(1)Source: JAMA Psychiatry, "Trends in US Emergency Department Visits for Mental Health, Overdose, and Violence Outcomes Before and During the COVID-19 Pandemic," February 3, 2021.
(1)Refer to “Annual rental revenue” and “Investment-grade or publicly traded large cap tenants” in the “Definitions and reconciliations” of our Supplemental Information for additional details.
(2)Liquidity as of March 31, 2021. Refer to “Key credit metrics” of our Supplemental Information for additional details.
(1)Represents credit rating levels from Moody’s Investors Service and S&P Global Ratings for publicly traded REITs (excluding mortgage REITs), from Bloomberg Professional Services as of March 31, 2021.
(2)As of March 31, 2021. Refer to “Key credit metrics” of our Supplemental Information for additional details.
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. Please refer to page 13 of this Earnings Press Release and our Supplemental Information for further information.
This document is not an offer to sell or a solicitation to buy securities of Alexandria Real Estate Equities, Inc. Any offers to sell or solicitations to buy our securities shall be made only by means of a prospectus approved for that purpose. Unless otherwise indicated, the “Company,” “Alexandria,” “ARE,” “we,” “us,” and “our” refer to Alexandria Real Estate Equities, Inc. and our consolidated subsidiaries.
1Q21 FFO per Share – Diluted, As Adjusted, of $1.91; and
Alexandria at the Vanguard and Heart of the Life Science Ecosystem
PASADENA, Calif. – April 26, 2021 – Alexandria Real Estate Equities, Inc. (NYSE:ARE) announced financial and operating results for the first quarter ended March 31, 2021.
Key highlights
Operating results
1Q21
1Q20
Total revenues:
In millions
$
479.8
$
439.9
Growth
9.1
%
Net income attributable to Alexandria’s common stockholders – diluted
In millions
$
6.1
$
16.8
Per share
$
0.04
$
0.14
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted
In millions
$
263.0
$
221.4
Per share
$
1.91
$
1.82
Alexandria and our tenants at the vanguard and heart of the life science ecosystem
Bringing together our unique and pioneering 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 solving COVID-19 with unprecedented speed and efficiency while addressing other major challenges to human health. Owing to the efforts of numerous Alexandria tenants, including Pfizer Inc., Moderna, Inc., and Johnson & Johnson, in developing and delivering safe and effective vaccines and therapies to people around the world, the inherent value of and critical need for the life science industry have been globally recognized. As we entered this new year, the essential R&D engine of the biopharma industry continued to perform with exceptional productivity, progress, and resilience. By maintaining 24/7 operations across our campuses and facilities, Alexandria enables our tenants to pursue their mission-critical research, development, manufacturing, and commercialization efforts to solve these most pressing current and future healthcare challenges.
Strong and flexible balance sheet with significant liquidity
•Investment-grade credit ratings ranked in the top 10% among all publicly traded REITs as of March 31, 2021.
•Net debt and preferred stock to Adjusted EBITDA of 5.8x for 1Q21 annualized.
•Fixed-charge coverage ratio of 4.7x for 1Q21 annualized.
•$4.3 billion of liquidity as of March 31, 2021.
•No debt maturities prior to 2024.
•13.0 years weighted-average remaining term of debt as of March 31, 2021.
Continued dividend strategy to share growth in cash flows with stockholders
Common stock dividend declared for 1Q21 of $1.09 per common share, aggregating $4.30 per common share for the twelve months ended March 31, 2021, up 24 cents, or 6%, over the twelve months ended March 31, 2020. Our FFO payout ratio of 60% for the three months ended March 31, 2021, 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
•55% of annual rental revenue from investment-grade or publicly traded large cap tenants.
•Weighted-average remaining lease term of 7.6 years.
Key development projects placed into service in 1Q21
We placed into service three fully leased development projects aggregating 376,475 RSF located across three submarkets at a weighted-average yield of 6.6% and 6.3% (cash basis).
Key strategic transaction that generated capital for investment into our highly leased value-creation pipeline
In April 2021, we sold a 70% partial interest in our 213 East Grand Avenue property located in our South San Francisco submarket for a sales price of $301.0 million, or $1,429 per RSF, representing capitalization rates of 4.5% and 4.0% (cash basis), which generated capital for investment into our highly leased development and redevelopment projects and strategic acquisitions.
Continued strong net operating income and internal growth
•Net operating income (cash basis) of $1.2 billion for 1Q21 annualized, up $112.8 million, or 10.3%, compared to 1Q20 annualized.
First Quarter Ended March 31, 2021, Financial and Operating Results (continued)
March 31, 2021
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
94.5
%
(1)
Operating margin
71
%
Adjusted EBITDA margin
69
%
Weighted-average remaining lease term:
All tenants
7.6
years
Top 20 tenants
10.9
years
(1)Includes 1.2 million RSF, or 3.5%, of vacancy at recently acquired properties in our North America markets, representing lease-up opportunities that will contribute to growth in cash flows. Approximately 26% of the vacant 1.2 million RSF is currently leased, with occupancy expected primarily over the next two quarters. Excluding these acquired vacancies, occupancy of operating properties in North America was 98.0% as of March 31, 2021. Refer to “Occupancy” of our Supplemental Information for additional details.
Sustained strength in tenant collections during the ongoing COVID-19 pandemic
•Tenant collections remain consistently high, with 99.4% of April 2021 billings collected as of the date of this release.
•As of March 31, 2021, our tenant receivables balance was $7.6 million.
Key items included in operating results
Key items included in net income attributable to Alexandria’s common stockholders:
(In millions, except per share amounts)
Amount
Per Share – Diluted
1Q21
1Q20
1Q21
1Q20
Unrealized losses on non-real estate investments
$
(46.3)
$
(17.1)
$
(0.34)
$
(0.14)
Realized gains on non-real estate investments
22.9
(1)
—
0.17
—
Gain on sales of real estate
2.8
(1)
—
0.02
—
Impairment of real estate
(5.1)
(1)
(9.6)
(0.04)
(0.08)
Impairment of non-real estate investments
—
(19.8)
—
(0.16)
Loss on early extinguishment of debt
(67.3)
(1)
—
(0.49)
—
Total
$
(93.0)
$
(46.5)
$
(0.68)
$
(0.38)
(1)Refer to “Funds from operations and funds from operations per share” of this Earnings Press Release for additional details.
Strategic acquisitions with significant value-creation opportunities in key submarkets
•During 1Q21, we completed the acquisition of 25 properties in key submarkets aggregating 3.1 million SF, including 1.8 million RSF from our acquisition of Alexandria Center® for Life Science – Fenway (described below), for an aggregate purchase price of $1.9 billion. All of these transactions included development and/or redevelopment opportunities. Additionally, some of the value-creation-related acquisitions also included one or more operating properties.
Acquisition of 401 Park Drive and 201 Brookline Avenue
•During 1Q21, we acquired the Alexandria Center® for Life Science – Fenway, located in our Fenway submarket, for a purchase price of $1.48 billion. The future collaborative life science campus, aggregating 1.8 million SF, consists of the following as of March 31, 2021:
•401 Park Drive (operating property with future redevelopment opportunity):
•Highly amenitized Class A office/R&D building aggregating 973,145 RSF is 90% occupied with a weighted-average remaining lease term of 8.4 years;
•56% of annual rental revenue is generated from investment-grade tenants;
•In-place rents are 38% below market; 30% of the RSF has a weighted-average remaining lease term of 3.1 years with in-place rents approximately 41% below market;
•Initial stabilized yields of 5.7% and 4.5% (cash basis); and
•Future opportunity to convert up to 311,066 RSF of office space, or 32% of the building, to office/laboratory space through redevelopment.
•201 Brookline Avenue (active development project):
•Office/laboratory building undergoing ground-up development, aggregating 510,116 RSF, targeting initial occupancy in 2022;
•84% is leased/negotiating to high-quality tenants; and
•We have a 97.9% ownership interest in this project.
•Future development opportunity for one office/laboratory building for which we are pursuing entitlement rights approximating 305,000 SF of office/laboratory along with retail and amenity spaces.
Highly leased value-creation pipeline
•Current and pre-leased near-term projects aggregating 4.2 million RSF are currently in progress. These projects are highly leased/negotiating at 76%, including RSF already in service, and will generate significant revenues and cash flows.
•During 1Q21, we commenced development and redevelopment of five projects aggregating 1.0 million RSF, which are currently 73% leased/negotiating.
•Fully leased development projects placed into service during 1Q21:
•176,832 RSF leased to REGENXBIO Inc. at 9804 Medical Center Drive in our Rockville submarket;
•100,086 RSF leased to Adaptive Biotechnologies Corporation at 1165 Eastlake Avenue East in our Lake Union submarket; and
•99,557 RSF leased to Atreca, Inc. at the Alexandria Center® for Life Science – San Carlos in our Greater Stanford submarket.
•Annual net operating income (cash basis) is expected to increase by $26 million upon the burn-off of initial free rent from recently delivered projects.
First Quarter Ended March 31, 2021, Financial and Operating Results (continued)
March 31, 2021
Key metrics as of March 31, 2021 (continued)
1Q21
Goal
Quarter
Trailing
4Q21
Annualized
12 Months
Annualized
Net debt and preferred stock to Adjusted EBITDA
5.8x
6.1x
Less than or equal to 5.2x
Fixed-charge coverage ratio
4.7x
4.4x
Greater than or equal to 4.8x
Value-creation pipeline of new Class A development and redevelopment projects as a percentage of gross investments in real estate
1Q21
Current and pre-leased near-term projects 76% leased/negotiating
9%
Income-producing/potential cash flows/covered land play(1)
6%
Land
4%
(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 1Q21, our common equity transactions included the following:
•In January 2021, we entered into forward equity sales agreements to sell an aggregate of 6.9 million shares of our common stock (including the exercise of underwriters’ option) aggregating $1.1 billion, at a public offering price of $164.00 per share, before underwriting discounts and commissions.
•In 1Q21, we settled a portion of our forward equity sales agreements by issuing 5.4 million shares and received net proceeds of $850.5 million.
•We expect to issue 1.5 million shares to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $232.6 million in 2021.
•In February 2021, we entered into a new ATM common stock offering program, which allows us to sell up to an aggregate of $1.0 billion of our common stock.
•In 1Q21, we issued 3.1 million shares under our ATM program at a price of $163.26 per share (before underwriting discounts) and received net proceeds of $492.3 million.
•As of April 26, 2021, the remaining aggregate amount available under our ATM program for future sales of common stock is $500.0 million.
•We issued the remaining 362 thousand shares of common stock to settle our forward equity sales agreements that were outstanding as of December 31, 2020, and received net proceeds of $56.2 million.
•In February 2021, we opportunistically issued $1.75 billion of unsecured senior notes payable with a weighted-average interest rate of 2.49% and a weighted-average maturity of 20.4 years. The unsecured senior notes include:
•$850.0 million of 3.00% unsecured senior notes due 2051.
•$900.0 million of 2.00% unsecured senior notes due 2032 expected to be allocated to eligible green projects.
•These proceeds were initially used to refinance our $650.0 million unsecured senior notes payable due in 2024, bearing an interest rate of 4.00%.
•As a result of this refinancing, we recognized a loss on early extinguishment of debt of $67.2 million, including the write-off of unamortized loan fees and premiums.
Investments
•Our investments in publicly traded companies and privately held entities aggregated a carrying amount of $1.6 billion, including an adjusted cost basis of $912.4 million and unrealized gains of $729.4 million, as of March 31, 2021.
•Investment income of $1.0 million for 1Q21 included $47.3 million in realized gains and $46.3 million in unrealized losses.
Subsequent events
•In April 2021, we acquired One Investors Way, located in our Route 128 submarket of Greater Boston, aggregating 240,000 RSF, for a purchase price of $105.0 million. The property was simultaneously 100% leased to Moderna, Inc. for 12 years and immediately placed into redevelopment. The property also includes a future development opportunity aggregating 350,000 RSF.
Industry and corporate responsibility leadership: catalyzing and leading the way for positive change to benefit human health and society
Industry leadership
•In February 2021, Alexandria was ranked as the third most sustainable REIT, as featured in Barron’s “The 10 Most Sustainable REITs, According to Calvert.”
•In March 2021, Alexandria LaunchLabs® at the Alexandria Center® at One Kendall Square in our Cambridge submarket was awarded the Fitwel Impact Award for achieving the highest-scoring project of all time. This is the second year in a row that Alexandria has held this distinction, demonstrating our unwavering commitment to optimizing projects to advance health and wellness.
•In January 2021, Alexandria Venture Investments, our strategic venture capital platform, was recognized for a fourth consecutive year as the most active biopharma corporate investor by new deal volume by Silicon Valley Bank in its “Healthcare Investments and Exits: Annual Report 2021.” In February 2021, Alexandria Venture Investments was also recognized as one of the five most active U.S. investors in agrifoodtech by deal volume in 2020 by AgFunder in its “2021 AgFunder AgriFoodTech Investment Report.”
Relentless drive to develop and implement disruptive and highly impactful solutions to society’s most urgent challenges
Against the backdrop of the ongoing COVID-19 pandemic, which has exacerbated persistent, preexisting societal challenges, and rooted in our mission to advance human health, Alexandria continues to work steadfastly to leverage our leadership, knowledge, expertise, and resources not only to combat the COVID-19 pandemic but also to create long-term scalable solutions to our most pressing societal challenges. This work includes national and regional efforts in the following areas, as further described below:
•Accelerating groundbreaking medical research, development, and manufacturing to advance lifesaving treatments and cures
•Harnessing the agrifood ecosystem to combat hunger, improve nutrition, and support human health at its most fundamental level
•Bolstering the resilience of our military, our veterans, and their families
•Conquering the opioid epidemic and revolutionizing addiction treatment
•Educationally empowering underserved students to achieve long-term success and reach their potential as leaders in the community
•Building a model for a comprehensive, sustainable solution to address homelessness
First Quarter Ended March 31, 2021, Financial and Operating Results (continued)
March 31, 2021
Accelerating groundbreaking medical research, development, and manufacturing to advance lifesaving treatments and cures
•Alexandria is a critical driver of medical progress and provides transformative strategic funding to speed the most promising breakthrough biomedical discoveries from laboratories to patients in need.
•Our ongoing partnership with the Parker Institute for Cancer Immunotherapy (“PICI”) is a key example of our significant efforts in this area. As a sustaining supporter of PICI, Alexandria supports mission-critical work to develop breakthrough immunotherapies that could turn cancers into curable diseases faster. Serving on PICI’s Board of Directors, our Executive Chairman and Founder, Joel S. Marcus, helped guide PICI toward achieving many accomplishments in 2020, including the development of a first-of-its-kind data analysis engine for scientific discovery.
Harnessing the agrifood ecosystem to combat hunger, improve nutrition, and support human health at its most fundamental level
•Driven by the understanding that food is a fundamental building block of human health and well-being, Alexandria is dedicated to ensuring all Americans have the nutritious, healthy food they need to thrive. Through the support of partners like Alexandria for hunger-relief organizations, including Project Angel Food, Nourish Now, Los Angeles Regional Food Bank, and Feeding America, these non-profits have provided over 6 billion meals to hungry Americans during the pandemic.
•In Cambridge, we are long-term supporters of Food For Free, a non-profit organization dedicated to providing the Greater Boston community with reliable access to fresh and nutritious food. In February 2021, Alexandria announced its contribution toward Food For Free’s new Just Eats Grocery Box program. The program, which aims to distribute 3,000 boxes of food per week through food pantries, Cambridge Housing Authority sites, other low-income housing sites, and schools, fills a critical gap for food-insecure families in Greater Boston.
•Additionally, through our agtech real estate infrastructure and investments in innovative agtech companies, we continue to help combat hunger and improve nutrition for countless people facing food insecurity.
Bolstering the resilience of our military, our veterans, and their families
•With profound appreciation for the immense sacrifices of our nation’s heroes and the essential role they play in enabling us to pursue our noble mission, Alexandria is committed to providing resources to assist our military, our veterans, and their families to live healthy, successful, and rewarding lives. We have actively supported the Navy SEAL Foundation since 2010, including through our record-breaking fundraising efforts as the chair of the New York City Benefit in 2017 and as the recipient of its prestigious Patriot Award in 2020.
•Motivated to continue to enhance our critical support of the U.S. military, Alexandria joined The Honor Foundation (“THF”) and its founding partner, the Navy SEAL Foundation, in 2017, to embark on a truly impactful partnership to create a mission-critical headquarters in San Diego for THF, a unique career transition program for the Special Operations Forces community that effectively translates elite military experience to the private sector and helps facilitate the next generation of corporate and community leaders. Alexandria conceived of, designed, fully built out, and donated the use of an 8,000 RSF state-of-the-art facility where our nation’s most elite service members can participate in a tuition-free three-month executive education program that provides tools and experiences to help them transition from the Special Operations Forces to their next mission in life.
•In 2020, THF served over 1,350 service members at its world-class headquarters, up from 802 in 2019, and graduated 296 of our nation’s heroes from the program, up from 178 in 2019.
Conquering the opioid epidemic and revolutionizing addiction treatment: OneFifteen, a blueprint for the nation
•Determined to reverse the trajectory of the U.S. opioid epidemic, which is one of the most pervasive public health challenges in our nation’s history, Alexandria has built a partnership with Verily Life Sciences to create OneFifteen, an innovative, non-profit healthcare ecosystem dedicated to the full and sustained recovery of people living with addiction. Together, we pioneered a fully integrated campus in Dayton, Ohio, that houses an evidence-based model encompassing a full continuum of care with dedicated facilities and services for crisis stabilization, medication-assisted treatment, residential housing, peer support, family reunification, workforce development, job placement, and community transition.
•OneFifteen’s first-of-its-kind campus ecosystem was featured as the cover story in the January/February 2021 issue of REIT Magazine. The piece highlights our leadership role in this meaningful endeavor.
•Since June 2019, we completed construction of the OneFifteen Outpatient Clinic; the Crisis Stabilization Unit; and most recently, OneFifteen Living, the residential housing component that was delivered in September 2020.
•Overdose deaths continue to rise dramatically during the COVID-19 pandemic, demonstrating the tremendous need for the OneFifteen ecosystem. Since opening in the fall of 2019, OneFifteen has made a positive impact on the local community and the way addiction is treated, seeing approximately 2,700 patients, including over 1,300 people during the three months ended March 31, 2021. It is our hope that OneFifteen’s holistic approach to data-driven treatment will serve as a model of recovery for the rest of the country to replicate.
First Quarter Ended March 31, 2021, Financial and Operating Results (continued)
March 31, 2021
Educationally empowering underserved students to achieve long-term success and reach their potential as leaders in the community
•Understanding that education is one of the most fundamental foundations for a safe and healthy life, Alexandria is deeply committed to driving educational opportunities and providing the support and resources needed to prepare students for academic success, the 21st century job market, and a productive, rewarding life.
•In February 2021, we made a $2 million community benefit gift to the San Francisco Unified School District (“SFUSD”) to support the development of a new science-focused school in our Mission Bay submarket. In addition to this gift, which extends Alexandria’s impactful collaboration with SFUSD, we will provide our laboratory design, construction, and development expertise to the project; participate in shaping the academic program; and facilitate connections with the local life science community to enhance the school’s STEM education opportunities.
Building a model for a comprehensive, sustainable solution to address homelessness
•Inspired by the OneFifteen platform, we are presently incubating a similar model to combat homelessness in Seattle with the goal of providing a complete continuum of services in a safe living environment, from treatment for addiction and mental health issues to job training and placement.
Represents an illustrative subset of approximately 100 tenants that have 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: U.S. Congressional Research Service, "Operation Warp Speed Contracts for COVID-19 Vaccines and Ancillary Vaccination Materials," Updated March 1, 2021.
Alexandria and our innovative tenants are at the vanguard and heart of the life science ecosystem solving COVID-19 with unprecedented speed and efficiency
Safe and effective vaccines and therapies, in addition to widespread testing, continue to be critically needed to bring an end to 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. This heroic work by our tenants and campus community members to help test for, treat, and prevent COVID-19, as well as to provide medical supplies 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
Since the novel coronavirus’s genetic makeup was revealed in January 2020, researchers around the world have been working with unprecedented speed to develop safe and effective vaccines. To expedite the development, manufacturing, and distribution of these vaccines, the U.S. government called for broad public-private collaboration and allocated 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) and Moderna, Inc. (in partnership with the National Institutes of Health), culminated in the Food and Drug Administration’s (“FDA”) issuance of Emergency Use Authorization (“EUA”) in December 2020 for their respective mRNA-based COVID-19 vaccines. In February 2021, the FDA granted an EUA to Johnson & Johnson for its one-shot vaccine. The U.S. has initiated a large-scale COVID-19 vaccination campaign and will continue to roll out vaccines across the nation, with the goal of having adequate supply for the entire U.S. adult population by the end of May 2021.
Additional tenants, including AstraZeneca plc, FUJIFILM Diosynth Biotechnologies, GlaxoSmithKline plc, 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 further bolster the widespread distribution of safe and effective COVID-19 vaccines 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 February 2021, Eli Lilly and Company received an additional EUA for its bamlanivimab + etesevimab COVID-19 antibody cocktail. In April 2021, due to observations of diminishing responsiveness of bamlanivimab alone to COVID-19 variants, Eli Lilly and Company requested that the FDA revoke its single antibody EUA and instead encourage use of their combination (bamlanivimab + etesevimab) antibody cocktail for COVID-19 patients at high risk of severe disease progression.
In addition, over 300 experimental therapies to treat COVID-19 are being studied in over 1,000 clinical trials around the world, and over 200 therapeutic candidates are in preclinical development. A substantial number of these programs are sponsored by our tenants, including the following:
•Vir Biotechnology, Inc. and GlaxoSmithKline plc announced on March 26, 2021, that they submitted an EUA request to the FDA for VIR-7831, their most advanced antibody therapy for the early treatment of adolescent and adult patients with mild to moderate COVID-19 risk for progression to hospitalization or death.
•AbbVie Inc., Amgen Inc., AstraZeneca plc, Atreca Inc., Merck & Co., Inc., Novartis AG, and Pfizer Inc. are similarly endeavoring to develop novel therapies and repurpose existing and investigational drugs to provide near-term treatments for moderate and severe COVID-19 patients and those at highest risk.
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. Even as vaccine distribution increases, the availability of widespread COVID-19 testing will remain critical for rapidly identifying new outbreaks and ultimately bringing the pandemic to an end.
Acquisitions with Development/Redevelopment Opportunities
Future Development
Active Development/Redevelopment
Operating With Future Development/ Redevelopment
Operating(1)
Operating
Completed in 1Q21:
Alexandria Center® for Life Science – Fenway
Fenway/Greater Boston
1/29/21
2
90%
(2)
305,000
510,116
311,066
662,079
—
$
1,483,200
(2)
840 Winter Street
Route 128/Greater Boston
1/20/21
1
100%
—
130,000
—
30,009
—
58,126
(3)
Other
Various
Various
22
97%
69,426
209,295
120,000
661,159
80,032
(4)
332,424
25
94%
374,426
849,411
431,066
1,353,247
80,032
1,873,750
Completed in April 2021:
550 Arsenal Street
Cambridge/Inner Suburbs/Greater Boston
4/21/21
1
98%
515,000
—
260,867
—
—
130,000
(3)
One Investors Way
Route 128/Greater Boston
4/6/21
1
100%
350,000
240,000
(5)
—
—
—
105,000
(3)
Other
Various
Various
—
1,535,000
—
—
—
—
92,534
327,534
Pending acquisitions:
Mercer Mega Block
Lake Union/Seattle
2021(6)
—
N/A
800,000
—
—
—
—
143,500
TBD
705,216
2021 acquisitions
$
3,050,000
2021 guidance range
$2,800,000 – $3,300,000
(1)Represents the operating component of our value-creation acquisitions that is not expected to undergo development or redevelopment.
(2)The campus includes an operating property with future redevelopment opportunities at 401 Park Drive, a development project at 201 Brookline Avenue, and a future development opportunity. 401 Park Drive, aggregating 973,145 RSF, is 90% occupied, with an additional 3% of leased space that is under renovation, and has initial stabilized yields of 5.7% and 4.5% (cash basis). We expect to provide total estimated costs and related yields for the development projects at 201 Brookline Avenue and the future development/redevelopment opportunities 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.
(3)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.
(4)Represents the acquisition of our partner’s 43.2% ownership interest in our previously unconsolidated real estate joint venture at 704 Quince Orchard Road for $9.4 million. We completed the redevelopment of this stabilized property in 2Q19.
(5)Upon acquisition of this property, we entered into a 12-year lease with Moderna, Inc. and immediately placed the property into redevelopment.
(6)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.
(1)Capitalization rates are calculated based upon net operating income and net operating income (cash basis) annualized for the quarter preceding the date on which the property is sold.
(2)In April 2021, we completed the sale of a 70% partial interest in 213 East Grand Avenue in our South San Francisco submarket for a sales price of $301.0 million, or $1,429 per RSF, representing capitalization rates of 4.5% and 4.0% (cash basis). We retained control over the newly formed real estate joint venture and therefore continued to consolidate this property. We accounted for the $103.7 million difference between the consideration received and the book value of the 70% interest sold as an equity transaction, with no gain or loss recognized in earnings.
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 13 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
As of 4/26/21
As of 2/1/21
Earnings per share(1)
$1.58 to $1.68
$2.14 to $2.34
Depreciation and amortization of real estate assets
5.50
5.50
Gain on sales of real estate(2)
(0.02)
—
Impairment of real estate – rental properties(2)
0.04
—
Allocation to unvested restricted stock awards
(0.03)
(0.04)
Funds from operations per share(3)
$7.07 to $7.17
$7.60 to $7.80
Unrealized losses on non-real estate investments
0.34
—
Realized gains on non-real estate investments(2)
(0.17)
—
Loss on early extinguishment of debt(4)
0.49
—
Allocation to unvested restricted stock awards
(0.01)
—
Other
(0.04)
—
Funds from operations per share, as adjusted(3)
$7.68 to $7.78
$7.60 to $7.80
Midpoint
$7.73
$7.70
As of 4/26/21
As of 2/1/21
Key Assumptions
Low
High
Low
High
Occupancy percentage in North America as of December 31, 2021(5)
95.3%
95.9%
95.6%
96.2%
Lease renewals and re-leasing of space:
Rental rate increases
30.0%
33.0%
29.0%
32.0%
Rental rate increases (cash basis)
17.0%
20.0%
16.0%
19.0%
Same property performance:
Net operating income increase
1.5%
3.5%
1.0%
3.0%
Net operating income increase (cash basis)
4.3%
6.3%
4.0%
6.0%
Straight-line rent revenue
$
114
$
124
$
114
$
124
General and administrative expenses
$
146
$
151
$
146
$
151
Capitalization of interest
$
172
$
182
$
167
$
177
Interest expense
$
128
$
138
$
133
$
143
(1)Excludes unrealized gains or losses after March 31, 2021, 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 per share” of this Earnings Press Release for additional details.
(3)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.
(4)Refer to “Key capital events” on page 3 of this Earnings Press Release for additional details on the the refinancing of our $650.0 million unsecured senior notes payable.
(5)Updated guidance for occupancy percentage in North America as of December 31, 2021, reflects vacancy at the recently acquired property at the Alexandria Center® for Life Science – Fenway, representing lease-up opportunities that will contribute to growth in cash flows. Refer to “Occupancy” of this Supplemental Information for additional details.
Principal repayments of unsecured senior notes payable
(650)
(650)
(650)
$
(650)
(2)
—
Unsecured senior line of credit, commercial paper, and other
(170)
(60)
(115)
(165)
Incremental debt
$
930
$
1,040
$
985
$
735
(1)Refer to “Key capital events” on page 3 of this Earnings Press Release for additional details on our January 2021 forward equity offering and shares issued under our ATM program. As of March 31, 2021, we issued 8.8 million shares of common stock and received net proceeds of $1.4 billion in 2021. We expect to issue 1.5 million shares to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $232.6 million in 2021.
(2)Refer to “Key capital events” on page 3 of this Earnings Press Release for additional details on the issuance of our $1.75 billion unsecured senior notes payable and the refinancing of our $650.0 million unsecured senior notes payable.
We will host a conference call on Tuesday, April 27, 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 first quarter ended March 31, 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, April 27, 2021. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 10151989.
Additionally, a copy of this Earnings Press Release and Supplemental Information for the first quarter ended March 31, 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/2021q1.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 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 $32.5 billion as of March 31, 2021, and an asset base in North America of 52.6 million square feet (“SF”). The asset base in North America includes 33.9 million RSF of operating properties and 4.0 million RSF of Class A properties undergoing construction, 7.3 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 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,” 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.
Funds From Operations and Funds From Operations per Share
March 31, 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
3/31/21
12/31/20
9/30/20
6/30/20
3/31/20
Net income attributable to Alexandria’s common stockholders
$
6,107
$
435,923
$
79,326
$
226,600
$
16,840
Depreciation and amortization of real estate assets
177,720
173,392
173,622
165,040
172,628
Noncontrolling share of depreciation and amortization from consolidated real estate JVs
(15,443)
(15,032)
(15,256)
(15,775)
(15,870)
Our share of depreciation and amortization from unconsolidated real estate JVs
3,076
2,976
2,936
2,858
2,643
Gain on sales of real estate
(2,779)
(1)
(152,503)
(1,586)
—
—
Impairment of real estate – rental properties
5,129
(2)
25,177
7,680
—
7,644
Allocation to unvested restricted stock awards
(201)
(420)
(1,261)
(2,228)
(847)
Funds from operations attributable to Alexandria’s common stockholders – diluted(3)
173,609
469,513
245,461
376,495
183,038
Unrealized losses (gains) on non-real estate investments
46,251
(233,538)
14,013
(171,652)
17,144
Realized gains on non-real estate investments
(22,919)
(4)
—
—
—
—
Impairment of non-real estate investments
—
—
—
4,702
19,780
Impairment of real estate
—
—
—
13,218
2,003
Loss on early extinguishment of debt
67,253
(5)
7,898
52,770
—
—
Termination fee
—
—
(86,179)
—
—
Acceleration of stock compensation expense due to executive officer resignation
—
—
4,499
—
—
Allocation to unvested restricted stock awards
(1,208)
2,774
179
2,251
(591)
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted
$
262,986
$
246,647
$
230,743
$
225,014
$
221,374
(1)Related to two real estate dispositions.
(2)Represents impairment charges recognized during 1Q21 to further lower the carrying amounts of three of our office properties located in our San Francisco Bay Area and Seattle markets and classified as held for sale in December 2020 to their respective estimated fair values based on the sales price negotiated for each property less costs to sell. We expect to complete these sales in 2Q21.
(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.
(4)Represents the realized gain related to the acquisition of one of our privately held non-real estate investments in a biopharmaceutical company by a pharmaceutical company.
(5)Primarily related to the refinancing of our $650.0 million unsecured senior notes payable. Refer to “Key capital events” on page 3 of this Earnings Press Release for additional details.
Funds From Operations and Funds From Operations per Share (continued)
March 31, 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
3/31/21
12/31/20
9/30/20
6/30/20
3/31/20
Net income per share attributable to Alexandria’s common stockholders – diluted
$
0.04
$
3.26
$
0.63
$
1.82
$
0.14
Depreciation and amortization of real estate assets
1.20
1.21
1.28
1.22
1.31
Gain on sales of real estate
(0.02)
(1)
(1.14)
(0.01)
—
—
Impairment of real estate – rental properties
0.04
(1)
0.19
0.06
—
0.06
Allocation to unvested restricted stock awards
—
(0.01)
(0.01)
(0.01)
(0.01)
Funds from operations per share attributable to Alexandria’s common stockholders – diluted
1.26
3.51
1.95
3.03
1.50
Unrealized losses (gains) on non-real estate investments
0.34
(1.75)
0.11
(1.38)
0.14
Realized gains on non-real estate investments
(0.17)
(1)
—
—
—
—
Impairment of non-real estate investments
—
—
—
0.04
0.16
Impairment of real estate
—
—
—
0.11
0.02
Loss on early extinguishment of debt
0.49
(1)
0.06
0.42
—
—
Termination fee
—
—
(0.69)
—
—
Acceleration of stock compensation expense due to executive officer resignation
—
—
0.04
—
—
Allocation to unvested restricted stock awards
(0.01)
0.02
—
0.01
—
Funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted
$
1.91
$
1.84
$
1.83
$
1.81
$
1.82
Weighted-average shares of common stock outstanding(2) – diluted
137,688
133,827
125,828
124,448
121,785
(1)Refer to the footnotes on the prior page for additional details.
(2)Refer to “Weighted-average shares of common stock outstanding – diluted” in the “Definitions and reconciliations” of our Supplemental Information for additional details.
Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® urban office 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 $32.5 billion as of March 31, 2021, and an asset base in North America of 52.6 million SF. The asset base in North America includes 33.9 million RSF of operating properties and 4.0 million RSF of Class A properties undergoing construction, 7.3 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 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.
Tenant base
Alexandria is known for our high-quality and diverse tenant base, with 55% of our annual rental revenue generated from tenants that are investment-grade rated or publicly traded large cap companies. The quality, diversity, breadth, and depth of our significant relationships with our tenants provide Alexandria with high-quality and stable cash flows. Alexandria’s underwriting team and long-term industry relationships positively distinguish us from all other publicly traded REITs and real estate companies.
Executive and senior management team
Alexandria’s executive and senior management team has unique experience and expertise in creating, owning, and operating highly dynamic and collaborative campuses in key urban life science, agtech, and technology cluster locations that inspire innovation. From the development of high-quality, sustainable real estate, to the ongoing cultivation of collaborative environments with unique amenities and events, the Alexandria team has a first-in-class reputation of excellence in our niche. Alexandria’s highly experienced management team also includes regional market directors with leading reputations and longstanding relationships within the life science, agtech, and technology communities in their respective innovation clusters. We believe that our expertise, experience, reputation, and key relationships in the real estate, life science, agtech, and technology sectors provide Alexandria significant competitive advantages in attracting new business opportunities.
Alexandria’s executive and senior management team consists of 52 individuals, averaging 24 years of real estate experience, including 11 years with Alexandria. Our executive management team alone averages 17 years of experience with Alexandria.
Alexandria is currently covered by the following research analysts. This list may be incomplete and is subject to change as firms initiate or discontinue coverage of our company. Please note that any opinions, estimates, or forecasts regarding our historical or predicted performance made by these analysts are theirs alone and do not represent opinions, estimates, or forecasts of Alexandria or our management. Alexandria does not by our reference or distribution of the information below imply our endorsement of or concurrence with any opinions, estimates, or forecasts of these analysts. Interested persons may obtain copies of analysts’ reports on their own as we do not distribute these reports. Several of these firms may, from time to time, own our stock and/or hold other long or short positions in our stock and may provide compensated services to us.
Long-Duration Cash Flows From High-Quality, Diverse, and
Innovative Tenants
Investment-Grade or Publicly Traded Large Cap Tenants
Tenant Mix
55%
of ARE’s Annual Rental Revenue(1)
Long-Duration Lease Terms
7.6 Years
Weighted-Average Remaining Term(2)
Percentage of ARE’s Annual Rental Revenue(1)
(1)Represents annual rental revenue in effect as of March 31, 2021.
(2)Based on aggregate annual rental revenue in effect as of March 31, 2021. Refer to “Annual rental revenue” in the “Definitions and reconciliations” of this Supplemental Information for additional details about our methodology on annual rental revenue from unconsolidated real estate joint ventures.
(3)Represents annual rental revenue currently generated from office space that is targeted for a future change in use. The weighted-average remaining term of these leases is 3.0 years.
(4)Represents annual rental revenue from publicly traded tech tenants with an average daily market capitalization greater than $200 billion for the twelve months ended March 31, 2021.
(5)Our other tenants, aggregating 5.0% of our annual rental revenue, comprise 4.2% of annual rental revenue from technology, professional services, finance, telecommunications, and construction/real estate companies and only 0.8% from retail-related tenants.
(1)Represents average occupancy of operating properties in North America as of each December 31 for the last 10 years and as of March 31, 2021.
(2)As of March 31, 2021.
(3)Includes 1.2 million RSF, or 3.5%, of vacancy at recently acquired properties in our North America markets (noted below), representing lease-up opportunities that will contribute to growth in cash flows. Approximately 26% of the vacant 1.2 million RSF is currently leased, with occupancy expected primarily over the next two quarters. Excluding these acquired vacancies, occupancy of operating properties in North America was 98.0% as of March 31, 2021. The estimated cost basis associated with these spaces was approximately $451.3 million as of March 31, 2021.
Percentage change over comparable period from prior year:
Number of same properties
250
Net operating income increase
4.4%
Rentable square feet
23,716,975
Net operating income increase (cash basis)
6.1%
Occupancy – current-period average
96.3%
Operating margin
73%
Occupancy – same-period prior-year average
96.4%
Three Months Ended March 31,
2021
2020
$ Change
% Change
Income from rentals:
Same properties
$
302,036
$
294,616
$
7,420
2.5
%
Non-same properties
68,197
43,326
24,871
57.4
Rental revenues
370,233
337,942
32,291
9.6
Same properties
96,638
92,280
4,358
4.7
Non-same properties
11,824
7,383
4,441
60.2
Tenant recoveries
108,462
99,663
8,799
8.8
Income from rentals
478,695
437,605
41,090
9.4
Same properties
101
100
1
1.0
Non-same properties
1,053
2,214
(1,161)
(52.4)
Other income
1,154
2,314
(1,160)
(50.1)
Same properties
398,775
386,996
11,779
3.0
Non-same properties
81,074
52,923
28,151
53.2
Total revenues
479,849
439,919
39,930
9.1
Same properties
108,395
108,947
(552)
(0.5)
Non-same properties
29,493
20,156
9,337
46.3
Rental operations
137,888
129,103
8,785
6.8
Same properties
290,380
278,049
12,331
4.4
Non-same properties
51,581
32,767
18,814
57.4
Net operating income
$
341,961
$
310,816
$
31,145
10.0
%
Net operating income – same properties
$
290,380
$
278,049
$
12,331
4.4
%
Straight-line rent revenue
(17,582)
(19,417)
1,835
(9.5)
Amortization of acquired below-market leases
(3,466)
(4,778)
1,312
(27.5)
Net operating income – same properties (cash basis)
$
269,332
$
253,854
$
15,478
6.1
%
Refer to “Same property comparisons” in the “Definitions and reconciliations” of this Supplemental Information for a reconciliation of same properties to total properties. “Definitions and reconciliations” also contains definitions of “Tenant recoveries” and “Net operating income” and their respective reconciliations from the most directly comparable financial measures presented in accordance with GAAP.
Developed/redeveloped/previously vacant space leased
New rates
$49.14
$45.67
$56.67
$53.61
RSF
1,155,834
1,802,013
Tenant improvements/leasing commissions
$37.17
$28.17
Weighted-average lease term
10.7 years
9.0 years
Leasing activity summary (totals):
New rates
$51.78
$48.53
$52.47
$49.46
RSF
1,677,659
(2)
4,358,846
Tenant improvements/leasing commissions
$35.17
$32.22
Weighted-average lease term
9.5 years
7.3 years
Lease expirations(1)
Expiring rates
$40.70
$43.84
$36.03
$39.01
RSF
747,275
3,560,188
Leasing activity includes 100% of results for each property in which we have an investment in North America.
(1)Excludes month-to-month leases aggregating 82,972 RSF and 96,383 RSF as of March 31, 2021, and December 31, 2020, respectively.
(2)During the three months ended March 31, 2021, we granted tenant concessions/free rent averaging 3.5 months with respect to the 1,677,659 RSF leased. Approximately 41% of the leases executed during the three months ended March 31, 2021, did not include concessions for free rent.
(1)Represents amounts in effect as of March 31, 2021.
(2)Excludes month-to-month leases aggregating 82,972 RSF as of March 31, 2021.
(3)Represents RSF targeted for development or redevelopment upon expiration of existing in-place leases, primarily related to recently acquired properties. Refer to “Investments in real estate” in the “Definitions and reconciliations” of this Supplemental Information for additional details on value-creation square feet currently included in rental properties.
(4)The largest remaining contractual lease expiration is a 55,183 RSF lease in our Mission Bay submarket.
(5)The largest remaining contractual lease expiration includes a Class A office/laboratory building for 113,555 RSF in our Cambridge/Inner Suburbs submarket and one lease for 62,490 RSF in our Research Triangle submarket.
(6)72% of the remaining expiring leases in Greater Boston are located in our Cambridge/Inner Suburbs submarket.
(Dollars in thousands, except average market cap amounts)
88% of Top 20 Annual Rental Revenue From Investment-Grade
or Publicly Traded Large Cap Tenants(1)
Tenant
Remaining Lease Term(1) (in years)
Aggregate RSF
Annual Rental Revenue(1)
Percentage of Aggregate Annual Rental Revenue(1)
Investment-Grade Credit Ratings
Average Market Cap(1)
(in billions)
Moody’s
S&P
1
Bristol-Myers Squibb Company
7.4
916,234
$
52,853
3.4
%
A2
A+
$
137.5
2
Takeda Pharmaceutical Company Ltd.
8.4
606,249
39,342
2.6
Baa2
BBB+
$
56.5
3
Facebook, Inc.
10.8
903,786
38,899
2.5
—
—
$
719.2
4
Illumina, Inc.
9.4
891,495
36,058
2.3
Baa3
BBB
$
52.3
5
Eli Lilly and Company
8.0
555,335
35,807
2.3
A2
A+
$
156.0
6
Sanofi
7.2
494,693
33,868
2.2
A1
AA
$
124.2
7
Moderna, Inc.
11.2
615,458
32,147
2.1
—
—
$
36.3
8
Novartis AG
7.4
423,914
30,128
2.0
A1
AA-
$
216.6
9
Uber Technologies, Inc.
61.7
(2)
1,009,188
27,379
1.8
—
—
$
73.8
10
Roche
2.4
(3)
612,242
25,768
1.7
Aa3
AA
$
298.4
11
bluebird bio, Inc.
6.2
312,805
23,142
1.5
—
—
$
3.3
12
Maxar Technologies
4.2
(4)
478,000
21,577
1.4
—
—
$
1.7
13
Massachusetts Institute of Technology
7.7
257,626
21,145
1.4
Aaa
AAA
$
—
14
The Children's Hospital Corporation
17.6
269,816
20,066
1.3
Aa2
AA
$
—
15
Jazz Pharmaceuticals, Inc.
9.4
198,041
20,003
1.3
—
—
$
7.6
16
New York University
10.5
204,691
19,531
1.3
Aa2
AA-
$
—
17
Merck & Co., Inc.
13.2
311,015
19,392
1.3
A1
AA-
$
201.4
18
Pfizer Inc.
3.9
416,979
17,762
1.2
A2
A+
$
202.8
19
United States Government
6.6
296,765
16,933
1.1
Aaa
AA+
$
—
20
Amgen Inc.
3.0
407,369
16,838
1.1
Baa1
A-
$
138.0
Total/weighted-average
10.9
(2)
10,181,701
$
548,638
35.8
%
(1)Based on aggregate annual rental revenue in effect as of March 31, 2021. Refer to “Annual rental revenue” and “Investment-grade or publicly traded large cap tenants” in the “Definitions and reconciliations” of this Supplemental Information for additional details about our methodology on annual rental revenue from unconsolidated real estate joint ventures and average daily market capitalization.
(2)Includes (i) ground leases for land at 1455 and 1515 Third Street (two buildings aggregating 422,980 RSF) and (ii) leases at 1655 and 1725 Third Street (two buildings aggregating 586,208 RSF) owned by our unconsolidated real estate joint venture in which we have an ownership interest of 10%. Annual rental revenue is presented using 100% of the annual rental revenue of our consolidated properties and our share of annual rental revenue for our unconsolidated real estate joint ventures. Refer to footnote 1 for additional details. Excluding the ground lease, the weighted-average remaining lease term for our top 20 tenants was 8.2 years as of March 31, 2021.
(3)Includes 197,787 RSF expiring in 2022 at our recently acquired property at 651 Gateway Boulevard in our South San Francisco submarket. Upon expiration of the lease, 651 Gateway Boulevard will be redeveloped into a Class A office/laboratory building. Excluding this 197,787 RSF, the weighted-average remaining term of space occupied by Roche is 2.8 years.
(4)Represents remaining lease term at two properties with future redevelopment and development opportunities. The leases with this tenant were in place when we acquired the properties in 4Q19.
50, 60, 75/125(1), 100, and 225(1) Binney Street, 161 and 215 First Street, 150 Second Street, 300 Third Street, and 11 Hurley Street
Alexandria Technology Square®
1,181,635
—
—
1,181,635
7
101,814
97.9
97.9
100, 200, 300, 400, 500, 600, and 700 Technology Square
The Arsenal on the Charles
475,743
—
360,545
836,288
11
18,195
89.3
50.8
311, 321, and 343 Arsenal Street, 300 and 400 North Beacon Street, 1, 2, and 3 Kingsbury Avenue, and 100, 200, and 400 Talcott Avenue
Alexandria Center® at One Kendall Square
814,779
—
—
814,779
10
70,167
98.6
98.6
One Kendall Square – Buildings 100, 200, 300, 400, 500, 600/700, 1400, 1800, 2000, and 399 Binney Street
480 and 500 Arsenal Street
234,260
—
—
234,260
2
10,955
93.1
93.1
640 Memorial Drive
225,504
—
—
225,504
1
13,860
100.0
100.0
780 and 790 Memorial Drive
99,658
—
—
99,658
2
8,292
100.0
100.0
167 Sidney Street and 99 Erie Street
54,549
—
—
54,549
2
4,025
100.0
100.0
79/96 13th Street (Charlestown Navy Yard)
25,309
—
—
25,309
1
620
100.0
100.0
Cambridge/Inner Suburbs
5,476,924
—
360,545
5,837,469
46
396,678
97.6
91.6
Fenway
Alexandria Center® for Life Science – Fenway
973,145
510,116
—
1,483,261
2
56,780
90.0
90.0
401 Park Drive and 201 Brookline Avenue(1)
Seaport Innovation District
380 and 420 E Street
195,506
—
—
195,506
2
3,522
100.0
100.0
5 Necco Street
87,163
—
—
87,163
1
4,672
86.6
86.6
Seaport Innovation District
282,669
—
—
282,669
3
8,194
95.9
95.9
Route 128
Reservoir Woods
515,273
—
—
515,273
3
22,004
100.0
100.0
40, 50, and 60 Sylvan Road
275 Grove Street
509,702
—
—
509,702
1
22,516
87.4
87.4
One Upland Road and 100 Tech Drive
443,513
—
—
443,513
2
18,008
100.0
100.0
Alexandria Park at 128
343,882
—
—
343,882
8
12,544
100.0
100.0
3 and 6/8 Preston Court, 29, 35, and 44 Hartwell Avenue, 35 and 45/47 Wiggins Avenue, and 60 Westview Street
225, 266, and 275 Second Avenue
317,617
—
—
317,617
3
12,343
84.8
84.8
19 Presidential Way
144,892
—
—
144,892
1
4,808
99.8
99.8
840 Winter Street
30,009
—
130,000
160,009
1
1,315
100.0
18.8
100 Beaver Street
82,330
—
—
82,330
1
4,605
100.0
100.0
285 Bear Hill Road
26,270
—
—
26,270
1
1,167
100.0
100.0
Route 128
2,413,488
—
130,000
2,543,488
21
$
99,310
95.3
%
90.4
%
(1)We own a partial interest in this property through a real estate joint venture. Refer to “Joint venture financial information” of this Supplemental Information for additional details.
100 Independence Drive and 125 and 135 Constitution Drive
Alexandria Center® for Life Science – San Carlos
315,758
330,158
—
645,916
4
18,076
100.0
100.0
825, 835, and 960 Industrial Road and 1075 Commercial Street
3825 and 3875 Fabian Way
478,000
—
—
478,000
2
21,577
100.0
100.0
Alexandria Stanford Life Science District
289,685
—
92,147
381,832
4
23,888
100.0
75.9
3160, 3165, 3170, and 3181 Porter Drive
Alexandria PARC
197,498
—
—
197,498
4
9,291
78.1
78.1
2100, 2200, 2300, and 2400 Geng Road
3330, 3412, 3450, and 3460 Hillview Avenue
183,267
—
—
183,267
4
15,180
100.0
100.0
2425 Garcia Avenue/2400/2450 Bayshore Parkway
99,208
—
—
99,208
1
4,257
100.0
100.0
Shoreway Science Center
82,462
—
—
82,462
2
4,952
100.0
100.0
75 and 125 Shoreway Road
1450 Page Mill Road
77,634
—
—
77,634
1
8,009
100.0
100.0
3350 West Bayshore Road
60,000
—
—
60,000
1
3,780
99.5
99.5
2625/2627/2631 Hanover Street
32,074
—
—
32,074
1
1,865
100.0
100.0
Greater Stanford
2,588,569
330,158
92,147
3,010,874
27
140,665
98.3
94.9
San Francisco Bay Area
7,582,096
645,158
92,147
8,319,401
60
$
374,050
95.4
%
94.3
%
(1)We own a partial interest in this property through a real estate joint venture. Refer to “Joint venture financial information” of this Supplemental Information for additional details.
Alexandria Center® for Life Science – New York City
740,972
—
—
740,972
3
$
66,054
99.0
%
99.0
%
430 and 450 East 29th Street
219 East 42nd Street
349,947
—
—
349,947
1
14,006
100.0
100.0
Alexandria Center® for Life Science – Long Island City
54,377
—
122,382
176,759
1
2,166
100.0
30.8
30-02 48th Avenue
New York City
1,145,296
—
122,382
1,267,678
5
82,226
99.4
89.8
San Diego
Torrey Pines
ARE Spectrum
336,461
146,456
—
482,917
4
18,072
100.0
100.0
3115 and 3215 Merryfield Row and 3013 and 3033 Science Park Road
ARE Torrey Ridge
294,326
—
—
294,326
3
12,296
84.6
84.6
10578, 10618, and 10628 Science Center Drive
ARE Sunrise
236,635
—
—
236,635
3
5,056
68.5
68.5
10931/10933 and 10975 North Torrey Pines Road, 3010 Science Park Road, and 10996 Torreyana Road
ARE Nautilus
220,651
—
—
220,651
4
10,924
100.0
100.0
3530 and 3550 John Hopkins Court and 3535 and 3565 General Atomics Court
11119, 11255, and 11355 North Torrey Pines Road
211,641
—
—
211,641
3
8,738
100.0
100.0
3545 Cray Court
118,225
—
—
118,225
1
3,636
46.1
46.1
Torrey Pines
1,417,939
146,456
—
1,564,395
18
58,722
87.1
87.1
University Town Center
Alexandria Point(1)
1,435,916
—
—
1,435,916
8
62,467
99.1
99.1
9880(2), 10210, 10260, 10290, and 10300 Campus Point Drive and 4161, 4224, and 4242 Campus Point Court
5200 Illumina Way(1)
792,687
—
—
792,687
6
29,977
100.0
100.0
University District
490,429
—
—
490,429
7
18,883
100.0
100.0
9393 and 9625(1) Towne Centre Drive, 4755, 4757, and 4767 Nexus Center Drive, and 4555 and 4796 Executive Drive
University Town Center
2,719,032
—
—
2,719,032
21
$
111,327
99.5
%
99.5
%
(1)We own a partial interest in this property through a real estate joint venture. Refer to “Joint venture financial information” of this Supplemental Information for additional details.
9605, 9645, 9675, 9685, 9725, 9735, 9808, 9855, and 9868 Scranton Road, 5505 Morehouse Drive(2), and 10055, 10065, 10121(2), and 10151(2) Barnes Canyon Road
6420 and 6450 Sequence Drive
318,200
—
—
318,200
2
7,774
81.0
81.0
Summers Ridge Science Park
316,531
—
—
316,531
4
11,077
100.0
100.0
9965, 9975, 9985, and 9995 Summers Ridge Road
ARE Portola
101,857
—
—
101,857
3
3,603
100.0
100.0
6175, 6225, and 6275 Nancy Ridge Drive
5810/5820 Nancy Ridge Drive
82,272
—
—
82,272
1
1,031
41.4
41.4
7330 Carroll Road
66,244
—
—
66,244
1
2,431
100.0
100.0
9877 Waples Street
63,774
—
—
63,774
1
2,374
100.0
100.0
5871 Oberlin Drive
33,842
—
—
33,842
1
1,710
100.0
100.0
Sorrento Mesa
1,762,709
176,428
79,945
2,019,082
27
54,065
87.7
83.9
Sorrento Valley
3911, 3931, 3985, 4025, 4031, 4045, and 4075 Sorrento Valley Boulevard
191,406
—
—
191,406
7
5,916
93.8
93.8
11025, 11035, 11045, 11055, 11065, and 11075 Roselle Street
121,655
—
—
121,655
6
3,428
100.0
100.0
Sorrento Valley
313,061
—
—
313,061
13
9,344
96.2
96.2
I-15 Corridor
13112 Evening Creek Drive
109,780
—
—
109,780
1
2,972
100.0
100.0
I-15 Corridor
109,780
—
—
109,780
1
2,972
100.0
100.0
Other
—
—
128,745
128,745
1
—
N/A
N/A
San Diego
6,322,521
322,884
208,690
6,854,095
81
236,430
93.3
90.3
Seattle
Lake Union
The Eastlake Life Science Campus by Alexandria
937,290
—
—
937,290
8
54,053
97.9
97.9
1165, 1201(1), 1208(1), 1551, and 1616 Eastlake Avenue East, 188 and 199(1) East Blaine Street, and 1600 Fairview Avenue East
400 Dexter Avenue North
290,111
—
—
290,111
1
14,820
100.0
100.0
2301 5th Avenue
197,135
—
—
197,135
1
9,308
99.0
99.0
219 Terry Avenue North
30,705
—
—
30,705
1
1,852
100.0
100.0
601 Dexter Avenue North
18,680
—
—
18,680
1
425
100.0
100.0
Lake Union
1,473,921
—
—
1,473,921
12
$
80,458
98.5
%
98.5
%
(1)We own a partial interest in this property through a real estate joint venture. Refer to “Joint venture financial information” of this Supplemental Information for additional details.
As of April 26, 2021, construction activities were in process at all of our active construction projects. Construction workers continue to observe social distancing and follow rules that restrict gatherings of large groups of people in close proximity, as well as adhere to other appropriate measures, which may slow the pace of construction.
Development and Redevelopment
Operating
Under Construction
Near Term
Intermediate Term
Future
Subtotal
Total
Investments in real estate
Book value as of March 31, 2021(1)
$
19,137,741
$
2,071,733
$
977,609
$
596,524
$
753,057
$
4,398,923
$
23,536,664
Square footage
Operating
33,914,369
—
—
—
—
—
33,914,369
New Class A development and redevelopment properties
—
4,002,513
4,612,656
3,826,115
9,221,297
21,662,581
21,662,581
Value-creation square feet currently included in rental properties(2)
—
—
(553,693)
(622,000)
(1,810,218)
(2,985,911)
(2,985,911)
Total square footage
33,914,369
4,002,513
4,058,963
3,204,115
7,411,079
18,676,670
52,591,039
(1)Balances exclude our share of the cost basis associated with our properties held by our unconsolidated real estate joint ventures, which is classified as investments in unconsolidated real estate joint ventures in our consolidated balance sheets. Refer to “Investments in real estate” in the “Definitions and reconciliations” of this Supplemental Information for reconciliation detail of investments in real estate.
(2)Refer to “Investments in real estate” in the “Definitions and reconciliations” of this Supplemental Information for additional details on value-creation square feet currently included in rental properties.
New Class A Development and Redevelopment Properties: Recent Deliveries
March 31, 2021
(Dollars in thousands)
Alexandria Center® for Life Science –
San Carlos
9877 Waples Street
1165 Eastlake Avenue East
9804 Medical Center Drive
San Francisco Bay Area/Greater Stanford
San Diego/Sorrento Mesa
Seattle/Lake Union
Maryland/Rockville
196,020 RSF
63,774 RSF
100,086 RSF
176,832 RSF
Property/Market/Submarket
Our Ownership Interest
RSF Placed in Service
Occupancy Percentage(1)
Total Project
Unlevered Yields
Delivery Date
4Q20
1Q21
Total
Initial Stabilized
Initial Stabilized (Cash Basis)
RSF
Investment
Development projects
Alexandria Center® for Life Science – San Carlos/
San Francisco Bay Area/Greater Stanford
Various
100%
96,463
99,557
196,020
100%
526,178
$
630,000
6.4
%
6.1
%
1165 Eastlake Avenue East/Seattle/Lake Union
March 2021
100%
—
100,086
100,086
100%
100,086
138,000
6.3
(2)
6.4
(2)
9804 Medical Center Drive/Maryland/Rockville
January 2021
100%
—
176,832
176,832
100%
176,832
89,300
(3)
8.3
(3)
8.0
(3)
Redevelopment projects
Alexandria Center® for Life Science – Long Island City/
New York City/New York City
December 2020
100%
17,716
—
17,716
100%
176,759
184,300
5.5
5.6
9877 Waples Street/San Diego/Sorrento Mesa
December 2020
100%
63,774
—
63,774
100%
63,744
31,000
8.8
8.1
Total
177,953
376,475
554,428
$
1,072,600
6.5
%
6.3
%
(1)Relates to total operating RSF placed in service as of the most recent delivery.
(2)Unlevered yields represent aggregate returns for 1165 Eastlake Avenue East, an amenity-rich research headquarters for Adaptive Biotechnologies Corporation, and 1208 Eastlake Avenue East, an adjacent multi-tenant office/laboratory building.
(3)Improvements in initial stabilized yields of 60 bps and 80 bps (cash basis) were driven by overall cost savings relative to initial budget.
Refer to “New Class A development and redevelopment properties: current projects” of this Supplemental Information for details on the RSF in service and under construction, if applicable.
New Class A Development and Redevelopment Properties: Current Projects (continued)
March 31, 2021
Property/Market/Submarket
Square Footage
Percentage
Dev/Redev
In Service
CIP
Total
Leased
Leased/Negotiating
Initial
Occupancy(1)
Under construction
The Arsenal on the Charles/Greater Boston/Cambridge/Inner Suburbs
Redev
475,743
360,545
836,288
79
%
85
%
2021
201 Haskins Way/San Francisco Bay Area/South San Francisco
Dev
—
315,000
315,000
100
100
2Q21
Alexandria Center® for Life Science – San Carlos/San Francisco Bay Area/
Greater Stanford
Dev
196,020
330,158
526,178
100
100
4Q20
3160 Porter Drive/San Francisco Bay Area/Greater Stanford
Redev
—
92,147
92,147
20
26
1H21
Alexandria Center® for Life Science – Long Island City/New York City/New York City
Redev
54,377
122,382
176,759
31
44
4Q20
3115 Merryfield Row/San Diego/Torrey Pines
Dev
—
146,456
146,456
100
100
2022
5505 Morehouse Drive/San Diego/Sorrento Mesa
Redev
—
79,945
79,945
35
35
2021
Other/Seattle
Redev
246,647
213,976
460,623
51
51
2022
9950 Medical Center Drive/Maryland/Rockville
Dev
—
84,264
84,264
100
100
1H22
(2)
700 Quince Orchard Road/Maryland/Gaithersburg
Redev
—
169,420
169,420
100
100
2021
Alexandria Center® for Life Science – Durham/Research Triangle/
Research Triangle(3)
Redev
—
652,381
652,381
77
77
1H21/2022
Alexandria Center® for AgTech/Research Triangle/Research Triangle(4)
Redev/Dev
180,400
160,000
340,400
55
55
2021
Alexandria Center® for Advanced Technologies/Research Triangle/
Research Triangle
Dev
—
250,000
250,000
(5)
58
(5)
58
(5)
2H21/2022
1,153,187
2,976,674
4,129,861
74
76
Under construction – additions in 1Q21
201 Brookline Avenue/Greater Boston/Fenway
Dev
—
510,116
510,116
17
84
2022
840 Winter Street/Greater Boston/Route 128
Redev
30,009
130,000
160,009
19
19
2022
SD Tech by Alexandria/San Diego/Sorrento Mesa
Dev
—
176,428
176,428
61
96
2022
Other/San Diego
Redev
—
128,745
128,745
100
100
2021
20400 Century Boulevard/Maryland/Gaithersburg
Redev
—
80,550
80,550
—
12
2022
30,009
1,025,839
1,055,848
34
73
1,183,196
4,002,513
5,185,709
66
76
Pre-leased near-term projects
Alexandria Point/San Diego/University Town Center(6)
Dev
—
171,102
171,102
100
100
1,183,196
4,173,615
5,356,811
67
%
76
%
(1)Initial occupancy dates are subject to leasing and/or market conditions. Construction disruptions resulting from COVID-19 and observance of social distancing measures may impact construction and occupancy forecasts and will continue to be monitored closely. Multi-tenant projects may have occupancy by tenants over a period of time. Stabilized occupancy may vary depending on single tenancy versus multi-tenancy.
(2)Refer to footnote 1 on the following page for additional details.
(3)The recently acquired Alexandria Center® for Life Science – Durham redevelopment project includes three properties at 40 Moore Drive, 2400 Ellis Road, and 14 TW Alexander Drive. 2400 Ellis Road is 100% leased, with initial occupancy anticipated in 1H21 and stabilized occupancy expected for the remaining buildings in 2022.
(4)The new strategic collaborative agtech campus consists of Phase I at 5 Laboratory Drive, including campus amenities, which was previously delivered, and Phase II at 9 Laboratory Drive.
(5)Represents 150,000 RSF that is 29% leased at 8 Davis Drive and 100,000 RSF that is 100% leased at 10 Davis Drive. Vertical construction at 8 Davis Drive has commenced, and 10 Davis Drive is expected to commence in 2Q21.
(6)Represents our 4150 Campus Point Court property, which is expected to commence vertical construction in 4Q21.
New Class A Development and Redevelopment Properties: Current Projects (continued)
March 31, 2021
(Dollars in thousands)
Our Ownership Interest
Unlevered Yields
Property/Market/Submarket
In Service
CIP
Cost to Complete
Total at Completion
Initial Stabilized
Initial Stabilized (Cash Basis)
Under construction
The Arsenal on the Charles/Greater Boston/Cambridge/Inner Suburbs
100
%
$
357,448
$
248,243
$
166,309
$
772,000
6.2
%
5.5
%
201 Haskins Way/San Francisco Bay Area/South San Francisco
100
%
—
291,082
$
78,918
$
370,000
6.4
%
6.2
%
Alexandria Center® for Life Science – San Carlos/San Francisco Bay Area/
Greater Stanford
100
%
182,558
340,378
$
107,064
$
630,000
6.4
%
6.1
%
3160 Porter Drive/San Francisco Bay Area/Greater Stanford
100
%
—
74,864
TBD
Alexandria Center® for Life Science – Long Island City/New York City/New York City
100
%
36,560
127,232
$
20,508
$
184,300
5.5
%
5.6
%
3115 Merryfield Row/San Diego/Torrey Pines
100
%
—
72,464
$
79,536
$
152,000
6.2
%
6.2
%
5505 Morehouse Drive/San Diego/Sorrento Mesa
100
%
—
21,950
TBD
Other/Seattle
100
%
54,152
65,329
9950 Medical Center Drive/Maryland/Rockville
100
%
—
41,154
$
18,446
$
59,600
8.6
%
(1)
7.7
%
(1)
700 Quince Orchard Road/Maryland/Gaithersburg
100
%
—
49,561
$
29,939
$
79,500
8.6
%
7.3
%
Alexandria Center® for Life Science – Durham/Research Triangle/Research Triangle
100
%
—
143,036
$
101,964
$
245,000
7.5
%
6.7
%
Alexandria Center® for AgTech/Research Triangle/Research Triangle
100
%
90,677
69,548
TBD
Alexandria Center® for Advanced Technologies/Research Triangle/Research Triangle
100
%
—
46,612
721,395
1,591,453
Under construction – additions in 1Q21
201 Brookline Avenue/Greater Boston/Fenway
97.9
%
—
370,409
TBD
840 Winter Street/Greater Boston/Route 128
100
%
12,517
47,979
SD Tech by Alexandria/San Diego/Sorrento Mesa
50.0
%
—
25,117
Other/San Diego
100
%
—
27,855
20400 Century Boulevard/Maryland/Gaithersburg
100
%
—
8,920
12,517
480,280
733,912
2,071,733
Pre-leased near-term projects
Alexandria Point/San Diego/University Town Center
55.0
%
—
26,342
Total
$
733,912
$
2,098,075
(1)During 1Q21, we leased the property to a public biotechnology company which resulted in higher rents and our initial stabilized yields increased by 130 bps and 90 bps (cash basis), and our date of initial occupancy has been revised to 1H22.
New Class A Development and Redevelopment Properties: Summary of Pipeline
March 31, 2021
(Dollars in thousands)
Property/Submarket
Our Ownership Interest
Book Value
Square Footage
Development and Redevelopment
Under Construction
Near Term
Intermediate Term
Future
Total
Greater Boston
The Arsenal on the Charles/Cambridge/Inner Suburbs
100
%
$
273,891
360,545
200,000
(1)
—
12,502
573,047
Alexandria Center® for Life Science – Fenway/Fenway
(2)
493,272
510,116
—
305,000
—
815,116
840 Winter Street/Route 128
100
%
47,979
130,000
—
—
—
130,000
325 Binney Street/Cambridge
100
%
154,591
—
450,000
(1)
—
—
450,000
57 Coolidge Avenue/Cambridge/Inner Suburbs
75.0
%
48,618
—
275,000
(1)
—
—
275,000
15 Necco Street/Seaport Innovation District
96.4
%
188,131
—
350,000
(1)
—
—
350,000
Reservoir Woods/Route 128
100
%
43,040
—
202,428
(1)(3)
—
752,845
(3)
955,273
10 Necco Street/Seaport Innovation District
100
%
91,872
—
—
175,000
—
175,000
215 Presidential Way/Route 128
100
%
6,808
—
—
112,000
—
112,000
Alexandria Technology Square®/Cambridge
100
%
7,881
—
—
—
100,000
100,000
380 and 420 E Street/Seaport Innovation District
100
%
117,197
—
—
—
1,000,000
(3)
1,000,000
99 A Street/Seaport Innovation District
95.3
%
45,335
—
—
—
235,000
235,000
One Upland Road and 100 Tech Drive/Route 128
100
%
8,696
—
—
—
750,000
750,000
231 Second Avenue/Route 128
100
%
1,093
—
—
—
32,000
32,000
Other value-creation projects
100
%
9,782
—
—
—
16,955
16,955
1,538,186
1,000,661
1,477,428
592,000
2,899,302
5,969,391
San Francisco Bay Area
201 Haskins Way/South San Francisco
100
%
291,082
315,000
—
—
—
315,000
Alexandria Center® for Life Science – San Carlos/
Greater Stanford
100
%
597,906
330,158
—
700,000
(3)
587,000
(3)
1,617,158
3160 Porter Drive/Greater Stanford
100
%
74,864
92,147
—
—
—
92,147
Alexandria Technology Center® – Gateway/South San Francisco
45.9
%
55,147
—
517,010
(1)(3)
—
291,000
808,010
901 California Avenue/Greater Stanford
100
%
713
—
56,924
—
—
56,924
88 Bluxome Street/SoMa
100
%
306,754
—
1,070,925
—
—
1,070,925
1450 Owens Street/Mission Bay
100
%
58,004
—
—
191,000
—
191,000
3825 and 3875 Fabian Way/Greater Stanford
100
%
—
—
—
250,000
(3)
228,000
(3)
478,000
3450 and 3460 Hillview Avenue/Greater Stanford
100
%
—
—
—
76,951
(3)
—
76,951
East Grand Avenue/South San Francisco
100
%
6,120
—
—
—
90,000
90,000
Other value-creation projects
100
%
—
—
—
—
25,000
25,000
$
1,390,590
737,305
1,644,859
1,217,951
1,221,000
4,821,115
(1)We expect to commence vertical construction or redevelopment of all or a portion of this project in 2021.
(2)We have a 97.9% ownership interest in 201 Brookline Avenue which is currently under construction. We have a 100% ownership interest in the intermediate-term development project.
(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 operation at properties that also have inherent future development or redevelopment opportunities. Upon expiration of existing in-place leases, we have the intent to demolish or redevelop the existing property, and commence future construction. Refer to “Definitions and reconciliations” of this Supplemental Information for additional details on value-creation square feet currently included in rental properties.
New Class A Development and Redevelopment Properties: Summary of Pipeline (continued)
March 31, 2021
(Dollars in thousands)
Property/Submarket
Our Ownership Interest
Book Value
Square Footage
Development and Redevelopment
Under Construction
Near Term
Intermediate Term
Future
Total
New York City
Alexandria Center® for Life Science – Long Island City/New York City
100
%
$
127,232
122,382
—
—
—
122,382
47-50 30th Street/New York City
100
%
29,771
—
135,938
—
—
135,938
Alexandria Center® for Life Science – New York City/New York City
100
%
62,078
—
—
550,000
(1)
—
550,000
219 East 42nd Street/New York City
100
%
—
—
—
—
579,947
(2)
579,947
219,081
122,382
135,938
550,000
579,947
1,388,267
San Diego
3115 Merryfield Row/Torrey Pines
100
%
72,464
146,456
—
—
—
146,456
SD Tech by Alexandria/Sorrento Mesa
50.0
%
109,519
176,428
190,074
(3)
160,000
333,845
860,347
5505 Morehouse Drive/Sorrento Mesa
100
%
21,950
79,945
—
—
—
79,945
Alexandria Point/University Town Center
55.0
%
105,773
—
351,102
(3)
249,164
(4)
320,281
(4)
920,547
10931 and 10933 Torrey Pines Road/Torrey Pines
100
%
—
—
—
242,000
(4)
—
242,000
University District/University Town Center
100
%
60,009
—
—
600,000
(4)(5)
—
600,000
11255 and 11355 North Torrey Pines Road/Torrey Pines
100
%
108,183
—
—
—
240,000
(4)
240,000
5200 Illumina Way/University Town Center
51.0
%
12,444
—
—
—
451,832
451,832
6450 Sequence Drive and Excess Land/Sorrento Mesa
100
%
36,312
—
—
—
911,915
(4)
911,915
4045 and 4075 Sorrento Valley Boulevard/Sorrento Valley
100
%
7,679
—
—
—
149,000
(4)
149,000
Other value-creation projects
100
%
27,855
128,745
—
—
50,000
178,745
562,188
531,574
541,176
1,251,164
2,456,873
4,780,787
Seattle
1150 Eastlake Avenue East/Lake Union
100
%
56,101
—
310,000
(3)
—
—
310,000
701 Dexter Avenue North/Lake Union
100
%
58,136
—
217,000
—
—
217,000
601 Dexter Avenue North/Lake Union
100
%
36,073
—
—
—
188,400
(4)
188,400
1010 4th Avenue South/SoDo
100
%
49,830
—
—
—
544,825
544,825
830 4th Avenue South/SoDo
100
%
—
—
—
—
52,488
(4)
52,488
Other value-creation projects
100
%
71,319
213,976
51,255
(4)
—
35,000
300,231
$
271,459
213,976
578,255
—
820,713
1,612,944
(1)We are currently negotiating a long-term ground lease with the City of New York for the future site of a new building approximating 550,000 RSF.
(2)Includes 349,947 RSF in operation with an opportunity to either convert the existing office space into office/laboratory space through future redevelopment or to expand the building by an additional 230,000 RSF through ground-up development. The building is currently occupied by Pfizer Inc. with a remaining lease term of approximately four years.
(3)We expect to commence vertical construction or redevelopment of all or a portion of this project during 2021.
(4)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 operation at properties that also have inherent future development or redevelopment opportunities. Upon expiration of existing in-place leases, we have the intent to demolish or redevelop the existing property, and commence future construction. Refer to “Definitions and reconciliations” of this Supplemental Information for additional details on value-creation square feet currently included in rental properties.
(5)Includes our recently acquired project at 4555 Executive Drive and 9363, 9373, and 9393 Towne Centre Drive in our University Town Center submarket, which is currently under evaluation for development, subject to future market conditions.
New Class A Development and Redevelopment Properties: Summary of Pipeline (continued)
March 31, 2021
(Dollars in thousands)
Property/Submarket
Our Ownership Interest
Book Value
Square Footage
Development and Redevelopment
Under Construction
Near Term
Intermediate Term
Future
Total
Maryland
9950 Medical Center Drive/Rockville
100
%
$
41,154
84,264
—
—
—
84,264
700 Quince Orchard Road/Gaithersburg
100
%
49,561
169,420
—
—
—
169,420
20400 Century Boulevard/Gaithersburg
100
%
8,920
80,550
—
—
—
80,550
14200 Shady Grove Road/Rockville
100
%
29,621
—
145,000
145,000
145,000
435,000
9808 Medical Center Drive/Rockville
100
%
2,896
—
90,000
(1)
—
—
90,000
132,152
334,234
235,000
145,000
145,000
859,234
Research Triangle
Alexandria Center® for Life Science – Durham/Research Triangle
100
%
143,036
652,381
—
—
—
652,381
Alexandria Center® for Advanced Technologies/Research Triangle
100
%
63,602
250,000
—
70,000
700,000
1,020,000
Alexandria Center® for AgTech, Phase II/Research Triangle
100
%
69,548
160,000
—
—
—
160,000
Other value-creation projects
100
%
4,185
—
—
—
76,262
76,262
280,371
1,062,381
—
70,000
776,262
1,908,643
Other value-creation projects
100
%
4,896
—
—
—
322,200
322,200
Total pipeline as of March 31, 2021
$
4,398,923
4,002,513
4,612,656
3,826,115
9,221,297
21,662,581
(2)
Key pending acquisition
Mercer Mega Block/Lake Union
—
800,000
—
—
800,000
4,002,513
5,412,656
3,826,115
9,221,297
22,462,581
(1)We expect to commence vertical construction or redevelopment of all or a portion of this project during 2021.
(2)Total square footage includes 2,985,911 RSF of buildings currently in operation that will be redeveloped or replaced with new development RSF upon 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.
Alexandria Center® for Life Science – Millbrae Station
San Francisco Bay Area
South San Francisco
64.5%
—
Alexandria Point(4)
San Diego
University Town Center
45.0%
1,337,916
5200 Illumina Way
San Diego
University Town Center
49.0%
792,687
9625 Towne Centre Drive
San Diego
University Town Center
49.9%
163,648
SD Tech by Alexandria(5)
San Diego
Sorrento Mesa
50.0%
677,597
The Eastlake Life Science Campus by Alexandria(6)
Seattle
Lake Union
70.0%
321,218
Unconsolidated Real Estate Joint Ventures
Property
Market
Submarket
Our Ownership Share(7)
Operating RSF
at 100%
1655 and 1725 Third Street
San Francisco Bay Area
Mission Bay
10.0
%
586,208
Menlo Gateway
San Francisco Bay Area
Greater Stanford
49.0
%
772,983
(1)In addition to the consolidated real estate joint ventures listed, various partners hold insignificant noncontrolling interests in six other real estate joint ventures in North America.
(2)We expect to commence vertical construction of 275,000 RSF during 2021.
(3)Excludes 600, 630, 650, 901, and 951 Gateway Boulevard in our South San Francisco submarket. Noncontrolling interest share is anticipated to be 49% as we make further contributions into the joint venture over time.
(4)Excludes 9880 Campus Point Drive in our University Town Center submarket.
(5)Excludes 5505 Morehouse Drive and 10121 and 10151 Barnes Canyon Road in our Sorrento Mesa submarket.
(6)Excludes 1165, 1551, and 1616 Eastlake Avenue East, 188 East Blaine Street, and 1600 Fairview Avenue East in our Lake Union submarket.
(7)In addition to the unconsolidated real estate joint ventures listed, we hold an interest in two other insignificant unconsolidated real estate joint ventures in North America.
Noncontrolling Interest Share of Consolidated Real Estate JVs
Our Share of Unconsolidated Real Estate JVs
Total revenues
$
44,762
$
10,512
Rental operations
(12,015)
(1,546)
32,747
8,966
General and administrative
(109)
(30)
Interest
—
(2,323)
Depreciation and amortization
(15,443)
(3,076)
Fixed returns allocated to redeemable noncontrolling interests(1)
217
—
$
17,412
$
3,537
Straight-line rent and below-market lease revenue
$
855
$
998
Funds from operations(2)
$
32,855
$
6,613
(1)Represents an allocation of joint venture earnings to redeemable noncontrolling interests primarily in one property in our South San Francisco submarket. These redeemable noncontrolling interests earn a fixed return on their investment rather than participate in the operating results of the property.
(2)Refer to “Funds from operations and funds from operations per share” in our Earnings Press Release and “Funds from operations and funds from operations, as adjusted, attributable to Alexandria’s common stockholders” in “Definitions and reconciliations” of this Supplemental Information for the definition and reconciliation from the most directly comparable financial measure presented in accordance with GAAP.
We present our equity investments at fair value whenever fair value or net asset value (“NAV”) is readily available. Adjustments for our limited partnership investments represent changes in reported NAV as a practical expedient to estimate fair value. For investments without readily available fair values, we adjust the carrying amount whenever such investments have an observable price change, and further adjustments are not made until another price change, if any, is observed. Refer to “Investments” in the “Definitions and reconciliations” of this Supplemental Information for additional details.
Three Months Ended March 31, 2021
Year Ended December 31, 2020
Realized gains
$
47,265
(1)
$
47,288
(2)
Unrealized (losses) gains
(46,251)
374,033
Investment income
$
1,014
$
421,321
Investments
Cost
Unrealized Gains
Carrying Amount
Fair value:
Publicly traded companies
$
234,146
$
322,871
(3)
$
557,017
Entities that report NAV
348,207
327,831
676,038
Entities that do not report NAV:
Entities with observable price changes
51,816
78,723
130,539
Entities without observable price changes
278,217
—
278,217
March 31, 2021
$
912,386
(4)
$
729,425
$
1,641,811
December 31, 2020
$
835,438
$
775,676
$
1,611,114
(1)Includes $22.9 million of realized gain related to the acquisition of one of our privately held non-real estate investments in a biopharmaceutical company by a pharmaceutical company.
(2)Includes impairments of $24.5 million related to investments in privately held entities that do not report NAV.
(3)Includes gross unrealized gains and losses of $346.3 million and $23.4 million, respectively, as of March 31, 2021.
(4)Represents 3.2% of total gross assets as of March 31, 2021.
Minimal Outstanding Borrowings and Significant Availability on Unsecured Senior Line of Credit
(in millions)
$4.3B
(in millions)
Availability under our unsecured senior line of credit, net of amounts outstanding under our commercial paper program
$
3,000
Outstanding forward equity sales agreements(1)
233
Cash, cash equivalents, and restricted cash
534
Investments in publicly traded companies
557
Liquidity as of March 31, 2021
$
4,324
Net Debt and Preferred Stock to Adjusted EBITDA(2)
Fixed-Charge Coverage Ratio(2)
(1)Represents expected net proceeds from the future settlement of the remaining 1.5 million shares outstanding under our forward equity sales agreements as of March 31, 2021.
(2)Quarter annualized. Refer to “Fixed-charge coverage ratio” and “Net debt and preferred stock to Adjusted EBITDA” in the “Definitions and reconciliations” of this Supplemental Information for additional details.
(1)Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to the amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.
(2)The commercial paper notes bear interest at short-term fixed rates and can generally be issued with a maturity of 30 days or less and with a maximum maturity of 397 days from the date of issuance. Borrowings under the program are used to fund short-term capital needs and are backed by our unsecured senior line of credit. In the event we are unable to issue commercial paper notes or refinance outstanding borrowings under terms equal to or more favorable than those under our unsecured senior line of credit, we expect to borrow under the unsecured senior line of credit at L+0.815%. As such, we calculate the weighted-average remaining term of our commercial paper by using the maturity date of our unsecured senior line of credit. The commercial paper notes sold during the three months ended March 31, 2021, were issued at a weighted-average yield to maturity of 0.22% and had a weighted-average maturity term of 10 days.
Debt covenants
Unsecured Senior Notes Payable
Unsecured Senior Line of Credit
Debt Covenant Ratios(1)
Requirement
March 31, 2021
Requirement
March 31, 2021
Total Debt to Total Assets
≤ 60%
31%
≤ 60.0%
29.1%
Secured Debt to Total Assets
≤ 40%
1%
≤ 45.0%
0.8%
Consolidated EBITDA to Interest Expense
≥ 1.5x
9.8x
≥ 1.50x
4.01x
Unencumbered Total Asset Value to Unsecured Debt
≥ 150%
298%
N/A
N/A
Unsecured Interest Coverage Ratio
N/A
N/A
≥ 1.75x
7.36x
(1)All covenant ratio titles utilize terms as defined in the respective debt and credit agreements. The calculation of consolidated EBITDA is based on the definitions contained in our loan agreements and is not directly comparable to the computation of EBITDA as described in Exchange Act Release No. 47226.
Unconsolidated real estate joint ventures’ debt
Unconsolidated Joint Venture
Our Share
Maturity Date
Stated Rate
Interest Rate(1)
Debt Balance at 100%(2)
1655 and 1725 Third Street
10.0%
3/10/25
4.50%
4.57%
$
598,338
Menlo Gateway, Phase II
49.0%
5/1/35
4.53%
4.59%
155,965
Menlo Gateway, Phase I
49.0%
8/10/35
4.15%
4.18%
138,905
$
893,208
(1)Includes interest expense and amortization of loan fees.
(2)Represents outstanding principal, net of unamortized deferred financing costs, as of March 31, 2021.
(1)Represents the weighted-average interest rate as of the end of the applicable period, including amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.
(2)Reflects any extension options that we control.
(3)Refer to footnote 2 on the prior page under “Fixed-rate and variable-rate debt.”
(4)During 1Q21, we achieved certain sustainability measures, as described in our unsecured senior line of credit agreement, which reduced the borrowing rate by one basis point for one year.
This section contains additional details for sections throughout this Supplemental Information and the accompanying Earnings Press Release, as well as explanations and reconciliations of certain non-GAAP financial measures and the reasons why we use these supplemental measures of performance and believe they provide useful information to investors. Additional detail can be found in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, as well as other documents filed with or furnished to the SEC from time to time.
Adjusted EBITDA and Adjusted EBITDA margin
The following table reconciles net income (loss) and revenues, the most directly comparable financial measures calculated and presented in accordance with GAAP, to Adjusted EBITDA and revenues, as adjusted, respectively:
Three Months Ended
(Dollars in thousands)
3/31/21
12/31/20
9/30/20
6/30/20
3/31/20
Net income
$
25,533
$
457,133
$
95,799
$
243,561
$
30,678
Interest expense
36,467
37,538
43,318
45,014
45,739
Income taxes
1,426
2,053
2,430
1,406
1,341
Depreciation and amortization
180,913
177,750
176,831
168,027
175,496
Stock compensation expense
12,446
11,394
12,994
9,185
9,929
Loss on early extinguishment of debt
67,253
7,898
52,770
—
—
Gain on sales of real estate
(2,779)
(152,503)
(1,586)
—
—
Realized gains on non-real estate investments
(22,919)
—
—
—
—
Unrealized losses (gains) on non-real estate investments
We use Adjusted EBITDA as a supplemental performance measure of our operations, for financial and operational decision-making, and as a supplemental means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation, and amortization (“EBITDA”), excluding stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, impairments of real estate, and significant termination fees. Adjusted EBITDA also excludes unrealized gains or losses and significant realized gains and impairments that result from our non-real estate investments. These non-real estate investment amounts are classified in our consolidated statements of operations outside of total revenues.
We believe Adjusted EBITDA provides investors with relevant and useful information as it allows investors to evaluate the operating performance of our business activities without having to account for differences recognized because of investing and financing decisions related to our real estate and non-real estate investments, our capital structure, capital market transactions, and variances resulting from the volatility of market conditions outside of our control. For example, we exclude gains or losses on the early extinguishment of debt to allow investors to measure our performance independent of our indebtedness and capital structure. We believe that adjusting for the effects of impairments and gains or losses on sales of real estate, significant impairments and gains on the sale of non-real estate investments, and significant termination fees allows investors to evaluate performance from period to period on a consistent basis without having to account for differences recognized because of investing and financing decisions related to our real estate and non-real estate investments or other corporate activities that may not be representative of the operating performance of our properties.
In addition, we believe that excluding charges related to stock compensation and unrealized gains or losses facilitates for investors a comparison of our business activities across periods without the volatility resulting from market forces outside of our control. Adjusted EBITDA has limitations as a measure of our performance. Adjusted EBITDA does not reflect our historical expenditures or future requirements for capital expenditures or contractual commitments. While Adjusted EBITDA is a relevant measure of performance, it does not represent net income (loss) or cash flows from operations calculated and presented in accordance with GAAP, and it should not be considered as an alternative to those indicators in evaluating performance or liquidity.
In order to calculate Adjusted EBITDA margin, we also make comparable adjustments to our revenues. We adjust our total revenues by realized gains, losses, and impairments related to our non-real estate investments and significant termination fees to arrive at revenues, as adjusted. Our calculation of Adjusted EBITDA margin divides Adjusted EBITDA by our revenues, as adjusted. We believe that consistent application of these comparable adjustments to both components of Adjusted EBITDA margin provides a more useful calculation for the comparison across periods.
Annual rental revenue
Annual rental revenue represents the annualized fixed base rental obligations, calculated in accordance with GAAP, for leases in effect as of the end of the period, related to our operating RSF. Annual rental revenue is presented using 100% of the annual rental revenue of our consolidated properties and our share of annual rental revenue for our unconsolidated real estate joint ventures. Annual rental revenue per RSF is computed by dividing annual rental revenue by the sum of 100% of the RSF of our consolidated properties and our share of the RSF of properties held in unconsolidated real estate joint ventures. As of March 31, 2021, approximately 94% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Annual rental revenue excludes these operating expenses recovered from our tenants. Amounts recovered from our tenants related to these operating expenses, along with base rent, are classified in income from rentals in our consolidated statements of operations.
Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and debt premiums (discounts). Refer to the definition of fixed-charge coverage ratio for a reconciliation of interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest.
Class A properties and AAA locations
Class A properties are properties clustered in AAA locations that provide 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. Class A properties generally command higher annual rental rates than other classes of similar properties.
AAA locations are in close proximity to concentrations of specialized skills, knowledge, institutions, and related businesses. Such locations are generally characterized by high barriers to entry for new landlords, high barriers to exit for tenants, and a limited supply of available space.
Development, redevelopment, and pre-construction
A key component of our business model is our disciplined allocation of capital to the development and redevelopment of new Class A properties, and property enhancements identified during the underwriting of certain acquired properties, located in collaborative life science, agtech, and technology campuses in AAA innovation clusters. These projects are generally focused on providing high-quality, generic, and reusable spaces that meet the real estate requirements of, and are reusable by, a wide range of tenants. Upon completion, each value-creation project is expected to generate a significant increase in rental income, net operating income, and cash flows. Our development and redevelopment projects are generally in locations that are highly desirable to high-quality entities, which we believe results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.
Development projects generally consist of the ground-up development of generic and reusable facilities. Redevelopment projects consist of the permanent change in use of office, warehouse, and shell space into office/laboratory, agtech, or tech office space. We generally will not commence new development projects for aboveground construction of new Class A office/laboratory, agtech, and tech office space without first securing significant pre-leasing for such space, except when there is solid market demand for high-quality Class A properties.
Pre-construction activities include entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building improvements. The advancement of pre-construction efforts is focused on reducing the time required to deliver projects to prospective tenants. These critical activities add significant value for future ground-up development and are required for the vertical construction of buildings. Ultimately, these projects will provide high-quality facilities and are expected to generate significant revenue and cash flows.
Development, redevelopment, and pre-construction spending also includes the following costs: (i) certain tenant improvements and renovations that will be reimbursed, (ii) amounts to bring certain acquired properties up to market standard and/or other costs identified during the acquisition process (generally within two years of acquisition), and (iii) permanent conversion of space for highly flexible, move-in-ready office/laboratory space to foster the growth of promising early- and growth-stage life science companies.
Revenue-enhancing and repositioning capital expenditures represent spending to reposition or significantly change the use of a property, including through improvement in the asset quality from Class B to Class A.
Non-revenue-enhancing capital expenditures represent costs required to maintain the current revenues of a stabilized property, including the associated costs for renewed and re-leased space.
Dividend payout ratio (common stock)
Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (shares of common stock outstanding on the respective record dates multiplied by the related dividend per share) to funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted.
Dividend yield
Dividend yield for the quarter represents the annualized quarter dividend divided by the closing common stock price at the end of the quarter.
Fixed-charge coverage ratio
Fixed-charge coverage ratio is a non-GAAP financial measure representing the ratio of Adjusted EBITDA to fixed charges. We believe this ratio is useful to investors as a supplemental measure of our ability to satisfy fixed financing obligations and preferred stock dividends. Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and debt premiums (discounts).
The following table reconciles interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest and fixed charges:
Funds from operations and funds from operations, as adjusted, attributable to Alexandria’s common stockholders
GAAP-basis accounting for real estate assets utilizes historical cost accounting and assumes that real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Nareit Board of Governors established funds from operations as an improved measurement tool. Since its introduction, funds from operations has become a widely used non-GAAP financial measure among equity REITs. We believe that funds from operations is helpful to investors as an additional measure of the performance of an equity REIT. Moreover, we believe that funds from operations, as adjusted, allows investors to compare our performance to the performance of other real estate companies on a consistent basis, without having to account for differences recognized because of real estate acquisition and disposition decisions, financing decisions, capital structure, capital market transactions, variances resulting from the volatility of market conditions outside of our control, or other corporate activities that may not be representative of the operating performance of our properties.
The 2018 White Paper published by the Nareit Board of Governors (the “Nareit White Paper”) defines funds from operations as net income (computed in accordance with GAAP), excluding gains or losses on sales of real estate, and impairments of real estate, plus depreciation and amortization of operating real estate assets, and after adjustments for our share of consolidated and unconsolidated partnerships and real estate joint ventures. Impairments represent the write-down of assets when fair value over the recoverability period is less than the carrying value due to changes in general market conditions and do not necessarily reflect the operating performance of the properties during the corresponding period.
We compute funds from operations, as adjusted, as funds from operations calculated in accordance with the Nareit White Paper, excluding significant gains, losses, and impairments realized on non-real estate investments, unrealized gains or losses on non-real estate investments, gains or losses on early extinguishment of debt, significant termination fees, acceleration of stock compensation expense due to the resignation of an executive officer, deal costs, the income tax effect related to such items, and the amount of such items that is allocable to our unvested restricted stock awards. Neither funds from operations nor funds from operations, as adjusted, should be considered as alternatives to net income (determined in accordance with GAAP) as indications of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as measures of liquidity, nor are they indicative of the availability of funds for our cash needs, including our ability to make distributions.
The following table reconciles net income to funds from operations for the share of consolidated real estate joint ventures attributable to noncontrolling interests and our share of unconsolidated real estate joint ventures:
Three Months Ended March 31, 2021
(In thousands)
Noncontrolling Interest Share of Consolidated Real Estate JVs
Our Share of Unconsolidated Real Estate JVs
Net income
$
17,412
$
3,537
Depreciation and amortization
15,443
3,076
Funds from operations
$
32,855
$
6,613
Initial stabilized yield (unlevered)
Initial stabilized yield is calculated as the estimated amounts of net operating income at stabilization divided by our investment in the property. Our initial stabilized yield excludes the benefit of leverage. Our cash rents related to our value-creation projects are generally expected to increase over time due to contractual annual rent escalations. Our estimates for initial stabilized yields, initial stabilized yields (cash basis), and total costs at completion represent our initial estimates at the commencement of the project. We expect to update this information upon completion of the project, or sooner if there are significant changes to the expected project yields or costs.
•Initial stabilized yield reflects rental income, including contractual rent escalations and any rent concessions over the term(s) of the lease(s), calculated on a straight-line basis.
•Initial stabilized yield (cash basis) reflects cash rents at the stabilization date after initial rental concessions, if any, have elapsed and our total cash investment in the property.
Investment-grade or publicly traded large cap tenants
Investment-grade or publicly traded large cap tenants represent tenants that are investment-grade rated or publicly traded companies with an average daily market capitalization greater than $10 billion for the twelve months ended March 31, 2021, as reported by Bloomberg Professional Services. In addition, we monitor the credit quality and related material changes of our tenants. Material changes that cause a tenant’s market capitalization to decline below $10 billion, which are not immediately reflected in the twelve-month average, may result in their exclusion from this measure.
Investments
We hold investments in publicly traded companies and privately held entities primarily involved in the life science, agtech, and technology industries. We recognize, measure, present, and disclose these investments as follows:
Statements of Operations
Balance Sheet
Gains and Losses
Carrying Amount
Unrealized
Realized
Difference between proceeds received upon disposition and historical cost
Publicly traded companies
Fair value
Changes in fair value
Privately held entities without readily determinable fair values that:
Report NAV
Fair value, using NAV as a practical expedient
Changes in NAV, as a practical expedient to fair value
Do not report NAV
Cost, adjusted for observable price changes and impairments
Observable price changes
Impairments to reduce costs to fair value, which result in an adjusted cost basis and the differences between proceeds received upon disposition and adjusted or historical cost
For investments in privately held entities that do not report NAV per share, an observable price is a price observed in an orderly transaction for an identical or similar investment of the same issuer. Observable price changes result from, among other things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. For these transactions to be considered observable price changes of the same issuer, we evaluate whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments we hold.
Investments in real estate
The following table reconciles our investments in real estate as of March 31, 2021:
(In thousands)
Investments in Real Estate
Gross investments in real estate
$
23,536,664
Less: accumulated depreciation
(3,315,190)
Net investments in real estate – North America
20,221,474
Net investments in real estate – Asia
31,944
Investments in real estate
$
20,253,418
Space Intentionally Blank
The square footage presented in the table below includes RSF of buildings in operation as of March 31, 2021, primarily representing lease expirations at recently acquired properties that also have inherent future development or redevelopment opportunities, for which we have the intent to demolish or redevelop the existing property upon expiration of the existing in-place leases and commencement of future construction:
Dev/ Redev
RSF of Lease Expirations Targeted for Development and Redevelopment
Property/Submarket
2021
2022
Thereafter
Total
Near-term projects:
50 and 60 Sylvan Road/Route 128
Redev
202,428
—
—
202,428
651 Gateway Boulevard/South San Francisco
Redev
—
198,089
101,921
(1)
300,010
Other/Seattle
Redev
—
51,255
—
51,255
202,428
249,344
101,921
553,693
Intermediate-term projects:
3825 Fabian Way/Greater Stanford
Redev
—
250,000
—
250,000
3450 and 3460 Hillview Avenue/Greater Stanford
Redev
—
42,340
34,611
76,951
1075 Commercial Street/Greater Stanford
Dev
9,738
—
—
9,738
10931 and 10933 North Torrey Pines Road/ Torrey Pines
Dev
—
92,450
—
92,450
10260 Campus Point Drive/University Town Center
Dev
—
—
109,164
109,164
9393 Towne Centre Drive/University Town Center
Dev
42,222
—
—
42,222
4555 Executive Drive/University Town Center
Dev
41,475
—
—
41,475
93,435
384,790
143,775
622,000
Future projects:
380 and 420 E Street/Seaport Innovation District
Dev
—
—
195,506
195,506
40 Sylvan Road/Route 128
Redev
—
—
312,845
312,845
3875 Fabian Way/Greater Stanford
Redev
—
—
228,000
228,000
960 Industrial Road/Greater Stanford
Dev
—
—
110,000
110,000
219 East 42nd Street/New York City
Dev
—
—
349,947
349,947
11255 and 11355 North Torrey Pines Road/ Torrey Pines
Dev
—
139,135
—
139,135
4161 Campus Point Court/University Town Center
Dev
—
—
159,884
159,884
6450 Sequence Drive/Sorrento Mesa
Redev
—
—
202,915
202,915
4045 and 4075 Sorrento Valley Boulevard/ Sorrento Valley
Dev
—
—
50,926
50,926
601 Dexter Avenue North/Lake Union
Dev
—
—
18,680
18,680
830 4th Avenue South/SoDo
Dev
—
—
42,380
42,380
—
139,135
1,671,083
1,810,218
295,863
773,269
1,916,779
2,985,911
(1) Represents vacant square footage as of March 31, 2021.
We present components of balance sheet and operating results information related to our real estate joint ventures, which are not presented, or intended to be presented, in accordance with GAAP. We present the proportionate share of certain financial line items as follows: (i) for each real estate joint venture that we consolidate in our financial statements, which are controlled by us through contractual rights or majority voting rights, but of which we own less than 100%, we apply the noncontrolling interest economic ownership percentage to each financial item to arrive at the amount of such cumulative noncontrolling interest share of each component presented; and (ii) for each real estate joint venture that we do not control and do not consolidate, and are instead controlled jointly or by our joint venture partners through contractual rights or majority voting rights, we apply our economic ownership percentage to each financial item to arrive at our proportionate share of each component presented.
The components of balance sheet and operating results information related to our real estate joint ventures do not represent our legal claim to those items. For each entity that we do not wholly own, the joint venture agreement generally determines what equity holders can receive upon capital events, such as sales or refinancing, or in the event of a liquidation. Equity holders are normally entitled to their respective legal ownership of any residual cash from a joint venture only after all liabilities, priority distributions, and claims have been repaid or satisfied.
We believe this information can help investors estimate the balance sheet and operating results information related to our partially owned entities. Presenting this information provides a perspective not immediately available from consolidated financial statements and one that can supplement an understanding of the joint venture assets, liabilities, revenues, and expenses included in our consolidated results.
The components of balance sheet and operating results information related to our real estate joint ventures are limited as an analytical tool as the overall economic ownership interest does not represent our legal claim to each of our joint ventures’ assets, liabilities, or results of operations. In addition, joint venture financial information may include financial information related to the unconsolidated real estate joint ventures that we do not control. We believe that in order to facilitate for investors a clear understanding of our operating results and our total assets and liabilities, joint venture financial information should be examined in conjunction with our consolidated statements of operations and balance sheets. Joint venture financial information should not be considered an alternative to our consolidated financial statements, which are presented and prepared in accordance with GAAP.
Key items included in net income attributable to Alexandria’s common stockholders
We present a tabular comparison of items, whether gain or loss, that may facilitate a high-level understanding of our results and provide context for the disclosures included in this Supplemental Information, our most recent annual report on Form 10-K, and our subsequent quarterly reports on Form 10-Q. We believe such tabular presentation promotes a better understanding for investors of the corporate-level decisions made and activities performed that significantly affect comparison of our operating results from period to period. We also believe this tabular presentation will supplement for investors an understanding of our disclosures and real estate operating results. Gains or losses on sales of real estate and impairments of held for sale assets are related to corporate-level decisions to dispose of real estate. Gains or losses on early extinguishment of debt are related to corporate-level financing decisions focused on our capital structure strategy. Significant realized and unrealized gains or losses on non-real estate investments and impairments of real estate and non-real estate investments are not related to the operating performance of our real estate assets as they result from strategic, corporate-level non-real estate investment decisions and external market conditions. Impairments of non-real estate investments are not related to the operating performance of our real estate as they represent the write-down of non-real estate investments when their fair values decline below their respective carrying
values due to changes in general market or other conditions outside of our control. Significant items, whether a gain or loss, included in the tabular disclosure for current periods are described in further detail in this Supplemental Information and accompanying Earnings Press Release.
Net cash provided by operating activities after dividends
Net cash provided by operating activities after dividends includes the deduction for distributions to noncontrolling interests. For purposes of this calculation, changes in operating assets and liabilities are excluded as they represent timing differences.
Net debt and preferred stock to Adjusted EBITDA
Net debt and preferred stock to Adjusted EBITDA is a non-GAAP financial measure that we believe is useful to investors as a supplemental measure in evaluating our balance sheet leverage. Net debt and preferred stock is equal to the sum of total consolidated debt less cash, cash equivalents, and restricted cash, plus preferred stock outstanding as of the end of the period. Refer to the definition of Adjusted EBITDA and Adjusted EBITDA margin for further information on the calculation of Adjusted EBITDA.
The following table reconciles debt to net debt and preferred stock and computes the ratio to Adjusted EBITDA:
(Dollars in thousands)
3/31/21
12/31/20
9/30/20
6/30/20
3/31/20
Secured notes payable
$
229,406
$
230,925
$
342,363
$
344,784
$
347,136
Unsecured senior notes payable
8,311,512
7,232,370
7,230,819
6,738,486
6,736,999
Unsecured senior line of credit and commercial paper
Net operating income, net operating income (cash basis), and operating margin
The following table reconciles net income to net operating income and to net operating income (cash basis):
Three Months Ended
(Dollars in thousands)
3/31/21
3/31/20
Net income
$
25,533
$
30,678
Equity in (earnings) losses of unconsolidated real estate joint ventures
(3,537)
3,116
General and administrative expenses
33,996
31,963
Interest expense
36,467
45,739
Depreciation and amortization
180,913
175,496
Impairment of real estate
5,129
2,003
Loss on early extinguishment of debt
67,253
—
Gain on sales of real estate
(2,779)
—
Investment (income) loss
(1,014)
21,821
Net operating income
341,961
310,816
Straight-line rent revenue
(27,382)
(20,597)
Amortization of acquired below-market leases
(12,112)
(15,964)
Net operating income (cash basis)
$
302,467
$
274,255
Net operating income (cash basis) – annualized
$
1,209,868
$
1,097,020
Net operating income (from above)
$
341,961
$
310,816
Total revenues
$
479,849
$
439,919
Operating margin
71%
71%
Net operating income is a non-GAAP financial measure calculated as net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding equity in the earnings of our unconsolidated real estate joint ventures, general and administrative expenses, interest expense, depreciation and amortization, impairments of real estate, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and investment income or loss. We believe net operating income provides useful information to investors regarding our financial condition and results of operations because it primarily reflects those income and expense items that are incurred at the property level. Therefore, we believe net operating income is a useful measure for investors to evaluate the operating performance of our consolidated real estate assets. Net operating income on a cash basis is net operating income adjusted to exclude the effect of straight-line rent and amortization of acquired above- and below-market lease revenue adjustments required by GAAP. We believe that net operating income on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent revenue and the amortization of acquired above- and below-market leases.
Furthermore, we believe net operating income is useful to investors as a performance measure for our consolidated properties because, when compared across periods, net operating income reflects trends in occupancy rates, rental rates, and operating costs, which provide a perspective not immediately apparent from net income or loss. Net operating income can be used to measure the initial stabilized yields of our properties by calculating net operating income generated by a property divided by our investment in the property. Net operating income excludes certain components from net income in order to provide results that are more closely related to the results of operations of our properties. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level rather than at the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort comparability of operating performance at the property level. Impairments of real estate have been excluded in deriving net operating income because we do not consider impairments of real estate to be property-level operating expenses. Impairments of real estate relate to changes in the values of our assets and do not reflect the current operating performance with respect to related revenues or expenses. Our impairments of real estate represent the write-down in the value of the assets to the estimated fair value less cost to sell. These impairments result from investing decisions or a deterioration in market conditions. We also exclude realized and unrealized investment income or loss, which results from investment decisions that occur at the corporate level related to non-real estate investments in publicly traded companies and certain privately held entities. Therefore, we do not consider these activities to be an indication of operating performance of our real estate assets at the property level. Our calculation of net operating income also excludes charges incurred from changes in certain financing decisions, such as losses on early extinguishment of debt, as these charges often relate to corporate strategy. Property operating expenses included in determining net operating income primarily consist of costs that are related to our operating properties, such as utilities, repairs, and maintenance; rental expense related to ground leases; contracted services, such as janitorial, engineering, and landscaping; property taxes and insurance; and property-level salaries. General and administrative expenses consist primarily of accounting and corporate compensation, corporate insurance, professional fees, office rent, and office supplies that are incurred as part of corporate office management. We calculate operating margin as net operating income divided by total revenues.
We believe that in order to facilitate for investors a clear understanding of our operating results, net operating income should be examined in conjunction with net income or loss as presented in our consolidated statements of operations. Net operating income should not be considered as an alternative to net income or loss as an indication of our performance, nor as an alternative to cash flows as a measure of our liquidity or our ability to make distributions.
Operating statistics
We present certain operating statistics related to our properties, including number of properties, RSF, occupancy percentage, leasing activity, and contractual lease expirations as of the end of the period. We believe these measures are useful to investors because they facilitate an understanding of certain trends for our properties. We compute the number of properties, RSF, occupancy percentage, leasing activity, and contractual lease expirations at 100% for all properties in which we have an investment, including properties owned by our consolidated and unconsolidated real estate joint ventures. For operating metrics based on annual rental revenue, refer to our discussion of annual rental revenue herein.
As a result of changes within our total property portfolio during the comparative periods presented, including changes from assets acquired or sold, properties placed into development or redevelopment, and development or redevelopment properties recently placed into service, the consolidated total income from rentals, as well as rental operating expenses in our operating results, can show significant changes from period to period. In order to supplement an evaluation of our results of operations over a given quarterly or annual period, we analyze the operating performance for all consolidated properties that were fully operating for the entirety of the comparative periods presented, referred to as same properties. We separately present quarterly and year-to-date same property results to align with the interim financial information required by the SEC in our management’s discussion and analysis of our financial condition and results of operations. These same properties are analyzed separately from properties acquired subsequent to the first day in the earliest comparable quarterly or year-to-date period presented, properties that underwent development or redevelopment at any time during the comparative periods, unconsolidated real estate joint ventures, properties classified as held for sale, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results. Additionally, termination fees, if any, are excluded from the results of same properties.
Space Intentionally Blank
The following table reconciles the number of same properties to total properties for the three months ended March 31, 2021:
Development – under construction
Properties
Acquisitions after January 1, 2020
Properties
9950 Medical Center Drive
1
3181 Porter Drive
1
Alexandria Center® for Life Science – San Carlos
275 Grove Street
1
2
601, 611, and 651 Gateway Boulevard
3
3115 Merryfield Row
1
3330, 3412, 3450, and 3460 Hillview Avenue
201 Haskins Way
1
4
Alexandria Center® for AgTech
2
9605 Medical Center Drive
1
Alexandria Center® for Advanced Technologies
9808 and 9868 Scranton Road
2
2
1075 Commercial Street
1
201 Brookline Avenue
1
4555 Executive Drive
1
SD Tech by Alexandria
1
Alexandria Center® for Life Science – Durham
11
13
Development – placed into
Reservoir Woods
3
service after January 1, 2020
Properties
One Upland Road
1
9804 Medical Center Drive
1
830 4th Avenue South
1
1165 Eastlake Avenue East
1
11255 and 11355 North Torrey Pines Road
2
2
Redevelopment – under construction
Properties
6420 and 6450 Sequence Drive
2
5505 Morehouse Drive
1
380 and 420 E Street
2
Alexandria Center® for Life Science – Long Island City
1
Alexandria Center® for Life Science – Fenway
1
3160 Porter Drive
1
704 Quince Orchard Road
1
The Arsenal on the Charles
11
Other
26
700 Quince Orchard Road
1
66
Alexandria Center® for Life Science – Durham
Unconsolidated real estate JVs
5
3
Properties held for sale
4
840 Winter Street
1
Total properties excluded from same properties
Other/San Diego
1
110
20400 Century Boulevard
1
Same properties
250
21
Total properties in North America as of
March 31, 2021
360
Redevelopment – placed into
service after January 1, 2020
Properties
9877 Waples Street
1
1
Stabilized occupancy date
The stabilized occupancy date represents the estimated date on which the project is expected to reach occupancy of 95% or greater.
Tenant recoveries
Tenant recoveries represent revenues comprising reimbursement of real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses and earned in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse us arises.
We classify rental revenues and tenant recoveries generated through the leasing of real estate assets within revenue in income from rentals in our consolidated statements of operations. We provide investors with a separate presentation of rental revenues and tenant recoveries in “Same Property Performance” of this Supplemental Information because we believe it promotes investors’ understanding of our operating results. We believe that the presentation of tenant recoveries is useful to investors as a supplemental measure of our ability to recover operating expenses under our triple net leases, including recoveries of utilities, repairs and maintenance, insurance, property taxes, common area expenses, and other operating expenses, and of our ability to mitigate the effect to net income for any significant variability to components of our operating expenses.
The following table reconciles income from rentals to tenant recoveries:
Three Months Ended
(In thousands)
3/31/21
12/31/20
9/30/20
6/30/20
3/31/20
Income from rentals
$
478,695
$
461,335
$
543,412
$
435,856
$
437,605
Rental revenues
(370,233)
(353,950)
(438,393)
(341,555)
(337,942)
Tenant recoveries
$
108,462
$
107,385
$
105,019
$
94,301
$
99,663
Total equity capitalization
Total equity capitalization is equal to the outstanding shares of common stock multiplied by the closing price on the last trading day at the end of each period presented.
Total market capitalization
Total market capitalization is equal to the sum of total equity capitalization and total debt.
Unencumbered net operating income as a percentage of total net operating income
Unencumbered net operating income as a percentage of total net operating income is a non-GAAP financial measure that we believe is useful to investors as a performance measure of the results of operations of our unencumbered real estate assets as it reflects those income and expense items that are incurred at the unencumbered property level. Unencumbered net operating income is derived from assets classified in continuing operations, which are not subject to any mortgage, deed of trust, lien, or other security interest, as of the period for which income is presented.
The following table summarizes unencumbered net operating income as a percentage of total net operating income:
Three Months Ended
(Dollars in thousands)
3/31/21
12/31/20
9/30/20
6/30/20
3/31/20
Unencumbered net operating income
$
330,160
$
315,586
$
388,575
$
296,358
$
295,001
Encumbered net operating income
11,801
11,367
16,024
16,687
15,815
Total net operating income
$
341,961
$
326,953
$
404,599
$
313,045
$
310,816
Unencumbered net operating income as a percentage of total net operating income
97%
97%
96%
95%
95%
Weighted-average interest rate for capitalization of interest
The weighted-average interest rate required for calculating capitalization of interest pursuant to GAAP represents a weighted-average rate based on the rates applicable to borrowings outstanding during the period, including expense/income related to interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees. A separate calculation is performed to determine our weighted-average interest rate for capitalization for each month. The rate will vary each month due to changes in variable interest rates, outstanding debt balances, the proportion of variable-rate debt to fixed-rate debt, the amount and terms of interest rate hedge agreements, and the amount of loan fee and premium (discount) amortization.
The following table presents the weighted-average interest rate for capitalization of interest:
Three Months Ended
3/31/21
12/31/20
9/30/20
6/30/20
3/31/20
Weighted-average interest rate for capitalization of interest
3.44%
3.66%
3.64%
4.03%
3.80%
Weighted-average shares of common stock outstanding – diluted
From time to time, we enter into capital market transactions, including forward equity sales agreements (“Forward Agreements”), to fund acquisitions, to fund construction of our highly leased development and redevelopment projects, and for general working capital purposes. We are required to consider the potential dilutive effect of our forward equity sales agreements under the treasury stock method while the forward equity sales agreements are outstanding. As of March 31, 2021, we had Forward Agreements outstanding to sell an aggregate of 1.5 million shares of common stock.
The weighted-average shares of common stock outstanding used in calculating EPS – diluted, FFO per share – diluted, and FFO per share – diluted, as adjusted, during each period are calculated as follows:
Three Months Ended
(In thousands)
3/31/21
12/31/20
9/30/20
6/30/20
3/31/20
Weighted-average of common stock outstanding – basic
137,319
133,688
124,901
124,333
121,433
Forward Agreements
369
139
927
115
352
Weighted-average of common stock outstanding – diluted
