PASADENA, Calif., Oct. 25, 2021 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE:ARE) announced financial and operating results for the third quarter ended September 30, 2021.

Key highlights





YTD


Operating results

3Q21


3Q20


3Q21


3Q20


Total revenues:









In millions

$

547.8


$

545.0


$

1,537.2


$

1,421.9


Growth

0.5%

(1)





8.1%

(1)




Net income attributable to Alexandria's common stockholders – diluted

In millions

$

101.3


$

79.3


$

490.6


$

324.2


Per share

$

0.67


$

0.63


$

3.38


$

2.61


Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted


In millions

$

296.0


$

230.7


$

841.3


$

677.1


Per share

$

1.95


$

1.83


$

5.80


$

5.46




(1)     3Q20 includes a termination fee of $89.5 million. Growth for 3Q21 and YTD 3Q21 was 20.2% and 15.4%, 
          respectively, excluding this termination fee.


Strategic relationship with Moderna, Inc. leads to new HQ and R&D facility at 325 Binney Street, representing largest life science lease executed in Company history

In September 2021, we signed a 15-year full-building lease with Moderna, Inc. to develop, construct, and operate its new headquarters and core R&D facility at 325 Binney Street, a leading-edge 462,100 RSF property designed to be the most sustainable laboratory building in Cambridge, representing the largest life science lease in Company history.

Historic-high year-to-date leasing volume and continued strong rental rate growth

  • During YTD 3Q21, historic demand for our high-quality office/laboratory space translated into 5.4 million RSF of leasing activity in only nine months, representing the highest leasing activity in Company history, surpassing our record annual leasing of 5.1 million RSF in 2019.
  • Continued strong leasing activity and rental rate growth during 3Q21 and YTD 3Q21 over expiring rates on renewed and re-leased space:




3Q21


YTD 3Q21



Total leasing activity – RSF


1,810,630


5,422,127



Leasing of development and redevelopment space – RSF


1,005,890

(1)

2,071,750



Lease renewals and re-leasing of space:







RSF (included in total leasing activity above)


671,775


2,666,313



Rental rate increases


35.3%


39.4%



Rental rate increases (cash basis)


19.3%


22.3%






(1)     Represents the second highest leasing quarter of development and redevelopment square footage in 
         Company history.

Continued strong net operating income and internal growth

  • Net operating income (cash basis) of $1.3 billion for 3Q21 annualized, up $234.3 million, or 21.2%, compared to 3Q20 annualized, excluding the effect of income recognized during 3Q20 aggregating $86.2 million, which comprised a termination fee of $89.5 million and related expenses of $3.3 million.
  • 95% of our leases contain contractual annual rent escalations approximating 3%.
  • Same property net operating income growth:
    • 3.0% and 7.1% (cash basis) for 3Q21 over 3Q20.
    • 4.1% and 7.3% (cash basis) for YTD 3Q21 over YTD 3Q20.

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


94.4%



Occupancy of operating properties in North America (excluding vacancy at recently acquired properties)


98.5%

(1)


Operating margin


70%



Adjusted EBITDA margin


68%








Weighted-average remaining lease term:





All tenants


7.4

years

Top 20 tenants


10.6

years





(1)

Excludes 1.6 million RSF, or 4.1%, of vacancy at recently acquired properties, representing lease-up opportunities that are expected to provide incremental annual rental revenues in excess of $59 million upon full lease-up. Excluding acquired vacancies, occupancy was 98.5% as of September 30, 2021, up 80 bps from 97.7% as of December 31, 2020. Refer to "Occupancy" in our Supplemental Information.

Credit rating outlook improvement

In October 2021, S&P Global Ratings upgraded our corporate issuer credit rating outlook to BBB+/Positive from BBB+/Stable as a result of our consistently strong operating performance and long-term positive fundamentals.

Strong and flexible balance sheet with significant liquidity

  • Investment-grade credit ratings ranked in the top 10% among all publicly traded U.S. REITs as of September 30, 2021.
  • Net debt and preferred stock to Adjusted EBITDA of 5.8x and fixed-charge coverage ratio of 5.1x for 3Q21 annualized.
  • Net debt to gross assets of 28% as of September 30, 2021.
  • $4.0 billion of liquidity as of September 30, 2021.

Continued dividend strategy to share growth in cash flows with stockholders

Common stock dividend declared for 3Q21 of $1.12 per common share, aggregating $4.42 per common share for the twelve months ended September 30, 2021, up 24 cents, or 6%, over the twelve months ended September 30, 2020. Our FFO payout ratio of 58% for the three months ended September 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 99.6% of October 2021 billings collected as of the date of this release.
  • As of September 30, 2021, our tenant receivables balance of $7.7 million continues to be near historical lows.

Key items included in operating results

Key items included in net income attributable to Alexandria's common stockholders:










YTD


3Q21


3Q20


3Q21


3Q20


3Q21


3Q20


3Q21


3Q20

(In millions, except per share 
     amounts)

Amount


Per Share –
Diluted


Amount


Per Share –
Diluted

Unrealized (losses) gains on
 non-real estate investments

$

(14.4)


$

(14.0)


$

(0.10)


$

(0.11)


$

183.3


$

140.5


$

1.26


$

1.13

Significant realized gains on
 non-real estate investments

52.4

(1)


0.35



110.1



0.76


(Loss) gain on sales of real
 estate

(0.4)


1.6



0.01


2.3


1.6


0.02


0.01

Impairment of real estate

(42.6)

(1)

(7.7)


(0.28)


(0.06)


(52.7)


(30.5)


(0.37)


(0.24)

Impairment of non-real estate
 investments






(24.5)



(0.20)

Loss on early extinguishment
 of debt


(52.8)



(0.42)


(67.3)


(52.8)


(0.46)


(0.42)

Termination fee(1)


86.2



0.69



86.2



0.69

Acceleration of stock
 compensation expense due to
 executive officer resignation


(4.5)



(0.04)



(4.5)



(0.04)

Total

$

(5.0)


$

8.8


$

(0.03)


$

0.07


$

175.7


$

116.0


$

1.21


$

0.93


(1)     Refer to "Funds from operations and funds from operations per share" of this Earnings Press Release for additional details.

Alexandria at the vanguard of innovation for over 750 tenants, with a focus to accommodate current tenant needs plus a path for their future growth

During 3Q21, we completed acquisitions in our key life science cluster submarkets aggregating 5.6 million SF, comprising 4.9 million RSF of value-creation opportunities and 0.7 million RSF of operating space, for an aggregate purchase price of $989.7 million.

Robust leasing activity of development and redevelopment projects

Historically high 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 leases executed in the nine months ended September 30, 2021, aggregating 2.1 million RSF, related to our development and redevelopment projects.

Value-creation development and redevelopment projects expected to generate significant growth in rental revenues and cash flows

Our highly leased value-creation pipeline of current and near-term projects that are under construction or will commence in the next six quarters is expected to generate significant incremental revenues, as follows:

Under Construction


Key Projects Expected to Commence

Construction in the Next Six Quarters(1)


Incremental Projected

Annual Rental Revenues








4.3 Million RSF


3.4 Million RSF


> $615 Million


37 Properties

+

20 Properties

=


79% Leased/Negotiating


80% Leased/Negotiating





(1)     We expect to commence construction of other projects in 2022.


  • Approximately 93% of leased/negotiating activity related to the 7.7 million RSF of projects under construction or expected to commence construction in the next six quarters, is from existing relationships.
  • In October 2021, our Alexandria Center® for Life Science – Fenway campus received entitlement rights to develop 450,000 SF of office/laboratory space.

Delivery of fully leased value-creation projects

  • During 3Q21, we placed into service development and redevelopment projects aggregating 238,163 RSF that are 100% leased across four submarkets.
  • Commencement of three value-creation projects aggregating 1.1 million RSF during 3Q21, including a 462,100 RSF development project at 325 Binney Street in our Cambridge submarket and a 229,000 RSF development project at 751 Gateway Boulevard in our South San Francisco submarket, which are 100% leased and 100% negotiating, respectively.
  • 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.

Key strategic transactions that generated capital for investment into our highly leased value-creation pipeline and acquisitions with development and redevelopment opportunities

  • During 3Q21, we completed dispositions of and sales of partial interests in real estate assets aggregating $339.4 million in our key life science cluster submarkets.
  • In October 2021, we completed the recapitalization of two consolidated real estate joint ventures in our Mission Bay submarket:


409 and 499 Illinois Street


1500 Owens Street


(Dollars in thousands)


Alexandria


JV Partner


Alexandria


JV Partner


Previous ownership


60%


40%


50.1%


49.9%


Recapitalization in October 2021


25%


75%


25%


75%


Sale of ownership interest


35%




25.1%














Sales price (our share)


$274,681


Capitalization rate


5.0%


Capitalization rate (cash)


4.2%


We retained control over these joint ventures and continue to consolidate them in our financial statements. Refer to "Dispositions and sales of partial interest" of this Earnings Press Release for additional details on these transactions.

Balance sheet management

Key metrics as of September 30, 2021

  • $38.6 billion of total market capitalization.
  • $29.3 billion of total equity capitalization.
  • No debt maturities prior to 2024.
  • 11.9 years weighted-average remaining term of debt as of September 30, 2021.
  • Investment-grade credit ratings ranked in the top 10% among all publicly traded U.S. REITs as of September 30, 2021.


3Q21


Goal



Quarter


Trailing


4Q21



Annualized


12 Months


Annualized

Net debt and preferred stock to
    Adjusted EBITDA


5.8x


6.2x


Less than or equal to 5.2x

Fixed-charge coverage ratio


5.1x


4.8x


Greater than or equal to 5.0x


















Value-creation pipeline of new Class A development and redevelopment projects as
a percentage of gross assets


3Q21

Under construction projects


7%

Pre-leased/negotiating near-term projects and key pending acquisition


2%

Income-producing/potential cash flows/covered land play(1)


5%

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

  • During 3Q21, we issued 2.5 million shares under our ATM program at a price of $200.73 per share (before underwriting discounts) and received net proceeds of $492.3 million. As of 3Q21, we have no amounts remaining under our ATM program. We expect to establish a new ATM program during 4Q21.
  • As of September 30, 2021, we had outstanding forward equity sales agreements aggregating $771.9 million to sell 4.6 million shares of our common stock. We expect to settle these forward equity sales agreements in 4Q21.

Investments

  • As of September 30, 2021, our investments aggregated $2.0 billion, including unrealized gains of $929.8 million.
  • Investment income of $67.1 million for 3Q21 included $81.5 million in realized gains and $14.4 million in unrealized losses.

Industry and ESG leadership: catalyzing and leading the way for positive change to benefit human health and society

  • In October 2021, our ESG commitment and leadership was recognized in the 2021 Global Real Estate Sustainability Benchmark ("GRESB") Real Estate Assessment, including the following achievements: (i) Global Sector Leader and a 5 Star rating — GRESB's highest rating — in the Diversified Listed sector for buildings in development, (ii) #2 ranking in the U.S. in the Science & Technology sector for buildings in operation, and (iii) fourth consecutive "A" disclosure score.
  • In October 2021, Alexandria received an ESG Rating of A from MSCI as a result of our continued advancement of green building opportunities, recognition of talent management programs, and below-industry-average turnover rate, among other achievements. Our MSCI ESG Rating of A is currently ranked in the top 10% among all publicly traded U.S. equity REITs. An MSCI ESG Rating is designed to measure a company's resilience to long-term industry-material ESG risks.
  • In September 2021, Alexandria achieved the Fitwel Viral Response Certification With Distinction, the highest certification level within the Fitwel Viral Response module, for the second consecutive year. This evidence-based, third-party certification recognizes the Company's comprehensive and rigorous approach to protecting the health of its building occupants.
  • In September 2021, the National September 11 Memorial & Museum honored Joel S. Marcus, our executive chairman and founder, for Distinction in Civic Engagement and Renewal, recognizing his meaningful contributions to and unwavering support of the 9/11 Memorial & Museum and its mission. As an active supporter of the Memorial & Museum since it opened in 2014, Mr. Marcus has served as a member of its board of trustees since his appointment in 2018 by former New York City Mayor Michael Bloomberg.
  • In September 2021, OneFifteen, an innovative non-profit healthcare ecosystem dedicated to the full and sustained recovery of people living with addiction, received an honorable mention in Fast Company's 2021 Innovation by Design Awards in the Impact category. Alexandria led the design and development of the pioneering OneFifteen campus in Dayton, Ohio, which houses a unique, evidence-based model encompassing a full continuum of care in one location, from intake, medication-assisted treatment, and residential living to family reunification, job training, and community transition.
  • In July 2021, Alexandria Venture Investments, our strategic venture capital platform, was recognized by Silicon Valley Bank in its Healthcare Investments and Exits: Mid-Year 2021 Report as the most active biopharma corporate investor by new deal volume from 2020 to 1H21 for the fourth consecutive year and as the most active new Series A investor in biopharma from 2020 to 1H21. Alexandria's venture activity provides us with, among other things, mission-critical data and knowledge on innovations and trends.

 

Acquisitions
September 30, 2021
(Dollars in thousands)











Square Footage














Acquisitions With Development/Redevelopment Opportunities(1)








Property


Submarket/Market


Date of

Purchase


Number of
Properties


Operating

Occupancy


Future
Development


Active
Development/
Redevelopment


Operating With
Future
Development/
Redevelopment


Operating(2)


Operating


Total


Purchase
Price


Completed in 1H21






49


95%


4,507,706


980,934


1,571,982


2,238,467


80,032


8,631,231


$

2,952,205



























Completed in 3Q21:

























Other


Other/Greater Boston


8/24/21


4


45%


440,992


453,869


173,276




1,068,137



192,000


1122 El Camino Real


South San Francisco/
  
San Francisco Bay Area


9/14/21


1


100%


700,000



223,232




700,000

(3)


105,250


Pacific Technology Park (50%
  interest in consolidated JV)


Sorrento Mesa/San Diego


8/5/21


5


100%




228,871


315,481



544,352



85,750



























Other


Other/San Diego


7/21/21


9


77%


64,235



211,440


98,428



374,103



135,484


3029 East Cornwallis Road


Research Triangle/
  Research Triangle


7/30/21



N/A


1,055,000






1,055,000



91,000


Other


Various


Various


8


95%


1,178,188



414,286


148,665


158,916


1,900,055



380,213








27


90%


3,438,415


453,869


1,251,105

(4)

562,574

(4)

158,916

(4)

5,641,647



989,697



























Completed in October 2021:

























Other






2


75%




185,228




185,228



203,800


Pending acquisition:

























Charles Park


Cambridge/
  
Greater Boston


December
2021


2


N/A


TBD(5)


400,000





400,000



815,000


Total






80




7,946,121


1,834,803


3,008,315


2,801,041


238,948


14,858,106


$

4,960,702



























2021 guidance range




















$4,460,000 – $5,460,000



























2022 pending acquisition:

























Mercer Mega Block


Lake Union/Seattle


1Q22(6)



N/A


800,000






800,000



$

143,500






















































(1)

We expect to provide total estimated costs and related yields for development and redevelopment projects in the future, subsequent to the commencement of construction. Refer to "New Class A development and redevelopment properties: current projects" in our Supplemental Information for additional details on active development and redevelopment projects.

(2)

Represents the operating component of our value-creation acquisitions that is not expected to undergo development or redevelopment.

(3)

Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operations with future development or redevelopment opportunities. We intend to demolish and develop or redevelop the existing properties upon expiration of the existing in-place leases. Refer to "Definitions and reconciliations" of this Supplemental Information for additional details on value-creation square feet currently included in rental properties.

(4)

We expect the acquisitions completed during the three months ended September 30, 2021 to generate initial annual net operating income of $35.9 million. These acquisitions included 27 operating properties with a weighted-average acquisition date of July 26, 2021 (weighted by initial annual
net operating income).

(5)

We expect to pursue additional entitlement opportunities for future development of additional office/laboratory space.

(6)

We continue to diligently work through various long-lead-time due diligence items. We are working toward completion of all due diligence items as soon as possible.

 

Dispositions and Sales of Partial Interest
September 30, 2021
(Dollars in thousands)


















Property


Submarket/Market


Date of
Sale


Interest
Sold


RSF


Capitalization
Rate


Capitalization
Rate

(Cash Basis)


Sales Price(1)


Sales Price
per RSF


Consideration
in Excess of
Book Value(2)


Completed YTD 3Q21:






















213 East Grand Avenue


South San Francisco/
  
San Francisco Bay Area


4/22/21


70%


300,930


4.5%


4.0%


$

301,000


$

1,429


$

103,679



400 Dexter Avenue North


Lake Union/Seattle


7/23/21


70%


290,111


4.1%


4.2%


254,814


$

1,255


$

95,467



260 Townsend Street


SoMa/San Francisco Bay Area


7/30/21


100%


66,682


N/A


N/A


49,000

(3)

$

735


(3)



220 and 240 2nd Avenue South


SoDo/Seattle


7/29/21


100%


80,160


N/A


N/A


24,100


$

301


$



Land


Other/San Diego


3/12/21


100%


185,000


N/A


N/A


22,900


N/A


(4)



9444 Waples Street


Sorrento Mesa/San Diego


8/5/21


50%


88,380


N/A


N/A


11,469


$

260


$

















663,283






Completed in October 2021:
  






















409 and 499 Illinois Street


Mission Bay/San Francisco
  
Bay Area


10/5/21


35%

(5)

455,069


5.0%


4.2%


274,681


$

1,366


$

113,756



1500 Owens Street


Mission Bay/San Francisco
  
Bay Area


10/5/21


25.1%

(5)

158,267






































937,964






Pending dispositions or sales of partial interest:




















   (6)


Greater Boston


4Q21


TBD








800,000

(7)

TBD


TBD



   (6)


San Francisco Bay Area


4Q21


TBD








400,000

(7)

TBD


TBD



   (8)


Various


4Q21


TBD








500,000

(7)

TBD


TBD







































$

2,637,964




























2021 guidance range














$

1,670,000

$

2,670,000



























































(1)

For sales of partial interests, represents the contractual sales price for the percentage interest of the property sold by us.

(2)

For each partial interest sale, 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)

The sales price includes the assumption by the buyer of a secured loan for $28.2 million. Upon completion of the sale, we recognized a loss on sale of real estate aggregating $435 thousand.

(4)

During the three months ended March 31, 2021, we recognized $2.8 million of gains on sales of real estate related to the completion of two real estate dispositions.

(5)

Refer to "Key strategic transactions that generated capital for investment into our highly leased value-creation pipeline and acquisitions with development and redevelopment opportunities" on page 2 of this Earnings Press Release for additional details.

(6)

Transactions are currently under negotiation of purchase and sale agreements.

(7)

Represents the approximate aggregate sales price for each transaction. A significant amount of the proceeds from pending dispositions were subject to completion of lease negotiations prior to advancing the disposition process.

(8)

Represents two transactions in early negotiations with potential buyers.

 

Guidance
September 30, 2021
(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, 2021. 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.




2021 Guidance




2021 Guidance Midpoint

Summary of Key Changes in Guidance


As of 10/25/21


As of 7/26/21


Summary of Key Changes in Sources and Uses
   of
Capital Guidance


As of 10/25/21


As of 7/26/21

EPS, FFO per share, and FFO per share, as adjusted


See updates below


Real estate dispositions and partial interest sales


$2,170


$1,920

Occupancy(1)


93.3% to 93.9%


94.3% to 94.9%


Construction(2)


$2,110


$1,910

Rental rate increases


33.0% to 36.0%


31.0% to 34.0%







Rental rate increases (cash basis)


19.0% to 22.0%


18.0% to 21.0%





























Projected 2021 Earnings per Share and Funds From Operations per Share Attributable to 
    Alexandria's Common Stockholders – Diluted



As of 10/25/21


As of 7/26/21

Earnings per share(3)


$3.91 to $3.93


$3.46 to $3.54

Depreciation and amortization of real estate assets



5.05




5.50


Gain on sales of real estate



(0.02)




(0.02)


Impairment of real estate – rental properties(4)



0.18




0.05


Allocation to unvested restricted stock awards



(0.04)




(0.04)


Funds from operations per share(5)


$9.08 to $9.10


$8.95 to $9.03

Unrealized gains on non-real estate investments



(1.26)




(1.39)


Significant realized gains on non-real estate investments(4)



(0.76)




(0.41)


Impairment of real estate(4)



0.19




0.02


Loss on early extinguishment of debt



0.46




0.47


Allocation to unvested restricted stock awards



0.02




0.01


Other



0.01




0.06


Funds from operations per share, as adjusted(5)


$7.74 to $7.76


$7.71 to $7.79

Midpoint


$7.75



$7.75
















Key Assumptions


Low


High


Occupancy percentage in North America as of December 31, 2021(1)


93.3%


93.9%


Lease renewals and re-leasing of space:






Rental rate increases


33.0%


36.0%


Rental rate increases (cash basis)


19.0%


22.0%


Same property performance:






Net operating income increase


2.0%


4.0%


Net operating income increase (cash basis)


4.7%


6.7%


Straight-line rent revenue


$

119


$

129


General and administrative expenses


$

146


$

151


Capitalization of interest


$

172


$

182


Interest expense


$

128


$

138


























Key Credit Metrics


2021 Guidance

Net debt and preferred stock to Adjusted EBITDA – 4Q21 annualized


Less than or equal to 5.2x

Fixed-charge coverage ratio – 4Q21 annualized


Greater than or equal to 5.0x







Key Sources and Uses of Capital


Range


Midpoint


Certain

Completed
Items


Sources of capital:











Net cash provided by operating activities after
   dividends


$

210


$

250


$

230




Incremental debt


1,415


575



995




2020 debt capital proceeds held in cash


150


250



200




Real estate dispositions and partial interest sales 


1,670


2,670



2,170


$

938


Common equity


2,975


3,975



3,475


$

3,533

(6)

Total sources of capital


$

6,420


$

7,720


$

7,070




Uses of capital:











Construction(2)


$

1,960


$

2,260


$

2,110




Acquisitions


4,460


5,460



4,960


$

4,146


Total uses of capital


$

6,420


$

7,720


$

7,070




Incremental debt (included above):











Issuance of unsecured senior notes payable


$

1,750


$

1,750


$

1,750


$

1,750


Principal repayments of unsecured senior notes
   payable


(650)


(650)



(650)


$

(650)


Unsecured senior line of credit, commercial paper,
   and other


315


(525)



(105)




Incremental debt


$

1,415


$

575


$

995






(1)

Updated guidance for occupancy percentage in North America as of December 31, 2021, reflects vacancy at one recently acquired property that closed in 3Q21, and two pending acquisitions expected to close in 4Q21, representing lease-up opportunities that will contribute to growth in cash flows. One of the two pending acquisitions includes value-creation opportunities while the other pending acquisition is 50% under lease negotiation. Excluding vacancy at recently acquired properties, we expect occupancy for properties in North America as of December 31, 2021 to increase by approximately 100 bps compared to December 31, 2020. Refer to "Occupancy" of our Supplemental Information for additional details.

(2)

Increase in construction guidance was primarily driven by recent pre-leasing/negotiating activity, which has provided additional visibility and accelerated our spending requirements on our active and near-term value-creation projects.

(3)

Excludes unrealized gains or losses after September 30, 2021, that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted.

(4)

Refer to "Funds from operations and funds from operations per share" of this Earnings Press Release for additional details.

(5)

Refer to "Funds from operations and funds from operations, as adjusted, attributable to Alexandria's common stockholders" in "Definitions and reconciliations" of our Supplemental Information for additional details.

(6)

Refer to "Key capital events" on page 3 of this Earnings Press Release for additional details. During the nine months ended September 30, 2021, we issued 16.2 million shares of common stock and received net proceeds of $2.8 billion. We expect to issue 4.6 million shares in 4Q21 to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $771.9 million.

Earnings Call Information and About the Company
September 30, 2021

We will host a conference call on Tuesday, October 26, 2021, at 3:00 p.m. Eastern Time ("ET")/noon Pacific Time ("PT"), which is open to the general public, to discuss our financial and operating results for the third quarter ended September 30, 2021. To participate in this conference call, dial (833) 366-1125 or (412) 902-6738 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the call for Alexandria Real Estate Equities, Inc. The audio webcast can be accessed at www.are.com in the "For Investors" section. A replay of the call will be available for a limited time from 5:00 p.m. ET/2:00 p.m. PT on Tuesday, October 26, 2021. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 10159105.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the third quarter ended September 30, 2021, is available in the "For Investors" section of our website at www.are.com or by following this link: http://www.are.com/fs/2021q3.pdf.

For any questions, please contact Joel S. Marcus, executive chairman and founder; Stephen A. Richardson, co-chief executive officer; Peter M. Moglia, co-chief executive officer and co-chief investment officer; Dean A. Shigenaga, president and chief financial officer; Paula Schwartz, managing director of Rx Communications Group, at (917) 322-2216; or Sara M. Kabakoff, vice president – communications, at (626) 578-0777.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® urban office real estate investment trust ("REIT"), is the first, longest-tenured, and pioneering owner, operator, and developer uniquely focused on collaborative life science, agtech, and technology campuses in AAA innovation cluster locations, with a total market capitalization of $38.6 billion as of September 30, 2021, and an asset base in North America of 63.9 million square feet ("SF"). The asset base in North America includes 38.7 million RSF of operating properties and 4.3 million RSF of Class A properties undergoing construction, 8.9 million RSF of near-term and intermediate-term development and redevelopment projects, and 12.0 million SF of future development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science, agtech, and technology campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science, agtech, and technology companies through our venture capital platform. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.

***********

This document includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2021 earnings per share attributable to Alexandria's common stockholders – diluted, 2021 funds from operations per share attributable to Alexandria's common stockholders – diluted, net operating income, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as "forecast," "guidance," "goals," "projects," "estimates," "anticipates," "believes," "expects," "intends," "may," "plans," "seeks," "should," "targets," or "will," or the negative of those words or similar words. These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. There can be no assurance that actual results will not be materially higher or lower than these expectations. These statements are subject to risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, lower than expected yields, increased interest rates and operating costs, adverse economic or real estate developments in our markets (including the impact of the ongoing COVID-19 pandemic), our failure to successfully place into service and lease any properties undergoing development or redevelopment and our existing space held for future development or redevelopment (including new properties acquired for that purpose), our failure to successfully operate or lease acquired properties, decreased rental rates, increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, adverse general and local economic conditions, an unfavorable capital market environment, decreased leasing activity or lease renewals, failure to obtain LEED and other healthy building certifications and efficiencies, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission ("SEC"). Accordingly, you are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are made as of the date of this Earnings Press Release and Supplemental Information, and unless otherwise stated, we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.

For additional discussion of the risks and other potential impacts posed by the outbreak of the COVID-19 pandemic and uncertainties we, our tenants, and the global and national economies face as a result, see the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K filed with the SEC on February 1, 2021.

Alexandria®, Lighthouse Design® logo, Building the Future of Life-Changing Innovation™, That's What's in Our DNA®, Labspace®, Alexandria Center®, Alexandria Technology Square®, Alexandria Technology Center®, 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, 2021
(Dollars in thousands, except per share amounts)




Three Months Ended


Nine Months Ended



9/30/21


6/30/21


3/31/21


12/31/20


9/30/20


9/30/21


9/30/20

Revenues:















Income from rentals


$

546,527



$

508,371



$

478,695



$

461,335



$

543,412

(1)


$

1,533,593



$

1,416,873


Other income


1,232



1,248



1,154



2,385



1,630



3,634



5,044


Total revenues


547,759



509,619



479,849



463,720



545,042



1,537,227



1,421,917

















Expenses:















Rental operations


165,995



143,955



137,888



136,767



140,443



447,838



393,457


General and administrative


37,931



37,880



33,996



32,690



36,913



109,807



100,651


Interest


35,678



35,158



36,467



37,538



43,318



107,303



134,071


Depreciation and amortization


210,842



190,052



180,913



177,750



176,831



581,807



520,354


Impairment of real estate


42,620

(1)


4,926



5,129



25,177



7,680



52,675

(1)


22,901


Loss on early extinguishment of debt






67,253



7,898



52,770



67,253



52,770


Total expenses


493,066



411,971



461,646



417,820



457,955



1,366,683



1,224,204

















Equity in earnings of unconsolidated real estate joint ventures


3,091



2,609



3,537



3,593



3,778



9,237



4,555


Investment income


67,084



304,263



1,014



255,137



3,348



372,361



166,184


(Loss) gain on sales of real estate


(435)





2,779



152,503



1,586



2,344



1,586


Net income


124,433



404,520



25,533



457,133



95,799



554,486



370,038


Net income attributable to noncontrolling interests


(21,286)



(19,436)



(17,412)



(15,649)



(14,743)



(58,134)



(40,563)


Net income attributable to Alexandria Real Estate Equities, Inc.'s
   stockholders


103,147



385,084



8,121



441,484



81,056



496,352



329,475


Net income attributable to unvested restricted stock awards


(1,883)



(4,521)



(2,014)



(5,561)



(1,730)



(5,750)



(5,304)


Net income attributable to Alexandria Real Estate Equities, Inc.'s common
   stockholders


$

101,264



$

380,563



$

6,107



$

435,923



$

79,326



$

490,602



$

324,171

















Net income per share attributable to Alexandria Real Estate Equities, Inc.'s
   common stockholders:















Basic


$

0.67



$

2.61



$

0.04



$

3.26



$

0.64



$

3.39



$

2.62


Diluted


$

0.67



$

2.61



$

0.04



$

3.26



$

0.63



$

3.38



$

2.61

















Weighted-average shares of common stock outstanding:















Basic


150,854



145,825



137,319



133,688



124,901



144,716



123,561


Diluted


151,561



146,058



137,688



133,827



125,828



145,153



124,027

















Dividends declared per share of common stock


$

1.12



$

1.12



$

1.09



$

1.09



$

1.06



$

3.33



$

3.15




(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, 2021
(In thousands)




9/30/21


6/30/21


3/31/21


12/31/20


9/30/20

Assets











Investments in real estate


$

23,071,514



$

21,692,385



$

20,253,418



$

18,092,372



$

17,600,648


Investments in unconsolidated real estate joint ventures


321,737



323,622



325,928



332,349



330,792


Cash and cash equivalents


325,872



323,876



492,184



568,532



446,255


Restricted cash


42,182



33,697



42,219



29,173



38,788


Tenant receivables


7,749



6,710



7,556



7,333



7,641


Deferred rent


816,219



781,600



751,967



722,751



719,552


Deferred leasing costs


329,952



321,005



294,328



272,673



266,440


Investments


2,046,878



1,999,283



1,641,811



1,611,114



1,330,945


Other assets


1,596,615



1,536,672



1,424,935



1,191,581



1,169,610


Total assets


$

28,558,718



$

27,018,850



$

25,234,346



$

22,827,878



$

21,910,671













Liabilities, Noncontrolling Interests, and Equity











Secured notes payable


$

198,758



$

227,984



$

229,406



$

230,925



$

342,363


Unsecured senior notes payable


8,314,851



8,313,025



8,311,512



7,232,370



7,230,819


Unsecured senior line of credit and commercial paper


749,978



299,990





99,991



249,989


Accounts payable, accrued expenses, and other liabilities


2,149,450



1,825,387



1,750,687



1,669,832



1,609,340


Dividends payable


173,560



170,647



160,779



150,982



143,040


Total liabilities


11,586,597



10,837,033



10,452,384



9,384,100



9,575,551













Commitments and contingencies






















Redeemable noncontrolling interests


11,681



11,567



11,454



11,342



11,232













Alexandria Real Estate Equities, Inc.'s stockholders' equity:











Common stock


1,532



1,507



1,457



1,367



1,333


Additional paid-in capital


14,727,735



14,194,023



12,994,748



11,730,970



10,711,119


Accumulated other comprehensive loss


(6,029)



(4,508)



(5,799)



(6,625)



(10,638)


Alexandria Real Estate Equities, Inc.'s stockholders' equity


14,723,238



14,191,022



12,990,406



11,725,712



10,701,814


Noncontrolling interests


2,237,202



1,979,228



1,780,102



1,706,724



1,622,074


Total equity


16,960,440



16,170,250



14,770,508



13,432,436



12,323,888


Total liabilities, noncontrolling interests, and equity


$

28,558,718



$

27,018,850



$

25,234,346



$

22,827,878



$

21,910,671


 

Funds From Operations and Funds From Operations per Share
September 30, 2021
(In thousands)


The following table presents a reconciliation of net income (loss) attributable to Alexandria's common stockholders, the most directly comparable financial measure presented in accordance with U.S. generally accepted accounting principles ("GAAP"), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria's common stockholders – diluted, and funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted, for the periods below:




Three Months Ended


Nine Months Ended



9/30/21


6/30/21


3/31/21


12/31/20


9/30/20


9/30/21


9/30/20

Net income attributable to Alexandria's common stockholders


$

101,264



$

380,563



$

6,107



$

435,923



$

79,326



$

490,602



$

324,171


Depreciation and amortization of real estate assets


205,436



186,498



177,720



173,392



173,622



569,654



511,290


Noncontrolling share of depreciation and amortization from consolidated real
   estate JVs


(17,871)



(16,301)



(15,443)



(15,032)



(15,256)



(49,615)



(46,901)


Our share of depreciation and amortization from unconsolidated real estate JVs


3,465



4,135



3,076



2,976



2,936



10,676



8,437


Loss (gain) on sales of real estate


435





(2,779)



(152,503)



(1,586)



(2,344)



(1,586)


Impairment of real estate – rental properties


18,602

(1)


1,754



5,129



25,177



7,680



25,485



15,324


Allocation to unvested restricted stock awards


(1,472)



(2,191)



(201)



(420)



(1,261)



(6,574)



(5,692)


Funds from operations attributable to Alexandria's common stockholders –
   diluted(2)


309,859



554,458



173,609



469,513



245,461



1,037,884



805,043


Unrealized losses (gains) on non-real estate investments


14,432



(244,031)



46,251



(233,538)



14,013



(183,348)



(140,495)


Significant realized gains on non-real estate investments


(52,427)

(3)


(34,773)



(22,919)







(110,119)




Impairment of non-real estate investments














24,482


Impairment of real estate


24,018

(4)


3,172









27,190



15,221


Loss on early extinguishment of debt






67,253



7,898



52,770



67,253



52,770


Termination fee










(86,179)

(5)




(86,179)


Acceleration of stock compensation expense due to executive officer resignation










4,499





4,499


Allocation to unvested restricted stock awards


149



3,428



(1,208)



2,774



179



2,400



1,804


Funds from operations attributable to Alexandria's common stockholders –
   diluted, as adjusted


$

296,031



$

282,254



$

262,986



$

246,647



$

230,743



$

841,260



$

677,145




(1)

Related to a property in a non-core submarket to reduce the carrying amount of the property to its estimated fair value less costs to sell, upon our review of the current local market conditions.

(2)

Calculated in accordance with standards established by the Nareit Board of Governors.

(3)

Includes three separate significant realized gains from the following transactions: (i) the sale of shares in an investment in a publicly traded biotechnology company, (ii) a distribution received from a limited partnership investment, and (iii) the acquisition of one of our privately held biotechnology investments by a publicly traded biotechnology company.

(4)

Primarily related to an impairment charge of $22.5 million to reduce the carrying amount of an option to purchase a land parcel in our SoMa submarket for the development of an office property to its estimated fair value less costs to sell, upon our classification of the option as held for sale in September 2021.  

(5)

Represents termination fee of $89.5 million and related expenses of $3.3 million recognized during the three months ended September 30, 2020, upon termination of our contract with Pinterest, Inc. related to a lease at 88 Bluxome Street in our SoMa submarket.

 

Funds From Operations and Funds From Operations per Share (continued)
September 30, 2021
(In thousands, except per share amounts)


The following table presents a reconciliation of net income (loss) per share attributable to Alexandria's common stockholders, the most directly comparable financial measure presented in accordance with GAAP, including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations per share attributable to Alexandria's common stockholders – diluted, and funds from operations per share attributable to Alexandria's common stockholders – diluted, as adjusted, for the periods below. Per share amounts may not add due to rounding.




Three Months Ended


Nine Months Ended



9/30/21


6/30/21


3/31/21


12/31/20


9/30/20


9/30/21


9/30/20

Net income per share attributable to Alexandria's common stockholders –
   diluted


$

0.67



$

2.61



$

0.04



$

3.26



$

0.63



$

3.38



$

2.61


Depreciation and amortization of real estate assets


1.26



1.19



1.20



1.21



1.28



3.66



3.81


Loss (gain) on sales of real estate






(0.02)



(1.14)



(0.01)



(0.02)



(0.01)


Impairment of real estate – rental properties


0.12



0.01



0.04



0.19



0.06



0.18



0.12


Allocation to unvested restricted stock awards


(0.01)



(0.01)





(0.01)



(0.01)



(0.05)



(0.04)


Funds from operations per share attributable to Alexandria's common
   stockholders – diluted


2.04



3.80



1.26



3.51



1.95



7.15



6.49


Unrealized losses (gains) on non-real estate investments


0.10



(1.67)



0.34



(1.75)



0.11



(1.26)



(1.13)


Significant realized gains on non-real estate investments


(0.35)



(0.24)



(0.17)







(0.76)




Impairment of non-real estate investments














0.20


Impairment of real estate


0.16



0.02









0.19



0.12


Loss on early extinguishment of debt






0.49



0.06



0.42



0.46



0.42


Termination fee










(0.69)





(0.69)


Acceleration of stock compensation expense due to executive officer resignation










0.04





0.04


Allocation to unvested restricted stock awards




0.02



(0.01)



0.02





0.02



0.01


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


$

1.95



$

1.93



$

1.91



$

1.84



$

1.83



$

5.80



$

5.46

















Weighted-average shares of common stock outstanding – diluted


151,561



146,058



137,688



133,827



125,828



145,153



124,027

















 

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SOURCE Alexandria Real Estate Equities, Inc.