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Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2018 |
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Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2018 | i |
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(1) See “Definitions and Reconciliations” in our Supplemental Information. As of December 31, 2017, annual rental revenue from investment-grade tenants excluding large cap tenants and annual rental revenue from investment-grade tenants excluding large cap tenants within our top 20 tenants were 46% and 72%, respectively. |
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Table of Contents | |
December 31, 2017 | |
EARNINGS PRESS RELEASE | Page |
SUPPLEMENTAL INFORMATION | Page |
Internal Growth | |
SUPPLEMENTAL INFORMATION (CONTINUED) | Page |
External Growth / Investments in Real Estate | |
Development and Redevelopment of New Class A Properties: | |
Balance Sheet Management | |
Definitions and Reconciliations | |
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 see page 8 of this Earnings Press Release and 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 its consolidated subsidiaries. |
Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2018 | iii |
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Alexandria Real Estate Equities, Inc.
Reports
Fourth Quarter and Year Ended December 31, 2017, Financial and Operating Results
Strong Internal and External Growth and
Significant Strategic Acquisitions and Growing Dividends
PASADENA, Calif. – January 29, 2018 – Alexandria Real Estate Equities, Inc. (NYSE:ARE)
announced financial and operating results for the fourth quarter and year ended December 31, 2017.
Key highlights
Increased common stock dividend
Common stock dividend for 2017 of $3.45 per common share, up 22 cents, or 7%, over 2016; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.
Leader in the Light award
In November 2017, we were awarded Nareit’s 2017 “Most Innovative” Leader in the Light, the highest achievement in sustainability innovation for all REITs and real estate companies.
Strong internal growth
• | Total revenues: |
• | $298.8 million, up 19.9%, for 4Q17, compared to $249.2 million for 4Q16 |
• | $1.1 billion, up 22.4%, for 2017, compared to $921.7 million for 2016 |
• | Continued substantial leasing activity and strong rental rate growth, in light of minimal contractual lease expirations for 4Q17 and 2017 and a highly leased value-creation pipeline: |
4Q17 | 2017 | |||||
Total leasing activity – RSF | 1,379,699 | 4,569,182 | ||||
Lease renewals and re-leasing of space: | ||||||
Rental rate increases | 24.8% | 25.1% | ||||
Rental rate increases (cash basis) | 10.4% | 12.7% | ||||
RSF (included in total leasing activity above) | 593,622 | 2,525,099 |
• | Executed key leases during 4Q17: |
• | 520,988 RSF leased to Facebook, Inc. at Menlo Gateway in our Greater Stanford submarket; |
• | 170,244 RSF renewal with Theravance Biopharma U.S., Inc. at 901 and 951 Gateway Boulevard in our South San Francisco submarket, with an average lease term of 10.2 years and rental rate increases of 59.2% and 15.1% (cash basis). |
• | Same property net operating income growth: |
• | 4.5% and 12.5% (cash basis) for 4Q17, compared to 4Q16 |
• | 3.1% and 6.8% (cash basis) for 2017, compared to 2016 |
Strong external growth; disciplined allocation of capital to visible, multiyear, highly leased
value-creation pipeline
• | Development projects, 100% leased, and placed into service in 4Q17: |
Property | Submarket | RSF | Tenant | |||||
510 Townsend Street | Mission Bay/SoMa | 295,333 | Stripe, Inc. | |||||
ARE Spectrum | Torrey Pines | 170,523 | Vertex Pharmaceuticals Inc. | |||||
505 Brannan Street | Mission Bay/SoMa | 148,146 | Pinterest, Inc. | |||||
400 Dexter Avenue North | Lake Union | 25,518 | Juno Therapeutics, Inc. |
• | Significant contractual near-term growth in annual cash rents of $96 million, of which $78 million will commence through 4Q18 ($26 million in 1Q18, $31 million in 2Q18, $10 million in 3Q18, and $11 million in 4Q18). This is related to development and redevelopment projects recently placed into service that are currently generating rental revenue. |
• | 4Q17 commencements of development projects aggregating 884,000 RSF, including: |
• | 520,988 RSF at Menlo Gateway in our Greater Stanford submarket; |
• | 164,000 RSF at 399 Binney Street in our Alexandria Center® at One Kendall Square campus in our Cambridge submarket; and |
• | 199,000 RSF at 279 East Grand Avenue in our South San Francisco submarket. |
• | 80% leased on 2.3 million RSF (development and redevelopment projects undergoing construction and 580,000 RSF undergoing pre-construction). |
Completed strategic acquisitions
Opportunistic acquisitions completed or under contract:
• | In 4Q17, acquired five properties in three transactions for an aggregate purchase price of $146.4 million, including the Menlo Gateway joint venture: |
• | Menlo Gateway real estate joint venture in our Greater Stanford submarket closed in November 2017: |
• | 772,983 RSF Class A office space, including 520,988 RSF of ground-up development, 100% leased to Facebook, Inc.; and |
• | 21% interest as of 4Q17, increasing to 49% interest by 1Q19. |
• | As of January 2018, we have closed and pending acquisitions aggregating $375.5 million in key submarkets with value-add operating, redevelopment, and future development opportunities. |
Operating results | 4Q17 | 4Q16 | Change | 2017 | 2016 | Change | |||||||||||||||
Net income (loss) attributable to Alexandria’s common stockholders – diluted: | |||||||||||||||||||||
In millions | $ | 36.8 | $ | (25.1 | ) | N/A | $ | 145.4 | $ | (151.1 | ) | N/A | |||||||||
Per share | $ | 0.38 | $ | (0.31 | ) | N/A | $ | 1.58 | $ | (1.99 | ) | N/A | |||||||||
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted: | |||||||||||||||||||||
In millions | $ | 147.0 | $ | 115.5 | 27.2 | % | $ | 554.5 | $ | 421.3 | 31.6 | % | |||||||||
Per share | $ | 1.53 | $ | 1.42 | 7.7 | % | $ | 6.02 | $ | 5.51 | 9.3 | % |
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Fourth Quarter and Year Ended December 31, 2017, Financial and Operating Results (continued) | |
December 31, 2017 | |
Items included in net income (loss) attributable to Alexandria’s common stockholders (amounts are shown after deducting any amounts attributable to noncontrolling interests): | |||||||||||||||||||||||||||||||
(In millions, except per share amounts) | Amount | Per Share – Diluted | Amount | Per Share – Diluted | |||||||||||||||||||||||||||
4Q17 | 4Q16 | 4Q17 | 4Q16 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
Gain on sales of: | |||||||||||||||||||||||||||||||
Real estate | $ | — | $ | 3.7 | $ | — | $ | 0.05 | $ | 14.5 | $ | 3.8 | $ | 0.15 | $ | 0.05 | |||||||||||||||
Non-real estate investments | — | — | — | — | — | 4.4 | — | 0.06 | |||||||||||||||||||||||
Impairment of: | |||||||||||||||||||||||||||||||
Rental properties | — | (3.5 | ) | — | (0.04 | ) | (0.2 | ) | (98.2 | ) | — | (1.29 | ) | ||||||||||||||||||
Land parcels | — | (12.5 | ) | — | (0.16 | ) | — | (110.4 | ) | — | (1.45 | ) | |||||||||||||||||||
Non-real estate investments | (3.8 | ) | — | (0.04 | ) | — | (8.3 | ) | (3.1 | ) | (0.09 | ) | (0.04 | ) | |||||||||||||||||
Loss on early extinguishment of debt | (2.8 | ) | — | (0.03 | ) | — | (3.5 | ) | (3.2 | ) | (0.03 | ) | (0.04 | ) | |||||||||||||||||
Preferred stock redemption charge | — | (35.7 | ) | — | (0.44 | ) | (11.3 | ) | (61.3 | ) | (0.12 | ) | (0.81 | ) | |||||||||||||||||
Total | $ | (6.6 | ) | $ | (48.0 | ) | $ | (0.07 | ) | $ | (0.59 | ) | $ | (8.8 | ) | $ | (268.0 | ) | $ | (0.09 | ) | $ | (3.52 | ) | |||||||
Weighted-average shares of common stock outstanding – diluted | 95.9 | 80.8 | 92.1 | 76.1 |
4Q16 and 2016 per share amounts above may not agree to funds from operations per share amounts due to the different weighted-average shares used in each period and the impact of per share amounts allocable to unvested restricted stock awards. See “Definitions and Reconciliations” on page 55 of our Supplemental Information for additional information.
Core operating metrics as of 4Q17; high quality revenue and cash flows
• | Percentage of annual rental revenue in effect from: |
• | Investment-grade or large cap tenants: 55% |
• | Class A properties in AAA locations: 80% |
• | Occupancy in North America: 96.8% |
• | Operating margin: 71% |
• | Adjusted EBITDA margin: 68% |
• | Weighted-average remaining lease term of top 20 tenants: 13.4 years |
• | See “Strong internal growth” in the key highlights section on the previous page for information on our leasing activity, rental rate growth, total revenue, and same property net operating income growth. |
Balance sheet management
Key metrics | 4Q17 | ||||
Total market capitalization | $ | 17.9 | billion | ||
Liquidity | $ | 2.0 | billion | ||
Net debt to Adjusted EBITDA: | |||||
Quarter annualized | 5.5x | ||||
Trailing 12 months | 5.9x | ||||
Fixed-charge coverage ratio: | |||||
Quarter annualized | 4.2x | ||||
Trailing 12 months | 4.1x | ||||
Unhedged variable-rate debt as a percentage of total debt | 1% | ||||
Current and future value-creation pipeline as a percentage of gross investments in real estate in North America | 9% |
Key capital events
• | In November 2017, we completed the offering of $600.0 million, 3.45%, unsecured senior notes, due in 2025, for net proceeds of $593.5 million. We used the net proceeds to repay LIBOR-based debt, including two of our secured construction loans aggregating $389.8 million and borrowings under our $1.65 billion unsecured senior line of credit. We recognized a loss on early extinguishment of debt of $2.8 million related to the early retirement of these two construction loans. |
• | During 4Q17, we sold 690 thousand shares of common stock under our ATM program for gross proceeds of $86.7 million, or $125.70 per share, and received net proceeds of $85.4 million. As of 4Q17, we had $413.4 million available for future sales under the ATM program. |
• | In December 2017, we issued 4.8 million shares of our common stock to settle our forward equity sales agreements executed in March 2017. Net proceeds of $484.6 million were used to fund highly leased construction projects in 2H17 and recent 2017 acquisitions. |
• | In January 2018, we entered into forward equity sales agreements to sell an aggregate 6.9 million shares of our common stock (including the exercise of underwriters’ option) at a public offering price of $123.50 per share. We expect to receive proceeds of $817.3 million, to be further adjusted as provided in the sales agreements, which will fund the current and near-term value-creation pipeline and opportunistic, strategic acquisitions in 2018. |
• | Completed dispositions during 4Q17, including two partial interest sales, for an aggregate sales price of $42.8 million. Refer to page 6 of this Earnings Press Release for additional information. |
Corporate responsibility and industry leadership
• | In January 2018, Alexandria Venture Investments launched the Alexandria Seed Capital Platform, an innovative seed-stage life science funding model and extension of Alexandria LaunchLabs, which will focus on providing seed-stage financing in transformative life science investments. |
• | In November 2017, Joel S. Marcus, Chairman, Chief Executive Officer & Founder, was elected as a member of Nareit’s 2018 Executive Board. |
• | See “Leader in the Light award” on page 1 of this Earnings Press Release. |
• | In November 2017, Alexandria LaunchLabs® - New York City was certified as the world’s first WELL laboratory, and achieved Gold-level recognition from the International WELL Building Institute. |
• | In November 2017, the Center for Active Design, an international nonprofit organization and operator of the Fitwel Certification System, appointed us to the Fitwel Leadership Advisory Board as a founding member. |
• | In January 2018, we were awarded a 2017 Governor’s Environmental and Economic Leadership Award, California’s highest environmental honor recognizing entities that have demonstrated exceptional leadership and made notable contributions to conserving precious natural resources while promoting economic growth. |
• | During 4Q17, we obtained Leadership in Energy and Environmental Design (“LEED®”) Gold certifications for properties within our Alexandria Center® at Kendall Square campus at 50 and 60 Binney Street and 11 Hurley Street in our Cambridge submarket. |
• | 49% of annual rental revenue expected from LEED certified projects upon completion of 12 in-process projects. |
Select 2017 Highlights | ![]() | |
December 31, 2017 | ||
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See our Fourth Quarter and Year Ended December 31, 2017 Earnings Press Release and Supplemental Information for additional information, non-GAAP measures, and definitions.
Acquisitions | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
4Q17 Acquisitions
Property | Submarket/Market | Date of Purchase | Number of Properties | Occupancy | Square Footage | Purchase Price | ||||||||||||||
Operating | Development/Redevelopment | |||||||||||||||||||
701 Gateway Boulevard(1) | South San Francisco/San Francisco | 12/19/17 | 1 | 90.6% | 170,862 | — | $ | 76,000 | ||||||||||||
Menlo Gateway (unconsolidated JV)(2) | Greater Stanford/San Francisco | 11/27/17 | 3 | 100% | 251,995 | 520,988 | 59,936 | |||||||||||||
4110 Campus Point Court (55% interest)(3) | University Town Center/San Diego | 12/28/17 | 1 | 100% | 44,034 | — | 10,450 | |||||||||||||
466,891 | 520,988 | $ | 146,386 |
We expect to provide total estimated costs at completion and related yields of development and redevelopment projects in the future.
(1) | Office building located within our Alexandria Technology Center® – Gateway campus. The property is 90.6% leased as of December 31, 2017, to multiple tenants with minimal near-term lease expirations, and we expect initial stabilized yields of 7.2% and 6.3% (cash basis) upon lease-up of the existing vacant office space. In addition, the property provides future opportunities to enhance our returns through the conversion of existing office space to office/laboratory space through redevelopment, and development of a new building. |
(2) | See page 5 of this Earnings Press Release for additional information on our acquisition in this real estate joint venture. |
(3) | Represents a 55% interest in a real estate joint venture with TIAA, which owns a property that expands our Campus Pointe by Alexandria campus. The joint venture leased the existing 44,034 RSF property back to the seller for one year, after which the joint venture may consider options to redevelop the existing property into tech office or office/laboratory space. |
1Q18 Acquisitions under purchase agreement/letter of intent
Property | Submarket/Market | Date of Purchase | Number of Properties | Anticipated Use | Occupancy | Square Footage | Purchase Price | ||||||||||||||||||||
Operating | Development/Redevelopment | Future Development | |||||||||||||||||||||||||
1455 and 1515 Third Street (acquisition of remaining 49% interest)(1) | Mission Bay/SoMa/ San Francisco | N/A | 2 | Office | 100% | N/A | — | — | $ | 37,800 | |||||||||||||||||
1655 and 1715 Third Street (10% interest in unconsolidated JV)(2) | Mission Bay/SoMa/ San Francisco | February 2018 | 2 | Office | N/A | — | 580,000 | — | 31,000 | (2) | |||||||||||||||||
2100-2400 Geng Road(3) | Greater Stanford/ San Francisco | 1/25/18 | 4 | Office/lab | 77% | 165,811 | 31,687 | — | 136,000 | ||||||||||||||||||
9965-9995 Summers Ridge Road(4) | Sorrento Mesa/ San Diego | 1/5/18 | 4 | Office/lab | 100% | 316,531 | — | 50,000 | 148,650 | ||||||||||||||||||
Pending | San Diego | 2Q18 | — | Office or lab | N/A | — | — | 120,000 | 17,000 | |||||||||||||||||||
Pending | Maryland | March 2018 | 1 | Office/lab | 31% | 24,846 | 54,485 | — | 5,000 | |||||||||||||||||||
507,188 | 666,172 | 170,000 | 375,450 | ||||||||||||||||||||||||
Additional projected acquisitions | 295,000 - 395,000 | ||||||||||||||||||||||||||
2018 Guidance range | $670,000 - $770,000 |
(1) | The first installment of $18.9 million related to our November 2016 acquisition was paid in 2Q17, the second installment of $18.9 million was paid in January 2018, and we expect the final installment to be paid during 1H18. |
(2) | Represents a 10% interest in a joint venture with Uber and the Golden State Warriors expected to be formed in February 2018. The joint venture is developing two office buildings aggregating 580,000 RSF, adjacent to the Golden State Warriors arena, which are 100% leased to Uber. Our initial equity contribution of $31.0 million will be funded at formation of the joint venture, and the project will transfer from pre-construction to under construction, with initial occupancy expected in 2019. |
(3) | Four-building office campus on 11 acres with 14 in-place leases with a weighted-average remaining lease term of three years. We are evaluating options for the conversion of existing office space into office/laboratory space through redevelopment. We expect to provide total estimated costs at completion and related yields in the future. |
(4) | A campus, with on-site amenities, consisting of four operating properties aggregating 316,531 RSF. The property also includes a future development opportunity for an additional 50,000 RSF building. The properties are 100% leased as of December 31, 2017, to Quidel Corporation and Abbott Laboratories, for aggregate terms of 15 years. We expect initial stabilized yields of 8.2% and 6.3% (cash basis) with an opportunity to enhance our initial return through future development. |
Acquisitions (continued): Menlo Gateway | ![]() | |
December 31, 2017 | ||
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(1) Includes our share of investment in real estate joint venture working capital.
(2) The joint venture is in process of obtaining non-recourse construction financing for the development project for Phase II of our Menlo Gateway joint venture.
Dispositions | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Property/Market/Submarket | Date of Sale | RSF | Net Operating Income(1) | Net Operating Income (Cash Basis)(1) | Contractual Sales Price | Gain | |||||||||||||||||
360 Longwood Avenue/Greater Boston/Longwood Medical Area | 7/6/17 | 203,090 | $ | 4,313 | $ | 4,168 | $ | 65,701 | $ | 14,106 | |||||||||||||
9625 Towne Centre Drive/San Diego/University Town Center (sale of partial interest)(2) | 12/19/17 | 163,648 | N/A | N/A | 13,470 | N/A | |||||||||||||||||
Campus Point Drive, Development Rights/San Diego/University Town Center (sale of 45% interest)(3) | 12/19/17 | 318,383 | N/A | N/A | 12,895 | N/A | |||||||||||||||||
6146 Nancy Ridge Drive/San Diego/Sorrento Mesa | 1/6/17 | 21,940 | N/A | N/A | 3,000 | 270 | |||||||||||||||||
1401/1413 Research Boulevard/Maryland/Rockville(4) | 5/17/17 | 90,000 | N/A | N/A | 7,937 | 111 | |||||||||||||||||
Operating property in China | 11/27/17 | 300,184 | $ | 365 | $ | 392 | 11,167 | — | |||||||||||||||
$ | 114,170 | $ | 14,487 | ||||||||||||||||||||
(1) | Represents annualized amounts for the quarter ended prior to the date of sale. Net operating income (cash basis) excludes straight-line rent and amortization of acquired below-market leases. |
(2) | In December 2017, we entered into a joint venture agreement to sell to TIAA a 49.9% interest in 9625 Towne Centre Drive, a 163,648 RSF redevelopment project undergoing construction in our University Town Center submarket, which is 100% leased to Takeda Pharmaceutical Company Ltd. We received an initial contribution of $13.5 million from TIAA for a 35.9% initial ownership interest as of December 31, 2017, and expect TIAA’s ownership interest to increase to 49.9% by the end of 2Q18 through additional capital contributions to fund construction. |
(3) | In connection with the agreement to sell a 45% partial interest in 10290 Campus Point Drive to TIAA in 2016, we also agreed to sell to TIAA a 45% partial interest in the related development rights aggregating 318,383 RSF in our Campus Pointe by Alexandria campus at a sales price of $90 per SF. The sale of the development rights was contingent upon the completion of certain entitlement milestones. Upon completion of the entitlement milestones, we completed the 45% partial interest sale of the related development rights in December 2017. |
(4) | Joint venture with a distinguished retail real estate developer for the development of a 90,000 RSF retail shopping center, with remaining construction costs to be funded from a $25.0 million non-recourse secured construction loan. |
Guidance | ![]() | |
December 31, 2017 | ||
(Dollars in millions, except per share amounts) | ||
The following updated guidance is based on our current view of existing market conditions and assumptions for the year ending December 31, 2018. There can be no assurance that actual amounts will be materially higher or lower than these expectations. See our discussion of “forward-looking statements” on page 8 of this Earnings Press Release.
Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s Common Stockholders – Diluted | |||||
Earnings per share | $2.04 to $2.24 | (1) | |||
Depreciation and amortization | 4.45 | ||||
Allocation to unvested restricted stock awards | (0.04) | ||||
Funds from operations per share | $6.45 to $6.65 | (1) |
Key Assumptions | Low | High | |||||||
Occupancy percentage in North America as of December 31, 2018 | 96.9% | 97.5% | |||||||
Lease renewals and re-leasing of space: | |||||||||
Rental rate increases | 13.0% | 16.0% | |||||||
Rental rate increases (cash basis) | 7.5% | 10.5% | |||||||
Same property performance: | |||||||||
Net operating income increase | 2.5% | 4.5% | |||||||
Net operating income increase (cash basis) | 9.0% | 11.0% | |||||||
Straight-line rent revenue | $ | 92 | $ | 102 | (3) | ||||
General and administrative expenses | $ | 85 | $ | 90 | |||||
Capitalization of interest | $ | 55 | $ | 65 | |||||
Interest expense | $ | 155 | $ | 165 | |||||
Key Credit Metrics | 2018 Guidance | ||
Net debt to Adjusted EBITDA – 4Q18 annualized | Less than 5.5x | ||
Net debt and preferred stock to Adjusted EBITDA – 4Q18 annualized | Less than 5.5x | ||
Fixed-charge coverage ratio – 4Q18 annualized | Greater than 4.0x | ||
Value-creation pipeline as a percentage of gross real estate as of December 31, 2018 | 8% to 12% |
Key Sources and Uses of Capital | Range | Midpoint | Key Completed Items | |||||||||||||||
Sources of capital: | ||||||||||||||||||
Net cash provided by operating activities after dividends | $ | 140 | $ | 180 | $ | 160 | ||||||||||||
Incremental debt | 470 | 430 | 450 | |||||||||||||||
Real estate dispositions, partial interest sales, and common equity | 1,110 | 1,310 | 1,210 | $ | 817 | (2) | ||||||||||||
Total sources of capital | $ | 1,720 | $ | 1,920 | $ | 1,820 | ||||||||||||
Uses of capital: | ||||||||||||||||||
Construction | $ | 1,050 | $ | 1,150 | $ | 1,100 | ||||||||||||
Acquisitions | 670 | 770 | 720 | (4) | ||||||||||||||
Total uses of capital | $ | 1,720 | $ | 1,920 | $ | 1,820 | ||||||||||||
Incremental debt (included above): | ||||||||||||||||||
Issuance of unsecured senior notes payable | $ | 550 | $ | 650 | $ | 600 | ||||||||||||
Repayments of secured notes payable | (10 | ) | (15 | ) | (13 | ) | ||||||||||||
Repayment of unsecured senior bank term loan | (200 | ) | (200 | ) | (200 | ) | ||||||||||||
$1.65 billion unsecured senior line of credit/other | 130 | (5 | ) | 63 | ||||||||||||||
Incremental debt | $ | 470 | $ | 430 | $ | 450 |
(1) | Excludes the impact of changes in fair value for equity investments pursuant to a new accounting standard effective January 1, 2018. For a comprehensive discussion on the new accounting standard update, refer to the “Recent Accounting Pronouncements” section in Note 2 – “Summary of Significant Accounting Policies” in our September 30, 2017, Form 10-Q filed on October 31, 2017, and our 2017 annual report on Form 10-K. |
(2) | Represents 6.9 million shares of our common stock subject to forward equity sales agreements executed in January 2018, with anticipated aggregate net proceeds of $817.3 million, subject to adjustments as provided in the forward equity sales agreements. The forward equity sales agreements expire no later than April 2019, and we expect to settle these agreements in 2018. |
(3) | Approximately 50% of straight-line rent revenue represents initial free rent on recently delivered and expected 2018 deliveries of new Class A properties from our development and redevelopment pipeline. |
(4) | See “Acquisitions” on page 4 of this Earnings Press Release. |
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Earnings Call Information and About the Company | |
December 31, 2017 | |
We will host a conference call on Tuesday, January 30, 2018, at 3:00 p.m. Eastern Time (“ET”)/noon Pacific Time (“PT”), which is open to the general public to discuss our financial and operating results for the fourth quarter and year ended December 31, 2017. To participate in this conference call, dial (877) 270-2148 or (412) 902-6510 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the Alexandria Real Estate Equities, Inc. call. 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, January 30, 2018. The replay number is (877) 344-7529 or (412) 317-0088, and the confirmation code is 10114665.
Additionally, a copy of this Earnings Press Release and Supplemental Information for the fourth quarter and year ended December 31, 2017, is available in the “For Investors” section of our website at www.are.com or by following this link: http://www.are.com/fs/2017q4.pdf.
For any questions, please contact Joel S. Marcus, chairman, chief executive officer, and founder, at (626) 578-9693 or Dean A. Shigenaga, executive vice president, chief financial officer, and treasurer, at (626) 578-0777.
About the Company
Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office real estate investment trust (“REIT”) uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $17.9 billion and an asset base in North America of 29.6 million SF as of December 31, 2017. The asset base in North America includes 22.0 million RSF of operating properties, including 1.7 million RSF of development and redevelopment of new Class A properties currently undergoing construction. Additionally, the asset base in North America includes 7.6 million SF of future development projects, including 1.6 million SF of near-term projects undergoing marketing for lease and pre-construction activities and 3.8 million SF of intermediate-term development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science and technology campuses that provide its 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 risk capital to transformative life science and technology companies through its venture capital arm. 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 2018 earnings per share attributable to Alexandria’s common stockholders – diluted, 2018 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,” “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, 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 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.
Consolidated Statements of Income | ![]() |
December 31, 2017 | |
(In thousands, except per share amounts) | |
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | 12/31/16 | 12/31/17 | 12/31/16 | ||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||
Rental | $ | 228,025 | $ | 216,021 | $ | 211,942 | $ | 207,193 | $ | 187,315 | $ | 863,181 | $ | 673,820 | ||||||||||||||
Tenant recoveries | 70,270 | 67,058 | 60,470 | 61,346 | 58,270 | 259,144 | 223,655 | |||||||||||||||||||||
Other income | 496 | (1) | 2,291 | 647 | 2,338 | 3,577 | 5,772 | 24,231 | ||||||||||||||||||||
Total revenues | 298,791 | 285,370 | 273,059 | 270,877 | 249,162 | 1,128,097 | 921,706 | |||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||
Rental operations | 88,073 | 83,469 | 76,980 | 77,087 | 73,244 | 325,609 | 278,408 | |||||||||||||||||||||
General and administrative | 18,910 | 17,636 | 19,234 | 19,229 | 17,458 | 75,009 | 63,884 | |||||||||||||||||||||
Interest | 36,082 | 31,031 | 31,748 | 29,784 | 31,223 | 128,645 | 106,953 | |||||||||||||||||||||
Depreciation and amortization | 107,714 | 107,788 | 104,098 | 97,183 | 95,222 | 416,783 | 313,390 | |||||||||||||||||||||
Impairment of real estate | — | — | 203 | — | 16,024 | 203 | 209,261 | |||||||||||||||||||||
Loss on early extinguishment of debt | 2,781 | — | — | 670 | — | 3,451 | 3,230 | |||||||||||||||||||||
Total expenses | 253,560 | 239,924 | 232,263 | 223,953 | 233,171 | 949,700 | 975,126 | |||||||||||||||||||||
Equity in earnings (losses) of unconsolidated real estate joint ventures | 376 | 14,100 | 589 | 361 | 86 | 15,426 | (184 | ) | ||||||||||||||||||||
Gain on sales of real estate – rental properties | — | — | — | 270 | 3,715 | 270 | 3,715 | |||||||||||||||||||||
Gain on sales of real estate – land parcels | — | — | 111 | — | — | 111 | 90 | |||||||||||||||||||||
Net income (loss) | 45,607 | 59,546 | 41,496 | 47,555 | 19,792 | 194,204 | (49,799 | ) | ||||||||||||||||||||
Net income attributable to noncontrolling interests | (6,219 | ) | (5,773 | ) | (7,275 | ) | (5,844 | ) | (4,488 | ) | (25,111 | ) | (16,102 | ) | ||||||||||||||
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s stockholders | 39,388 | 53,773 | 34,221 | 41,711 | 15,304 | 169,093 | (65,901 | ) | ||||||||||||||||||||
Dividends on preferred stock | (1,302 | ) | (1,302 | ) | (1,278 | ) | (3,784 | ) | (3,835 | ) | (7,666 | ) | (20,223 | ) | ||||||||||||||
Preferred stock redemption charge | — | — | — | (11,279 | ) | (35,653 | ) | (11,279 | ) | (61,267 | ) | |||||||||||||||||
Net income attributable to unvested restricted stock awards | (1,255 | ) | (1,198 | ) | (1,313 | ) | (987 | ) | (943 | ) | (4,753 | ) | (3,750 | ) | ||||||||||||||
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | $ | 36,831 | $ | 51,273 | $ | 31,630 | $ | 25,661 | $ | (25,127 | ) | $ | 145,395 | $ | (151,141 | ) | ||||||||||||
Net income (loss) per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders: | ||||||||||||||||||||||||||||
Basic | $ | 0.39 | $ | 0.55 | $ | 0.35 | $ | 0.29 | $ | (0.31 | ) | $ | 1.59 | $ | (1.99 | ) | ||||||||||||
Diluted | $ | 0.38 | $ | 0.55 | $ | 0.35 | $ | 0.29 | $ | (0.31 | ) | $ | 1.58 | $ | (1.99 | ) | ||||||||||||
Weighted-average shares of common stock outstanding: | ||||||||||||||||||||||||||||
Basic | 95,138 | 92,598 | 90,215 | 88,147 | 80,800 | 91,546 | 76,103 | |||||||||||||||||||||
Diluted | 95,914 | 93,296 | 90,745 | 88,200 | 80,800 | 92,063 | 76,103 | |||||||||||||||||||||
Dividends declared per share of common stock | $ | 0.90 | $ | 0.86 | $ | 0.86 | $ | 0.83 | $ | 0.83 | $ | 3.45 | $ | 3.23 |
(1) | Includes an impairment charge of $3.8 million related to one publicly traded non-real estate investment. |
Consolidated Balance Sheets | ![]() |
December 31, 2017 | |
(In thousands) | |
12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | 12/31/16 | ||||||||||||||||
Assets | ||||||||||||||||||||
Investments in real estate | $ | 10,298,019 | $ | 10,046,521 | $ | 9,819,413 | $ | 9,470,667 | $ | 9,077,972 | ||||||||||
Investments in unconsolidated real estate joint ventures | 110,618 | 33,692 | 58,083 | 50,457 | 50,221 | |||||||||||||||
Cash and cash equivalents | 254,381 | 118,562 | 124,877 | 151,209 | 125,032 | |||||||||||||||
Restricted cash | 22,805 | 27,713 | 20,002 | 18,320 | 16,334 | |||||||||||||||
Tenant receivables | 10,262 | 9,899 | 8,393 | 9,979 | 9,744 | |||||||||||||||
Deferred rent | 434,731 | 402,353 | 383,062 | 364,348 | 335,974 | |||||||||||||||
Deferred leasing costs | 221,430 | 208,265 | 201,908 | 202,613 | 195,937 | |||||||||||||||
Investments | 523,254 | 485,262 | 424,920 | 394,471 | 342,477 | |||||||||||||||
Other assets | 228,453 | 213,056 | 205,009 | 206,562 | 201,197 | |||||||||||||||
Total assets | $ | 12,103,953 | $ | 11,545,323 | $ | 11,245,667 | $ | 10,868,626 | $ | 10,354,888 | ||||||||||
Liabilities, Noncontrolling Interests, and Equity | ||||||||||||||||||||
Secured notes payable | $ | 771,061 | $ | 1,153,890 | $ | 1,127,348 | $ | 1,083,758 | $ | 1,011,292 | ||||||||||
Unsecured senior notes payable | 3,395,804 | 2,801,290 | 2,800,398 | 2,799,508 | 2,378,262 | |||||||||||||||
Unsecured senior line of credit | 50,000 | 314,000 | 300,000 | — | 28,000 | |||||||||||||||
Unsecured senior bank term loans | 547,942 | 547,860 | 547,639 | 547,420 | 746,471 | |||||||||||||||
Accounts payable, accrued expenses, and tenant security deposits | 763,832 | 740,070 | 734,189 | 782,637 | 731,671 | |||||||||||||||
Dividends payable | 92,145 | 83,402 | 81,602 | 78,976 | 76,914 | |||||||||||||||
Preferred stock redemption liability | — | — | — | 130,000 | — | |||||||||||||||
Total liabilities | 5,620,784 | 5,640,512 | 5,591,176 | 5,422,299 | 4,972,610 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Redeemable noncontrolling interests | 11,509 | 11,418 | 11,410 | 11,320 | 11,307 | |||||||||||||||
Alexandria Real Estate Equities, Inc.’s stockholders’ equity: | ||||||||||||||||||||
7.00% Series D cumulative convertible preferred stock | 74,386 | 74,386 | 74,386 | 74,386 | 86,914 | |||||||||||||||
6.45% Series E cumulative redeemable preferred stock | — | — | — | — | 130,000 | |||||||||||||||
Common stock | 998 | 943 | 921 | 899 | 877 | |||||||||||||||
Additional paid-in capital | 5,824,258 | 5,287,777 | 5,059,180 | 4,855,686 | 4,672,650 | |||||||||||||||
Accumulated other comprehensive income | 50,024 | 43,864 | 22,677 | 21,460 | 5,355 | |||||||||||||||
Alexandria Real Estate Equities, Inc.’s stockholders’ equity | 5,949,666 | 5,406,970 | 5,157,164 | 4,952,431 | 4,895,796 | |||||||||||||||
Noncontrolling interests | 521,994 | 486,423 | 485,917 | 482,576 | 475,175 | |||||||||||||||
Total equity | 6,471,660 | 5,893,393 | 5,643,081 | 5,435,007 | 5,370,971 | |||||||||||||||
Total liabilities, noncontrolling interests, and equity | $ | 12,103,953 | $ | 11,545,323 | $ | 11,245,667 | $ | 10,868,626 | $ | 10,354,888 |
Funds From Operations and Funds From Operations per Share | ![]() |
December 31, 2017 | |
(In thousands, except per share amounts) | |
The following tables present a reconciliation of net income (loss) attributable to Alexandria’s common stockholders, the most directly comparable financial measure presented in accordance with generally accepted accounting principles (“GAAP”), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria’s common stockholders – diluted, and funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted, and related per share amounts. Amounts allocable to unvested restricted stock awards are not material and are not presented separately within the per share table below. Per share amounts may not add due to rounding.
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | 12/31/16 | 12/31/17 | 12/31/16 | ||||||||||||||||||||||
Net income (loss) attributable to Alexandria’s common stockholders | $ | 36,831 | $ | 51,273 | $ | 31,630 | $ | 25,661 | $ | (25,127 | ) | $ | 145,395 | $ | (151,141 | ) | ||||||||||||
Depreciation and amortization | 107,714 | 107,788 | 104,098 | 97,183 | 95,222 | 416,783 | 313,390 | |||||||||||||||||||||
Noncontrolling share of depreciation and amortization from consolidated real estate JVs | (3,777 | ) | (3,608 | ) | (3,735 | ) | (3,642 | ) | (2,598 | ) | (14,762 | ) | (9,349 | ) | ||||||||||||||
Our share of depreciation and amortization from unconsolidated real estate JVs | 432 | 383 | 324 | 412 | 655 | 1,551 | 2,707 | |||||||||||||||||||||
Gain on sales of real estate – rental properties | — | — | — | (270 | ) | (3,715 | ) | (270 | ) | (3,715 | ) | |||||||||||||||||
Our share of gain on sales of real estate from unconsolidated real estate JVs | — | (14,106 | ) | — | — | — | (14,106 | ) | — | |||||||||||||||||||
Gain on sales of real estate – land parcels | — | — | (111 | ) | — | — | (111 | ) | (90 | ) | ||||||||||||||||||
Impairment of real estate – rental properties | — | — | 203 | — | 3,506 | 203 | 98,194 | |||||||||||||||||||||
Allocation to unvested restricted stock awards | (734 | ) | (957 | ) | (685 | ) | (561 | ) | — | (2,920 | ) | — | ||||||||||||||||
Funds from operations attributable to Alexandria’s common stockholders – diluted(1) | 140,466 | 140,773 | 131,724 | 118,783 | 67,943 | 531,763 | 249,996 | |||||||||||||||||||||
Non-real estate investment income | — | — | — | — | — | — | (4,361 | ) | ||||||||||||||||||||
Impairment of land parcels and non-real estate investments | 3,805 | (2) | — | 4,491 | — | 12,511 | 8,296 | 113,539 | ||||||||||||||||||||
Loss on early extinguishment of debt | 2,781 | — | — | 670 | — | 3,451 | 3,230 | |||||||||||||||||||||
Preferred stock redemption charge | — | — | — | 11,279 | 35,653 | 11,279 | 61,267 | |||||||||||||||||||||
Allocation to unvested restricted stock awards | (94 | ) | — | (58 | ) | (150 | ) | (605 | ) | (321 | ) | (2,356 | ) | |||||||||||||||
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted | $ | 146,958 | $ | 140,773 | $ | 136,157 | $ | 130,582 | $ | 115,502 | $ | 554,468 | $ | 421,315 |
Net income (loss) per share attributable to Alexandria’s common stockholders | $ | 0.38 | $ | 0.55 | $ | 0.35 | $ | 0.29 | $ | (0.31 | ) | $ | 1.58 | $ | (1.99 | ) | ||||||||||||
Depreciation and amortization | 1.08 | 1.11 | 1.10 | 1.06 | 1.15 | 4.35 | 4.02 | |||||||||||||||||||||
Gain on sales of real estate – rental properties | — | — | — | — | (0.05 | ) | — | (0.05 | ) | |||||||||||||||||||
Our share of gain on sales of real estate from unconsolidated real estate JVs | — | (0.15 | ) | — | — | — | (0.15 | ) | — | |||||||||||||||||||
Impairment of real estate – rental properties | — | — | — | — | 0.05 | — | 1.29 | |||||||||||||||||||||
Funds from operations per share attributable to Alexandria’s common stockholders – diluted(1) | 1.46 | 1.51 | 1.45 | 1.35 | 0.84 | 5.78 | 3.27 | |||||||||||||||||||||
Non-real estate investment income | — | — | — | — | — | — | (0.06 | ) | ||||||||||||||||||||
Impairment of land parcels and non-real estate investments | 0.04 | — | 0.05 | — | 0.15 | 0.09 | 1.47 | |||||||||||||||||||||
Loss on early extinguishment of debt | 0.03 | — | — | 0.01 | — | 0.03 | 0.04 | |||||||||||||||||||||
Preferred stock redemption charge | — | — | — | 0.12 | 0.43 | 0.12 | 0.79 | |||||||||||||||||||||
Funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted | $ | 1.53 | $ | 1.51 | $ | 1.50 | $ | 1.48 | $ | 1.42 | $ | 6.02 | $ | 5.51 | ||||||||||||||
Weighted-average shares of common stock outstanding for calculating funds from operations per share and funds from operations, as adjusted, per share – diluted | 95,914 | 93,296 | 90,745 | 88,200 | 81,280 | 92,063 | 76,412 |
(1) | Calculated in accordance with standards established by the Advisory Board of Governors of the National Association of Real Estate Investment Trusts (the “Nareit Board of Governors”) in its April 2002 White Paper and related implementation guidance. |
(2) | Related to one publicly traded non-real estate investment. |
SUPPLEMENTAL
INFORMATION
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Company Profile | |
December 31, 2017 | |
Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office REIT uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $17.9 billion and an asset base in North America of 29.6 million SF as of December 31, 2017. The asset base in North America includes 22.0 million RSF of operating properties, including 1.7 million RSF of development and redevelopment of new Class A properties currently undergoing construction. Additionally, the asset base in North America includes 7.6 million SF of future development projects, including 1.6 million SF of near-term projects undergoing marketing for lease and pre-construction activities and 3.8 million SF of intermediate-term development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science and technology campuses that provide its 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 risk capital to transformative life science and technology companies through its venture capital arm. 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 investment-grade or large cap tenants. The impressive 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 highly dynamic and collaborative campuses in key urban life science 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 its niche. Alexandria’s highly experienced management team also includes regional market directors with leading reputations and longstanding relationships within the life science and technology communities in their respective urban innovation clusters. We believe that our expertise, experience, reputation, and key relationships in the real estate, life science, and technology industries provide Alexandria significant competitive advantages in attracting new business opportunities.
Alexandria’s executive and senior management team consists of 30 individuals, averaging 26 years of real estate experience, including 13 years with Alexandria. Our executive management team alone averages 18 years of experience with Alexandria.
EXECUTIVE MANAGEMENT TEAM |
Joel S. Marcus |
Chairman, Chief Executive Officer & Founder |
Dean A. Shigenaga |
Executive Vice President Chief Financial Officer & Treasurer |
Thomas J. Andrews |
Executive Vice President Regional Market Director – Greater Boston |
Jennifer J. Banks |
Executive Vice President General Counsel & Corporate Secretary |
Vincent R. Ciruzzi |
Chief Development Officer |
John H. Cunningham |
Executive Vice President Regional Market Director – New York City |
Peter M. Moglia |
Chief Investment Officer |
Stephen A. Richardson |
Chief Operating Officer & Regional Market Director – San Francisco |
Daniel J. Ryan |
Executive Vice President Regional Market Director – San Diego & Strategic Operations |
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Investor Information | |
December 31, 2017 | |
Corporate Headquarters | New York Stock Exchange Trading Symbols | Information Requests | |||
385 East Colorado Boulevard, Suite 299 | Common stock: ARE | Phone: | (626) 396-4828 | ||
Pasadena, California 91101 | 7.00% Series D preferred stock: ARE PRD | Email: | corporateinformation@are.com | ||
Web: | www.are.com | ||||
Equity Research Coverage |
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 its management. Alexandria does not by its reference or distribution of the information below imply its 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. |
Bank of America Merrill Lynch | Citigroup Global Markets Inc. | J.P. Morgan Securities LLC | RBC Capital Markets | |||
Jamie Feldman / Jeffrey Spector | Michael Bilerman / Emmanuel Korchman | Anthony Paolone / Patrice Chen | Michael Carroll / Brian Hawthorne | |||
(646) 855-5808 / (646) 855-1363 | (212) 816-1383 / (212) 816-1382 | (212) 622-6682 / (212) 622-1893 | (440) 715-2649 / (440) 715-2653 | |||
Barclays Capital Inc. | Evercore ISI | Mitsubishi UFJ Securities (USA), Inc. | Robert W. Baird & Co. Incorporated | |||
Ross Smotrich / Trevor Young | Sheila McGrath / Nathan Crossett | Karin Ford / Jason Twizell | David Rodgers / Richard Schiller | |||
(212) 526-2306 / (212) 526-3098 | (212) 497-0882 / (212) 497-0870 | (212) 405-7349 / (212) 405-7160 | (216) 737-7341 / (312) 609-5485 | |||
BTIG, LLC | Green Street Advisors, Inc. | Mizuho Securities USA Inc. | UBS Securities LLC | |||
Tom Catherwood / James Sullivan | Jed Reagan / Daniel Ismail | Richard Anderson / Zachary Silverberg | Nick Yulico / Frank Lee | |||
(212) 738-6140 / (212) 738-6139 | (949) 640-8780 / (949) 640-8780 | (212) 205-8445 / (212) 205-7855 | (212) 713-3402 / (415) 352-5679 | |||
CFRA | JMP Securities – JMP Group, Inc. | |||||
Kenneth Leon | Peter Martin / Brian Riley | |||||
(212) 438-4638 | (415) 835-8904 / (415) 835-8908 | |||||
Fixed Income Coverage | Rating Agencies | |||||
J.P. Morgan Securities LLC | Wells Fargo & Company | Moody’s Investors Service | S&P Global Ratings | |||
Mark Streeter / Jonathan Rau | Thierry Perrein / Kevin McClure | Thuy Nguyen / Reed Valutas | Fernanda Hernandez / Anita Ogbara | |||
(212) 834-5086 / (212) 834-5237 | (704) 410-3262 / (704) 410-3252 | (212) 553-7168 / (212) 553-4169 | (212) 438-1347 / (212) 438-5077 | |||
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High-Quality, Diverse, and Innovative Tenants | |
December 31, 2017 | |
Cash Flows from High-Quality, Diverse, and Innovative Tenants
Investment-Grade or Large Cap Tenants | Tenant Mix | |||
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55% | ||||
of ARE’s Total | ||||
Annual Rental Revenue(1) | ||||
A REIT Industry-Leading Tenant Roster | Percentage of ARE’s Annual Rental Revenue(1) |
(1) | Represents annual rental revenue in effect as of December 31, 2017. |
(2) | Leading technology entities represent investment-grade or large cap (public or private) entities. |
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Class A Properties in AAA Locations | |
December 31, 2017 | |
High-Quality Cash Flows from Class A Properties in AAA Locations
Class A Properties in AAA Locations | AAA Locations | |||
![]() | ||||
80% | ||||
of ARE’s | ||||
Annual Rental Revenue(1) | ||||
Percentage of ARE’s Annual Rental Revenue(1) |
(1) | Represents annual rental revenue in effect as of December 31, 2017. |
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Occupancy | |
December 31, 2017 | |
Solid Demand for Class A Properties in AAA Locations
Drives Solid Occupancy
Solid Historical Occupancy(1) | Occupancy across Key Locations | |||
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95% | ||||
Over 10 Years | ||||
Occupancy of Operating Properties | ||||
as of December 31, 2017 |
(1) | Average occupancy of operating properties in North America as of each December 31 for the last 10 years. |
Financial and Asset Base Highlights | ![]() |
December 31, 2017 | |
(Dollars in thousands, except per share amounts) | |
Three Months Ended (unless stated otherwise) | ||||||||||||||||||||
12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | 12/31/16 | ||||||||||||||||
Selected financial data from consolidated financial statements and related information | ||||||||||||||||||||
Adjusted EBITDA – quarter annualized | $ | 817,392 | $ | 773,828 | $ | 755,048 | $ | 723,764 | $ | 662,836 | ||||||||||
Adjusted EBITDA – trailing 12 months | $ | 767,508 | $ | 728,869 | $ | 689,079 | $ | 650,579 | $ | 610,839 | ||||||||||
Adjusted EBITDA margins | 68% | 68% | 68% | 67% | 67% | |||||||||||||||
Operating margins | 71% | 71% | 72% | 72% | 71% | |||||||||||||||
Net debt at end of period | $ | 4,516,672 | $ | 4,698,568 | $ | 4,660,216 | $ | 4,292,773 | $ | 4,052,576 | ||||||||||
Net debt to Adjusted EBITDA – quarter annualized | 5.5x | 6.1x | 6.2x | 5.9x | 6.1x | |||||||||||||||
Net debt to Adjusted EBITDA – trailing 12 months | 5.9x | 6.4x | 6.8x | 6.6x | 6.6x | |||||||||||||||
Net debt and preferred stock to Adjusted EBITDA – quarter annualized | 5.6x | 6.2x | 6.3x | 6.0x | 6.4x | |||||||||||||||
Net debt and preferred stock to Adjusted EBITDA – trailing 12 months | 6.0x | 6.5x | 6.9x | 6.7x | 7.0x | |||||||||||||||
Fixed-charge coverage ratio – quarter annualized | 4.2x | 4.1x | 4.1x | 4.1x | 3.8x | |||||||||||||||
Fixed-charge coverage ratio – trailing 12 months | 4.1x | 4.0x | 3.9x | 3.8x | 3.6x | |||||||||||||||
Unencumbered net operating income as a percentage of total net operating income | 86% | 81% | 81% | 81% | 82% | |||||||||||||||
Closing stock price at end of period | $ | 130.59 | $ | 118.97 | $ | 120.47 | $ | 110.52 | $ | 111.13 | ||||||||||
Common shares outstanding (in thousands) at end of period | 99,784 | 94,325 | 92,098 | 89,884 | 87,666 | |||||||||||||||
Total equity capitalization at end of period | $ | 13,140,843 | $ | 11,328,163 | $ | 11,202,668 | $ | 10,037,702 | $ | 9,991,832 | ||||||||||
Total market capitalization at end of period | $ | 17,905,650 | $ | 16,145,203 | $ | 15,978,053 | $ | 14,468,388 | $ | 14,155,857 | ||||||||||
Dividend per share – quarter/annualized | $0.90/$3.60 | $0.86/$3.44 | $0.86/$3.44 | $0.83/$3.32 | $0.83/$3.32 | |||||||||||||||
Dividend payout ratio for the quarter | 61% | 58% | 58% | 57% | 63% | |||||||||||||||
Dividend yield – annualized | 2.8% | 2.9% | 2.9% | 3.0% | 3.0% | |||||||||||||||
General and administrative expense as a percentage of total assets – trailing 12 months | 0.6% | 0.6% | 0.6% | 0.6% | 0.6% | |||||||||||||||
General and administrative expense as a percentage of total revenues – trailing 12 months | 6.6% | 6.8% | 7.0% | 7.0% | 6.9% | |||||||||||||||
Capitalized interest | $ | 12,897 | $ | 17,092 | $ | 15,069 | $ | 13,164 | $ | 11,659 | ||||||||||
Weighted-average interest rate for capitalization of interest during period | 3.89% | 3.96% | 3.98% | 3.95% | 3.72% | |||||||||||||||
Financial and Asset Base Highlights (continued) | ![]() |
December 31, 2017 | |
(Dollars in thousands, except annual rental revenue per occupied RSF amounts) | |
Three Months Ended (unless stated otherwise) | ||||||||||||||||||||
12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | 12/31/16 | ||||||||||||||||
Amounts included in funds from operations and non-revenue-enhancing capital expenditures | ||||||||||||||||||||
Straight-line rent revenue | $ | 33,281 | $ | 20,865 | $ | 17,905 | $ | 35,592 | $ | 20,993 | ||||||||||
Amortization of acquired below-market leases | $ | 4,147 | $ | 4,545 | $ | 5,004 | $ | 5,359 | $ | 2,818 | ||||||||||
Straight-line rent expense on ground leases | $ | 205 | $ | 206 | $ | 201 | $ | 198 | $ | 557 | ||||||||||
Stock compensation expense | $ | 6,961 | $ | 7,893 | $ | 5,504 | $ | 5,252 | $ | 6,426 | ||||||||||
Amortization of loan fees | $ | 2,571 | $ | 2,840 | $ | 2,843 | $ | 2,895 | $ | 3,080 | ||||||||||
Amortization of debt premiums | $ | 639 | $ | 652 | $ | 625 | $ | 596 | $ | 383 | ||||||||||
Non-revenue-enhancing capital expenditures: | ||||||||||||||||||||
Building improvements | $ | 2,469 | $ | 2,453 | $ | 1,840 | $ | 1,138 | $ | 2,135 | ||||||||||
Tenant improvements and leasing commissions | $ | 9,578 | $ | 9,976 | $ | 9,389 | $ | 18,377 | $ | 11,614 | ||||||||||
Operating statistics and related information (at end of period) | ||||||||||||||||||||
Number of properties – North America | 213 | 206 | 202 | 199 | 199 | |||||||||||||||
RSF (including development and redevelopment projects under construction) – North America | 21,981,133 | 20,642,042 | 20,567,473 | 20,084,195 | 19,869,729 | |||||||||||||||
Total square feet – North America | 29,563,221 | 28,583,747 | 28,351,518 | 28,176,780 | 25,162,360 | |||||||||||||||
Annual rental revenue per occupied RSF – North America | $ | 48.01 | $ | 47.19 | $ | 46.55 | $ | 45.94 | $ | 45.15 | ||||||||||
Occupancy of operating properties – North America | 96.8% | 96.1% | 95.7% | 95.5% | 96.6% | |||||||||||||||
Occupancy of operating and redevelopment properties – North America | 94.7% | 93.9% | 94.0% | 94.7% | 95.7% | |||||||||||||||
Weighted average remaining lease term (in years) | 8.9 | 8.8 | 8.8 | 9.0 | 8.8 | |||||||||||||||
Total leasing activity – RSF | 1,379,699 | 786,925 | 1,081,777 | 1,320,781 | 1,501,376 | |||||||||||||||
Lease renewals and re-leasing of space – change in average new rental rates over expiring rates: | ||||||||||||||||||||
Rental rate increases | 24.8% | 24.2% | 23.2% | 27.8% | 25.8% | |||||||||||||||
Rental rate increases (cash basis) | 10.4% | 10.0% | 9.4% | 17.7% | 9.5% | |||||||||||||||
RSF (included in total leasing activity above) | 593,622 | 448,472 | 604,142 | 878,863 | 671,222 | |||||||||||||||
Same property – percentage change over comparable quarter from prior year: | ||||||||||||||||||||
Net operating income increase | 4.5% | 2.2% | 1.8% | 2.6% | 3.2% | |||||||||||||||
Net operating income increase (cash basis) | 12.5% | 7.8% | 7.0% | 5.5% | 4.9% | |||||||||||||||
![]() | |
Key Operating Metrics | |
December 31, 2017 | |
Favorable Lease Structure(1) | Same Property Net Operating Income Growth | |||||||||
![]() | ![]() | |||||||||
Stable cash flows | ||||||||||
Percentage of triple net leases | 97% | |||||||||
Increasing cash flows | ||||||||||
Percentage of leases containing annual rent escalations | 95% | |||||||||
Lower capex burden | ||||||||||
Percentage of leases providing for the recapture of capital expenditures | 94% | |||||||||
Margins(2) | Rental Rate Growth: Renewed/Re-Leased Space | |||||||||
![]() | ![]() | |||||||||
Adjusted EBITDA | Operating | |||||||||
68% | 71% | |||||||||
(1) | Percentages calculated based on RSF as of December 31, 2017. |
(2) | Represents the three months ended December 31, 2017. |
Same Property Performance | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Same Property Financial Data | 4Q17 | 2017 | Same Property Statistical Data | 4Q17 | 2017 | ||||||
Percentage change over comparable period from prior year: | Number of same properties | 169 | 166 | ||||||||
Net operating income increase | 4.5% | 3.1% | Rentable square feet | 15,177,562 | 14,414,434 | ||||||
Net operating income increase (cash basis) | 12.5% | 6.8% | Occupancy – current-period average | 96.3% | 96.0% | ||||||
Operating margin | 71% | 70% | Occupancy – same-period prior-year average | 97.1% | 97.2% |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||
2017 | 2016 | $ Change | % Change | 2017 | 2016 | $ Change | % Change | ||||||||||||||||||||||||
Same properties | $ | 176,897 | $ | 171,003 | $ | 5,894 | 3.4 | % | $ | 613,866 | $ | 596,898 | $ | 16,968 | 2.8 | % | |||||||||||||||
Non-same properties | 51,128 | 16,312 | 34,816 | 213.4 | 249,315 | 76,922 | 172,393 | 224.1 | |||||||||||||||||||||||
Total rental | 228,025 | 187,315 | 40,710 | 21.7 | 863,181 | 673,820 | 189,361 | 28.1 | |||||||||||||||||||||||
Same properties | 60,568 | 54,688 | 5,880 | 10.8 | 209,273 | 202,565 | 6,708 | 3.3 | |||||||||||||||||||||||
Non-same properties | 9,702 | 3,582 | 6,120 | 170.9 | 49,871 | 21,090 | 28,781 | 136.5 | |||||||||||||||||||||||
Total tenant recoveries | 70,270 | 58,270 | 12,000 | 20.6 | 259,144 | 223,655 | 35,489 | 15.9 | |||||||||||||||||||||||
Same properties | 141 | 39 | 102 | 261.5 | 447 | 117 | 330 | 282.1 | |||||||||||||||||||||||
Non-same properties | 355 | 3,538 | (3,183 | ) | (90.0 | ) | 5,325 | 24,114 | (18,789 | ) | (77.9 | ) | |||||||||||||||||||
Total other income | 496 | 3,577 | (3,081 | ) | (86.1 | ) | 5,772 | 24,231 | (18,459 | ) | (76.2 | ) | |||||||||||||||||||
Same properties | 237,606 | 225,730 | 11,876 | 5.3 | 823,586 | 799,580 | 24,006 | 3.0 | |||||||||||||||||||||||
Non-same properties | 61,185 | 23,432 | 37,753 | 161.1 | 304,511 | 122,126 | 182,385 | 149.3 | |||||||||||||||||||||||
Total revenues | 298,791 | 249,162 | 49,629 | 19.9 | 1,128,097 | 921,706 | 206,391 | 22.4 | |||||||||||||||||||||||
Same properties | 70,144 | 65,541 | 4,603 | 7.0 | 244,819 | 237,960 | 6,859 | 2.9 | |||||||||||||||||||||||
Non-same properties | 17,929 | 7,703 | 10,226 | 132.8 | 80,790 | 40,448 | 40,342 | 99.7 | |||||||||||||||||||||||
Total rental operations | 88,073 | 73,244 | 14,829 | 20.2 | 325,609 | 278,408 | 47,201 | 17.0 | |||||||||||||||||||||||
Same properties | 167,462 | 160,189 | 7,273 | 4.5 | 578,767 | 561,620 | 17,147 | 3.1 | |||||||||||||||||||||||
Non-same properties | 43,256 | 15,729 | 27,527 | 175.0 | 223,721 | 81,678 | 142,043 | 173.9 | |||||||||||||||||||||||
Net operating income | $ | 210,718 | $ | 175,918 | $ | 34,800 | 19.8 | % | $ | 802,488 | $ | 643,298 | $ | 159,190 | 24.7 | % | |||||||||||||||
Net operating income – same properties | $ | 167,462 | $ | 160,189 | $ | 7,273 | 4.5 | % | $ | 578,767 | $ | 561,620 | $ | 17,147 | 3.1 | % | |||||||||||||||
Straight-line rent revenue and amortization of acquired below-market leases | (10,162 | ) | (20,330 | ) | 10,168 | (50.0 | ) | (19,176 | ) | (37,424 | ) | 18,248 | (48.8 | ) | |||||||||||||||||
Net operating income – same properties (cash basis) | $ | 157,300 | $ | 139,859 | $ | 17,441 | 12.5 | % | $ | 559,591 | $ | 524,196 | $ | 35,395 | 6.8 | % | |||||||||||||||
![]() | |
Leasing Activity | |
December 31, 2017 | |
Three Months Ended | Year Ended | Year Ended | ||||||||||||||||||||||
December 31, 2017 | December 31, 2017 | December 31, 2016 | ||||||||||||||||||||||
(Dollars per RSF) | Including Straight-Line Rent | Cash Basis | Including Straight-Line Rent | Cash Basis | Including Straight-Line Rent | Cash Basis | ||||||||||||||||||
Leasing activity: | ||||||||||||||||||||||||
Renewed/re-leased space(1) | ||||||||||||||||||||||||
Rental rate changes | 24.8% | 10.4% | 25.1% | 12.7% | 27.6% | 12.0% | ||||||||||||||||||
New rates | $ | 50.23 | $ | 47.17 | $ | 51.05 | $ | 47.99 | $ | 48.60 | $ | 45.83 | ||||||||||||
Expiring rates | $ | 40.25 | $ | 42.72 | $ | 40.80 | $ | 42.60 | $ | 38.09 | $ | 40.92 | ||||||||||||
Rentable square footage | 593,622 | 2,525,099 | 2,129,608 | |||||||||||||||||||||
Tenant improvements/leasing commissions | $ | 14.58 | $ | 18.74 | $ | 15.69 | ||||||||||||||||||
Weighted-average lease term | 5.9 years | 6.2 years | 5.5 years | |||||||||||||||||||||
Developed/redeveloped/previously vacant space leased | ||||||||||||||||||||||||
New rates | $ | 65.75 | (2) | $ | 58.94 | (2) | $ | 47.56 | (2) | $ | 42.93 | (2) | $ | 50.24 | $ | 38.72 | ||||||||
Rentable square footage | 786,077 | 2,044,083 | 1,260,459 | |||||||||||||||||||||
Tenant improvements/leasing commissions | $ | 10.61 | $ | 9.83 | $ | 12.42 | ||||||||||||||||||
Weighted-average lease term | 11.1 years | 10.1 years | 32.6 years | (3) | ||||||||||||||||||||
Leasing activity summary (totals): | ||||||||||||||||||||||||
New rates | $ | 59.07 | $ | 53.88 | $ | 49.49 | $ | 45.72 | $ | 49.21 | $ | 43.19 | ||||||||||||
Rentable square footage | 1,379,699 | 4,569,182 | (4) | 3,390,067 | ||||||||||||||||||||
Tenant improvements/leasing commissions | $ | 12.32 | $ | 14.75 | $ | 14.48 | ||||||||||||||||||
Weighted-average lease term | 8.9 years | 7.9 years | 15.6 years | |||||||||||||||||||||
Lease expirations:(1) | ||||||||||||||||||||||||
Expiring rates | $ | 39.06 | $ | 41.56 | $ | 39.99 | $ | 41.71 | $ | 36.70 | $ | 39.32 | ||||||||||||
Rentable square footage | 690,388 | 2,919,259 | 2,484,169 |
Leasing activity includes 100% of results for each property in which we have an investment in North America.
(1) | Excludes 25 month-to-month leases aggregating 37,006 RSF and 20 month-to-month leases aggregating 31,207 RSF as of December 31, 2017 and 2016, respectively. |
(2) | New rental rates include 100% of the RSF and rates for the 520,988 RSF lease executed for the Phase II development project of our Menlo Gateway joint venture. Adjusting for our 21% ownership of the Menlo Gateway joint venture, our weighted-average new rental rates were $49.00 and $46.15 (cash basis) and $38.84 and $35.70 (cash basis) per RSF for 4Q17 and 2017, respectively. |
(3) | 2016 information includes the 75-year ground lease with Uber at 1455 and 1515 Third Street in our Mission Bay/SoMa submarket. The average lease term, excluding this ground lease was 10.7 years. |
(4) | During 2017, we granted tenant concessions/free rent averaging 2.5 months with respect to the 4,569,182 RSF leased. Approximately 69% of the leases executed during 2017 did not include concessions for free rent. |
![]() | |
Contractual Lease Expirations | |
December 31, 2017 | |
Year | Number of Leases | RSF | Percentage of Occupied RSF | Annual Rental Revenue (per RSF)(1) | Percentage of Total Annual Rental Revenue | ||||||||||||||||||||||||
2018 | (2) | 98 | 1,282,567 | 6.6 | % | $ | 41.57 | 5.8 | % | ||||||||||||||||||||
2019 | 85 | 1,349,444 | 6.9 | % | $ | 40.34 | 5.9 | % | |||||||||||||||||||||
2020 | 102 | 1,682,954 | 8.6 | % | $ | 38.27 | 7.0 | % | |||||||||||||||||||||
2021 | 88 | 1,741,892 | 8.9 | % | $ | 41.83 | 7.9 | % | |||||||||||||||||||||
2022 | 81 | 1,429,544 | 7.3 | % | $ | 45.13 | 7.0 | % | |||||||||||||||||||||
2023 | 50 | 1,855,662 | 9.5 | % | $ | 43.13 | 8.7 | % | |||||||||||||||||||||
2024 | 32 | 1,402,704 | 7.2 | % | $ | 48.47 | 7.4 | % | |||||||||||||||||||||
2025 | 22 | 698,697 | 3.6 | % | $ | 47.72 | 3.6 | % | |||||||||||||||||||||
2026 | 17 | 729,295 | 3.7 | % | $ | 44.38 | 3.5 | % | |||||||||||||||||||||
2027 | 24 | 1,834,072 | 9.4 | % | $ | 44.39 | 8.8 | % | |||||||||||||||||||||
Thereafter | 44 | 5,564,341 | 28.3 | % | $ | 57.55 | 34.4 | % |
Market | 2018 Contractual Lease Expirations | Annual Rental Revenue (per RSF)(1) | 2019 Contractual Lease Expirations | Annual Rental Revenue (per RSF)(1) | |||||||||||||||||||||||||||||||||||||||
Leased | Negotiating/ Anticipating | Targeted for Development/ Redevelopment | Remaining Expiring Leases | Total(2) | Leased | Negotiating/ Anticipating | Targeted for Development/ Redevelopment | Remaining Expiring Leases | Total | ||||||||||||||||||||||||||||||||||
Greater Boston | 37,850 | 73,516 | — | 187,598 | 298,964 | $ | 58.03 | 16,188 | 76,463 | — | 262,186 | 354,837 | $ | 50.85 | |||||||||||||||||||||||||||||
San Francisco | 32,488 | — | 345,811 | (3) | 66,903 | 445,202 | 35.32 | 24,612 | — | — | 155,604 | 180,216 | 43.12 | ||||||||||||||||||||||||||||||
New York City | 15,517 | 3,827 | — | 12,184 | 31,528 | N/A | — | — | — | 32,399 | 32,399 | N/A | |||||||||||||||||||||||||||||||
San Diego | 19,870 | — | 71,510 | (4) | 227,503 | 318,883 | 34.54 | 17,415 | — | 44,034 | (5) | 253,901 | 315,350 | 31.55 | |||||||||||||||||||||||||||||
Seattle | 2,468 | — | — | 6,272 | 8,740 | 52.56 | 1,283 | — | — | 212,010 | 213,293 | 43.67 | |||||||||||||||||||||||||||||||
Maryland | 5,104 | 2,951 | — | 36,265 | 44,320 | 19.39 | — | — | — | 156,089 | 156,089 | 26.05 | |||||||||||||||||||||||||||||||
Research Triangle Park | 3,088 | 18,833 | — | 38,399 | 60,320 | 26.29 | — | — | — | 40,235 | 40,235 | 20.25 | |||||||||||||||||||||||||||||||
Canada | — | — | — | 63,465 | 63,465 | 19.38 | — | — | — | 6,562 | 6,562 | 22.16 | |||||||||||||||||||||||||||||||
Non-cluster markets | — | — | — | 11,145 | 11,145 | 26.02 | — | — | — | 50,463 | 50,463 | 22.25 | |||||||||||||||||||||||||||||||
Total | 116,385 | 99,127 | 417,321 | 649,734 | 1,282,567 | $ | 41.57 | 59,498 | 76,463 | 44,034 | 1,169,449 | 1,349,444 | $ | 40.34 | |||||||||||||||||||||||||||||
Percentage of expiring leases | 9 | % | 8 | % | 33 | % | 50 | % | 100 | % | 4 | % | 6 | % | 3 | % | 87 | % | 100 | % |
(1) | Represents amounts in effect as of December 31, 2017. |
(2) | Excludes 25 month-to-month leases aggregating 37,006 RSF as of December 31, 2017. |
(3) | Includes 195,000 RSF expiring in 1Q18 at 960 Industrial Road, a recently acquired property located in our Greater Stanford submarket, and 23,840 RSF expiring in 1Q18 at 201 Haskins Way, a recently acquired property in our South San Francisco submarket. We are pursuing entitlements aggregating 500,000 RSF for a multi-building development at 960 Industrial Road and entitlements aggregating 280,000 RSF at 201 Haskins Way. Also includes 126,971 RSF of office space targeted for redevelopment into office/laboratory space upon expiration of the existing lease in 3Q18 at 681 Gateway Boulevard in our South San Francisco submarket. Concurrent with our redevelopment, we anticipate expanding 681 Gateway Boulevard by an additional 15,000-30,000 RSF and expect initial occupancy in 2019. |
(4) | Represents 71,510 RSF that expired in January 2018 at 9880 Campus Point Drive in our University Town Center submarket. We expect to demolish the existing R&D building and develop a 98,000 RSF Class A office/laboratory property. |
(5) | Represents 44,034 RSF expiring in January 2019 at 4110 Campus Point Court, a recently acquired property in our University Town Center submarket, which we expect to redevelop into tech office or office/laboratory space. |
Top 20 Tenants | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
84% of Top 20 Annual Rental Revenue from Investment-Grade or Large Cap Tenants
Tenant | Remaining Lease Term in Years(1) | Aggregate RSF | Annual Rental Revenue(1) | Percentage of Aggregate Annual Rental Revenue(1) | Investment-Grade Ratings | ||||||||||||||||||||
Moody’s | S&P | ||||||||||||||||||||||||
1 | Illumina, Inc. | 12.6 | 891,495 | $ | 34,736 | 3.7 | % | — | BBB | ||||||||||||||||
2 | Takeda Pharmaceutical Company Ltd. | 12.3 | 386,111 | 30,522 | 3.3 | A1 | A- | ||||||||||||||||||
3 | Eli Lilly and Company | 11.9 | 469,266 | 29,335 | 3.2 | A2 | AA- | ||||||||||||||||||
4 | Bristol-Myers Squibb Company | 9.9 | 460,050 | 28,800 | 3.1 | A2 | A+ | ||||||||||||||||||
5 | Novartis AG | 8.9 | 377,831 | 28,630 | 3.1 | Aa3 | AA- | ||||||||||||||||||
6 | Sanofi | 10.2 | 388,242 | 24,821 | 2.7 | A1 | AA | ||||||||||||||||||
7 | Uber Technologies, Inc. | 74.9 | (2) | 422,980 | 22,150 | 2.4 | (3) | (3) | |||||||||||||||||
8 | New York University | 12.7 | 209,224 | 20,718 | 2.2 | Aa2 | AA- | ||||||||||||||||||
9 | bluebird bio, Inc. | 9.1 | 262,261 | 20,086 | 2.2 | — | — | ||||||||||||||||||
10 | Stripe, Inc. | 9.8 | 295,333 | 17,822 | 1.9 | — | — | ||||||||||||||||||
11 | Roche | 4.1 | 343,861 | 17,597 | 1.9 | A1 | AA | ||||||||||||||||||
12 | Amgen Inc. | 6.3 | 407,369 | 16,838 | 1.8 | Baa1 | A | ||||||||||||||||||
13 | Massachusetts Institute of Technology | 7.5 | 256,126 | 16,729 | 1.8 | Aaa | AAA | ||||||||||||||||||
14 | Celgene Corporation | 5.7 | 360,014 | 15,271 | 1.6 | Baa2 | BBB+ | ||||||||||||||||||
15 | United States Government | 7.6 | 264,358 | 15,018 | 1.6 | Aaa | AA+ | ||||||||||||||||||
16 | FibroGen, Inc. | 5.9 | 234,249 | 14,198 | 1.5 | — | — | ||||||||||||||||||
17 | Juno Therapeutics, Inc. | 11.3 | 266,794 | 13,815 | 1.5 | — | — | ||||||||||||||||||
18 | Biogen Inc. | 10.8 | 305,212 | 13,278 | 1.4 | Baa1 | A- | ||||||||||||||||||
19 | Facebook, Inc. | 11.8 | 382,883 | 12,718 | (4) | 1.4 | (3) | (3) | |||||||||||||||||
20 | Pinterest, Inc. | 15.2 | 148,146 | 12,015 | 1.3 | (3) | (3) | ||||||||||||||||||
Total/weighted average | 13.4 | (2) | 7,131,805 | $ | 405,097 | 43.6 | % |
(1) | Based on aggregate annual rental revenue in effect as of December 31, 2017. |
(2) | Represents a ground lease with Uber at 1455 and 1515 Third Street in our Mission Bay/SoMa submarket. Excluding the ground lease, the weighted-average remaining lease term for our top 20 tenants was 9.9 years as of |
December 31, 2017.
(3) | Tenant with market capitalization (public or private) greater than $10 billion as of December 31, 2017. |
(4) | Includes annual rental revenue based upon our 21% equity interest as of 4Q17 in the 251,995 RSF Phase I property of our Menlo Gateway joint venture. Our equity interest in this project will increase to 49% by 1Q19. |
Summary of Properties and Occupancy | ![]() |
December 31, 2017 | |
(Dollars in thousands, except per RSF amounts) | |
Summary of properties
Market | RSF | Number of Properties | Annual Rental Revenue | |||||||||||||||||||||||||||
Operating | Development | Redevelopment | Total | % of Total | Total | % of Total | Per RSF | |||||||||||||||||||||||
Greater Boston | 6,135,551 | 255,155 | 59,173 | 6,449,879 | 29 | % | 54 | $ | 356,178 | 38 | % | $ | 61.05 | |||||||||||||||||
San Francisco | 4,604,736 | 1,020,918 | — | 5,625,654 | 26 | 39 | 216,765 | 23 | 49.37 | |||||||||||||||||||||
New York City | 727,674 | — | — | 727,674 | 3 | 2 | 63,325 | 7 | 87.20 | |||||||||||||||||||||
San Diego | 4,107,487 | — | 163,648 | 4,271,135 | 19 | 53 | 151,871 | 16 | 39.12 | |||||||||||||||||||||
Seattle | 1,037,920 | — | — | 1,037,920 | 5 | 11 | 48,720 | 5 | 48.03 | |||||||||||||||||||||
Maryland | 2,079,450 | — | 45,039 | 2,124,489 | 10 | 29 | 51,931 | 6 | 26.23 | |||||||||||||||||||||
Research Triangle Park | 1,043,726 | — | 175,000 | 1,218,726 | 6 | 16 | 26,544 | 3 | 25.93 | |||||||||||||||||||||
Canada | 256,967 | — | — | 256,967 | 1 | 3 | 6,652 | 1 | 26.00 | |||||||||||||||||||||
Non-cluster markets | 268,689 | — | — | 268,689 | 1 | 6 | 5,394 | 1 | 25.60 | |||||||||||||||||||||
North America | 20,262,200 | 1,276,073 | 442,860 | 21,981,133 | 100 | % | 213 | $ | 927,380 | 100 | % | $ | 48.01 |
See our “Definitions and Reconciliations” for additional information.
Summary of occupancy
Operating Properties | Operating and Redevelopment Properties | |||||||||||||||||
Market | 12/31/17 | 9/30/17 | 12/31/16 | 12/31/17 | 9/30/17 | 12/31/16 | ||||||||||||
Greater Boston | 96.6 | % | 95.9 | % | 96.2 | % | 95.7 | % | 95.0 | % | 96.2 | % | ||||||
San Francisco | 99.6 | 100.0 | 99.9 | 99.6 | 100.0 | 99.9 | ||||||||||||
New York City | 99.8 | 99.8 | 97.3 | 99.8 | 99.8 | 97.3 | ||||||||||||
San Diego | 94.5 | 92.4 | 94.3 | 90.9 | 88.6 | 90.4 | ||||||||||||
Seattle | 97.7 | 98.2 | 97.6 | 97.7 | 98.2 | 97.6 | ||||||||||||
Maryland | 95.2 | 93.6 | 95.8 | 93.2 | 91.6 | 95.8 | ||||||||||||
Research Triangle Park | 98.1 | 98.1 | 99.0 | 84.0 | 84.0 | 99.0 | ||||||||||||
Subtotal | 97.0 | 96.1 | 96.7 | 94.9 | 93.9 | 95.8 | ||||||||||||
Canada | 99.6 | 99.2 | 99.2 | 99.6 | 99.2 | 99.2 | ||||||||||||
Non-cluster markets | 78.4 | 88.6 | 87.7 | 78.4 | 88.6 | 87.7 | ||||||||||||
North America | 96.8 | % | 96.1 | % | 96.6 | % | 94.7 | % | 93.9 | % | 95.7 | % | ||||||
Property Listing | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Market / Submarket / Address | RSF | Number of Properties | Annual Rental Revenue | Occupancy Percentage | ||||||||||||||||||||||||
Operating | Operating and Redevelopment | |||||||||||||||||||||||||||
Operating | Development | Redevelopment | Total | |||||||||||||||||||||||||
Greater Boston | ||||||||||||||||||||||||||||
Cambridge/Inner Suburbs | ||||||||||||||||||||||||||||
Alexandria Center® at Kendall Square | ||||||||||||||||||||||||||||
50, 60, 75/125, and 100 Binney Street, 161 First Street, 215 First Street, 150 Second Street, 300 Third Street, and 11 Hurley Street | 1,990,476 | 91,155 | — | 2,081,631 | 9 | $ | 134,312 | 98.1 | % | 98.1 | % | |||||||||||||||||
225 Binney Street (consolidated joint venture – 30% ownership) | 305,212 | — | — | 305,212 | 1 | 13,278 | 100.0 | 100.0 | ||||||||||||||||||||
Alexandria Technology Square® | 1,181,635 | — | — | 1,181,635 | 7 | 86,607 | 99.9 | 99.9 | ||||||||||||||||||||
100, 200, 300, 400, 500, 600, and 700 Technology Square | ||||||||||||||||||||||||||||
Alexandria Center® at One Kendall Square | 644,771 | 164,000 | — | 808,771 | 10 | 48,456 | 94.6 | 94.6 | ||||||||||||||||||||
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 | 10,532 | 100.0 | 100.0 | ||||||||||||||||||||
640 Memorial Drive | 225,504 | — | — | 225,504 | 1 | 13,771 | 100.0 | 100.0 | ||||||||||||||||||||
780 and 790 Memorial Drive | 99,658 | — | — | 99,658 | 2 | 7,432 | 100.0 | 100.0 | ||||||||||||||||||||
167 Sidney Street and 99 Erie Street | 54,549 | — | — | 54,549 | 2 | 3,735 | 100.0 | 100.0 | ||||||||||||||||||||
79/96 13th Street (Charlestown Navy Yard) | 25,309 | — | — | 25,309 | 1 | 620 | 100.0 | 100.0 | ||||||||||||||||||||
Cambridge/Inner Suburbs | 4,761,374 | 255,155 | — | 5,016,529 | 35 | 318,743 | 98.5 | 98.5 | ||||||||||||||||||||
Longwood Medical Area | ||||||||||||||||||||||||||||
360 Longwood Avenue (unconsolidated joint venture – 27.5% ownership) | 210,709 | — | — | 210,709 | 1 | 2,788 | 60.3 | 60.3 | ||||||||||||||||||||
Route 128 | ||||||||||||||||||||||||||||
Alexandria Park at 128 | 343,882 | — | — | 343,882 | 8 | 10,478 | 95.6 | 95.6 | ||||||||||||||||||||
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 | 258,444 | — | 59,173 | 317,617 | 3 | 10,989 | 100.0 | 81.4 | ||||||||||||||||||||
19 Presidential Way | 144,892 | — | — | 144,892 | 1 | 3,907 | 74.4 | 74.4 | ||||||||||||||||||||
100 Beaver Street | 82,330 | — | — | 82,330 | 1 | 3,149 | 100.0 | 100.0 | ||||||||||||||||||||
285 Bear Hill Road | 26,270 | — | — | 26,270 | 1 | 1,167 | 100.0 | 100.0 | ||||||||||||||||||||
Route 128 | 855,818 | — | 59,173 | 914,991 | 14 | 29,690 | 93.9 | 87.8 | ||||||||||||||||||||
Route 495 | ||||||||||||||||||||||||||||
111 and 130 Forbes Boulevard | 155,846 | — | — | 155,846 | 2 | 1,543 | 100.0 | 100.0 | ||||||||||||||||||||
20 Walkup Drive | 91,045 | — | — | 91,045 | 1 | 649 | 100.0 | 100.0 | ||||||||||||||||||||
30 Bearfoot Road | 60,759 | — | — | 60,759 | 1 | 2,765 | 100.0 | 100.0 | ||||||||||||||||||||
Route 495 | 307,650 | — | — | 307,650 | 4 | 4,957 | 100.0 | 100.0 | ||||||||||||||||||||
Greater Boston | 6,135,551 | 255,155 | 59,173 | 6,449,879 | 54 | $ | 356,178 | 96.6 | % | 95.7 | % | |||||||||||||||||
Property Listing (continued) | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Market / Submarket / Address | RSF | Number of Properties | Annual Rental Revenue | Occupancy Percentage | ||||||||||||||||||||||||
Operating | Operating and Redevelopment | |||||||||||||||||||||||||||
Operating | Development | Redevelopment | Total | |||||||||||||||||||||||||
San Francisco | ||||||||||||||||||||||||||||
Mission Bay/SoMa | ||||||||||||||||||||||||||||
409 and 499 Illinois Street (consolidated joint venture – 60% ownership) | 455,069 | — | — | 455,069 | 2 | $ | 28,584 | 100.0 | % | 100.0 | % | |||||||||||||||||
1455 and 1515 Third Street | 422,980 | — | — | 422,980 | 2 | 22,150 | 100.0 | 100.0 | ||||||||||||||||||||
510 Townsend Street | 295,333 | — | — | 295,333 | 1 | 17,822 | 100.0 | 100.0 | ||||||||||||||||||||
88 Bluxome Street | 232,470 | — | — | 232,470 | 1 | 3,813 | 100.0 | 100.0 | ||||||||||||||||||||
455 Mission Bay Boulevard South | 210,398 | — | — | 210,398 | 1 | 12,201 | 100.0 | 100.0 | ||||||||||||||||||||
1500 Owens Street (consolidated joint venture – 50.1% ownership) | 158,267 | — | — | 158,267 | 1 | 7,712 | 100.0 | 100.0 | ||||||||||||||||||||
1700 Owens Street | 157,340 | — | — | 157,340 | 1 | 10,893 | 100.0 | 100.0 | ||||||||||||||||||||
505 Brannan Street (consolidated joint venture – 99.7% ownership) | 148,146 | — | — | 148,146 | 1 | 12,015 | 100.0 | 100.0 | ||||||||||||||||||||
Mission Bay/SoMa | 2,080,003 | — | — | 2,080,003 | 10 | 115,190 | 100.0 | 100.0 | ||||||||||||||||||||
South San Francisco | ||||||||||||||||||||||||||||
213, 249, 259, 269, and 279 East Grand Avenue | 407,369 | 499,930 | — | 907,299 | 5 | 16,838 | 100.0 | 100.0 | ||||||||||||||||||||
Alexandria Technology Center® – Gateway | 619,037 | — | — | 619,037 | 7 | 28,128 | 97.4 | 97.4 | ||||||||||||||||||||
600, 630, 650, 681, 701, 901, and 951 Gateway Boulevard | ||||||||||||||||||||||||||||
400 and 450 East Jamie Court and 201 Haskins Way | 186,875 | — | — | 186,875 | 3 | 7,755 | 100.0 | 100.0 | ||||||||||||||||||||
500 Forbes Boulevard | 155,685 | — | — | 155,685 | 1 | 6,619 | 100.0 | 100.0 | ||||||||||||||||||||
7000 Shoreline Court | 136,395 | — | — | 136,395 | 1 | 5,340 | 100.0 | 100.0 | ||||||||||||||||||||
341 and 343 Oyster Point Boulevard | 107,960 | — | — | 107,960 | 2 | 4,479 | 100.0 | 100.0 | ||||||||||||||||||||
849 Mitten Road | 103,857 | — | — | 103,857 | 1 | 3,411 | 100.0 | 100.0 | ||||||||||||||||||||
South San Francisco | 1,717,178 | 499,930 | — | 2,217,108 | 20 | 72,570 | 99.1 | 99.1 | ||||||||||||||||||||
Greater Stanford | ||||||||||||||||||||||||||||
Menlo Gateway (unconsolidated joint venture)(1) | 251,995 | 520,988 | — | 772,983 | 3 | 4,015 | 100.0 | 100.0 | ||||||||||||||||||||
100 Independence Drive and 125 and 135 Constitution Drive | ||||||||||||||||||||||||||||
960 Industrial Road | 195,000 | — | — | 195,000 | 1 | 4,875 | 100.0 | 100.0 | ||||||||||||||||||||
2425 Garcia Avenue/2400/2450 Bayshore Parkway | 99,208 | — | — | 99,208 | 1 | 4,257 | 100.0 | 100.0 | ||||||||||||||||||||
3165 Porter Drive | 91,644 | — | — | 91,644 | 1 | 3,885 | 100.0 | 100.0 | ||||||||||||||||||||
1450 Page Mill Road | 77,634 | — | — | 77,634 | 1 | 8,009 | 100.0 | 100.0 | ||||||||||||||||||||
3350 West Bayshore Road | 60,000 | — | — | 60,000 | 1 | 2,211 | 100.0 | 100.0 | ||||||||||||||||||||
2625/2627/2631 Hanover Street | 32,074 | — | — | 32,074 | 1 | 1,753 | 100.0 | 100.0 | ||||||||||||||||||||
Greater Stanford | 807,555 | 520,988 | — | 1,328,543 | 9 | 29,005 | 100.0 | 100.0 | ||||||||||||||||||||
San Francisco | 4,604,736 | 1,020,918 | — | 5,625,654 | 39 | 216,765 | 99.6 | 99.6 | ||||||||||||||||||||
New York City | ||||||||||||||||||||||||||||
Manhattan | ||||||||||||||||||||||||||||
Alexandria Center® for Life Science | 727,674 | — | — | 727,674 | 2 | 63,325 | 99.8 | 99.8 | ||||||||||||||||||||
430 and 450 East 29th Street | ||||||||||||||||||||||||||||
New York City | 727,674 | — | — | 727,674 | 2 | $ | 63,325 | 99.8 | % | 99.8 | % | |||||||||||||||||
(1) See page 5 of our Earnings Press Release for additional information. |
Property Listing (continued) | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Market / Submarket / Address | RSF | Number of Properties | Annual Rental Revenue | Occupancy Percentage | ||||||||||||||||||||||||
Operating | Operating and Redevelopment | |||||||||||||||||||||||||||
Operating | Development | Redevelopment | Total | |||||||||||||||||||||||||
San Diego | ||||||||||||||||||||||||||||
Torrey Pines | ||||||||||||||||||||||||||||
ARE Spectrum | 336,461 | — | — | 336,461 | 3 | $ | 17,352 | 100.0 | % | 100.0 | % | |||||||||||||||||
3215 Merryfield Row and 3013 and 3033 Science Park Road | ||||||||||||||||||||||||||||
ARE Torrey Ridge | 294,993 | — | — | 294,993 | 3 | 11,506 | 76.4 | 76.4 | ||||||||||||||||||||
10578, 10614, and 10628 Science Center Drive | ||||||||||||||||||||||||||||
ARE Sunrise | 236,082 | — | — | 236,082 | 3 | 9,401 | 100.0 | 100.0 | ||||||||||||||||||||
10931/10933 and 10975 North Torrey Pines Road, 3010 Science Park Road, and 10996 Torreyana Road | ||||||||||||||||||||||||||||
ARE Nautilus | 223,751 | — | — | 223,751 | 4 | 8,878 | 88.9 | 88.9 | ||||||||||||||||||||
3530 and 3550 John Hopkins Court and 3535 and 3565 General Atomics Court | ||||||||||||||||||||||||||||
3545 Cray Court | 116,556 | — | — | 116,556 | 1 | 4,827 | 100.0 | 100.0 | ||||||||||||||||||||
11119 North Torrey Pines Road | 72,506 | — | — | 72,506 | 1 | 3,409 | 100.0 | 100.0 | ||||||||||||||||||||
Torrey Pines | 1,280,349 | — | — | 1,280,349 | 15 | 55,373 | 92.6 | 92.6 | ||||||||||||||||||||
University Town Center | ||||||||||||||||||||||||||||
5200 Illumina Way | 792,687 | — | — | 792,687 | 6 | 28,738 | 100.0 | 100.0 | ||||||||||||||||||||
Campus Pointe by Alexandria | ||||||||||||||||||||||||||||
10290 and 10300 Campus Point Drive and 4110 Campus Point Court (consolidated joint venture – 55% ownership) | 798,799 | — | — | 798,799 | 3 | 32,236 | 95.6 | 95.6 | ||||||||||||||||||||
9880 Campus Point Drive | 71,510 | — | — | 71,510 | 1 | 2,774 | 100.0 | 100.0 | ||||||||||||||||||||
ARE Towne Centre | ||||||||||||||||||||||||||||
9363, 9373, and 9393 Towne Centre Drive | 140,398 | — | — | 140,398 | 3 | 3,419 | 100.0 | 100.0 | ||||||||||||||||||||
9625 Towne Centre Drive (consolidated joint venture)(1) | — | — | 163,648 | 163,648 | 1 | — | N/A | — | ||||||||||||||||||||
ARE Esplanade | 241,963 | — | — | 241,963 | 4 | 10,036 | 100.0 | 100.0 | ||||||||||||||||||||
4755, 4757, and 4767 Nexus Center Drive and 4796 Executive Drive | ||||||||||||||||||||||||||||
University Town Center | 2,045,357 | — | 163,648 | 2,209,005 | 18 | 77,203 | 98.3 | 91.0 | ||||||||||||||||||||
Sorrento Mesa | ||||||||||||||||||||||||||||
5810/5820 and 6138/6150 Nancy Ridge Drive | 138,970 | — | — | 138,970 | 2 | 3,950 | 100.0 | 100.0 | ||||||||||||||||||||
ARE Portola | 105,812 | — | — | 105,812 | 3 | 2,057 | 69.0 | 69.0 | ||||||||||||||||||||
6175, 6225, and 6275 Nancy Ridge Drive | ||||||||||||||||||||||||||||
10121 and 10151 Barnes Canyon Road | 102,392 | — | — | 102,392 | 2 | 2,681 | 100.0 | 100.0 | ||||||||||||||||||||
7330 Carroll Road | 66,244 | — | — | 66,244 | 1 | 2,431 | 100.0 | 100.0 | ||||||||||||||||||||
5871 Oberlin Drive | 33,817 | — | — | 33,817 | 1 | 993 | 100.0 | 100.0 | ||||||||||||||||||||
Sorrento Mesa | 447,235 | — | — | 447,235 | 9 | 12,112 | 92.7 | 92.7 | ||||||||||||||||||||
Sorrento Valley | ||||||||||||||||||||||||||||
11025, 11035, 11045, 11055, 11065, and 11075 Roselle Street | 121,655 | — | — | 121,655 | 6 | 3,022 | 92.8 | 92.8 | ||||||||||||||||||||
3985, 4025, 4031, and 4045 Sorrento Valley Boulevard | 103,111 | — | — | 103,111 | 4 | 1,189 | 48.2 | 48.2 | ||||||||||||||||||||
Sorrento Valley | 224,766 | — | — | 224,766 | 10 | 4,211 | 72.3 | 72.3 | ||||||||||||||||||||
I-15 Corridor | ||||||||||||||||||||||||||||
13112 Evening Creek Drive | 109,780 | — | — | 109,780 | 1 | 2,972 | 100.0 | 100.0 | ||||||||||||||||||||
San Diego | 4,107,487 | — | 163,648 | 4,271,135 | 53 | $ | 151,871 | 94.5 | % | 90.9 | % | |||||||||||||||||
(1) This property is owned by a consolidated real estate joint venture. As of 4Q17, we hold an ownership interest of 64.1% in this joint venture. TIAA’s initial ownership interest of 35.9% as of 4Q17 is expected to increase to 49.9% by the end of 2Q18 as TIAA contributes additional amounts to fund future construction. |
Property Listing (continued) | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Market / Submarket / Address | RSF | Number of Properties | Annual Rental Revenue | Occupancy Percentage | ||||||||||||||||||||||||
Operating | Operating and Redevelopment | |||||||||||||||||||||||||||
Operating | Development | Redevelopment | Total | |||||||||||||||||||||||||
Seattle | ||||||||||||||||||||||||||||
Lake Union | ||||||||||||||||||||||||||||
400 Dexter Avenue North | 290,111 | — | — | 290,111 | 1 | $ | 14,803 | 98.0 | % | 98.0 | % | |||||||||||||||||
1201 and 1208 Eastlake Avenue East | 203,369 | — | — | 203,369 | 2 | 8,748 | 100.0 | 100.0 | ||||||||||||||||||||
1616 Eastlake Avenue East | 168,708 | — | — | 168,708 | 1 | 8,215 | 95.6 | 95.6 | ||||||||||||||||||||
1551 Eastlake Avenue East | 117,482 | — | — | 117,482 | 1 | 4,841 | 100.0 | 100.0 | ||||||||||||||||||||
199 East Blaine Street | 115,084 | — | — | 115,084 | 1 | 6,196 | 100.0 | 100.0 | ||||||||||||||||||||
219 Terry Avenue North | 30,705 | — | — | 30,705 | 1 | 1,842 | 100.0 | 100.0 | ||||||||||||||||||||
1600 Fairview Avenue East | 27,991 | — | — | 27,991 | 1 | 1,124 | 100.0 | 100.0 | ||||||||||||||||||||
Lake Union | 953,450 | — | — | 953,450 | 8 | 45,769 | 98.6 | 98.6 | ||||||||||||||||||||
Elliott Bay | ||||||||||||||||||||||||||||
3000/3018 Western Avenue | 47,746 | — | — | 47,746 | 1 | 1,839 | 100.0 | 100.0 | ||||||||||||||||||||
410 West Harrison Street and 410 Elliott Avenue West | 36,724 | — | — | 36,724 | 2 | 1,112 | 71.8 | 71.8 | ||||||||||||||||||||
Elliott Bay | 84,470 | — | — | 84,470 | 3 | 2,951 | 87.7 | 87.7 | ||||||||||||||||||||
Seattle | 1,037,920 | — | — | 1,037,920 | 11 | 48,720 | 97.7 | 97.7 | ||||||||||||||||||||
Maryland | ||||||||||||||||||||||||||||
Rockville | ||||||||||||||||||||||||||||
9800, 9900, and 9920 Medical Center Drive | 341,169 | — | 45,039 | 386,208 | 6 | 13,176 | 100.0 | 88.3 | ||||||||||||||||||||
1330 Piccard Drive | 131,511 | — | — | 131,511 | 1 | 3,065 | 87.5 | 87.5 | ||||||||||||||||||||
1500 and 1550 East Gude Drive | 90,489 | — | — | 90,489 | 2 | 1,681 | 100.0 | 100.0 | ||||||||||||||||||||
14920 and 15010 Broschart Road | 86,703 | — | — | 86,703 | 2 | 2,231 | 100.0 | 100.0 | ||||||||||||||||||||
1405 Research Boulevard | 71,669 | — | — | 71,669 | 1 | 2,310 | 100.0 | 100.0 | ||||||||||||||||||||
5 Research Place | 63,852 | — | — | 63,852 | 1 | 2,396 | 100.0 | 100.0 | ||||||||||||||||||||
12301 Parklawn Drive | 49,185 | — | — | 49,185 | 1 | 1,329 | 100.0 | 100.0 | ||||||||||||||||||||
5 Research Court | 49,160 | — | — | 49,160 | 1 | — | — | — | ||||||||||||||||||||
Rockville | 883,738 | — | 45,039 | 928,777 | 15 | 26,188 | 92.6 | 88.1 | ||||||||||||||||||||
Gaithersburg | ||||||||||||||||||||||||||||
Alexandria Technology Center® – Gaithersburg I | 377,401 | — | — | 377,401 | 4 | 8,093 | 91.1 | 91.1 | ||||||||||||||||||||
9 West Watkins Mill Road and 910, 930, and 940 Clopper Road | ||||||||||||||||||||||||||||
Alexandria Technology Center® – Gaithersburg II | 237,137 | — | — | 237,137 | 5 | 6,278 | 100.0 | 100.0 | ||||||||||||||||||||
708 Quince Orchard Road, 1300 Quince Orchard Boulevard, and 19, 20, and 22 Firstfield Road | ||||||||||||||||||||||||||||
401 Professional Drive | 63,154 | — | — | 63,154 | 1 | 1,472 | 100.0 | 100.0 | ||||||||||||||||||||
950 Wind River Lane | 50,000 | — | — | 50,000 | 1 | 1,082 | 100.0 | 100.0 | ||||||||||||||||||||
620 Professional Drive | 27,950 | — | — | 27,950 | 1 | 1,191 | 100.0 | 100.0 | ||||||||||||||||||||
Gaithersburg | 755,642 | — | — | 755,642 | 12 | 18,116 | 95.5 | 95.5 | ||||||||||||||||||||
Beltsville | ||||||||||||||||||||||||||||
8000/9000/10000 Virginia Manor Road | 191,884 | — | — | 191,884 | 1 | 2,489 | 100.0 | 100.0 | ||||||||||||||||||||
Northern Virginia | ||||||||||||||||||||||||||||
14225 Newbrook Drive | 248,186 | — | — | 248,186 | 1 | 5,138 | 100.0 | 100.0 | ||||||||||||||||||||
Maryland | 2,079,450 | — | 45,039 | 2,124,489 | 29 | $ | 51,931 | 95.2 | % | 93.2 | % | |||||||||||||||||
Property Listing (continued) | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Market / Submarket / Address | RSF | Number of Properties | Annual Rental Revenue | Occupancy Percentage | ||||||||||||||||||||||||
Operating | Operating and Redevelopment | |||||||||||||||||||||||||||
Operating | Development | Redevelopment | Total | |||||||||||||||||||||||||
Research Triangle Park | ||||||||||||||||||||||||||||
Research Triangle Park | ||||||||||||||||||||||||||||
Alexandria Technology Center® – Alston | 186,870 | — | — | 186,870 | 3 | $ | 3,388 | 91.0 | % | 91.0 | % | |||||||||||||||||
100, 800, and 801 Capitola Drive | ||||||||||||||||||||||||||||
Alexandria Center® for AgTech – RTP | — | — | 175,000 | 175,000 | 1 | — | N/A | — | ||||||||||||||||||||
5 Laboratory Drive | ||||||||||||||||||||||||||||
108/110/112/114 TW Alexander Drive | 158,417 | — | — | 158,417 | 1 | 4,607 | 100.0 | 100.0 | ||||||||||||||||||||
Alexandria Innovation Center® – Research Triangle Park | 135,677 | — | — | 135,677 | 3 | 3,360 | 99.2 | 99.2 | ||||||||||||||||||||
7010, 7020, and 7030 Kit Creek Road | ||||||||||||||||||||||||||||
6 Davis Drive | 100,000 | — | — | 100,000 | 1 | 1,787 | 97.7 | 97.7 | ||||||||||||||||||||
7 Triangle Drive | 96,626 | — | — | 96,626 | 1 | 3,156 | 100.0 | 100.0 | ||||||||||||||||||||
2525 East NC Highway 54 | 82,996 | — | — | 82,996 | 1 | 3,680 | 100.0 | 100.0 | ||||||||||||||||||||
407 Davis Drive | 81,956 | — | — | 81,956 | 1 | 1,644 | 100.0 | 100.0 | ||||||||||||||||||||
601 Keystone Park Drive | 77,395 | — | — | 77,395 | 1 | 1,379 | 100.0 | 100.0 | ||||||||||||||||||||
6040 George Watts Hill Drive | 61,547 | — | — | 61,547 | 1 | 2,148 | 100.0 | 100.0 | ||||||||||||||||||||
5 Triangle Drive | 32,120 | — | — | 32,120 | 1 | 856 | 100.0 | 100.0 | ||||||||||||||||||||
6101 Quadrangle Drive | 30,122 | — | — | 30,122 | 1 | 539 | 100.0 | 100.0 | ||||||||||||||||||||
Research Triangle Park | 1,043,726 | — | 175,000 | 1,218,726 | 16 | 26,544 | 98.1 | 84.0 | ||||||||||||||||||||
Canada | 256,967 | — | — | 256,967 | 3 | 6,652 | 99.6 | 99.6 | ||||||||||||||||||||
Non-cluster markets | 268,689 | — | — | 268,689 | 6 | 5,394 | 78.4 | 78.4 | ||||||||||||||||||||
Total – North America | 20,262,200 | 1,276,073 | 442,860 | 21,981,133 | 213 | $ | 927,380 | 96.8 | % | 94.7 | % | |||||||||||||||||
![]() | |
Disciplined Management of Ground-Up Developments | |
December 31, 2017 | |
![q417prelease.jpg](https://capedge.com/proxy/8-K/0001035443-18-000022/q417prelease.jpg)
Represents pre-leased percentage at commencement of vertical construction since January 1, 2008.
Investments in Real Estate | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Investments in Real Estate | Square Feet | |||||||||||||
Consolidated | Unconsolidated(1) | Total | ||||||||||||
Investments in real estate: | ||||||||||||||
Rental properties | $ | 11,092,815 | 19,799,496 | 462,704 | 20,262,200 | |||||||||
Development and redevelopment of new Class A properties: | ||||||||||||||
Undergoing construction – target delivery in 2018–2020 | ||||||||||||||
Development projects | 310,825 | 755,085 | 520,988 | 1,276,073 | ||||||||||
Redevelopment projects | 72,282 | 442,860 | — | 442,860 | ||||||||||
1,197,945 | 520,988 | 1,718,933 | ||||||||||||
20,997,441 | 983,692 | 21,981,133 | ||||||||||||
Near-term projects undergoing marketing and pre-construction – target delivery in 2019 and 2020 | 163,764 | 1,015,000 | 580,000 | 1,595,000 | ||||||||||
Intermediate-term development projects | 408,347 | 3,798,961 | — | 3,798,961 | ||||||||||
Future development projects | 96,112 | 2,639,437 | — | 2,639,437 | ||||||||||
Portion of developable square feet that will replace existing RSF included in rental properties(2) | N/A | (451,310 | ) | — | (451,310 | ) | ||||||||
7,002,088 | 580,000 | 7,582,088 | ||||||||||||
Gross investments in real estate | 12,144,145 | 27,999,529 | 1,563,692 | 29,563,221 | ||||||||||
Less: accumulated depreciation | (1,875,810 | ) | ||||||||||||
Net investments in real estate – North America | 10,268,335 | |||||||||||||
Net investments in real estate – Asia | 29,684 | |||||||||||||
Investments in real estate | $ | 10,298,019 | ||||||||||||
(1) | Our share of the cost basis associated with unconsolidated square feet is classified in investments in unconsolidated real estate joint ventures in our consolidated balance sheets. |
(2) | See footnotes 5, 7, and 8 on page 40. |
Development and Redevelopment of New Class A Properties: 2017 Deliveries | ![]() | |
December 31, 2017 | ||
100 Binney Street | 510 Townsend Street | 505 Brannan Street, Phase I | ||
Greater Boston/Cambridge | San Francisco/Mission Bay/SoMa | San Francisco/Mission Bay/SoMa | ||
341,776 RSF | 295,333 RSF | 148,146 RSF | ||
Bristol-Myers Squibb Company Facebook, Inc. | Stripe, Inc. | Pinterest, Inc. | ||
![]() | ![]() | ![]() |
ARE Spectrum | 5200 Illumina Way, Parking Structure | 400 Dexter Avenue North | ||
San Diego/Torrey Pines | San Diego/University Town Center | Seattle/Lake Union | ||
336,461 RSF | N/A | 290,111 RSF | ||
The Medicines Company Celgene Corporation Wellspring Biosciences LLC Vertex Pharmaceuticals Incorporated | Illumina, Inc. | Juno Therapeutics, Inc. ClubCorp Holdings, Inc. | ||
![]() | ![]() | ![]() |
RSF represents the cumulative RSF placed into service as of 4Q17, including RSF that have been placed into service prior to January 1, 2017.
Development and Redevelopment of New Class A Properties: 2017 Deliveries (continued) | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Property/Market/Submarket | Our Ownership Interest | Date Delivered | RSF in Service | Total Project | Unlevered Yields | |||||||||||||||||||||||||||||||||||||||
Prior to 1/1/17 | Placed into Service | Total | Initial Stabilized | Initial Stabilized Cash Basis | ||||||||||||||||||||||||||||||||||||||||
1Q17 | 2Q17 | 3Q17 | 4Q17 | Leased | RSF | Investment | ||||||||||||||||||||||||||||||||||||||
Consolidated development projects | ||||||||||||||||||||||||||||||||||||||||||||
100 Binney Street/Greater Boston/Cambridge | 100% | 9/21/17 | — | — | — | 341,776 | — | 341,776 | 100% | 432,931 | $ | 439,000 | 8.2 | % | 7.4 | % | ||||||||||||||||||||||||||||
510 Townsend Street/San Francisco/ Mission Bay/SoMa | 100% | 10/31/17 | — | — | — | — | 295,333 | 295,333 | 100% | 295,333 | $ | 226,000 | 7.9 | % | 7.5 | % | ||||||||||||||||||||||||||||
505 Brannan Street, Phase I/San Francisco/Mission Bay/SoMa | 99.7% | 10/10/17 | — | — | — | — | 148,146 | 148,146 | 100% | 148,146 | $ | 140,000 | 8.5 | % | 7.2 | % | ||||||||||||||||||||||||||||
ARE Spectrum/San Diego/Torrey Pines | 100% | Various | 102,938 | 31,336 | 31,664 | — | 170,523 | 336,461 | 98% | 336,461 | $ | 277,000 | 6.4 | % | 6.2 | % | ||||||||||||||||||||||||||||
5200 Illumina Way, Parking Structure/San Diego/University Town Center | 100% | 5/15/17 | — | — | N/A | — | — | N/A | 100% | N/A | $ | 60,000 | 7.0 | % | 7.0 | % | ||||||||||||||||||||||||||||
400 Dexter Avenue North/Seattle/Lake Union | 100% | Various | — | 241,276 | — | 17,620 | 31,215 | 290,111 | 100% | 290,111 | $ | 223,000 | 7.0 | % | 7.1 | % | ||||||||||||||||||||||||||||
Total | 102,938 | 272,612 | 31,664 | 359,396 | 645,217 | 1,411,827 |
Development and Redevelopment of New Class A Properties: 2018–2020 Deliveries (Projects Undergoing Construction and Near-Term Projects Undergoing Marketing and Pre-Construction) | ![]() | |
December 31, 2017 | ||
100 Binney Street | 399 Binney Street | 266 and 275 Second Avenue | 1655 and 1715 Third Street | |||
Greater Boston/Cambridge | Greater Boston/Cambridge | Greater Boston/Route 128 | San Francisco/Mission Bay/SoMa | |||
91,155 RSF | 164,000 RSF | 59,173 RSF | 580,000 RSF | |||
Foghorn Therapeutics, Inc. Sigilon Therapeutics, Inc. Tango Therapeutics, Inc. TCR2 Therapeutics, Inc. | Rubius Therapeutics, Inc. Relay Therapeutics, Inc. Celsius Therapeutics, Inc. Marketing | Visterra, Inc. Marketing | Uber Technologies, Inc. | |||
![]() | ![]() | ![]() | ![]() |
213 East Grand Avenue | 279 East Grand Avenue | 201 Haskins Way | 681 Gateway Boulevard | |||
San Francisco/South San Francisco | San Francisco/South San Francisco | San Francisco/South San Francisco | San Francisco/South San Francisco | |||
300,930 RSF | 199,000 RSF | 280,000 RSF | 126,971 RSF | |||
Merck & Co., Inc. | Multi-Tenant | Marketing | Multi-Tenant/Marketing | |||
![]() | ![]() | ![]() | ![]() |
Development and Redevelopment of New Class A Properties: 2018–2020 Deliveries (Projects Undergoing Construction and Near-Term Projects Undergoing Marketing and Pre-Construction) | ![]() | |
December 31, 2017 | ||
Menlo Gateway | 825 and 835 Industrial Road | 9625 Towne Centre Drive | ||
San Francisco/Greater Stanford | San Francisco/Greater Stanford | San Diego/University Town Center | ||
520,988 RSF | 530,000 RSF | 163,648 RSF | ||
Facebook, Inc. | Marketing | Takeda Pharmaceutical Company Ltd. | ||
![]() | ![]() | ![]() |
9880 Campus Point Drive | 1818 Fairview Avenue East | 9900 Medical Center Drive | 5 Laboratory Drive | |||
San Diego/University Town Center | Seattle/Lake Union | Maryland/Rockville | Research Triangle Park/RTP | |||
71,510 RSF | 205,000 RSF | 45,039 RSF | 175,000 RSF | |||
Marketing | Multi-Tenant | Marketing | Multi-Tenant | |||
![]() | ![]() | ![]() | ![]() |
Development and Redevelopment of New Class A Properties: 2018–2020 Deliveries (Projects Undergoing Construction and Near-Term Projects Undergoing Marketing and Pre-Construction) (continued) | ![]() | |
December 31, 2017 | ||
Property/Market/Submarket | Our Ownership Interest | Project RSF | Percentage | Project Start | Occupancy(1) | |||||||||||||||||||||||
In Service | CIP | Total | Leased | Negotiating | Total | Initial | Stabilized | |||||||||||||||||||||
Consolidated developments under construction | ||||||||||||||||||||||||||||
100 Binney Street/Greater Boston/Cambridge | 100% | 341,776 | 91,155 | 432,931 | 100 | % | — | % | 100 | % | 3Q15 | 3Q17 | 1Q18 | |||||||||||||||
399 Binney Street/Greater Boston/Cambridge | 100% | — | 164,000 | 164,000 | 75 | % | — | % | 75 | % | 4Q17 | 4Q18 | 2019 | |||||||||||||||
213 East Grand Avenue/San Francisco/South San Francisco | 100% | — | 300,930 | 300,930 | 100 | % | — | % | 100 | % | 2Q17 | 1Q19 | 2019 | |||||||||||||||
279 East Grand Avenue/San Francisco/South San Francisco | 100% | — | 199,000 | 199,000 | — | % | 52 | % | 52 | % | 4Q17 | 2019 | 2020 | |||||||||||||||
341,776 | 755,085 | 1,096,861 | 78 | % | 10 | % | 88 | % | ||||||||||||||||||||
Consolidated redevelopments under construction | ||||||||||||||||||||||||||||
266 and 275 Second Avenue/Greater Boston/Route 128 | 100% | 144,584 | 59,173 | 203,757 | 84 | % | — | % | 84 | % | 3Q17 | 2Q18 | 2018 | |||||||||||||||
9900 Medical Center Drive/Maryland/Rockville | 100% | — | 45,039 | 45,039 | — | % | — | % | — | % | 3Q17 | 2Q18 | 2018 | |||||||||||||||
5 Laboratory Drive/Research Triangle Park/RTP | 100% | — | 175,000 | 175,000 | 15 | % | 24 | % | 39 | % | 2Q17 | 3Q18 | 2019 | |||||||||||||||
9625 Towne Centre Drive/San Diego/University Town Center | 50.1% | (2) | — | 163,648 | 163,648 | 100 | % | — | % | 100 | % | 3Q15 | 4Q18 | 2018 | ||||||||||||||
144,584 | 442,860 | 587,444 | 61 | % | 8 | % | 69 | % | ||||||||||||||||||||
486,360 | 1,197,945 | 1,684,305 | ||||||||||||||||||||||||||
Unconsolidated joint venture development under construction | ||||||||||||||||||||||||||||
Menlo Gateway/San Francisco/Greater Stanford | (3) | 251,995 | 520,988 | 772,983 | 100 | % | — | % | 100 | % | 4Q17 | 4Q19 | 4Q19 | |||||||||||||||
738,355 | 1,718,933 | 2,457,288 | ||||||||||||||||||||||||||
Unconsolidated joint venture development under pre-construction | ||||||||||||||||||||||||||||
1655 and 1715 Third Street/San Francisco/Mission Bay/SoMa(4) | 10% | — | 580,000 | 580,000 | 100 | % | (4) | — | % | 100 | % | 1Q18 | 2019 | 2019 | ||||||||||||||
Total | 738,355 | 2,298,933 | 3,037,288 | 85 | % | 4 | % | 89 | % | |||||||||||||||||||
Near-term development projects undergoing marketing and pre-construction | ||||||||||||||||||||||||||||
1818 Fairview Avenue East/Seattle/Lake Union | 100% | — | 205,000 | 205,000 | TBD | TBD | TBD | 2019 | TBD | |||||||||||||||||||
825 and 835 Industrial Road/San Francisco/Greater Stanford | 100% | — | 530,000 | 530,000 | TBD | |||||||||||||||||||||||
201 Haskins Way/San Francisco/South San Francisco | 100% | — | 280,000 | 280,000 | ||||||||||||||||||||||||
— | 1,015,000 | 1,015,000 | ||||||||||||||||||||||||||
Near-term redevelopment projects undergoing marketing and pre-construction | ||||||||||||||||||||||||||||
681 Gateway Boulevard/San Francisco/South San Francisco(5) | 100% | 126,971 | — | 126,971 | — | % | 35 | % | (5) | 35 | % | 4Q18 | 2019 | TBD | ||||||||||||||
9880 Campus Point Drive/San Diego/University Town Center(6) | 100% | 71,510 | — | 71,510 | TBD | |||||||||||||||||||||||
198,481 | — | 198,481 | ||||||||||||||||||||||||||
Near-term projects undergoing marketing and pre-construction (includes 1655 and 1715 Third Street) | 198,481 | 1,595,000 | 1,793,481 | |||||||||||||||||||||||||
Total | 936,836 | 3,313,933 | 4,250,769 |
(1) | Initial occupancy dates are subject to leasing and/or market conditions. Stabilized occupancy may vary depending on single tenancy versus multi-tenancy. |
(2) | See page 6 of our Earnings Press Release for additional information on our partial interest sale at 9625 Towne Centre Drive. |
(3) | See page 5 of our Earnings Press Release for additional information on our acquisition at Menlo Gateway. |
(4) | See page 4 of our Earnings Press Release for additional information. |
(5) | The building is 100% occupied through September 2018, after which we expect to redevelop the building from office to office/laboratory space and expand by an additional 15,000 to 30,000 RSF. We have a letter of intent for a lease under negotiation aggregating 45,000 RSF, or 35% of the project. |
(6) | This building is 100% occupied through January 2018, after which we expect to demolish the existing R&D building and develop a 98,000 RSF Class A office/laboratory property. We expect initial stabilized yields for our entire Campus Pointe by Alexandria campus to be in the low 7% range. |
Development and Redevelopment of New Class A Properties: 2018–2020 Deliveries (Projects Undergoing Construction and Near-Term Projects Undergoing Marketing and Pre-Construction) (continued) | ![]() |
December 31, 2017 | |
(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) | |||||||||||||||||||||||||
Consolidated developments under construction | |||||||||||||||||||||||||||||||
100 Binney Street/Greater Boston/Cambridge | 100% | $ | 302,933 | $ | 80,860 | $ | 55,207 | $ | 439,000 | 8.2 | % | 7.4 | % | ||||||||||||||||||
399 Binney Street/Greater Boston/Cambridge | 100% | — | 85,772 | 88,228 | 174,000 | 7.3 | % | 6.7 | % | ||||||||||||||||||||||
213 East Grand Avenue/San Francisco/South San Francisco | 100% | — | 102,803 | 157,197 | 260,000 | 7.2 | % | 6.4 | % | ||||||||||||||||||||||
279 East Grand Avenue/San Francisco/South San Francisco | 100% | — | 41,390 | TBD | TBD | TBD | TBD | ||||||||||||||||||||||||
$ | 302,933 | $ | 310,825 | TBD | TBD | ||||||||||||||||||||||||||
Consolidated redevelopments under construction | |||||||||||||||||||||||||||||||
266 and 275 Second Avenue/Greater Boston/Route 128 | 100% | $ | 60,658 | $ | 11,788 | $ | 16,554 | $ | 89,000 | 8.4 | % | 7.1 | % | ||||||||||||||||||
9900 Medical Center Drive/Maryland/Rockville | 100% | — | 7,639 | 6,661 | 14,300 | 8.4 | % | 8.4 | % | ||||||||||||||||||||||
5 Laboratory Drive/Research Triangle Park/RTP | 100% | — | 12,748 | 49,752 | 62,500 | 7.7 | % | 7.6 | % | ||||||||||||||||||||||
9625 Towne Centre Drive/San Diego/University Town Center | 50.1% | (1) | — | 40,107 | 52,893 | (1) | 93,000 | 7.0 | % | 7.0 | % | ||||||||||||||||||||
60,658 | 72,282 | 125,860 | 258,800 | ||||||||||||||||||||||||||||
Total | $ | 363,591 | $ | 383,107 | TBD | TBD |
Our Ownership Interest | Cost to Complete | Unlevered Yields | ||||||||||||||||||||||||||||||||
Property/Market/Submarket | In Service | CIP | Construction Loan | ARE Funding | Total at Completion | Initial Stabilized | Initial Stabilized (Cash Basis) | |||||||||||||||||||||||||||
Unconsolidated joint venture development under construction and pre-construction | ||||||||||||||||||||||||||||||||||
(Amounts represent our share) | ||||||||||||||||||||||||||||||||||
Menlo Gateway/San Francisco/Greater Stanford | (2) | $ | 49,053 | $ | 41,395 | $ | 124,223 | $ | 215,329 | $ | 430,000 | 6.9% | 6.3% | |||||||||||||||||||||
1655 and 1715 Third Street/San Francisco/Mission Bay/SoMa(3) | 10 | % | (3) | (3) | 37,500 | 40,500 | (3) | 78,000 | 7.8% | 6.0% | ||||||||||||||||||||||||
49,053 | 41,395 | 161,723 | 255,829 | 508,000 | ||||||||||||||||||||||||||||||
Consolidated developments/redevelopments under construction | 363,591 | 383,107 | — | TBD | TBD | |||||||||||||||||||||||||||||
Total | $ | 412,644 | $ | 424,502 | $ | 161,723 | TBD | TBD |
(1) | We expect to receive contributions from our joint venture partner of $30.7 million to fund construction. See page 6 of our Earnings Press Release for additional information on our partial interest sale at 9625 Towne Centre Drive. |
(2) | See page 5 of our Earnings Press Release for additional information on our acquisition at Menlo Gateway. |
(3) | See page 4 of our Earnings Press Release for additional information. |
Development and Redevelopment of New Class A Properties: Intermediate-Term Development Projects | ![]() |
December 31, 2017 | |
325 Binney Street | 88 Bluxome Street | 505 Brannan Street, Phase II | 960 Industrial Road | Alexandria Center® for Life Science | ||||
Greater Boston/Cambridge | San Francisco/Mission Bay/SoMa | San Francisco/Mission Bay/SoMa | San Francisco/Greater Stanford | New York City/Manhattan | ||||
208,965 RSF | 1,070,925 RSF | 165,000 RSF | 500,000 RSF | 420,000 RSF | ||||
![]() | ![]() | ![]() | ![]() | ![]() |
5200 Illumina Way | Campus Point Drive | 1150 Eastlake Avenue East | 1165/1166 Eastlake Avenue East | 9800 Medical Center Drive | ||||
San Diego/University Town Center | San Diego/University Town Center | Seattle/Lake Union | Seattle/Lake Union | Maryland/Rockville | ||||
386,044 RSF | 318,383 RSF | 260,000 RSF | 106,000 RSF | 180,000 RSF | ||||
![]() | ![]() | ![]() | ![]() | ![]() |
Development and Redevelopment of New Class A Properties: Summary of Pipeline | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Property/Submarket | Our Ownership Interest | Book Value | Square Footage | ||||||||||||||||||||||||||||
Development Projects | |||||||||||||||||||||||||||||||
Undergoing Construction | Near-Term Projects Undergoing Marketing and Pre-Construction | Intermediate- Term Development | Future Development | Total(1) | |||||||||||||||||||||||||||
Greater Boston | |||||||||||||||||||||||||||||||
Undergoing construction | |||||||||||||||||||||||||||||||
100 Binney Street/Cambridge | 100 | % | $ | 80,860 | 91,155 | — | — | — | 91,155 | ||||||||||||||||||||||
266 and 275 Second Avenue/Route 128 | 100 | % | 11,788 | 59,173 | — | — | — | 59,173 | |||||||||||||||||||||||
399 Binney Street (Alexandria Center® at One Kendall Square) | 100 | % | 85,772 | 164,000 | — | — | — | 164,000 | |||||||||||||||||||||||
Intermediate-term development | |||||||||||||||||||||||||||||||
325 Binney Street/Cambridge | 100 | % | 87,251 | — | — | 208,965 | — | 208,965 | |||||||||||||||||||||||
50 Rogers Street/Cambridge | 100 | % | 6,466 | (2) | — | — | 183,644 | — | 183,644 | ||||||||||||||||||||||
Future development projects | |||||||||||||||||||||||||||||||
Alexandria Technology Square®/Cambridge | 100 | % | 7,787 | — | — | — | 100,000 | 100,000 | |||||||||||||||||||||||
Other future projects | 100 | % | 7,612 | — | — | — | 221,955 | 221,955 | |||||||||||||||||||||||
287,536 | 314,328 | — | 392,609 | 321,955 | 1,028,892 | ||||||||||||||||||||||||||
San Francisco | |||||||||||||||||||||||||||||||
Undergoing construction | |||||||||||||||||||||||||||||||
213 East Grand Avenue/South San Francisco | 100 | % | 102,803 | 300,930 | — | — | — | 300,930 | |||||||||||||||||||||||
279 East Grand Avenue/South San Francisco | 100 | % | 41,390 | 199,000 | — | — | — | 199,000 | |||||||||||||||||||||||
Menlo Gateway/Greater Stanford | 49 | % | (3) | — | 520,988 | — | — | — | 520,988 | ||||||||||||||||||||||
Near-term projects undergoing marketing and pre-construction | |||||||||||||||||||||||||||||||
825 and 835 Industrial Road/Greater Stanford | 100 | % | 92,160 | — | 530,000 | — | — | 530,000 | |||||||||||||||||||||||
1655 and 1715 Third Street/Mission Bay/SoMa(4) | 10 | % | — | — | 580,000 | — | — | 580,000 | |||||||||||||||||||||||
201 Haskins Way/South San Francisco | 100 | % | 39,122 | — | 280,000 | (5) | — | — | 280,000 | ||||||||||||||||||||||
681 Gateway Boulevard/South San Francisco(6) | 100 | % | — | — | — | — | — | — | |||||||||||||||||||||||
Intermediate-term development | |||||||||||||||||||||||||||||||
88 Bluxome Street/Mission Bay/SoMa | 100 | % | 162,334 | — | — | 1,070,925 | (7) | — | 1,070,925 | ||||||||||||||||||||||
505 Brannan Street, Phase II/Mission Bay/SoMa | 99.7 | % | 14,988 | — | — | 165,000 | — | 165,000 | |||||||||||||||||||||||
960 Industrial Road/Greater Stanford | 100 | % | 69,255 | — | — | 500,000 | (8) | — | 500,000 | ||||||||||||||||||||||
Future development projects | |||||||||||||||||||||||||||||||
East Grand Avenue/South San Francisco | 100 | % | 5,988 | — | — | — | 90,000 | 90,000 | |||||||||||||||||||||||
Other future projects | 100 | % | 228 | — | — | — | 95,620 | 95,620 | |||||||||||||||||||||||
528,268 | 1,020,918 | 1,390,000 | 1,735,925 | 185,620 | 4,332,463 | ||||||||||||||||||||||||||
New York City | |||||||||||||||||||||||||||||||
Alexandria Center® for Life Science/Manhattan | 100 | % | — | — | — | 420,000 | — | 420,000 | |||||||||||||||||||||||
$ | — | — | — | 420,000 | — | 420,000 | |||||||||||||||||||||||||
(1) Total pipeline SF represents operating RSF targeted for near-term and intermediate-term development plus incremental developable SF. (2) Represents a multifamily residential development with approximately 130-140 units (adjacent to 161 First Street). As part of our successful efforts to increase the entitlements on our Alexandria Center® at Kendall Square development, we agreed to develop two multifamily residential projects, one of which was previously completed and sold. We expect to commence construction of this project in 2018, and we are in negotiations for a potential sale. (3) See page 5 of our Earnings Press Release for additional information on our acquisition at Menlo Gateway. (4) See page 4 of our Earnings Press Release for additional information. (5) The near-term development project undergoing entitlements for 280,000 RSF will replace the existing 23,840 RSF operating property. (6) See page 23 of our Supplemental Informational for additional information on our near-term redevelopment opportunities. (7) The intermediate-term development project undergoing entitlements for 1,070,925 developable SF will replace the existing 232,470 RSF operating property. (8) The intermediate-term development project undergoing entitlements for 500,000 RSF will replace the existing 195,000 RSF operating property. |
Development and Redevelopment of New Class A Properties: Summary of Pipeline (continued) | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Property/Submarket | Our Ownership Interest | Book Value | Square Footage | ||||||||||||||||||||||||||||
Development Projects | |||||||||||||||||||||||||||||||
Undergoing Construction | Near-Term Projects Undergoing Marketing and Pre-Construction | Intermediate- Term Development | Future Development | Total(1) | |||||||||||||||||||||||||||
San Diego | |||||||||||||||||||||||||||||||
Undergoing construction | |||||||||||||||||||||||||||||||
9625 Towne Centre Drive/University Town Center | 50.1 | % | (2) | $ | 40,107 | 163,648 | — | — | — | 163,648 | |||||||||||||||||||||
Intermediate-term development | |||||||||||||||||||||||||||||||
5200 Illumina Way/University Town Center | 100 | % | 11,562 | — | — | 386,044 | — | 386,044 | |||||||||||||||||||||||
Campus Point Drive/University Town Center | 55 | % | 14,890 | — | — | 318,383 | — | 318,383 | |||||||||||||||||||||||
Future development projects | |||||||||||||||||||||||||||||||
Vista Wateridge/Sorrento Mesa | 100 | % | 3,971 | — | — | — | 163,000 | 163,000 | |||||||||||||||||||||||
Other future projects | 100 | % | 30,295 | — | — | — | 259,895 | 259,895 | |||||||||||||||||||||||
100,825 | 163,648 | — | 704,427 | 422,895 | 1,290,970 | ||||||||||||||||||||||||||
Seattle | |||||||||||||||||||||||||||||||
Near-term projects undergoing marketing and pre-construction | |||||||||||||||||||||||||||||||
1818 Fairview Avenue East/Lake Union | 100 | % | 32,482 | — | 205,000 | — | — | 205,000 | |||||||||||||||||||||||
Intermediate-term development | |||||||||||||||||||||||||||||||
1150 Eastlake Avenue East/Lake Union | 100 | % | 19,269 | — | — | 260,000 | — | 260,000 | |||||||||||||||||||||||
1165/1166 Eastlake Avenue East/Lake Union | 100 | % | 15,115 | — | — | 106,000 | — | — | 106,000 | ||||||||||||||||||||||
66,866 | — | 205,000 | 366,000 | — | 571,000 | ||||||||||||||||||||||||||
Maryland | |||||||||||||||||||||||||||||||
Undergoing construction | |||||||||||||||||||||||||||||||
9900 Medical Center Drive/Rockville | 100 | % | 7,639 | 45,039 | — | — | — | 45,039 | |||||||||||||||||||||||
Intermediate-term development | |||||||||||||||||||||||||||||||
9800 Medical Center Drive/Rockville | 100 | % | 7,217 | — | — | 180,000 | — | 180,000 | |||||||||||||||||||||||
Future development projects | |||||||||||||||||||||||||||||||
Other future projects | 100 | % | 4,035 | — | — | — | 61,000 | 61,000 | |||||||||||||||||||||||
18,891 | 45,039 | — | 180,000 | 61,000 | 286,039 | ||||||||||||||||||||||||||
Research Triangle Park | |||||||||||||||||||||||||||||||
Undergoing construction | |||||||||||||||||||||||||||||||
5 Laboratory Drive/Research Triangle Park | 100 | % | 12,748 | 175,000 | — | — | — | 175,000 | |||||||||||||||||||||||
Future development projects | |||||||||||||||||||||||||||||||
6 Davis Drive/Research Triangle Park | 100 | % | 16,671 | — | — | — | 1,000,000 | 1,000,000 | |||||||||||||||||||||||
Other future projects | 100 | % | 4,149 | — | — | — | 76,262 | 76,262 | |||||||||||||||||||||||
33,568 | 175,000 | — | — | 1,076,262 | 1,251,262 | ||||||||||||||||||||||||||
Non-cluster markets – other future projects | 100 | % | 15,376 | — | — | — | 571,705 | 571,705 | |||||||||||||||||||||||
$ | 1,051,330 | 1,718,933 | 1,595,000 | 3,798,961 | 2,639,437 | 9,752,331 |
(1) | Total pipeline SF represents operating RSF plus incremental SF targeted for near-term and intermediate-term development. |
(2) | See page 6 of our Earnings Press Release for additional information on our partial interest sale at 9625 Towne Centre Drive. |
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Sustainability | |
December 31, 2017 | |
![q417sustainability.jpg](https://capedge.com/proxy/8-K/0001035443-18-000022/q417sustainability.jpg)
(1) Upon completion of 12 LEED® certification projects in process.
(2) Upon completion of 3 WELL® certification projects in process.
(3) Upon completion of 8 Fitwel® certification projects in process.
Construction Spending | ![]() |
December 31, 2017 | |
(Dollars in thousands, except per RSF amounts) | |
Construction Spending | Year Ended December 31, 2017 | ||||||
Additions to real estate – consolidated projects | $ | 893,685 | |||||
Investments in unconsolidated real estate joint ventures | 17,876 | ||||||
Construction spending (cash basis)(1) | 911,561 | ||||||
Decrease in accrued construction | (11,034 | ) | |||||
Construction spending | $ | 900,527 | |||||
Projected Construction Spending | Year Ending December 31, 2018 | ||||||
Development and redevelopment projects | $ | 814,000 | |||||
Investments in unconsolidated real estate joint ventures | 149,000 | ||||||
Contributions from noncontrolling interests (consolidated real estate joint ventures) | (37,000 | ) | |||||
Generic laboratory infrastructure/building improvement projects | 153,000 | (2) | |||||
Non-revenue-enhancing capital expenditures and tenant improvements | 21,000 | ||||||
Total projected construction spending | 1,100,000 | ||||||
Guidance range | $ | 1,050,000 | – | $1,150,000 | |||
Non-Revenue-Enhancing Capital Expenditures(3) | Year Ended December 31, 2017 | Recent Average per RSF(4) | |||||||||||
Amount | Per RSF | ||||||||||||
Non-revenue-enhancing capital expenditures | $ | 7,900 | $ | 0.41 | $ | 0.46 | |||||||
Tenant improvements and leasing costs: | |||||||||||||
Re-tenanted space | $ | 17,437 | $ | 25.32 | $ | 18.47 | |||||||
Renewal space | 29,884 | 16.27 | 10.89 | ||||||||||
Total tenant improvements and leasing costs/weighted average | $ | 47,321 | $ | 18.74 | (5) | $ | 13.20 | ||||||
(1) | Includes revenue-enhancing projects and non-revenue-enhancing capital expenditures. |
(2) | Includes $25 million to $30 million of projected construction spending related to the demolition of the existing R&D building and development of a new 98,000 RSF Class A office/laboratory property at 9880 Campus Point Drive in our University Town Center submarket. |
(3) | Excludes amounts that are recoverable from tenants, revenue enhancing, or related to properties that have undergone redevelopment. |
(4) | Represents the average for the five years ended December 31, 2017. |
(5) | Includes approximately $12.3 million, or $16.92 per RSF, of leasing commissions related to lease renewals and re-leasing space for seven leases in our Greater Boston and San Francisco markets with a weighted-average lease term of 10 years and rental rate increases of 33.3% and 19.4% (cash basis). |
Joint Venture Financial Information | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Consolidated Real Estate Joint Ventures | Unconsolidated Real Estate Joint Ventures | |||||||||||
Property/Market/Submarket | Noncontrolling Interest Share(1) | Property/Market/Submarket | Our Share | |||||||||
225 Binney Street/Greater Boston/Cambridge | 70.0 | % | 360 Longwood Avenue/Greater Boston/Longwood Medical Area | 27.5 | % | |||||||
409 and 499 Illinois Street/San Francisco/Mission Bay/SoMa | 40.0 | % | Menlo Gateway/San Francisco/Greater Stanford | 49.0 | % | (2) | ||||||
1500 Owens Street/San Francisco/Mission Bay/SoMa | 49.9 | % | 1401/1413 Research Boulevard/Maryland/Rockville | 65.0 | % | |||||||
10290 and 10300 Campus Point Drive and 4110 Campus Point Court/ San Diego/University Town Center | 45.0 | % | ||||||||||
9625 Towne Centre Drive/San Diego/University Town Center | 49.9 | % | (3) |
December 31, 2017 | |||||||||
Noncontrolling Interest Share of Consolidated Real Estate JVs | Our Share of Unconsolidated Real Estate JVs | ||||||||
Investments in real estate | $ | 507,207 | $ | 149,466 | |||||
Cash and cash equivalents | 19,047 | 6,440 | |||||||
Restricted cash | — | 1,420 | |||||||
Other assets | 31,966 | 11,529 | |||||||
Secured notes payable (see page 49) | — | (53,482 | ) | ||||||
Other liabilities | (24,717 | ) | (4,755 | ) | |||||
Redeemable noncontrolling interests | (11,509 | ) | — | ||||||
$ | 521,994 | $ | 110,618 | ||||||
Noncontrolling Interest Share of Consolidated Real Estate JVs | Our Share of Unconsolidated Real Estate JVs | ||||||||||||||
4Q17 | 2017 | 4Q17 | 2017 | ||||||||||||
Total revenues | $ | 13,790 | $ | 54,812 | $ | 1,471 | $ | 7,320 | |||||||
Rental operations | (4,080 | ) | (15,852 | ) | (405 | ) | (2,599 | ) | |||||||
9,710 | 38,960 | 1,066 | 4,721 | ||||||||||||
General and administrative | (19 | ) | (145 | ) | (26 | ) | (66 | ) | |||||||
Interest | — | — | (232 | ) | (1,784 | ) | |||||||||
Depreciation and amortization | (3,777 | ) | (14,762 | ) | (432 | ) | (1,551 | ) | |||||||
Gain on sale of real estate | — | — | — | 14,106 | |||||||||||
$ | 5,914 | $ | 24,053 | $ | 376 | $ | 15,426 |
(1) | In addition to the consolidated real estate joint ventures listed, various partners hold insignificant noncontrolling interests in three other properties in North America. |
(2) | See page 5 of our Earnings Press Release for additional information on our acquisition at Menlo Gateway. |
(3) | See page 6 of our Earnings Press Release for additional information on our partial interest sale at 9625 Towne Centre Drive. |
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Investments | |
December 31, 2017 | |
Public/Private Mix (Cost) | Tenant/Non-Tenant Mix (Cost) | |
![]() | ![]() | |
Investments (in millions) | 260 | ||||||
Public investments: | |||||||
Cost basis | $ | 60 | Holdings | ||||
Net unrealized gains | 49 | $1.8M | |||||
Private investments | 414 | ||||||
$ | 523 | ||||||
Average Investment Amount |
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Key Credit Metrics | |
December 31, 2017 | |
Net Debt to Adjusted EBITDA(1) | Net Debt and Preferred Stock to Adjusted EBITDA(1) | |||||
![]() | ||||||
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Fixed-Charge Coverage Ratio(1) | Liquidity(2) | |||||
![]() | ||||||
$2.0B | ||||||
(in millions) | ||||||
Availability under our $1.65 billion unsecured senior line of credit | $ | 1,600 | ||||
Remaining construction loan commitment | 25 | |||||
Available-for-sale equity securities, at fair value | 109 | |||||
Cash, cash equivalents, and restricted cash | 277 | |||||
$ | 2,011 | |||||
(1) | Quarter annualized. |
(2) | As of December 31, 2017. |
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Summary of Debt | |
December 31, 2017 | |
Debt maturities chart
(In millions)
![]() |
(1) | Includes our secured construction loan for our property at 50 and 60 Binney Street in our Cambridge submarket with aggregate commitments of $350.0 million. We have two one-year options to extend the stated maturity date to January 28, 2021, subject to certain conditions. Our guidance on page 7 assumes repayment of our 2019 unsecured senior bank term loan amounts aggregating $200.0 million in 2018. |
Fixed-rate/hedged and unhedged variable-rate debt
(Dollars in thousands)
Fixed-Rate/Hedged Variable-Rate Debt | Unhedged Variable-Rate Debt | Total | Percentage | Weighted-Average | |||||||||||||||
Interest Rate(1) | Remaining Term (in years) | ||||||||||||||||||
Secured notes payable | $ | 745,742 | $ | 25,319 | $ | 771,061 | 16.2 | % | 4.04 | % | 3.3 | ||||||||
Unsecured senior notes payable | 3,395,804 | — | 3,395,804 | 71.3 | 4.05 | 6.9 | |||||||||||||
$1.65 billion unsecured senior line of credit | 50,000 | — | 50,000 | 1.0 | 2.05 | 3.8 | |||||||||||||
2019 Unsecured Senior Bank Term Loan | 199,496 | — | 199,496 | 4.2 | 2.85 | 1.0 | |||||||||||||
2021 Unsecured Senior Bank Term Loan | 348,446 | — | 348,446 | 7.3 | 2.59 | 3.0 | |||||||||||||
Total/weighted average | $ | 4,739,488 | $ | 25,319 | $ | 4,764,807 | 100.0 | % | 3.87 | % | 5.7 | ||||||||
Percentage of total debt | 99 | % | 1 | % | 100 | % |
(1) | Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees. |
Summary of Debt (continued) | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Debt | Stated Rate | Interest Rate(1) | Maturity Date(2) | Principal Payments Remaining for the Periods Ending December 31, | Principal | Unamortized (Deferred Financing Cost), (Discount)/Premium | Total | |||||||||||||||||||||||||||||||||||||||
2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | |||||||||||||||||||||||||||||||||||||||||
Secured notes payable | ||||||||||||||||||||||||||||||||||||||||||||||
Greater Boston | L+1.50 | % | 3.22 | % | 1/28/19 | (3) | $ | — | $ | 325,319 | $ | — | $ | — | $ | — | $ | — | $ | 325,319 | $ | (1,296 | ) | $ | 324,023 | |||||||||||||||||||||
Greater Boston, San Diego, Seattle, and Maryland | 7.75 | % | 8.13 | 4/1/20 | 1,979 | 2,138 | 104,352 | — | — | — | 108,469 | (752 | ) | 107,717 | ||||||||||||||||||||||||||||||||
San Diego | 4.66 | % | 4.97 | 1/1/23 | 1,479 | 1,687 | 1,762 | 1,852 | 1,942 | 26,259 | 34,981 | (329 | ) | 34,652 | ||||||||||||||||||||||||||||||||
Greater Boston | 3.93 | % | 3.19 | 3/10/23 | 1,091 | 1,505 | 1,566 | 1,628 | 1,693 | 74,517 | 82,000 | 2,828 | 84,828 | |||||||||||||||||||||||||||||||||
Greater Boston | 4.82 | % | 3.39 | 2/6/24 | 2,720 | 3,090 | 3,217 | 3,406 | 3,576 | 186,991 | 203,000 | 16,068 | 219,068 | |||||||||||||||||||||||||||||||||
San Francisco | 6.50 | % | 6.67 | 7/1/36 | 22 | 23 | 25 | 26 | 28 | 649 | 773 | — | 773 | |||||||||||||||||||||||||||||||||
Secured debt weighted-average interest rate/subtotal | 4.39 | % | 4.04 | 7,291 | 333,762 | 110,922 | 6,912 | 7,239 | 288,416 | 754,542 | 16,519 | 771,061 | ||||||||||||||||||||||||||||||||||
2019 Unsecured Senior Bank Term Loan | L+1.20 | % | 2.85 | 1/3/19 | — | 200,000 | — | — | — | — | 200,000 | (504 | ) | 199,496 | ||||||||||||||||||||||||||||||||
2021 Unsecured Senior Bank Term Loan | L+1.10 | % | 2.59 | 1/15/21 | — | — | — | 350,000 | — | — | 350,000 | (1,554 | ) | 348,446 | ||||||||||||||||||||||||||||||||
$1.65 billion unsecured senior line of credit | L+1.00 | % | 2.05 | 10/29/21 | — | — | — | 50,000 | — | — | 50,000 | — | 50,000 | |||||||||||||||||||||||||||||||||
Unsecured senior notes payable | 2.75 | % | 2.96 | 1/15/20 | — | — | 400,000 | — | — | — | 400,000 | (1,628 | ) | 398,372 | ||||||||||||||||||||||||||||||||
Unsecured senior notes payable | 4.60 | % | 4.74 | 4/1/22 | — | — | — | — | 550,000 | — | 550,000 | (2,760 | ) | 547,240 | ||||||||||||||||||||||||||||||||
Unsecured senior notes payable | 3.90 | % | 4.04 | 6/15/23 | — | — | — | — | — | 500,000 | 500,000 | (3,236 | ) | 496,764 | ||||||||||||||||||||||||||||||||
Unsecured senior notes payable | 3.45 | % | 3.56 | 4/30/25 | — | — | — | — | — | 600,000 | 600,000 | (4,057 | ) | 595,943 | ||||||||||||||||||||||||||||||||
Unsecured senior notes payable | 4.30 | % | 4.52 | 1/15/26 | — | — | — | — | — | 300,000 | 300,000 | (6,205 | ) | 293,795 | ||||||||||||||||||||||||||||||||
Unsecured senior notes payable | 3.95 | % | 4.14 | 1/15/27 | — | — | — | — | — | 350,000 | 350,000 | (4,518 | ) | 345,482 | ||||||||||||||||||||||||||||||||
Unsecured senior notes payable | 3.95 | % | 4.08 | 1/15/28 | — | — | — | — | — | 425,000 | 425,000 | (4,231 | ) | 420,769 | ||||||||||||||||||||||||||||||||
Unsecured senior notes payable | 4.50 | % | 4.62 | 7/30/29 | — | — | — | — | — | 300,000 | 300,000 | (2,561 | ) | 297,439 | ||||||||||||||||||||||||||||||||
Unsecured debt weighted average/subtotal | 3.84 | — | 200,000 | 400,000 | 400,000 | 550,000 | 2,475,000 | 4,025,000 | (31,254 | ) | 3,993,746 | |||||||||||||||||||||||||||||||||||
Weighted-average interest rate/total | 3.87 | % | $ | 7,291 | $ | 533,762 | $ | 510,922 | $ | 406,912 | $ | 557,239 | $ | 2,763,416 | $ | 4,779,542 | $ | (14,735 | ) | $ | 4,764,807 | |||||||||||||||||||||||||
Balloon payments | $ | — | $ | 525,319 | $ | 503,979 | $ | 400,000 | $ | 550,000 | $ | 2,758,417 | $ | 4,737,715 | $ | — | $ | 4,737,715 | ||||||||||||||||||||||||||||
Principal amortization | 7,291 | 8,443 | 6,943 | 6,912 | 7,239 | 4,999 | 41,827 | (14,735 | ) | 27,092 | ||||||||||||||||||||||||||||||||||||
Total debt | $ | 7,291 | $ | 533,762 | $ | 510,922 | $ | 406,912 | $ | 557,239 | $ | 2,763,416 | $ | 4,779,542 | $ | (14,735 | ) | $ | 4,764,807 | |||||||||||||||||||||||||||
Fixed-rate/hedged variable-rate debt | $ | 7,291 | $ | 508,443 | $ | 510,922 | $ | 406,912 | $ | 557,239 | $ | 2,763,416 | $ | 4,754,223 | $ | (14,735 | ) | $ | 4,739,488 | |||||||||||||||||||||||||||
Unhedged variable-rate debt | — | 25,319 | — | — | — | — | 25,319 | — | 25,319 | |||||||||||||||||||||||||||||||||||||
Total debt | $ | 7,291 | $ | 533,762 | $ | 510,922 | $ | 406,912 | $ | 557,239 | $ | 2,763,416 | $ | 4,779,542 | $ | (14,735 | ) | $ | 4,764,807 | |||||||||||||||||||||||||||
(1) | Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees. |
(2) | Reflects any extension options that we control. |
(3) | Secured construction loan for our property at 50 and 60 Binney Street in our Cambridge submarket with aggregate commitments of $350.0 million. We have two one-year options to extend the stated maturity date to January 28, 2021, subject to certain conditions. As of December 31, 2017, the aggregate remaining commitments are $24.7 million. |
Summary of Debt (continued) | ![]() |
December 31, 2017 | |
(Dollars in thousands) | |
Unconsolidated Real Estate Joint Ventures’ Debt
Unconsolidated Joint Venture | Our Share | Initial Maturity Date | Extension Option Maturity Date(1) | Interest Rate(2) | Debt Balance(3) | Remaining Commitments | ||||||||||||||
360 Longwood Avenue | 27.5% | 9/1/22 | 9/1/24 | 3.54 | % | $ | 94,040 | $ | 17,000 | (4) | ||||||||||
1401/1413 Research Boulevard | 65.0% | 5/17/20 | 7/1/20 | 4.42 | % | 5,972 | 18,488 | |||||||||||||
Menlo Gateway, Phase I | (5) | 3/1/19 | 3/3/20 | 4.66 | % | 111,015 | 38,926 | |||||||||||||
$ | 211,027 | $ | 74,414 | |||||||||||||||||
The above non-recourse secured loans amounts represent 100% of the loan amounts at the joint venture level. |
(1) | Reflects extension options that exist, which may be subject to certain conditions. |
(2) | Represents interest rate, including interest expense and amortization of loan fees and discount/premium. |
(3) | Represents outstanding principal, net of unamortized deferred financing costs and discount/premium. |
(4) | The remaining loan commitment balance excludes an earn-out advance provision that allows for incremental borrowings up to $48.0 million, subject to certain conditions. |
(5) | See page 5 of our Earnings Press Release for additional information. |
Debt covenants
Debt Covenant Ratios(1) | Unsecured Senior Notes Payable | $1.65 Billion Unsecured Senior Line of Credit and Unsecured Senior Bank Term Loans | ||||||
Requirement | Actual | Requirement | Actual | |||||
Total Debt to Total Assets | ≤ 60% | 35% | ≤ 60.0% | 28.7% | ||||
Secured Debt to Total Assets | ≤ 40% | 6% | ≤ 45.0% | 4.6% | ||||
Consolidated EBITDA to Interest Expense | ≥ 1.5x | 5.9x | ≥ 1.50x | 3.94x | ||||
Unencumbered Total Asset Value to Unsecured Debt | ≥ 150% | 278% | N/A | N/A | ||||
Unsecured Leverage Ratio | N/A | N/A | ≤ 60.0% | 30.8% | ||||
Unsecured Interest Coverage Ratio | N/A | N/A | ≥ 1.50x | 6.91x |
(1) | All covenant ratio titles utilize terms as defined in the respective debt agreements; therefore, EBITDA is not calculated under the definition set forth by the SEC in Exchange Act Release No. 47226. |
Interest rate swap agreements
Effective Date | Maturity Date | Number of Contracts | Weighted-Average Interest Pay Rate(1) | Fair Value as of 12/31/17 | Notional Amount in Effect as of | ||||||||||||||||||
12/31/17 | 12/31/18 | 12/31/19 | |||||||||||||||||||||
March 31, 2017 | March 31, 2018 | 11 | 1.18% | $ | 618 | $ | 700,000 | $ | — | $ | — | ||||||||||||
March 31, 2017 | March 31, 2018 | 4 | 1.76% | (103 | ) | 200,000 | — | — | |||||||||||||||
March 29, 2018 | March 31, 2019 | 8 | 1.16% | 4,373 | — | 600,000 | — | ||||||||||||||||
March 29, 2019 | March 31, 2020 | 1 | 1.89% | 269 | — | — | 100,000 | ||||||||||||||||
Total | $ | 5,157 | $ | 900,000 | $ | 600,000 | $ | 100,000 |
(1) | In addition to the interest pay rate for each swap agreement, interest is payable at an applicable margin over LIBOR for borrowings outstanding as of December 31, 2017, as listed under the column heading “Stated Rate” in our summary table of outstanding indebtedness and respective principal payments on the previous page. |
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Definitions and Reconciliations | |
December 31, 2017 | |
This section contains additional information for sections throughout this Supplemental Information package, 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 margins
The following table reconciles net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA:
Three Months Ended | |||||||||||||||||||||
(Dollars in thousands) | 12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | 12/31/16 | ||||||||||||||||
Net income | $ | 45,607 | $ | 59,546 | $ | 41,496 | $ | 47,555 | $ | 19,792 | |||||||||||
Interest expense | 36,082 | 31,031 | 31,748 | 29,784 | 31,223 | ||||||||||||||||
Income taxes | 1,398 | 1,305 | 1,333 | 767 | 737 | ||||||||||||||||
Depreciation and amortization | 107,714 | 107,788 | 104,098 | 97,183 | 95,222 | ||||||||||||||||
Stock compensation expense | 6,961 | 7,893 | 5,504 | 5,252 | 6,426 | ||||||||||||||||
Loss on early extinguishment of debt | 2,781 | — | — | 670 | — | ||||||||||||||||
Gain on sales of real estate – rental properties | — | — | — | (270 | ) | (3,715 | ) | ||||||||||||||
Our share of gain on sales of real estate from unconsolidated real estate JVs | — | (14,106 | ) | — | — | — | |||||||||||||||
Gain on sales of real estate – land parcels | — | — | (111 | ) | — | — | |||||||||||||||
Impairment of real estate and non-real estate investments | 3,805 | — | 4,694 | — | 16,024 | ||||||||||||||||
Adjusted EBITDA | $ | 204,348 | $ | 193,457 | $ | 188,762 | $ | 180,941 | $ | 165,709 | |||||||||||
Revenues | $ | 302,596 | (1) | $ | 285,370 | $ | 277,550 | (1) | $ | 270,877 | $ | 249,162 | |||||||||
Adjusted EBITDA margins | 68% | 68% | 68% | 67% | 67% |
(1) | Excludes impairment charges aggregating $4.5 million and $3.8 million, primarily related to three non-real estate investments, during 2Q17 and 4Q17, respectively. We believe excluding impairment of non-real estate investments improves the consistency and comparability of the Adjusted EBITDA margins from period to period. |
We use Adjusted EBITDA as a supplemental performance measure of our real estate rental operations, for financial and operational decision making, and as a supplemental or additional 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, and impairments. We believe Adjusted EBITDA provides investors relevant and useful information because it allows investors to view income from our real estate rental operations on an unleveraged basis before the effects of interest, taxes, depreciation and amortization, stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and impairments.
By excluding interest expense and gains or losses on early extinguishment of debt, Adjusted EBITDA allows investors to measure our performance independent of our capital structure and indebtedness. We believe that excluding charges related to share-based compensation facilitates a comparison of our operations across periods without the variances caused by the volatility of the
expense (which depends on market forces outside our control). We believe that adjusting for the effects of impairments and gains or losses on sales of real estate allows investors to evaluate performance from period to period on a consistent basis without having to account for differences recognized because of investment and disposition decisions. Adjusted EBITDA has limitations as a measure of our performance. Adjusted EBITDA does not reflect our historical cash expenditures or future cash requirements for capital expenditures or contractual commitments. While Adjusted EBITDA is a relevant measure of performance, it does not represent net income or net 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.
Annual rental revenue
Annual rental revenue represents the annualized fixed base rental amount, 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 December 31, 2017, approximately 97% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, 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 are classified in tenant recoveries in our consolidated statements of income.
Cash interest
Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and debt premiums/discounts. See 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.
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Definitions and Reconciliations (continued) | |
December 31, 2017 | |
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 located in world-class collaborative life science and technology campuses in AAA urban innovation clusters. These projects are 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 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 or tech office space. We generally will not commence new development projects for aboveground construction of new Class A office/laboratory 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.
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 fixed-charge coverage ratio calculation below is not directly comparable to the computation of ratio of earnings to fixed charges as defined in Item 503(d) of Regulation S-K and to the computation of “Consolidated Ratio of Earnings to Fixed Charges and Consolidated Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends” included in Exhibit 12.1 to our annual report on Form 10-K.
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:
Three Months Ended | |||||||||||||||||||
(Dollars in thousands) | 12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | 12/31/16 | ||||||||||||||
Adjusted EBITDA | $ | 204,348 | $ | 193,457 | $ | 188,762 | $ | 180,941 | $ | 165,709 | |||||||||
Interest expense | $ | 36,082 | $ | 31,031 | $ | 31,748 | $ | 29,784 | $ | 31,223 | |||||||||
Capitalized interest | 12,897 | 17,092 | 15,069 | 13,164 | 11,659 | ||||||||||||||
Amortization of loan fees | (2,571 | ) | (2,840 | ) | (2,843 | ) | (2,895 | ) | (3,080 | ) | |||||||||
Amortization of debt premiums | 639 | 652 | 625 | 596 | 383 | ||||||||||||||
Cash interest | 47,047 | 45,935 | 44,599 | 40,649 | 40,185 | ||||||||||||||
Dividends on preferred stock | 1,302 | 1,302 | 1,278 | 3,784 | 3,835 | ||||||||||||||
Fixed charges | $ | 48,349 | $ | 47,237 | $ | 45,877 | $ | 44,433 | $ | 44,020 | |||||||||
Fixed-charge coverage ratio: | |||||||||||||||||||
– quarter annualized | 4.2x | 4.1x | 4.1x | 4.1x | 3.8x | ||||||||||||||
– trailing 12 months | 4.1x | 4.0x | 3.9x | 3.8x | 3.6x | ||||||||||||||
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Definitions and Reconciliations (continued) | |
December 31, 2017 | |
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 investment and disposition decisions, financing decisions, capital structures, and capital market transactions. We compute funds from operations in accordance with standards established by the Nareit Board of Governors in its April 2002 White Paper and related implementation guidance (the “Nareit White Paper”). The Nareit White Paper defines funds from operations as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciable real estate and land parcels and impairments of depreciable real estate (excluding land parcels), plus real estate-related depreciation and amortization, 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 less/plus significant gains/losses on the sale of investments, plus losses on early extinguishment of debt, preferred stock redemption charges, impairments of non-depreciable real estate, impairments of non-real estate investments, and deal costs, 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.
Initial stabilized yield (unlevered)
Initial stabilized yield is calculated as the quotient of the estimated amounts of net operating income at stabilization and our investment in the property. Our initial stabilized yield excludes the benefit of leverage. Our cash rents related to our value-creation projects are 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 large cap tenants
Investment-grade or large cap tenants include tenants that are investment-grade rated or have their most recently reported market capitalization (public or private) greater than $10 billion as of December 31, 2017.
Items included in net income (loss) 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 this tabular presentation promotes a better understanding of corporate-level decisions and activities that significantly impact comparison of our operating results from period to period. We also believe this tabular presentation will supplement an understanding of our disclosures and real estate operating results. Gains or losses on sales of real estate and impairments for held for sale assets are related to corporate-level decisions to dispose of real estate. Gains or losses on early extinguishment of debt and preferred stock redemption charges are related to corporate-level financing decisions focused on our capital structure strategy. Significant gains or losses for non-real estate investments are not related to the operating performance of our real estate as they result from strategic, corporate-level non-real estate investment decisions and 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 a non-real estate investment when its fair value declines below its carrying value due to changes in general market or other conditions. Significant items, whether a gain or loss, included in the tabular disclosure for current periods are described in further detail in our Supplemental Information.
Joint venture financial information
We present components of balance sheet and operating results information related to our joint ventures, which are not in accordance with, or intended to be presentations 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, 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, 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 joint ventures do not represent our legal claim to those items. The joint venture agreement for each entity that we do not wholly own 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 joint venture assets, liabilities, revenues, and expenses included in our consolidated results.
The components of balance sheet and operating results information related to 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 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 income and balance sheets. Joint venture financial information should not be considered an alternative to our consolidated financial statements, which are prepared in accordance with GAAP.
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Definitions and Reconciliations (continued) | |
December 31, 2017 | |
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 to Adjusted EBITDA and net debt and preferred stock to Adjusted EBITDA
Net debt 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 is equal to the sum of total consolidated debt less cash, cash equivalents, and restricted cash. Net debt and preferred stock is equal to the sum of net debt, as discussed above, plus preferred stock outstanding as of period end. See “Adjusted EBITDA” for further information on the calculation of Adjusted EBITDA.
The following table reconciles debt to net debt, and to net debt and preferred stock, and computes the ratio of each to Adjusted EBITDA:
(Dollars in thousands) | 12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | 12/31/16 | |||||||||||||||
Secured notes payable | $ | 771,061 | $ | 1,153,890 | $ | 1,127,348 | $ | 1,083,758 | $ | 1,011,292 | ||||||||||
Unsecured senior notes payable | 3,395,804 | 2,801,290 | 2,800,398 | 2,799,508 | 2,378,262 | |||||||||||||||
Unsecured senior line of credit | 50,000 | 314,000 | 300,000 | — | 28,000 | |||||||||||||||
Unsecured senior bank term loans | 547,942 | 547,860 | 547,639 | 547,420 | 746,471 | |||||||||||||||
Unamortized deferred financing costs | 29,051 | 27,803 | 29,710 | 31,616 | 29,917 | |||||||||||||||
Cash and cash equivalents | (254,381 | ) | (118,562 | ) | (124,877 | ) | (151,209 | ) | (125,032 | ) | ||||||||||
Restricted cash | (22,805 | ) | (27,713 | ) | (20,002 | ) | (18,320 | ) | (16,334 | ) | ||||||||||
Net debt | $ | 4,516,672 | $ | 4,698,568 | $ | 4,660,216 | $ | 4,292,773 | $ | 4,052,576 | ||||||||||
Net debt | $ | 4,516,672 | $ | 4,698,568 | $ | 4,660,216 | $ | 4,292,773 | $ | 4,052,576 | ||||||||||
7.00% Series D convertible preferred stock | 74,386 | 74,386 | 74,386 | 74,386 | 86,914 | |||||||||||||||
6.45% Series E redeemable preferred stock | — | — | — | — | 130,000 | |||||||||||||||
Net debt and preferred stock | $ | 4,591,058 | $ | 4,772,954 | $ | 4,734,602 | $ | 4,367,159 | $ | 4,269,490 | ||||||||||
Adjusted EBITDA: | ||||||||||||||||||||
– quarter annualized | $ | 817,392 | $ | 773,828 | $ | 755,048 | $ | 723,764 | $ | 662,836 | ||||||||||
– trailing 12 months | $ | 767,508 | $ | 728,869 | $ | 689,079 | $ | 650,579 | $ | 610,839 | ||||||||||
Net debt to Adjusted EBITDA: | ||||||||||||||||||||
– quarter annualized | 5.5 | x | 6.1 | x | 6.2 | x | 5.9 | x | 6.1 | x | ||||||||||
– trailing 12 months | 5.9 | x | 6.4 | x | 6.8 | x | 6.6 | x | 6.6 | x | ||||||||||
Net debt and preferred stock to Adjusted EBITDA: | ||||||||||||||||||||
– quarter annualized | 5.6 | x | 6.2 | x | 6.3 | x | 6.0 | x | 6.4 | x | ||||||||||
– trailing 12 months | 6.0 | x | 6.5 | x | 6.9 | x | 6.7 | x | 7.0 | x |
Net operating income and operating margin
The following table reconciles net income (loss) to net operating income:
Three Months Ended | Year Ended | |||||||||||||||||||
(Dollars in thousands) | 12/31/17 | 12/31/16 | 12/31/17 | 12/31/16 | ||||||||||||||||
Net income (loss) | $ | 45,607 | $ | 19,792 | $ | 194,204 | $ | (49,799 | ) | |||||||||||
Equity in (earnings) losses of unconsolidated real estate joint ventures | (376 | ) | (86 | ) | (15,426 | ) | 184 | |||||||||||||
General and administrative expenses | 18,910 | 17,458 | 75,009 | 63,884 | ||||||||||||||||
Interest expense | 36,082 | 31,223 | 128,645 | 106,953 | ||||||||||||||||
Depreciation and amortization | 107,714 | 95,222 | 416,783 | 313,390 | ||||||||||||||||
Impairment of real estate | — | 16,024 | 203 | 209,261 | ||||||||||||||||
Loss on early extinguishment of debt | 2,781 | — | 3,451 | 3,230 | ||||||||||||||||
Gain on sales of real estate – rental properties | — | (3,715 | ) | (270 | ) | (3,715 | ) | |||||||||||||
Gain on sales of real estate – land parcels | — | — | (111 | ) | (90 | ) | ||||||||||||||
Net operating income | $ | 210,718 | $ | 175,918 | $ | 802,488 | $ | 643,298 | ||||||||||||
Revenues | $ | 298,791 | $ | 249,162 | $ | 1,128,097 | $ | 921,706 | ||||||||||||
Operating margin | 71% | 71% | 71% | 70% |
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 (losses) of our unconsolidated real estate joint ventures, general and administrative expenses, interest expense, depreciation and amortization, impairment of real estate, gain or loss on early extinguishment of debt, and gain or loss on sales of real estate. 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 evaluating the operating performance of our 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 the timing differences between the recognition of revenue in accordance with GAAP and the receipt of payments reflected in our consolidated results.
Further, we believe net operating income is useful to investors as a performance measure 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. Net operating income can be used to measure the initial stabilized yields of our properties by calculating the quotient of net operating income generated by a property on a straight-line basis and 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
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Definitions and Reconciliations (continued) | |
December 31, 2017 | |
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 and deterioration in market conditions. Our calculation of net operating income also excludes charges incurred from changes in certain financing decisions, such as loss on early extinguishment of debt, as these charges often relate to corporate strategy. Property operating expenses that are 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 believe that in order to facilitate a clear understanding of our operating results, net operating income should be examined in conjunction with net income as presented in our consolidated statements of income. Net operating income should not be considered as an alternative to net income as an indication of our performance, nor as an alternative to cash flows as a measure either of 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 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 that include annual rental rate revenue, see our discussion of annual rental revenue herein.
Same property comparisons
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 rental revenues, tenant recoveries, and 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 period, we analyze the operating performance for all properties that were fully operating for the entirety of the comparative periods presented, referred to as same properties. These properties are analyzed separately from properties acquired subsequent to the first day in the earliest comparable period presented, properties that underwent development or redevelopment at any time during the comparative periods, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results. Additionally, rental revenues from lease termination fees, if any, are excluded from the results of same properties.
The following table reconciles the number of same properties to total properties:
Development – under construction | Properties | |||
213 East Grand Avenue | 1 | |||
100 Binney Street | 1 | |||
399 Binney Street | 1 | |||
279 East Grand Avenue | 1 | |||
Menlo Gateway (unconsolidated real estate JV) | 3 | |||
7 | ||||
Development – placed into service after January 1, 2016 | Properties | |||
50 and 60 Binney Street | 2 | |||
430 East 29th Street | 1 | |||
5200 Illumina Way, Building 6 | 1 | |||
4796 Executive Drive | 1 | |||
360 Longwood Avenue (unconsolidated real estate JV) | 1 | |||
1455 and 1515 Third Street | 2 | |||
505 Brannan Street | 1 | |||
510 Townsend Street | 1 | |||
ARE Spectrum | 3 | |||
400 Dexter Avenue North | 1 | |||
14 | ||||
Redevelopment – under construction | Properties | ||
9625 Towne Centre Drive | 1 | ||
5 Laboratory Drive | 1 | ||
9900 Medical Center Drive | 1 | ||
266 and 275 Second Avenue | 2 | ||
5 | |||
Redevelopment – placed into service after January 1, 2016 | Properties | ||
10151 Barnes Canyon Road | 1 | ||
11 Hurley Street | 1 | ||
10290 Campus Point Drive | 1 | ||
3 | |||
Acquisitions after January 1, 2016 | Properties | ||
Torrey Ridge Science Center | 3 | ||
Alexandria Center® at One Kendall Square | 9 | ||
88 Bluxome Street | 1 | ||
960 Industrial Road | 1 | ||
1450 Page Mill Road | 1 | ||
201 Haskins Way | 1 | ||
701 Gateway Boulevard | 1 | ||
4110 Campus Point Court | 1 | ||
18 | |||
Total properties excluded from same properties | 47 | ||
Same properties | 166 | ||
Total properties in North America as of December 31, 2017 | 213 | ||
Stabilized occupancy date
The stabilized occupancy date represents the estimated date on which the project is expected to reach occupancy of 95% or greater.
Total equity market capitalization
Total equity market capitalization is equal to the sum of outstanding shares of 7.00% Series D cumulative convertible preferred stock, 6.45% Series E cumulative redeemable preferred stock, and common stock multiplied by the related closing price of each class of security at the end of each period presented.
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Definitions and Reconciliations (continued) | |
December 31, 2017 | |
Total market capitalization
Total market capitalization is equal to the sum of total equity market 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) | 12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | 12/31/16 | ||||||||||||||
Unencumbered net operating income | $ | 181,719 | $ | 164,291 | $ | 158,072 | $ | 157,391 | $ | 143,570 | |||||||||
Encumbered net operating income | 28,999 | 37,610 | 38,007 | 36,399 | 32,348 | ||||||||||||||
Total net operating income | $ | 210,718 | $ | 201,901 | $ | 196,079 | $ | 193,790 | $ | 175,918 | |||||||||
Unencumbered net operating income as a percentage of total net operating income | 86% | 81% | 81% | 81% | 82% |
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 our 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 | |||||||||
12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | 12/31/16 | |||||
Weighted-average interest rate for capitalization of interest | 3.89% | 3.96% | 3.98% | 3.95% | 3.72% |
Weighted-average shares of common stock outstanding – diluted
In March 2017, we entered into agreements to sell an aggregate of 6.9 million shares of our common stock, consisting of an initial issuance of 2.1 million shares and the remaining 4.8 million shares subject to forward equity sales agreements, at a public offering price of $108.55 per share less underwriters’ discount. We issued the initial 2.1 million shares at closing in March 2017 for net proceeds, after underwriters’ discount and issuance costs, of $217.8 million and issued the remaining 4.8 million shares of common stock in December 2017 for net proceeds, after underwriters’ discount and issuance costs, of $484.6 million.
Weighted-average shares of common stock outstanding – diluted for 4Q17 and 2017 used in the computation of earnings per share – diluted, and funds from operations per share – diluted for 4Q17 and 2017, include 4.8 million shares related to the forward equity sales agreements using the treasury method of accounting (which assumes an issuance at the contractual price less the assumed repurchase of common shares at the average market price by using the net proceeds of $484.6 million) through the settlement date in December 2017. In July 2016, we entered into similar forward equity sales agreements that were settled in December 2016. The weighted-average shares of common stock outstanding – diluted during each period include the following shares related to our forward equity sales agreements:
Three Months Ended | Year Ended | |||||||||||||||||||
(In thousands) | 4Q17 | 3Q17 | 2Q17 | 1Q17 | 4Q16 | 4Q17 | 4Q16 | |||||||||||||
Earnings per share – diluted | 776 | 698 | 530 | 53 | — | 517 | — | |||||||||||||
Funds from operations – diluted | 776 | 698 | 530 | 53 | 480 | 517 | 309 |