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Alexandria Real Estate Equities, Inc., at the Vanguard of the Life Science Industry, Providing High-Quality Office/Laboratory Space to Meet Historic-High Demand, Reports: 4Q21 and 2021 Net Income per Share - Diluted of $0.47 and $3.82, respectively; 4Q21 and 2021 FFO per Share - Diluted, As Adjusted, of $1.97 and $7.76, respectively

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·13 min read
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PASADENA, Calif., Jan. 31, 2022 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE:ARE) announced financial and operating results for the fourth quarter and year ended December 31, 2021.

Key highlights







Operating results

4Q21


4Q20


2021


2020


Total revenues:









In millions

$ 576.9


$ 463.7


$ 2,114.2


$ 1,885.6


Growth

24.4%



12.1%



Net income attributable to Alexandria's common stockholders – diluted

In millions

$ 72.8


$ 435.9


$ 563.4


$ 760.8


Per share

$ 0.47


$ 3.26


$ 3.82


$ 6.01


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


In millions

$ 303.6


$ 246.6


$ 1,144.9


$ 923.8


Per share

$ 1.97


$ 1.84


$ 7.76


$ 7.30


Historic leasing volume and rental rate growth

  • Historic demand for our high-quality office/laboratory space has translated into record leasing volume and rental rate growth in 2021 for our overall portfolio and our value-creation pipeline.



4Q21


Previous
Quarterly
Record


2021


Previous
Annual
Record

Total leasing activity – RSF


4,094,174

(1)

1,933,838


9,516,301

(1)

5,062,722

Leasing of development and redevelopment
space – RSF


1,795,633

(1)

1,063,951


3,867,383

(1)

2,258,262

Lease renewals and re-leasing of space:









RSF (included in total leasing activity above)


1,947,727

(1)

1,472,713


4,614,040

(1)

2,562,178

Rental rate increases


35.9%




37.9%

(1)

37.6%

Rental rate increases (cash basis)


22.9%




22.6%

(1)

18.3%


(1) Represents the highest leasing volume and rental rate growth in Company history.

Continued strong net operating income and internal growth

  • Net operating income (cash basis) of $1.4 billion for 4Q21 annualized, up $279.9 million, or 24.2%, compared to 4Q20 annualized.

  • 95% of our leases contain contractual annual rent escalations approximating 3%.

  • Same property net operating income growth:

A REIT industry-leading high-quality tenant roster with high-quality revenues and cash flows, strong margins, and operational excellence; growth of 100 bps in occupancy over 4Q20(1)

Percentage of total annual rental revenue in effect from investment-grade or
publicly traded large cap tenants


51%



Occupancy of operating properties in North America


94.0%



Occupancy of operating properties in North America (excluding vacancy at
recently acquired properties)


98.7%

(1)


Operating margin


70%



Adjusted EBITDA margin


71%








Weighted-average remaining lease term:





All tenants


7.5

years

Top 20 tenants


10.9

years



(1)

Excludes 1.8 million RSF, or 4.7%, of vacancy at recently acquired properties representing lease-up opportunities that are expected to provide incremental annual rental revenues. Excluding recently acquired vacancies, occupancy was 98.7% as of December 31, 2021, up 100 bps from 97.7% as of December 31, 2020. Refer to "Occupancy" in our Supplemental Information.

Historic high demand drives visibility for future growth aggregating $610 million of incremental annual rental revenue from 7.4 million RSF of value-creation projects that are 83% leased/negotiating

Our highly leased value-creation pipeline of current and near-term projects that are under construction or that will commence construction in the next six quarters is expected to generate greater than $610 million of incremental annual rental revenues, primarily commencing from 1Q22 through 4Q24.

  • 7.4 million RSF of our value-creation projects are either under construction or expected to commence construction in the next six quarters.

  • 83% leased/negotiating.

Strong and flexible balance sheet with significant liquidity

  • Investment-grade credit ratings ranked in the top 10% among all publicly traded U.S. REITs as of December 31, 2021.

  • Net debt and preferred stock to Adjusted EBITDA of 5.2x and fixed-charge coverage ratio of 5.3x for 4Q21 annualized, representing the best ratios in the past 10 years.

  • Total debt and preferred stock to gross assets of 26% as of December 31, 2021.

  • $5.4 billion liquidity as of December 31, 2021, including our outstanding forward equity sales agreements entered into in January 2022.

Strategic value harvesting and asset recycling

During 4Q21, we completed $2.0 billion in dispositions and partial interest sales at an average capitalization rate (cash basis) of 4.2%.

Continued dividend strategy to share growth in cash flows with stockholders

Common stock dividend declared for 4Q21 of $1.15 per common share, aggregating $4.48 per common share for the year ended December 31, 2021, up 24 cents, or 6%, over the year ended December 31, 2020. Our FFO payout ratio of 60% for the three months ended December 31, 2021 allows us to continue to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Key items included in operating results

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












4Q21


4Q20


4Q21


4Q20


2021


2020


2021


2020

(In millions, except per share
amounts)

Amount


Per Share –
Diluted


Amount


Per Share –
Diluted

Unrealized (losses) gains on
non-real estate investments

$ (139.7)


$ 233.5


$ (0.91)


$ 1.75


$ 43.6


$ 374.0


$ 0.30


$ 2.96

Significant realized gains on
non-real estate investments





110.1



0.75


Gain on sales of real estate

124.2

(1)

152.5


0.80


1.14


126.6


154.1


0.86


1.22

Impairment of real estate


(25.2)



(0.19)


(52.7)


(55.7)


(0.35)


(0.44)

Impairment of non-real estate
investments






(24.5)



(0.19)

Loss on early extinguishment
of debt


(7.9)



(0.06)


(67.3)


(60.7)


(0.46)


(0.48)

Termination fee






86.2



0.68

Acceleration of stock
compensation expense due to
executive officer resignation






(4.5)



(0.04)

Total

$ (15.5)


$ 352.9


$ (0.11)


$ 2.64


$ 160.3


$ 468.9


$ 1.10


$ 3.71


(1) Refer to "Funds from operations and funds from operations per share" of this Earnings Press Release for additional details.

External growth and investment in real estate

Alexandria at the vanguard of innovation for over 850 tenants, with a focus on accommodating current tenant needs and providing a path for their future growth

  • During 4Q21, we completed acquisitions in our key life science cluster submarkets aggregating 4.1 million SF, comprising 3.9 million RSF of future development opportunities and 191,879 RSF of operating space, for an aggregate purchase price of $1.5 billion, including our previously announced acquisition of One Rogers Street in our Cambridge submarket for a purchase price of $849.4 million. These acquisitions are primarily focused on future development or redevelopment opportunities to expand our mega campuses and accommodate the future growth of our tenants.

Delivery and commencement of value-creation projects

  • During 4Q21, we placed into service development and redevelopment projects aggregating 600,768 RSF that are 100% leased across multiple submarkets.

  • Annual net operating income (cash basis) is expected to increase by $39 million upon the burn-off of initial free rent from recently delivered projects.

  • During 4Q21, we commenced construction on four value-creation projects aggregating 1.1 million RSF, including a 403,892 RSF recently acquired redevelopment project at One Rogers Street, which expands our Alexandria Center® at Kendall Square mega campus in Cambridge. We pre-leased the entire building by executing leases aggregating 403,892 RSF prior to the closing of the acquisition in December 2021.

  • In January 2022, we completed the acquisition of 202,997 SF additional development entitlements, for an aggregate of 507,997 SF, at our 421 Park Drive future development site in our Alexandria Center® for Life Science – Fenway mega campus in our Fenway submarket.

Value-creation pipeline of new Class A development and redevelopment projects as
a percentage of gross assets


4Q21

Under construction projects 82% leased/negotiating


9%

Pre-leased/negotiating near-term projects 89% leased/negotiating


2%

Income-producing/potential cash flows/covered land play(1)


6%

Land


2%




(1)

Includes projects that have existing buildings that are generating or can generate operating cash flows. Also includes development rights associated with existing operating campuses.

Balance sheet management

Credit rating outlook improvement

In October 2021, S&P Global Ratings upgraded our corporate issuer credit rating outlook to BBB+/Positive from BBB+/Stable as a result of our consistently strong operating performance and long-term positive fundamentals.

Key metrics as of December 31, 2021

  • $44.0 billion of total market capitalization.

  • $35.2 billion of total equity capitalization; represents top 10% in total equity capitalization among all publicly traded U.S. REITs as of December 31, 2021.

  • No debt maturities prior to 2024.

  • 12.1 years weighted-average remaining term of debt as of December 31, 2021.



4Q21


Goal



Quarter


Trailing


4Q22



Annualized


12 Months


Annualized

Net debt and preferred stock to
Adjusted EBITDA


5.2x (1)


5.6x


Less than or equal to 5.1x

Fixed-charge coverage ratio


5.3x (1)


5.0x


Greater than or equal to 5.1x


(1)

Net debt and preferred stock to adjusted EBITDA and fixed-charge coverage represent the best ratios in the past 10 years.

Key capital events

  • In December 2021, we entered into a new ATM common stock offering program, which allows us to sell up to an aggregate of $1.0 billion of our common stock. As of January 31, 2022, the full amount remains available for future sales of our common stock.

  • In December 2021, we settled the outstanding forward equity sales agreements by issuing 4.6 million shares of common stock and received net proceeds of $770.6 million.

  • In January 2022, we entered into new forward equity sales agreements aggregating $1.7 billion to sell 8.1 million shares of our common stock (including the exercise of underwriters' option) at a public offering price of $210.00 per share, before underwriting discounts and commissions.

Investments

  • As of December 31, 2021, our investments aggregated $1.9 billion, including unrealized gains of $797.7 million.

  • Investment income of $259.5 million for the year ended December 31, 2021 included $215.8 million in realized gains and $43.6 million in unrealized gains.

Industry and ESG leadership: catalyzing and leading the way for positive change to benefit human health and society

  • In January 2022, Alexandria Venture Investments, our strategic venture capital platform, was recognized by Silicon Valley Bank in its "Healthcare Investments and Exits: 2022 Annual Report" as the #1 most active corporate investor in biopharma by new deal volume (2020-2021) for the fifth consecutive year. Alexandria's venture activity provides us with, among other things, mission-critical data and knowledge on key industry innovations and trends.

  • In December 2021, Alexandria established a new social responsibility pillar to address America's growing mental health crisis, with a focus on helping children cope with the loss of a parent or family member to suicide. By partnering with Camp Kita, a tuition-free summer camp for 8- to 17-year-olds who are impacted by the loss of a family member to suicide, we have enabled the non-profit to have long-term access to 28 acres in Acton, Maine that will serve as the camp's future home. The dedicated space will allow Camp Kita to expand its programming, advance its mission, and support the mental health of a community of young survivors.

  • As a testament to Alexandria's operational excellence and exceptional team, in November 2021, we were recognized at the 2021 BOMA Boston TOBY (The Outstanding Building of the Year) & Industry Awards for the Laboratory Building of the Year (100 Binney Street) and the Corporate Facility of the Year (200 Technology Square). Five members from our Greater Boston team were also honored for their individual achievements. The TOBY & Industry Awards recognize excellence in property management, building operations, and service in the commercial real estate industry.

  • In November 2021, Alexandria's executive chairman and founder, Joel S. Marcus, joined the National Medal of Honor Museum Foundation at the Dallas Cowboys' "Salute to Service" game to support the future National Medal of Honor Museum in Arlington, Texas and its mission to inspire visitors with the stories of our country's Medal of Honor recipients for generations to come. Mr. Marcus has served on the foundation's board of directors since 2019.

  • In October 2021, OneFifteen, an innovative, data-driven non-profit evidence-based healthcare ecosystem dedicated to the full and sustained recovery of people living with addiction, celebrated its second anniversary. Since seeing its first patients in October 2019 at its pioneering campus in Dayton, Ohio, which was designed and developed by Alexandria, OneFifteen has treated over 4,000 patients and conducted over 11,500 telehealth visits.

  • In October 2021, STEAM:Coders honored Alexandria with the Corporate Vanguard Award, recognizing our longstanding commitment to the non-profit's mission to inspire underrepresented and underserved students and their families through science, technology, engineering, art, and math (STEAM) education in preparation for academic and career opportunities.

Acquisitions
December 31, 2021
(Dollars in thousands)











Square Footage














Acquisitions With Development/Redevelopment Opportunities(1)








Property


Submarket/Market


Date of

Purchase


Number of
Properties


Operating

Occupancy


Future
Development


Active
Development/
Redevelopment


Operating With
Future
Development/
Redevelopment


Operating(2)


Operating


Total(3)


Purchase Price


Completed in YTD 3Q21






76


93%


7,946,121


1,434,803


2,823,087


2,801,041


238,948


14,272,878


$

3,941,902



























Completed in 4Q21:

























One Rogers Street


Cambridge/Inner Suburbs/
Greater Boston


12/30/21


1


100 (4)


TBD


403,892



4,367



408,259



849,422


1178 El Camino Real


South San Francisco/
San Francisco Bay Area


11/5/21



N/A


620,000






620,000



128,000


3420 and 3440 Hillview
Avenue


Greater Stanford/San
Francisco Bay Area


10/5/21


2


75




185,228




185,228



203,800


888 Bransten Road


Greater Stanford/San
Francisco Bay Area


11/4/21



N/A


210,830






210,830



55,000


Other


Various


Various


8


75


1,888,874


144,113


489,466



187,512


2,709,965



291,030








11


75


2,719,704


548,005


674,694

(5)

4,367

(5)

187,512

(5)

4,134,282



1,527,252


2021 acquisitions






87


91%


10,665,825


1,982,808


3,497,781


2,805,408


426,460


18,407,160


$

5,469,154



























(1)

We expect to provide total estimated costs and related yields for development and redevelopment projects in the future, subsequent to the commencement of construction. Refer to "New Class A development and redevelopment properties: current projects" in our Supplemental Information for additional details on active development and redevelopment projects.

(2)

Represents the operating component of our value-creation acquisitions that is not expected to undergo development or redevelopment.

(3)

Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operations with future development or redevelopment opportunities. We intend to demolish and develop or to redevelop the existing properties upon expiration of the existing in-place leases. Refer to "Definitions and reconciliations" in our Supplemental Information for additional details on value-creation square feet currently included in rental properties.

(4)

We pre-leased the entire building by executing leases aggregating 403,892 RSF prior to closing of the acquisition in December 2021.

(5)

We expect the acquisitions completed during the three months ended December 31, 2021 to generate initial annual net operating income of $14.8 million for the twelve months following acquisition. These acquisitions included 11 operating properties with a weighted-average acquisition date of October 19, 2021 (weighted by initial annual net operating income).

Acquisitions (continued)
December 31, 2021
(Dollars in thousands)











Square Footage














Acquisitions With Development/Redevelopment Opportunities(1)








Property


Submarket/Market


Date of

Purchase


Number of
Properties


Operating

Occupancy


Future
Development


Active
Development/
Redevelopment


Operating With
Future
Development/
Redevelopment


Operating(2)


Operating


Total(3)


Purchase
Price


Completed in January 2022:

























421 Park Drive(4)


Fenway/Greater Boston


1/13/22



N/A


202,997

(4)





202,997


$

81,119


225 and 235 Presidential Way


Route 128/Greater Boston


1/28/22


2


100%




440,130




440,130



124,673


3301, 3303, 3305, and 3307 Hillview
Avenue


Greater Stanford/
San Francisco Bay Area


1/6/22


4


100




292,013




292,013



446,000


Costa Verde by Alexandria


University Town Center/

San Diego


1/11/22


1


100


537,000



8,730




545,730



...