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Section 1: 8-K (8-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 25, 2019


ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)

Maryland
 
1-12993
 
95-4502084
(State or other jurisdiction of
incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)




385 East Colorado Boulevard, Suite 299
 
 
Pasadena, California
 
91101
(Address of principal executive offices)
 
(Zip Code)


Registrant’s telephone number, including area code: (626) 578-0777
 

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o               Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o               Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o               Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o               Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4 (c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o






Item 1.01. Entry into a Material Definitive Agreement.

On April 25, 2019, Alexandria Real Estate Equities, Inc. (the “Company”) and its subsidiary Alexandria Real Estate Equities, L.P. entered into an escrow agreement (the “Citibank Escrow Agreement”) with Citibank, N.A., as administrative agent, certain lenders, and Shearman & Sterling LLP, as escrow agent (the “Unsecured Senior Bank Term Loan Escrow Agent”), pursuant to which the Company and the other parties to the Fifth Amended and Restated Term Loan Agreement (the “Unsecured Senior Bank Term Loan”) submitted their signature pages to the Unsecured Senior Bank Term Loan to be held by the Unsecured Senior Bank Term Loan Escrow Agent in escrow. Pursuant to the Citibank Escrow Agreement, the Unsecured Senior Bank Term Loan Escrow Agent will release the signatures to the Unsecured Senior Bank Term Loan and the Unsecured Senior Bank Term Loan will become effective upon satisfaction by the Company of certain conditions precedent to the effectiveness of the Unsecured Senior Bank Term Loan set forth in the Unsecured Senior Bank Term Loan. If the conditions are not satisfied by the Company on or prior to July 2, 2019, the Unsecured Senior Bank Term Loan signature pages will be deemed to have been revoked, the escrow arrangements under the Citibank Escrow Agreement will terminate, and the Unsecured Senior Bank Term Loan will not become effective.

The conditions to be satisfied by the Company include the delivery of certain legal opinions and certificates and the absence of any default under the Unsecured Senior Bank Term Loan. While there can be no assurance in this regard, the Company expects that it will satisfy the conditions on or prior to June 28, 2019, and that the Unsecured Senior Bank Term Loan will thereupon become effective. The purpose and effect of the Citibank Escrow Agreement are to permit the Company to “lock in” currently the terms and conditions of the Unsecured Senior Bank Term Loan and the identities of the lenders thereunder while deferring the effectiveness of the amendments set forth in the Unsecured Senior Bank Term Loan until the Company satisfies the conditions to effectiveness.

The Unsecured Senior Bank Term Loan will amend and restate the Company’s Fourth Amended and Restated Term Loan Agreement dated as of September 28, 2018, with Citibank, N.A., as administrative agent; Citibank, N.A., RBC Capital Markets, and The Bank of Nova Scotia, as joint lead arrangers and joint book running managers; and certain financial institutions party thereto as lenders. As of April 25, 2019, the principal amount outstanding under such facility was $350 million (the “Existing Unsecured Senior Bank Term Loan”).

The Unsecured Senior Bank Term Loan will extend the maturity date of the Existing Unsecured Senior Bank Term Loan to January 2, 2025.

Affiliates of lenders under the Unsecured Senior Bank Term Loan have, from time to time, performed, and may in the future perform, various financial advisory, investment banking, and general financing services for the Company.

The foregoing summary of the Unsecured Senior Bank Term Loan does not purport to be complete and is qualified in its entirety by reference to the full text of the Unsecured Senior Bank Term Loan, a copy of which is anticipated to be filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2019, to the extent it becomes effective.

Item 2.02.  Results of Operations and Financial Condition.

On April 29, 2019, the Company issued a press release entitled “Alexandria Real Estate Equities, Inc. Reports First Quarter Ended March 31, 2019 Financial and Operating Results.”  The press release referred to certain supplemental information that is available on the Company’s website at www.are.com.  A copy of the press release and supplemental information are attached hereto as Exhibit 99.1.

The information contained in this Item 2.02, including the exhibit referenced herein, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section.  Such information shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information included in Item 1.01 is incorporated herein by reference.






Item 9.01.  Financial Statements and Exhibits.

(d)  Exhibits.

99.1                Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the First Quarter Ended March 31, 2019.

Forward-looking Statements

This current report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act.  These statements include words such as “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “goals,” “believes,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” or “will,” or the negative of these words or similar words.  Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in each such statement.  A number of important factors could cause actual results to differ materially from those included within or contemplated by the forward-looking statements, including, but not limited to, the factors described in the Company’s filings with the Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.  The Company does not undertake any responsibility to update any of these factors or to announce publicly any revisions to any of the forward-looking statements contained in this or any other document, whether as a result of new information, future events, or otherwise.





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
ALEXANDRIA REAL ESTATE EQUITIES, INC.
 
 
 
 
 
 
April 29, 2019
 
By:
/s/ Joel S. Marcus
 
 
 
 
Joel S. Marcus
 
 
 
 
Executive Chairman
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Stephen A. Richardson
 
 
 
 
Stephen A. Richardson
 
 
 
 
Co-Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Peter M. Moglia
 
 
 
 
Peter M. Moglia
 
 
 
 
Co-Chief Executive Officer and
Co-Chief Investment Officer
 
 
 
 
 
 
 
 
 
By:
/s/ Dean A. Shigenaga
 
 
 
 
Dean A. Shigenaga
 
 
 
 
Co-President and Chief Financial Officer
 





EXHIBIT INDEX

Exhibit
Number        Exhibit Title    
99.1Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the First Quarter Ended March 31, 2019.


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
397707095_q119frontcover.jpg

 
Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2019




397707095_q119insidecover1.jpg

 
Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2019
i




397707095_q119insidecover2.jpg
(1)
Refer to “Annual Rental Revenue,” “Class A Properties and AAA Locations,” and “Investment-Grade or Publicly Traded Large Cap Tenants” in the “Definitions and Reconciliations” section of our Supplemental Information for additional information. As of March 31, 2019, annual rental revenue solely from investment-grade tenants within our overall tenant base and within our top 20 tenants was 46% and 75%, respectively.

 
ii

 
 
 
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Table of Contents
March 31, 2019
 
 


EARNINGS PRESS RELEASE
Page
 
 
Page
 
 
 
 
 
 
 
 
 
SUPPLEMENTAL INFORMATION
Page
 
 
Page
 
External Growth / Investments in Real Estate
 
 
 
 
New Class A Development and Redevelopment Properties:
 
 
 
 
Internal Growth
 
 
 
 
 
Balance Sheet Management
 
 
 
 
 
Definitions and Reconciliations
 
 
 
 

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. Please refer to page 7 of this Earnings Press Release and our Supplemental Information for further information.
 
This document is not an offer to sell or a solicitation to buy securities of Alexandria Real Estate Equities, Inc. Any offers to sell or solicitations to buy our securities shall be made only by means of a prospectus approved for that purpose. Unless otherwise indicated, the “Company,” “Alexandria,” “ARE,” “we,” “us,” and “our” refer to Alexandria Real Estate Equities, Inc. and our consolidated subsidiaries.

 
Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2019
iii

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Alexandria Real Estate Equities, Inc.
Reports:
1Q19 Revenues of $358.8 million, up 12.1% over 1Q18;
1Q19 Earnings per Share – Diluted of $1.11;
1Q19 FFO – Diluted, As Adjusted, per Share of $1.71; and
Operational Excellence and Growing Dividends


PASADENA, Calif. – April 29, 2019 – Alexandria Real Estate Equities, Inc. (NYSE:ARE)
announced financial and operating results for the first quarter ended March 31, 2019.

Key highlights

Operating results
 
1Q19
 
1Q18
Total revenues:
 
 
 
In millions
$
358.8

 
$
320.1

Growth from 1Q18
12.1%

 
 
 
 
 
 
Net income attributable to Alexandria’s common stockholders – diluted:
In millions
$
123.6

 
$
132.4

Per share
$
1.11

 
$
1.32

 
 
 
 
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted:
In millions
$
189.8

 
$
162.5

Per share
$
1.71

 
$
1.62


25th anniversary: an important milestone in company history
In January 2019, we celebrated the 25th anniversary of our founding. Since our initial launch in January 1994 as a garage startup with a unique, strategic business plan, $19 million in Series A capital, and a vision to create a new kind of real estate company focused on serving the life science industry, we have grown into an investment-grade rated S&P 500® company with a total market capitalization of $21.8 billion. From our initial public offering in May 1997 through March 31, 2019, we have generated a total shareholder return of 1,542%, assuming reinvestment of dividends.

A REIT industry-leading, high-quality tenant roster

50% of annual rental revenue from investment-grade or publicly traded large cap tenants.

Continuation of strong rental rate growth
Strong rental rate increases (cash basis) of 24.3% for 1Q19 represents our highest quarterly cash rental rate increase over the past 10 years.

Credit rating improvement
In February 2019, S&P Global Ratings raised our corporate issuer credit rating to BBB+/Stable from BBB/Positive. The rating upgrade reflects our consistently strong operating performance and continued successful delivery of our value-creation pipeline.
 









Sale of partial interest in core Class A property
In February 2019, we sold a 60% interest in 75/125 Binney Street, a Class A property in our Cambridge submarket, for a sales price of $438 million, or $1,880 per RSF, representing a 4.3% capitalization rate on 4Q18 net operating income (cash basis), annualized. We retained control over, and continue to consolidate, the new joint venture. We accounted for the $202.2 million difference between the consideration received and the book value of the 60% interest sold as an equity transaction with no gain recognized in earnings.

Anchor lease with Pinterest, Inc. at 88 Bluxome Street
In March 2019, we leased 488,899 RSF to Pinterest, Inc. at 88 Bluxome Street in our Mission Bay/SoMa submarket. The lease with Pinterest, Inc. brings pre-leasing of the 1.1 million RSF future development project to 58%.

Increased common stock dividend
Common stock dividend declared for 1Q19 of $0.97 per common share, up seven cents, or 7.8%, over 1Q18; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Strong internal growth
Net operating income (cash basis) of $892.9 million for 1Q19 annualized, up $134.6 million, or 17.8%, compared to 1Q18 annualized
Same property net operating income growth:
2.3% and 10.2% (cash basis) for 1Q19, compared to 1Q18
Continued strong leasing activity and rental rate growth in light of modest contractual lease expirations at the beginning of 2019 and a highly leased value-creation pipeline:
 
 
1Q19
 
Total leasing activity – RSF
 
1,248,972

 
Lease renewals and re-leasing of space:
 
 
 
RSF (included in total leasing activity above)
 
509,415

 
Rental rate increases
 
32.9%

 
Rental rate increases (cash basis)
 
24.3%

 
 
 
 
 

Future growth of net operating income (cash basis) driven by recently delivered projects

Significant near-term growth of net operating income (cash basis) of $65 million upon the burn-off of initial free rent on recently delivered projects.


 
1


 
 
 
397707095_q119logo1.jpg
First Quarter Ended March 31, 2019, Financial and Operating Results (continued)
March 31, 2019
 
 

Strong external growth; disciplined allocation of capital to visible, highly leased
value-creation pipeline

Since the beginning of 4Q18, we have placed into service 1.0 million RSF of development and redevelopment projects, including the following projects during 1Q19:
Property
 
Submarket
 
RSF
 
Leased
 
Tenant
279 East Grand Avenue
 
South San Francisco
 
139,810

 
100%
 
Verily Life Sciences, LLC; insitro, Inc.
399 Binney Street
 
Cambridge
 
123,403

 
100%
 
Three life science entities
188 East Blaine Street
 
Lake Union
 
90,615

 
100%
 
bluebird bio, Inc.;
Seattle Cancer Care Alliance;
Sana Biotechnology, Inc.
681 Gateway Boulevard
 
South San Francisco
 
66,000

 
100%
 
Eli Lilly and Company
Alexandria PARC
 
Greater Stanford
 
48,547

 
100%
 
Workday, Inc.
 
 
 
 
 
 
 
 
 
1Q19 commencements of development projects aggregating 356,904 RSF, including:
174,640 RSF at 9800 Medical Center Drive in our Rockville submarket, which is 79% leased to REGENXBIO, Inc.;
98,000 RSF at 9880 Campus Point Drive in our University Town Center submarket; and
84,264 RSF at 9950 Medical Center Drive in our Rockville submarket, which is 100% leased to Autolus Therapeutics PLC.

Completed acquisitions

During 1Q19, we acquired 10 properties for an aggregate purchase price of $383.0 million in key submarkets. These acquisitions consisted of:
Future development opportunities aggregating 175,000 RSF in our Seaport Innovation District submarket, along with 129,084 RSF of operating properties with future development and redevelopment opportunities; and
247,770 RSF of operating properties strategically located in our Greater Stanford and Mission Bay/SoMa submarkets.

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 – Diluted
1Q19
 
1Q18
 
1Q19
 
1Q18
Unrealized gains on non-real estate investments(1)
$
72.2

 
$
72.2

 
$
0.65

 
$
0.70

Realized gains on non-real estate investments

 
8.3

 

 
0.08

Loss on early extinguishment of debt
(7.4
)
 

 
(0.07
)
 

Preferred stock redemption charge
(2.6
)
 

 
(0.02
)
 

Total
$
62.2

 
$
80.5

 
$
0.56

 
$
0.78

 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding
for calculation of earnings per share – diluted
111.1

 
100.1

(1) Refer to “Investments” on page 45 of our Supplemental Information for additional information.

 
Core operating metrics as of or for the quarter ended March 31, 2019
High-quality revenues and cash flows and operational excellence
Percentage of annual rental revenue in effect from:
 
 
 
Investment-grade or publicly traded large cap tenants
 
50
%
 
Class A properties in AAA locations
 
77
%
 
Occupancy of operating properties in North America
 
97.2
%
 
Operating margin
 
72
%
 
Adjusted EBITDA margin
 
70
%
 
Weighted-average remaining lease term:
 
 
 
All tenants
 
8.4
 years
 
Top 20 tenants
 
12.1
 years
 
 
 
 
 
Refer to the previous page for information on our total revenues, net operating income, same property net operating income growth, leasing activity, and rental rate growth.

Balance sheet management

Key metrics as of March 31, 2019

$15.9 billion of total equity capitalization
$21.8 billion of total market capitalization
$2.7 billion of liquidity
No unhedged variable-rate debt
95% of unencumbered net operating income as a percentage of total net operating income
 
 
1Q19
 
 
 
 
 
Quarter
 
Trailing 12
 
4Q19
 
 
 
Annualized
 
Months
 
Goal
 
Net debt to Adjusted EBITDA
 
5.4x
 
5.8x
 
Less than or equal to 5.3x
(1) 
Fixed-charge coverage ratio
 
4.5x
 
4.2x
 
Greater than 4.0x
(1) 
Total value-creation pipeline as a percentage of gross investments in real estate in North America
 
10%
 
N/A
 
8% to 12%
 
(1)
Quarter annualized.

Key capital events
During 1Q19, we successfully increased our weighted-average remaining term of debt outstanding to over seven years, as a result of the following:
In March 2019, we completed an offering of $850.0 million of unsecured senior notes for net proceeds of $846.1 million. The unsecured senior notes consisted of:
$300.0 million of 4.85% unsecured senior notes due 2049.
$350.0 million of 3.80% unsecured senior notes due 2026. The net proceeds were used to repay a secured note payable related to 50/60 Binney Street, a recently completed Class A property, which was awarded LEED® Gold certification, and the remaining proceeds will be allocated to fund recently completed and future eligible green projects.
$200.0 million of our 4.00% unsecured senior notes payable due 2024 issued at a yield to maturity of 3.453%, and are part of the same series that was originally issued in 2018. The net proceeds will also be used to fund recently completed and future eligible green projects.

 
2


 
 
 
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First Quarter Ended March 31, 2019, Financial and Operating Results (continued)
March 31, 2019
 
 

Key capital events (continued)
In March 2019, we repaid the remaining $193.1 million balance of our secured construction loan related to 50/60 Binney Street and recognized a loss on early extinguishment of debt of $269 thousand.
In January 2019, we repaid early one secured note payable aggregating $106.7 million, which was due in 2020 and bore interest at 7.75%, and recognized a loss on early extinguishment of debt of $7.1 million, including the write-off of unamortized loan fees.
During 1Q19, we repurchased, in privately negotiated transactions, 275,000 shares of our 7.00% Series D cumulative convertible preferred stock for $9.2 million, or $33.60 per share, and recognized a preferred stock redemption charge of $2.6 million. As of 1Q19, 2.3 million shares of our 7.00% Series D cumulative convertible preferred stock were outstanding at a book value aggregating $57.5 million.
During the first quarter of 2019 and through April 29, 2019, there was no sale activity under our “at the market” common stock offering programs. As of April 29, 2019, the remaining aggregate amount available under our current programs for future sales of common stock is $658.7 million.
Investments
We carry our investments in publicly traded companies and certain privately held entities at fair value. As of March 31, 2019, cumulative unrealized gains related to changes in fair value aggregated $312.4 million and our adjusted cost basis aggregated $688.5 million. Investment income recognized in 1Q19 included the following:
Unrealized gains of $72.2 million; and
Realized gains of $11.4 million.

Corporate responsibility and industry leadership
In February 2019, it was announced that we are working with Verily Life Sciences, LLC, Alphabet’s life science division, to build a tech-focused rehabilitation campus in Dayton, Ohio, for the full and sustained recovery of people living with opioid addiction. The campus will provide a comprehensive model of care that will include a behavioral health treatment center, rehabilitation housing, and wrap-around services, and will act as a state of the art model for opioid addiction treatment nationwide.
In February 2019, we were recognized by the Center for Active Design, which operates Fitwel®, as the inaugural Industry Leading Company in Fitwel’s 2018 Best in Building Health. We were selected based on our 3-Star Fitwel certification (the highest rating possible); our leadership in promoting and educating the real estate industry on the opportunities for and benefits of building design, construction, and operational practices that support high levels of occupant health and wellness; and our #1 global ranking in the 2018 GRESB Health & Well-Being Module.
In March 2019, Alexandria LaunchLabs® – Cambridge, located at the Alexandria Center® at One Kendall Square in Greater Boston, achieved LEED gold certification and a Fitwel 3-Star certification.

 
Subsequent events
In April 2019, we entered into an agreement to extend the maturity date of our unsecured senior bank term loan to January 2, 2025. We expect that the extension will become effective in June 2019, upon the satisfaction of certain conditions.
In April 2019, we announced the launch of a new strategic agricultural technology (agtech) business initiative with the opening of the Alexandria Center® for AgTech – Research Triangle, the first state of the art, fully integrated, multi-tenant, amenity-rich agtech R&D and greenhouse campus. The campus opens with a 97% leased first phase, a 175,000 RSF redevelopment, at 5 Laboratory Drive, in the heart of Research Triangle, the most important, dense, and diverse agtech cluster in the United States.

 
3


 
 
Acquisitions
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March 31, 2019
(Dollars in thousands)
 
 


Property
 
Submarket/Market
 
Date of Purchase
 
Number of Properties
 
Operating
Occupancy
 
Square Footage
 
Unlevered Yields
 
Purchase Price
 
 
 
 
Future Development
 
Operating With Future Development/ Redevelopment
 
Operating
 
Initial Stabilized
 
Initial Stabilized (Cash)
 
 
 
 
 
 
 
 
Value-creation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10 Necco Street
 
Seaport Innovation District/Greater Boston
 
3/26/19
 
 
N/A
 
175,000

 

 

 
(1 
) 
 
 
(1 
) 
 
 
$
81,100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating with value-creation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3911 and 3931 Sorrento Valley Boulevard
 
Sorrento Mesa/San Diego
 
1/9/19
 
2
 
100%
 

 
53,220

 

 
7.2
%
 
 
6.6
%
 
 
 
23,250

 
Other
 
 
 
 
 
4
 
 
 

 
75,864

 

 
 
 
 
 
 
 
 
39,150

 
 
 
 
 
 
 
6
 
 
 

 
129,084

 

 
 
 
 
 
 
 
 
62,400

 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3170 Porter Drive
 
Greater Stanford/
San Francisco
 
1/10/19
 
1
 
100%
 

 

 
98,626

 
7.5
%
 
 
5.1
%
 
 
 
100,250

 
Shoreway Science Center
 
Greater Stanford/
San Francisco
 
1/10/19
 
2
 
100%
 

 

 
82,462

 
7.2
%
 
 
5.5
%
 
 
 
73,200

 
260 Townsend Street
 
Mission Bay/SoMa/
San Francisco
 
3/14/19
 
1
 
100%
 

 

 
66,682

 
7.4
%
 
 
5.8
%
 
 
 
66,000

(2) 
 
 
 
 
 
 
4
 
 
 

 

 
247,770

 
 
 
 
 
 
 
 
239,450

 
Total acquisitions
 
 
 
 
 
10
 
 
 
175,000

 
129,084

 
247,770

 
 
 
 
 
 
 
 
382,950

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10260 Campus Point Drive and
4161 Campus Point Court
 
University Town Center/
San Diego
 
1/2/19
 
2
 
100%
 
N/A

 
N/A

 
N/A

 
(3 
) 
 
 
(3 
) 
 
 
 
65,000

(4) 
Pending
 
Various
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
182,050

 
2019 guidance range midpoint
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
630,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
We expect to provide total estimated costs and related yields in the future upon the commencement of development.
(2)
Purchase price includes the assumption of a $28.2 million secured loan with a stated interest rate of 4.14%.
(3)
Refer to the “New Class A Development and Redevelopment Properties: Summary of Pipeline” of our Supplemental Information for additional information.
(4)
In December 2018, we acquired two buildings adjacent to our Campus Pointe by Alexandria campus aggregating 269,048 RSF, comprising 109,164 RSF at 10260 Campus Point Drive and 159,884 RSF at 4161 Campus Point Court which are 100% leased through 2022. At lease expiration, 10260 Campus Point Drive will be redeveloped and expanded into a 176,455 RSF Class A building, which is 100% pre-leased for 15 years with the target delivery in 2021. 4161 Campus Point Court will support future development aggregating 201,900 RSF through one or more Class A buildings at our Campus Pointe by Alexandria campus. The total purchase price of $80.0 million was paid in two installments, $15.0 million in December 2018 and $65.0 million in January 2019.


 
4


 
 
Dispositions and Sale of Partial Interest in Core Class A Property
397707095_q119logo1.jpg
March 31, 2019
(Dollars in thousands, except per RSF amounts)
 
 


Property
 
Submarket/Market
 
Date of Sale
 
RSF
 
Sales Price
 
Sales Price per RSF
 
Gain
 
Sale of partial interest in core Class A property:
 
 
 
 
 
 
 
 
 
 
 
 
 
75/125 Binney Street (sale of 60% noncontrolling interest)(1)
 
Cambridge/Greater Boston
 
2/13/19
 
388,270
 
$
438,000

 
$
1,880

 
(1) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 guidance range midpoint
 
 
 
 
 
 
 
$
750,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
In February 2019, we sold a 60% interest in 75/125 Binney Street, a Class A property in our Cambridge submarket, for a sales price of $438 million, or $1,880 per RSF, representing a 4.3% capitalization rate on net operating income (cash basis), annualized, for the three months ended December 31, 2018. We retained control over, and continue to consolidate, the new joint venture. We accounted for the $202.2 million difference between the consideration received and the book value of the 60% interest sold as an equity transaction with no gain recognized in earnings.

 
5


 
 
Guidance
397707095_q119logo1.jpg
March 31, 2019
(Dollars in millions, except per share amounts)
 
 
 

The following updated guidance is based on our current view of existing market conditions and assumptions for the year ending December 31, 2019. There can be no assurance that actual amounts will not be materially higher or lower than these expectations. Refer to our discussion of “forward-looking statements” on page 7 of this Earnings Press Release for additional information.
Summary of Key Changes in Guidance
 
Guidance
 
Summary of Key Changes in Key Sources and Uses of Capital Guidance
 
 
Guidance Midpoint
 
 
 
As of 4/29/19
 
As of 2/4/19
 
 
As of 4/29/19
 
As of 2/4/19
 
EPS, FFO per share, and FFO per share, as adjusted
 
See updates below
 
Issuance of unsecured senior notes payable
 
 
$
850

 
 
 
$
650

 
 
Rental rate increases
 
26.0% to 29.0%
 
25.0% to 28.0%
 
Repayment of secured notes payable
 
 
$
(315
)
 
 
 
$
(125
)
 
 
Rental rate increases (cash basis)
 
13.0% to 16.0%
 
11.0% to 14.0%
 
 
 
 
 
 
 
 
 
 
 
Projected Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s Common Stockholders – Diluted, as Adjusted
 
 
 
As of 4/29/19
 
As of 2/4/19
 
Earnings per share(1)
 
$2.65 to $2.75
 
$1.95 to $2.15
 
Depreciation and amortization
 
 
4.85
 
 
 
4.85
 
 
Allocation to unvested restricted stock awards
 
 
(0.05)
 
 
 
(0.03)
 
 
Funds from operations per share(2)
 
$7.45 to $7.55
 
$6.77 to $6.97
 
Unrealized gains on non-real estate investment(1)
 
 
(0.65)
 
 
 
 
 
Loss on early extinguishment of debt
 
 
0.07
 
 
 
0.06
 
 
Preferred stock redemption charge
 
 
0.02
 
 
 
0.02
 
 
Allocation to unvested restricted stock awards
 
 
0.01
 
 
 
 
 
Funds from operations per share, as adjusted
 
$6.90 to $7.00
 
$6.85 to $7.05
 
Midpoint
 
$6.95
 
$6.95
 
Key Assumptions
 
Low
 
High
 
Occupancy percentage in North America as of December 31, 2019
 
97.7%

 
98.3%

 
 
 
 
 
 
 
Lease renewals and re-leasing of space:
 
 
 
 
 
Rental rate increases
 
26.0%

 
29.0%

 
Rental rate increases (cash basis)
 
13.0%

 
16.0%

 
Same property performance:
 
 
 
 
 
Net operating income increase
 
1.0%

 
3.0%

 
Net operating income increase (cash basis)
 
6.0%

 
8.0%

 
 
 
 
 
 
 
Straight-line rent revenue
 
$
95

 
$
105

(5)
General and administrative expenses
 
$
108

 
$
113

 
Capitalization of interest
 
$
72

 
$
82

 
Interest expense
 
$
172

 
$
182

 
 
 
 
 
 
 
 
 
 
2019 Guidance
 
Key Credit Metrics
 
 
Net debt to Adjusted EBITDA – 4Q19 annualized
 
Less than or equal to 5.3x
 
Net debt and preferred stock to Adjusted EBITDA – 4Q19 annualized
 
Less than or equal to 5.4x
 
Fixed-charge coverage ratio – 4Q19 annualized
 
Greater than 4.0x
 
Value-creation pipeline as a percentage of gross real estate as of
December 31, 2019
 
8% to 12%
 
Key Sources and Uses of Capital
 
Range
 
Midpoint
 
Certain Completed Items
Sources of capital:
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities after dividends
 
$
170

 
$
210

 
$
190

 
 
 
Incremental debt
 
485

 
445

 
 
465

 
 
 
Real estate dispositions and partial interest sales:
 
 
 
 
 
 
 
 
 
 
Sale of partial interest in core Class A property
 
438

 
438

 
 
438

 
$
438

(3) 
Other
 
262

 
362

 
 
312

 
 
Common equity
 
475

 
575

 
 
525

 
 
 
Total sources of capital
 
$
1,830

 
$
2,030

 
$
1,930

 
 
 
Uses of capital:
 
 
 
 
 
 
 
 
 
 
Construction
 
$
1,250

 
$
1,350

 
$
1,300

 
 
 
Acquisitions
 
580

 
680

 
 
630

 
(4)
Total uses of capital
 
$
1,830

 
$
2,030

 
$
1,930

 
 
 
Incremental debt (included above):
 
 
 
 
 
 
 
 
 
 
Issuance of unsecured senior notes payable
 
$
850

 
$
850

 
$
850

 
$
850

 
Assumption of secured note payable
 
28

 
28

 
 
28

 
$
28

 
Repayments of secured notes payable
 
(310
)
 
(320
)
 
 
(315
)
 
$
(300
)
 
$2.2 billion unsecured senior line of credit/other
 
(83
)
 
(113
)
 
 
(98
)
 
 
 
Incremental debt
 
$
485

 
$
445

 
$
465

 
 
 



(1)
Excludes future unrealized gains or losses after March 31, 2019, that are required to be recognized in earnings.
(2)
Calculated in accordance with standards established by the Advisory Board of Governors of the National Association of Real Estate Investment Trusts (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” section of our Supplemental Information for additional information.
(3)
Refer to “Dispositions and Sale of Partial Interest in Core Class A Property” in this Earnings Press Release for additional information.
(4)
Refer to “Acquisitions” in this Earnings Press Release for additional information.
(5)
Approximately 45% of straight-line rent revenue represents initial free rent on recently delivered and expected 2019 deliveries of new Class A properties from our development and redevelopment pipeline.


 
6


 
 
 
397707095_q119logo1.jpg
Earnings Call Information and About the Company
March 31, 2019
 
 


We will host a conference call on Tuesday, April 30, 2019, at 3:00 p.m. Eastern Time (“ET”)/noon Pacific Time (“PT”), which is open to the general public to discuss our financial and operating results for the first quarter ended March 31, 2019. To participate in this conference call, dial (833) 366-1125 or (412) 902-6738 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the call for Alexandria Real Estate Equities, Inc. The audio webcast can be accessed at www.are.com in the “For Investors” section. A replay of the call will be available for a limited time from 5:00 p.m. ET/2:00 p.m. PT on Tuesday, April 30, 2019. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 10128833.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the first quarter ended March 31, 2019, is available in the “For Investors” section of our website at www.are.com or by following this link: http://www.are.com/fs/2019q1.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, co-president and chief financial officer; or Sara M. Kabakoff, assistant vice president – corporate communications, at (626) 578-0777.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office real estate investment trust (“REIT”) uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $21.8 billion and an asset base in North America of 33.7 million square feet (“SF”) as of March 31, 2019. The asset base in North America includes 23.2 million RSF of operating properties and 4.4 million RSF of new Class A properties currently undergoing construction or pre-construction, consisting of 2.1 million RSF of development and redevelopment projects under construction, and 2.3 million RSF undergoing pre‑construction activities. Additionally, the asset base in North America includes 6.1 million SF of intermediate-term and future development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, 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 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 and technology companies through our venture capital arm. 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 2019 earnings per share attributable to Alexandria’s common stockholders – diluted, 2019 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,” 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, 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, 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 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™, LaunchLabs®, Alexandria Center®, Alexandria Technology Square®, Alexandria Summit®, Alexandria Technology Center®, Alexandria Innovation Center®, and GradLabs™ are trademarks of Alexandria Real Estate Equities, Inc. All other company names, trademarks, and logos referenced herein are the property of their respective owners.


 
7


 
 
Consolidated Statements of Operations
397707095_q119logo1.jpg
March 31, 2019
(In thousands, except per share amounts)
 
 

 
 
Three Months Ended
 
 
3/31/19

12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
Revenues:
 
 

 
 

 
 

 
 

 
 

Income from rentals(1)
 
$
354,749

 
$
337,785

 
$
336,547

 
$
322,794

 
$
317,655

Other income
 
4,093

 
2,678

 
5,276

 
2,240

 
2,484

Total revenues
 
358,842

 
340,463

 
341,823

 
325,034

 
320,139

 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
Rental operations
 
101,501

 
97,682

 
99,759

 
91,908

 
91,771

General and administrative
 
24,677

 
22,385

 
22,660

 
22,939

 
22,421

Interest
 
39,100

 
40,239

 
42,244

 
38,097

 
36,915

Depreciation and amortization
 
134,087

 
124,990

 
119,600

 
118,852

 
114,219

Impairment of real estate
 

 

 

 
6,311

 

Loss on early extinguishment of debt
 
7,361



 
1,122

 

 

Total expenses
 
306,726

 
285,296

 
285,385

 
278,107

 
265,326

 
 
 
 
 
 
 
 
 
 
 
Equity in earnings of unconsolidated real estate joint ventures
 
1,146

 
1,029

 
40,718

 
1,090

 
1,144

Investment income (loss)
 
83,556

 
(83,531
)
 
122,203

 
12,530

 
85,561

Gain on sales of real estate
 

 
8,704

 

 

 

Net income (loss)
 
136,818

 
(18,631
)
 
219,359

 
60,547

 
141,518

Net income attributable to noncontrolling interests
 
(7,659
)
 
(6,053
)
 
(5,723
)
 
(5,817
)
 
(5,888
)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s stockholders
 
129,159

 
(24,684
)
 
213,636

 
54,730

 
135,630

Dividends on preferred stock
 
(1,026
)
 
(1,155
)
 
(1,301
)
 
(1,302
)
 
(1,302
)
Preferred stock redemption charge
 
(2,580
)
 
(4,240
)
 

 

 

Net income attributable to unvested restricted stock awards
 
(1,955
)
 
(1,661
)
 
(3,395
)
 
(1,412
)
 
(1,941
)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders
 
$
123,598

 
$
(31,740
)
 
$
208,940

 
$
52,016

 
$
132,387

 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.11

 
$
(0.30
)
 
$
2.01

 
$
0.51

 
$
1.33

Diluted
 
$
1.11

 
$
(0.30
)
 
$
1.99

 
$
0.51

 
$
1.32

 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
 
111,054

 
106,033

 
104,179

 
101,881

 
99,855

Diluted
 
111,054

 
106,033

 
105,385

 
102,236

 
100,125

 
 
 
 
 
 
 
 
 
 
 
Dividends declared per share of common stock
 
$
0.97

 
$
0.97

 
$
0.93

 
$
0.93

 
$
0.90


(1)
Upon the adoption of new lease accounting standards on January 1, 2019, rental revenues and tenant recoveries are aggregated within income from rentals. Prior periods have been reclassified to conform to new standards. Refer to “Financial and Asset Base Highlights” and “Lease Accounting” in the “Definitions and Reconciliations” section of our Supplemental Information for additional information.

 
8


 
 
Consolidated Balance Sheets
397707095_q119logo1.jpg
March 31, 2019
(In thousands)
 
 

 
 
3/31/19
 
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
Assets
 
 
 
 

 
 

 
 

 
 

Investments in real estate
 
$
12,410,350

 
$
11,913,693

 
$
11,587,312

 
$
11,190,771

 
$
10,671,227

Investments in unconsolidated real estate joint ventures
 
290,405

 
237,507

 
197,970

 
192,972

 
169,865

Cash and cash equivalents
 
261,372

 
234,181

 
204,181

 
287,029

 
221,645

Restricted cash
 
54,433

 
37,949

 
29,699

 
34,812

 
37,337

Tenant receivables
 
9,645

 
9,798

 
11,041

 
8,704

 
11,258

Deferred rent
 
558,103

 
530,237

 
511,680

 
490,428

 
467,112

Deferred leasing costs
 
241,268

 
239,070

 
238,295

 
232,964

 
226,803

Investments
 
1,000,904

 
892,264

 
957,356

 
790,753

 
724,310

Other assets
 
653,726

(1) 
370,257

 
368,032

 
333,757

 
291,639

Total assets
 
$
15,480,206

 
$
14,464,956

 
$
14,105,566

 
$
13,562,190

 
$
12,821,196

 
 
 
 
 
 
 
 
 
 
 
Liabilities, Noncontrolling Interests, and Equity
 
 
 
 
 
 
 
 
 
 
Secured notes payable
 
$
356,461

 
$
630,547

 
$
632,792

 
$
776,260

 
$
775,689

Unsecured senior notes payable
 
5,139,500

 
4,292,293

 
4,290,906

 
4,289,521

 
3,396,912

Unsecured senior line of credit
 

 
208,000

 
413,000

 

 
490,000

Unsecured senior bank term loans
 
347,542

 
347,415

 
347,306

 
548,324

 
548,197

Accounts payable, accrued expenses, and tenant security deposits
 
1,171,377

(1) 
981,707

 
907,094

 
849,274

 
783,986

Dividends payable
 
110,412

 
110,280

 
101,084

 
98,676

 
93,065

Total liabilities
 
7,125,292

 
6,570,242

 
6,692,182

 
6,562,055

 
6,087,849

 
 
 
 
 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
 
10,889

 
10,786

 
10,771

 
10,861

 
10,212

 
 
 
 
 
 
 
 
 
 
 
Alexandria Real Estate Equities, Inc.’s stockholders’ equity:
 
 
 
 
 
 
 
 
 
 
7.00% Series D cumulative convertible preferred stock
 
57,461

 
64,336

 
74,386

 
74,386

 
74,386

Common stock
 
1,112

 
1,110

 
1,058

 
1,033

 
1,007

Additional paid-in capital
 
7,518,716

 
7,286,954

 
6,801,150

 
6,387,527

 
6,117,976

Accumulated other comprehensive (loss) income
 
(10,712
)
 
(10,435
)
 
(3,811
)
 
(2,485
)
 
1,228

Alexandria Real Estate Equities, Inc.’s stockholders’ equity
 
7,566,577

 
7,341,965

 
6,872,783

 
6,460,461

 
6,194,597

Noncontrolling interests
 
777,448

 
541,963

 
529,830

 
528,813

 
528,538

Total equity
 
8,344,025

 
7,883,928

 
7,402,613

 
6,989,274

 
6,723,135

Total liabilities, noncontrolling interests, and equity
 
$
15,480,206

 
$
14,464,956

 
$
14,105,566

 
$
13,562,190

 
$
12,821,196


(1)
Increase is related to the recognition of a lease liability and corresponding right-of-use asset for our operating leases in which we are a lessee, upon the adoption of a new lease accounting standard on January 1, 2019. As of March 31, 2019, the right-of-use asset and corresponding lease liability aggregated $238.4 million and $244.6 million, respectively. Refer to “Lease Accounting” in the “Definitions and Reconciliations” section of our Supplemental Information for additional information.

 
9


 
 
Funds From Operations and Funds From Operations per Share
397707095_q119logo1.jpg
March 31, 2019
(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 generally accepted accounting principles (“GAAP”), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria’s common stockholders – diluted, and funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted, for the periods below:
 
 
Three Months Ended
 
 
3/31/19
 
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
Net income (loss) attributable to Alexandria’s common stockholders – basic
 
$
123,598

 
$
(31,740
)
 
$
208,940

 
$
52,016

 
$
132,387

Assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 

 

 
1,301

 

 

Net income (loss) attributable to Alexandria’s common stockholders – diluted
 
123,598

 
(31,740
)
 
210,241

 
52,016

 
132,387

Depreciation and amortization
 
134,087

 
124,990

 
119,600

 
118,852

 
114,219

Noncontrolling share of depreciation and amortization from consolidated real estate JVs
 
(5,419
)
 
(4,252
)
 
(4,044
)
 
(3,914
)
 
(3,867
)
Our share of depreciation and amortization from unconsolidated real estate JVs
 
846

 
719

 
1,011

 
807

 
644

Gain on sales of real estate
 

 
(8,704
)
 

 

 

Our share of gain on sales of real estate from unconsolidated real estate JVs
 

 

 
(35,678
)
 

 

Assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 
1,026

 

 

 

 
1,302

Allocation to unvested restricted stock awards
 
(2,054
)
 

 
(1,312
)
 
(1,042
)
 
(1,548
)
Funds from operations attributable to Alexandria’s common stockholders – diluted(2)
 
252,084

 
81,013

 
289,818

 
166,719

 
243,137

Unrealized (gains) losses on non-real estate investments
 
(72,206
)
 
94,850

 
(117,188
)
 
(5,067
)
 
(72,229
)
Realized gains on non-real estate investments
 

 
(6,428
)
 

 

 
(8,252
)
Impairment of real estate – land parcels
 

 

 

 
6,311

 

Impairment of non-real estate investments
 

 
5,483

 

 

 

Loss on early extinguishment of debt
 
7,361

 

 
1,122

 

 

Our share of gain on early extinguishment of debt from unconsolidated real estate JVs
 

 

 
(761
)
 

 

Preferred stock redemption charge
 
2,580

 
4,240

 

 

 

Removal of assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 
(1,026
)
 

 
(1,301
)
 

 
(1,302
)
Allocation to unvested restricted stock awards
 
990

 
(1,138
)
 
1,889

 
(18
)
 
1,125

Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
189,783

 
$
178,020

 
$
173,579

 
$
167,945

 
$
162,479


(1)
Refer to “Weighted-Average Shares of Common Stock Outstanding – Diluted” in the “Definitions and Reconciliations” section of our Supplemental Information for additional information regarding our 7.00% Series D cumulative convertible preferred stock.
(2)
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” section of our Supplemental Information for additional information.

 
10


 
 
Funds From Operations and Funds From Operations per Share (continued)
397707095_q119logo1.jpg
March 31, 2019
(In thousands, except per share amounts)
 
 


The following table presents a reconciliation of net income (loss) per share attributable to Alexandria’s common stockholders, the most directly comparable financial measure presented in accordance with GAAP, including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations per share attributable to Alexandria’s common stockholders – diluted, and funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted, for the periods below. Per share amounts may not add due to rounding.
 
 
Three Months Ended
 
 
3/31/19
 
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
 Net income (loss) per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted
 
$
1.11

 
$
(0.30
)
 
$
1.99

 
$
0.51

 
$
1.32

Depreciation and amortization 
 
1.17

 
1.14

 
1.11

 
1.13

 
1.08

Gain on sale of real estate
 

 
(0.08
)
 

 

 

Our share of gain on sales of real estate from unconsolidated real estate JVs
 

 

 
(0.34
)
 

 

Assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 

 

 

 

 
0.01

Allocation to unvested restricted stock awards
 
(0.02
)
 

 
(0.01
)
 
(0.01
)
 

Funds from operations per share attributable to Alexandria’s common stockholders – diluted(2)
 
2.26

 
0.76

 
2.75

 
1.63

 
2.41

Unrealized (gains) losses on non-real estate investments
 
(0.65
)
 
0.89

 
(1.11
)
 
(0.05
)
 
(0.70
)
Realized gains on non-real estate investments
 

 
(0.06
)
 

 

 
(0.08
)
Impairment of real estate – land parcels
 

 

 

 
0.06

 

Impairment of non-real estate investments
 

 
0.05

 

 

 

Loss on early extinguishment of debt
 
0.07

 

 
0.01

 

 

Our share of gain on early extinguishment of debt from unconsolidated real estate JVs
 

 

 
(0.01
)
 

 

Preferred stock redemption charge
 
0.02

 
0.04

 

 

 

Removal of assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 

 

 

 

 
(0.01
)
Allocation to unvested restricted stock awards
 
0.01

 

 
0.02

 

 

Funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
1.71

 
$
1.68

 
$
1.66

 
$
1.64

 
$
1.62

 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding(1) for calculations of:
 
 
 
 
 
 
 
 
 
 
Earnings per share – diluted
 
111,054

 
106,033

 
105,385

 
102,236

 
100,125

Funds from operations – diluted, per share
 
111,635

 
106,244

 
105,385

 
102,236

 
100,866

Funds from operations – diluted, as adjusted, per share
 
111,054

 
106,244

 
104,641

 
102,236

 
100,125


(1)
Refer to footnote 1 on the previous page for additional information.
(2)
Refer to footnote 2 on the previous page for additional information.



 
11










SUPPLEMENTAL
INFORMATION









 
 
 
397707095_q119logo1.jpg
Company Profile
March 31, 2019
 
 

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office REIT uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $21.8 billion and an asset base in North America of 33.7 million SF as of March 31, 2019. The asset base in North America includes 23.2 million RSF of operating properties and 4.4 million RSF of new Class A properties currently undergoing construction or pre-construction, consisting of 2.1 million RSF of development and redevelopment projects under construction, and 2.3 million RSF undergoing pre‑construction activities. Additionally, the asset base in North America includes 6.1 million SF of intermediate-term and future development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, 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 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 and technology companies through our venture capital arm. 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.

Tenant base

Alexandria is known for our high-quality and diverse tenant base, with 50% of our annual rental revenue generated from entities with an investment-grade credit rating or are publicly traded large cap tenants. The quality, diversity, breadth, and depth of our significant relationships with our tenants provide Alexandria with high-quality and stable cash flows. Alexandria’s underwriting team and long-term industry relationships positively distinguish us from all other publicly traded REITs and real estate companies.

Executive and senior management team

Alexandria’s executive and senior management team has unique experience and expertise in creating highly dynamic and collaborative campuses in key urban life science and technology cluster locations that inspire innovation. From the development of high-quality, sustainable real estate, to the ongoing cultivation of collaborative environments with unique amenities and events, the Alexandria team has a first-in-class reputation of excellence in our niche. Alexandria’s highly experienced management team also includes regional market directors with leading reputations and longstanding relationships within the life science and technology communities in their respective urban innovation clusters. We believe that our expertise, experience, reputation, and key relationships in the real estate, life science, and technology industries provide Alexandria significant competitive advantages in attracting new business opportunities.
 
Alexandria’s executive and senior management team consists of 42 individuals, averaging 24 years of real estate experience, including 13 years with Alexandria. Our executive management team alone averages 19 years of experience with Alexandria.

EXECUTIVE MANAGEMENT TEAM
Joel S. Marcus
Executive Chairman & Founder
Stephen A. Richardson
Co-Chief Executive Officer
Peter M. Moglia
Co-Chief Executive Officer & Co-Chief Investment Officer
Dean A. Shigenaga
Co-President & Chief Financial Officer
Thomas J. Andrews
Co-President & Regional Market Director – Greater Boston
Daniel J. Ryan
Co-Chief Investment Officer & Regional Market Director – San Diego
Jennifer J. Banks
Co-Chief Operating Officer, General Counsel & Corporate Secretary
Lawrence J. Diamond
Co-Chief Operating Officer & Regional Market Director – Maryland
Vincent R. Ciruzzi
Chief Development Officer
John H. Cunningham
Executive Vice President – Regional Market Director – New York City

 
13


 
 
 
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Investor Information
March 31, 2019
 
 

Corporate Headquarters
 
New York Stock Exchange Trading Symbols
 
Information Requests
385 East Colorado Boulevard, Suite 299
 
Common stock: ARE
 
Phone:
(626) 578-0777
Pasadena, California 91101
 
7.00% Series D preferred stock: ARE PRD
 
Email:
 
 
 
 
Web:
www.are.com
 
 
 
 
 
 
Equity Research Coverage
Alexandria is currently covered by the following research analysts. This list may be incomplete and is subject to change as firms initiate or discontinue coverage of our company. Please note that any opinions, estimates, or forecasts regarding our historical or predicted performance made by these analysts are theirs alone and do not represent opinions, estimates, or forecasts of Alexandria or our management. Alexandria does not by our reference or distribution of the information below imply our endorsement of or concurrence with any opinions, estimates, or forecasts of these analysts. Interested persons may obtain copies of analysts’ reports on their own as we do not distribute these reports. Several of these firms may, from time to time, own our stock and/or hold other long or short positions in our stock and may provide compensated services to us.
Bank of America Merrill Lynch
 
Citigroup Global Markets Inc.
 
J.P. Morgan Securities LLC
 
RBC Capital Markets
Jamie Feldman / Jeffrey Spector
 
Michael Bilerman / Emmanuel Korchman
 
Anthony Paolone / Patrice Chen
 
Michael Carroll / Jason Idoine
(646) 855-5808 / (646) 855-1363
 
(212) 816-1383 / (212) 816-1382
 
(212) 622-6682 / (212) 622-1893
 
(440) 715-2649 / (440) 715-2651
 
 
 
 
 
 
 
Barclays Capital Inc.
 
Evercore ISI
 
Mitsubishi UFJ Securities (USA), Inc.
 
Robert W. Baird & Co. Incorporated
Ross Smotrich / Trevor Young
 
Sheila McGrath / Wendy Ma
 
Karin Ford / Ryan Cybart
 
David Rodgers
(212) 526-2306 / (212) 526-3098
 
(212) 497-0882 / (212) 497-0870
 
(212) 405-7249 / (212) 405-6591
 
(216) 737-7341
 
 
 
 
 
 
 
BTIG, LLC
 
Green Street Advisors, Inc.
 
Mizuho Securities USA Inc.
 
SMBC Nikko Securities America, Inc.
Tom Catherwood / James Sullivan
 
Daniel Ismail / Chris Darling
 
Haendel St. Juste / Zachary Silverberg
 
Richard Anderson
(212) 738-6140 / (212) 738-6139
 
(949) 640-8780 / (949) 640-8780<