Alexandria Real Estate Equities, Inc. Reports Second Quarter Ended June 30, 2018, Financial and Operating Results Strong Internal and External Growth, Operational Excellence and Growing Dividends

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Alexandria Real Estate Equities, Inc. Reports Second Quarter Ended June 30, 2018, Financial and Operating Results Strong Internal and External Growth, Operational Excellence and Growing Dividends

PR Newswire

PASADENA, Calif., July 30, 2018 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. ARE announced financial and operating results for the second quarter ended June 30, 2018.

Key highlights

Increased common stock dividend

Common stock dividend for 2Q18 of $0.93 per common share, up 7 cents, or 8.1%, over 2Q17; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Strong internal growth

  • Total revenues:
    • $325.0 million, up 19.0%, for 2Q18, compared to $273.1 million for 2Q17
    • $645.2 million, up 18.6%, for 1H18, compared to $543.9 million for 1H17
  • Net operating income (cash basis) of $818.7 million for 2Q18 annualized, up $60.4 million, or 8.0%, compared to 1Q18 annualized, and up $125.5 million, or 18.1%, compared to 4Q17 annualized
  • Same property net operating income growth:
    • 4.1% and 6.3% (cash basis) for 2Q18, compared to 2Q17
    • 4.1% and 10.3% (cash basis) for 1H18, compared to 1H17
  • Continued solid leasing activity and strong rental rate growth, in light of modest contractual lease expirations at the beginning of 2018 and a highly leased value-creation pipeline:




2Q18



1H18

Total leasing activity – RSF



985,996



2,467,160

Lease renewals and re-leasing of space:









Rental rate increases



24.0%



21.5%

Rental rate increases (cash basis)



12.8%



13.8%

RSF (included in total leasing activity above)



727,265



961,813











 

  • Key leases executed during 2Q18 (included in total leasing activity above):

 

Property



Submarket



RSF





Tenant

215 First Street



Cambridge



152,157

(1)



Sarepta Therapeutics, Inc.

960 Industrial Road



Greater Stanford



110,000

(2)



Joby Aero, Inc.

1201 Eastlake Avenue East



Lake Union



106,106

(3)



Fred Hutchinson Cancer

 Research Center

Alexandria Center® at One

   Kendall Square



Cambridge



69,512

(4)



Ipsen Bioscience, Inc.

950 Wind River Lane



Gaithersburg



50,000





AstraZeneca PLC







(1)

Includes 121,476 RSF renewed/re-leased at rental rate increases of 53% and 36% (cash basis) and expansion of 30,681 RSF. 88,459 RSF represents early renewal of a lease expiration in January 2021.

(2)

Represents short-term lease for 110,000 RSF. The property also includes an additional 423,000 RSF undergoing entitlements for future development in one or two phases.

(3)

Re-leasing of space with a lease expiration in May 2019 at a rental rate increase of 35%.

(4)

Re-leasing of space with a lease expiration in June 2019 at rental rate increases of 16%  and 49% (cash).

Strong external growth; disciplined allocation of capital to visible, multiyear, highly leased value-creation pipeline

  • Highly leased value-creation pipeline with deliveries targeted for 2018 and 2019:








Property

Leased %



Unlevered Yields

Target Delivery





Initial Stabilized



Initial Stabilized (Cash)

2018



501,325

RSF



75%



7.5%



7.0%

2019



2,110,831

RSF



86%



7.3%



6.7%





2,612,156

RSF



84%



7.3%



6.8%



















    • Includes 2Q18 commencement of vertical construction of a ground-up development project aggregating 205,000 RSF, 12% leased and 12% negotiating, at 1818 Fairview Avenue East in our Lake Union submarket.
  • New Class A development and redevelopment properties recently placed into service
    • 1.6 million RSF placed into service during the last 12 months with average yields of 7.6% and 7.1% (cash).

Recent and future growth in net operating income (cash basis) driven by recently delivered projects:

  • Significant near-term contractual growth in annual cash rents of $44 million related to initial free rent granted on development and redevelopment projects recently placed into service (and no longer included in our value-creation pipeline) that are currently generating rental revenue.

Completed strategic acquisitions

Acquisitions completed:

  • In 2Q18 and July 2018, we acquired 14 properties and four land parcels for an aggregate purchase price of $662.9 million in key submarkets. These acquisitions consisted of:
    • Two properties and four land parcels supporting the future development of new Class A buildings aggregating 1,010,000 RSF;
    • 389,452 RSF of value-add operating properties with future redevelopment opportunities, including $203.0 million for a fee simple interest in an office building aggregating 349,947 RSF located in New York City, which is currently occupied by Pfizer Inc.; and
    • 828,014 RSF of 99% occupied operating properties, including significant below-market leases.

Operating results



2Q18



2Q17



1H18



1H17

Net income attributable to Alexandria's common stockholders – diluted:

In millions

$

52.0





$

31.6





$

185.0





$

57.3



Per share

$

0.51





$

0.35





$

1.83





$

0.64



















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

In millions

$

167.9





$

136.2





$

330.4





$

266.7



Per share

$

1.64





$

1.50





$

3.27





$

2.98





See "Items Included in Net Income Attributable to Alexandria's Common Stockholders" below for additional information.

 

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



(In millions, except per share amounts)

Amount



Per Share – Diluted



Amount



Per Share – Diluted

2Q18



2Q17



2Q18



2Q17



1H18



1H17



1H18



1H17

Realized gain on non-real estate

   investment

$



$



$



$



$

8.3



$



$

0.08



$

Unrealized gains on non-real estate

   investments(1)

5.1





0.05





77.3





0.76



Gain on sales of real estate



0.1









0.4





Impairment of:































Real estate

(6.3)



(0.2)



(0.06)





(6.3)



(0.2)



(0.06)



Non-real estate investments



(4.5)





(0.05)





(4.5)





(0.05)

Loss on early extinguishment of debt











(0.7)





(0.01)

Preferred stock redemption charge











(11.3)





(0.12)

Total

$

(1.2)



$

(4.6)



$

(0.01)



$

(0.05)



$

79.3



$

(16.3)



$

0.78



$

(0.18)

Weighted-average shares of common stock

   outstanding for calculation of earnings per share –

   diluted



102.2



90.7











101.2



89.5



(1)  See "Investments" on page 46 of our Supplemental Information for additional information.

Core operating metrics as of or for the quarter ended June 30, 2018

High-quality revenues and cash flows and operational excellence

  • Percentage of annual rental revenue in effect from:
    • Investment-grade or large cap tenants: 55%
    • Class A properties in AAA locations: 78%
  • Occupancy of operating properties in North America: 97.1%
  • Operating margin: 72%
  • Adjusted EBITDA margin: 69%
  • Weighted-average remaining lease term:
    • Total tenants: 8.6 years
    • Top 20 tenants: 12.8 years
  • See "Strong Internal Growth" on the previous page for information on our total revenues, same property net operating income growth, leasing activity, and rental rate growth.

Balance sheet management

Key metrics

  • $18.8 billion of total market capitalization as of June 30, 2018
  • $2.9 billion of liquidity as of June 30, 2018




2Q18









Quarter



Trailing 12



4Q18



Annualized



Months



Goal

Net debt to Adjusted EBITDA



5.8x



6.2x



Less than 5.5x

Fixed-charge coverage ratio



4.3x



4.3x



Greater than 4.0x

Unhedged variable-rate debt as a percentage of

   total debt



5%



N/A



Less than 5%

Current and future value-creation pipeline as a 

   percentage of gross investments in real estate

   in North America



10%



N/A



8% to 12%

Key capital events

  • In June 2018, we completed an offering of $900.0 million of unsecured senior notes for net proceeds of $891.4 million. The unsecured senior notes consisted of:
    • $450.0 million of 4.00% unsecured senior notes, due in 2024. The net proceeds will be used to fund certain eligible green development and redevelopment projects that have received or are expected to receive LEED® Gold or Platinum certification.
    • $450.0 million of 4.70% unsecured senior notes, due in 2030.
  • During 2Q18, we sold 2.5 million shares of common stock under our at-the-market common stock offering program ("ATM program") for $124.46 per share and received net proceeds of $300.8 million. In July 2018, we sold 703,625 shares of common stock under our ATM common stock offering program for $127.91 per share and received net proceeds of $88.7 million. As of July 30, 2018, we had $17.7 million available for future sales under the ATM program. We expect to file a new ATM program in the next few quarters.
  • In April 2018, our unconsolidated real estate joint venture at Menlo Gateway in our Greater Stanford submarket closed a secured note payable with commitments available for borrowing of $157.3 million, for the development of Phase II of the project. The loan matures on May 1, 2035, and bears interest at a fixed rate of 4.53%.

Corporate responsibility and industry leadership

  • Nareit CARE Gold Award Winner
    • 2018 recipient of the Nareit Gold Investor CARE (Communications and Reporting Excellence) Award in the Large Cap Equity REIT category as the best-in-class REIT that delivers transparency, quality, and efficient communications and reporting to the investment community, which is our third Nareit Gold Investor CARE Award (2015, 2016, and 2018).
  • 50% of annual rental revenue is expected from LEED-certified projects upon completion of 10 in-process projects. In April 2018, 100 Binney Street in our Cambridge submarket received LEED Gold® certification, demonstrating our commitment to sustainability.
  • In May 2018, Joel S. Marcus, executive chairman and founder, served as a keynote speaker at the Research Triangle Regional Partnership's 2018 State of the Region. The event highlighted how the region can facilitate economic growth and infrastructural improvements to prepare for more diversified expansion in the future.
  • In June 2018, Joel S. Marcus was appointed to the Emily Krzyzewski Center board of directors. The Center serves as a college access hub propelling academically focused, low-income K-12 students and graduates toward success in college.
  • In June 2018, Circulate San Diego awarded 9880 Campus Point Drive in our University Town Center submarket the Circulate Mobility Certification, formerly known as the MOVE Alliance Certification. The certification is awarded for transit-oriented, smart growth projects in the San Diego region.
  • In June 2018, we released our inaugural 2017 Corporate Responsibility Report that highlights our continual efforts to make a positive, meaningful and purposeful impact on the health, safety and well-being of our tenants, stockholders and employees, as well as on the communities in which we live and work.

Subsequent events

  • During 2Q18, we entered into a contract to sell a land parcel located in Northern Virginia and recognized an impairment of $6.3 million to lower the carrying amount to the estimated fair value less selling costs. We completed the sale, at a price of $6.0 million, in July 2018 with no gain or loss.
  • In July 2018, we repaid $150.0 million of the outstanding balance of one secured construction loan. In connection with the partial repayment of the secured construction loan, we recognized a loss on early extinguishment of debt of $299 thousand related to the write-off of unamortized loan fees.

 

Sustainability

June 30, 2018

 



 



 

Acquisitions



















June 30, 2018



















(Dollars in thousands)



































Property



Submarket/Market



Date of

Purchase



Number of

Properties



Operating

Occupancy



Square Footage



Unlevered Yields















 

Operating



Operating with

Future

Redevelopment





Future

Development



Initial

Stabilized



Initial

Stabilized

(Cash)





























Purchase Price





Future Development



















































  701 Dexter Avenue North



Lake Union/Seattle



7/20/18



1



N/A









217,000





(1)







(1)





$

33,500





  Other



Various



Various





N/A









493,000





(1)







(1)







58,205

























































Operating with Value-Creation





















































  219 East 42nd Street



Manhattan/New York City



7/10/18



1



100%





349,947

(2)







 

6.8%

(2)





 

6.7%

(2)





203,000





  100 Tech Drive



Route 128/Greater Boston



4/13/18



1



100%



200,431







300,000





 

8.7%







 

7.3%







87,250

























































Operating























































  Maryland Life Science Portfolio



Rockville/Gaithersburg/

   Maryland



5/8/18



8



100%



376,106



39,505









9.1%







7.0%

(3)





146,500





  2301 5th Avenue



Lake Union/Seattle



6/1/18



1



97%



197,136











 

8.3%







 

5.1%

(3)





95,000





  Other



Various



Various



2



100%



54,341









N/A





N/A







39,400

(4)















14







828,014



389,452





1,010,000

















662,855





1Q18 acquisitions















































339,400





Total











































$

1,002,255





2018 guidance midpoint











































$

1,010,000













(1)

We expect to provide total estimated costs and related yields of development and redevelopment projects in the future.

(2)

We acquired a fee simple interest in this office building, which is currently occupied by Pfizer Inc. with a remaining lease term of six years. Upon expiration of the lease, we have the opportunity to increase cash flows through the conversion of office space into office/laboratory space through redevelopment. Under the Midtown East Rezoning, this property is currently entitled with an as-of-right density for an additional 230,000 developable square feet. Unlevered initial stabilized yields represent initial returns during the Pfizer, Inc. occupancy prior to any future redevelopment activities. We expect to provide total estimated costs and related yields of the development or redevelopment in the future.

(3)

These properties provide an opportunity to increase cash flows through the re-leasing of in-place leases currently 16% and 25% below market at the Maryland Life Science Portfolio and 2301 5th Avenue, respectively.

(4)

Includes, among others, the final installment related to our November 2016 acquisition of 1455 and 1515 Third Street of $18.9 million which was paid during the three months ended June 30, 2018.

 

 

Guidance

June 30, 2018

(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 for additional information.



















Guidance







Guidance

Summary of Key Changes in Guidance



As of 7/30/18



As of 4/30/18



Summary of Key Changes in Guidance



As of 7/30/18



As of 4/30/18

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



See updates below(1)



Key sources and uses of capital



(2)



N/A

Occupancy percentage in North America as of December 31, 2018



97.1% to 97.7%



96.9% to 97.5%



Rental rate increases



17.0% to 20.0%



13.0% to 16.0%













Rental rate increases (cash basis)



9.5% to 12.5%



7.5% to 10.5%



Projected Earnings per Share and Funds From Operations per Share Attributable to Alexandria's

   Common Stockholders – Diluted







As of 7/30/18



As of 4/30/18



Earnings per share



$2.87 to $2.93



$2.88 to $2.98



Depreciation and amortization





4.50







4.45





Allocation to unvested restricted stock awards





(0.05)







(0.05)





Funds from operations per share



$7.32 to $7.38



$7.28 to $7.38



Realized gain on non-real estate investment in 1Q18





(0.08)







(0.08)





Unrealized gains on non-real estate investments(3)





(0.76)







(0.70)





Impairment of real estate – land parcels(4)





0.06











Allocation to unvested restricted stock awards/other





0.03







0.02





Funds from operations per share, as adjusted



$6.57 to $6.63



$6.52 to $6.62



Midpoint



$6.60



$6.57



 

Key Assumptions



Low



High



Occupancy percentage in North America as of December 31, 2018



97.1%



97.7%















Lease renewals and re-leasing of space:











Rental rate increases



17.0%



20.0%



Rental rate increases (cash basis)



9.5%



12.5%



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

(7)

General and administrative expenses



$

85



$

90



Capitalization of interest



$

55



$

65



Interest expense



$

155



$

165















 





Guidance

as of 7/30/18



Key Credit Metrics





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



Unhedged variable-rate debt as a percentage of total debt as of December 31, 2018



Less than 5%



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



Certain

Completed

Items

Through

7/30/18

Sources of capital:





















  Net cash provided by operating activities after dividends



$

140





$

180





$

160









  Incremental debt



540





500







520









  Real estate dispositions, partial interest sales, and

     common equity



1,330





1,530







1,430





$

1,200

(5)

Total sources of capital



$

2,010





$

2,210





$

2,110









Uses of capital:





















  Construction



$

1,050





$

1,150







$

1,100









  Acquisitions



960





1,060







1,010





(6)



Total uses of capital



$

2,010





$

2,210





$

2,110









Incremental debt (included above):





















  Issuance of unsecured senior notes payable



$

900





$

900







$

900





$

900



  Repayments of secured notes payable



(160)





(165)







(163)





$

(150)



  Repayment of unsecured senior bank term loan



(200)





(200)







(200)









  $1.65 billion unsecured senior line of credit/other







(35)







(17)









Incremental debt



$

540





$

500





$

520













(1)

Midpoint of FFO per share, as adjusted guidance increased by $0.03 from $6.57 to $6.60 primarily due to the incremental acquisitions as noted in footnote 2, and the continued strength of our core and the related increases in projected occupancy and rental rate growth on leasing activity.

(2)

Updates to key sources and uses of capital guidance for 2018 include: (a) $290 million increase in the midpoint of acquisitions range from $720 million to $1.0 billion, (b) $220 million increase in the midpoint of real estate dispositions, partial interest sales, and common equity range from $1.2 billion to $1.4 billion, (c) $300 million increase in issuance of unsecured senior notes payable reflecting the June 2018 issuance of our $900 million unsecured senior notes, and (d) $150 million increase in repayments of secured notes payable reflecting the July 2018 partial repayment of our secured construction loan.

(3)

Per share amounts of unrealized gains on non-real estate investments may be different for the full year ending December 31, 2018, depending on the weighted-average shares outstanding for the year ending December 31, 2018. Excludes future unrealized gains or losses that could be recognized in earnings from changes in fair value of equity investments after June 30, 2018. See page 46 of our Supplemental Information for additional information.

(4)

Impairment of real estate aggregating $6.3 million recognized during the three months ended June 30, 2018, related to one land parcel located in Northern Virginia that was subsequently sold in July 2018 with no gain or loss.

(5)

We have completed transactions aggregating $1.2 billion through July 2018. This includes completed and projected settlement of our forward equity sales agreements and completed sales under our ATM program. In January 2018, we executed forward equity sales agreements for 6.9 million shares of our common stock. In March 2018, we settled 843,600 shares from the forward equity sales agreements and received proceeds of $100.2 million, net of underwriting discounts and adjustments provided in the forward equity sales agreements. We expect to receive proceeds of $709.9 million upon settlement of the remaining outstanding forward equity sales agreements, to be further adjusted as provided in the sales agreements, in 2018. During the three months ended June 30, 2018, we sold 2.5 million shares of common stock under our ATM program at $124.46 per share, with net proceeds of $300.8 million. In July 2018, we sold 703,625 shares of common stock under our ATM common stock offering program for $127.91 per share and received net proceeds of $88.7 million.

(6)

See "Acquisitions" on page 5 of this Earnings Press Release for additional information.

(7)

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.



Earnings Call Information and About the Company

June 30, 2018

We will host a conference call on Tuesday, July 31, 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 second quarter ended June 30, 2018. 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, July 31, 2018. The replay number is (877) 344-7529 or (412) 317-0088, and the confirmation code is 10118275.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the second quarter ended June 30, 2018, is available in the "For Investors" section of our website at www.are.com or by following this link: http://www.are.com/fs/2018q2.pdf.

For any questions, please contact Joel S. Marcus, executive chairman and founder; Stephen A. Richardson, co-chief executive officer; Peter M. Moglia, co-chief executive officer and co-chief investment officer; Dean A. Shigenaga, co-president and chief financial officer; or Sara M. Kabakoff, assistant vice president – corporate communications, at (626) 578-0777.

About the Company

Alexandria Real Estate Equities, Inc. 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 $18.8 billion and an asset base in North America of 32.0 million SF as of June 30, 2018. The asset base in North America includes 21.5 million RSF of operating properties and 3.5 million RSF of development and redevelopment of new Class A properties currently undergoing construction and pre-construction activities with target delivery dates ranging from 2018 through 2020. Additionally, the asset base in North America includes 7.0 million SF of intermediate-term and future development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle 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 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.

***********

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," "goals," "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.

Alexandria®, Lighthouse Design® logo, Building the Future of Life-Changing Innovation™, LaunchLabs®, Alexandria Center®, Alexandria Technology Square®, and Alexandria Summit® are trademarks of Alexandria Real Estate Equities, Inc. All other company names, trademarks, and logos referenced herein are the property of their respective owners.



Consolidated Statements of Income





June 30, 2018





(In thousands, except per share amounts)





























Three Months Ended



Six Months Ended





6/30/18



3/31/18



12/31/17



9/30/17



6/30/17



6/30/18



6/30/17

Revenues:





























Rental



$

250,635





$

244,485





$

228,025





$

216,021





$

211,942





$

495,120





$

419,135



Tenant recoveries



72,159





73,170





70,270





67,058





60,470





145,329





121,816



Other income



2,240





2,484





496





2,291





647





4,724





2,985



Total revenues



325,034





320,139





298,791





285,370





273,059





645,173





543,936

































Expenses:





























Rental operations



91,908





91,771





88,073





83,469





76,980





183,679





154,067



General and administrative



22,939





22,421





18,910





17,636





19,234





45,360





38,463



Interest



38,097





36,915





36,082





31,031





31,748





75,012





61,532



Depreciation and amortization



118,852





114,219





107,714





107,788





104,098





233,071





201,281



Impairment of real estate



6,311

















203





6,311





203



Loss on early extinguishment of debt











2,781

















670



Total expenses



278,107





265,326





253,560





239,924





232,263





543,433





456,216

































Equity in earnings of unconsolidated real estate joint ventures



1,090





1,144





376





14,100





589





2,234





950



Investment income(1)



12,530





85,561

















98,091







Gain on sales of real estate – rental properties



























270



Gain on sales of real estate – land parcels



















111









111



Net income



60,547





141,518





45,607





59,546





41,496





202,065





89,051



Net income attributable to noncontrolling interests



(5,817)





(5,888)





(6,219)





(5,773)





(7,275)





(11,705)





(13,119)



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

  stockholders



54,730





135,630





39,388





53,773





34,221





190,360





75,932



Dividends on preferred stock



(1,302)





(1,302)





(1,302)





(1,302)





(1,278)





(2,604)





(5,062)



Preferred stock redemption charge



























(11,279)



Net income attributable to unvested restricted stock awards



(1,412)





(1,941)





(1,255)





(1,198)





(1,313)





(2,765)





(2,300)



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

   common stockholders



$

52,016





$

132,387





$

36,831





$

51,273





$

31,630





$

184,991





$

57,291

































Net income per share attributable to Alexandria Real Estate Equities,

   Inc.'s common stockholders:





























Basic



$

0.51





$

1.33





$

0.39





$

0.55





$

0.35





$

1.83





$

0.64



Diluted



$

0.51





$

1.32





$

0.38





$

0.55





$

0.35





$

1.83





$

0.64

































Weighted-average shares of common stock outstanding:





























Basic



101,881





99,855





95,138





92,598





90,215





100,878





89,186



Diluted



102,236





100,125





95,914





93,296





90,745





101,191





89,479

































Dividends declared per share of common stock



$

0.93





$

0.90





$

0.90





$

0.86





$

0.86





$

1.83





$

1.69







(1)

See "Investments" on page 46 of our Supplemental Information for additional information.

 



Consolidated Balance Sheets

June 30, 2018

(In thousands)







6/30/18



3/31/18



12/31/17



9/30/17



6/30/17

Assets





















Investments in real estate



$

11,190,771





$

10,671,227





$

10,298,019





$

10,046,521





$

9,819,413



Investments in unconsolidated real estate joint ventures



192,972





169,865





110,618





33,692





58,083



Cash and cash equivalents



287,029





221,645





254,381





118,562





124,877



Restricted cash



34,812





37,337





22,805





27,713





20,002



Tenant receivables



8,704





11,258





10,262





9,899





8,393



Deferred rent



490,428





467,112





434,731





402,353





383,062



Deferred leasing costs



232,964





226,803





221,430





208,265





201,908



Investments



790,753





724,310





523,254





485,262





424,920



Other assets



333,757





291,639





228,453





213,056





205,009



Total assets



$

13,562,190





$

12,821,196





$

12,103,953





$

11,545,323





$

11,245,667

























Liabilities, Noncontrolling Interests, and Equity





















Secured notes payable



$

776,260





$

775,689





$

771,061





$

1,153,890





$

1,127,348



Unsecured senior notes payable



4,289,521





3,396,912





3,395,804





2,801,290





2,800,398



Unsecured senior line of credit







490,000





50,000





314,000





300,000



Unsecured senior bank term loans



548,324





548,197





547,942





547,860





547,639



Accounts payable, accrued expenses, and tenant security deposits



849,274





783,986





763,832





740,070





734,189



Dividends payable



98,676





93,065





92,145





83,402





81,602



Total liabilities



6,562,055





6,087,849





5,620,784





5,640,512





5,591,176



Commitments and contingencies





















Redeemable noncontrolling interests



10,861





10,212





11,509





11,418





11,410



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





















  7.00% Series D cumulative convertible preferred stock



74,386





74,386





74,386





74,386





74,386



  Common stock



1,033





1,007





998





943





921



  Additional paid-in capital



6,387,527





6,117,976





5,824,258





5,287,777





5,059,180



  Accumulated other comprehensive (loss) income



(2,485)





1,228





50,024





43,864





22,677



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



6,460,461





6,194,597





5,949,666





5,406,970





5,157,164



Noncontrolling interests



528,813





528,538





521,994





486,423





485,917



Total equity



6,989,274





6,723,135





6,471,660





5,893,393





5,643,081



Total liabilities, noncontrolling interests, and equity



$

13,562,190





$

12,821,196





$

12,103,953





$

11,545,323





$

11,245,667



 

 

Funds From Operations and Funds From Operations per Share



June 30, 2018



(In thousands)











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















Three Months Ended



Six Months Ended





6/30/18



3/31/18



12/31/17



9/30/17



6/30/17



6/30/18



6/30/17

Net income attributable to Alexandria's common stockholders



$

52,016





$

132,387





$

36,831





$

51,273





$

31,630





$

184,991





$

57,291



 Depreciation and amortization



118,852





114,219





107,714





107,788





104,098





233,071





201,281



 Noncontrolling share of depreciation and amortization from consolidated real

    estate JVs



(3,914)





(3,867)





(3,777)





(3,608)





(3,735)





(7,781)





(7,377)



 Our share of depreciation and amortization from unconsolidated real estate JVs



807





644





432





383





324





1,451





736



 Gain on sales of real estate – rental properties



























(270)



 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)









(111)



 Impairment of real estate – rental properties



















203









203



 Allocation to unvested restricted stock awards



(1,042)





(1,548)





(734)





(957)





(685)





(3,212)





(1,245)



 Dilutive effect of assumed conversion of 7.00% Series D cumulative convertible 

   preferred stock(1)







1,302

















2,604







Funds from operations attributable to Alexandria's common stockholders –

 diluted(2)



166,719





243,137





140,466





140,773





131,724





411,124





250,508



 Unrealized gains on non-real estate investments(1)



(5,067)





(72,229)

















(77,296)







 Realized gain on non-real estate investment







(8,252)

















(8,252)







 Removal of dilutive effect of assumed conversion of 7.00% Series D

   cumulative convertible preferred stock included in funds from operations above(1)







(1,302)

















(2,604)







 Impairment of land parcels and non-real estate investments



6,311

 

(3)







3,805









4,491





6,311

 

(3)



4,491



 Loss on early extinguishment of debt











2,781

















670



 Preferred stock redemption charge



























11,279



 Allocation to unvested restricted stock awards



(18)





1,125





(94)









(58)





1,140





(209)



Funds from operations attributable to Alexandria's common stockholders –

  diluted, as adjusted



$

167,945





$

162,479





$

146,958





$

140,773





$

136,157





$

330,423





$

266,739







(1)

On January 1, 2018, we adopted an ASU that requires changes in the fair value of our non-real estate investments to be recognized in net income. During the three months ended March 31, 2018, we recognized unrealized gains of $72.2 million. These unrealized gains are

included in net income and funds from operations as defined by Nareit ("Nareit FFO"). For net income per share purposes, our Series D preferred stock was not assumed to be converted for the three months ended March 31, 2018, as its assumed conversion was anti-dilutive.

However, for Nareit FFO per share, we assumed the conversion of the Series D preferred stock because its effect was dilutive on a per share basis.

 



We compute funds from operations, as adjusted, excluding unrealized gains or losses on non-real estate investments. As a result, the assumed conversion of our Series D preferred stock was reversed from our Nareit FFO calculation, as its impact was anti-dilutive on a per share basis for our funds from operations, as adjusted.

 



See "Investments" on page 46 of our Supplemental Information for additional information. See definitions for "Funds from operations and funds from operations, as adjusted, attributable to Alexandria's common stockholders" and "Weighted-Average Shares of Common Stock Outstanding – Diluted" on pages 53 and 57, respectively, of our Supplemental Information for additional information.

(2)

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.

(3)

Impairment of real estate recognized during the three months ended June 30, 2018, related to one land parcel located in Northern Virginia that was subsequently sold in July 2018 with no gain or loss.

 







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















Three Months Ended



Six Months Ended





6/30/18



3/31/18



12/31/17



9/30/17



6/30/17



6/30/18



6/30/17

Net income per share attributable to Alexandria's common stockholders



$

0.51





$

1.32





$

0.38





$

0.55





$

0.35





$

1.83





$

0.64



 Depreciation and amortization



1.13





1.08





1.08





1.11





1.10





2.23





2.16



 Our share of gain on sales of real estate from unconsolidated real estate JVs















(0.15)















 Allocation to unvested restricted stock awards



(0.01)





















(0.03)







 Dilutive effect of assumed conversion of 7.00% Series D cumulative convertible

   preferred stock(1)







0.01























Funds from operations per share attributable to Alexandria's common

   stockholders – diluted(2)



1.63





2.41





1.46





1.51





1.45





4.03





2.80



 Unrealized gains on non-real estate investments(1)



(0.05)





(0.70)

















(0.76)







 Realized gain on non-real estate investment







(0.08)

















(0.08)







 Removal of dilutive effect of assumed conversion of 7.00% Series D cumulative

   convertible preferred stock included in funds from operations above(1)







(0.01)























 Impairment of land parcels and non-real estate investments



0.06

 

(3)







0.04









0.05





0.06

 

(3)



0.05



 Loss on early extinguishment of debt











0.03

















0.01



 Preferred stock redemption charge



























0.12



 Allocation to unvested restricted stock awards























0.02







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



$

1.64





$

1.62





$

1.53





$

1.51





$

1.50





$

3.27





$

2.98

































Weighted-average shares of common stock outstanding(1) for calculations of:





























  Earnings per share – diluted and funds from operations – diluted, as adjusted, per

   share



102,236





100,125





95,914





93,296





90,745





101,191





89,479



Funds from operations – diluted, per share



102,236





100,866





95,914





93,296





90,745





101,933





89,479







(1)

See footnote 1 on prior page for additional information.

(2)

Calculated in accordance with standards established by the Nareit Board of Governors in its April 2002 White Paper and related implementation guidance.

(3)

See footnote 3 on prior page for additional information.

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/alexandria-real-estate-equities-inc-reports-second-quarter-ended-june-30-2018-financial-and-operating-results-strong-internal-and-external-growth-operational-excellence-and-growing-dividends-300688589.html

SOURCE Alexandria Real Estate Equities, Inc.

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