PASADENA, Calif., Feb. 1, 2021 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE:ARE) announced financial and operating results for the fourth quarter and year ended December 31, 2020.
Key highlights | ||||||||||||
Operating results | 4Q20 | 4Q19 | 2020 | 2019 | ||||||||
Total revenues: | ||||||||||||
In millions | $ | 463.7 | $ | 408.1 | $ | 1,885.6 | $ | 1,531.3 | ||||
Growth | 13.6% | 23.1% | ||||||||||
Net income attributable to Alexandria's common stockholders – diluted | ||||||||||||
In millions | $ | 435.9 | $ | 199.6 | $ | 760.8 | $ | 351.0 | ||||
Per share | $ | 3.26 | $ | 1.74 | $ | 6.01 | $ | 3.12 | ||||
Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted | ||||||||||||
In millions | $ | 246.6 | $ | 203.4 | $ | 923.8 | $ | 783.0 | ||||
Per share | $ | 1.84 | $ | 1.77 | $ | 7.30 | $ | 6.96 |
Alexandria and our tenants at the vanguard and heart of the life science ecosystem
Bringing together our unique and pioneering strategic vertical platforms of essential Labspace® real estate, strategic venture investments, impactful thought leadership, and purposeful corporate responsibility, Alexandria is at the vanguard and heart of the vital life science ecosystem that is advancing solutions for COVID-19 and other key challenges to human health. Owing to the efforts of numerous Alexandria tenants, including Pfizer and Moderna, in developing and delivering safe and effective vaccines and therapies to people around the world, the inherent value and critical need for the life science industry has been globally recognized. The essential R&D engine of the biopharma industry continued with productivity and resilience throughout this past year. By maintaining continuous operations across our campuses and facilities, Alexandria has enabled our tenants, to continue to pursue their essential, mission-critical research, development, manufacturing, and commercialization efforts to solve the most pressing current and future healthcare challenges.
Strong and flexible balance sheet with significant liquidity
Continued dividend strategy to share growth in cash flows with stockholders
Common stock dividend declared for 4Q20 of $1.09 per common share, aggregating $4.24 per common share for the year ended December 31, 2020, up 24 cents, or 6%, over the year ended December 31, 2019. Our FFO payout ratio of 60% for the three months ended December 31, 2020, allows us to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.
A REIT industry-leading, high-quality tenant roster
Key strategic transactions that generated capital for investment into our highly leased value-creation pipeline and strategic acquisitions
During 4Q20, we completed two strategic transactions that generated capital aggregating $874.6 million for investment into our highly leased development and redevelopment projects and strategic acquisitions:
Continued solid net operating income and internal growth
4Q20 | 2020 | |||||||
Total leasing activity – RSF | 1,369,599 | 4,358,846 | ||||||
Leasing of development and redevelopment space – RSF | 488,154 | 1,012,364 | ||||||
Lease renewals and re-leasing of space: | ||||||||
RSF (included in total leasing activity above) | 699,916 | 2,556,833 | ||||||
Rental rate increases | 29.8% | 37.6% | ||||||
Rental rate increases (cash basis) | 10.7% | 18.3% |
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 | 55% | ||||
Occupancy of operating properties in North America | 94.6% | (1) | |||
Operating margin | 71% | ||||
Adjusted EBITDA margin | 69% | ||||
Weighted-average remaining lease term: | |||||
All tenants | 7.6 | years | |||
Top 20 tenants | 11.0 | years | |||
(1) | Includes 970,199 RSF, or 3.1%, of vacancy in our North America markets, representing lease-up opportunities that will contribute to growth in cash flows at recently acquired properties. Excluding these acquired vacancies, occupancy of operating properties in North America was 97.7% as of December 31, 2020. Refer to "Occupancy" of our Supplemental Information for additional details regarding vacancy from recently acquired properties. |
Sustained strength in tenant collections during the ongoing COVID-19 pandemic
Key items included in operating results
Key items included in net income attributable to Alexandria's common stockholders: | |||||||||||||||||||||||||||||||
4Q20 | 4Q19 | 4Q20 | 4Q19 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||
(In millions, except per share amounts) | Amount | Per Share – Diluted | Amount | Per Share – Diluted | |||||||||||||||||||||||||||
Unrealized gains on non-real estate investments | $ | 233.5 | $ | 148.3 | $ | 1.75 | $ | 1.29 | $ | 374.0 | $ | 161.5 | $ | 2.96 | $ | 1.44 | |||||||||||||||
Gain on sales of real estate | 152.5 | 0.5 | 1.14 | — | 154.1 | 0.5 | 1.22 | — | |||||||||||||||||||||||
Impairment of real estate | (25.2) | (12.3) | (0.19) | (0.11) | (55.7) | (12.3) | (0.44) | (0.11) | |||||||||||||||||||||||
Impairment of non-real estate investments | — | (10.0) | — | (0.09) | (24.5) | (17.1) | (0.19) | (0.15) | |||||||||||||||||||||||
Loss on early extinguishment of debt | (7.9) | — | (0.06) | — | (60.7) | (47.6) | (0.48) | (0.42) | |||||||||||||||||||||||
Loss on early termination of interest rate hedge agreements | — | — | — | — | — | (1.7) | — | (0.02) | |||||||||||||||||||||||
Termination fee | — | — | — | — | 86.2 | — | 0.68 | — | |||||||||||||||||||||||
Acceleration of stock compensation expense due to executive officer resignation | — | — | — | — | (4.5) | — | (0.04) | — | |||||||||||||||||||||||
Preferred stock redemption charge | — | — | — | — | — | (2.6) | — | (0.02) | |||||||||||||||||||||||
Total | $ | 352.9 | $ | 126.5 | $ | 2.64 | $ | 1.09 | $ | 468.9 | $ | 80.7 | $ | 3.71 | $ | 0.72 | |||||||||||||||
Strategic acquisitions with significant value-creation opportunities in key submarkets
Acquisition of 401 Park Drive and 201 Brookline Avenue
Highly leased value-creation pipeline, including COVID-19-focused R&D spaces
Balance sheet management
Key metrics as of December 31, 2020
4Q20 | Goal | ||||||||||
Quarter | Trailing | 4Q21 | |||||||||
Annualized | 12 Months | Annualized | |||||||||
Net debt and preferred stock to Adjusted EBITDA | 5.3x | 5.5x | Less than or equal to 5.2x | ||||||||
Fixed-charge coverage ratio | 4.6x | 4.4x | Greater than or equal to 4.5x | ||||||||
Value-creation pipeline of new Class A development and redevelopment projects as a percentage of gross investments in real estate | 4Q20 | ||||||||||
Current and pre-leased near-term projects 78% leased/negotiating | 8% | ||||||||||
Income-producing/potential cash flows/covered land play(1) | 7% | ||||||||||
Land | 3% | ||||||||||
(1) | Includes projects that have existing buildings that are generating or can generate operating cash flows. Also includes development rights associated with existing operating campuses. |
Key capital events
New Agreement | Change | |||||
Commitments available for borrowing | $3.0 billion | Up $800 million | ||||
Interest rate | LIBOR+0.825% | Added a 0% LIBOR floor | ||||
Maturity date | January 6, 2026 | Extended 2 years | ||||
Investments
Industry and corporate responsibility leadership: catalyzing and leading the way for positive change to benefit human health and society
Industry leadership
Pioneering social responsibility initiatives to continue to drive unique, disruptive, and highly impactful solutions to tackle some of society's most complex and pressing challenges
Alexandria is profoundly committed to driving forward significant collaborative and innovative solutions to address some of today's most urgent and widespread societal challenges, including the COVID-19 pandemic, the opioid epidemic, and the educational achievement gap.
At the vanguard and heart of the life science ecosystem's fight against COVID-19
Pioneering a groundbreaking, data-driven, and evidence-based model to help solve the opioid epidemic
Building educational foundations for students to pave paths for long-term success and close the achievement gap
Select 2020 Financial HighlightsDecember 31, 2020
(1) | Source: Company filings and FactSet as of December 31, 2020. |
(2) | Rental rate increases of 37.6% and 18.3% (cash basis) represent our highest annual increases on renewed and re-leased space in the last 10 years. |
(3) | Represents tenant collections from April 1, 2020 to December 31, 2020. |
(4) | Ranking based on 2019 construction-in-progress for publicly held REITs. |
Represents an illustrative subset of approximately 100 tenants focused on COVID-19-related efforts, with some of these companies working on multiple efforts that span testing, treatment, and/or vaccine development. | |
(1) | Source: National Institutes of Health, "NIH launches clinical trials network to test COVID-19-related vaccines and other preventive tools," July 8, 2020. |
(1) | As of January 29, 2021. Source: U.S. Department of Health & Human Services. Federal funding presented includes the total commitment value. |
(2) | Source: U.S. Food and Drug Administration, "FDA Takes Additional Action in Fight Against COVID-19 By Issuing Emergency Use Authorization for Second COVID-19 Vaccine," December 18, 2020. |
Alexandria Fighting COVID-19 on Multiple Fronts December 31, 2020
Alexandria and our innovative tenants are at the vanguard and heart of the life science ecosystem advancing solutions for COVID-19
Safe and effective vaccines and therapies, in addition to widespread testing, continue to be critically needed to combat the global COVID-19 pandemic. By maintaining essential continuous operations across our campuses, Alexandria has enabled several of our life science tenants to pursue mission-critical COVID-19-related research and development. The heroic work being done by so many of our tenants and campus community members to help test for, treat, and prevent COVID-19, as well as provide medical supplies and protective equipment to neighboring hospitals, is profound and inspiring. We are currently tracking approximately 100 tenants across our cluster markets that have contributed meaningful time and resources to advancing solutions for COVID-19.
Developing preventative vaccines
A prophylactic vaccine is critically needed to resolve the global COVID-19 pandemic. As such, researchers around the world are working tirelessly to develop a safe and effective vaccine in record time. Furthermore, to help expedite the development, manufacturing, and distribution of COVID-19 vaccines, the U.S. government initiated an unprecedented public-private collaboration, allocating several billions of dollars to these efforts.
This support along with the internal vaccine development expertise and innovative technology platforms of our tenants Pfizer Inc. (in partnership with BioNTech) andModerna, Inc. (in partnership with the National institutes of Health), culminated in the FDA providing Emergency Use Authorization ("EUA") in December 2020 for their respective mRNA based COVID-19 vaccines. The U.S. has begun a large-scale COVID-19 vaccination campaign and will continue to roll out vaccines across the nation, prioritizing frontline and essential workers, the elderly, and individuals considered high-risk.
Additional tenants, including AstraZeneca plc,Emergent BioSolutions Inc., FUJIFILM Diosynth Biotechnologies, GlaxoSmithKline,Johnson & Johnson, Novavax, Inc., and Sanofi, have similarly received strong government support for their efforts in the development, manufacturing, and/or distribution of COVID-19 vaccines. Many of these companies will report critical trial data over the coming months, which, if positive, could help bolster the widespread delivery of a safe and effective COVID-19 vaccine around the world.
Advancing new and repurposed therapies
Safe and effective therapies are important for mitigating the impact of COVID-19, decreasing hospitalizations, and improving patient outcomes overall. On October 22, 2020, the FDA approved Veklury® (remdesivir), developed by our tenant Gilead Sciences, Inc., as the first antiviral treatment approved for COVID-19 patients requiring hospitalization. Subsequently, in November 2020, the FDA granted EUAs to tenant Eli Lilly and Company's bamlanivimab for the treatment of newly infected high-risk patients with mild or moderate disease, as well as to Regeneron Pharmaceutical's antibody cocktail for a similar indication.
In addition, over 300 experimental therapies to treat COVID-19 are being studied in over 900 clinical trials around the world, as well as over more than 150 therapeutic candidates in preclinical development. A substantial number of these programs are sponsored by our tenants, including the following:
Improving testing quality and capacity
Abbott Laboratories,Adaptive Biotechnologies Corporation,Color,Cue Health Inc.,Laboratory Corporation of America Holdings,Quest Diagnostics,Quidel Corporation,Roche, Thermo Fisher Scientific Inc., Verily Life Sciences, and others are working to improve testing quality, capacity, and turnaround time to more effectively determine who has an active COVID-19 infection, who has been exposed to the virus, and who has developed immunity against it. The increased availability of widespread COVID-19 testing is critical for curtailing the pandemic and facilitating a safer reopening of workplaces, communities, and society overall.
Acquisitions December 31, 2020 (Dollars in thousands) | |||||||||||||||||||||||||||
Square Footage | |||||||||||||||||||||||||||
Property | Submarket/Market | Date of Purchase | Number of Properties | Operating Occupancy | Future Development | Active Redevelopment | Operating With Future Development/ Redevelopment | Operating | Purchase Price | ||||||||||||||||||
Completed in YTD 3Q20 | 39 | 86% | 3,197,313 | 716,155 | 1,236,177 | 3,325,313 | $ | 1,982,749 | (1) | ||||||||||||||||||
Completed in 4Q20: | |||||||||||||||||||||||||||
6420 and 6450 Sequence Drive | Sorrento Mesa/San Diego | 11/13/20 | 2 | 89 (2) | 709,000 | — | 202,915 | 115,285 | 169,698 | (2) | |||||||||||||||||
380 and 420 E Street | Seaport Innovation District/Greater Boston | 10/29/20 | 2 | 100 | 1,000,000 | (3) | — | 195,506 | — | 168,500 | (4) | ||||||||||||||||
3450 and 3460 Hillview Avenue | Greater Stanford/San Francisco | 10/6/20 | 2 | 100 | — | — | 76,951 | — | 65,748 | (4) | |||||||||||||||||
700 Quince Orchard Road | Gaithersburg/Maryland | 10/23/20 | 1 | N/A | — | 169,420 | (5) | — | — | 43,000 | |||||||||||||||||
Other | 9 | 62 | 175,400 | 213,976 | 51,255 | 389,992 | 133,707 | (4) | |||||||||||||||||||
16 | 80 | 1,884,400 | 383,396 | 526,627 | 505,277 | 580,653 | |||||||||||||||||||||
2020 acquisitions | 55 | 85% | 5,081,713 | 1,099,551 | 1,762,804 | 3,830,590 | $ | 2,563,402 | |||||||||||||||||||
(1) | Refer to our quarterly report on Form 10-Q for the period ended September 30, 2020, filed on October 26, 2020, for transactions and related yield information. |
(2) | The two operating properties are currently 89% occupied, and upon completion of renovations, a lease for 60,432 RSF will commence in 2H21, which will increase occupancy to 100%. We expect to achieve unlevered initial stabilized yields of 7.2% and 6.2% (cash basis) for these operating properties. |
(3) | Represents total square footage upon completion of development of a new Class A property. Square footage presented includes 195,506 RSF of buildings currently in operation at properties with inherent future development opportunities. We intend to demolish the existing property upon expiration of the existing in-place leases and commencement of future construction. 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 to provide total estimated costs and related yields for development and redevelopment projects in the future, subsequent to the commencement of construction. |
(5) | Refer to "New Class A development and redevelopment properties: current projects" of our Supplemental Information for additional details. |
Acquisitions (continued) December 31, 2020 (Dollars in thousands) | |||||||||||||||||||||||||||
Square Footage | |||||||||||||||||||||||||||
Property | Submarket/Market | Date of Purchase | Number of Properties | Operating Occupancy | Future Development | Active Development/Redevelopment | Operating With Future Development/ Redevelopment | Operating | Purchase Price | ||||||||||||||||||
2021 acquisitions | |||||||||||||||||||||||||||
Completed: | |||||||||||||||||||||||||||
Alexandria Center® for Life Science – Fenway | Fenway/Greater Boston | 1/29/21 | 2 | 93% (1) | 305,000 | 510,116 | — | 973,145 | $ | 1,483,200 | (1) | ||||||||||||||||
840 Winter Street | Route 128/Greater Boston | 1/20/21 | 1 | 100 | — | 130,000 | 30,009 | — | 58,126 | (2) | |||||||||||||||||
Other | Various | Various | 2 | N/A | — | 185,669 | — | — | 60,750 | (2) | |||||||||||||||||
5 | 93% | 305,000 | 825,785 | 30,009 | 973,145 | 1,602,076 | |||||||||||||||||||||
Pending: | |||||||||||||||||||||||||||
Mercer Mega Block | Lake Union/Seattle | TBD(3) | — | N/A | 800,000 | — | — | — | 143,500 | ||||||||||||||||||
TBD | 954,424 | ||||||||||||||||||||||||||
2021 acquisitions | $ | 2,700,000 | |||||||||||||||||||||||||
2021 guidance range | $2,450,000 – $2,950,000 | ||||||||||||||||||||||||||
(1) | Refer to page 2 in our Earnings Press Release for additional information. |
(2) | We expect to provide total estimated costs and related yields for development and redevelopment projects in the future, subsequent to the commencement of construction. |
(3) | We continue to diligently work through various long-lead-time due diligence items, with certain deadlines extending into 2021. We are working toward completion of all due diligence items as soon as possible. |
Dispositions December 31, 2020 (Dollars in thousands) | |||||||||||||||||||||||
Property | Submarket/Market | Date of Sale | Interest Sold | RSF | Sales Price | Sales Price per RSF | Gain | ||||||||||||||||
Completed in YTD 3Q20 | 536,152 | $ | 252,454 | $ | 1,603 | ||||||||||||||||||
Completed in 4Q20: | |||||||||||||||||||||||
510 Townsend Street and 505 Brannan Street | SoMa/San Francisco | 11/20/20 | 100% | 443,479 | 560,162 | (1) | $ | 1,263 | 151,871 | ||||||||||||||
1201 and 1208 Eastlake Avenue East and 199 East Blaine Street | Lake Union/Seattle | 11/24/20 | 70% | 321,218 | 314,466 | (2) | $ | 1,399 | (3) | ||||||||||||||
Other | Various | Various | 100% | 44,855 | 10,250 | N/A | 615 | ||||||||||||||||
809,552 | 884,878 | 152,486 | |||||||||||||||||||||
2020 dispositions | 1,345,704 | $ | 1,137,332 | $ | 154,089 | ||||||||||||||||||
(1) | We completed the dispositions of these two tech office properties at capitalization rates of 5.3% and 5.0% (cash basis) based on annualized net operating income and net operating income (cash basis), respectively, for the three months ended September 30, 2020. |
(2) | This transaction represents capitalization rate of 4.2%, based on annualized net operating income and net operating income (cash basis) for the three months ended December 31, 2020. |
(3) | This sale of a partial interest represents consideration in excess of book value aggregating $211.3 million. We retained control over this real estate joint venture, and therefore, we continue to consolidate these properties. For consolidated joint ventures, we account for the consideration in excess of net book value of the interest sold as an equity transaction, with no gain or loss recognized in earnings. |
GuidanceDecember 31, 2020 (Dollars in millions, except per share amounts) | ||||||||||||||||||||
On January 5, 2021, we issued a current report on Form 8-K providing updates to key 2021 guidance items in connection with our forward equity offering. 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 12 of this Earnings Press Release for additional details. | ||||||||||||||||||||
Projected 2021 Earnings per Share and Funds From Operations per Share Attributable to | ||||||||||||||||||||
Alexandria's Common Stockholders – Diluted | Key Credit Metrics | 2021 Guidance | ||||||||||||||||||
Earnings per share(1) | $2.14 to $2.34 | Net debt and preferred stock to Adjusted EBITDA – 4Q21 annualized | Less than or equal to 5.2x | |||||||||||||||||
Depreciation and amortization of real estate assets | 5.50 | Fixed-charge coverage ratio – 4Q21 annualized | Greater than or equal to 4.5x | |||||||||||||||||
Allocation to unvested restricted stock awards | (0.04) | |||||||||||||||||||
Funds from operations per share(2) | $7.60 to $7.80 | |||||||||||||||||||
Midpoint | $7.70 |
Certain | |||||||||||||||||||||
Completed | |||||||||||||||||||||
Key Assumptions | Low | High | Key Sources and Uses of Capital | Range | Midpoint | Items | |||||||||||||||
Occupancy percentage in North America as of December 31, 2021 | 95.6% | 96.2% | Sources of capital: | ||||||||||||||||||
Lease renewals and re-leasing of space: | Net cash provided by operating activities after dividends | $ | 210 | $ | 250 | $ | 230 | ||||||||||||||
Rental rate increases | 29.0% | 32.0% | Incremental debt | 730 | 740 | 735 | |||||||||||||||
Rental rate increases (cash basis) | 16.0% | 19.0% | 2020 debt capital proceeds held in cash | 150 | 250 | 200 | |||||||||||||||
Same property performance: | Real estate dispositions and partial interest sales(3) | 1,250 | 1,500 | 1,375 | |||||||||||||||||
Net operating income increase | 1.0% | 3.0% | Common equity | 1,700 | 2,100 | 1,900 | $ | 1,141 | (4) | ||||||||||||
Net operating income increase (cash basis) | 4.0% | 6.0% | Total sources of capital | $ | 4,040 | $ | 4,840 | $ | 4,440 | ||||||||||||
Straight-line rent revenue | $ | 114 | $ | 124 | Uses of capital: | ||||||||||||||||
General and administrative expenses | $ | 146 | $ | 151 | Construction | $ | 1,590 | $ | 1,890 | $ | 1,740 | ||||||||||
Capitalization of interest | $ | 167 | $ | 177 | Acquisitions | 2,450 | 2,950 | 2,700 | $ | 1,602 | |||||||||||
Interest expense | $ | 133 | $ | 143 | Total uses of capital | $ | 4,040 | $ | 4,840 | $ | 4,440 | ||||||||||
Incremental debt (included above): | |||||||||||||||||||||
Issuance of unsecured senior notes payable(5) | $ | 700 | $ | 1,100 | $ | 900 | |||||||||||||||
Unsecured senior line of credit, commercial paper program, and other | 30 | (360) | (165) | ||||||||||||||||||
Incremental debt | $ | 730 | $ | 740 | $ | 735 | |||||||||||||||
(1) | Excludes unrealized gains or losses after December 31, 2020, that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted. |
(2) | Refer to "Funds from operations and funds from operations, as adjusted, attributable to Alexandria's common stockholders" in "Definitions and reconciliations" of our Supplemental Information for additional details. |
(3) | In December 2020, three office buildings aggregating 146,842 RSF met the criteria to be classified as held for sale. We expect to complete the sale of these properties in 2021 for a total estimated sales price of $78.1 million, including the buyer's assumption of a $28.2 million secured note payable related to one of the buildings. Upon the buildings being classified as held for sale, we recognized impairment charges aggregating $25.2 million. |
(4) | Refer to "Key capital events" on page 3 of this Earnings Press Release for additional information on our January 2021 forward equity offering and our remaining outstanding forward equity contracts issued under our ATM program. |
(5) | In addition to our guidance range, we may seek opportunities to refinance our $650 million unsecured senior notes payable green bond due in 2024 prior to its maturity, subject to market conditions. |
Earnings Call Information and About the CompanyDecember 31, 2020
We will host a conference call on Tuesday, February 2, 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 fourth quarter and year ended December 31, 2020. 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, February 2, 2021. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 10149959.
Additionally, a copy of this Earnings Press Release and Supplemental Information for the fourth quarter and year ended December 31, 2020, is available in the "For Investors" section of our website at www.are.com or by following this link: http://www.are.com/fs/2020q4.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; or Sara M. Kabakoff, vice president – communications, at (626) 578-0777; or Paula Schwartz, managing director of Rx Communications Group, at (917) 322-2216.
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, technology, and agtech campuses in AAA innovation cluster locations, with a total market capitalization of $31.9 billion as of December 31, 2020, and an asset base in North America of 49.7 million square feet ("SF"). The asset base in North America includes 31.9 million RSF of operating properties and 3.3 million RSF of Class A properties undergoing construction, 7.1 million RSF of near-term and intermediate-term development and redevelopment projects, and 7.4 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, 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, technology, and agtech 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, technology, and agtech companies through our venture capital platform. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.
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This document includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 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," 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 (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, 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™, Labspace®, Alexandria Center®, Alexandria Technology Square®, Alexandria Technology Center®, Alexandria Innovation Center®, LaunchLabs®, and That's What's in Our DNA™ 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 OperationsDecember 31, 2020 (Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
12/31/20 | 9/30/20 | 6/30/20 | 3/31/20 | 12/31/19 | 12/31/20 | 12/31/19 | ||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||
Income from rentals | $ | 461,335 | $ | 543,412 | (1) | $ | 435,856 | $ | 437,605 | $ | 404,721 | $ | 1,878,208 | $ | 1,516,864 | |||||||||||||
Other income | 2,385 | 1,630 | 1,100 | 2,314 | 3,393 | 7,429 | 14,432 | |||||||||||||||||||||
Total revenues | 463,720 | 545,042 | 436,956 | 439,919 | 408,114 | 1,885,637 | 1,531,296 | |||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||
Rental operations | 136,767 | 140,443 | 123,911 | 129,103 | 121,852 | 530,224 | 445,492 | |||||||||||||||||||||
General and administrative | 32,690 | 36,913 | 31,775 | 31,963 | 29,782 | 133,341 | 108,823 | |||||||||||||||||||||
Interest | 37,538 | 43,318 | 45,014 | 45,739 | 45,493 | 171,609 | 173,675 | |||||||||||||||||||||
Depreciation and amortization | 177,750 | 176,831 | 168,027 | 175,496 | 140,518 | 698,104 | 544,612 | |||||||||||||||||||||
Impairment of real estate | 25,177 | 7,680 | 13,218 | 2,003 | 12,334 | 48,078 | 12,334 | |||||||||||||||||||||
Loss on early extinguishment of debt | 7,898 | (2) | 52,770 | — | — | — | 60,668 | 47,570 | ||||||||||||||||||||
Total expenses | 417,820 | 457,955 | 381,945 | 384,304 | 349,979 | 1,642,024 | 1,332,506 | |||||||||||||||||||||
Equity in earnings (losses) of unconsolidated real estate joint ventures | 3,593 | 3,778 | 3,893 | (3,116) | 4,777 | 8,148 | 10,136 | |||||||||||||||||||||
Investment income (loss) | 255,137 | 3,348 | 184,657 | (21,821) | 152,667 | 421,321 | 194,647 | |||||||||||||||||||||
Gain on sales of real estate | 152,503 | 1,586 | — | — | 474 | 154,089 | 474 | |||||||||||||||||||||
Net income | 457,133 | 95,799 | 243,561 | 30,678 | 216,053 | 827,171 | 404,047 | |||||||||||||||||||||
Net income attributable to noncontrolling interests | (15,649) | (14,743) | (13,907) | (11,913) | (13,612) | (56,212) | (40,882) | |||||||||||||||||||||
Net income attributable to Alexandria Real Estate Equities, Inc.'s stockholders | 441,484 | 81,056 | 229,654 | 18,765 | 202,441 | 770,959 | 363,165 | |||||||||||||||||||||
Dividends on preferred stock | — | — | — | — | — | — | (3,204) | |||||||||||||||||||||
Preferred stock redemption charge | — | — | — | — | — | — | (2,580) | |||||||||||||||||||||
Net income attributable to unvested restricted stock awards | (5,561) | (1,730) | (3,054) | (1,925) | (2,823) | (10,168) | (6,386) | |||||||||||||||||||||
Net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders | $ | 435,923 | $ | 79,326 | $ | 226,600 | $ | 16,840 | $ | 199,618 | $ | 760,791 | $ | 350,995 | ||||||||||||||
Net income per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders: | ||||||||||||||||||||||||||||
Basic | $ | 3.26 | $ | 0.64 | $ | 1.82 | $ | 0.14 | $ | 1.75 | $ | 6.03 | $ | 3.13 | ||||||||||||||
Diluted | $ | 3.26 | $ | 0.63 | $ | 1.82 | $ | 0.14 | $ | 1.74 | $ | 6.01 | $ | 3.12 | ||||||||||||||
Weighted-average shares of common stock outstanding: | ||||||||||||||||||||||||||||
Basic | 133,688 | 124,901 | 124,333 | 121,433 | 114,175 | 126,106 | 112,204 | |||||||||||||||||||||
Diluted | 133,827 | 125,828 | 124,448 | 121,785 | 114,974 | 126,490 | 112,524 | |||||||||||||||||||||
Dividends declared per share of common stock | $ | 1.09 | $ | 1.06 | $ | 1.06 | $ | 1.03 | $ | 1.03 | $ | 4.24 | $ | 4.00 |
(1) | Includes a termination fee aggregating $89.5 million related to the termination of a future lease at our 88 Bluxome Street development project. |
(2) | Includes $7.3 million related to the extinguishment of two secured notes payable aggregating $108.2 million, due in 2023 with a weighted-average interest rate of 3.67%, and $651 thousand related to the amendment of our unsecured senior line of credit. |
Consolidated Balance SheetsDecember 31, 2020 (In thousands) | ||||||||||||||||||||
12/31/20 | 9/30/20 | 6/30/20 | 3/31/20 | 12/31/19 | ||||||||||||||||
Assets | ||||||||||||||||||||
Investments in real estate | $ | 18,092,372 | $ | 17,600,648 | $ | 16,281,125 | $ | 15,832,182 | $ | 14,844,038 | ||||||||||
Investments in unconsolidated real estate joint ventures | 332,349 | 330,792 | 326,858 | 325,665 | 346,890 | |||||||||||||||
Cash and cash equivalents | 568,532 | 446,255 | 206,860 | 445,255 | 189,681 | |||||||||||||||
Restricted cash | 29,173 | 38,788 | 34,680 | 43,116 | 53,008 | |||||||||||||||
Tenant receivables | 7,333 | 7,641 | 7,208 | 14,976 | 10,691 | |||||||||||||||
Deferred rent | 722,751 | 719,552 | 688,749 | 663,926 | 641,844 | |||||||||||||||
Deferred leasing costs | 272,673 | 266,440 | 274,483 | 269,458 | 270,043 | |||||||||||||||
Investments | 1,611,114 | 1,330,945 | 1,318,465 | 1,123,482 | 1,140,594 | |||||||||||||||
Other assets | 1,191,581 | 1,169,610 | 930,680 | 983,875 | 893,714 | |||||||||||||||
Total assets | $ | 22,827,878 | $ | 21,910,671 | $ | 20,069,108 | $ | 19,701,935 | $ | 18,390,503 | ||||||||||
Liabilities, Noncontrolling Interests, and Equity | ||||||||||||||||||||
Secured notes payable | $ | 230,925 | $ | 342,363 | $ | 344,784 | $ | 347,136 | $ | 349,352 | ||||||||||
Unsecured senior notes payable | 7,232,370 | 7,230,819 | 6,738,486 | 6,736,999 | 6,044,127 | |||||||||||||||
Unsecured senior line of credit and commercial paper | 99,991 | 249,989 | 440,000 | 221,000 | 384,000 | |||||||||||||||
Accounts payable, accrued expenses, and other liabilities | 1,669,832 | 1,609,340 | 1,343,181 | 1,352,554 | 1,320,268 | |||||||||||||||
Dividends payable | 150,982 | 143,040 | 133,681 | 129,981 | 126,278 | |||||||||||||||
Total liabilities | 9,384,100 | 9,575,551 | 9,000,132 | 8,787,670 | 8,224,025 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Redeemable noncontrolling interests | 11,342 | 11,232 | 12,122 | 12,013 | 12,300 | |||||||||||||||
Alexandria Real Estate Equities, Inc.'s stockholders' equity: | ||||||||||||||||||||
Common stock | 1,367 | 1,333 | 1,246 | 1,243 | 1,208 | |||||||||||||||
Additional paid-in capital | 11,730,970 | 10,711,119 | 9,443,274 | 9,336,949 | 8,874,367 | |||||||||||||||
Accumulated other comprehensive loss | (6,625) | (10,638) | (13,080) | (15,606) | (9,749) | |||||||||||||||
Alexandria Real Estate Equities, Inc.'s stockholders' equity | 11,725,712 | 10,701,814 | 9,431,440 | 9,322,586 | 8,865,826 | |||||||||||||||
Noncontrolling interests | 1,706,724 | 1,622,074 | 1,625,414 | 1,579,666 | 1,288,352 | |||||||||||||||
Total equity | 13,432,436 | 12,323,888 | 11,056,854 | 10,902,252 | 10,154,178 | |||||||||||||||
Total liabilities, noncontrolling interests, and equity | $ | 22,827,878 | $ | 21,910,671 | $ | 20,069,108 | $ | 19,701,935 | $ | 18,390,503 |
Funds From Operations and Funds From Operations per ShareDecember 31, 2020 (In thousands) | ||||||||||||||||||||||||||||
The following table presents a reconciliation of net income (loss) attributable to Alexandria's common stockholders, the most directly comparable financial measure presented in accordance with generally accepted accounting principles ("GAAP"), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria's common stockholders – diluted, and funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted, for the periods below: | ||||||||||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
12/31/20 | 9/30/20 | 6/30/20 | 3/31/20 | 12/31/19 | 12/31/20 | 12/31/19 | ||||||||||||||||||||||
Net income attributable to Alexandria's common stockholders | $ | 435,923 | $ | 79,326 | $ | 226,600 | $ | 16,840 | $ | 199,618 | $ | 760,791 | $ | 350,995 | ||||||||||||||
Depreciation and amortization of real estate assets | 173,392 | 173,622 | 165,040 | 172,628 | 137,761 | 684,682 | 541,855 | |||||||||||||||||||||
Noncontrolling share of depreciation and amortization from consolidated real estate JVs | (15,032) | (15,256) | (15,775) | (15,870) | (10,176) | (61,933) | (30,960) | |||||||||||||||||||||
Our share of depreciation and amortization from unconsolidated real estate JVs | 2,976 | 2,936 | 2,858 | 2,643 | 2,702 | 11,413 | 6,366 | |||||||||||||||||||||
Gain on sales of real estate | (152,503) | (1) | (1,586) | — | — | (474) | (154,089) | (474) | ||||||||||||||||||||
Impairment of real estate – rental properties | 25,177 | (1) | 7,680 | — | 7,644 | 12,334 | 40,501 | (2) | 12,334 | |||||||||||||||||||
Assumed conversion of 7.00% Series D cumulative convertible preferred stock | — | — | — | — | — | — | 3,204 | |||||||||||||||||||||
Allocation to unvested restricted stock awards | (420) | (1,261) | (2,228) | (847) | (1,809) | (7,018) | (5,904) | |||||||||||||||||||||
Funds from operations attributable to Alexandria's common stockholders – diluted(3) | 469,513 | 245,461 | 376,495 | 183,038 | 339,956 | 1,274,347 | 877,416 | |||||||||||||||||||||
Unrealized (gains) losses on non-real estate investments | (233,538) | 14,013 | (171,652) | 17,144 | (148,268) | (374,033) | (161,489) | |||||||||||||||||||||
Impairment of non-real estate investments | — | — | 4,702 | 19,780 | 9,991 | 24,482 | 17,124 | |||||||||||||||||||||
Impairment of real estate | — | — | 13,218 | 2,003 | — | 15,221 | — | |||||||||||||||||||||
Loss on early extinguishment of debt | 7,898 | 52,770 | — | — | — | 60,668 | 47,570 | |||||||||||||||||||||
Loss on early termination of interest rate hedge agreements | — | — | — | — | — | — | 1,702 | |||||||||||||||||||||
Termination fee | — | (86,179) | — | — | — | (86,179) | — | |||||||||||||||||||||
Acceleration of stock compensation expense due to executive officer resignation | — | 4,499 | — | — | — | 4,499 | — | |||||||||||||||||||||
Preferred stock redemption charge | — | — | — | — | — | — | 2,580 | |||||||||||||||||||||
Removal of assumed conversion of 7.00% Series D cumulative convertible preferred stock | — | — | — | — | — | — | (3,204) | |||||||||||||||||||||
Allocation to unvested restricted stock awards | 2,774 | 179 | 2,251 | (591) | 1,760 | 4,790 | 1,307 | |||||||||||||||||||||
Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted | $ | 246,647 | $ | 230,743 | $ | 225,014 | $ | 221,374 | $ | 203,439 | $ | 923,795 | $ | 783,006 |
(1) | Refer to "Dispositions" in our Earnings Press Release for additional details. |
(2) | Includes a $7.6 million impairment of our investment in a recently developed retail property held by our unconsolidated real estate joint venture recognized in 1Q20. This impairment is classified in equity in earnings of unconsolidated real estate joint ventures within our consolidated statements of operations. |
(3) | Calculated in accordance with standards established by the Nareit Board of Governors. Refer to "Funds from operations and funds from operations, as adjusted, attributable to Alexandria's common stockholders" in the "Definitions and reconciliations" of our Supplemental Information for additional details. |
Funds From Operations and Funds From Operations per Share (continued)December 31, 2020 (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 | Year Ended | |||||||||||||||||||||||||||
12/31/20 | 9/30/20 | 6/30/20 | 3/31/20 | 12/31/19 | 12/31/20 | 12/31/19 | ||||||||||||||||||||||
Net income per share attributable to Alexandria's common stockholders – diluted | $ | 3.26 | $ | 0.63 | $ | 1.82 | $ | 0.14 | $ | 1.74 | $ | 6.01 | $ | 3.12 | ||||||||||||||
Depreciation and amortization of real estate assets | 1.21 | 1.28 | 1.22 | 1.31 | 1.13 | 5.01 | 4.60 | |||||||||||||||||||||
Gain on sales of real estate | (1.14) | (0.01) | — | — | — | (1.22) | — | |||||||||||||||||||||
Impairment of real estate – rental properties | 0.19 | 0.06 | — | 0.06 | 0.11 | 0.32 | 0.11 | |||||||||||||||||||||
Allocation to unvested restricted stock awards | (0.01) | (0.01) | (0.01) | (0.01) | (0.02) | (0.05) | (0.06) | |||||||||||||||||||||
Funds from operations per share attributable to Alexandria's common stockholders – diluted | 3.51 | 1.95 | 3.03 | 1.50 | 2.96 | 10.07 | 7.77 | |||||||||||||||||||||
Unrealized (gains) losses on non-real estate investments | (1.75) | 0.11 | (1.38) | 0.14 | (1.29) | (2.96) | (1.44) | |||||||||||||||||||||
Impairment of non-real estate investments | — | — | 0.04 | 0.16 | 0.09 | 0.19 | 0.15 | |||||||||||||||||||||
Impairment of real estate | — | — | 0.11 | 0.02 | — | 0.12 | — | |||||||||||||||||||||
Loss on early extinguishment of debt | 0.06 | 0.42 | — | — | — | 0.48 | 0.42 | |||||||||||||||||||||
Loss on early termination of interest rate hedge agreements | — | — | — | — | — | — | 0.02 | |||||||||||||||||||||
Termination fee | — | (0.69) | — | — | — | (0.68) | — | |||||||||||||||||||||
Acceleration of stock compensation expense due to executive officer resignation | — | 0.04 | — | — | — | 0.04 | — | |||||||||||||||||||||
Preferred stock redemption charge | — | — | — | — | — | — | 0.02 | |||||||||||||||||||||
Allocation to unvested restricted stock awards | 0.02 | — | 0.01 | — | 0.01 | 0.04 | 0.02 | |||||||||||||||||||||
Funds from operations per share attributable to Alexandria's common stockholders – diluted, as adjusted | $ | 1.84 | $ | 1.83 | $ | 1.81 | $ | 1.82 | $ | 1.77 | $ | 7.30 | $ | 6.96 | ||||||||||||||
Weighted-average shares of common stock outstanding(1) for calculations of: | ||||||||||||||||||||||||||||
Earnings per share – diluted | 133,827 | 125,828 | 124,448 | 121,785 | 114,974 | 126,490 | 112,524 | |||||||||||||||||||||
Funds from operations – diluted, per share | 133,827 | 125,828 | 124,448 | 121,785 | 114,974 | 126,490 | 112,966 | |||||||||||||||||||||
Funds from operations – diluted, as adjusted, per share | 133,827 | 125,828 | 124,448 | 121,785 | 114,974 | 126,490 | 112,524 | |||||||||||||||||||||
(1) | Refer to "Weighted-average shares of common stock outstanding – diluted" in the "Definitions and reconciliations" of our Supplemental Information for additional details. |
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SOURCE Alexandria Real Estate Equities, Inc.