U.S. Markets closed

Alexandria Real Estate Equities, Inc. Reports: 2Q19 Revenues of $373.9 million, up 15.0% over 2Q18; 2Q19 and 1H19 EPS - Diluted of $0.68 and $1.80, respectively; 2Q19 and 1H19 FFO per Share - Diluted, As Adjusted, of $1.73 and $3.44, respectively; and Operational Excellence and Growing Dividends

PASADENA, Calif., July 29, 2019 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (ARE) announced financial and operating results for the second quarter ended June 30, 2019.

Key highlights

Operating results

2Q19


2Q18


1H19


1H18

Total revenues:







In millions

$

373.9


$

325.0


$

732.7


$

645.2

Growth

15.0%




13.6%










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

In millions

$

76.3


$

52.0


$

200.2


$

185.0

Per share

$

0.68


$

0.51


$

1.80


$

1.83









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

In millions

$

192.7


$

167.9


$

382.5


$

330.4

Per share

$

1.73


$

1.64


$

3.44


$

3.27

 

88 Bluxome Street is the first and only project to win full approval in Central SoMa
In July 2019, we, along with TMG Partners, won full project approval to develop a 1.07 million RSF mixed-use campus at 88 Bluxome Street in Central SoMa. Anchored by a 490,000 RSF lease with Pinterest, Inc., the future development, which is the first and only project in Central SoMa to receive full approval and 100% of its Prop M allocation from the San Francisco Planning Commission, is nearly 60% pre-leased. Construction is expected to commence in 2020, and initial delivery is expected in 2022.

Strong internal growth

  • Net operating income (cash basis) of $938.5 million for 2Q19 annualized, up $119.9 million, or 14.6%, compared to 2Q18 annualized
  • Same property net operating income growth:
  • Continued strong leasing activity in light of modest contractual lease expirations at the beginning of 2019 and a highly leased value-creation pipeline; continued rental rate growth in 1H19 over expiring rates on renewed and re-leased space:


2Q19


1H19

Total leasing activity – RSF



819,949



2,068,921

Lease renewals and re-leasing of space:







RSF (included in total leasing activity above)



587,930



1,097,345

Rental rate increases



32.5%



32.6%

Rental rate increases (cash basis)



17.8%



20.1%

 

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

  • Since the beginning of 4Q18, we have placed into service 1.2 million RSF of development and redevelopment projects, including 218,061 RSF in 2Q19.
  • Significant near-term growth in net operating income (cash basis) of $58 million annually upon the burn-off of initial free rent on recently delivered projects.
  • 2Q19 commencements of development projects aggregating 841,178 RSF, includes:
  • Projects with initial occupancy in 2020 have grown to 2.2 million RSF.
  • During 2019, we leased 948,986 RSF of development and redevelopment space, including 196,020 RSF executed in July 2019.

A REIT industry-leading, high-quality tenant roster

  • 53% of annual rental revenue from investment-grade or publicly traded large cap tenants.
  • Weighted-average remaining lease terms of 8.4 years.

New issuance of $1.25 billion unsecured senior notes to elongate debt maturities
In July 2019, we opportunistically issued $1.25 billion of unsecured senior notes payable, with a weighted-average interest rate of 3.72% and a weighted-average maturity of 19.5 years. The proceeds were used to refinance $1.125 billion of unsecured senior notes payable and unsecured senior bank term loan, with a weighted-average interest rate of 3.94% and a weighted-average maturity of 2.4 years, with remaining proceeds used to reduce the outstanding balance of our unsecured senior line of credit. Upon completion of the refinancing, the pro forma weighted-average remaining term on our outstanding debt is 10.1 years, with no debt maturing until 2023.

Increased common stock dividend
Common stock dividend declared for 2Q19 of $1.00 per common share, up three cents, or 3.1%, over 1Q19; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

2019 Nareit Investor CARE Gold Award winner
2019 recipient of the Nareit Investor CARE (Communications and Reporting Excellence) Gold 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; our fourth Nareit Investor CARE Gold Award over the last five years.

Completed acquisitions
During 2Q19, we completed the acquisitions of three properties and a land parcel for an aggregate purchase price of $296.5 million. These acquisitions consisted of:

  • 5 and 15 Necco Street, located in our Seaport Innovation District submarket for $252.0 million, which includes a future ground-up development site aggregating 293,000 RSF, and a Class A office building aggregating 87,163 RSF, which is 87% leased for 12 years; and
  • Future development opportunities aggregating 337,400 RSF strategically located in our Sorrento Valley and Lake Union submarkets, including 58,680 RSF currently 100% occupied.

Key items included in operating results

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

(In millions, except per share
amounts)

Amount


Per Share –
Diluted


Amount


Per Share –
Diluted

2Q19


2Q18


2Q19


2Q18


1H19


1H18


1H19


1H18

Unrealized gains on non-real
estate investments(1)

$

11.1



$

5.1



$

0.10



$

0.05



$

83.3



$

77.3



$

0.75



$

0.76


Realized gains on non-real estate
investments











8.3





0.08


Impairment of real estate



(6.3)





(0.06)





(6.3)





(0.06)


Loss on early extinguishment of
debt









(7.4)





(0.07)




Preferred stock redemption charge









(2.6)





(0.02)




Total

$

11.1



$

(1.2)



$

0.10



$

(0.01)



$

73.3



$

79.3



$

0.66



$

0.78


















Weighted-average shares of common stock
outstanding for calculation of earnings
per share – diluted

111.5



102.2







111.3



101.2



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

 

Core operating metrics as of or for the quarter ended June 30, 2019

High-quality revenues and cash flows, and operational excellence

Percentage of annual rental revenue in effect from:




Investment-grade or publicly traded large cap tenants


53%


Class A properties in AAA locations


77%


Occupancy of operating properties in North America


97.4%


Operating margin


72%


Adjusted EBITDA margin


69%


Weighted-average remaining lease term:



All tenants


8.4 years

Top 20 tenants


12.0 years





Refer to the previous page for information on our total revenues, net operating income, same property net operating income growth, rental rate growth, and leasing activity.

Balance sheet management

Key metrics as of June 30, 2019

  • $15.9 billion of total equity capitalization
  • $22.2 billion of total market capitalization
  • $3.4 billion of liquidity
  • 94% of net operating income is unencumbered


2Q19


Goal



Quarter

Annualized


Trailing 12

Months


4Q19

Annualized





Net debt to Adjusted EBITDA


5.8x


6.1x


Less than or
equal to 5.3x

Fixed-charge coverage ratio


4.2x


4.2x


Greater than
4.0x










Percentage
Leased/
Negotiating


Quarter Annualized

Value-creation pipeline as a percentage of gross
     investments in real estate:



2Q19


4Q19

Goal

New Class A development and redevelopment projects:







Undergoing construction with initial occupancy
     targeted for 2019 and 2020 and our pre-leased pre-
     construction project at 88 Bluxome Street


74%


5%


Less than
15%

Undergoing pre-construction, marketing, and future
     value-creation projects


N/A


6%


 

Key capital events

  • During 2Q19, we completed sales and entered into forward equity sales agreement for an aggregate of 8.7 million shares of common stock, including issuances under our ATM program, at a weighted-average price of $144.50 per share, for aggregate net proceeds of approximately $1.2 billion as follows:
  • As of July 29, 2019, the remaining aggregate amount available under our ATM program for future sales of common stock is $22.5 million. We expect to establish a new ATM program during 3Q19.

Investments
We carry our investments in publicly traded companies and certain privately held entities at fair value. As of June 30, 2019, cumulative unrealized gains related to changes in fair value aggregated $323.4 million and our adjusted cost basis aggregated $734.4 million. Investment income included the following:

  • Unrealized gains of $11.1 million and $83.3 million recognized during 2Q19 and 1H19, respectively
  • Realized gains of $10.4 million and $21.8 million recognized during 2Q19 and 1H19, respectively

Corporate responsibility, industry leadership, and strategic initiatives

  • In April 2019, we announced the launch of a new strategic agricultural technology (agtech) business initiative and the opening of Phase I of the Alexandria Center® for AgTech – Research Triangle, the first and only fully integrated, amenity-rich, multi-tenant agtech R&D and greenhouse campus, in the heart of Research Triangle, the most important, dense, and diverse agtech cluster in the United States. The campus opened with a 97% leased, 175,000 RSF first phase redevelopment at 5 Laboratory Drive.
  • In June 2019, we announced our partnership with Columbia University to open our second Alexandria LaunchLabs® in New York City in the spring of 2020. The full-service platform will offer member companies 13,298 RSF of highly flexible, turnkey office/laboratory space and feature a high-tech event center to host workshops, networking events, and educational opportunities for the entrepreneurial life science community.
  • In June 2019, we celebrated the opening of the first facilities within a tech-focused opioid rehabilitation campus in Dayton, Ohio. In partnership with Verily Life Sciences, LLC, we are leading the design and development of this 59,000 RSF state-of-the-art campus to provide a comprehensive model of care dedicated to the recovery of people suffering from opioid addiction.

Subsequent events

  • In July 2019, we opportunistically issued $1.25 billion of unsecured senior notes payable, with a weighted-average interest rate of 3.72% and a weighted-average maturity of 19.5 years, including $750.0 million of 3.375% unsecured senior notes due 2031 and $500.0 million of 4.00% unsecured senior notes due 2050. The proceeds were used to refinance $1.125 billion of unsecured senior notes payable and unsecured senior bank term loan, with a weighted-average interest rate of 3.94% and a weighted-average maturity of 2.4 years, consisting of the following:
  • In July 2019, we acquired a 55% interest in 4224 and 4242 Campus Point Court and 10210 Campus Point Drive, located adjacent to our Campus Pointe by Alexandria campus in our University Town Center submarket of San Diego, for $140.3 million. The joint venture will include three operating properties aggregating 314,092 RSF, which are currently 83% occupied by multiple tenants. The properties, which have future value-creation opportunities, will be integrated into the current campus to create a 1.9 million RSF mega campus.

 

Acquisitions
June 30, 2019
(Dollars in thousands)



Property


Submarket/Market


Date of
Purchase


Number of
Properties


Operating

Occupancy


Square Footage


Unlevered Yields


Purchase Price






Future
Development


Active
Redevelopment


Operating With
Future
Development/
Redevelopment


Operating


Initial
Stabilized


Initial
Stabilized
(Cash)









































Completed 1Q19


Various


1Q19


10


100%



175,000



129,084


247,770


(1)


(1)


$

447,950


(2)

Completed 2Q19:





























5 Necco Street


Seaport Innovation
    District/Greater
    Boston


5/9/19(3)


1


87%

(3)





87,163


5.2%


5.1%





252,000


15 Necco Street




N/A



293,000





(4)


(4)



601 Dexter Avenue North


Lake Union/Seattle


6/18/19


1


100%



188,400



18,680



(4)


(4)



28,500




























4075 Sorrento Valley Boulevard


Sorrento Valley/
    San Diego


5/13/19


1


100%



149,000



40,000



(4)


(4)



16,000


(2)

Completed 1H19











805,400



187,764


334,933









744,450































Subsequent to 2Q19:


























































4224/4242 Campus Point Court and
10210 Campus Point Drive
(55% interest in consolidated JV)


University Town
    Center/San
    Diego


7/9/19


3


83%

(5)





314,092


6.9%


6.0%



140,250

(2)

Other


Various


July 2019


1


100%



135,938




30,680


(4)


(4)



38,200


(2)






























Pending


San Francisco
    Bay Area


3Q19


1


N/A




250,000




(4)


(4)



179,000


Pending


San Francisco
    Bay Area


3Q19


1


N/A



700,000





(4)


(4)



120,000


Pending


San Francisco
    Bay Area


3Q19


1


N/A




92,000




(4)


(4)



26,000


Pending


San Diego


3Q19


Various


76%



700,000




560,000


(4), (6)


(4), (6)



122,500













1,535,938


342,000



904,772









625,950































Additional targeted acquisitions











854,000












179,600


Total











3,195,338


342,000


187,764


1,239,705








$

1,550,000






















































































































(1)

Refer to our first quarter ended March 31, 2019, Earnings Press Release and Supplemental Information filed on April 29, 2019, for related yield information.

(2)

Included within our acquisition guidance as of April 20, 2019. On June 20, 2019, we updated our 2019 acquisition guidance. Please see our Current Report on Form 8-K filed on June 20, 2019 for specific details.

(3)

The seller accepted our offer on April 30, 2019, and we completed the acquisition of 5 and 15 Necco Street on May 9, 2019. The 5 Necco building is 87% leased for 12 years and expected to be occupied later in 2019. The remaining 13% of
RSF is targeted for retail space.

(4)

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

(5)

The property is currently 83% occupied and a lease for 10% of the property will commence in 4Q19 upon completion of renovations, increasing occupancy to 93%.

(6)

We expect to provide yields for operating properties subsequent to closing the acquisition.

 


Dispositions and Sales of Partial Interests in Core Class A Properties

June 30, 2019

(Dollars in thousands, except per RSF amounts)












Capitalization
Rate

(Cash Basis)(1)











Consideration
in Excess of
Book Value(2)


Property


Submarket/Market


Date of
Sale


Square
Footage


Capitalization
Rate





Sales Price



Sales Price
per RSF




Sales of noncontrolling partial interests in core Class A properties:






















75/125 Binney Street (sale of 60% noncontrolling interest)


Cambridge/Greater Boston


2/13/19


388,270


4.2%


4.3%





$

438,000


$

1,880


$

202,246


Pending(3)


San Francisco Bay Area


Pending


TBD   


TBD


TBD





140,000


TBD  


TBD  


Pending(3)


San Diego


Pending


TBD   


TBD


TBD





287,500


TBD  


TBD  

















$

865,500






























2019 guidance range
















$ 820,000 – $ 920,000
































































(1)

Capitalization rates are calculated based upon net operating income (cash basis), annualized for the quarter preceding the date on which the property is sold.

(2)

We retained or expect to retain control over and consolidate these joint ventures. For consolidated joint ventures, we account for the difference between the consideration received and the book value of the interest to be sold as an equity
transaction, with no gain or loss recognized in earnings.

(3)

We expect to complete this partial interest sale during 3Q19.


 

 


Guidance
June 30, 2019
(Dollars in millions, except per share amounts)



     On June 20, 2019, we filed a Current Report on Form 8-K with updated guidance for the year ending December 31, 2019. The following further updates guidance based on our current view of existing market conditions and assumptions for the year ending December 31, 2019. There can be no assurance that actual amounts will not be materially higher or lower than these expectations. Refer to our discussion of "forward-looking statements" on page 7 of this Earnings Press Release for additional information.





Summary of Key Changes in Guidance


Guidance



Summary of Key Changes in Key Sources and Uses of
     Capital Guidance



Guidance Midpoint


As of 7/29/19


As of 6/20/19



As of 7/29/19


As of 6/20/19

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


See updates below



Issuance of unsecured senior notes payable



$

2,100



$

850


Rental rate increases


27.0% to 30.0%


26.0% to 29.0%



Repayments of unsecured senior notes payable



$

(950)



$


Rental rate increases (cash basis)


14.0% to 17.0%


13.0% to 16.0%



Repayments of unsecured senior bank term loan



$

(175)



$























Projected Earnings per Share and Funds From Operations per Share Attributable to Alexandria's 
     Common Stockholders – Diluted, as Adjusted



Key Credit Metrics



2019 Guidance




As of 7/29/19


As of 6/20/19



Net debt to Adjusted EBITDA – 4Q19 annualized



Less than or equal to 5.3x

Earnings per share(1)


$2.39 to $2.47


$2.65 to $2.75



Net debt and preferred stock to Adjusted EBITDA – 4Q19 annualized



Less than or equal to 5.4x

     Depreciation and amortization


4.85


4.85



Fixed-charge coverage ratio – 4Q19 annualized



Greater than 4.0x

     Allocation to unvested restricted stock awards


(0.05)


(0.05)



Value-creation pipeline as a percentage of gross real estate as of 
     
December 31, 2019



Less than 15%

Funds from operations per share(2)


$7.19 to $7.27


$7.45 to $7.55

















     Unrealized gains on non-real estate investment(1)


(0.75)


(0.65)

















     Loss on early extinguishment of debt(3)


0.45


0.07

















     Preferred stock redemption charge


0.02


0.02

















     Allocation to unvested restricted stock awards


0.01


0.01

















Funds from operations per share, as adjusted


$6.92 to $7.00


$6.90 to $7.00

















Midpoint


$6.96


$6.95
























Key Sources and Uses of Capital (in millions)


Range



Midpoint


Certain
Completed
Items








Sources of capital:





















Net cash provided by operating activities after        


$

170


$

210




$

190




          dividends








     Incremental debt



610


570





590











     Real estate dispositions and partial interest sales



820


920





870


$

438

(4)








     Common equity



1,150


1,250





1,200


$

1,218

(5)








Total sources of capital


$

2,750


$

2,950




$

2,850




Key Assumptions


Low


High



Uses of capital:














Occupancy percentage in North America as of December 31, 2019(6)


97.2%


97.8%



     Construction


$

1,250


$

1,350




$

1,300











     Acquisitions



1,500


1,600





1,550



(4)


Lease renewals and re-leasing of space:


27.0%


30.0%



Total uses of capital


$

2,750


$

2,950




$

2,850




     Rental rate increases


14.0%


17.0%



Incremental debt (included above):














     Rental rate increases (cash basis)







     Issuance of unsecured senior notes payable


$

2,100


$

2,100




$

2,100


$

2,100

(3)

Same property performance:







     Assumption of secured note payable



28


28





28


$

28


     Net operating income increase


1.0%


3.0%



     Repayments of unsecured senior notes payable



(950)


(950)





(950)


$

(950)

(3)

     Net operating income increase (cash basis)


6.0%


8.0%



     Repayments of secured notes payable



(310)


(320)





(315)


$

(300)









     Repayments of unsecured senior bank term loan



(175)


(175)





(175)


$

(175)

(3)

Straight-line rent revenue


$

95


$

105

(7)


     $2.2 billion unsecured senior line of credit/other



(83)


(113)





(98)




General and administrative expenses


$

108


$

113



Incremental debt


$

610


$

570




$

590




Capitalization of interest


$

79


$

89

















Interest expense


$

167


$

177










































































































(1)

Excludes future unrealized gains or losses after June 30, 2019, that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted.

(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"). Refer to the "Funds From Operations and Funds From
Operations, As Adjusted, Attributable to Alexandria's Common Stockholders" section in "Definitions and Reconciliations" of our Supplemental Information for additional information.

(3)

Refer to the first item under "Subsequent Events" in this Earnings Press Release for additional information.

(4)

Refer to "Acquisitions" and "Dispositions and Sales of Partial Interests in Core Class A Properties" in this Earnings Press Release for additional information.

(5)

Includes 602,484 shares of common stock for net proceeds of $86.1 million issued under our ATM program in 2Q19 and unsettled forward equity sales agreements related to 8.1 million shares of our common stock.

(6)

On June 20, 2019, we updated guidance for occupancy percentage for operating properties in North America as of December 31, 2019, to reflect the pending acquisition of a campus located in our San Diego market that includes multiple
operating buildings aggregating 560,000 RSF, which is 76% leased. Additionally, as expected, we will commence renovations on 116,556 RSF at 3545 Cray Court in our Torrey Pines submarket upon expiration of the existing lease in 3Q19.
In aggregate for these items, we expect a temporary decline in occupancy percentage in North America of approximately 1% from 2Q19 to 3Q19.

(7)

Approximately 45% of straight-line rent revenue represents initial free rent on recently delivered and expected 2019 deliveries of new Class A properties from our development and redevelopment pipeline.

 

Earnings Call Information and About the Company

We will host a conference call on Tuesday, July 30, 2019, 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, 2019. To participate in this conference call, dial (833) 366-1125 or (412) 902-6738 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the call for Alexandria Real Estate Equities, Inc. The audio webcast can be accessed at www.are.com in the "For Investors" section. A replay of the call will be available for a limited time from 5:00 p.m. ET/2:00 p.m. PT on Tuesday, July 30, 2019. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 10131624.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the second quarter ended June 30, 2019, is available in the "For Investors" section of our website at www.are.com or by following this link: http://www.are.com/fs/2019q2.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® urban office real estate investment trust ("REIT"), is the first and longest-tenured owner, operator, and developer uniquely focused on collaborative life science, technology, and agtech campuses in AAA innovation cluster locations, with a total market capitalization of $22.2 billion as of June 30, 2019, and an asset base in North America of 37.1 million square feet ("SF") as of July 29, 2019, including pending acquisitions. The asset base in North America includes 24.5 million RSF of operating properties and 1.5 million RSF of Class A properties undergoing construction, with projected initial occupancy in 2019, 2.2 million RSF of Class A properties undergoing construction or pre-construction, with projected initial occupancy in 2020, 4.4 million RSF of Class A properties undergoing or nearing pre-construction, with projected initial occupancy in 2021 or 2022, and 4.5 million of future development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science, technology, and agtech campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science and technology companies through our 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 2019 earnings per share attributable to Alexandria's common stockholders – diluted, 2019 funds from operations per share attributable to Alexandria's common stockholders – diluted, net operating income, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as "forecast," "guidance," "goals," "projects," "estimates," "anticipates," "believes," "expects," "intends," "may," "plans," "seeks," "should," or "will," or the negative of those words or similar words. These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. There can be no assurance that actual results will not be materially higher or lower than these expectations. These statements are subject to risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate developments in our markets, 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®, Alexandria Summit®, Alexandria Technology Center®, Alexandria Innovation Center®, and GradLabs™ 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 Operations
June 30, 2019
(Dollars in thousands, except per share amounts)




Three Months Ended


Six Months Ended



6/30/19


3/31/19


12/31/18


9/30/18


6/30/18


6/30/19


6/30/18

Revenues:















Income from rentals(1)


$

371,618


$

354,749


$

337,785


$

336,547


$

322,794


$

726,367


$

640,449

Other income


2,238


4,093


2,678


5,276


2,240


6,331


4,724

Total revenues


373,856


358,842


340,463


341,823


325,034


732,698


645,173
















Expenses:















Rental operations


105,689


101,501


97,682


99,759


91,908


207,190


183,679

General and administrative


26,434


24,677


22,385


22,660


22,939


51,111


45,360

Interest


42,879


39,100


40,239


42,244


38,097


81,979


75,012

Depreciation and amortization


134,437


134,087


124,990


119,600


118,852


268,524


233,071

Impairment of real estate






6,311



6,311

Loss on early extinguishment of debt



7,361



1,122



7,361


Total expenses


309,439


306,726


285,296


285,385


278,107


616,165


543,433















Equity in earnings of unconsolidated real estate joint ventures


1,262


1,146


1,029


40,718


1,090


2,408


2,234

Investment income (loss)


21,500


83,556


(83,531)


122,203


12,530


105,056


98,091

Gain on sales of real estate




8,704





Net income (loss)


87,179


136,818


(18,631)


219,359


60,547


223,997


202,065

Net income attributable to noncontrolling interests


(8,412)


(7,659)


(6,053)


(5,723)


(5,817)


(16,071)


(11,705)

Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s
     stockholders


78,767


129,159


(24,684)


213,636


54,730


207,926


190,360

Dividends on preferred stock


(1,005)


(1,026)


(1,155)


(1,301)


(1,302)


(2,031)


(2,604)

Preferred stock redemption charge



(2,580)


(4,240)




(2,580)


Net income attributable to unvested restricted stock awards


(1,432)


(1,955)


(1,661)


(3,395)


(1,412)


(3,134)


(2,765)

Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s
     common stockholders


$

76,330


$

123,598


$

(31,740)


$

208,940


$

52,016


$

200,181


$

184,991
















Net income (loss) per share attributable to Alexandria Real Estate
     Equities, Inc.'s common stockholders:















Basic


$

0.68


$

1.11


$

(0.30)


$

2.01


$

0.51


$

1.80


$

1.83

Diluted


$

0.68


$

1.11


$

(0.30)


$

1.99


$

0.51


$

1.80


$

1.83
















Weighted-average shares of common stock outstanding:















Basic


111,433


111,054


106,033


104,179


101,881


111,245


100,878

Diluted


111,501


111,054


106,033


105,385


102,236


111,279


101,191
















Dividends declared per share of common stock


$

1.00


$

0.97


$

0.97


$

0.93


$

0.93


$

1.97


$

1.83





(1)

Upon the adoption of new lease accounting standards on January 1, 2019, rental revenues and tenant recoveries are aggregated within income from rentals. Prior periods have been reclassified to conform to new standards. Refer to
"Financial and Asset Base Highlights" and the "Lease Accounting" and "Tenant Recoveries" sections in "Definitions and Reconciliations" of our Supplemental Information for additional information.

 

 

Consolidated Balance Sheets
June 30, 2019
(In thousands)




6/30/19


3/31/19


12/31/18


9/30/18


6/30/18

Assets











Investments in real estate


$

12,872,824


$

12,410,350


$

11,913,693


$

11,587,312


$

11,190,771

Investments in unconsolidated real estate joint ventures


334,162


290,405


237,507


197,970


192,972

Cash and cash equivalents


198,909


261,372


234,181


204,181


287,029

Restricted cash


39,316


54,433


37,949


29,699


34,812

Tenant receivables


9,228


9,645


9,798


11,041


8,704

Deferred rent


585,082


558,103


530,237


511,680


490,428

Deferred leasing costs


247,468


241,268


239,070


238,295


232,964

Investments


1,057,854


1,000,904


892,264


957,356


790,753

Other assets


694,627


653,726


370,257


368,032


333,757

Total assets


$

16,039,470


$

15,480,206


$

14,464,956


$

14,105,566


$

13,562,190












Liabilities, Noncontrolling Interests, and Equity











Secured notes payable


$

354,186


$

356,461


$

630,547


$

632,792


$

776,260

Unsecured senior notes payable


5,140,914


5,139,500


4,292,293


4,290,906


4,289,521

Unsecured senior line of credit


514,000



208,000


413,000


Unsecured senior bank term loans


347,105


347,542


347,415


347,306


548,324

Accounts payable, accrued expenses, and tenant security deposits


1,157,417


1,171,377


981,707


907,094


849,274

Dividends payable


114,379


110,412


110,280


101,084


98,676

Total liabilities


7,628,001


7,125,292


6,570,242


6,692,182


6,562,055












Commitments and contingencies






















Redeemable noncontrolling interests


10,994


10,889


10,786


10,771


10,861












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











7.00% Series D cumulative convertible preferred stock


57,461


57,461


64,336


74,386


74,386

Common stock


1,120


1,112


1,110


1,058


1,033

Additional paid-in capital


7,581,573


7,518,716


7,286,954


6,801,150


6,387,527

Accumulated other comprehensive loss


(11,134)


(10,712)


(10,435)


(3,811)


(2,485)

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


7,629,020


7,566,577


7,341,965


6,872,783


6,460,461

Noncontrolling interests


771,455


777,448


541,963


529,830


528,813

Total equity


8,400,475


8,344,025


7,883,928


7,402,613


6,989,274

Total liabilities, noncontrolling interests, and equity


$

16,039,470


$

15,480,206


$

14,464,956


$

14,105,566


$

13,562,190

 

 

Funds From Operations and Funds From Operations per Share
June 30, 2019
(In thousands)


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




Three Months Ended


Six Months Ended



6/30/19


3/31/19


12/31/18


9/30/18


6/30/18


6/30/19


6/30/18

Net income (loss) attributable to Alexandria's common stockholders – basic


$

76,330


$

123,598


$

(31,740)


$

208,940


$

52,016


$

200,181


$

184,991

Assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)





1,301




Net income (loss) attributable to Alexandria's common stockholders – diluted


76,330


123,598


(31,740)


210,241


52,016


200,181


184,991

Depreciation and amortization


134,437


134,087


124,990


119,600


118,852


268,524


233,071

Noncontrolling share of depreciation and amortization from consolidated real
     estate JVs


(6,744)


(5,419)


(4,252)


(4,044)


(3,914)


(12,163)


(7,781)

Our share of depreciation and amortization from unconsolidated real estate JVs


973


846


719


1,011


807


1,819


1,451

Gain on sales of real estate




(8,704)





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





(35,678)




Assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)


1,005


1,026





2,031


2,604

Allocation to unvested restricted stock awards


(1,445)


(2,054)



(1,312)


(1,042)


(3,740)


(3,212)

Funds from operations attributable to Alexandria's common stockholders –
     diluted(2)


204,556


252,084


81,013


289,818


166,719


456,652


411,124

Unrealized (gains) losses on non-real estate investments


(11,058)


(72,206)


94,850


(117,188)


(5,067)


(83,264)


(77,296)

Realized gains on non-real estate investments




(6,428)





(8,252)

Impairment of real estate – land parcels






6,311



6,311

Impairment of non-real estate investments




5,483





Loss on early extinguishment of debt



7,361



1,122



7,361


Our share of gain on early extinguishment of debt from unconsolidated real estate
     JVs





(761)




Preferred stock redemption charge



2,580


4,240




2,580


Removal of assumed conversion of 7.00% Series D cumulative convertible
     preferred stock(1)


(1,005)


(1,026)



(1,301)



(2,031)


(2,604)

Allocation to unvested restricted stock awards


179


990


(1,138)


1,889


(18)


1,157


1,140

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


$

192,672


$

189,783


$

178,020


$

173,579


$

167,945


$

382,455


$

330,423





(1)

Refer to the "Weighted-Average Shares of Common Stock Outstanding – Diluted" section in "Definitions and Reconciliations" of our Supplemental Information for additional information regarding our 7.00% Series D cumulative convertible
preferred stock.

(2)

Calculated in accordance with standards established by the Nareit Board of Governors. Refer to the "Funds From Operations and Funds From Operations, As Adjusted, Attributable to Alexandria's Common Stockholders" section in
"Definitions and Reconciliations" of our Supplemental Information for additional information.

 

Funds From Operations and Funds From Operations per Share (continued)
June 30, 2019
(In thousands, except per share amounts)


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




Three Months Ended


Six Months Ended



6/30/19


3/31/19


12/31/18


9/30/18


6/30/18


6/30/19


6/30/18

Net income (loss) per share attributable to Alexandria Real Estate Equities,
     Inc.'s common stockholders – diluted


$

0.68


$

1.11


$

(0.30)


$

1.99


$

0.51


$

1.80


$

1.83

Depreciation and amortization


1.15


1.17


1.14


1.11


1.13


2.32


2.23

Gain on sale of real estate




(0.08)





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





(0.34)




Allocation to unvested restricted stock awards



(0.02)



(0.01)


(0.01)


(0.04)


(0.03)

Funds from operations per share attributable to Alexandria's common
     stockholders – diluted(1)


1.83


2.26


0.76


2.75


1.63


4.08


4.03

Unrealized (gains) losses on non-real estate investments


(0.10)


(0.65)


0.89


(1.11)


(0.05)


(0.75)


(0.76)

Realized gains on non-real estate investments




(0.06)





(0.08)

Impairment of real estate – land parcels






0.06



0.06

Impairment of non-real estate investments




0.05





Loss on early extinguishment of debt



0.07



0.01



0.07


Our share of gain on early extinguishment of debt from unconsolidated real
     estate JVs





(0.01)




Preferred stock redemption charge



0.02


0.04




0.02


Allocation to unvested restricted stock awards



0.01



0.02



0.02


0.02

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


$

1.73


$

1.71


$

1.68


$

1.66


$

1.64


$

3.44


$

3.27
















Weighted-average shares of common stock outstanding(2) for calculations of:















Earnings per share – diluted


111,501


111,054


106,033


105,385


102,236


111,279


101,191

Funds from operations – diluted, per share


112,077


111,635


106,244


105,385


102,236


111,857


101,933

Funds from operations – diluted, as adjusted, per share


111,501


111,054


106,244


104,641


102,236


111,279


101,191



































































(1)

Refer to footnote 2 on the previous page for additional information.

(2)

Refer to footnote 1 on the previous page for additional information.

 

 




Cision

View original content:http://www.prnewswire.com/news-releases/alexandria-real-estate-equities-inc-reports-2q19-revenues-of-373-9-million-up-15-0-over-2q18-2q19-and-1h19-eps--diluted-of-0-68-and-1-80--respectively-2q19-and-1h19-ffo-per-share--diluted-as-adjusted-of-1-73-and-3--300892477.html