Alexandria Real Estate Equities, Inc., at the Vanguard of Providing High-Quality Office/Laboratory Space to Meet Historic-High Demand from the Life Science Industry, Reports: 2Q21 and 1H21 Net Income per Share - Diluted of $2.61 and $2.74, respectively; 2Q21 and 1H21 FFO per Share - Diluted, As Adjusted, of $1.93 and $3.84, respectively
PASADENA, Calif., July 26, 2021 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE:ARE) announced financial and operating results for the second quarter ended June 30, 2021.
Key highlights | ||||||||||||||||||||
Operating results | 2Q21 | 2Q20 | 1H21 | 1H20 | ||||||||||||||||
Total revenues: | ||||||||||||||||||||
In millions | $ | 509.6 | $ | 437.0 | $ | 989.5 | $ | 876.9 | ||||||||||||
Growth | 16.6% | 12.8% | ||||||||||||||||||
Net income attributable to Alexandria's common stockholders – diluted | ||||||||||||||||||||
In millions | $ | 380.6 | $ | 226.6 | $ | 388.5 | $ | 244.8 | ||||||||||||
Per share | $ | 2.61 | $ | 1.82 | $ | 2.74 | $ | 1.99 | ||||||||||||
Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted | ||||||||||||||||||||
In millions | $ | 282.3 | $ | 225.0 | $ | 545.2 | $ | 446.4 | ||||||||||||
Per share | $ | 1.93 | $ | 1.81 | $ | 3.84 | $ | 3.63 | ||||||||||||
Six-time Nareit Investor CARE Gold Award winner
2021 recipient of the Nareit Investor CARE (Communications and Reporting Excellence) Gold Award in the Large Cap Equity REIT category as the best-in-class REIT delivering transparency, quality, and efficient communications and reporting to the investment community. This represents our fourth consecutive Nareit Investor CARE Gold Award, and our sixth Gold Award over the last seven years.
Historic leasing activity and rental rate growth; continued strong net operating income and internal growth
- During 2Q21, historic demand for our high-quality office/laboratory space translated into 1.9 million RSF of leasing activity, representing the highest leasing activity in a single quarter and the second highest rental rate growth in Company history.
- Continued strong leasing activity and rental rate growth during 2Q21 and 1H21 over expiring rates on renewed and re-leased space:
2Q21 | 1H21 | |||||
Total leasing activity – RSF | 1,933,838 | 3,611,497 | ||||
Leasing of development and redevelopment space – RSF | 256,328 | 1,045,301 | ||||
Lease renewals and re-leasing of space: | ||||||
RSF (included in total leasing activity above) | 1,472,713 | 1,994,538 | ||||
Rental rate increases | 42.4% | 40.7% | ||||
Rental rate increases (cash basis) | 25.4% | 23.3% | ||||
- Net operating income (cash basis) of $1.3 billion for 2Q21 annualized, up $194.4 million, or 17.6%, compared to 2Q20 annualized.
- 95% of our leases contain contractual annual rent escalations approximating 3%.
- Same property net operating income growth:
- 3.7% and 7.8% (cash basis) for 2Q21 over 2Q20.
- 4.4% and 7.4% (cash basis) for 1H21 over 1H20.
A REIT industry-leading high-quality tenant roster with high-quality revenues and cash flows, strong margins, and operational excellence
Percentage of annual rental revenue in effect from investment-grade or | 53% | ||||
Occupancy of operating properties in North America | 94.3% | (1) | |||
Operating margin | 72% | ||||
Adjusted EBITDA margin | 69% | ||||
Weighted-average remaining lease term: | |||||
All tenants | 7.5 | years | |||
Top 20 tenants | 11.1 | years | |||
(1) | Includes 1.4 million RSF, or 3.8%, of vacancy at recently acquired properties in our North America markets, |
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 June 30, 2021.
- Net debt and preferred stock to Adjusted EBITDA of 5.8x for 2Q21 annualized.
- Fixed-charge coverage ratio of 4.9x for 2Q21 annualized.
- $4.5 billion of liquidity as of June 30, 2021.
Continued dividend strategy to share growth in cash flows with stockholders
Common stock dividend declared for 2Q21 of $1.12 per common share, aggregating $4.36 per common share for the twelve months ended June 30, 2021, up 24 cents, or 6%, over the twelve months ended June 30, 2020. Our FFO payout ratio of 60% for the three months ended June 30, 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.
Sustained strength in tenant collections
- Tenant collections remain consistently high, with 99.4% of July 2021 billings collected as of the date of this release.
- As of June 30, 2021, our tenant receivables balance was $6.7 million, representing our lowest balance since 2012.
Leasing activity of development and redevelopment projects
We continue to execute our unique and differentiated life science strategy at an accelerated pace and expand our collaborative campuses and asset base in each of our key life science cluster submarkets, and we remain strategically positioned to take maximum advantage of historic tenant demand. Demand for our value-creation development and redevelopment projects of high-quality office/laboratory space, as well as continued operational excellence at our world-class, sophisticated laboratory facilities and strong execution by our team, has translated into record leasing activity. The following table provides leasing activity of our development and redevelopment projects:
Leased RSF | In-Process RSF(1) | |||||||||||||
2020 | 1H21 | As of July 26, 2021 | ||||||||||||
1.0 million | 1.0 million | 3.0 million | ||||||||||||
(1) | Represents in-process leasing activity on near-term value-creation development and redevelopment projects that |
Value-creation development and redevelopment projects are expected to generate significant growth in rental revenues and cash flows
Under Construction | Projects Expected to Commence Construction in 2021/2022 | Incremental Projected Annual Rental Revenues | ||||
3.4 million RSF | 3.6 million RSF | >$545 million | ||||
33 Properties | + | 19 Properties | = | |||
80% Leased/Negotiating | 89% Leased/Negotiating | |||||
Delivery of fully leased value-creation projects
- During 2Q21, we placed into service development and redevelopment projects aggregating 755,565 RSF that are 100% leased across five submarkets.
- Annual net operating income (cash basis) is expected to increase by $49 million upon the burn-off of initial free rent from recently delivered projects.
Key items included in operating results
Key items included in net income attributable to Alexandria's common stockholders: | |||||||||||||||||||||||||||||||
(In millions, except per share amounts) | Amount |
Per Share – |
Amount |
Per Share – | |||||||||||||||||||||||||||
2Q21 | 2Q20 | 2Q21 | 2Q20 | 1H21 | 1H20 | 1H21 | 1H20 | ||||||||||||||||||||||||
Unrealized gains on non-real estate investments | $ | 244.0 | $ | 171.7 | $ | 1.67 | $ | 1.38 | $ | 197.8 | $ | 154.5 | $ | 1.39 | $ | 1.25 | |||||||||||||||
Realized gains on non-real estate investments | 34.8 | (1) | — | 0.24 | — | 57.7 | — | 0.41 | — | ||||||||||||||||||||||
Gain on sales of real estate | — | — | — | — | 2.8 | — | 0.02 | — | |||||||||||||||||||||||
Impairment of real estate | (4.9) | (13.2) | (0.03) | (0.11) | (10.1) | (22.9) | (0.07) | (0.18) | |||||||||||||||||||||||
Impairment of non-real estate investments | — | (4.7) | — | (0.04) | — | (24.5) | — | (0.20) | |||||||||||||||||||||||
Loss on early extinguishment of debt | — | — | — | — | (67.3) | — | (0.47) | — | |||||||||||||||||||||||
Total | $ | 273.9 | $ | 153.8 | $ | 1.88 | $ | 1.23 | $ | 180.9 | $ | 107.1 | $ | 1.28 | $ | 0.87 | |||||||||||||||
(1) | Refer to "Funds from operations and funds from operations per share" of this Earnings Press Release for additional details. |
Alexandria at the vanguard of innovation for over 750 tenants and looking to accommodate current needs plus a path for future growth
- In June 2021, we entered into a definitive agreement to expand our Alexandria Center® at Kendall Square campus through our acquisition of a 100% interest in One Rogers Street and One Charles Park for a purchase price of $815.0 million. This acquisition provides a key expansion to our mega campus strategy in our Cambridge submarket, the premier life science real estate market in the world, and consists of the following:
- Upon closing of the acquisition, we expect to redevelop the two existing buildings, along with the services of The Davis Companies, into a Class A life science project aggregating 400,000 RSF of technical office/laboratory space. We will retain our wholly owned interest in the project upon completion of the redevelopments.
- These two buildings are 100% under lease negotiation with several cutting-edge life science companies.
- The redevelopment project is targeting initial occupancy in 2023.
- Parking garage with approximately 650 spaces.
- We expect to pursue additional entitlement opportunities for future development of additional office/laboratory space at this site.
- We expect to complete this acquisition in December 2021.
- During 2Q21, we completed acquisitions in our key life science cluster submarkets aggregating 5.5 million SF (includes Sequence Drive described in the next bullet); 4.7 million RSF of value-creation opportunities; and 0.9 million RSF of operating space, for an aggregate purchase price of $1.1 billion.
- In June 2021, we acquired five operating buildings at 6260, 6290, 6310, 6340, and 6350 Sequence Drive aggregating 487,023 RSF, located in our Sorrento Mesa submarket, for a purchase price of $298.5 million, with opportunity to increase the campus by approximately 400,000 SF through ground-up development.
- The five operating buildings are currently 100% occupied with a weighted-average remaining lease term of 2.7 years. We expect to develop or redevelop these spaces upon expiration of the existing in-place leases.
- The aggregate 887,000 RSF from this acquisition provides a significant future development opportunity to expand our existing Sequence District by Alexandria campus into a flagship mega campus aggregating 1.9 million SF.
Key strategic transactions that generated capital for investment into our highly leased value-creation pipeline and acquisitions with development and redevelopment opportunities
- In April 2021, we sold a 70% partial interest in our 213 East Grand Avenue property located in our South San Francisco submarket for a sales price of $301.0 million, or $1,429 per RSF, representing capitalization rates of 4.5% and 4.0% (cash basis).
- In July 2021, we sold a 70% partial interest in our 400 Dexter Avenue North property located in our Lake Union submarket for a sales price of $254.8 million, or $1,255 per RSF, representing capitalization rates of 4.1% and 4.2% (cash basis).
Balance sheet management
Key metrics as of June 30, 2021
- $36.3 billion of total market capitalization.
- $27.4 billion of total equity capitalization.
- No debt maturities prior to 2024.
- 12.5 years weighted-average remaining term of debt as of June 30, 2021.
- Investment-grade credit ratings ranked in the top 10% among all publicly traded U.S. REITs as of June 30, 2021.
2Q21 | Goal | |||||||
Quarter | Trailing | 4Q21 | ||||||
Annualized | 12 Months | Annualized | ||||||
Net debt and preferred stock to | 5.8x | 6.2x | Less than or equal to 5.2x | |||||
Fixed-charge coverage ratio | 4.9x | 4.6x | Greater than or equal to 5.0x | |||||
Value-creation pipeline of new Class A development and redevelopment projects as a | 2Q21 | ||
Current and key near-term projects and key pending acquisition 84% leased/negotiating | 10% | ||
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 |
Key capital events
- In June 2021, we entered into forward equity sales agreements aggregating $1.5 billion to sell 8.1 million shares of our common stock (including the exercise of underwriters' option) at a public offering price of $184.00 per share, before underwriting discounts and commissions.
- In 2Q21, we settled a portion of these forward equity sales agreements by issuing 4.9 million shares and received net proceeds of $870.3 million.
- We expect to issue 3.1 million shares in 2H21 to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $547.8 million.
- We also expect to issue 1.5 million shares in 2H21 to settle our remaining outstanding January 2021 forward equity sales agreements and receive net proceeds of approximately $230.5 million.
- During 2Q21, there was no sale activity under our ATM common stock offering program. As of July 26, 2021, the remaining aggregate amount available under our current program for future sales of common stock is $500.0 million.
Investments
- As of June 30, 2021, our investments aggregated $2.0 billion, including an adjusted cost basis of $1.0 billion, unrealized gains of $1.0 billion, and $48.0 million of investments accounted for under the equity method of accounting.
- Investment income of $304.3 million for 2Q21 included $60.2 million in realized gains and $244.0 million in unrealized gains.
Subsequent events
- In July 2021, we completed acquisitions for an aggregate purchase price of $387.9 million, comprising 496,070 RSF of operating properties with future development and redevelopment opportunities and 335,825 RSF of operating properties strategically located across multiple markets.
Industry and ESG leadership: catalyzing and leading the way for positive change to benefit human health and society
Industry leadership
- We were ranked in the top 10 of the world's largest and most impactful real estate firms on the Forbes 2021 Global 2000 list determined based on sales, profits, assets, and market value.
- In June 2021, we released our 2020 Environmental, Social & Governance Report, which showcases our longstanding ESG commitment and leadership. Key highlights in the report include the company's critical efforts to tackle climate change by pioneering low-carbon and climate-resilient design solutions (refer to page iii for spotlight on 325 Binney Street), mitigating climate-related risk in our asset base, and investing in and providing essential infrastructure for sustainable agrifoodtech companies; continuing strong progress toward our 2025 environmental impact goals, including further reducing carbon emissions; and catalyzing the health, wellness, safety, and productivity of our employees and tenants, local communities, and the world at large through the built environment and our social responsibility initiatives.
Acquisitions: | ||||||||||||||||||||||||||
June 30, 2021 | ||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||
Square Footage | ||||||||||||||||||||||||||
Acquisitions With Development/Redevelopment Opportunities(1) | ||||||||||||||||||||||||||
Property | Submarket/Market | Date of Purchase | Number | Operating Occupancy | Future Development | Active Development/ | Operating With | Operating(2) | Operating | Total | Purchase Price | |||||||||||||||
Completed in 1Q21 | 25 | 94% | 374,426 | 849,411 | 431,066 | 1,353,247 | 80,032 | 3,088,182 | $ 1,873,750 | |||||||||||||||||
Completed in 2Q21: | ||||||||||||||||||||||||||
550 Arsenal Street | Cambridge/Inner Suburbs/ | 4/21/21 | 1 | 98% | 775,000 | — | 260,867 | — | — | 775,000 | (3) | 130,000 | ||||||||||||||
One Investors Way | Route 128/Greater Boston | 4/6/21 | 1 | 100% | 350,000 | — | — | 240,000 | (4) | — | 590,000 | 105,000 | ||||||||||||||
1501-1599 Industrial Road | Greater Stanford/San | 6/22/21 | 6 | 88% | — | — | 103,063 | — | — | 103,063 | 112,000 | |||||||||||||||
2475 Hanover Street | Greater Stanford/San | 4/28/21 | 1 | 100% | — | — | 83,980 | — | — | 83,980 | 105,000 | |||||||||||||||
6260, 6290, 6310, 6340, and | Sorrento Mesa/San Diego | 6/10/21 | 5 | 100% | 887,000 | — | 487,023 | — | — | 887,000 | (3) | 298,476 | ||||||||||||||
9601, 9605, 9609, 9613, and | Rockville/Maryland | 5/12/21 | 5 | 100% | 258,000 | 94,256 | — | 595,381 | — | 947,637 | 80,382 | |||||||||||||||
Other | Various | Various | 5 | 77% | 1,863,280 | 37,267 | 205,983 | 49,839 | — | 2,156,369 | 247,597 | |||||||||||||||
24 | 96% | 4,133,280 | 131,523 | 1,140,916 | 885,220 | — | 5,543,049 | 1,078,455 | ||||||||||||||||||
Completed in July 2021: | ||||||||||||||||||||||||||
Other | Various | Various | 13 | 91% | — | — | 496,070 | 335,825 | — | 831,895 | 387,941 | |||||||||||||||
Pending acquisitions: | ||||||||||||||||||||||||||
Charles Park | Cambridge/Greater Boston | December | 2 | N/A | TBD(5) | 400,000 | — | — | — | 400,000 | 815,000 | |||||||||||||||
Mercer Mega Block | Lake Union/Seattle | 2H21(6) | — | N/A | 800,000 | — | — | — | — | 800,000 | 143,500 | |||||||||||||||
2 | 800,000 | 400,000 | — | — | — | 1,200,000 | 958,500 | |||||||||||||||||||
64 | 5,307,706 | 1,380,934 | 2,068,052 | 2,574,292 | 80,032 | 10,663,126 | 4,298,646 | |||||||||||||||||||
Other future acquisitions | 661,354 | |||||||||||||||||||||||||
2021 acquisitions | $ 4,960,000 | |||||||||||||||||||||||||
2021 guidance range | $4,460,000 – $5,460,000 | |||||||||||||||||||||||||
(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. 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 redevelop the existing properties upon expiration of the existing in-place leases. Refer to "Definitions and reconciliations" of this Supplemental Information for additional details on value-creation square feet currently included in rental properties. |
(4) | Upon acquisition of this property, we entered into a 12-year lease with Moderna, Inc. |
(5) | We expect to pursue additional entitlement opportunities for future development of additional office/laboratory space. |
(6) | We continue to diligently work through various long-lead-time due diligence items. We are working toward completion of all due diligence items as soon as possible. |
Dispositions and Sales of Partial Interest | ||||||||||||||||||||||||||||
June 30, 2021 | ||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Capitalization (Cash Basis)(1) | Sales Price | Consideration | ||||||||||||||||||||||||||
Property | Submarket/Market | Date of | Interest | RSF | Capitalization | Sales Price | ||||||||||||||||||||||
Completed through July 26, 2021: | ||||||||||||||||||||||||||||
213 East Grand Avenue | South San Francisco/ | 4/22/21 | 70% | 300,930 | 4.5 % | 4.0 % | $ | 301,000 | $ | 1,429 | $ | 103,679 | ||||||||||||||||
400 Dexter Avenue North | Lake Union/Seattle | 7/23/21 | 70% | 290,111 | 4.1 % | 4.2 % | 254,814 | $ | 1,255 | $ | 95,467 | |||||||||||||||||
Land | Other/San Diego | 3/12/21 | 100% | 185,000 | N/A | N/A | 22,900 | N/A | (3) | |||||||||||||||||||
$ | 578,714 | |||||||||||||||||||||||||||
Pending dispositions or sales of partial interest: | ||||||||||||||||||||||||||||
Pending(4) | Various | TBD | TBD | $285,000 – $385,000 | TBD | TBD | ||||||||||||||||||||||
2021 guidance range | $1,670,000 – $2,170,000 | |||||||||||||||||||||||||||
(1) | Capitalization rates are calculated based upon net operating income and net operating income (cash basis) annualized for the quarter preceding the date on which the property is sold. |
(2) | 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 |
(3) | During the three months ended March 31, 2021, we recognized $2.8 million of gains on sales of real estate related to the completion of two real estate dispositions. |
(4) | Represents transactions in various stages of completion ranging from receipt of offers to signed purchase and sale agreements. |
Guidance |
June 30, 2021 |
(Dollars in millions, except per share amounts) |
On June 14, 2021, we issued a current report on Form 8-K providing updates to key 2021 guidance items in connection with our public offering of common stock. The following updated guidance is based on our current view of existing market conditions and assumptions for the year ending December 31, 2021. Our updated guidance does not reflect any significant changes from June 14, 2021, except as noted in the summary of key changes in guidance tables below. Also, refer to our discussion of "forward-looking statements" on page 7 of this Earnings Press Release for additional details. |
2021 Guidance | 2021 Guidance | |||||||||
Summary of Key Changes in Guidance | As of 7/26/21 | As of 6/14/21 | Summary of Key Changes in Guidance | As of 7/26/21 | As of 6/14/21 | |||||
EPS, FFO per share, and FFO per share, as adjusted | See updates below | Fixed-charge coverage ratio – 4Q21 annualized | Greater than or equal to 5.0x | Greater than or equal to 4.8x | ||||||
Same property net operating income increase | 2.0% to 4.0% | 1.7% to 3.7% | ||||||||
Same property net operating income increase (cash basis) | 4.7% to 6.7% | 4.3% to 6.3% | ||||||||
Projected 2021 Earnings per Share and Funds From Operations per Share Attributable to | ||||||||
As of 7/26/21 | As of 6/14/21 | |||||||
Earnings per share(1) | $3.46 to $3.54 | $1.60 to $1.70 | ||||||
Depreciation and amortization of real estate assets | 5.50 | 5.50 | ||||||
Gain on sales of real estate | (0.02) | (0.02) | ||||||
Impairment of real estate – rental properties | 0.05 | 0.04 | ||||||
Allocation to unvested restricted stock awards | (0.04) | (0.03) | ||||||
Funds from operations per share(2) | $8.95 to $9.03 | $7.09 to $7.19 | ||||||
Unrealized (gains) losses on non-real estate investments | (1.39) | 0.34 | ||||||
Realized gains on non-real estate investments(3) | (0.41) | (0.17) | ||||||
Impairment of real estate | 0.02 | — | ||||||
Loss on early extinguishment of debt | 0.47 | 0.49 | ||||||
Allocation to unvested restricted stock awards | 0.01 | (0.01) | ||||||
Other | 0.06 | (0.04) | ||||||
Funds from operations per share, as adjusted(2) | $7.71 to $7.79 | $7.70 to $7.80 | ||||||
Midpoint | $7.75 | $7.75 | ||||||
Key Assumptions | Low | High | |||||||
Occupancy percentage in North America as of December 31, 2021 | 94.3% | 94.9% | |||||||
Lease renewals and re-leasing of space: | |||||||||
Rental rate increases | 31.0% | 34.0% | |||||||
Rental rate increases (cash basis) | 18.0% | 21.0% | |||||||
Same property performance: | |||||||||
Net operating income increase | 2.0% | 4.0% | |||||||
Net operating income increase (cash basis) | 4.7% | 6.7% | |||||||
Straight-line rent revenue | $ | 119 | $ | 129 | |||||
General and administrative expenses | $ | 146 | $ | 151 | |||||
Capitalization of interest | $ | 172 | $ | 182 | |||||
Interest expense | $ | 128 | $ | 138 | |||||
Key Credit Metrics | 2021 Guidance | |
Net debt and preferred stock to Adjusted EBITDA – 4Q21 annualized | Less than or equal to 5.2x | |
Fixed-charge coverage ratio – 4Q21 annualized | Greater than or equal to 5.0x |
Key Sources and Uses of Capital | Range |
Midpoint |
Certain Completed | |||||||||||||
Sources of capital: | ||||||||||||||||
Net cash provided by operating activities after dividends | $ | 210 | $ | 250 | $ | 230 | ||||||||||
Incremental debt | 1,215 | 875 | 1,045 | |||||||||||||
2020 debt capital proceeds held in cash | 150 | 250 | 200 | |||||||||||||
Real estate dispositions and partial interest sales (refer to page 5) | 1,670 | 2,170 | 1,920 | $ | 579 | |||||||||||
Common equity | 2,975 | 3,975 | 3,475 | $ | 3,048 | (4) | ||||||||||
Total sources of capital | $ | 6,220 | $ | 7,520 | $ | 6,870 | ||||||||||
Uses of capital: | ||||||||||||||||
Construction | $ | 1,760 | $ | 2,060 | $ | 1,910 | ||||||||||
Acquisitions | 4,460 | 5,460 | 4,960 | $ | 3,340 | |||||||||||
Total uses of capital | $ | 6,220 | $ | 7,520 | $ | 6,870 | ||||||||||
Incremental debt (included above): | ||||||||||||||||
Issuance of unsecured senior notes payable | $ | 1,750 | $ | 1,750 | $ | 1,750 | $ | 1,750 | ||||||||
Principal repayments of unsecured senior notes payable | (650) | (650) | (650) | $ | (650) | |||||||||||
Unsecured senior line of credit, commercial paper, and other | 115 | (225) | (55) | |||||||||||||
Incremental debt | $ | 1,215 | $ | 875 | $ | 1,045 | ||||||||||
(1) | Excludes unrealized gains or losses after June 30, 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 "Definitions and reconciliations" of our Supplemental Information for additional details. |
(3) | Refer to "Funds from operations and funds from operations per share" of this Earnings Press Release for additional details. |
(4) | Refer to "Key capital events" on page 3 of this Earnings Press Release for additional details on our June 2021 public offering of common stock. During the six months ended June 30, 2021, we issued 13.8 million shares of common stock and received net proceeds of $2.3 billion. We expect to issue 4.6 million shares in 2H21 to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $778.4 million. |
Earnings Call Information and About the Company
June 30, 2021
We will host a conference call on Tuesday, July 27, 2021, 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 second quarter ended June 30, 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, July 27, 2021. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 10156073.
Additionally, a copy of this Earnings Press Release and Supplemental Information for the second quarter ended June 30, 2021, is available in the "For Investors" section of our website at www.are.com or by following this link: http://www.are.com/fs/2021q2.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; or 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 $36.3 billion as of June 30, 2021, and an asset base in North America of 58.1 million square feet ("SF"). The asset base in North America includes 36.7 million RSF of operating properties and 3.4 million RSF of Class A properties undergoing construction, 7.7 million RSF of near-term and intermediate-term development and redevelopment projects, and 10.3 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.
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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 2021 earnings per share attributable to Alexandria's common stockholders – diluted, 2021 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, increased interest rates and operating costs, adverse economic or real estate developments in our markets (including the impact of the ongoing COVID-19 pandemic), 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.
For additional discussion of the risks and other potential impacts posed by the outbreak of the COVID-19 pandemic and uncertainties we, our tenants, and the global and national economies face as a result, see the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K filed with the SEC on February 1, 2021.
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®, Alexandria Innovation Center®, and Alexandria Summit® 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 | |||||||||||||||||||||||
June 30, 2021 | |||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | |||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | 6/30/20 | 6/30/21 | 6/30/20 | |||||||||||||||||
Revenues: | |||||||||||||||||||||||
Income from rentals | $ | 508,371 | $ | 478,695 | $ | 461,335 | $ | 543,412 | $ | 435,856 | $ | 987,066 | $ | 873,461 | |||||||||
Other income | 1,248 | 1,154 | 2,385 | 1,630 | 1,100 | 2,402 | 3,414 | ||||||||||||||||
Total revenues | 509,619 | 479,849 | 463,720 | 545,042 | 436,956 | 989,468 | 876,875 | ||||||||||||||||
Expenses: | |||||||||||||||||||||||
Rental operations | 143,955 | 137,888 | 136,767 | 140,443 | 123,911 | 281,843 | 253,014 | ||||||||||||||||
General and administrative | 37,880 | 33,996 | 32,690 | 36,913 | 31,775 | 71,876 | 63,738 | ||||||||||||||||
Interest | 35,158 | 36,467 | 37,538 | 43,318 | 45,014 | 71,625 | 90,753 | ||||||||||||||||
Depreciation and amortization | 190,052 | 180,913 | 177,750 | 176,831 | 168,027 | 370,965 | 343,523 | ||||||||||||||||
Impairment of real estate | 4,926 | 5,129 | 25,177 | 7,680 | 13,218 | 10,055 | 15,221 | ||||||||||||||||
Loss on early extinguishment of debt | — | 67,253 | 7,898 | 52,770 | — | 67,253 | — | ||||||||||||||||
Total expenses | 411,971 | 461,646 | 417,820 | 457,955 | 381,945 | 873,617 | 766,249 | ||||||||||||||||
Equity in earnings of unconsolidated real estate joint ventures | 2,609 | 3,537 | 3,593 | 3,778 | 3,893 | 6,146 | 777 | ||||||||||||||||
Investment income | 304,263 | 1,014 | 255,137 | 3,348 | 184,657 | 305,277 | 162,836 | ||||||||||||||||
Gain on sales of real estate | — | 2,779 | 152,503 | 1,586 | — | 2,779 | — | ||||||||||||||||
Net income | 404,520 | 25,533 | 457,133 | 95,799 | 243,561 | 430,053 | 274,239 | ||||||||||||||||
Net income attributable to noncontrolling interests | (19,436) | (17,412) | (15,649) | (14,743) | (13,907) | (36,848) | (25,820) | ||||||||||||||||
Net income attributable to Alexandria Real Estate Equities, Inc.'s stockholders | 385,084 | 8,121 | 441,484 | 81,056 | 229,654 | 393,205 | 248,419 | ||||||||||||||||
Net income attributable to unvested restricted stock awards | (4,521) | (2,014) | (5,561) | (1,730) | (3,054) | (4,663) | (3,574) | ||||||||||||||||
Net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders | $ | 380,563 | $ | 6,107 | $ | 435,923 | $ | 79,326 | $ | 226,600 | $ | 388,542 | $ | 244,845 | |||||||||
Net income per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders: | |||||||||||||||||||||||
Basic | $ | 2.61 | $ | 0.04 | $ | 3.26 | $ | 0.64 | $ | 1.82 | $ | 2.74 | $ | 1.99 | |||||||||
Diluted | $ | 2.61 | $ | 0.04 | $ | 3.26 | $ | 0.63 | $ | 1.82 | $ | 2.74 | $ | 1.99 | |||||||||
Weighted-average shares of common stock outstanding: | |||||||||||||||||||||||
Basic | 145,825 | 137,319 | 133,688 | 124,901 | 124,333 | 141,596 | 122,883 | ||||||||||||||||
Diluted | 146,058 | 137,688 | 133,827 | 125,828 | 124,448 | 141,896 | 123,117 | ||||||||||||||||
Dividends declared per share of common stock | $ | 1.12 | $ | 1.09 | $ | 1.09 | $ | 1.06 | $ | 1.06 | $ | 2.21 | $ | 2.09 | |||||||||
Consolidated Balance Sheets | ||||||||||||||||||||
June 30, 2021 | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | 6/30/20 | ||||||||||||||||
Assets | ||||||||||||||||||||
Investments in real estate | $ | 21,692,385 | $ | 20,253,418 | $ | 18,092,372 | $ | 17,600,648 | $ | 16,281,125 | ||||||||||
Investments in unconsolidated real estate joint ventures | 323,622 | 325,928 | 332,349 | 330,792 | 326,858 | |||||||||||||||
Cash and cash equivalents | 323,876 | 492,184 | 568,532 | 446,255 | 206,860 | |||||||||||||||
Restricted cash | 33,697 | 42,219 | 29,173 | 38,788 | 34,680 | |||||||||||||||
Tenant receivables | 6,710 | 7,556 | 7,333 | 7,641 | 7,208 | |||||||||||||||
Deferred rent | 781,600 | 751,967 | 722,751 | 719,552 | 688,749 | |||||||||||||||
Deferred leasing costs | 321,005 | 294,328 | 272,673 | 266,440 | 274,483 | |||||||||||||||
Investments | 1,999,283 | 1,641,811 | 1,611,114 | 1,330,945 | 1,318,465 | |||||||||||||||
Other assets | 1,536,672 | 1,424,935 | 1,191,581 | 1,169,610 | 930,680 | |||||||||||||||
Total assets | $ | 27,018,850 | $ | 25,234,346 | $ | 22,827,878 | $ | 21,910,671 | $ | 20,069,108 | ||||||||||
Liabilities, Noncontrolling Interests, and Equity | ||||||||||||||||||||
Secured notes payable | $ | 227,984 | $ | 229,406 | $ | 230,925 | $ | 342,363 | $ | 344,784 | ||||||||||
Unsecured senior notes payable | 8,313,025 | 8,311,512 | 7,232,370 | 7,230,819 | 6,738,486 | |||||||||||||||
Unsecured senior line of credit and commercial paper | 299,990 | — | 99,991 | 249,989 | 440,000 | |||||||||||||||
Accounts payable, accrued expenses, and other liabilities | 1,825,387 | 1,750,687 | 1,669,832 | 1,609,340 | 1,343,181 | |||||||||||||||
Dividends payable | 170,647 | 160,779 | 150,982 | 143,040 | 133,681 | |||||||||||||||
Total liabilities | 10,837,033 | 10,452,384 | 9,384,100 | 9,575,551 | 9,000,132 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Redeemable noncontrolling interests | 11,567 | 11,454 | 11,342 | 11,232 | 12,122 | |||||||||||||||
Alexandria Real Estate Equities, Inc.'s stockholders' equity: | ||||||||||||||||||||
Common stock | 1,507 | 1,457 | 1,367 | 1,333 | 1,246 | |||||||||||||||
Additional paid-in capital | 14,194,023 | 12,994,748 | 11,730,970 | 10,711,119 | 9,443,274 | |||||||||||||||
Accumulated other comprehensive loss | (4,508) | (5,799) | (6,625) | (10,638) | (13,080) | |||||||||||||||
Alexandria Real Estate Equities, Inc.'s stockholders' equity | 14,191,022 | 12,990,406 | 11,725,712 | 10,701,814 | 9,431,440 | |||||||||||||||
Noncontrolling interests | 1,979,228 | 1,780,102 | 1,706,724 | 1,622,074 | 1,625,414 | |||||||||||||||
Total equity | 16,170,250 | 14,770,508 | 13,432,436 | 12,323,888 | 11,056,854 | |||||||||||||||
Total liabilities, noncontrolling interests, and equity | $ | 27,018,850 | $ | 25,234,346 | $ | 22,827,878 | $ | 21,910,671 | $ | 20,069,108 | ||||||||||
Funds From Operations and Funds From Operations per Share
June 30, 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 | Six Months Ended | ||||||||||||||||||||
6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | 6/30/20 | 6/30/21 | 6/30/20 | |||||||||||||||
Net income attributable to Alexandria's common stockholders | $ | 380,563 | $ | 6,107 | $ | 435,923 | $ | 79,326 | $ | 226,600 | $ | 388,542 | $ | 244,845 | |||||||
Depreciation and amortization of real estate assets | 186,498 | 177,720 | 173,392 | 173,622 | 165,040 | 364,218 | 337,668 | ||||||||||||||
Noncontrolling share of depreciation and amortization from consolidated real estate JVs | (16,301) | (15,443) | (15,032) | (15,256) | (15,775) | (31,744) | (31,645) | ||||||||||||||
Our share of depreciation and amortization from unconsolidated real estate JVs | 4,135 | 3,076 | 2,976 | 2,936 | 2,858 | 7,211 | 5,501 | ||||||||||||||
Gain on sales of real estate | — | (2,779) | (152,503) | (1,586) | — | (2,779) | — | ||||||||||||||
Impairment of real estate – rental properties | 1,754 | 5,129 | 25,177 | 7,680 | — | 6,883 | 7,644 | ||||||||||||||
Allocation to unvested restricted stock awards | (2,191) | (201) | (420) | (1,261) | (2,228) | (4,427) | (4,531) | ||||||||||||||
Funds from operations attributable to Alexandria's common stockholders – diluted(1) | 554,458 | 173,609 | 469,513 | 245,461 | 376,495 | 727,904 | 559,482 | ||||||||||||||
Unrealized (gains) losses on non-real estate investments | (244,031) | 46,251 | (233,538) | 14,013 | (171,652) | (197,780) | (154,508) | ||||||||||||||
Realized gains on non-real estate investments | (34,773) | (2) | (22,919) | — | — | — | (57,692) | — | |||||||||||||
Impairment of non-real estate investments | — | — | — | — | 4,702 | — | 24,482 | ||||||||||||||
Impairment of real estate | 3,172 | — | — | — | 13,218 | 3,172 | 15,221 | ||||||||||||||
Loss on early extinguishment of debt | — | 67,253 | 7,898 | 52,770 | — | 67,253 | — | ||||||||||||||
Termination fee | — | — | — | (86,179) | — | — | — | ||||||||||||||
Acceleration of stock compensation expense due to executive officer resignation | — | — | — | 4,499 | — | — | — | ||||||||||||||
Allocation to unvested restricted stock awards | 3,428 | (1,208) | 2,774 | 179 | 2,251 | 2,382 | 1,711 | ||||||||||||||
Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted | $ | 282,254 | $ | 262,986 | $ | 246,647 | $ | 230,743 | $ | 225,014 | $ | 545,239 | $ | 446,388 | |||||||
(1) | Calculated in accordance with standards established by the Nareit Board of Governors. 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. |
(2) | Represents realized gains related to the sales of our investments in two publicly traded biotechnology companies. |
Funds From Operations and Funds From Operations per Share (continued)
June 30, 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 | Six Months Ended | |||||||||||||||||||||
6/30/21 | 3/31/21 | 12/31/20 | 9/30/20 | 6/30/20 | 6/30/21 | 6/30/20 | ||||||||||||||||
Net income per share attributable to Alexandria's common stockholders – diluted | $ | 2.61 | $ | 0.04 | $ | 3.26 | $ | 0.63 | $ | 1.82 | $ | 2.74 | $ | 1.99 | ||||||||
Depreciation and amortization of real estate assets | 1.19 | 1.20 | 1.21 | 1.28 | 1.22 | 2.39 | 2.53 | |||||||||||||||
Gain on sales of real estate | — | (0.02) | (1.14) | (0.01) | — | (0.02) | — | |||||||||||||||
Impairment of real estate – rental properties | 0.01 | 0.04 | 0.19 | 0.06 | — | 0.05 | 0.06 | |||||||||||||||
Allocation to unvested restricted stock awards | (0.01) | — | (0.01) | (0.01) | (0.01) | (0.03) | (0.04) | |||||||||||||||
Funds from operations per share attributable to Alexandria's common stockholders – diluted | 3.80 | 1.26 | 3.51 | 1.95 | 3.03 | 5.13 | 4.54 | |||||||||||||||
Unrealized (gains) losses on non-real estate investments | (1.67) | 0.34 | (1.75) | 0.11 | (1.38) | (1.39) | (1.25) | |||||||||||||||
Realized gains on non-real estate investments | (0.24) | (0.17) | — | — | — | (0.41) | — | |||||||||||||||
Impairment of non-real estate investments | — | — | — | — | 0.04 | — | 0.20 | |||||||||||||||
Impairment of real estate | 0.02 | — | — | — | 0.11 | 0.02 | 0.12 | |||||||||||||||
Loss on early extinguishment of debt | — | 0.49 | 0.06 | 0.42 | — | 0.47 | — | |||||||||||||||
Termination fee | — | — | — | (0.69) | — | — | — | |||||||||||||||
Acceleration of stock compensation expense due to executive officer resignation | — | — | — | 0.04 | — | — | — | |||||||||||||||
Allocation to unvested restricted stock awards | 0.02 | (0.01) | 0.02 | — | 0.01 | 0.02 | 0.02 | |||||||||||||||
Funds from operations per share attributable to Alexandria's common stockholders – diluted, as adjusted | $ | 1.93 | $ | 1.91 | $ | 1.84 | $ | 1.83 | $ | 1.81 | $ | 3.84 | $ | 3.63 | ||||||||
Weighted-average shares of common stock outstanding – diluted(1) | 146,058 | 137,688 | 133,827 | 125,828 | 124,448 | 141,896 | 123,117 | |||||||||||||||
(1) | Refer to "Weighted-average shares of common stock outstanding – diluted" in the "Definitions and reconciliations" of our Supplemental Information for additional details. | ||
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