ALEXANDRIA REAL ESTATE EQUITIES, INC. Forward-looking statements
Certain information and statements included in this quarterly report on Form 10-Q, including, without limitation, statements containing the words "forecast," "guidance," "projects," "estimates," "anticipates," "goals," "believes," "expects," "intends," "may," "plans," "seeks," "should," or "targets," "will," or the negative of those words or similar words, constitute "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. Forward-looking statements involve inherent risks and uncertainties regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, results of operations, and financial position. 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 following: •Operating factors such as a failure to operate our business successfully in comparison to market expectations or in comparison to our competitors, our inability to obtain capital when desired or refinance debt maturities when desired, and/or a failure to maintain our status as a REIT for federal tax purposes. •Market and industry factors such as adverse developments concerning the life science, agtech, and technology industries and/or our tenants. •Government factors such as any unfavorable effects resulting from federal, state, local, and/or foreign government policies, laws, and/or funding levels. •Global factors such as negative economic, political, financial, credit market, and/or banking conditions. •Uncertain global, national, and local impacts of the ongoing COVID-19 pandemic. •Other factors such as climate change, cyber intrusions, and/or changes in laws, regulations, and financial accounting standards. This list of risks and uncertainties is not exhaustive. Additional information regarding risk factors that may affect us is included under "Item 1A. Risk factors" and "Item 7. Management's discussion and analysis of financial condition and results of operations" of our annual report on Form 10-K for the year endedDecember 31, 2020 , and respective sections within this quarterly report on Form 10-Q. Readers of this quarterly report on Form 10-Q should also read our other documents filed publicly with theSEC for further discussion regarding such factors. 44 --------------------------------------------------------------------------------
The COVID-19 pandemic
InDecember 2019 , a novel coronavirus, which causes respiratory illness and spreads from person to person (COVID-19), was identified for the first time. The first case of COVID-19 in theU.S. was reported onJanuary 20, 2020 . OnMarch 11, 2020 , theWorld Health Organization declared COVID-19 a global pandemic, and onMarch 13, 2020 , theU.S. declared a national emergency with respect to COVID-19.
COVID-19 prevention, treatment, and other measures to combat the pandemic
Since scientists shared the virus's genetic makeup inJanuary 2020 , intense research has been underway around the world to develop treatments and vaccines for COVID-19. This has led to theU.S. Food and Drug Administration ("FDA") issuing Emergency Use Authorizations ("EUAs") for therapeutics to treat patients with COVID-19 and, most recently, issuing EUAs for three vaccines for use in the prevention of coronavirus disease caused by COVID-19. The three vaccines issued EUAs were created by Pfizer Inc. (in partnership with BioNTech), Moderna, Inc. (in partnership with theNational Institutes of Health ("NIH")), and Johnson & Johnson, each a tenant of ours. TheU.S. began a large-scale COVID-19 vaccination campaign inDecember 2020 . As ofJuly 23, 2021 , according to theU.S. Centers for Disease Control and Prevention , approximately 162.4 million individuals in theU.S. have been fully vaccinated for COVID-19, and theU.S. will continue to roll out vaccines across the nation. TheU.S. has sufficient vaccine supply to inoculate 100% of the population for which the vaccines are authorized and continues to facilitate access and encourage the remaining unvaccinated population to get vaccinated so the country may achieve herd immunity. Access to vaccines outside theU.S. remains limited, and as a result, new strains of COVID-19 continue to emerge. The level of resistance these new strains may have to the existing vaccines remains unknown and is being closely tracked by governments in partnership with industry. The effectiveness and durability of current vaccines to emerging variants will help determine the need for boosters in the future.
Impact to the global and
As a result of the unprecedented measures taken in the
Based on the data provided by theU.S. Bureau of Labor Statistics onJuly 2, 2021 , the unemployment rate in theU.S. is up by 2.4% sinceFebruary 2020 to 5.9%. While still higher compared to pre-pandemic levels, there has been a slight decrease sinceDecember 2020 . TheJuly 2021 data reported an increase of approximately 850,000 jobs inJune 2021 , reflecting the gradual reopening of the economy as a result of vaccine distribution. SinceMarch 2020 , theU.S. government has passed approximately$5.3 trillion in government funding to combat the pandemic and stimulate the economy. The various relief packages provided unemployment benefits, direct payments to all eligible Americans, small business loans, funding toward highly impacted industries and funding toward theU.S. health system to fund research, construction, and acquisition of equipment for vaccine and infectious disease research facilities, as well as the distribution of vaccines. It is too early to determine the full, long-term economic impact of the COVID-19 pandemic and corresponding government stimulus measures. Potential ineffectiveness of relief measures could lead to the deterioration of economic conditions, significant inflation, long-term high unemployment rates, and/or a recession, which in turn could materially affect our (or our tenants' or venture investment portfolio companies') performance, financial condition, results of operations, and cash flows. See "Item 1A. Risk factors" in our most recent annual report on Form 10-K for additional discussion of the risks posed by the COVID-19 pandemic and uncertainties we, our tenants, and the national and global economies may face as a result. 45
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Overview
We are aMaryland corporation formed inOctober 1994 that has elected to be taxed as a REIT for federal income tax purposes. We are an S&P 500® urban office REIT and the first, longest-tenured, and pioneering owner, operator, and developer uniquely focused on collaborative life science, agtech, and technology campuses inAAA innovation cluster locations, with a total market capitalization of$36.3 billion and an asset base inNorth America of 58.1 million SF as ofJune 30, 2021 . The asset base inNorth America includes 36.7 million RSF of operating properties and 3.4 million RSF of Class A properties undergoing construction, 7.7 million RSF of near-term and intermediate-term development and redevelopment projects, and 10.3 million SF of future development projects. Founded in 1994, we pioneered this niche and have since established a significant market presence in key locations, includingGreater Boston , theSan Francisco Bay Area ,New York City ,San Diego ,Seattle ,Maryland , and Research Triangle. We have a longstanding and proven track record of developing Class A properties clustered in urban life science, agtech, and technology campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success.Alexandria also provides strategic capital to transformative life science, agtech, and technology companies through our venture capital platform. We believe these advantages result in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.
As of
•Investment-grade or publicly traded large cap tenants represented 53% of our
total annual rental revenue;
•Approximately 95% of our leases (on an RSF basis) contained effective annual
rent escalations that were either fixed (generally ranging from approximately
3.0% to 3.5%) or indexed based on a consumer price index or other index;
•Approximately 94% of our leases (on an RSF basis) were triple net leases, which
require tenants to pay substantially all real estate taxes, insurance,
utilities, repairs and maintenance, common area expenses, and other operating
expenses (including increases thereto) in addition to base rent; and
•Approximately 94% of our leases (on an RSF basis) provided for the recapture of
capital expenditures (such as heating, ventilation, and air conditioning systems
maintenance and/or replacement, roof replacement, and parking lot resurfacing)
that we believe would typically be borne by the landlord in traditional office
leases.
Our primary business objective is to maximize stockholder value by providing our
stockholders with the greatest possible total return and long-term asset value
based on a multifaceted platform of internal and external growth. A key element
of our strategy is our unique focus on Class A properties clustered in urban
campuses. These key urban campus locations are characterized by high barriers to
entry for new landlords, high barriers to exit for tenants, and a limited supply
of available space. They generally represent highly desirable locations for
tenancy by life science, agtech, and technology entities because of their close
proximity to concentrations of specialized skills, knowledge, institutions, and
related businesses. Our strategy also includes drawing upon our deep and broad
real estate, life science, agtech, and technology relationships in order to
identify and attract new and leading tenants and to source additional
value-creation real estate.
46
--------------------------------------------------------------------------------Executive summary
Operating results
Three Months Ended June 30 ,
Six Months Ended
2021 2020 2021 2020
Net income attributable to
$ 380.6 $ 226.6 $ 388.5 $ 244.8 Per share $ 2.61$ 1.82 $ 2.74 $ 1.99 Funds from operations attributable toAlexandria's common stockholders - diluted, as adjusted: In millions$ 282.3 $ 225.0 $ 545.2 $ 446.4 Per share $ 1.93$ 1.81 $ 3.84 $ 3.63
The operating results shown above include certain items related to corporate-level investing and financing decisions. Refer to the tabular presentation of these items at the beginning of the "Results of operations" section within this Item 2 for additional information.
Six-time Nareit Investor CARE Gold Award winner
2021 recipient of the Nareit Investor CARE (Communications and Reporting Excellence) Gold Award in the Large Cap Equity REIT category as the best-in-class REIT delivering transparency, quality, and efficient communications and reporting to the investment community. This represents our fourth consecutive Nareit Investor CARE Gold Award, and our sixth Gold Award over the last seven years.
Historic leasing activity and rental rate growth; continued strong net operating income and internal growth
•During the three months endedJune 30, 2021 , historic demand for our high-quality office/laboratory space translated into 1.9 million RSF of leasing activity, representing the highest leasing activity in a single quarter and the second highest rental rate growth in Company history. •Continued strong leasing activity and rental rate growth during the three and six months endedJune 30, 2021 , over expiring rates on renewed and re-leased space: June 30, 2021 Three Months Ended Six Months Ended Total leasing activity - RSF 1,933,838 3,611,497 Leasing of development and redevelopment space - RSF 256,328 1,045,301 Lease renewals and re-leasing of space: RSF (included in total leasing activity above) 1,472,713 1,994,538 Rental rate increases 42.4% 40.7% Rental rate increases (cash basis) 25.4% 23.3% •Total revenues: •$509.6 million, up 16.6%, for the three months endedJune 30, 2021 , compared to$437.0 million for the three months endedJune 30, 2020 . •$989.5 million, up 12.8%, for the six months endedJune 30, 2021 , compared to$876.9 million for the six months endedJune 30, 2020 . •Net operating income (cash basis) of$1.3 billion for the three months endedJune 30, 2021 , annualized, increased by$194.4 million , or 17.6%, compared to the three months endedJune 30, 2020 , annualized. •95% of our leases contain contractual annual rent escalations approximating 3%. •Same property net operating income growth: •3.7% and 7.8% (cash basis) for the three months endedJune 30, 2021 , over the three months endedJune 30, 2020 . •4.4% and 7.4% (cash basis) for the six months endedJune 30, 2021 , over the six months endedJune 30, 2020 . 47 --------------------------------------------------------------------------------
A REIT industry-leading high-quality tenant roster with high-quality revenues and cash flows, strong margins, and operational excellence
Percentage of annual rental revenue in effect from investment-grade or publicly traded large cap tenants
53 %
Occupancy of operating properties in North America 94.3 % (1)
Operating margin 72 %
Adjusted EBITDA margin 69 %
Weighted-average remaining lease term:
All tenants 7.5 years
Top 20 tenants 11.1 years
(1)Includes 1.4 million RSF, or 3.8%, of vacancy at recently acquired properties
in our North America markets, representing lease-up opportunities that are
expected to provide incremental annual rental revenues in excess of $55 million .
Approximately 35% of the vacant 1.4 million RSF is currently under
leased/negotiating, with occupancy expected primarily over the next two
quarters. Excluding these acquired vacancies, occupancy of operating properties
in North America was 98.1% as of June 30, 2021 . Refer to the "Summary of
occupancy percentages in North America " section within this Item 2 for
additional information regarding vacancy at recently acquired properties.
Strong and flexible balance sheet with significant liquidity
•Investment-grade credit ratings ranked in the top 10% among all publicly tradedU.S. REITs as ofJune 30, 2021 . •Net debt and preferred stock to Adjusted EBITDA of 5.8x and fixed-charge coverage ratio of 4.9x for the three months endedJune 30, 2021 , annualized. •$4.5 billion of liquidity as ofJune 30, 2021 .
Continued dividend strategy to share growth in cash flows with stockholders
Common stock dividend declared for the three months endedJune 30, 2021 , of$1.12 per common share, aggregating$4.36 per common share for the twelve months endedJune 30, 2021 , up24 cents , or 6%, over the twelve months endedJune 30, 2020 . Our FFO payout ratio of 60% for the three months endedJune 30, 2021 , allows us to continue to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.
Sustained strength in tenant collections
•Tenant collections remain consistently high, with 99.4% ofJuly 2021 billings collected as of the date of this report. •As ofJune 30, 2021 , our tenant receivables balance was$6.7 million , representing our lowest balance since 2012.
Leasing activity of development and redevelopment projects
We continue to execute our unique and differentiated life science strategy at an
accelerated pace and expand our collaborative campuses and asset base in each of
our key life science cluster submarkets, and we remain strategically positioned
to take maximum advantage of historic tenant demand. Demand for our
value-creation development and redevelopment projects of high-quality
office/laboratory space, as well as continued operational excellence at our
world-class, sophisticated laboratory facilities and strong execution by our
team, has translated into record leasing activity. The following table provides
leasing activity of our development and redevelopment projects:
Leased RSF In-Process RSF(1)
2020 Six months ended June 30, 2021 As of July 26, 2021
1.0 million 1.0 million 3.0 million
(1) Represents in-process leasing activity on near-term value-creation
development and redevelopment projects that are expected to commence vertical
construction in 2021/2022. Includes 2.2 million RSF related to leases under
negotiation/executed letters of intent and 0.8 million RSF related to letters of
intent under negotiation.
Value-creation development and redevelopment projects are expected to generate significant growth in rental revenues and cash flows
Projects Expected to Commence Incremental Projected
Under Construction Construction in 2021/2022 Annual Rental Revenues
3.4 million RSF 3.6 million RSF
33 Properties + 19 Properties = >$545 million
80% Leased/Negotiating 89% Leased/Negotiating
48--------------------------------------------------------------------------------
Delivery of fully leased value-creation projects
•During the three months endedJune 30, 2021 , we placed into service development and redevelopment projects aggregating 755,565 RSF that are 100% leased across five submarkets. •Annual net operating income (cash basis) is expected to increase by$49 million upon the burn-off of initial free rent from recently delivered projects.
•InJune 2021 , we entered into a definitive agreement to expand ourAlexandria Center® atKendall Square campus through our acquisition of a 100% interest inOne Rogers Street andOne Charles Park for a purchase price of$815.0 million . This acquisition provides a key expansion to our mega campus strategy in ourCambridge submarket, the premier life science real estate market in the world, and consists of the following: •Upon closing of the acquisition, we expect to redevelop the two existing buildings, along with the services ofThe Davis Companies , into a Class A life science project aggregating 400,000 RSF of technical office/laboratory space. We will retain our wholly owned interest in the project upon completion of the redevelopments. •These two buildings are 100% under lease negotiation with several cutting-edge life science companies. •The redevelopment project is targeting initial occupancy in 2023. •Parking garage with approximately 650 spaces. •We expect to pursue additional entitlement opportunities for future development of additional office/laboratory space at this site. •We expect to complete this acquisition inDecember 2021 . •During the three months endedJune 30, 2021 , we completed acquisitions in our key life science cluster submarkets aggregating 5.5 million SF (includesSequence Drive described in the next bullet); 4.7 million RSF of value-creation opportunities; and 0.9 million RSF of operating space, for an aggregate purchase price of$1.1 billion . •InJune 2021 , we acquired five operating buildings at 6260, 6290, 6310, 6340, and6350 Sequence Drive aggregating 487,023 RSF, located in our Sorrento Mesa submarket, for a purchase price of$298.5 million , with opportunity to increase the campus by approximately 400,000 SF through ground-up development. •The five operating buildings are currently 100% occupied with a weighted-average remaining lease term of 2.7 years. We expect to develop or redevelop these spaces upon expiration of the existing in-place leases. •The aggregate 887,000 RSF from this acquisition provides a significant future development opportunity to expand our existingSequence District byAlexandria campus into a flagship mega campus aggregating 1.9 million SF.
Key strategic transactions that generated capital for investment into our highly leased value-creation pipeline and acquisitions with development and redevelopment opportunities
•InApril 2021 , we sold a 70% partial interest in our213 East Grand Avenue property located in ourSouth San Francisco submarket for a sales price of$301.0 million , or$1,429 per RSF, representing capitalization rates of 4.5% and 4.0% (cash basis). •InJuly 2021 , we sold a 70% partial interest in our400 Dexter Avenue North property located in ourLake Union submarket for a sales price of$254.8 million , or$1,255 per RSF, representing capitalization rates of 4.1% and 4.2% (cash basis). Balance sheet management
Key metrics as of
•$36.3 billion of total market capitalization. •$27.4 billion of total equity capitalization. •No debt maturing prior to 2024. •12.5 years weighted-average remaining term of debt as ofJune 30, 2021 . •Investment-grade credit ratings ranked in the top 10% among all publicly tradedU.S. REITs as ofJune 30, 2021 . June 30, 2021 Goal for Fourth Quarter of 2021, Quarter Annualized Trailing 12 Months Annualized Net debt and preferred stock to Adjusted 5.8x 6.2x Less than or equal to 5.2x EBITDA Fixed-charge coverage ratio 4.9x 4.6x Greater than or equal to 5.0x 49
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Value-creation pipeline of new Class A development and redevelopment projects as a percentage of gross investments in real estate
June 30, 2021
Current and key near-term projects and key pending acquisition 84%
10%
leased/negotiating
Income-producing/potential cash flows/covered land play(1) 6% Land 2% (1)Includes projects that have existing buildings that are generating or can generate operating cash flows. Also includes development rights associated with existing operating campuses. Key capital events •InJune 2021 , we entered into forward equity sales agreements aggregating$1.5 billion to sell 8.1 million shares of our common stock (including the exercise of underwriters' option) at a public offering price of$184.00 per share, before underwriting discounts and commissions. •During the three months endedJune 30, 2021 , we settled a portion of these forward equity sales agreements by issuing 4.9 million shares and received net proceeds of$870.3 million . •We expect to issue 3.1 million shares in the second half of 2021 to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately$547.8 million . •We also expect to issue 1.5 million shares in the second half of 2021 to settle our remaining outstandingJanuary 2021 forward equity sales agreements and receive net proceeds of approximately$230.5 million . •During the three months endedJune 30, 2021 , there was no sale activity under our ATM common stock offering program. As ofJune 30, 2021 and as of the date of this report, the remaining aggregate amount available under our current program for future sales of common stock is$500.0 million .
Investments
•As ofJune 30, 2021 , our investments aggregated$2.0 billion , including an adjusted cost basis of$1.0 billion , unrealized gains of$1.0 billion , and$48.0 million of investments accounted for under the equity method of accounting. •Investment income of$304.3 million for the three months endedJune 30, 2021 , consisted of$60.2 million of realized gains and$244.0 million of unrealized gains.
Industry and ESG leadership: catalyzing and leading the way for positive change to benefit human health and society
Industry leadership •We were ranked in the top 10 of the world's largest and most impactful real estate firms on the Forbes 2021 Global 2000 list determined based on sales, profits, assets, and market value. •InJune 2021 , we released our 2020 Environmental, Social & Governance Report, which showcases our longstanding ESG commitment and leadership. Key highlights in the report include the company's critical efforts to tackle climate change by pioneering low-carbon and climate-resilient design solutions, mitigating climate-related risk in our asset base, and investing in and providing essential infrastructure for sustainable agrifoodtech companies; continuing strong progress toward our 2025 environmental impact goals, including further reducing carbon emissions; and catalyzing the health, wellness, safety, and productivity of our employees and tenants, local communities, and the world at large through the built environment and our social responsibility initiatives. 50 --------------------------------------------------------------------------------
Operating summary
Same Property Net Operating
Income Growth Favorable Lease Structure(1)
Strategic Lease Structure by Owner and Operatorof Collaborative Life Science,
Agtech, and Technology Campuses
Increasing cash flows
Percentage of leases containing annual rent escalations 95%
[[Image Removed: are-20210630_g2.jpg]] Stable cash flows
[[Image Removed: are-20210630_g1.jpg]] Percentage of triple 94%
net leases
Lower capex burden
Percentage of leases providing for the recapture of capital 94%
expenditures
Rental Rate Growth:
Renewed/Re-Leased Space Margins(2)
Operating Adjusted EBITDA
[[Image Removed: are-20210630_g3.jpg]] [[Image Removed: are-20210630_g4.jpg]] 72% 69%
(1)Percentages calculated based on RSF as of
51
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Long-Duration Cash Flows From High-Quality, Diverse, and
Innovative Tenants
Investment-Grade or Long-Duration Lease Terms
Publicly Traded Large Cap Tenants
53% 7.5 Years
of ARE's Weighted-Average
Annual Rental Revenue(1) Remaining Term(2)
Tenant Mix
[[Image Removed: are-20210630_g5.jpg]]
Percentage of ARE's Annual Rental Revenue(1)
(1)Represents annual rental revenue in effect as of June 30, 2021 . Refer to the
"Non-GAAP measures and definitions" section within this Item 2 for additional
information.
(2)Based on aggregate annual rental revenue in effect as of June 30, 2021 . Refer
to definition of "Annual rental revenue" in the "Non-GAAP measures and
definitions" section within this Item 2 for additional information on our
methodology on annual rental revenue for unconsolidated real estate joint
ventures.
(3)Represents annual rental revenue currently generated from office space that
is targeted for a future change in use. The weighted-average remaining term of
these leases is 2.9 years.
(4)Represents annual rental revenue from publicly traded technology tenants with
an average daily market capitalization greater than $200 billion for the twelve
months ended June 30, 2021 .
(5)Our other tenants, aggregating 5.0% of our annual rental revenue, comprise
3.9% of annual rental revenue from technology, professional services, finance,
telecommunications, and construction/real estate companies and only 1.1% from
retail-related tenants.
52
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High-Quality Cash Flows From High-Quality Tenants and
Class A Properties in AAA Locations
Industry-Leading AAA Locations
Tenant Roster
85%
of ARE's Top 20 Tenants'
Annual Rental Revenue(1) [[Image Removed: are-20210630_g6.jpg]]
Is From Investment-Grade or
Publicly Traded
Large Cap Tenants
Percentage of ARE's Annual Rental Revenue(1)
Solid Historical Occupancy Across Key Locations(3)
Occupancy(2)
96% [[Image Removed: are-20210630_g7.jpg]]
Over 10 Years
(1)Represents annual rental revenue in effect as ofJune 30, 2021 . Refer to the "Non-GAAP measures and definitions" section within this Item 2 for additional information. (2)Represents average occupancy of operating properties inNorth America as of eachDecember 31 for the last 10 years and as ofJune 30, 2021 . (3)As ofJune 30, 2021 . (4)Refer to the "Summary of occupancy percentages inNorth America " section within this Item 2 for additional information. 53 --------------------------------------------------------------------------------
Leasing
The following table summarizes our leasing activity at our properties:
Three Months Ended Six Months Ended Year Ended
June 30, 2021 June 30, 2021 December 31, 2020
Including Including Including
Straight-Line Rent Cash Basis Straight-Line Rent Cash Basis Straight-Line Rent Cash Basis
(Dollars per RSF)
Leasing activity:
Renewed/re-leased space(1)
Rental rate changes 42.4% 25.4% 40.7% 23.3% 37.6% 18.3%
New rates $58.70 $56.16 $58.41 $55.82 $49.51 $46.53
Expiring rates $41.22 $44.77 $41.51 $45.29 $35.99 $39.32
RSF 1,472,713 1,994,538 2,556,833
Tenant improvements/leasing
commissions $32.06 $31.82 $35.08
Weighted-average lease term 5.8 years 6.1 years 6.0 years
Developed/redeveloped previously
vacant space leased(2)
New rates $57.61 $53.52 $51.56 $47.91 $56.67 $53.61
RSF 461,125 1,616,959 1,802,013
Weighted-average lease term 7.5 years 9.8 years 9.0 years
Leasing activity summary (totals):
New rates $58.44 $55.53 $55.34 $52.28 $52.47 $49.46
RSF 1,933,838 (3) 3,611,497 (4) 4,358,846
Weighted-average lease term 6.2 years 7.7 years 7.3 years
Lease expirations(1)
Expiring rates $40.06 $43.13 $40.25 $43.35 $36.03 $39.01
RSF 1,712,307 2,459,582 3,560,188
Leasing activity includes 100% of results for each property in which we have an
investment in
(1)Excludes month-to-month leases aggregating 88,305 RSF and 96,383 RSF as ofJune 30, 2021 , andDecember 31, 2020 , respectively. (2)Refer to "New Class A development and redevelopment properties: summary of pipeline" section within this Item 2 for additional information on total project costs. (3)Represents the highest leasing activity in a single quarter in Company history. (4)During the six months endedJune 30, 2021 , we granted tenant concessions/free rent averaging 2.6 months with respect to the 3,611,497 RSF leased. Approximately 47% of the leases executed during the six months endedJune 30, 2021 , did not include concessions for free rent. 54 --------------------------------------------------------------------------------
Summary of contractual lease expirations
The following table summarizes information with respect to the contractual lease
expirations at our properties as of
Percentage of Annual Rental Revenue Percentage of Total
Year RSF Occupied RSF (per RSF)(1) Annual Rental Revenue
2021 (2) 913,052 2.7 % $ 46.74 2.6 %
2022 2,503,192 7.3 % $ 45.14 6.8 %
2023 3,472,768 10.1 % $ 40.58 8.5 %
2024 2,912,682 8.5 % $ 43.28 7.6 %
2025 2,778,313 8.1 % $ 51.54 8.7 %
2026 2,077,113 6.0 % $ 48.24 6.1 %
2027 2,109,753 6.1 % $ 50.48 6.4 %
2028 2,951,361 8.6 % $ 50.79 9.1 %
2029 2,132,286 6.2 % $ 53.42 6.9 %
2030 2,299,958 6.7 % $ 53.53 7.5 %
Thereafter 10,225,279 29.7 % $ 48.19 29.8 %
(1)Represents amounts in effect as of
The following tables present information by market with respect to our lease expirations inNorth America as ofJune 30, 2021 , for the remainder of 2021, and all of 2022: 2021 Contractual Lease Expirations (in RSF) Targeted for Annual Rental Negotiating/ Development/ Remaining Revenue Market Leased Anticipating Redevelopment(1) Expiring Leases Total2) (per RSF)(3) Greater Boston 57,247 62,312 202,428 35,120 357,107$ 46.37 San Francisco Bay Area 122,534 4,570 - 73,301 200,405 57.99 New York City 30,408 - - 4,973 35,381 N/A San Diego 46,586 - 84,359 35,085 166,030 37.40 Seattle 24,990 6,053 - 33,341 64,384 18.62 Maryland 7,268 - - 76 7,344 35.23 Research Triangle 23,435 - - 43,911 67,346 30.78 Canada - - - - - - Non-cluster/other markets - - - 15,055 15,055 86.16 Total 312,468 72,935 286,787 240,862 913,052$ 46.74 Percentage of expiring leases 34 % 8 % 31 % 27 % 100 % 2022 Contractual Lease Expirations (in RSF) Targeted for Annual Rental Negotiating/ Development/ Remaining Revenue Market Leased Anticipating Redevelopment(1) Expiring Leases(4) Total (per RSF)(3) Greater Boston 118,555 149,849 - 275,190 (5) 543,594$ 58.71 San Francisco Bay Area - 33,498 490,127 233,583 757,208 52.08 New York City - 14,891 - 3,264 18,155 N/A San Diego 103,730 - 250,028 211,117 564,875 36.31 Seattle - - 51,255 151,092 202,347 34.39 Maryland 7,638 18,090 - 50,865 76,593 29.11 Research Triangle - 30,039 - 207,409 237,448 22.48 Canada - - - 28,623 28,623 22.57 Non-cluster/other markets - - - 74,349 74,349 44.25 Total 229,923 246,367 791,410 1,235,492 2,503,192$ 45.14 Percentage of expiring leases 9 % 10 % 32 % 49 % 100 % (1)Represents RSF targeted for development or redevelopment upon expiration of existing in-place leases, primarily related to recently acquired properties. Refer to "Investments in real estate - value-creation square footage currently in rental properties" in the "Non-GAAP measures and definitions" section within this Item 2 for additional details on value-creation square feet currently included in rental properties. (2)Excludes month-to-month leases aggregating 88,305 RSF as ofJune 30, 2021 . (3)Represents amounts in effect as ofJune 30, 2021 . (4)The largest remaining contractual lease expiration includes one lease for 62,490 RSF in our Research Triangle submarket. (5)57% of the remaining expiring leases inGreater Boston are located in ourCambridge /Inner Suburbs submarket. 55 --------------------------------------------------------------------------------
Top 20 tenants
85% of Top 20 Annual Rental Revenue From Investment-Grade
or Publicly Traded Large Cap Tenants(1)
Our properties are leased to a high-quality and diverse group of tenants, with
no individual tenant accounting for more than 3.3% of our annual rental revenue
in effect as of June 30, 2021 . The following table sets forth information
regarding leases with our 20 largest tenants in North America based upon annual
rental revenue in effect as of June 30, 2021 (dollars in thousands, except
average market cap):
Annual Percentage of Aggregate Average Market
Remaining Lease Term(1) Aggregate Rental Annual Rental Revenue Investment-Grade Credit Ratings Cap(1)
Tenant (in Years) RSF Revenue(1) (1) Moody's S&P (in billions)
1 Bristol-Myers Squibb Company 7.2 916,234 $ 53,100 3.3 % A2 A+ $ 140.0
2 Takeda Pharmaceutical Company Ltd. 8.1 606,249 39,342 2.4 Baa2 BBB+ $ 55.8
3 Moderna, Inc. 11.2 855,458 39,341 2.4 - - $ 48.9
4 Facebook, Inc. 10.5 903,786 38,595 2.4 - - $ 797.7
5 Eli Lilly and Company 7.5 580,693 37,047 2.3 A2 A+ $ 167.4
6 Illumina, Inc. 9.1 891,495 36,118 2.2 Baa3 BBB $ 55.3
7 Sanofi 8.1 494,693 35,040 2.1 A1 AA $ 126.5
8 Novartis AG 7.1 423,914 30,216 1.9 A1 AA- $ 217.7
9 Uber Technologies, Inc. 61.4 (2) 1,009,188 27,379 1.7 - - $ 84.7
10 Roche 2.8 (3) 546,893 26,040 1.6 Aa3 AA $ 299.6
11 bluebird bio, Inc. 5.9 312,805 23,142 1.4 - - $ 3.0
12 Maxar Technologies 4.2 (4) 478,000 21,803 1.3 - - $ 2.1
13 Massachusetts Institute of Technology 7.5 257,626 21,145 1.3 Aaa AAA $ -
14 United States Government 13.8 918,516 20,236 1.2 Aaa AA+ $ -
15 The Children's Hospital Corporation 17.3 269,816 20,066 1.2 Aa2 AA $ -
16 Jazz Pharmaceuticals, Inc. 9.2 198,041 20,003 1.2 - - $ 8.6
17 New York University 10.2 204,691 19,531 1.2 Aa2 AA- $ -
18 Merck & Co., Inc. 12.9 311,015 19,392 1.2 A1 AA- $ 200.2
19 Pfizer Inc. 3.7 416,979 17,762 1.1 A2 A+ $ 207.3
20 FibroGen, Inc. 7.4 234,249 16,896 1.0 - - $ 3.4
Total/weighted-average 11.1 (2) 10,830,341 $ 562,194 34.4 %
Annual rental revenue and RSF include 100% of each property managed by us in
(1)Based on aggregate annual rental revenue in effect as ofJune 30, 2021 . Refer to the definitions of "Annual rental revenue" and "Investment-grade or publicly traded large cap tenants" in the "Non-GAAP measures and definitions" section within this Item 2 for our methodologies on annual rental revenue from unconsolidated real estate joint ventures and average market capitalization. (2)Includes (i) ground leases for land at1455 and 1515 Third Street (two buildings aggregating 422,980 RSF) and (ii) leases at1655 and 1725 Third Street (two buildings aggregating 586,208 RSF) owned by our unconsolidated real estate joint venture in which we have an ownership interest of 10%. Annual rental revenue is presented using 100% of the annual rental revenue of our consolidated properties and our share of annual rental revenue for our unconsolidated real estate joint ventures. Refer to footnote 1 for additional details. Excluding the ground lease, the weighted-average remaining lease term for our top 20 tenants was 8.5 years as ofJune 30, 2021 . (3)Includes 197,787 RSF expiring in 2022 at our recently acquired property at651 Gateway Boulevard in ourSouth San Francisco submarket. Upon expiration of the lease,651 Gateway Boulevard will be redeveloped into a Class A office/laboratory building. Excluding this 197,787 RSF, the weighted-average remaining term of space leased to Roche is 3.4 years. (4)Represents remaining lease term at two properties with future redevelopment and development opportunities. The leases with this tenant were in place when we acquired the property during the three months endedDecember 31, 2019 . 56 --------------------------------------------------------------------------------
Locations of properties
The locations of our properties are diversified among a number of life science, agtech, and technology cluster markets. The following table sets forth the total RSF, number of properties, and annual rental revenue in effect as ofJune 30, 2021 , in each of our markets inNorth America (dollars in thousands, except per RSF amounts): RSF Annual Rental Revenue Market Operating Development Redevelopment Total % of Total Number of Properties Total % of Total Per RSFGreater Boston 9,893,984 510,116 490,545 10,894,645 27 % 77$ 579,594 36 %$ 61.32 San Francisco Bay Area 8,046,553 368,149 92,147 8,506,849 21 66 408,038 25 61.46New York City 1,160,472 - 120,027 1,280,499 3 5 83,961 5 72.80San Diego 7,102,797 341,891 117,212 7,561,900 19 88 263,165 16 39.49Seattle 2,628,577 - 213,976 2,842,553 7 40 108,354 7 42.26Maryland 3,593,787 84,264 344,226 4,022,277 10 50 95,592 6 26.88 Research Triangle 3,137,115 410,000 325,936 3,873,051 10 35 71,093 4 24.42Canada 268,551 - - 268,551 1 3 5,164 - 24.98 Non-cluster/other markets 600,709 - - 600,709 1 13 11,174 1 40.41 Properties held for sale 225,849 - - 225,849 1 4 6,168 - N/ANorth America 36,658,394 1,714,420 1,704,069 40,076,883 100 % 381$ 1,632,303 100 %$ 48.65 3,418,489
Summary of occupancy percentages in
The following table sets forth the occupancy percentages for our operating properties and our operating and redevelopment properties in each of ourNorth America markets, excluding properties held for sale, as of the following dates: Operating Properties Operating and Redevelopment Properties Market 6/30/21 3/31/21 6/30/20 6/30/21 3/31/21 6/30/20 Greater Boston 95.5 % (1) 96.2 % 98.2 % 91.0 % 91.5 % 95.6 % San Francisco Bay Area 94.0 (1)(2) 95.4 94.7 92.9 94.3 90.6 New York City 99.4 99.4 97.1 90.1 89.8 86.2 San Diego 93.8 (1) 93.3 91.8 92.3 90.3 90.8 Seattle 97.6 96.8 95.1 90.2 89.6 95.1 Maryland 98.9 97.9 93.9 90.3 90.4 93.2 Research Triangle 92.8 (1) 90.8 96.8 84.1 73.7 96.8 Subtotal 95.2 95.3 95.1 90.9 89.9 92.6 Canada 77.0 81.6 90.0 77.0 81.6 90.0 Non-cluster/other markets 46.0 52.6 70.8 46.0 52.6 70.8 North America 94.3 % (1) 94.5 % 94.8 % 90.1 % 89.2 % 92.3 % (1)Excludes 1.4 million RSF, or 3.8%, of vacancy at recently acquired properties in ourNorth America markets, representing lease-up opportunities that are expected to provide incremental annual rental revenues in excess of$55 million . Approximately 35% of the vacant 1.4 million RSF is currently under leased/negotiating, with occupancy expected primarily over the next two quarters. Excluding these acquired vacancies, occupancy of operating properties inNorth America was 98.1% as ofJune 30, 2021 . The following table provides vacancy detail for our recent acquisitions:
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