Alexandria Real Estate Equities, Inc. Reports: 3Q22 and YTD 3Q22 Net Income per Share - Diluted of $2.11 and $2.88, respectively; and 3Q22 and YTD 3Q22 FFO per Share - Diluted, As Adjusted, of $2.13 and $6.28, respectively
PASADENA, Calif., Oct. 24, 2022 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE:ARE) announced financial and operating results for the third quarter ended September 30, 2022.
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Key highlights
YTD
Operating results
3Q22
3Q21
3Q22
3Q21
Total revenues:
In millions
$ 659.9
$ 547.8
$ 1,918.7
$ 1,537.2
Growth
20.5 %
24.8 %
Net income attributable to Alexandria's common stockholders – diluted
In millions
$ 341.4
$ 101.3
$ 461.5
$ 490.6
Per share
$ 2.11
$ 0.67
$ 2.88
$ 3.38
Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted
In millions
$ 344.7
$ 296.0
$ 1,008.1
$ 841.3
Per share
$ 2.13
$ 1.95
$ 6.28
$ 5.80
A REIT industry-leading, high-quality roster of over 1,000 tenants and operational excellence, supporting high-quality revenues, cash flows, and strong margins
Percentage of total annual rental revenue in effect from investment-grade or publicly traded large cap tenants
49 %
Sustained strength in tenant collections:
Tenant receivables as of September 30, 2022
$ 7.8
million
October tenant rent and receivables collected as of October 24, 2022
99.9 %
Occupancy of operating properties in North America
94.3 %
Operating margin
70 %
Adjusted EBITDA margin
69 %
Weighted-average remaining lease term:
All tenants
7.2
years
Top 20 tenants
9.7
years
Solid leasing volume and rental rate increase
During 3Q22, we completed 1.7 million RSF of leasing activity; 87% of which was generated from our roster of over 1,000 tenants.
Quarterly leasing volume continues to surpass our 10-year quarterly average of 1.3 million RSF and our pre-COVID 5-year quarterly average of 1.1 million RSF.
3Q22 rental rate increases on lease renewals and re-leasing of space were 27.1% and 22.6% (cash basis).
3Q22
YTD 3Q22
Total leasing activity – RSF
1,662,069
6,405,265
Leasing of development and redevelopment space – RSF
329,006
2,685,138
Lease renewals and re-leasing of space:
RSF (included in total leasing activity above)
1,094,821
3,045,980
Rental rate increases
27.1 %
34.3 %
Rental rate increases (cash basis)
22.6 %
24.2 %
Continued strong net operating income and internal growth
Net operating income (cash basis) of $1.6 billion for 3Q22 annualized, up $306.0 million, or 22.9%, compared to 3Q21 annualized.
5.1% and 10.6% (cash basis) for 3Q22 over 3Q21, representing the third-highest same property net operating income (cash basis) growth in Company history.
7.0% and 8.9% (cash basis) for YTD 3Q22 over YTD 3Q21.
Strong and flexible balance sheet with significant liquidity
Investment-grade credit ratings ranked in the top 10% among all publicly traded U.S. REITs.
Net debt and preferred stock to Adjusted EBITDA of 5.4x and fixed-charge coverage ratio of 4.9x for 3Q22 annualized.
Total debt and preferred stock to gross assets of 27%.
95.9% of our debt has a fixed rate.
13.2 years weighted-average remaining term of debt.
No debt maturities prior to 2025.
$6.4 billion of liquidity.
Continued strategic value harvesting with strong valuations
During YTD 3Q22, we completed dispositions and sales of partial interests aggregating $2.2 billion, including $1.0 billion of dispositions during 3Q22:
Sale of five properties in our South San Francisco and Greater Stanford submarkets for an aggregate sales price of $383.6 million, or $1,161 per RSF, representing capitalization rates of 5.2% and 5.2% (cash basis).
Sale of a 70% interest in 3215 Merryfield Row in our Torrey Pines submarket for a sales price of $149.9 million, or $1,256 per RSF, representing capitalization rates of 4.5% and 4.2% (cash basis).
Sale of a 70% interest in Summers Ridge Science Park in our Sorrento Mesa submarket for a sales price of $159.6 million, or $720 per RSF, representing capitalization rates of 4.9% and 4.6% (cash basis).
Continued dividend strategy to share strong and consistent growth in operating cash flows with stockholders while also retaining a significant portion for reinvestment
Common stock dividend declared for 3Q22 of $1.18 per common share, aggregating $4.66 per common share for the twelve months ended September 30, 2022, up 24 cents, or 5%, over the twelve months ended September 30, 2021.
Dividend yield of 3.4% as of September 30, 2022.
FFO payout ratio of 56% for the three months ended September 30, 2022.
Average annual dividend per-share growth of 6.5% over the last five years.
Completion of unsecured senior line of credit upsizing and term extension
In September 2022, we amended our unsecured senior line of credit. Key changes include:
New Agreement
Change
Commitments available for borrowing
$4.0 billion
Up $1.0 billion
Maturity date
January 22, 2028
Extended by 2 years
Interest rate
SOFR+0.875%
Converted to SOFR
from LIBOR
Alexandria's tenants drive visibility for future growth aggregating over $645 million of incremental net operating income Highly leased value-creation pipeline of current and seven near-term projects expected to generate greater than $645 million of incremental net operating income, primarily commencing from 4Q22 through 3Q25.
7.6 million RSF of our value-creation projects, which are 78% leased.
80% of the leased RSF was generated from our roster of over 1,000 tenants.
Key items included in operating results
Key items included in net income attributable to Alexandria's common stockholders:
YTD
3Q22
3Q21
3Q22
3Q21
3Q22
3Q21
3Q22
3Q21
(In millions, except per share amounts)
Amount
Per Share – Diluted
Amount
Per Share – Diluted
Unrealized (losses) gains on non-real estate investments
$ (56.5)
$ (14.4)
$ (0.35)
$ (0.10)
$ (388.1)
$ 183.3
$ (2.42)
$ 1.26
Significant realized gains on non-real estate investments
—
52.4
—
0.35
—
110.1
—
0.76
Gain (loss) on sales of real estate
323.7
(0.4)
2.00
—
537.9
2.3
3.35
0.02
Impairment of real estate
(38.8)
(42.6)
(0.24)
(0.28)
(38.8)
(52.7)
(0.24)
(0.37)
Loss on early extinguishment of debt
—
—
—
—
(3.3)
(67.3)
(0.02)
(0.46)
Acceleration of stock compensation expense due to executive officer resignation
(7.2)
—
(0.04)
—
(7.2)
—
(0.04)
—
Total
$ 221.2
$ (5.0)
$ 1.37
$ (0.03)
$ 100.5
$ 175.7
$ 0.63
$ 1.21
Balance sheet management
Key metrics as of September 30, 2022
$33.3 billion in total market capitalization.
$22.8 billion in total equity capitalization, which ranks in the top 10% among all publicly traded U.S. REITs.
13.2 years weighted-average remaining term of debt.
No remaining LIBOR-based debt ahead of June 2023 phase-out.
3Q22
Goal
Quarter
Trailing
4Q22
Annualized
12 Months
Annualized
Net debt and preferred stock to Adjusted EBITDA
5.4x
5.6x
Less than or equal to 5.1x
Fixed-charge coverage ratio
4.9x
5.1x
Greater than or equal to 5.1x
Key capital events
In September 2022, we amended our unsecured senior line of credit to increase the aggregate commitment to $4.0 billion and extend the maturity date to January 22, 2028. Refer to page 2 of this Earnings Press Release for additional detail.
In September 2022, we increased the aggregate amount we may issue from time to time under our commercial paper program to $2.0 billion from $1.5 billion.
During 3Q22, we settled a portion of our outstanding forward equity sales agreements by issuing 1.0 million shares and received net proceeds of $199.7 million. We expect to issue an aggregate of 8.0 million shares at an average price of $186.03 per share to settle all our outstanding forward equity sales agreements and receive net proceeds of approximately $1.5 billion in 4Q22.
During 3Q22, there was no sale activity under our ATM program. As of September 30, 2022, the remaining aggregate amount available under our ATM program for future sales of common stock was $246.6 million.
Investments
As of September 30, 2022:
Our investments aggregated $1.6 billion.
Unrealized gains presented in our consolidated balance sheets were $421.1 million, comprising gross unrealized gains and losses aggregating $529.0 million and $107.9 million, respectively.
Investment loss of $32.3 million for the three months ended September 30, 2022, presented in our consolidated statements of operations, consisted of $24.2 million of realized gains and $56.5 million of unrealized losses/changes in fair value.
External growth and investment in real estate
Delivery and commencement of value-creation projects
During 3Q22, we placed into service development and redevelopment projects aggregating 332,961 RSF across multiple submarkets resulting in $30 million of incremental net operating income.
82% of construction costs related to active development and redevelopment projects aggregating 5.6 million RSF are under a guaranteed maximum price ("GMP") contract or other fixed contracts. Our budgets also include construction cost contingencies in GMP contracts plus additional landlord contingencies that generally range from 3% to 5%.
Annual net operating income (cash basis) is expected to increase by $45 million upon the burn-off of initial free rent from recently delivered projects.
Value-creation pipeline of new Class A development and redevelopment projects as a percentage of gross assets
3Q22
Under construction projects 76% leased/negotiating
10 %
Near-term projects expected to commence construction in the next five quarters 88% leased
1 %
Income-producing/potential cash flows/covered land play(1)
8 %
Land
3 %
(1)
Includes projects that have existing buildings that are generating or can generate operating cash flows. Also includes development rights associated with existing operating campuses.
Alexandria is at the vanguard of innovation for a high-quality roster of over 1,000 tenants, focused on accommodating their current needs and providing them with a path for future growth
During 3Q22, we completed acquisitions in our key life science cluster submarkets aggregating 1.2 million RSF of value-creation opportunities for an aggregate purchase price of $316.7 million.
Industry and ESG leadership: catalyzing and leading the way for positive change to benefit human health and society
In October 2022, Alexandria continued to enhance its first social responsibility pillar focused on advancing human health by empowering NEXT for AUTISM's development of important support services for autistic individuals and their families. Alexandria has been forging strategically supportive partnerships with highly impactful organizations that aim to accelerate groundbreaking medical innovation to advance vitally needed therapies for individuals with autism.
In October 2022, Alexandria's position as a groundbreaking leader in ESG was reinforced in the 2022 GRESB Real Estate Assessment, with several achievements, including: (i) Regional and Global Sector Leader for buildings in development in the Science & Technology sector, (ii) #2 ranking for buildings in operation in the Diversified Listed sector, and (iii) "A" disclosure score for the fifth consecutive year. Alexandria has earned "Green Star" recognitions in the operating asset benchmark for the sixth consecutive year and in the development benchmark for the third consecutive year since its 2020 launch.
Industry and ESG leadership (continued)
In October 2022, Alexandria was recognized as a Climate Leader by the Sponsors of Mass Save®, a collaborative of the energy utilities and energy efficiency service providers in Massachusetts. Utilizing these programs in our Greater Boston market, we have implemented over 65 energy conservation projects across more than 40 buildings over the last 10 years, resulting in estimated recurring annual energy savings of over 5 million kWh. Alexandria was the only real estate company to be selected in the inaugural cohort of honorees.
In September 2022, coinciding with National Suicide Prevention Month, we announced our deepened partnership with KITA, a non-profit providing tuition-free summer camp for children who have lost a loved one to suicide, and the advancement of our eighth social responsibility pillar addressing the mental health crisis. Through Alexandria's significant support, KITA will have free, long-term access to 28 acres in Acton, Maine that will serve as the non-profit's new home and enable it to grow its program and increase the number of children it serves.
In July 2022, Alexandria Venture Investments, our strategic venture capital platform, was recognized as the #1 most active corporate investor in biopharma by new deal volume (2021-1H22) for the fifth consecutive year by Silicon Valley Bank in its "Healthcare Investments and Exits: Mid-Year 2022 Report." Alexandria's venture activity provides us with, among other things, mission-critical data and insights into industry innovations and trends.
About Alexandria Real Estate Equities, Inc.
Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is a best-in-class, mission-driven life science REIT making a positive and lasting impact on the world. As the pioneer of the life science real estate niche since its founding in 1994, Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative life science, agtech, and technology campuses in AAA innovation cluster locations, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. The trusted partner to over 1,000 tenants, as of September 30, 2022, Alexandria has a total market capitalization of $33.3 billion and an asset base in North America of 74.5 million square feet ("SF"), which includes 41.1 million RSF of operating properties and 5.6 million RSF of Class A properties undergoing construction, 9.9 million RSF of near-term and intermediate-term development and redevelopment projects, and 17.9 million SF of future development projects. Alexandria has a longstanding and proven track record of developing Class A properties clustered in life science, agtech, and technology campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science, agrifoodtech, climate innovation, and technology companies through our venture capital platform. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.
Acquisitions September 30, 2022 (Dollars in thousands)
Property
Submarket/Market
Date of
Purchase
Number of Properties
Operating
Occupancy
Square Footage
Purchase Price
Acquisitions With Development/Redevelopment Opportunities(1)
Future Development
Operating With Future Development/ Redevelopment
Operating(2)
Operating
Total(3)
Completed in 1H22
32
91
%
5,486,991
2,866,642
451,760
—
8,373,453
$
2,120,863
Completed in 3Q22:
100 Edwin H. Land Boulevard
Cambridge/Inner Suburbs/ Greater Boston
8/1/22
1
100
%
TBD
104,500
—
—
104,500
170,000
10010 and 10140 Campus Point Drive and 4275 Campus Point Court
University Town Center/ San Diego
9/29/22
3
100
750,000
226,144
—
—
750,000
106,380
Other
Various
Various
3
96
302,000
108,478
—
—
372,278
40,349
7
99
%
1,052,000
439,122
(4)
—
—
1,226,778
316,729
Completed in October 2022:
1001 Trinity Street and 1020 Red River Street
Austin/Texas
10/4/22
2
100
%
123,976
198,972
—
—
322,948
108,000
Other
360
108,360
Pending
Various
104,048
Total
$
2,650,000
2022 guidance range
$2,550,000 – $2,750,000
(1)
We expect to provide total estimated costs and related yields for development and redevelopment projects in the future, subsequent to the commencement of construction.
(2)
Represents the operating component of our value-creation acquisitions that is not expected to undergo future development or redevelopment.
(3)
Represents total square footage upon completion of development or redevelopment of one or more new Class A properties. Square footage presented includes RSF of buildings currently in operation with future development or redevelopment opportunities. Refer to "Definitions and reconciliations" in our Supplemental Information for additional details on value-creation square feet currently included in rental properties.
(4)
We expect the acquisitions completed during the three months ended September 30, 2022 to generate initial annual net operating income of approximately $12 million for the twelve months following acquisition. These acquisitions included seven operating properties with a weighted-average acquisition date of August 27, 2022 (weighted by initial annual net operating income).
Dispositions and Sales of Partial Interest September 30, 2022 (Dollars in thousands, except per RSF amounts)
Capitalization Rate
(Cash Basis)
Sales Price per RSF
Gain or Consideration in Excess of Book Value
Property
Submarket/Market
Date of Sale
Interest Sold
RSF
Capitalization Rate
Sales Price
Completed 1H22:
100 Binney Street
Cambridge/Inner Suburbs/Greater Boston
3/30/22
70 %
432,931
3.6 %
3.5 %
$ 713,228
(1)
$ 2,353
$ 413,615
(2)
300 Third Street
Cambridge/Inner Suburbs/Greater Boston
6/27/22
70 %
131,963
4.6 %
4.3 %
166,485
(1)
$ 1,802
113,020
(2)
Alexandria Park at 128, 285 Bear Hill Road, 111 and 130 Forbes Boulevard, and 20 Walkup Drive
Route 128 and Route 495/Greater Boston
6/8/22
100 %
617,043
5.1 %
5.1 %
334,397
$ 542
202,325
Other
N/A
N/A
47,800
N/A
11,894
1,261,910
740,854
Completed 3Q22:
1450 Owens Street
Mission Bay/San Francisco Bay Area
7/1/22
20 %
(3)
191,000
N/A
N/A
25,039
(1)
N/A
10,083
(2)
341 and 343 Oyster Point Boulevard, 7000 Shoreline Court, and Shoreway Science Center
South San Francisco and Greater Stanford/San Francisco Bay Area
9/15/22
100 %
330,379
5.2 %
5.2 %
383,635
$ 1,161
223,127
3215 Merryfield Row
Torrey Pines/San Diego
9/1/22
70 %
170,523
4.5 %
4.2 %
149,940
(1)
$ 1,256
42,214
(2)
Summers Ridge Science Park
Sorrento Mesa/San Diego
9/15/22
70 %
316,531
4.9 %
4.6 %
159,600
(1)
$ 720
65,097
(2)
7330 and 7360 Carroll Road
Sorrento Mesa/San Diego
9/15/22
100 %
84,442
4.4 %
4.6 %
59,476
$ 704
35,463
13112 Evening Creek Drive
Other/San Diego
9/26/22
100 %
109,780
5.3 %
5.3 %
55,500
$ 506
31,001
Other
Various
N/A
N/A
127,196
N/A
34,108
960,386
441,093
Total
$ 2,222,296
$ 1,181,947
2022 guidance range
$1,450,000 – $2,600,000
(1)
Represents the contractual sales price for the percentage interest of the property sold by us.
(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 equity transaction, with no gain or loss recognized in earnings.
(3)
Relates to the sale of a partial interest in a land parcel. The noncontrolling interest share of our joint venture partner is anticipated to increase to 75% as our partner contributes capital for construction over time. As of September 30, 2022, the noncontrolling interest share of our joint venture partner was 34.5%.
Guidance September 30, 2022 (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, 2022. There can be no assurance that actual amounts will not be materially higher or lower than these expectations. Also, refer to our discussion of "forward-looking statements" on page 7 of this Earnings Press Release for additional details.
2022 Guidance Midpoint
Summary of Key Changes in Guidance
As of 10/24/22
As of 7/25/22
EPS, FFO per share, and FFO per share, as adjusted
See updates below
Occupancy percentage in North America as of December 31, 2022
95.0% to 95.6%
95.2% to 95.8%
Straight-line rent revenue
$139 to $149
$144 to $154
Projected 2022 Earnings per Share and Funds From Operations per Share Attributable to Alexandria's Common Stockholders – Diluted
As of 10/24/22
As of 7/25/22
Earnings per share(1)
$3.56 to $3.58
$2.14 to $2.20
Depreciation and amortization of real estate assets
5.50
5.50
Gain on sales of real estate
(3.35)
(1.34)
Allocation to unvested restricted stock awards
(0.01)
(0.02)
Funds from operations per share(2)
$5.70 to $5.72
$6.28 to $6.34
Unrealized losses on non-real estate investments
2.42
2.07
Impairment of real estate
0.24
—
Loss on early extinguishment of debt
0.02
0.02
Acceleration of stock compensation expense due to executive officer resignation
0.04
0.04
Allocation to unvested restricted stock awards
(0.03)
(0.02)
Other
0.01
(0.01)
Funds from operations per share, as adjusted(2)
$8.40 to $8.42
$8.38 to $8.44
Midpoint
$8.41
$8.41
Key Assumptions
Low
High
Occupancy percentage in North America as of December 31, 2022(4)
95.0 %
95.6 %
Lease renewals and re-leasing of space:
Rental rate increases
30.0 %
35.0 %
Rental rate increases (cash basis)
18.0 %
23.0 %
Same property performance:
Net operating income increase
6.0 %
8.0 %
Net operating income increase (cash basis)
6.8 %
8.8 %
Straight-line rent revenue(5)
$ 139
$ 149
General and administrative expenses
$ 172
$ 180
Capitalization of interest
$ 269
$ 279
Interest expense
$ 90
$ 100
Key Credit Metrics
2022 Guidance
Net debt and preferred stock to Adjusted EBITDA – 4Q22 annualized
Less than or equal to 5.1x
Fixed-charge coverage ratio – 4Q22 annualized
Greater than or equal to 5.1x
Key Sources and Uses of Capital
Range
Midpoint
Certain
Completed Items
Sources of capital:
Net cash provided by operating activities after dividends
$ 275
$ 325
$
300
Incremental debt
1,383
583
983
See below
Dispositions and sales of partial interests (refer to page 5)
1,450
2,600
2,025
$ 2,222
Common equity
2,342
2,342
2,342
$ 2,342
(3)
Total sources of capital
$ 5,450
$ 5,850
$
5,650
Uses of capital:
Construction (refer to page 47)
$ 2,900
$ 3,100
$
3,000
Acquisitions (refer to page 4)
2,550
2,750
2,650
$ 2,546
Total uses of capital
$ 5,450
$ 5,850
$
5,650
Incremental debt (included above):
Issuance of unsecured senior notes payable
$ 1,800
$ 1,800
$
1,800
$ 1,800
Repayments of secured notes payable
(195)
(195)
(195)
$ (195)
Unsecured senior line of credit, commercial paper, and other
(22)
(722)
(372)
Cash expected to be held at December 31, 2022(6)
(200)
(300)
(250)
Incremental debt
$ 1,383
$ 583
$
983
(1)
Excludes unrealized gains or losses after September 30, 2022 that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted.
(2)
Refer to "Funds from operations and funds from operations, as adjusted, attributable to Alexandria's common stockholders" in the "Definitions and reconciliations" of our Supplemental Information for additional details.
(3)
Refer to "Key capital events" on page 3 of this Earnings Press Release for additional details. During the nine months ended September 30, 2022, we entered into new forward equity sales agreements aggregating $2.3 billion to sell 12.3 million shares of our common stock, and settled a portion of these forward equity sales agreements by issuing 4.2 million shares and received net proceeds of $847.9 million. We expect to issue 8.0 million shares to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $1.5 billion in 4Q22.
(4)
Updated guidance for occupancy percentage in North America as of December 31, 2022, reflects one property acquired in 3Q22 with 70,278 operating RSF that was occupied by the seller through September 30, 2022.
(5)
Reduction in our guidance range for straight-line rent revenue by $5 million is primarily attributable to: i) completed and projected dispositions, and ii) the write-off of deferred rent in 3Q22 in connection with the early termination of one below-market lease aggregating 21,621 RSF, with no downtime in occupancy, at rental rate increases of 23% and 36% (cash basis).
(6)
Represents cash expected to be held at December 31, 2022, which reduces our 2023 debt capital needs.
Earnings Call Information and About the Company September 30, 2022
We will host a conference call on Tuesday, October 25, 2022, at 3:00 p.m. Eastern Time ("ET")/noon Pacific Time ("PT"), which is open to the general public, to discuss our financial and operating results for the third quarter ended September 30, 2022. 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, October 25, 2022. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 9685874.
Additionally, a copy of this Earnings Press Release and Supplemental Information for the third quarter ended September 30, 2022 is available in the "For Investors" section of our website at www.are.com or by following this link: https://www.are.com/fs/2022q3.pdf.
For any questions, please contact Joel S. Marcus, executive chairman and founder; Peter M. Moglia, chief executive officer and co-chief investment officer; Dean A. Shigenaga, president and chief financial officer; Paula Schwartz, managing director of Rx Communications Group, at (917) 633-7790; or Sara M. Kabakoff, vice president – strategic communications, at (626) 578-0777.
About the Company
Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is a best-in-class, mission-driven life science REIT making a positive and lasting impact on the world. As the pioneer of the life science real estate niche since its founding in 1994, Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative life science, agtech, and technology campuses in AAA innovation cluster locations, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. The trusted partner to over 1,000 tenants, as of September 30, 2022, Alexandria has a total market capitalization of $33.3 billion and an asset base in North America of 74.5 million SF, which includes 41.1 million RSF of operating properties and 5.6 million RSF of Class A properties undergoing construction, 9.9 million RSF of near-term and intermediate-term development and redevelopment projects, and 17.9 million SF of future development projects. Alexandria has a longstanding and proven track record of developing Class A properties clustered in life science, agtech, and technology campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science, agrifoodtech, climate innovation, and technology companies through our venture capital platform. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.
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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 2022 earnings per share attributable to Alexandria's common stockholders – diluted, 2022 funds from operations per share attributable to Alexandria's common stockholders – diluted, net operating income, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as "forecast," "guidance," "goals," "projects," "estimates," "anticipates," "believes," "expects," "intends," "may," "plans," "seeks," "should," "targets," or "will," or the negative of those words or similar words. These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. There can be no assurance that actual results will not be materially higher or lower than these expectations. These statements are subject to risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, lower than expected yields, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully place into service and lease any properties undergoing development or redevelopment and our existing space held for future development or redevelopment (including new properties acquired for that purpose), our failure to successfully operate or lease acquired properties, decreased rental rates, increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, adverse general and local economic conditions, an unfavorable capital market environment, decreased leasing activity or lease renewals, failure to obtain LEED and other healthy building certifications and efficiencies, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission ("SEC"). Accordingly, you are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are made as of the date of this Earnings Press Release and Supplemental Information, and unless otherwise stated, we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.
Alexandria®, Lighthouse Design® logo, Building the Future of Life-Changing Innovation®, That's What's in Our DNA®, At the Vanguard and Heart of the Life Science Ecosystem™, Alexandria Center®, Alexandria Technology Square®, Alexandria Technology Center®, and Alexandria Innovation Center® are copyrights and trademarks of Alexandria Real Estate Equities, Inc. All other company names, trademarks, and logos referenced herein are the property of their respective owners.
Consolidated Statements of Operations September 30, 2022 (Dollars in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
9/30/22
6/30/22
3/31/22
12/31/21
9/30/21
9/30/22
9/30/21
Revenues:
Income from rentals
$ 656,853
$ 640,959
$ 612,554
$ 574,656
$ 546,527
$ 1,910,366
$ 1,533,593
Other income
2,999
2,805
2,511
2,267
1,232
8,315
3,634
Total revenues
659,852
643,764
615,065
576,923
547,759
1,918,681
1,537,227
Expenses:
Rental operations
201,189
196,284
181,328
175,717
165,995
578,801
447,838
General and administrative
49,958
(1)
43,397
40,931
41,654
37,931
134,286
109,807
Interest
22,984
24,257
29,440
34,862
35,678
76,681
107,303
Depreciation and amortization
254,929
242,078
240,659
239,254
210,842
737,666
581,807
Impairment of real estate
38,783
(1)
—
—
—
42,620
38,783
52,675
Loss on early extinguishment of debt
—
3,317
—
—
—
3,317
67,253
Total expenses
567,843
509,333
492,358
491,487
493,066
1,569,534
1,366,683
Equity in earnings of unconsolidated real estate joint ventures
40
213
220
3,018
3,091
473
9,237
Investment (loss) income
(32,305)
(39,481)
(240,319)
(112,884)
67,084
(312,105)
372,361
Gain (loss) on sales of real estate
323,699
214,219
—
124,226
(435)
537,918
2,344
Net income (loss)
383,443
309,382
(117,392)
99,796
124,433
575,433
554,486
Net income attributable to noncontrolling interests
(38,747)
(37,168)
(32,177)
(24,901)
(21,286)
(108,092)
(58,134)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s stockholders
344,696
272,214
(149,569)
74,895
103,147
467,341
496,352
Net income attributable to unvested restricted stock awards
(3,257)
(2,934)
(2,081)
(2,098)
(1,883)
(5,866)
(5,750)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s common stockholders
$ 341,439
$ 269,280
$ (151,650)
$ 72,797
$ 101,264
$ 461,475
$ 490,602
Net income (loss) per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders:
Basic
$ 2.11
$ 1.67
$ (0.96)
$ 0.47
$ 0.67
$ 2.88
$ 3.39
Diluted
$ 2.11
$ 1.67
$ (0.96)
$ 0.47
$ 0.67
$ 2.88
$ 3.38
Weighted-average shares of common stock outstanding:
Basic
161,554
161,412
158,198
153,464
150,854
160,400
144,716
Diluted
161,554
161,412
158,198
154,307
151,561
160,400
145,153
Dividends declared per share of common stock
$ 1.18
$ 1.18
$ 1.15
$ 1.15
$ 1.12
$ 3.51
$ 3.33
(1)
Refer to "Funds from operations and funds from operations per share" of this Earnings Press Release for additional details.
Consolidated Balance Sheets September 30, 2022 (In thousands)
9/30/22
6/30/22
3/31/22
12/31/21
9/30/21
Assets
Investments in real estate
$ 28,771,745
$ 27,952,931
$ 27,100,009
$ 24,980,669
$ 23,071,514
Investments in unconsolidated real estate joint ventures
38,285
37,587
38,456
38,483
321,737
Cash and cash equivalents
533,824
420,258
775,060
361,348
325,872
Restricted cash
332,344
97,404
95,106
53,879
42,182
Tenant receivables
7,759
7,069
7,570
7,379
7,749
Deferred rent
918,995
905,699
881,743
839,335
816,219
Deferred leasing costs
506,864
498,434
484,184
402,898
329,952
Investments
1,624,921
1,657,461
1,661,101
1,876,564
2,046,878
Other assets
1,633,877
1,667,210
1,801,027
1,658,818
1,596,615
Total assets
$ 34,368,614
$ 33,244,053
$ 32,844,256
$ 30,219,373
$ 28,558,718
Liabilities, Noncontrolling Interests, and Equity
Secured notes payable
$ 40,594
$ 24,986
$ 208,910
$ 205,198
$ 198,758
Unsecured senior notes payable
10,098,588
10,096,462
10,094,337
8,316,678
8,314,851
Unsecured senior line of credit and commercial paper
386,666
149,958
—
269,990
749,978
Accounts payable, accrued expenses, and other liabilities
2,393,764
2,317,940
2,172,692
2,210,410
2,149,450
Dividends payable
193,623
192,571
187,701
183,847
173,560
Total liabilities
13,113,235
12,781,917
12,663,640
11,186,123
11,586,597
Commitments and contingencies
Redeemable noncontrolling interests
9,612
9,612
9,612
9,612
11,681
Alexandria Real Estate Equities, Inc.'s stockholders' equity:
Common stock
1,626
1,615
1,614
1,580
1,532
Additional paid-in capital
17,639,434
17,149,571
16,934,094
16,195,256
14,727,735
Accumulated other comprehensive loss
(24,725)
(11,851)
(5,727)
(7,294)
(6,029)
Alexandria Real Estate Equities, Inc.'s stockholders' equity
17,616,335
17,139,335
16,929,981
16,189,542
14,723,238
Noncontrolling interests
3,629,432
3,313,189
3,241,023
2,834,096
2,237,202
Total equity
21,245,767
20,452,524
20,171,004
19,023,638
16,960,440
Total liabilities, noncontrolling interests, and equity
$ 34,368,614
$ 33,244,053
$ 32,844,256
$ 30,219,373
$ 28,558,718
Funds From Operations and Funds From Operations per Share September 30, 2022 (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
Nine Months Ended
9/30/22
6/30/22
3/31/22
12/31/21
9/30/21
9/30/22
9/30/21
Net income (loss) attributable to Alexandria's common stockholders
$ 341,439
$ 269,280
$ (151,650)
$ 72,797
$ 101,264
$ 461,475
$ 490,602
Depreciation and amortization of real estate assets
251,453
238,565
237,160
234,979
205,436
727,178
569,654
Noncontrolling share of depreciation and amortization from consolidated real estate JVs
(27,790)
(26,418)
(23,681)
(21,265)
(17,871)
(77,889)
(49,615)
Our share of depreciation and amortization from unconsolidated real estate JVs
795
934
955
3,058
3,465
2,684
10,676
(Gain) loss on sales of real estate
(323,699)
(214,219)
—
(124,226)
435
(537,918)
(2,344)
Impairment of real estate – rental properties
—
—
—
—
18,602
—
25,485
Allocation to unvested restricted stock awards
1,002
—
—
—
(1,472)
(81)
(6,574)
Funds from operations attributable to Alexandria's common stockholders – diluted(1)
243,200
268,142
62,784
165,343
309,859
575,449
1,037,884
Unrealized losses (gains) on non-real estate investments
56,515
68,128
263,433
139,716
14,432
388,076
(183,348)
Significant realized gains on non-real estate investments
—
—
—
—
(52,427)
—
(110,119)
Impairment of real estate
38,783
(2)
—
—
—
24,018
38,783
27,190
Loss on early extinguishment of debt
—
3,317
—
—
—
3,317
67,253
Acceleration of stock compensation expense due to executive officer resignation
7,185
(3)
—
—
—
—
7,185
—
Allocation to unvested restricted stock awards
(1,033)
(778)
(1,604)
(1,432)
149
(4,743)
2,400
Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted
$ 344,650
$ 338,809
$ 324,613
$ 303,627
$ 296,031
$ 1,008,067
$ 841,260
(1)
Calculated in accordance with standards established by the Nareit Board of Governors.
(2)
Includes $38.3 million related to the impairment of one future development, which we recognized upon our decision not to proceed with the project.
(3)
Relates to the resignation of Stephen A. Richardson, our former Co-Chief Executive Officer, in July 2022.
Funds From Operations and Funds From Operations per Share (continued) September 30, 2022 (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
Nine Months Ended
9/30/22
6/30/22
3/31/22
12/31/21
9/30/21
9/30/22
9/30/21
Net income (loss) per share attributable to Alexandria's common stockholders – diluted
$ 2.11
$ 1.67
$ (0.96)
$ 0.47
$ 0.67
$ 2.88
$ 3.38
Depreciation and amortization of real estate assets
1.39
1.32
1.36
1.40
1.26
4.06
3.66
Gain on sales of real estate
(2.00)
(1.33)
—
(0.80)
—
(3.35)
(0.02)
Impairment of real estate – rental properties
—
—
—
—
0.12
—
0.18
Allocation to unvested restricted stock awards
0.01
—
—
—
(0.01)
—
(0.05)
Funds from operations per share attributable to Alexandria's common stockholders – diluted
1.51
1.66
0.40
1.07
2.04
3.59
7.15
Unrealized losses (gains) on non-real estate investments
0.35
0.42
1.67
0.91
0.10
2.42
(1.26)
Significant realized gains on non-real estate investments
—
—
—
—
(0.35)
—
(0.76)
Impairment of real estate
0.24
—
—
—
0.16
0.24
0.19
Loss on early extinguishment of debt
—
0.02
—
—
—
0.02
0.46
Acceleration of stock compensation expense due to executive officer resignation
0.04
—
—
—
—
0.04
—
Allocation to unvested restricted stock awards
(0.01)
—
(0.02)
(0.01)
—
(0.03)
0.02
Funds from operations per share attributable to Alexandria's common stockholders – diluted, as adjusted
$ 2.13
$ 2.10
$ 2.05
$ 1.97
$ 1.95
$ 6.28
$ 5.80
Weighted-average shares of common stock outstanding for calculation of:
Earnings per share – diluted
161,554
161,412
158,198
154,307
151,561
160,400
145,153
Funds from operations, diluted, per share
161,554
161,412
158,209
154,307
151,561
160,400
145,153
Funds from operations, diluted, as adjusted, per share
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