Alexandria Real Estate Equities, Inc. Reports: 3Q22 and YTD 3Q22 Net Income per Share - Diluted of $2.11 and $2.88, respectively; and 3Q22 and YTD 3Q22 FFO per Share - Diluted, As Adjusted, of $2.13 and $6.28, respectively
PASADENA, Calif., Oct. 24, 2022 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE:ARE) announced financial and operating results for the third quarter ended September 30, 2022.
Key highlights | YTD | ||||||
Operating results | 3Q22 | 3Q21 | 3Q22 | 3Q21 | |||
Total revenues: | |||||||
In millions | $ 659.9 | $ 547.8 | $ 1,918.7 | $ 1,537.2 | |||
Growth | 20.5 % | 24.8 % | |||||
Net income attributable to Alexandria's common stockholders – diluted | |||||||
In millions | $ 341.4 | $ 101.3 | $ 461.5 | $ 490.6 | |||
Per share | $ 2.11 | $ 0.67 | $ 2.88 | $ 3.38 | |||
Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted | |||||||
In millions | $ 344.7 | $ 296.0 | $ 1,008.1 | $ 841.3 | |||
Per share | $ 2.13 | $ 1.95 | $ 6.28 | $ 5.80 | |||
A REIT industry-leading, high-quality roster of over 1,000 tenants and operational excellence, supporting high-quality revenues, cash flows, and strong margins
Percentage of total annual rental revenue in effect from investment-grade or | 49 % | |||
Sustained strength in tenant collections: | ||||
Tenant receivables as of September 30, 2022 | $ 7.8 | million | ||
October tenant rent and receivables collected as of October 24, 2022 | 99.9 % | |||
Occupancy of operating properties in North America | 94.3 % | |||
Operating margin | 70 % | |||
Adjusted EBITDA margin | 69 % | |||
Weighted-average remaining lease term: | ||||
All tenants | 7.2 | years | ||
Top 20 tenants | 9.7 | years | ||
Solid leasing volume and rental rate increase
- During 3Q22, we completed 1.7 million RSF of leasing activity; 87% of which was generated from our roster of over 1,000 tenants.
- Quarterly leasing volume continues to surpass our 10-year quarterly average of 1.3 million RSF and our pre-COVID 5-year quarterly average of 1.1 million RSF.
- 3Q22 rental rate increases on lease renewals and re-leasing of space were 27.1% and 22.6% (cash basis).
3Q22 | YTD 3Q22 | |||
Total leasing activity – RSF | 1,662,069 | 6,405,265 | ||
Leasing of development and redevelopment space – RSF | 329,006 | 2,685,138 | ||
Lease renewals and re-leasing of space: | ||||
RSF (included in total leasing activity above) | 1,094,821 | 3,045,980 | ||
Rental rate increases | 27.1 % | 34.3 % | ||
Rental rate increases (cash basis) | 22.6 % | 24.2 % |
Continued strong net operating income and internal growth
- Net operating income (cash basis) of $1.6 billion for 3Q22 annualized, up $306.0 million, or 22.9%, compared to 3Q21 annualized.
- 96% of our leases contain contractual annual rent escalations approximating 3%.
- Same property net operating income growth:
- 5.1% and 10.6% (cash basis) for 3Q22 over 3Q21, representing the third-highest same property net operating income (cash basis) growth in Company history.
- 7.0% and 8.9% (cash basis) for YTD 3Q22 over YTD 3Q21.
Strong and flexible balance sheet with significant liquidity
- Investment-grade credit ratings ranked in the top 10% among all publicly traded U.S. REITs.
- Net debt and preferred stock to Adjusted EBITDA of 5.4x and fixed-charge coverage ratio of 4.9x for 3Q22 annualized.
- Total debt and preferred stock to gross assets of 27%.
- 95.9% of our debt has a fixed rate.
- 13.2 years weighted-average remaining term of debt.
- No debt maturities prior to 2025.
- $6.4 billion of liquidity.
Continued strategic value harvesting with strong valuations
During YTD 3Q22, we completed dispositions and sales of partial interests aggregating $2.2 billion, including $1.0 billion of dispositions during 3Q22:
- Sale of five properties in our South San Francisco and Greater Stanford submarkets for an aggregate sales price of $383.6 million, or $1,161 per RSF, representing capitalization rates of 5.2% and 5.2% (cash basis).
- Sale of a 70% interest in 3215 Merryfield Row in our Torrey Pines submarket for a sales price of $149.9 million, or $1,256 per RSF, representing capitalization rates of 4.5% and 4.2% (cash basis).
- Sale of a 70% interest in Summers Ridge Science Park in our Sorrento Mesa submarket for a sales price of $159.6 million, or $720 per RSF, representing capitalization rates of 4.9% and 4.6% (cash basis).
Continued dividend strategy to share strong and consistent growth in operating cash flows with stockholders while also retaining a significant portion for reinvestment
- Common stock dividend declared for 3Q22 of $1.18 per common share, aggregating $4.66 per common share for the twelve months ended September 30, 2022, up 24 cents, or 5%, over the twelve months ended September 30, 2021.
- Dividend yield of 3.4% as of September 30, 2022.
- FFO payout ratio of 56% for the three months ended September 30, 2022.
- Average annual dividend per-share growth of 6.5% over the last five years.
Completion of unsecured senior line of credit upsizing and term extension
- In September 2022, we amended our unsecured senior line of credit. Key changes include:
New Agreement | Change | |||||
Commitments available for borrowing | $4.0 billion | Up $1.0 billion | ||||
Maturity date | January 22, 2028 | Extended by 2 years | ||||
Interest rate | SOFR+0.875% | Converted to SOFR from LIBOR | ||||
Alexandria's tenants drive visibility for future growth aggregating over $645 million of incremental net operating income
Highly leased value-creation pipeline of current and seven near-term projects expected to generate greater than $645 million of incremental net operating income, primarily commencing from 4Q22 through 3Q25.
- 7.6 million RSF of our value-creation projects, which are 78% leased.
- 80% of the leased RSF was generated from our roster of over 1,000 tenants.
Key items included in operating results
Key items included in net income attributable to Alexandria's common stockholders: | |||||||||||||||
YTD | |||||||||||||||
3Q22 | 3Q21 | 3Q22 | 3Q21 | 3Q22 | 3Q21 | 3Q22 | 3Q21 | ||||||||
(In millions, except per share amounts) | Amount | Per Share – | Amount | Per Share – | |||||||||||
Unrealized (losses) gains | $ (56.5) | $ (14.4) | $ (0.35) | $ (0.10) | $ (388.1) | $ 183.3 | $ (2.42) | $ 1.26 | |||||||
Significant realized gains on | — | 52.4 | — | 0.35 | — | 110.1 | — | 0.76 | |||||||
Gain (loss) on sales of real | 323.7 | (0.4) | 2.00 | — | 537.9 | 2.3 | 3.35 | 0.02 | |||||||
Impairment of real estate | (38.8) | (42.6) | (0.24) | (0.28) | (38.8) | (52.7) | (0.24) | (0.37) | |||||||
Loss on early | — | — | — | — | (3.3) | (67.3) | (0.02) | (0.46) | |||||||
Acceleration of stock | (7.2) | — | (0.04) | — | (7.2) | — | (0.04) | — | |||||||
Total | $ 221.2 | $ (5.0) | $ 1.37 | $ (0.03) | $ 100.5 | $ 175.7 | $ 0.63 | $ 1.21 | |||||||
Balance sheet management
Key metrics as of September 30, 2022
- $33.3 billion in total market capitalization.
- $22.8 billion in total equity capitalization, which ranks in the top 10% among all publicly traded U.S. REITs.
- 13.2 years weighted-average remaining term of debt.
- No remaining LIBOR-based debt ahead of June 2023 phase-out.
3Q22 | Goal | ||||||
Quarter | Trailing | 4Q22 | |||||
Annualized | 12 Months | Annualized | |||||
Net debt and preferred stock to | 5.4x | 5.6x | Less than or equal to 5.1x | ||||
Fixed-charge coverage ratio | 4.9x | 5.1x | Greater than or equal to 5.1x | ||||
Key capital events
- In September 2022, we amended our unsecured senior line of credit to increase the aggregate commitment to $4.0 billion and extend the maturity date to January 22, 2028. Refer to page 2 of this Earnings Press Release for additional detail.
- In September 2022, we increased the aggregate amount we may issue from time to time under our commercial paper program to $2.0 billion from $1.5 billion.
- During 3Q22, we settled a portion of our outstanding forward equity sales agreements by issuing 1.0 million shares and received net proceeds of $199.7 million. We expect to issue an aggregate of 8.0 million shares at an average price of $186.03 per share to settle all our outstanding forward equity sales agreements and receive net proceeds of approximately $1.5 billion in 4Q22.
- During 3Q22, there was no sale activity under our ATM program. As of September 30, 2022, the remaining aggregate amount available under our ATM program for future sales of common stock was $246.6 million.
Investments
- As of September 30, 2022:
- Our investments aggregated $1.6 billion.
- Unrealized gains presented in our consolidated balance sheets were $421.1 million, comprising gross unrealized gains and losses aggregating $529.0 million and $107.9 million, respectively.
- Investment loss of $32.3 million for the three months ended September 30, 2022, presented in our consolidated statements of operations, consisted of $24.2 million of realized gains and $56.5 million of unrealized losses/changes in fair value.
External growth and investment in real estate
Delivery and commencement of value-creation projects
- During 3Q22, we placed into service development and redevelopment projects aggregating 332,961 RSF across multiple submarkets resulting in $30 million of incremental net operating income.
- 82% of construction costs related to active development and redevelopment projects aggregating 5.6 million RSF are under a guaranteed maximum price ("GMP") contract or other fixed contracts. Our budgets also include construction cost contingencies in GMP contracts plus additional landlord contingencies that generally range from 3% to 5%.
- Annual net operating income (cash basis) is expected to increase by $45 million upon the burn-off of initial free rent from recently delivered projects.
Value-creation pipeline of new Class A development and redevelopment projects as | 3Q22 | |
Under construction projects 76% leased/negotiating | 10 % | |
Near-term projects expected to commence construction in the next five quarters 88% leased | 1 % | |
Income-producing/potential cash flows/covered land play(1) | 8 % | |
Land | 3 % | |
(1) | Includes projects that have existing buildings that are generating or can generate operating cash flows. Also |
Alexandria is at the vanguard of innovation for a high-quality roster of over 1,000 tenants, focused on accommodating their current needs and providing them with a path for future growth
- During 3Q22, we completed acquisitions in our key life science cluster submarkets aggregating 1.2 million RSF of value-creation opportunities for an aggregate purchase price of $316.7 million.
Industry and ESG leadership: catalyzing and leading the way for positive change to benefit human health and society
- In October 2022, Alexandria continued to enhance its first social responsibility pillar focused on advancing human health by empowering NEXT for AUTISM's development of important support services for autistic individuals and their families. Alexandria has been forging strategically supportive partnerships with highly impactful organizations that aim to accelerate groundbreaking medical innovation to advance vitally needed therapies for individuals with autism.
- In October 2022, Alexandria's position as a groundbreaking leader in ESG was reinforced in the 2022 GRESB Real Estate Assessment, with several achievements, including: (i) Regional and Global Sector Leader for buildings in development in the Science & Technology sector, (ii) #2 ranking for buildings in operation in the Diversified Listed sector, and (iii) "A" disclosure score for the fifth consecutive year. Alexandria has earned "Green Star" recognitions in the operating asset benchmark for the sixth consecutive year and in the development benchmark for the third consecutive year since its 2020 launch.
Industry and ESG leadership (continued)
- In October 2022, Alexandria was recognized as a Climate Leader by the Sponsors of Mass Save®, a collaborative of the energy utilities and energy efficiency service providers in Massachusetts. Utilizing these programs in our Greater Boston market, we have implemented over 65 energy conservation projects across more than 40 buildings over the last 10 years, resulting in estimated recurring annual energy savings of over 5 million kWh. Alexandria was the only real estate company to be selected in the inaugural cohort of honorees.
- In September 2022, coinciding with National Suicide Prevention Month, we announced our deepened partnership with KITA, a non-profit providing tuition-free summer camp for children who have lost a loved one to suicide, and the advancement of our eighth social responsibility pillar addressing the mental health crisis. Through Alexandria's significant support, KITA will have free, long-term access to 28 acres in Acton, Maine that will serve as the non-profit's new home and enable it to grow its program and increase the number of children it serves.
- In July 2022, Alexandria Venture Investments, our strategic venture capital platform, was recognized as the #1 most active corporate investor in biopharma by new deal volume (2021-1H22) for the fifth consecutive year by Silicon Valley Bank in its "Healthcare Investments and Exits: Mid-Year 2022 Report." Alexandria's venture activity provides us with, among other things, mission-critical data and insights into industry innovations and trends.
About Alexandria Real Estate Equities, Inc.
Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is a best-in-class, mission-driven life science REIT making a positive and lasting impact on the world. As the pioneer of the life science real estate niche since its founding in 1994, Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative life science, agtech, and technology campuses in AAA innovation cluster locations, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. The trusted partner to over 1,000 tenants, as of September 30, 2022, Alexandria has a total market capitalization of $33.3 billion and an asset base in North America of 74.5 million square feet ("SF"), which includes 41.1 million RSF of operating properties and 5.6 million RSF of Class A properties undergoing construction, 9.9 million RSF of near-term and intermediate-term development and redevelopment projects, and 17.9 million SF of future development projects. Alexandria has a longstanding and proven track record of developing Class A properties clustered in 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, agrifoodtech, climate innovation, 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.
Acquisitions | |||||||||||||||||||||||
Property | Submarket/Market | Date of Purchase | Number of | Operating Occupancy | Square Footage | Purchase | |||||||||||||||||
Acquisitions With Development/Redevelopment Opportunities(1) | |||||||||||||||||||||||
Future | Operating With | Operating(2) | Operating | Total(3) | |||||||||||||||||||
Completed in 1H22 | 32 | 91 | % | 5,486,991 | 2,866,642 | 451,760 | — | 8,373,453 | $ | 2,120,863 | |||||||||||||
Completed in 3Q22: | |||||||||||||||||||||||
100 Edwin H. Land Boulevard | Cambridge/Inner Suburbs/ | 8/1/22 | 1 | 100 | % | TBD | 104,500 | — | — | 104,500 | 170,000 | ||||||||||||
10010 and 10140 Campus Point Drive | University Town Center/ | 9/29/22 | 3 | 100 | 750,000 | 226,144 | — | — | 750,000 | 106,380 | |||||||||||||
Other | Various | Various | 3 | 96 | 302,000 | 108,478 | — | — | 372,278 | 40,349 | |||||||||||||
7 | 99 | % | 1,052,000 | 439,122 | (4) | — | — | 1,226,778 | 316,729 | ||||||||||||||
Completed in October 2022: | |||||||||||||||||||||||
1001 Trinity Street and 1020 Red | Austin/Texas | 10/4/22 | 2 | 100 | % | 123,976 | 198,972 | — | — | 322,948 | 108,000 | ||||||||||||
Other | 360 | ||||||||||||||||||||||
108,360 | |||||||||||||||||||||||
Pending | Various | 104,048 | |||||||||||||||||||||
Total | $ | 2,650,000 | |||||||||||||||||||||
2022 guidance range | $2,550,000 – $2,750,000 | ||||||||||||||||||||||
(1) | We expect to provide total estimated costs and related yields for development and redevelopment projects in the future, subsequent to the commencement of construction. |
(2) | Represents the operating component of our value-creation acquisitions that is not expected to undergo future development or redevelopment. |
(3) | Represents total square footage upon completion of development or redevelopment of one or more new Class A properties. Square footage presented includes RSF of buildings currently in operation with future development or redevelopment opportunities. Refer to "Definitions and reconciliations" in our Supplemental Information for additional details on value-creation square feet currently included in rental properties. |
(4) | We expect the acquisitions completed during the three months ended September 30, 2022 to generate initial annual net operating income of approximately $12 million for the twelve months following acquisition. These acquisitions included seven operating properties with a weighted-average acquisition date of August 27, 2022 (weighted by initial annual net operating income). |
Dispositions and Sales of Partial Interest | ||||||||||||||||||||||||||
Capitalization (Cash Basis) | Sales Price | Gain or | ||||||||||||||||||||||||
Property | Submarket/Market | Date of | Interest | RSF | Capitalization | Sales Price | ||||||||||||||||||||
Completed 1H22: | ||||||||||||||||||||||||||
100 Binney Street | Cambridge/Inner Suburbs/Greater | 3/30/22 | 70 % | 432,931 | 3.6 % | 3.5 % | $ 713,228 | (1) | $ 2,353 | $ 413,615 | (2) | |||||||||||||||
300 Third Street | Cambridge/Inner Suburbs/Greater | 6/27/22 | 70 % | 131,963 | 4.6 % | 4.3 % | 166,485 | (1) | $ 1,802 | 113,020 | (2) | |||||||||||||||
Alexandria Park at 128, 285 Bear Hill | Route 128 and Route 495/Greater | 6/8/22 | 100 % | 617,043 | 5.1 % | 5.1 % | 334,397 | $ 542 | 202,325 | |||||||||||||||||
Other | N/A | N/A | 47,800 | N/A | 11,894 | |||||||||||||||||||||
1,261,910 | 740,854 | |||||||||||||||||||||||||
Completed 3Q22: | ||||||||||||||||||||||||||
1450 Owens Street | Mission Bay/San Francisco Bay Area | 7/1/22 | 20 % | (3) | 191,000 | N/A | N/A | 25,039 | (1) | N/A | 10,083 | (2) | ||||||||||||||
341 and 343 Oyster Point Boulevard, | South San Francisco and Greater | 9/15/22 | 100 % | 330,379 | 5.2 % | 5.2 % | 383,635 | $ 1,161 | 223,127 | |||||||||||||||||
3215 Merryfield Row | Torrey Pines/San Diego | 9/1/22 | 70 % | 170,523 | 4.5 % | 4.2 % | 149,940 | (1) | $ 1,256 | 42,214 | (2) | |||||||||||||||
Summers Ridge Science Park | Sorrento Mesa/San Diego | 9/15/22 | 70 % | 316,531 | 4.9 % | 4.6 % | 159,600 | (1) | $ 720 | 65,097 | (2) | |||||||||||||||
7330 and 7360 Carroll Road | Sorrento Mesa/San Diego | 9/15/22 | 100 % | 84,442 | 4.4 % | 4.6 % | 59,476 | $ 704 | 35,463 | |||||||||||||||||
13112 Evening Creek Drive | Other/San Diego | 9/26/22 | 100 % | 109,780 | 5.3 % | 5.3 % | 55,500 | $ 506 | 31,001 | |||||||||||||||||
Other | Various | N/A | N/A | 127,196 | N/A | 34,108 | ||||||||||||||||||||
960,386 | 441,093 | |||||||||||||||||||||||||
Total | $ 2,222,296 | $ 1,181,947 | ||||||||||||||||||||||||
2022 guidance range | $1,450,000 – $2,600,000 | |||||||||||||||||||||||||
(1) | Represents the contractual sales price for the percentage interest of the property sold by us. |
(2) | We retained control over the newly formed real estate joint venture and therefore continued to consolidate this property. We accounted for the difference between the consideration received and the book value of the interest sold as an equity transaction, with no gain or loss recognized in earnings. |
(3) | Relates to the sale of a partial interest in a land parcel. The noncontrolling interest share of our joint venture partner is anticipated to increase to 75% as our partner contributes capital for construction over time. As of September 30, 2022, the noncontrolling interest share of our joint venture partner was 34.5%. |
Guidance | ||||
The following updated guidance is based on our current view of existing market conditions and assumptions for the year ending December 31, 2022. There can be no assurance that actual | ||||
2022 Guidance Midpoint | ||||
Summary of Key Changes in Guidance | As of 10/24/22 | As of 7/25/22 | ||
EPS, FFO per share, and FFO per share, as adjusted | See updates below | |||
Occupancy percentage in North America as of December 31, 2022 | 95.0% to 95.6% | 95.2% to 95.8% | ||
Straight-line rent revenue | $139 to $149 | $144 to $154 | ||
Projected 2022 Earnings per Share and Funds From Operations per Share Attributable to | |||||||||
As of 10/24/22 | As of 7/25/22 | ||||||||
Earnings per share(1) | $3.56 to $3.58 | $2.14 to $2.20 | |||||||
Depreciation and amortization of real estate assets | 5.50 | 5.50 | |||||||
Gain on sales of real estate | (3.35) | (1.34) | |||||||
Allocation to unvested restricted stock awards | (0.01) | (0.02) | |||||||
Funds from operations per share(2) | $5.70 to $5.72 | $6.28 to $6.34 | |||||||
Unrealized losses on non-real estate investments | 2.42 | 2.07 | |||||||
Impairment of real estate | 0.24 | — | |||||||
Loss on early extinguishment of debt | 0.02 | 0.02 | |||||||
Acceleration of stock compensation expense due to | 0.04 | 0.04 | |||||||
Allocation to unvested restricted stock awards | (0.03) | (0.02) | |||||||
Other | 0.01 | (0.01) | |||||||
Funds from operations per share, as adjusted(2) | $8.40 to $8.42 | $8.38 to $8.44 | |||||||
Midpoint | $8.41 | $8.41 | |||||||
Key Assumptions | Low | High | |||
Occupancy percentage in North America as of December 31, 2022(4) | 95.0 % | 95.6 % | |||
Lease renewals and re-leasing of space: | |||||
Rental rate increases | 30.0 % | 35.0 % | |||
Rental rate increases (cash basis) | 18.0 % | 23.0 % | |||
Same property performance: | |||||
Net operating income increase | 6.0 % | 8.0 % | |||
Net operating income increase (cash basis) | 6.8 % | 8.8 % | |||
Straight-line rent revenue(5) | $ 139 | $ 149 | |||
General and administrative expenses | $ 172 | $ 180 | |||
Capitalization of interest | $ 269 | $ 279 | |||
Interest expense | $ 90 | $ 100 | |||
Key Credit Metrics | 2022 Guidance | |
Net debt and preferred stock to Adjusted EBITDA – 4Q22 annualized | Less than or equal to 5.1x | |
Fixed-charge coverage ratio – 4Q22 annualized | Greater than or equal to 5.1x | |
Key Sources and Uses of Capital | Range | Midpoint | Certain Completed | |||||||
Sources of capital: | ||||||||||
Net cash provided by operating activities after | $ 275 | $ 325 | $ | 300 | ||||||
Incremental debt | 1,383 | 583 | 983 | See below | ||||||
Dispositions and sales of partial interests (refer to | 1,450 | 2,600 | 2,025 | $ 2,222 | ||||||
Common equity | 2,342 | 2,342 | 2,342 | $ 2,342 | (3) | |||||
Total sources of capital | $ 5,450 | $ 5,850 | $ | 5,650 | ||||||
Uses of capital: | ||||||||||
Construction (refer to page 47) | $ 2,900 | $ 3,100 | $ | 3,000 | ||||||
Acquisitions (refer to page 4) | 2,550 | 2,750 | 2,650 | $ 2,546 | ||||||
Total uses of capital | $ 5,450 | $ 5,850 | $ | 5,650 | ||||||
Incremental debt (included above): | ||||||||||
Issuance of unsecured senior notes payable | $ 1,800 | $ 1,800 | $ | 1,800 | $ 1,800 | |||||
Repayments of secured notes payable | (195) | (195) | (195) | $ (195) | ||||||
Unsecured senior line of credit, commercial paper, | (22) | (722) | (372) | |||||||
Cash expected to be held at December 31, 2022(6) | (200) | (300) | (250) | |||||||
Incremental debt | $ 1,383 | $ 583 | $ | 983 | ||||||
(1) | Excludes unrealized gains or losses after September 30, 2022 that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted. |
(2) | Refer to "Funds from operations and funds from operations, as adjusted, attributable to Alexandria's common stockholders" in the "Definitions and reconciliations" of our Supplemental Information for additional details. |
(3) | Refer to "Key capital events" on page 3 of this Earnings Press Release for additional details. During the nine months ended September 30, 2022, we entered into new forward equity sales agreements aggregating $2.3 billion to sell 12.3 million shares of our common stock, and settled a portion of these forward equity sales agreements by issuing 4.2 million shares and received net proceeds of $847.9 million. We expect to issue 8.0 million shares to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $1.5 billion in 4Q22. |
(4) | Updated guidance for occupancy percentage in North America as of December 31, 2022, reflects one property acquired in 3Q22 with 70,278 operating RSF that was occupied by the seller through September 30, 2022. |
(5) | Reduction in our guidance range for straight-line rent revenue by $5 million is primarily attributable to: i) completed and projected dispositions, and ii) the write-off of deferred rent in 3Q22 in connection with the early termination of one below-market lease aggregating 21,621 RSF, with no downtime in occupancy, at rental rate increases of 23% and 36% (cash basis). |
(6) | Represents cash expected to be held at December 31, 2022, which reduces our 2023 debt capital needs. |
Earnings Call Information and About the Company
September 30, 2022
We will host a conference call on Tuesday, October 25, 2022, at 3:00 p.m. Eastern Time ("ET")/noon Pacific Time ("PT"), which is open to the general public, to discuss our financial and operating results for the third quarter ended September 30, 2022. To participate in this conference call, dial (833) 366-1125 or (412) 902-6738 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the call for Alexandria Real Estate Equities, Inc. The audio webcast can be accessed at www.are.com in the "For Investors" section. A replay of the call will be available for a limited time from 5:00 p.m. ET/2:00 p.m. PT on Tuesday, October 25, 2022. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 9685874.
Additionally, a copy of this Earnings Press Release and Supplemental Information for the third quarter ended September 30, 2022 is available in the "For Investors" section of our website at www.are.com or by following this link: https://www.are.com/fs/2022q3.pdf.
For any questions, please contact Joel S. Marcus, executive chairman and founder; Peter M. Moglia, chief executive officer and co-chief investment officer; Dean A. Shigenaga, president and chief financial officer; Paula Schwartz, managing director of Rx Communications Group, at (917) 633-7790; or Sara M. Kabakoff, vice president – strategic communications, at (626) 578-0777.
About the Company
Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is a best-in-class, mission-driven life science REIT making a positive and lasting impact on the world. As the pioneer of the life science real estate niche since its founding in 1994, Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative life science, agtech, and technology campuses in AAA innovation cluster locations, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. The trusted partner to over 1,000 tenants, as of September 30, 2022, Alexandria has a total market capitalization of $33.3 billion and an asset base in North America of 74.5 million SF, which includes 41.1 million RSF of operating properties and 5.6 million RSF of Class A properties undergoing construction, 9.9 million RSF of near-term and intermediate-term development and redevelopment projects, and 17.9 million SF of future development projects. Alexandria has a longstanding and proven track record of developing Class A properties clustered in 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, agrifoodtech, climate innovation, 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.
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This document includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2022 earnings per share attributable to Alexandria's common stockholders – diluted, 2022 funds from operations per share attributable to Alexandria's common stockholders – diluted, net operating income, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as "forecast," "guidance," "goals," "projects," "estimates," "anticipates," "believes," "expects," "intends," "may," "plans," "seeks," "should," "targets," or "will," or the negative of those words or similar words. These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. There can be no assurance that actual results will not be materially higher or lower than these expectations. These statements are subject to risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, lower than expected yields, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully place into service and lease any properties undergoing development or redevelopment and our existing space held for future development or redevelopment (including new properties acquired for that purpose), our failure to successfully operate or lease acquired properties, decreased rental rates, increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, adverse general and local economic conditions, an unfavorable capital market environment, decreased leasing activity or lease renewals, failure to obtain LEED and other healthy building certifications and efficiencies, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission ("SEC"). Accordingly, you are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are made as of the date of this Earnings Press Release and Supplemental Information, and unless otherwise stated, we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.
Alexandria®, Lighthouse Design® logo, Building the Future of Life-Changing Innovation®, That's What's in Our DNA®, At the Vanguard and Heart of the Life Science Ecosystem™, Alexandria Center®, Alexandria Technology Square®, Alexandria Technology Center®, and Alexandria Innovation Center® are copyrights and trademarks of Alexandria Real Estate Equities, Inc. All other company names, trademarks, and logos referenced herein are the property of their respective owners.
Consolidated Statements of Operations | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
9/30/22 | 6/30/22 | 3/31/22 | 12/31/21 | 9/30/21 | 9/30/22 | 9/30/21 | ||||||||
Revenues: | ||||||||||||||
Income from rentals | $ 656,853 | $ 640,959 | $ 612,554 | $ 574,656 | $ 546,527 | $ 1,910,366 | $ 1,533,593 | |||||||
Other income | 2,999 | 2,805 | 2,511 | 2,267 | 1,232 | 8,315 | 3,634 | |||||||
Total revenues | 659,852 | 643,764 | 615,065 | 576,923 | 547,759 | 1,918,681 | 1,537,227 | |||||||
Expenses: | ||||||||||||||
Rental operations | 201,189 | 196,284 | 181,328 | 175,717 | 165,995 | 578,801 | 447,838 | |||||||
General and administrative | 49,958 | (1) | 43,397 | 40,931 | 41,654 | 37,931 | 134,286 | 109,807 | ||||||
Interest | 22,984 | 24,257 | 29,440 | 34,862 | 35,678 | 76,681 | 107,303 | |||||||
Depreciation and amortization | 254,929 | 242,078 | 240,659 | 239,254 | 210,842 | 737,666 | 581,807 | |||||||
Impairment of real estate | 38,783 | (1) | — | — | — | 42,620 | 38,783 | 52,675 | ||||||
Loss on early extinguishment of debt | — | 3,317 | — | — | — | 3,317 | 67,253 | |||||||
Total expenses | 567,843 | 509,333 | 492,358 | 491,487 | 493,066 | 1,569,534 | 1,366,683 | |||||||
Equity in earnings of unconsolidated real estate joint ventures | 40 | 213 | 220 | 3,018 | 3,091 | 473 | 9,237 | |||||||
Investment (loss) income | (32,305) | (39,481) | (240,319) | (112,884) | 67,084 | (312,105) | 372,361 | |||||||
Gain (loss) on sales of real estate | 323,699 | 214,219 | — | 124,226 | (435) | 537,918 | 2,344 | |||||||
Net income (loss) | 383,443 | 309,382 | (117,392) | 99,796 | 124,433 | 575,433 | 554,486 | |||||||
Net income attributable to noncontrolling interests | (38,747) | (37,168) | (32,177) | (24,901) | (21,286) | (108,092) | (58,134) | |||||||
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s | 344,696 | 272,214 | (149,569) | 74,895 | 103,147 | 467,341 | 496,352 | |||||||
Net income attributable to unvested restricted stock awards | (3,257) | (2,934) | (2,081) | (2,098) | (1,883) | (5,866) | (5,750) | |||||||
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s | $ 341,439 | $ 269,280 | $ (151,650) | $ 72,797 | $ 101,264 | $ 461,475 | $ 490,602 | |||||||
Net income (loss) per share attributable to Alexandria Real Estate Equities, | ||||||||||||||
Basic | $ 2.11 | $ 1.67 | $ (0.96) | $ 0.47 | $ 0.67 | $ 2.88 | $ 3.39 | |||||||
Diluted | $ 2.11 | $ 1.67 | $ (0.96) | $ 0.47 | $ 0.67 | $ 2.88 | $ 3.38 | |||||||
Weighted-average shares of common stock outstanding: | ||||||||||||||
Basic | 161,554 | 161,412 | 158,198 | 153,464 | 150,854 | 160,400 | 144,716 | |||||||
Diluted | 161,554 | 161,412 | 158,198 | 154,307 | 151,561 | 160,400 | 145,153 | |||||||
Dividends declared per share of common stock | $ 1.18 | $ 1.18 | $ 1.15 | $ 1.15 | $ 1.12 | $ 3.51 | $ 3.33 | |||||||
(1) | Refer to "Funds from operations and funds from operations per share" of this Earnings Press Release for additional details. |
Consolidated Balance Sheets | ||||||||||
9/30/22 | 6/30/22 | 3/31/22 | 12/31/21 | 9/30/21 | ||||||
Assets | ||||||||||
Investments in real estate | $ 28,771,745 | $ 27,952,931 | $ 27,100,009 | $ 24,980,669 | $ 23,071,514 | |||||
Investments in unconsolidated real estate joint ventures | 38,285 | 37,587 | 38,456 | 38,483 | 321,737 | |||||
Cash and cash equivalents | 533,824 | 420,258 | 775,060 | 361,348 | 325,872 | |||||
Restricted cash | 332,344 | 97,404 | 95,106 | 53,879 | 42,182 | |||||
Tenant receivables | 7,759 | 7,069 | 7,570 | 7,379 | 7,749 | |||||
Deferred rent | 918,995 | 905,699 | 881,743 | 839,335 | 816,219 | |||||
Deferred leasing costs | 506,864 | 498,434 | 484,184 | 402,898 | 329,952 | |||||
Investments | 1,624,921 | 1,657,461 | 1,661,101 | 1,876,564 | 2,046,878 | |||||
Other assets | 1,633,877 | 1,667,210 | 1,801,027 | 1,658,818 | 1,596,615 | |||||
Total assets | $ 34,368,614 | $ 33,244,053 | $ 32,844,256 | $ 30,219,373 | $ 28,558,718 | |||||
Liabilities, Noncontrolling Interests, and Equity | ||||||||||
Secured notes payable | $ 40,594 | $ 24,986 | $ 208,910 | $ 205,198 | $ 198,758 | |||||
Unsecured senior notes payable | 10,098,588 | 10,096,462 | 10,094,337 | 8,316,678 | 8,314,851 | |||||
Unsecured senior line of credit and commercial paper | 386,666 | 149,958 | — | 269,990 | 749,978 | |||||
Accounts payable, accrued expenses, and other liabilities | 2,393,764 | 2,317,940 | 2,172,692 | 2,210,410 | 2,149,450 | |||||
Dividends payable | 193,623 | 192,571 | 187,701 | 183,847 | 173,560 | |||||
Total liabilities | 13,113,235 | 12,781,917 | 12,663,640 | 11,186,123 | 11,586,597 | |||||
Commitments and contingencies | ||||||||||
Redeemable noncontrolling interests | 9,612 | 9,612 | 9,612 | 9,612 | 11,681 | |||||
Alexandria Real Estate Equities, Inc.'s stockholders' equity: | ||||||||||
Common stock | 1,626 | 1,615 | 1,614 | 1,580 | 1,532 | |||||
Additional paid-in capital | 17,639,434 | 17,149,571 | 16,934,094 | 16,195,256 | 14,727,735 | |||||
Accumulated other comprehensive loss | (24,725) | (11,851) | (5,727) | (7,294) | (6,029) | |||||
Alexandria Real Estate Equities, Inc.'s stockholders' equity | 17,616,335 | 17,139,335 | 16,929,981 | 16,189,542 | 14,723,238 | |||||
Noncontrolling interests | 3,629,432 | 3,313,189 | 3,241,023 | 2,834,096 | 2,237,202 | |||||
Total equity | 21,245,767 | 20,452,524 | 20,171,004 | 19,023,638 | 16,960,440 | |||||
Total liabilities, noncontrolling interests, and equity | $ 34,368,614 | $ 33,244,053 | $ 32,844,256 | $ 30,219,373 | $ 28,558,718 | |||||
Funds From Operations and Funds From Operations per Share | ||||||||||||||
The following table presents a reconciliation of net income (loss) attributable to Alexandria's common stockholders, the most directly comparable financial measure presented in | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
9/30/22 | 6/30/22 | 3/31/22 | 12/31/21 | 9/30/21 | 9/30/22 | 9/30/21 | ||||||||
Net income (loss) attributable to Alexandria's common stockholders | $ 341,439 | $ 269,280 | $ (151,650) | $ 72,797 | $ 101,264 | $ 461,475 | $ 490,602 | |||||||
Depreciation and amortization of real estate assets | 251,453 | 238,565 | 237,160 | 234,979 | 205,436 | 727,178 | 569,654 | |||||||
Noncontrolling share of depreciation and amortization from consolidated real | (27,790) | (26,418) | (23,681) | (21,265) | (17,871) | (77,889) | (49,615) | |||||||
Our share of depreciation and amortization from unconsolidated real estate JVs | 795 | 934 | 955 | 3,058 | 3,465 | 2,684 | 10,676 | |||||||
(Gain) loss on sales of real estate | (323,699) | (214,219) | — | (124,226) | 435 | (537,918) | (2,344) | |||||||
Impairment of real estate – rental properties | — | — | — | — | 18,602 | — | 25,485 | |||||||
Allocation to unvested restricted stock awards | 1,002 | — | — | — | (1,472) | (81) | (6,574) | |||||||
Funds from operations attributable to Alexandria's common stockholders – | 243,200 | 268,142 | 62,784 | 165,343 | 309,859 | 575,449 | 1,037,884 | |||||||
Unrealized losses (gains) on non-real estate investments | 56,515 | 68,128 | 263,433 | 139,716 | 14,432 | 388,076 | (183,348) | |||||||
Significant realized gains on non-real estate investments | — | — | — | — | (52,427) | — | (110,119) | |||||||
Impairment of real estate | 38,783 | (2) | — | — | — | 24,018 | 38,783 | 27,190 | ||||||
Loss on early extinguishment of debt | — | 3,317 | — | — | — | 3,317 | 67,253 | |||||||
Acceleration of stock compensation expense due to executive officer resignation | 7,185 | (3) | — | — | — | — | 7,185 | — | ||||||
Allocation to unvested restricted stock awards | (1,033) | (778) | (1,604) | (1,432) | 149 | (4,743) | 2,400 | |||||||
Funds from operations attributable to Alexandria's common stockholders – | $ 344,650 | $ 338,809 | $ 324,613 | $ 303,627 | $ 296,031 | $ 1,008,067 | $ 841,260 | |||||||
(1) | Calculated in accordance with standards established by the Nareit Board of Governors. |
(2) | Includes $38.3 million related to the impairment of one future development, which we recognized upon our decision not to proceed with the project. |
(3) | Relates to the resignation of Stephen A. Richardson, our former Co-Chief Executive Officer, in July 2022. |
Funds From Operations and Funds From Operations per Share (continued) | ||||||||||||||
The following table presents a reconciliation of net income (loss) per share attributable to Alexandria's common stockholders, the most directly comparable financial measure presented in | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
9/30/22 | 6/30/22 | 3/31/22 | 12/31/21 | 9/30/21 | 9/30/22 | 9/30/21 | ||||||||
Net income (loss) per share attributable to Alexandria's common | $ 2.11 | $ 1.67 | $ (0.96) | $ 0.47 | $ 0.67 | $ 2.88 | $ 3.38 | |||||||
Depreciation and amortization of real estate assets | 1.39 | 1.32 | 1.36 | 1.40 | 1.26 | 4.06 | 3.66 | |||||||
Gain on sales of real estate | (2.00) | (1.33) | — | (0.80) | — | (3.35) | (0.02) | |||||||
Impairment of real estate – rental properties | — | — | — | — | 0.12 | — | 0.18 | |||||||
Allocation to unvested restricted stock awards | 0.01 | — | — | — | (0.01) | — | (0.05) | |||||||
Funds from operations per share attributable to Alexandria's common | 1.51 | 1.66 | 0.40 | 1.07 | 2.04 | 3.59 | 7.15 | |||||||
Unrealized losses (gains) on non-real estate investments | 0.35 | 0.42 | 1.67 | 0.91 | 0.10 | 2.42 | (1.26) | |||||||
Significant realized gains on non-real estate investments | — | — | — | — | (0.35) | — | (0.76) | |||||||
Impairment of real estate | 0.24 | — | — | — | 0.16 | 0.24 | 0.19 | |||||||
Loss on early extinguishment of debt | — | 0.02 | — | — | — | 0.02 | 0.46 | |||||||
Acceleration of stock compensation expense due to executive officer resignation | 0.04 | — | — | — | — | 0.04 | — | |||||||
Allocation to unvested restricted stock awards | (0.01) | — | (0.02) | (0.01) | — | (0.03) | 0.02 | |||||||
Funds from operations per share attributable to Alexandria's common | $ 2.13 | $ 2.10 | $ 2.05 | $ 1.97 | $ 1.95 | $ 6.28 | $ 5.80 | |||||||
Weighted-average shares of common stock outstanding for calculation of: | ||||||||||||||
Earnings per share – diluted | 161,554 | 161,412 | 158,198 | 154,307 | 151,561 | 160,400 | 145,153 | |||||||
Funds from operations, diluted, per share | 161,554 | 161,412 | 158,209 | 154,307 | 151,561 | 160,400 | 145,153 | |||||||
Funds from operations, diluted, as adjusted, per share | 161,554 | 161,412 | 158,209 | 154,307 | 151,561 | 160,400 | 145,153 | |||||||
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SOURCE Alexandria Real Estate Equities, Inc.
