31.01.2022 22:10:00

Alexandria Real Estate Equities, Inc., at the Vanguard of the Life Science Industry, Providing High-Quality Office/Laboratory Space to Meet Historic-High Demand, Reports: 4Q21 and 2021 Net Income ...

PASADENA, Calif., Jan. 31, 2022 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE:ARE) announced financial and operating results for the fourth quarter and year ended December 31, 2021.

 

 

 

 

 

 

 

 

 

 

 

 

Key highlights







Operating results

4Q21


4Q20


2021


2020


Total revenues:









In millions

$  576.9


$     463.7


$  2,114.2


$  1,885.6


Growth

24.4%



12.1%



Net income attributable to Alexandria's common stockholders – diluted

In millions

$    72.8


$     435.9


$     563.4


$     760.8


Per share

$    0.47


$       3.26


$       3.82


$       6.01


Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted


In millions

$  303.6


$     246.6


$  1,144.9


$     923.8


Per share

$    1.97


$       1.84


$       7.76


$       7.30


Historic leasing volume and rental rate growth

  • Historic demand for our high-quality office/laboratory space has translated into record leasing volume and rental rate growth in 2021 for our overall portfolio and our value-creation pipeline.


4Q21


Previous
Quarterly
Record


2021


Previous
Annual
Record

Total leasing activity – RSF


4,094,174

(1)

1,933,838


9,516,301

(1)

5,062,722

Leasing of development and redevelopment
   space – RSF


1,795,633

(1)

1,063,951


3,867,383

(1)

2,258,262

Lease renewals and re-leasing of space:









RSF (included in total leasing activity above)


1,947,727

(1)

1,472,713


4,614,040

(1)

2,562,178

Rental rate increases


35.9%




37.9%

(1)

37.6%

Rental rate increases (cash basis)


22.9%




22.6%

(1)

18.3%


(1)     Represents the highest leasing volume and rental rate growth in Company history.

Continued strong net operating income and internal growth

  • Net operating income (cash basis) of $1.4 billion for 4Q21 annualized, up $279.9 million, or 24.2%, compared to 4Q20 annualized.
  • 95% of our leases contain contractual annual rent escalations approximating 3%.
  • Same property net operating income growth:
    • 5.0% and 7.5% (cash basis) for 4Q21 over 4Q20.
    • 4.2% and 7.1% (cash basis) for 2021 over 2020.

A REIT industry-leading high-quality tenant roster with high-quality revenues and cash flows, strong margins, and operational excellence; growth of 100 bps in occupancy over 4Q20(1)

Percentage of total annual rental revenue in effect from investment-grade or
   publicly traded large cap tenants


51%



Occupancy of operating properties in North America


94.0%



Occupancy of operating properties in North America (excluding vacancy at
   recently acquired properties)


98.7%

(1)


Operating margin


70%



Adjusted EBITDA margin


71%








Weighted-average remaining lease term:





All tenants


7.5

years

Top 20 tenants


10.9

years



(1)

Excludes 1.8 million RSF, or 4.7%, of vacancy at recently acquired properties representing lease-up opportunities that are expected to provide incremental annual rental revenues. Excluding recently acquired vacancies, occupancy was 98.7% as of December 31, 2021, up 100 bps from 97.7% as of December 31, 2020. Refer to "Occupancy" in our Supplemental Information.

Historic high demand drives visibility for future growth aggregating $610 million of incremental annual rental revenue from 7.4 million RSF of value-creation projects that are 83% leased/negotiating

Our highly leased value-creation pipeline of current and near-term projects that are under construction or that will commence construction in the next six quarters is expected to generate greater than $610 million of incremental annual rental revenues, primarily commencing from 1Q22 through 4Q24.

  • 7.4 million RSF of our value-creation projects are either under construction or expected to commence construction in the next six quarters.
  • 83% leased/negotiating.

Strong and flexible balance sheet with significant liquidity

  • Investment-grade credit ratings ranked in the top 10% among all publicly traded U.S. REITs as of December 31, 2021.
  • Net debt and preferred stock to Adjusted EBITDA of 5.2x and fixed-charge coverage ratio of 5.3x for 4Q21 annualized, representing the best ratios in the past 10 years.
  • Total debt and preferred stock to gross assets of 26% as of December 31, 2021.
  • $5.4 billion liquidity as of December 31, 2021, including our outstanding forward equity sales agreements entered into in January 2022.

Strategic value harvesting and asset recycling

During 4Q21, we completed $2.0 billion in dispositions and partial interest sales at an average capitalization rate (cash basis) of 4.2%.

Continued dividend strategy to share growth in cash flows with stockholders

Common stock dividend declared for 4Q21 of $1.15 per common share, aggregating $4.48 per common share for the year ended December 31, 2021, up 24 cents, or 6%, over the year ended December 31, 2020. Our FFO payout ratio of 60% for the three months ended December 31, 2021 allows us to continue to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Key items included in operating results

Key items included in net income attributable to Alexandria's common stockholders:












4Q21


4Q20


4Q21


4Q20


2021


2020


2021


2020

(In millions, except per share
     amounts)

Amount


Per Share –
Diluted


Amount


Per Share –
Diluted

Unrealized (losses) gains on
  non-real estate investments

$ (139.7)


$ 233.5


$ (0.91)


$ 1.75


$  43.6


$  374.0


$  0.30


$ 2.96

Significant realized gains on
  non-real estate investments





110.1



0.75


Gain on sales of real estate

124.2

(1)

152.5


0.80


1.14


126.6


154.1


0.86


1.22

Impairment of real estate


(25.2)



(0.19)


(52.7)


(55.7)


(0.35)


(0.44)

Impairment of non-real estate
  investments






(24.5)



(0.19)

Loss on early extinguishment
  of debt


(7.9)



(0.06)


(67.3)


(60.7)


(0.46)


(0.48)

Termination fee






86.2



0.68

Acceleration of stock
  compensation expense due to
  executive officer resignation






(4.5)



(0.04)

Total

$  (15.5)


$ 352.9


$ (0.11)


$ 2.64


$  160.3


$  468.9


$  1.10


$ 3.71


(1)     Refer to "Funds from operations and funds from operations per share" of this Earnings Press Release for additional details.

External growth and investment in real estate

Alexandria at the vanguard of innovation for over 850 tenants, with a focus on accommodating current tenant needs and providing a path for their future growth

  • During 4Q21, we completed acquisitions in our key life science cluster submarkets aggregating 4.1 million SF, comprising 3.9 million RSF of future development opportunities and 191,879 RSF of operating space, for an aggregate purchase price of $1.5 billion, including our previously announced acquisition of One Rogers Street in our Cambridge submarket for a purchase price of $849.4 million. These acquisitions are primarily focused on future development or redevelopment opportunities to expand our mega campuses and accommodate the future growth of our tenants.

Delivery and commencement of value-creation projects

  • During 4Q21, we placed into service development and redevelopment projects aggregating 600,768 RSF that are 100% leased across multiple submarkets.
  • Annual net operating income (cash basis) is expected to increase by $39 million upon the burn-off of initial free rent from recently delivered projects.
  • During 4Q21, we commenced construction on four value-creation projects aggregating 1.1 million RSF, including a 403,892 RSF recently acquired redevelopment project at One Rogers Street, which expands our Alexandria Center® at Kendall Square mega campus in Cambridge. We pre-leased the entire building by executing leases aggregating 403,892 RSF prior to the closing of the acquisition in December 2021.
  • In January 2022, we completed the acquisition of 202,997 SF additional development entitlements, for an aggregate of 507,997 SF, at our 421 Park Drive future development site in our Alexandria Center® for Life Science – Fenway mega campus in our Fenway submarket.

Value-creation pipeline of new Class A development and redevelopment projects as
a percentage of gross assets


4Q21

Under construction projects 82% leased/negotiating


9%

Pre-leased/negotiating near-term projects 89% leased/negotiating


2%

Income-producing/potential cash flows/covered land play(1)


6%

Land


2%




(1)

Includes projects that have existing buildings that are generating or can generate operating cash flows. Also includes development rights associated with existing operating campuses.

Balance sheet management

Credit rating outlook improvement

In October 2021, S&P Global Ratings upgraded our corporate issuer credit rating outlook to BBB+/Positive from BBB+/Stable as a result of our consistently strong operating performance and long-term positive fundamentals.

Key metrics as of December 31, 2021

  • $44.0 billion of total market capitalization.
  • $35.2 billion of total equity capitalization; represents top 10% in total equity capitalization among all publicly traded U.S. REITs as of December 31, 2021.
  • No debt maturities prior to 2024.
  • 12.1 years weighted-average remaining term of debt as of December 31, 2021.


4Q21


Goal



Quarter


Trailing


4Q22



Annualized


12 Months


Annualized

Net debt and preferred stock to
   Adjusted EBITDA


5.2x   (1)


5.6x


Less than or equal to 5.1x

Fixed-charge coverage ratio


5.3x   (1)


5.0x


Greater than or equal to 5.1x


(1)

Net debt and preferred stock to adjusted EBITDA and fixed-charge coverage represent the best ratios in the past 10 years.

Key capital events

  • In December 2021, we entered into a new ATM common stock offering program, which allows us to sell up to an aggregate of $1.0 billion of our common stock. As of January 31, 2022, the full amount remains available for future sales of our common stock.
  • In December 2021, we settled the outstanding forward equity sales agreements by issuing 4.6 million shares of common stock and received net proceeds of $770.6 million.
  • In January 2022, we entered into new forward equity sales agreements aggregating $1.7 billion to sell 8.1 million shares of our common stock (including the exercise of underwriters' option) at a public offering price of $210.00 per share, before underwriting discounts and commissions.

Investments

  • As of December 31, 2021, our investments aggregated $1.9 billion, including unrealized gains of $797.7 million.
  • Investment income of $259.5 million for the year ended December 31, 2021 included $215.8 million in realized gains and $43.6 million in unrealized gains.

Industry and ESG leadership: catalyzing and leading the way for positive change to benefit human health and society

  • In January 2022, Alexandria Venture Investments, our strategic venture capital platform, was recognized by Silicon Valley Bank in its "Healthcare Investments and Exits: 2022 Annual Report" as the #1 most active corporate investor in biopharma by new deal volume (2020-2021) for the fifth consecutive year. Alexandria's venture activity provides us with, among other things, mission-critical data and knowledge on key industry innovations and trends.
  • In December 2021, Alexandria established a new social responsibility pillar to address America's growing mental health crisis, with a focus on helping children cope with the loss of a parent or family member to suicide. By partnering with Camp Kita, a tuition-free summer camp for 8- to 17-year-olds who are impacted by the loss of a family member to suicide, we have enabled the non-profit to have long-term access to 28 acres in Acton, Maine that will serve as the camp's future home. The dedicated space will allow Camp Kita to expand its programming, advance its mission, and support the mental health of a community of young survivors.
  • As a testament to Alexandria's operational excellence and exceptional team, in November 2021, we were recognized at the 2021 BOMA Boston TOBY (The Outstanding Building of the Year) & Industry Awards for the Laboratory Building of the Year (100 Binney Street) and the Corporate Facility of the Year (200 Technology Square). Five members from our Greater Boston team were also honored for their individual achievements. The TOBY & Industry Awards recognize excellence in property management, building operations, and service in the commercial real estate industry.
  • In November 2021, Alexandria's executive chairman and founder, Joel S. Marcus, joined the National Medal of Honor Museum Foundation at the Dallas Cowboys' "Salute to Service" game to support the future National Medal of Honor Museum in Arlington, Texas and its mission to inspire visitors with the stories of our country's Medal of Honor recipients for generations to come. Mr. Marcus has served on the foundation's board of directors since 2019.
  • In October 2021, OneFifteen, an innovative, data-driven non-profit evidence-based healthcare ecosystem dedicated to the full and sustained recovery of people living with addiction, celebrated its second anniversary. Since seeing its first patients in October 2019 at its pioneering campus in Dayton, Ohio, which was designed and developed by Alexandria, OneFifteen has treated over 4,000 patients and conducted over 11,500 telehealth visits.
  • In October 2021, STEAM:Coders honored Alexandria with the Corporate Vanguard Award, recognizing our longstanding commitment to the non-profit's mission to inspire underrepresented and underserved students and their families through science, technology, engineering, art, and math (STEAM) education in preparation for academic and career opportunities.

 

Acquisitions
December 31, 2021
(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


Operating(2)


Operating


Total(3)


Purchase Price


Completed in YTD 3Q21






76


93%


7,946,121


1,434,803


2,823,087


2,801,041


238,948


14,272,878


$

3,941,902



























Completed in 4Q21:

























One Rogers Street


Cambridge/Inner Suburbs/
   
Greater Boston


12/30/21


1


100   (4)


TBD


403,892



4,367



408,259



849,422


1178 El Camino Real


South San Francisco/
   San Francisco Bay Area


11/5/21



N/A


620,000






620,000



128,000


3420 and 3440 Hillview
   Avenue


Greater Stanford/San 
   Francisco Bay Area


10/5/21


2


75




185,228




185,228



203,800


888 Bransten Road


Greater Stanford/San
   Francisco Bay Area


11/4/21



N/A


210,830






210,830



55,000


Other


Various


Various


8


75


1,888,874


144,113


489,466



187,512


2,709,965



291,030








11


75


2,719,704


548,005


674,694

(5)

4,367

(5)

187,512

(5)

4,134,282



1,527,252


2021 acquisitions






87


91%


10,665,825


1,982,808


3,497,781


2,805,408


426,460


18,407,160


$

5,469,154



























(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. Refer to "New Class A development and redevelopment properties: current projects" in our Supplemental Information for additional details on active development and redevelopment projects.

(2)

Represents the operating component of our value-creation acquisitions that is not expected to undergo development or redevelopment.

(3)

Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operations with future development or redevelopment opportunities. We intend to demolish and develop or to redevelop the existing properties upon expiration of the existing in-place leases. Refer to "Definitions and reconciliations" in our Supplemental Information for additional details on value-creation square feet currently included in rental properties.

(4)

We pre-leased the entire building by executing leases aggregating 403,892 RSF prior to closing of the acquisition in December 2021.

(5)

We expect the acquisitions completed during the three months ended December 31, 2021 to generate initial annual net operating income of $14.8 million for the twelve months following acquisition. These acquisitions included 11 operating properties with a weighted-average acquisition date of October 19, 2021 (weighted by initial annual net operating income).

 

Acquisitions (continued)
December 31, 2021
(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


Operating(2)


Operating


Total(3)


Purchase
Price


Completed in January 2022:

























421 Park Drive(4)


Fenway/Greater Boston


1/13/22



N/A


202,997

(4)





202,997


$

81,119


225 and 235 Presidential Way


Route 128/Greater Boston


1/28/22


2


100%




440,130




440,130



124,673


3301, 3303, 3305, and 3307 Hillview
   Avenue


Greater Stanford/
   
San Francisco Bay Area


1/6/22


4


100




292,013




292,013



446,000


Costa Verde by Alexandria


University Town Center/

   San Diego


1/11/22


1


100


537,000



8,730




545,730



125,000


Alexandria Center® for Life Science –
   Durham


Research Triangle/Research
   Triangle


1/11/22



N/A


1,175,000






1,175,000



99,428


104 and 108/110/112/114 TW
   Alexander Drive, 2752 East NC
   Highway 54, and 10 South Triangle
   Drive(5)


Research Triangle/Research
   Triangle


1/6/22


4


88


750,000



69,484




819,484



80,000


Other


Various


Various


7


92


228,250



428,097


381,760



1,038,107



263,620








18


96%


2,893,247



1,238,454


381,760



4,513,461



1,219,840


Pending acquisitions:

























Mercer Mega Block


Lake Union/Seattle


February
2022



N/A


800,000






800,000



143,500


Intersection Campus


Texas


February
2022


9


81%




998,304




998,304



402,000


























545,500


Other targeted acquisitions(6)
























1,234,660


2022 acquisitions (midpoint)























$

3,000,000




























2022 guidance range





















$2,500,000 – $3,500,000




























(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 the operating component of our value-creation acquisitions that is not expected to undergo development or redevelopment.

(3)

Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operation with future development or redevelopment opportunities. We intend to demolish and develop or to redevelop the existing properties upon expiration of the existing in-place leases. Refer to "Definitions and reconciliations" in our Supplemental Information for additional details on value-creation square feet currently included in rental properties.

(4)

Represents the incremental purchase price related to the achievement of additional entitlement rights of 202,997 SF at our Alexandria Center® for Life Science – Fenway mega campus.

(5)

Represents the acquisition of fee simple interests in the land underlying our recently acquired 108/110/112/114 TW Alexander Drive buildings, which were previously subject to ground leases.

(6)

Includes a land parcel aggregating 680,000 RSF of future development opportunity at 1150 El Camino Real in our South San Francisco submarket. The property is a transit-oriented opportunity with a BART station located on premises that will combine with other contiguous land that was recently acquired, including 1122 and 1178 El Camino Real, to create a new mega campus consisting of 2.0 million RSF of future development opportunities.

 

Dispositions and Sales of Partial Interest
December 31, 2021
(Dollars in thousands)

Property


Submarket/Market


Date of
Sale


Interest
Sold


RSF


Capitalization    
Rate    


Capitalization   
Rate   

(Cash Basis)   


Sales Price(1)


Sales Price
per RSF


Gain or
Consideration
in Excess of
Book Value


























Completed in YTD 3Q21









1,011,263








$                       663,283




$     201,490





























Completed in 4Q21:


























50 and 60 Binney Street


Cambridge/Inner Suburbs/
   
Greater Boston


12/15/21


66%



532,395


4.3%



3.9%



782,259


$       2,226


457,529

(3)




























409 and 499 Illinois Street


Mission Bay/San Francisco Bay Area


10/5/21


35%

(2)


455,069


5.0%



4.2%



274,681


$       1,366


113,756

(3)


1500 Owens Street


Mission Bay/San Francisco Bay Area



25.1%

(2)


158,267

































455 Mission Bay Boulevard
   South


Mission Bay/San Francisco Bay Area


12/16/21


75%



228,140


4.1%



3.8%



381,355


$       1,295


221,868

(3)


1700 Owens Street


Mission Bay/San Francisco Bay Area





164,513



































Menlo Gateway


Greater Stanford/San Francisco Bay
   Area


12/21/21


(4)



772,983


5.4%



5.1%



397,851

(5)

$       1,430


101,050

(6)


2301 5th Avenue


Lake Union/Seattle


12/22/21


100%



197,135


6.3%



4.9%



118,707


$          602


23,175

(6)


Other


Various


Various


100%



79,007


N/A



N/A



12,000


N/A













2,587,509








1,966,853




917,378



2021 dispositions and sales of partial interest







3,598,772








$                    2,630,136

(7)



$  1,118,868

(8)




























(1)

For sales of partial interests; represents the contractual sales price for the percentage interest of the property sold by us.

(2)

We recapitalized these consolidated real estate joint ventures and sold: (i) a 35% interest in 409 and 499 Illinois Street and (ii) a 25.1% interest in 1500 Owens Street, resulting in an acquisition by the investor of a 75% ownership interest in each joint venture, including the interest held by our previous joint venture partners.

(3)

For each partial interest sale, we retained control over the newly formed real estate joint venture and therefore continued to consolidate this property. We accounted for the difference between the consideration received and the book value of the interest sold as an equity transaction, with no gain or loss recognized in earnings.

(4)

We sold our 49.0% interest in Menlo Gateway, which represents our entire equity interest in the unconsolidated real estate joint venture.

(5)

Represents a sales price of $541.5 million less our share of the debt held by the unconsolidated real estate joint venture assumed by the buyer aggregating $143.6 million.

(6)

We sold our entire interest in this property and recognized the related gain in earnings, classified within gain (loss) on sales of real estate in our consolidated statements of operations.

(7)

Represents the highest total volume of dispositions in Company history, at a weighted-average capitalization rate (cash basis) of 4.1%.

(8)

We achieved a weighted-average value-creation margin of 75% on our completed dispositions and sales of partial interest.

 

Dispositions and Sales of Partial Interest (continued)
December 31, 2021
(Dollars in thousands)


Property


Market


Date of
Sale


Interest
Sold


RSF


Sales Price

















Partial interest sale


Greater Boston


1Q22


TBD



TBD


$         650,000

$         750,000


Other real estate dispositions and partial interest sales




1Q22


TBD



TBD


50,000

150,000


Other targeted real estate dispositions and partial interest sales











600,000

1,200,000

















2022 guidance range











$      1,300,000

$      2,100,000

















 

Guidance
December 31, 2021
(Dollars in millions, except per share amounts)


The following guidance is based on our current view of existing market conditions and assumptions for the year ending December 31, 2022. 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 9 of this Earnings Press Release for additional details.


Projected 2022 Earnings per Share and Funds From Operations per Share Attributable to
   Alexandria's Common Stockholders – Diluted

Earnings per share(1)


$2.65 to $2.85

Depreciation and amortization of real estate assets


5.65

Allocation to unvested restricted stock awards


(0.04)

Funds from operations per share(2)


$8.26 to $8.46

Midpoint


$8.36







Key Assumptions


Low


High


Occupancy percentage in North America as of December 31, 2022


95.2%


95.8%


Lease renewals and re-leasing of space:






Rental rate increases


30.0%


35.0%


Rental rate increases (cash basis)


18.0%


23.0%


Same property performance:






Net operating income increase


5.5%


7.5%


Net operating income increase (cash basis)


6.5%


8.5%


Straight-line rent revenue


$            150


$            160


General and administrative expenses


$            168


$            176


Capitalization of interest


$            269


$            279


Interest expense


$              90


$            100














Key Credit Metrics


2022 Guidance

Net debt and preferred stock to Adjusted EBITDA – 4Q22 annualized


Less than or equal to 5.1x

Fixed-charge coverage ratio – 4Q22 annualized


Greater than or equal to 5.1x




Key Sources and Uses of Capital


Range


Midpoint


Certain

Completed
Items

Sources of capital:











Net cash provided by operating activities after
   dividends


$    275


$    325


$

300




Incremental debt


1,375


1,025



1,200



Real estate dispositions and partial interest sales
   (refer to page 7)


1,300


2,100



1,700




Common equity


2,250


3,250



2,750


$  1,691


Total sources of capital


$ 5,200


$ 6,700


$

5,950




Uses of capital:











Construction


$ 2,700


$ 3,200


$

2,950




Acquisitions (refer to page 5)


2,500


3,500



3,000


$  1,220


Total uses of capital


$ 5,200


$ 6,700


$

5,950




Incremental debt (included above):











Issuance of unsecured senior notes payable


$ 1,200


$ 1,700


$

1,450




Unsecured senior line of credit, commercial paper,
   and other


175


(675)



(250)




Incremental debt


$ 1,375


$ 1,025


$

1,200















(1)

Excludes unrealized gains or losses after December 31, 2021 that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted.

(2)

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.



Earnings Call Information and About the Company
December 31, 2021

We will host a conference call on Tuesday, February 1, 2022, 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 fourth quarter and year ended December 31, 2021. 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, February 1, 2022. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 10161869.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the fourth quarter and year ended December 31, 2021, is available in the "For Investors" section of our website at www.are.com or by following this link: https://www.are.com/fs/2021q4.pdf.

For any questions, please contact Joel S. Marcus, executive chairman and founder; Stephen A. Richardson, co-chief executive officer; Peter M. Moglia, co-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) 322-2216; or Sara M. Kabakoff, vice president – communications, at (626) 578-0777.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® urban office real estate investment trust ("REIT"), is the first, longest-tenured, and pioneering owner, operator, and developer uniquely focused on collaborative life science, agtech, and technology campuses in AAA innovation cluster locations, with a total market capitalization of $44.0 billion as of December 31, 2021, and an asset base in North America of 67.0 million square feet ("SF"). The asset base in North America includes 38.8 million RSF of operating properties and 4.8 million RSF of Class A properties undergoing construction, 8.7 million RSF of near-term and intermediate-term development and redevelopment projects, and 14.7 million SF of future development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science, agtech, and 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, agtech, 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 2022 earnings per share attributable to Alexandria's common stockholders – diluted, 2022 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.

Alexandria®, Lighthouse Design® logo, Building the Future of Life-Changing Innovation™, That's What's in Our DNA®, Labspace®, 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
December 31, 2021
(Dollars in thousands, except per share amounts)



Three Months Ended


Year Ended



12/31/21


9/30/21


6/30/21


3/31/21


12/31/20


12/31/21


12/31/20

Revenues:















Income from rentals


$       574,656


$       546,527


$       508,371


$       478,695


$       461,335


$    2,108,249


$    1,878,208

Other income


2,267


1,232


1,248


1,154


2,385


5,901


7,429

Total revenues


576,923


547,759


509,619


479,849


463,720


2,114,150


1,885,637
















Expenses:















Rental operations


175,717


165,995


143,955


137,888


136,767


623,555


530,224

General and administrative


41,654


37,931


37,880


33,996


32,690


151,461


133,341

Interest


34,862


35,678


35,158


36,467


37,538


142,165


171,609

Depreciation and amortization


239,254


210,842


190,052


180,913


177,750


821,061


698,104

Impairment of real estate



42,620


4,926


5,129


25,177


52,675


48,078

Loss on early extinguishment of debt





67,253


7,898


67,253


60,668

Total expenses


491,487


493,066


411,971


461,646


417,820


1,858,170


1,642,024
















Equity in earnings of unconsolidated real estate joint ventures


3,018


3,091


2,609


3,537


3,593


12,255


8,148

Investment (loss) income


(112,884)


67,084


304,263


1,014


255,137


259,477


421,321

Gain (loss) on sales of real estate


124,226

(1)

(435)



2,779


152,503


126,570

(1)

154,089

Net income


99,796


124,433


404,520


25,533


457,133


654,282


827,171

Net income attributable to noncontrolling interests


(24,901)


(21,286)


(19,436)


(17,412)


(15,649)


(83,035)


(56,212)

Net income attributable to Alexandria Real Estate Equities, Inc.'s
   stockholders


74,895


103,147


385,084


8,121


441,484


571,247


770,959

Net income attributable to unvested restricted stock awards


(2,098)


(1,883)


(4,521)


(2,014)


(5,561)


(7,848)


(10,168)

Net income attributable to Alexandria Real Estate Equities, Inc.'s common
   stockholders


$         72,797


$       101,264


$       380,563


$           6,107


$       435,923


$       563,399


$       760,791
















Net income per share attributable to Alexandria Real Estate Equities, Inc.'s
   common stockholders:















Basic


$             0.47


$             0.67


$             2.61


$             0.04


$             3.26


$             3.83


$             6.03

Diluted


$             0.47


$             0.67


$             2.61


$             0.04


$             3.26


$             3.82


$             6.01
















Weighted-average shares of common stock outstanding:















Basic


153,464


150,854


145,825


137,319


133,688


146,921


126,106

Diluted


154,307


151,561


146,058


137,688


133,827


147,460


126,490
















Dividends declared per share of common stock


$             1.15


$             1.12


$             1.12


$             1.09


$             1.09


$             4.48


$             4.24



(1)

Refer to "Funds from operations and funds from operations per share" of this Earnings Press Release for additional details.

 

Consolidated Balance Sheets
December 31, 2021
(In thousands)



12/31/21


9/30/21


6/30/21


3/31/21


12/31/20

Assets











Investments in real estate


$  24,980,669


$  23,071,514


$  21,692,385


$  20,253,418


$  18,092,372

Investments in unconsolidated real estate joint ventures


38,483


321,737


323,622


325,928


332,349

Cash and cash equivalents


361,348


325,872


323,876


492,184


568,532

Restricted cash


53,879


42,182


33,697


42,219


29,173

Tenant receivables


7,379


7,749


6,710


7,556


7,333

Deferred rent


839,335


816,219


781,600


751,967


722,751

Deferred leasing costs


402,898


329,952


321,005


294,328


272,673

Investments


1,876,564


2,046,878


1,999,283


1,641,811


1,611,114

Other assets


1,658,818


1,596,615


1,536,672


1,424,935


1,191,581

Total assets


$  30,219,373


$  28,558,718


$  27,018,850


$  25,234,346


$  22,827,878












Liabilities, Noncontrolling Interests, and Equity











Secured notes payable


$       205,198


$       198,758


$       227,984


$       229,406


$       230,925

Unsecured senior notes payable


8,316,678


8,314,851


8,313,025


8,311,512


7,232,370

Unsecured senior line of credit and commercial paper


269,990


749,978


299,990



99,991

Accounts payable, accrued expenses, and other liabilities


2,210,410


2,149,450


1,825,387


1,750,687


1,669,832

Dividends payable


183,847


173,560


170,647


160,779


150,982

Total liabilities


11,186,123


11,586,597


10,837,033


10,452,384


9,384,100












Commitments and contingencies






















Redeemable noncontrolling interests


9,612


11,681


11,567


11,454


11,342












Alexandria Real Estate Equities, Inc.'s stockholders' equity:











Common stock


1,580


1,532


1,507


1,457


1,367

Additional paid-in capital


16,195,256


14,727,735


14,194,023


12,994,748


11,730,970

Accumulated other comprehensive loss


(7,294)


(6,029)


(4,508)


(5,799)


(6,625)

Alexandria Real Estate Equities, Inc.'s stockholders' equity


16,189,542


14,723,238


14,191,022


12,990,406


11,725,712

Noncontrolling interests


2,834,096


2,237,202


1,979,228


1,780,102


1,706,724

Total equity


19,023,638


16,960,440


16,170,250


14,770,508


13,432,436

Total liabilities, noncontrolling interests, and equity


$  30,219,373


$  28,558,718


$  27,018,850


$  25,234,346


$  22,827,878

 

Funds From Operations and Funds From Operations per Share
December 31, 2021
(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


Year Ended



12/31/21


9/30/21


6/30/21


3/31/21


12/31/20


12/31/21


12/31/20

Net income attributable to Alexandria's common stockholders


$     72,797


$   101,264


$   380,563


$       6,107


$   435,923


$   563,399


$   760,791

Depreciation and amortization of real estate assets


234,979


205,436


186,498


177,720


173,392


804,633


684,682

Noncontrolling share of depreciation and amortization from consolidated real
   estate JVs


(21,265)


(17,871)


(16,301)


(15,443)


(15,032)


(70,880)


(61,933)

Our share of depreciation and amortization from unconsolidated real estate JVs


3,058


3,465


4,135


3,076


2,976


13,734


11,413

(Gain) loss on sales of real estate


(124,226)

(1)

435



(2,779)


(152,503)


(126,570)

(1)

(154,089)

Impairment of real estate – rental properties



18,602


1,754


5,129


25,177


25,485


40,501

Allocation to unvested restricted stock awards



(1,472)


(2,191)


(201)


(420)


(6,315)


(7,018)

Funds from operations attributable to Alexandria's common stockholders – 
   diluted(2)


165,343


309,859


554,458


173,609


469,513


1,203,486


1,274,347

Unrealized losses (gains) on non-real estate investments


139,716


14,432


(244,031)


46,251


(233,538)


(43,632)


(374,033)

Significant realized gains on non-real estate investments



(52,427)


(34,773)


(22,919)



(110,119)


Impairment of non-real estate investments








24,482

Impairment of real estate



24,018


3,172




27,190


15,221

Loss on early extinguishment of debt





67,253


7,898


67,253


60,668

Termination fee








(86,179)

Acceleration of stock compensation expense due to executive officer resignation








4,499

Allocation to unvested restricted stock awards


(1,432)


149


3,428


(1,208)


2,774


710


4,790

Funds from operations attributable to Alexandria's common stockholders – 
   diluted, as adjusted


$   303,627


$   296,031


$   282,254


$   262,986


$   246,647


$  1,144,888


$   923,795



(1)

Includes $101.1 million related to the sale of our entire 49.0% interest in the unconsolidated real estate joint venture at Menlo Gateway.

(2)

Calculated in accordance with standards established by the Nareit Board of Governors.

 

Funds From Operations and Funds From Operations per Share (continued)
December 31, 2021
(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


Year Ended



12/31/21


9/30/21


6/30/21


3/31/21


12/31/20


12/31/21


12/31/20

Net income per share attributable to Alexandria's common stockholders –
   diluted


$         0.47


$         0.67


$         2.61


$         0.04


$         3.26


$         3.82


$         6.01

Depreciation and amortization of real estate assets


1.40


1.26


1.19


1.20


1.21


5.07


5.01

(Gain) loss on sales of real estate


(0.80)




(0.02)


(1.14)


(0.86)


(1.22)

Impairment of real estate – rental properties



0.12


0.01


0.04


0.19


0.17


0.32

Allocation to unvested restricted stock awards



(0.01)


(0.01)



(0.01)


(0.04)


(0.05)

Funds from operations per share attributable to Alexandria's common
   stockholders – diluted


1.07


2.04


3.80


1.26


3.51


8.16


10.07

Unrealized losses (gains) on non-real estate investments


0.91


0.10


(1.67)


0.34


(1.75)


(0.30)


(2.96)

Significant realized gains on non-real estate investments



(0.35)


(0.24)


(0.17)



(0.75)


Impairment of non-real estate investments








0.19

Impairment of real estate



0.16


0.02




0.18


0.12

Loss on early extinguishment of debt





0.49


0.06


0.46


0.48

Termination fee








(0.68)

Acceleration of stock compensation expense due to executive officer resignation








0.04

Allocation to unvested restricted stock awards


(0.01)



0.02


(0.01)


0.02


0.01


0.04

Funds from operations per share attributable to Alexandria's common
   stockholders – diluted, as adjusted


$         1.97


$         1.95


$         1.93


$         1.91


$         1.84


$         7.76


$         7.30
















Weighted-average shares of common stock outstanding – diluted


154,307


151,561


146,058


137,688


133,827


147,460


126,490
















 

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