investors to measure our performance independent of our indebtedness and capital structure. We believe that adjusting for the effects of impairments and gains or losses on sales of real estate, significant impairments and realized gains or losses on non-real estate investments, and significant termination fees allows investors to evaluate performance from period to period on a consistent basis without having to account for differences recognized because of investing and financing decisions related to our real estate and non-real estate investments or other corporate activities that may not be representative of the operating performance of our properties.
In addition, we believe that excluding charges related to stock compensation and unrealized gains or losses facilitates for investors a comparison of our business activities across periods without the volatility resulting from market forces outside of our control. Adjusted EBITDA has limitations as a measure of our performance. Adjusted EBITDA does not reflect our historical expenditures or future requirements for capital expenditures or contractual commitments. While Adjusted EBITDA is a relevant measure of performance, it does not represent net income (loss) or cash flows from operations calculated and presented in accordance with GAAP, and it should not be considered as an alternative to those indicators in evaluating performance or liquidity.
In order to calculate the Adjusted EBITDA margin, we divide Adjusted EBITDA by total revenues as presented in our consolidated statements of operations. We believe that this supplemental performance measure provides investors with additional useful information regarding the profitability of our operating activities.
The following table reconciles net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA and calculates the Adjusted EBITDA margin for the three months ended March 31, 2023 and 2022 (dollars in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Net income (loss) | $ | 121,693 | | | $ | (117,392) | | | | | |
Interest expense | 13,754 | | | 29,440 | | | | | |
Income taxes | 1,131 | | | 3,571 | | | | | |
Depreciation and amortization | 265,302 | | | 240,659 | | | | | |
Stock compensation expense | 16,486 | | | 14,028 | | | | | |
Unrealized losses on non-real estate investments | 65,855 | | | 263,433 | | | | | |
Adjusted EBITDA | $ | 484,221 | | | $ | 433,739 | | | | | |
| | | | | | | |
Total revenues | $ | 700,795 | | | $ | 615,065 | | | | | |
| | | | | | | |
Adjusted EBITDA margin | 69% | | 71% | | | | |
Annual rental revenue
Annual rental revenue represents the annualized fixed base rental obligations, calculated in accordance with GAAP, for leases in effect as of the end of the period, related to our operating RSF. Annual rental revenue is presented using 100% of the annual rental revenue from our consolidated properties and our share of annual rental revenue for our unconsolidated real estate joint ventures. Annual rental revenue per RSF is computed by dividing annual rental revenue by the sum of 100% of the RSF of our consolidated properties and our share of the RSF of properties held in unconsolidated real estate joint ventures. As of March 31, 2023, approximately 93% of our leases (on an annual rental revenue basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Annual rental revenue excludes these operating expenses recovered from our tenants. Amounts recovered from our tenants related to these operating expenses, along with base rent, are classified in income from rentals in our consolidated statements of operations.
Capitalization rates
Capitalization rates are calculated based on net operating income and net operating income (cash basis) annualized for the quarter preceding the date on which the property is sold, or near-term prospective net operating income.
Cash interest
Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and debt premiums (discounts). Refer to the definition of “Fixed-charge coverage ratio” in this section within this Item 2 for a reconciliation of interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest.
Class A properties and AAA locations
Class A properties are properties clustered in AAA locations that provide 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. Class A properties generally command higher annual rental rates than other classes of similar properties.
AAA locations are in close proximity to concentrations of specialized skills, knowledge, institutions, and related businesses. Such locations are generally characterized by high barriers to entry for new landlords, high barriers to exit for tenants, and a limited supply of available space.
Construction costs related to active development and redevelopment projects under contract
Includes (i) costs incurred to date, (ii) remaining costs to complete under a general contractor’s guaranteed maximum price (“GMP”) construction contract or other fixed contracts, and (iii) our maximum committed tenant improvement allowances under our executed leases. The general contractor’s GMP contract or other fixed contracts reduce our exposure to costs of construction materials, labor, and services from third-party contractors and suppliers, unless the overruns result from, among other things, a force majeure event or a change in the scope of work covered by the contract.
Development, redevelopment, and pre-construction
A key component of our business model is our disciplined allocation of capital to the development and redevelopment of new Class A properties, and property enhancements identified during the underwriting of certain acquired properties, located in collaborative life science, agtech, and advanced technology campuses in AAA innovation clusters. These projects are generally focused on providing high-quality, generic, and reusable spaces that meet the real estate requirements of, and are reusable by, a wide range of tenants. Upon completion, each value-creation project is expected to generate increases in rental income, net operating income, and cash flows. Our development and redevelopment projects are generally in locations that are highly desirable to high-quality entities, which we believe results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.
Development projects generally consist of the ground-up development of generic and reusable facilities. Redevelopment projects consist of the permanent change in use of office, warehouse, and shell space into office/laboratory, agtech, or tech space. We generally will not commence new development projects for aboveground construction of new Class A office/laboratory, agtech, and tech space without first securing significant pre-leasing for such space, except when there is solid market demand for high-quality Class A properties.
Pre-construction activities include entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building improvements. The advancement of pre-construction efforts is focused on reducing the time required to deliver projects to prospective tenants. These critical activities add significant value for future ground-up development and are required for the vertical construction of buildings. Ultimately, these projects will provide high-quality facilities and are expected to generate significant revenue and cash flows.
Development, redevelopment, and pre-construction spending also includes the following costs: (i) amounts to bring certain acquired properties up to market standard and/or other costs identified during the acquisition process (generally within two years of acquisition) and (ii) permanent conversion of space for highly flexible, move-in-ready office/laboratory space to foster the growth of promising early- and growth-stage life science companies.
Revenue-enhancing and repositioning capital expenditures represent spending to reposition or significantly change the use of a property, including through improvement in the asset quality from Class B to Class A.
Non-revenue-enhancing capital expenditures represent costs required to maintain the current revenues of a stabilized property, including the associated costs for renewed and re-leased space.
Fixed-charge coverage ratio
Fixed-charge coverage ratio is a non-GAAP financial measure representing the ratio of Adjusted EBITDA to fixed charges. We believe that this ratio is useful to investors as a supplemental measure of our ability to satisfy fixed financing obligations and preferred stock dividends. Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and debt premiums (discounts).
The following table reconciles interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest and fixed charges and computes the fixed-charge coverage ratio for the three months ended March 31, 2023 and 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2023 | | 2022 | | | | |
Adjusted EBITDA | | $ | 484,221 | | | $ | 433,739 | | | | | |
| | | | | | | | |
Interest expense | | $ | 13,754 | | | $ | 29,440 | | | | | |
Capitalized interest | | 87,070 | | | 57,763 | | | | | |
Amortization of loan fees | | (3,639) | | | (3,103) | | | | | |
Amortization of debt (discounts) premiums | | (288) | | | 424 | | | | | |
Cash interest and fixed charges | | $ | 96,897 | | | $ | 84,524 | | | | | |
| | | | | | | | |
Fixed-charge coverage ratio: | | | | | | | | |
– period annualized | | 5.0x | | 5.1x | | | | |
– trailing 12 months | | 5.0x | | 5.1x | | | | |
Gross assets
Gross assets are calculated as total assets plus accumulated depreciation as of March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Total assets | $ | 36,912,465 | | | $ | 35,523,399 | |
Accumulated depreciation | 4,561,854 | | | 4,354,063 | |
Gross assets | $ | 41,474,319 | | | $ | 39,877,462 | |
| | | |
Initial stabilized yield (unlevered)
Initial stabilized yield is calculated as the estimated amounts of net operating income at stabilization divided by our investment in the property. Our initial stabilized yield excludes the benefit of leverage. Our cash rents related to our value-creation projects are generally expected to increase over time due to contractual annual rent escalations. Our estimates for initial stabilized yields, initial stabilized yields (cash basis), and total costs at completion represent our initial estimates at the commencement of the project. We expect to update this information upon completion of the project, or sooner if there are significant changes to the expected project yields or costs.
•Initial stabilized yield reflects rental income, including contractual rent escalations and any rent concessions over the term(s) of the lease(s), calculated on a straight-line basis.
•Initial stabilized yield (cash basis) reflects cash rents at the stabilization date after initial rental concessions, if any, have elapsed and our total cash investment in the property.
Investment-grade or publicly traded large cap tenants
Investment-grade or publicly traded large cap tenants represent tenants that are investment-grade rated or publicly traded companies with an average daily market capitalization greater than $10 billion for the twelve months ended March 31, 2023, as reported by Bloomberg Professional Services. Credit ratings from Moody’s Investors Service and S&P Global Ratings reflect credit ratings of the tenant’s parent entity, and there can be no assurance that a tenant’s parent entity will satisfy the tenant’s lease obligation upon such tenant’s default. We monitor the credit quality and related material changes of our tenants. Material changes that cause a tenant’s market capitalization to decrease below $10 billion, which are not immediately reflected in the twelve-month average, may result in their exclusion from this measure.
Investments in real estate – our value-creation pipeline of new Class A development and redevelopment projects as a percentage of gross assets
The following table presents our value-creation pipeline of new Class A development and redevelopment projects as a percentage of gross assets as of March 31, 2023:
| | | | | | | | | | | | | | | | | | | |
| | Percentage of Gross Assets | | | |
Under construction projects 69% leased/negotiating | | | 11% | | | | |
Near-term projects expected to commence construction in the next four quarters 100% leased | | | 1% | | | | |
Income-producing/potential cash flows/covered land play(1) | | | 8% | | | | |
Land | | | 3% | | | | |
| | | | | | | |
(1)Includes projects with existing buildings that are generating or can generate operating cash flows. Also includes development rights associated with existing operating campuses. These projects aggregated 1.1% of total annual rental revenue as of March 31, 2023 and are included in our industry mix chart as targeted for a future change in use. Refer to “High-quality and diverse client base in AAA locations” section within this Item 2 for additional information.
Investments in real estate – value-creation square footage currently in rental properties
The square footage presented in the table below includes RSF of buildings in operation as of March 31, 2023, primarily representing lease expirations or vacant space at recently acquired properties and projects that have an opportunity for first-time conversion from non-laboratory space to laboratory space that also have inherent future development or redevelopment opportunities and for which we have the intent to, subject to market conditions, demolish or redevelop upon expiration of the existing in-place leases and commencement of future construction:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Dev/Redev | | RSF of Lease Expirations Targeted for Development and Redevelopment |
Property/Submarket | | | 2023 | | 2024 | | Thereafter(1) | | Total |
Near-term projects: | | | | | | | | | | |
100 Edwin H. Land Boulevard/Cambridge/Inner Suburbs | | Redev | | — | | | 104,500 | | | — | | | 104,500 | |
840 Winter Street/Route 128 | | Redev | | 10,265 | | | 17,965 | | | — | | | 28,230 | |
269 East Grand Avenue/South San Francisco | | Redev | | — | | | 107,250 | | | — | | | 107,250 | |
3301 Monte Villa Parkway/Bothell | | Redev | | — | | | 50,552 | | | — | | | 50,552 | |
| | | | 10,265 | | | 280,267 | | | — | | | 290,532 | |
Intermediate-term projects: | | | | | | | | | | |
219 East 42nd Street/New York City | | Dev | | — | | | 349,947 | | | — | | | 349,947 | |
10975 and 10995 Torreyana Road/Torrey Pines | | Dev | | — | | | 84,829 | | | — | | | 84,829 | |
| | | | — | | | 434,776 | | | — | | | 434,776 | |
Future projects: | | | | | | | | | | |
311 Arsenal Street/Cambridge/Inner Suburbs | | Redev | | — | | | — | | | 308,446 | | | 308,446 | |
446, 458, 500, and 550 Arsenal Street/Cambridge/Inner Suburbs | | Dev | | — | | | — | | | 392,583 | | | 392,583 | |
380 and 420 E Street/Seaport Innovation District | | Dev | | — | | | — | | | 195,506 | | | 195,506 | |
Other/Greater Boston | | Redev | | — | | | — | | | 167,549 | | | 167,549 | |
1122 and 1150 El Camino Real/South San Francisco | | Dev | | — | | | — | | | 375,232 | | | 375,232 | |
3875 Fabian Way/Greater Stanford | | Dev | | — | | | — | | | 228,000 | | | 228,000 | |
960 Industrial Road/Greater Stanford | | Dev | | — | | | — | | | 110,000 | | | 110,000 | |
Campus Point by Alexandria/University Town Center | | Dev | | — | | | 495,192 | | | — | | | 495,192 | |
Sequence District by Alexandria/Sorrento Mesa | | Dev/Redev | | — | | | — | | | 688,034 | | | 688,034 | |
4025 and 4045 Sorrento Valley Boulevard/Sorrento Valley | | Dev | | — | | | — | | | 22,886 | | | 22,886 | |
830 4th Avenue South/SoDo | | Dev | | — | | | — | | | 42,380 | | | 42,380 | |
Other/Seattle | | Dev | | — | | | — | | | 102,437 | | | 102,437 | |
1020 Red River Street/Austin | | Redev | | — | | | 126,034 | | | — | | | 126,034 | |
Canada | | Redev | | — | | | — | | | 247,743 | | | 247,743 | |
| | | | — | | | 621,226 | | | 2,880,796 | | | 3,502,022 | |
| | | | 10,265 | | | 1,336,269 | | | 2,880,796 | | | 4,227,330 | |
(1)Includes vacant square footage as of March 31, 2023.
Joint venture financial information
We present components of balance sheet and operating results information related to our real estate joint ventures, which are not presented, or intended to be presented, in accordance with GAAP. We present the proportionate share of certain financial line items as follows: (i) for each real estate joint venture that we consolidate in our financial statements, which are controlled by us through contractual rights or majority voting rights, but of which we own less than 100%, we apply the noncontrolling interest economic ownership percentage to each financial item to arrive at the amount of such cumulative noncontrolling interest share of each component presented; and (ii) for each real estate joint venture that we do not control and do not consolidate, and are instead controlled jointly or by our joint venture partners through contractual rights or majority voting rights, we apply our economic ownership percentage to each financial item to arrive at our proportionate share of each component presented.
The components of balance sheet and operating results information related to our real estate joint ventures do not represent our legal claim to those items. For each entity that we do not wholly own, the joint venture agreement generally determines what equity holders can receive upon capital events, such as sales or refinancing, or in the event of a liquidation. Equity holders are normally entitled to their respective legal ownership of any residual cash from a joint venture only after all liabilities, priority distributions, and claims have been repaid or satisfied.
We believe that this information can help investors estimate the balance sheet and operating results information related to our partially owned entities. Presenting this information provides a perspective not immediately available from consolidated financial statements and one that can supplement an understanding of the joint venture assets, liabilities, revenues, and expenses included in our consolidated results.
The components of balance sheet and operating results information related to our real estate joint ventures are limited as an analytical tool as the overall economic ownership interest does not represent our legal claim to each of our joint ventures’ assets, liabilities, or results of operations. In addition, joint venture financial information may include financial information related to the unconsolidated real estate joint ventures that we do not control. We believe that in order to facilitate for investors a clear understanding of our operating results and our total assets and liabilities, joint venture financial information should be examined in conjunction with our consolidated statements of operations and balance sheets. Joint venture financial information should not be considered an alternative to our consolidated financial statements, which are presented and prepared in accordance with GAAP.
Mega campus
Mega campuses are cluster campuses that consist of approximately 1 million RSF or more, including operating, active development/redevelopment, and land RSF less operating RSF expected to be demolished. The following table reconciles our operating RSF as of March 31, 2023:
| | | | | | | | |
| | Operating RSF |
Mega campus | | 28,341,978 | |
Non-mega campus | | 13,603,787 | |
Total | | 41,945,765 | |
| | |
Mega campus RSF as a percentage of total operating property RSF | | 68 | % |
Net cash provided by operating activities after dividends
Net cash provided by operating activities after dividends includes the deduction for distributions to noncontrolling interests. For purposes of this calculation, changes in operating assets and liabilities are excluded as they represent timing differences.
Net debt and preferred stock to Adjusted EBITDA
Net debt and preferred stock to Adjusted EBITDA is a non-GAAP financial measure that we believe is useful to investors as a supplemental measure of evaluating our balance sheet leverage. Net debt and preferred stock is equal to the sum of total consolidated debt less cash, cash equivalents, and restricted cash, plus preferred stock outstanding as of the end of the period. Refer to the definition of “Adjusted EBITDA and Adjusted EBITDA margin” within this section of this Item 2 for further information on the calculation of Adjusted EBITDA.
The following table reconciles debt to net debt and preferred stock and computes the ratio to Adjusted EBITDA as of March 31, 2023 and December 31, 2022 (dollars in thousands):
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Secured notes payable | $ | 73,645 | | | $ | 59,045 | |
Unsecured senior notes payable | 11,089,124 | | | 10,100,717 | |
Unsecured senior line of credit and commercial paper | 374,536 | | | — | |
Unamortized deferred financing costs | 82,831 | | | 74,918 | |
Cash and cash equivalents | (1,263,452) | | | (825,193) | |
Restricted cash | (34,932) | | | (32,782) | |
Preferred stock | — | | | — | |
Net debt and preferred stock | $ | 10,321,752 | | | $ | 9,376,705 | |
| | | |
Adjusted EBITDA: | | | |
– quarter annualized | $ | 1,936,884 | | | $ | 1,846,936 | |
– trailing 12 months | $ | 1,848,018 | | | $ | 1,797,536 | |
| | | |
Net debt and preferred stock to Adjusted EBITDA: | | | |
– quarter annualized | 5.3 | x | | 5.1 | x |
– trailing 12 months | 5.6 | x | | 5.2 | x |
Net operating income, net operating income (cash basis), and operating margin
The following table reconciles net income (loss) to net operating income and net operating income (cash basis) and computes operating margin for the three months ended March 31, 2023 and 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2023 | | 2022 | | | | |
Net income (loss) | | $ | 121,693 | | | $ | (117,392) | | | | | |
| | | | | | | | |
Equity in earnings of unconsolidated real estate joint ventures | | (194) | | | (220) | | | | | |
General and administrative expenses | | 48,196 | | | 40,931 | | | | | |
Interest expense | | 13,754 | | | 29,440 | | | | | |
Depreciation and amortization | | 265,302 | | | 240,659 | | | | | |
Investment loss | | 45,111 | | | 240,319 | | | | | |
Net operating income | | 493,862 | | | 433,737 | | | | | |
Straight-line rent revenue | | (33,191) | | | (42,025) | | | | | |
Amortization of acquired below-market leases | | (21,636) | | | (13,915) | | | | | |
Net operating income (cash basis) | | $ | 439,035 | | | $ | 377,797 | | | | | |
| | | | | | | | |
Net operating income (cash basis) – annualized | | $ | 1,756,140 | | | $ | 1,511,188 | | | | | |
| | | | | | | | |
Net operating income (from above) | | $ | 493,862 | | | $ | 433,737 | | | | | |
Total revenues | | $ | 700,795 | | | $ | 615,065 | | | | | |
Operating margin | | 70% | | 71% | | | | |
Net operating income is a non-GAAP financial measure calculated as net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding equity in the earnings of our unconsolidated real estate joint ventures, general and administrative expenses, interest expense, depreciation and amortization, impairments of real estate, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and investment income or loss. We believe net operating income provides useful information to investors regarding our financial condition and results of operations because it primarily reflects those income and expense items that are incurred at the property level. Therefore, we believe net operating income is a useful measure for investors to evaluate the operating performance of our consolidated real estate assets. Net operating income on a cash basis is net operating income adjusted to exclude the effect of straight-line rent and amortization of acquired above- and below-market lease revenue adjustments required by GAAP. We believe that net operating income on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent revenue and the amortization of acquired above- and below-market leases.
Furthermore, we believe net operating income is useful to investors as a performance measure of our consolidated properties because, when compared across periods, net operating income reflects trends in occupancy rates, rental rates, and operating costs, which provide a perspective not immediately apparent from net income or loss. Net operating income can be used to measure the initial stabilized yields of our properties by calculating net operating income generated by a property divided by our investment in the property. Net operating income excludes certain components from net income in order to provide results that are more closely related to the results of operations of our properties. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level rather than at the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort comparability of operating performance at the property level. Impairments of real estate have been excluded in deriving net operating income because we do not consider impairments of real estate to be property-level operating expenses. Impairments of real estate relate to changes in the values of our assets and do not reflect the current operating performance with respect to related revenues or expenses. Our impairments of real estate represent the write-down in the value of the assets to the estimated fair value less cost to sell. These impairments result from investing decisions or a deterioration in market conditions. We also exclude realized and unrealized investment gain or loss, which results from investment decisions that occur at the corporate level related to non-real estate investments in publicly traded companies and certain privately held entities. Therefore, we do not consider these activities to be an indication of operating performance of our real estate assets at the property level. Our calculation of net operating income also excludes charges incurred from changes in certain financing decisions, such as losses on early extinguishment of debt, as these charges often relate to corporate strategy. Property operating expenses included in determining net operating income primarily consist of costs that are related to our operating properties, such as utilities, repairs, and maintenance; rental expense related to ground leases; contracted services, such as janitorial, engineering, and landscaping; property taxes and insurance; and property-level salaries. General and administrative expenses consist primarily of accounting and corporate compensation, corporate insurance, professional fees, office rent, and office supplies that are incurred as part of corporate office management. We calculate operating margin as net operating income divided by total revenues.
We believe that in order to facilitate for investors a clear understanding of our operating results, net operating income should be examined in conjunction with net income or loss as presented in our consolidated statements of operations. Net operating income should not be considered as an alternative to net income or loss as an indication of our performance, nor as an alternative to cash flows as a measure of our liquidity or our ability to make distributions.
Operating statistics
We present certain operating statistics related to our properties, including number of properties, RSF, occupancy percentage, leasing activity, and contractual lease expirations as of the end of the period. We believe these measures are useful to investors because they facilitate an understanding of certain trends for our properties. We compute the number of properties, RSF, occupancy percentage, leasing activity, and contractual lease expirations at 100% for all properties in which we have an investment, including properties owned by our consolidated and unconsolidated real estate joint ventures. For operating metrics based on annual rental revenue, refer to the definition of “Annual rental revenue” in this “Non-GAAP measures and definitions” section within this Item 2.
Same property comparisons
As a result of changes within our total property portfolio during the comparative periods presented, including changes from assets acquired or sold, properties placed into development or redevelopment, and development or redevelopment properties recently placed into service, the consolidated total income from rentals, as well as rental operating expenses in our operating results, can show significant changes from period to period. In order to supplement an evaluation of our results of operations over a given quarterly or annual period, we analyze the operating performance for all consolidated properties that were fully operating for the entirety of the comparative periods presented, referred to as same properties. We separately present quarterly and year-to-date same property results to align with the interim financial information required by the SEC in our management’s discussion and analysis of our financial condition and results of operations. These same properties are analyzed separately from properties acquired subsequent to the first day in the earliest comparable quarterly or year-to-date period presented, properties that underwent development or redevelopment at any time during the comparative periods, unconsolidated real estate joint ventures, properties classified as held for sale, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results. Additionally, termination fees, if any, are excluded from the results of same properties. Refer to the “Same properties” subsection in the “Results of operations” section within this Item 2 for additional information.
Stabilized occupancy date
The stabilized occupancy date represents the estimated date on which the project is expected to reach occupancy of 95% or greater.
Tenant recoveries
Tenant recoveries represent revenues comprising reimbursement of real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses and earned in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse us arises.
We classify rental revenues and tenant recoveries generated through the leasing of real estate assets within revenues in income from rentals in our consolidated statements of operations. We provide investors with a separate presentation of rental revenues and tenant recoveries in the “Comparison of results for the three months ended March 31, 2023 to the three months ended March 31, 2022” subsection of the “Results of operations” section within this Item 2 because we believe it promotes investors’ understanding of our operating results. We believe that the presentation of tenant recoveries is useful to investors as a supplemental measure of our ability to recover operating expenses under our triple net leases, including recoveries of utilities, repairs and maintenance, insurance, property taxes, common area expenses, and other operating expenses, and of our ability to mitigate the effect to net income for any significant variability to components of our operating expenses.
The following table reconciles income from rentals to tenant recoveries for the three months ended March 31, 2023 and 2022 (in thousands):
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2023 | | 2022 | | | | |
Income from rentals | | $ | 687,949 | | | $ | 612,554 | | | | | |
Rental revenues | | (518,302) | | | (469,537) | | | | | |
Tenant recoveries | | $ | 169,647 | | | $ | 143,017 | | | | | |
| | | | | | | | |
Total equity capitalization
Total equity capitalization is equal to the outstanding shares of common stock multiplied by the closing price on the last trading day at the end of each period presented.
Total market capitalization
Total market capitalization is equal to the sum of total equity capitalization and total debt.
Unencumbered net operating income as a percentage of total net operating income
Unencumbered net operating income as a percentage of total net operating income is a non-GAAP financial measure that we believe is useful to investors as a performance measure of the results of operations of our unencumbered real estate assets as it reflects those income and expense items that are incurred at the unencumbered property level. Unencumbered net operating income is derived from assets classified in continuing operations, which are not subject to any mortgage, deed of trust, lien, or other security interest, as of the period for which income is presented.
The following table summarizes unencumbered net operating income as a percentage of total net operating income for the three months ended March 31, 2023 and 2022 (dollars in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Unencumbered net operating income | $ | 492,860 | | | $ | 420,960 | | | | | |
Encumbered net operating income | 1,002 | | | 12,777 | | | | | |
Total net operating income | $ | 493,862 | | | $ | 433,737 | | | | | |
Unencumbered net operating income as a percentage of total net operating income | 100% | | 97% | | | | |
Weighted-average shares of common stock outstanding – diluted
From time to time, we enter into capital market transactions, including forward equity sales agreements (“Forward Agreements”), to fund acquisitions, to fund construction of our highly leased development and redevelopment projects, and for general working capital purposes. We are required to consider the potential dilutive effect of our Forward Agreements under the treasury stock method while the Forward Agreements are outstanding. As of March 31, 2023, we had Forward Agreements outstanding to sell an aggregate of 699 thousand shares of common stock. Refer to Note 13 – “Stockholders’ equity” to our unaudited consolidated financial statements under Item 1 of this report for additional information.
The weighted-average shares of common stock outstanding used in calculating EPS – diluted, funds from operations per share – diluted, and funds from operations per share – diluted, as adjusted, for the three months ended March 31, 2023 and 2022 are calculated as follows. Also shown are the weighted-average unvested shares associated with restricted stock awards used in calculating the amounts allocable to unvested stock award holders for each of the respective periods presented below (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Basic shares for earnings per share | 170,784 | | | 158,198 | | | | | |
Forward Agreements | — | | | — | | | | | |
Diluted shares for earnings per share | 170,784 | | | 158,198 | | | | | |
| | | | | | | |
Basic shares for funds from operations per share and funds from operations per share, as adjusted | 170,784 | | | 158,198 | | | | | |
Forward Agreements | — | | | 11 | | | | | |
Diluted shares for funds from operations per share and funds from operations per share, as adjusted | 170,784 | | | 158,209 | | | | | |
| | | | | | | |
Weighted-average unvested restricted shares used in the allocations of net income, funds from operations, and funds from operations, as adjusted | 2,277 | | | 1,826 | | | | | |