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Yahoo Finance Plus Alexandria Real Estate Equities, Inc. Reports: 3Q22 and YTD 3Q22 Net Income per Share - Diluted of $2.11 and $2.88, respectively; and 3Q22 and YTD 3Q22 FFO per Share - Diluted, As Adjusted, of $2.13 and $6.28, respectively
PASADENA, Calif., Oct. 24, 2022 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE:ARE) announced financial and operating results for the third quarter ended September 30, 2022.
Key highlights | YTD | ||||||
Operating results | 3Q22 | 3Q21 | 3Q22 | 3Q21 | |||
Total revenues: | |||||||
In millions | $ 659.9 | $ 547.8 | $ 1,918.7 | $ 1,537.2 | |||
Growth | 20.5 % | 24.8 % | |||||
Net income attributable to Alexandria's common stockholders – diluted | |||||||
In millions | $ 341.4 | $ 101.3 | $ 461.5 | $ 490.6 | |||
Per share | $ 2.11 | $ 0.67 | $ 2.88 | $ 3.38 | |||
Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted | |||||||
In millions | $ 344.7 | $ 296.0 | $ 1,008.1 | $ 841.3 | |||
Per share | $ 2.13 | $ 1.95 | $ 6.28 | $ 5.80 | |||
A REIT industry-leading, high-quality roster of over 1,000 tenants and operational excellence, supporting high-quality revenues, cash flows, and strong margins
Percentage of total annual rental revenue in effect from investment-grade or | 49 % | |||
Sustained strength in tenant collections: | ||||
Tenant receivables as of September 30, 2022 | $ 7.8 | million | ||
October tenant rent and receivables collected as of October 24, 2022 | 99.9 % | |||
Occupancy of operating properties in North America | 94.3 % | |||
Operating margin | 70 % | |||
Adjusted EBITDA margin | 69 % | |||
Weighted-average remaining lease term: | ||||
All tenants | 7.2 | years | ||
Top 20 tenants | 9.7 | years | ||
Solid leasing volume and rental rate increase
During 3Q22, we completed 1.7 million RSF of leasing activity; 87% of which was generated from our roster of over 1,000 tenants.
Quarterly leasing volume continues to surpass our 10-year quarterly average of 1.3 million RSF and our pre-COVID 5-year quarterly average of 1.1 million RSF.
3Q22 rental rate increases on lease renewals and re-leasing of space were 27.1% and 22.6% (cash basis).
3Q22 | YTD 3Q22 | |||
Total leasing activity – RSF | 1,662,069 | 6,405,265 | ||
Leasing of development and redevelopment space – RSF | 329,006 | 2,685,138 | ||
Lease renewals and re-leasing of space: | ||||
RSF (included in total leasing activity above) | 1,094,821 | 3,045,980 | ||
Rental rate increases | 27.1 % | 34.3 % | ||
Rental rate increases (cash basis) | 22.6 % | 24.2 % |
Continued strong net operating income and internal growth
Net operating income (cash basis) of $1.6 billion for 3Q22 annualized, up $306.0 million, or 22.9%, compared to 3Q21 annualized.
96% of our leases contain contractual annual rent escalations approximating 3%.
Same property net operating income growth:
Strong and flexible balance sheet with significant liquidity
Investment-grade credit ratings ranked in the top 10% among all publicly traded U.S. REITs.
Net debt and preferred stock to Adjusted EBITDA of 5.4x and fixed-charge coverage ratio of 4.9x for 3Q22 annualized.
Total debt and preferred stock to gross assets of 27%.
95.9% of our debt has a fixed rate.
13.2 years weighted-average remaining term of debt.
No debt maturities prior to 2025.
$6.4 billion of liquidity.
Continued strategic value harvesting with strong valuations
During YTD 3Q22, we completed dispositions and sales of partial interests aggregating $2.2 billion, including $1.0 billion of dispositions during 3Q22:
Sale of five properties in our South San Francisco and Greater Stanford submarkets for an aggregate sales price of $383.6 million, or $1,161 per RSF, representing capitalization rates of 5.2% and 5.2% (cash basis).
Sale of a 70% interest in 3215 Merryfield Row in our Torrey Pines submarket for a sales price of $149.9 million, or $1,256 per RSF, representing capitalization rates of 4.5% and 4.2% (cash basis).
Sale of a 70% interest in Summers Ridge Science Park in our Sorrento Mesa submarket for a sales price of $159.6 million, or $720 per RSF, representing capitalization rates of 4.9% and 4.6% (cash basis).
Continued dividend strategy to share strong and consistent growth in operating cash flows with stockholders while also retaining a significant portion for reinvestment
Common stock dividend declared for 3Q22 of $1.18 per common share, aggregating $4.66 per common share for the twelve months ended September 30, 2022, up 24 cents, or 5%, over the twelve months ended September 30, 2021.
Dividend yield of 3.4% as of September 30, 2022.
FFO payout ratio of 56% for the three months ended September 30, 2022.
Average annual dividend per-share growth of 6.5% over the last five years.
Completion of unsecured senior line of credit upsizing and term extension
In September 2022, we amended our unsecured senior line of credit. Key changes include:
New Agreement | Change | |||||
Commitments available for borrowing | $4.0 billion | Up $1.0 billion | ||||
Maturity date | January 22, 2028 | Extended by 2 years | ||||
Interest rate | SOFR+0.875% | Converted to SOFR from LIBOR | ||||
Alexandria's tenants drive visibility for future growth aggregating over $645 million of incremental net operating income
Highly leased value-creation pipeline of current and seven near-term projects expected to generate greater than $645 million of incremental net operating income, primarily commencing from 4Q22 through 3Q25.
7.6 million RSF of our value-creation projects, which are 78% leased.
80% of the leased RSF was generated from our roster of over 1,000 tenants.
Key items included in operating results
Key items included in net income attributable to Alexandria's common stockholders: | |||||||||||||||
YTD | |||||||||||||||
3Q22 | 3Q21 | 3Q22 | 3Q21 | 3Q22 | 3Q21 | 3Q22 | 3Q21 | ||||||||
(In millions, except per share amounts) | Amount | Per Share – | Amount | Per Share – | |||||||||||
Unrealized (losses) gains | $ (56.5) | $ (14.4) | $ (0.35) | $ (0.10) | $ (388.1) | $ 183.3 | $ (2.42) | $ 1.26 | |||||||
Significant realized gains on | — | 52.4 | — | 0.35 | — | 110.1 | — | 0.76 | |||||||
Gain (loss) on sales of real | 323.7 | (0.4) | 2.00 | — | 537.9 | 2.3 | 3.35 | 0.02 | |||||||
Impairment of real estate | (38.8) | (42.6) | (0.24) | (0.28) | (38.8) | (52.7) | (0.24) | (0.37) | |||||||
Loss on early | — | — | — | — | (3.3) | (67.3) | (0.02) | (0.46) | |||||||
Acceleration of stock | (7.2) | — | (0.04) | — | (7.2) | — | (0.04) | — | |||||||
Total | $ 221.2 | $ (5.0) | $ 1.37 | $ (0.03) | $ 100.5 | $ 175.7 | $ 0.63 | $ 1.21 | |||||||
Balance sheet management
Key metrics as of September 30, 2022
$33.3 billion in total market capitalization.
$22.8 billion in total equity capitalization, which ranks in the top 10% among all publicly traded U.S. REITs.
13.2 years weighted-average remaining term of debt.
No remaining LIBOR-based debt ahead of June 2023 phase-out.
3Q22 | Goal | ||||||
Quarter | Trailing | 4Q22 | |||||
Annualized | 12 Months | Annualized | |||||
Net debt and preferred stock to | 5.4x | 5.6x | Less than or equal to 5.1x | ||||
Fixed-charge coverage ratio | 4.9x | 5.1x | Greater than or equal to 5.1x | ||||
Key capital events
In September 2022, we amended our unsecured senior line of credit to increase the aggregate commitment to $4.0 billion and extend the maturity date to January 22, 2028. Refer to page 2 of this Earnings Press Release for additional detail.
In September 2022, we increased the aggregate amount we may issue from time to time under our commercial paper program to $2.0 billion from $1.5 billion.
During 3Q22, we settled a portion of our outstanding forward equity sales agreements by issuing 1.0 million shares and received net proceeds of $199.7 million. We expect to issue an aggregate of 8.0 million shares at an average price of $186.03 per share to settle all our outstanding forward equity sales agreements and receive net proceeds of approximately $1.5 billion in 4Q22.
During 3Q22, there was no sale activity under our ATM program. As of September 30, 2022, the remaining aggregate amount available under our ATM program for future sales of common stock was $246.6 million.
Investments
As of September 30, 2022:
Investment loss of $32.3 million for the three months ended September 30, 2022, presented in our consolidated statements of operations, consisted of $24.2 million of realized gains and $56.5 million of unrealized losses/changes in fair value.
External growth and investment in real estate
Delivery and commencement of value-creation projects
During 3Q22, we placed into service development and redevelopment projects aggregating 332,961 RSF across multiple submarkets resulting in $30 million of incremental net operating income.
82% of construction costs related to active development and redevelopment projects aggregating 5.6 million RSF are under a guaranteed maximum price ("GMP") contract or other fixed contracts. Our budgets also include construction cost contingencies in GMP contracts plus additional landlord contingencies that generally range from 3% to 5%.
Annual net operating income (cash basis) is expected to increase by $45 million upon the burn-off of initial free rent from recently delivered projects.
Value-creation pipeline of new Class A development and redevelopment projects as | 3Q22 | |
Under construction projects 76% leased/negotiating | 10 % | |
Near-term projects expected to commence construction in the next five quarters 88% leased | 1 % | |
Income-producing/potential cash flows/covered land play(1) | 8 % | |
Land | 3 % | |
(1) | Includes projects that have existing buildings that are generating or can generate operating cash flows. Also |
Alexandria is at the vanguard of innovation for a high-quality roster of over 1,000 tenants, focused on accommodating their current needs and providing them with a path for future growth
During 3Q22, we completed acquisitions in our key life science cluster submarkets aggregating 1.2 million RSF of value-creation opportunities for an aggregate purchase price of $316.7 million.
Industry and ESG leadership: catalyzing and leading the way for positive change to benefit human health and society
In October 2022, Alexandria continued to enhance its first social responsibility pillar focused on advancing human health by empowering NEXT for AUTISM's development of important support services for autistic individuals and their families. Alexandria has been forging strategically supportive partnerships with highly impactful organizations that aim to accelerate groundbreaking medical innovation to advance vitally needed therapies for individuals with autism.
In October 2022, Alexandria's position as a groundbreaking leader in ESG was reinforced in the 2022 GRESB Real Estate Assessment, with several achievements, including: (i) Regional and Global Sector Leader for buildings in development in the Science & Technology sector, (ii) #2 ranking for buildings in operation in the Diversified Listed sector, and (iii) "A" disclosure score for the fifth consecutive year. Alexandria has earned "Green Star" recognitions in the operating asset benchmark for the sixth consecutive year and in the development benchmark for the third consecutive year since its 2020 launch.
Industry and ESG leadership (continued)
In October 2022, Alexandria was recognized as a Climate Leader by the Sponsors of Mass Save®, a collaborative of the energy utilities and energy efficiency service providers in Massachusetts. Utilizing these programs in our Greater Boston market, we have implemented over 65 energy conservation projects across more than 40 buildings over the last 10 years, resulting in estimated recurring annual energy savings of over 5 million kWh. Alexandria was the only real estate company to be selected in the inaugural cohort of honorees.
In September 2022, coinciding with National Suicide Prevention Month, we announced our deepened partnership with KITA, a non-profit providing tuition-free summer camp for children who have lost a loved one to suicide, and the advancement of our eighth social responsibility pillar addressing the mental health crisis. Through Alexandria's significant support, KITA will have free, long-term access to 28 acres in Acton, Maine that will serve as the non-profit's new home and enable it to grow its program and increase the number of children it serves.
In July 2022, Alexandria Venture Investments, our strategic venture capital platform, was recognized as the #1 most active corporate investor in biopharma by new deal volume (2021-1H22) for the fifth consecutive year by Silicon Valley Bank in its "Healthcare Investments and Exits: Mid-Year 2022 Report." Alexandria's venture activity provides us with, among other things, mission-critical data and insights into industry innovations and trends.
About Alexandria Real Estate Equities, Inc.
Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is a best-in-class, mission-driven life science REIT making a positive and lasting impact on the world. As the pioneer of the life science real estate niche since its founding in 1994, Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative life science, agtech, and technology campuses in AAA innovation cluster locations, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. The trusted partner to over 1,000 tenants, as of September 30, 2022, Alexandria has a total market capitalization of $33.3 billion and an asset base in North America of 74.5 million square feet ("SF"), which includes 41.1 million RSF of operating properties and 5.6 million RSF of Class A properties undergoing construction, 9.9 million RSF of near-term and intermediate-term development and redevelopment projects, and 17.9 million SF of future development projects. Alexandria has a longstanding and proven track record of developing Class A properties clustered in life science, agtech, and technology campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science, agrifoodtech, climate innovation, and technology companies through our venture capital platform. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.
Acquisitions | |||||||||||||||||||||||
Property | Submarket/Market | Date of Purchase | Number of | Operating Occupancy | Square Footage | Purchase | |||||||||||||||||
Acquisitions With Development/Redevelopment Opportunities(1) | |||||||||||||||||||||||
Future | Operating With | Operating(2) | Operating | Total(3) | |||||||||||||||||||
Completed in 1H22 | 32 | 91 | % | 5,486,991 | 2,866,642 | 451,760 | — | 8,373,453 | $ | 2,120,863 | |||||||||||||
Completed in 3Q22: | |||||||||||||||||||||||
100 Edwin H. Land Boulevard | Cambridge/Inner Suburbs/ | 8/1/22 | 1 | 100 | % | TBD | 104,500 | — | — | 104,500 | 170,000 | ||||||||||||
10010 and 10140 Campus Point Drive | University Town Center/ | 9/29/22 | 3 | 100 | 750,000 | 226,144 | — | — | 750,000 | 106,380 | |||||||||||||
Other | Various | Various | 3 | 96 | 302,000 | 108,478 | — | — | 372,278 | 40,349 | |||||||||||||
7 | 99 | % | 1,052,000 | 439,122 | (4) | — | — | 1,226,778 | 316,729 | ||||||||||||||
Completed in October 2022: | |||||||||||||||||||||||
1001 Trinity Street and 1020 Red | Austin/Texas | 10/4/22 | 2 | 100 | % | 123,976 | 198,972 | — | — | 322,948 | 108,000 | ||||||||||||
Other | 360 | ||||||||||||||||||||||
108,360 | |||||||||||||||||||||||
Pending | Various | 104,048 | |||||||||||||||||||||
Total | ... | ||||||||||||||||||||||
