ALEXANDRIA REAL ESTATE EQUITIES, INC. PASADENA, Calif., April 29, 2019 /PRNewswire/ -- 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.
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; | |||||
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 | (1) | |||
Fixed-charge coverage ratio | 4.5x | 4.2x | Greater than 4.0x | (1) | |||
Total value-creation pipeline as a percentage of | 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
- 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.
Acquisitions | |||||||||||||||||||||||||||||||
March 31, 2019 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||
Property | Submarket/Market | Date of | Number of | Operating Occupancy | Square Footage | Unlevered Yields | Purchase Price | ||||||||||||||||||||||||
Future | Operating With | Operating | Initial | Initial | |||||||||||||||||||||||||||
Value-creation | |||||||||||||||||||||||||||||||
10 Necco Street | Seaport Innovation | 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/ | 1/10/19 | 1 | 100% | — | — | 98,626 | 7.5% | 5.1% | 100,250 | |||||||||||||||||||||
Shoreway Science Center | Greater Stanford/ | 1/10/19 | 2 | 100% | — | — | 82,462 | 7.2% | 5.5% | 73,200 | |||||||||||||||||||||
260 Townsend Street | Mission Bay/SoMa/ | 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 | University Town Center/ | 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 |
Dispositions and Sale of Partial Interest in Core Class A Property | |||||||||||||||||
March 31, 2019 | |||||||||||||||||
(Dollars in thousands, except per RSF amounts) | |||||||||||||||||
Property | Submarket/Market | Date of Sale | RSF | Sales Price | Sales Price | 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 |
Guidance | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||
Summary of Key Changes in Guidance | Guidance | Summary of Key Changes in Key Sources and Uses of | 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 | Key Credit Metrics | 2019 Guidance | ||||||||||||||||||||||||
As of 4/29/19 | As of 2/4/19 | Net debt to Adjusted EBITDA – 4Q19 annualized | Less than or equal to 5.3x | |||||||||||||||||||||||
Earnings per share(1) | $2.65 to $2.75 | $1.95 to $2.15 | Net debt and preferred stock to Adjusted EBITDA – 4Q19 annualized | Less than or equal to 5.4x | ||||||||||||||||||||||
Depreciation and amortization | 4.85 | 4.85 | Fixed-charge coverage ratio – 4Q19 annualized | Greater than 4.0x | ||||||||||||||||||||||
Allocation to unvested restricted stock awards | (0.05) | (0.03) | Value-creation pipeline as a percentage of gross real estate as of | 8% to 12% | ||||||||||||||||||||||
Funds from operations per share(2) | $7.45 to $7.55 | $6.77 to $6.97 | December 31, 2019 | |||||||||||||||||||||||
Unrealized gains on non-real estate investment(1) | (0.65) | — | Certain Completed Items | |||||||||||||||||||||||
Loss on early extinguishment of debt | 0.07 | 0.06 | ||||||||||||||||||||||||
Preferred stock redemption charge | 0.02 | 0.02 | Key Sources and Uses of Capital | Range | Midpoint | |||||||||||||||||||||
Allocation to unvested restricted stock awards | 0.01 | — | Sources of capital: | |||||||||||||||||||||||
Funds from operations per share, as adjusted | $6.90 to $7.00 | $6.85 to $7.05 | Net cash provided by operating activities after | $ | 170 | $ | 210 | $ | 190 | |||||||||||||||||
Midpoint | $6.95 | $6.95 | dividends | |||||||||||||||||||||||
Incremental debt | 485 | 445 | 465 | |||||||||||||||||||||||
Real estate dispositions and partial interest sales: | ||||||||||||||||||||||||||
Key Assumptions | Low | High | Sale of partial interest in core Class A property | 438 | 438 | 438 | $ | 438 | (3) | |||||||||||||||||
Occupancy percentage in North America as of December 31, 2019 | 97.7% | 98.3% | Other | 262 | 362 | 312 | ||||||||||||||||||||
Common equity | 475 | 575 | 525 | |||||||||||||||||||||||
Lease renewals and re-leasing of space: | Total sources of capital | $ | 1,830 | $ | 2,030 | $ | 1,930 | |||||||||||||||||||
Rental rate increases | 26.0% | 29.0% | Uses of capital: | |||||||||||||||||||||||
Rental rate increases (cash basis) | 13.0% | 16.0% | Construction | $ | 1,250 | $ | 1,350 | $ | 1,300 | |||||||||||||||||
Same property performance: | Acquisitions | 580 | 680 | 630 | (4) | |||||||||||||||||||||
Net operating income increase | 1.0% | 3.0% | Total uses of capital | $ | 1,830 | $ | 2,030 | $ | 1,930 | |||||||||||||||||
Net operating income increase (cash basis) | 6.0% | 8.0% | Incremental debt (included above): | |||||||||||||||||||||||
Issuance of unsecured senior notes payable | $ | 850 | $ | 850 | $ | 850 | $ | 850 | ||||||||||||||||||
Straight-line rent revenue | $ | 95 | $ | 105 | (5) | Assumption of secured note payable | 28 | 28 | 28 | $ | 28 | |||||||||||||||
General and administrative expenses | $ | 108 | $ | 113 | Repayments of secured notes payable | (310) | (320) | (315) | $ | (300) | ||||||||||||||||
Capitalization of interest | $ | 72 | $ | 82 | $2.2 billion unsecured senior line of credit/other | (83) | (113) | (98) | ||||||||||||||||||
Interest expense | $ | 172 | $ | 182 | 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 |
(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. |
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.
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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 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.
Consolidated Statements of Operations | ||||||||||||||||||||
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 |
Consolidated Balance Sheets | ||||||||||||||||||||
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 |
Funds From Operations and Funds From Operations per Share | ||||||||||||||||||||
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 | ||||||||||||||||||||
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 |
(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 |
Funds From Operations and Funds From Operations per Share (continued) | ||||||||||||||||||||
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 | ||||||||||||||||||||
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 | $ | 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, | $ | 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. | ||||||||||||||||||||
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SOURCE Alexandria Real Estate Equities, Inc.
