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Alexandria Real Estate Equities, Inc. Reports: 2018 Revenues of $1.3 billion, up 17.7% over 2017; 4Q18 Loss Per Share - Diluted of $(0.30) and 2018 EPS - Diluted of $3.52; 4Q18 and 2018 FFO - Diluted, As Adjusted, Per Share of $1.68 and $6.60; Operational Excellence and Growing Dividends

PASADENA, Calif., Feb. 4, 2019 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (ARE) announced financial and operating results for the fourth quarter and year ended December 31, 2018.

Key highlights

Operating results


4Q18


4Q17


2018


2017

Total revenues:








In millions

$

340.5


$

298.8


$

1,327.5


$

1,128.1

Growth

13.9%




17.7%











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

In millions

$

(31.7)


$

36.8


$

364.0


$

145.4

Per share

$

(0.30)


$

0.38


$

3.52


$

1.58









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

In millions

$

178.0


$

147.0


$

682.0


$

554.5

Per share

$

1.68


$

1.53


$

6.60


$

6.02


On January 1, 2018, we adopted a new accounting standard that requires us, on a prospective basis, to present certain equity investments at fair value with changes in fair value reflected in earnings. See "Items Included in Net (Loss) Income Attributable to Alexandria's Common Stockholders" on the next page for additional information.

A REIT industry-leading, high-quality tenant roster

52% of annual rental revenue from investment-grade or publicly traded large cap tenants.

Continuation of strong rental rate growth and leasing activity

Strong rental rate increases of 24.1% and 14.1% (cash basis) for 2018. The rental rate increase of 14.1% (cash basis) represents our highest annual increase during the past 10 years. Our leasing activity aggregating 4.7 million RSF for 2018 represents the second highest annual leasing activity in our history.

Sale of partial interest in core Class A property

In February 2019, we executed a purchase and sale agreement to sell a 60% interest in 75/125 Binney Street, a Class A property in our Cambridge submarket, for a sales price of $438 million, or $1,880 per RSF, representing a 4.3% capitalization rate on 4Q18 net operating income (cash basis), annualized. We expect to complete this partial interest sale in 1Q19 and to reinvest these proceeds into our value-creation pipeline.

2018 credit rating improvement

During 2018, Moody's Investors Service upgraded our corporate issuer credit rating to Baa1/Stable from Baa2/Stable and S&P Global Ratings raised its credit outlook for our corporate credit rating to BBB/Positive from BBB/Stable.

Increased common stock dividend

Common stock dividend declared for 4Q18 of $0.97 per common share, up 4 cents, or 4.3%, over 3Q18; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Investments

We carry our investments in publicly traded companies and certain privately held entities at fair value. As of December 31, 2018, cumulative unrealized gains related to changes in fair value aggregated $240.2 million. Investment income included the following:

  • Unrealized losses of $94.9 million and unrealized gains of $99.6 million recognized in 4Q18 and 2018, respectively; and
  • Realized gains of $11.3 million and $37.1 million recognized in 4Q18 and 2018, respectively.

Strong internal growth

  • Net operating income (cash basis) of $878.0 million for 4Q18 annualized, up $184.9 million, or 26.7%, compared to 4Q17 annualized
  • Same property net operating income growth:
  • Continued strong leasing activity and rental rate growth in light of modest contractual lease expirations at the beginning of 2018 and a highly leased value-creation pipeline:

 



4Q18


2018

Total leasing activity – RSF


1,558,064


4,721,692

Lease renewals and re-leasing of space:





RSF (included in total leasing activity above)


650,540


2,088,216

Rental rate increases


17.4%


24.1%

Rental rate increases (cash basis)


11.4%


14.1%

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

Significant development and redevelopment projects placed into service:

Property


Submarket


RSF


Leased


Tenant

4Q18:









213 East Grand Avenue


South San Francisco


300,930


100%


Merck & Co., Inc.

9625 Towne Centre 
     Drive


University Town 
     Center


163,648


100%


Takeda Pharmaceutical 
     Company Ltd.

January 2019:









399 Binney Street


Cambridge


123,403


100%


Three life science entities

Future growth of net operating income (cash basis) driven by recently delivered projects

Significant near-term growth of net operating income (cash basis) of $42 million upon the burn-off of initial free rent on recently delivered projects.

Completed acquisitions

During 4Q18, we acquired three properties for an aggregate purchase price of $155.0 million in two key submarkets.

Items included in results

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

(In millions, except per share 
     amounts)

4Q18


4Q17


4Q18


4Q17


2018


2017


2018


2017

Amount


Per Share –
Diluted


Amount


Per Share –
Diluted

Unrealized (losses) gains on non-
     real estate investments(1)

$

(94.9)



$



$

(0.89)



$



$

99.6



$



$

0.96



$


Realized gains on non-real estate 
     investments

6.4





0.06





14.7





0.14




Gain on sales of real estate

8.7





0.08





44.4

(2)


14.5

(2)



0.43



0.15


Impairment of:
















Real estate









(6.3)



(0.2)



(0.06)




Non-real estate investments

(5.5)



(3.8)



(0.05)



(0.04)



(5.5)



(8.3)



(0.05)



(0.09)


Early extinguishment of debt:
















Loss



(2.8)





(0.03)



(1.1)



(3.5)



(0.01)



(0.03)


Gain









0.8

(2)




0.01




Preferred stock redemption charge

(4.2)





(0.04)





(4.2)



(11.3)



(0.04)



(0.12)


Allocation to unvested restricted 
     stock awards



0.1







(2.2)



0.1



(0.02)




Total

$

(89.5)



$

(6.5)



$

(0.84)



$

(0.07)



$

140.2



$

(8.7)



$

1.36



$

(0.09)


















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

106.0



95.9







103.3



92.1




(1)  See "Investments" on page 45 of our Supplemental Information for additional information.

(2)  Includes our share of amounts attributable to our unconsolidated real estate joint ventures. See "Joint Venture Financial Information" in our Supplemental Information for additional information.

Core operating metrics as of or for the quarter ended December 31, 2018

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


52%



Class A properties in AAA locations


77%



Occupancy of operating properties in North America


97.3%



Operating margin


71%



Adjusted EBITDA margin


69%



Weighted-average remaining lease term:




All tenants


8.6 years


Top 20 tenants


12.3 years






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

Balance sheet management

Key metrics

  • $18.4 billion of total market capitalization
  • $2.4 billion of liquidity
  • 3% unhedged variable-rate debt as a percentage of total debt

 



4Q18





Quarter


Trailing 12


4Q19



Annualized


Months


Goal

Net debt to Adjusted EBITDA


5.4x


5.6x


Less than or
equal to 5.3x

Fixed-charge coverage ratio


4.1x


4.2x


Greater than 4.0x

Current and future value-creation pipeline as a 
     percentage of gross investments in real estate 
     in North America


11%


N/A


8% to 12%

Key capital events

  • During 4Q18, we executed additional interest rate hedge agreements with a notional of $250.0 million and a weighted-average fixed pay rate of 2.84%, effective March 29, 2019.
  • During 4Q18, we repurchased, in privately negotiated transactions, 402,000 shares of our 7.00% Series D cumulative convertible preferred stock for $14.0 million, or $34.77 per share, and recognized a preferred stock redemption charge of $4.2 million.
  • In November 2018, we exercised our option to extend the maturity date of our secured construction loan for our properties at 50 and 60 Binney Street in our Cambridge submarket to January 28, 2020.
  • In December 2018, we settled the remaining 5.2 million shares from our January 2018 forward equity sales agreements and received proceeds of $608.1 million, or $116.97 per share, net of underwriting discounts and adjustments as provided for in the agreements.
  • During 4Q18, there was no activity under our "at the market" common stock offering programs. As of December 31, 2018, the remaining aggregate amount available under our current programs for future sales of common stock is $658.7 million.

Corporate responsibility and industry leadership

  • Our philanthropy and volunteerism efforts focus on providing mission-critical support to non-profit organizations doing impactful work in the areas of medical research, STEM education, military support services, and local communities. In 2018, our team members volunteered more than 2,600 hours to support over 250 non-profit organizations across the country.
  • We value both the health and wellness of our team members as well as supporting organizations on the leading edge of medical innovation. In November 2018, we were honored to support 49 team members in the New York City Marathon in order to benefit Memorial Sloan Kettering Cancer Center.
  • In November 2018, Robin Hood, New York City's largest poverty-fighting organization, held its annual investor conference, at which Joel S. Marcus, our executive chairman and founder, curated and moderated the "Go Long on Ag" panel that focused on the critical need for agricultural innovation to provide more nutritious food in order to feed a rapidly growing population.
  • In November 2018, Ari Frankel, our assistant vice president of sustainability and high performance buildings, was elected 2019 Chair of Nareit's Real Estate Sustainability Council.
  • In January 2019, we were recognized as the most active biopharma investor by new deal volume in 2017-2018 by Silicon Valley Bank in its "Trends in Healthcare Investments and Exits 2019" report and ranked by Forbes as the top venture capital investor in the healthcare sector by U.S.-based deal volume in 2018.

Subsequent events

  • In January 2019, we repaid early one secured note payable aggregating $106.7 million, originally due in 2020 and that bore interest at 7.75%, and recognized a loss on early extinguishment of debt of $7.1 million, including the write-off of unamortized loan fees.
  • In January 2019, we repurchased, in privately negotiated transactions, 275,000 shares of our  7.00% Series D cumulative convertible preferred stock for $9.2 million, or $33.60 per share, and recognized a preferred stock redemption charge of $2.6 million. As of February 4, 2019, 2.3 million shares of our Series D Convertible Preferred Stock were outstanding at a book value aggregating $57.5 million.
  • In January 2019, we completed the acquisition of five properties in key submarkets with value-add operating properties. See "Acquisitions" in this Earnings Press Release for additional information.

Select 2018 Highlights
December 31, 2018

 

Acquisitions
December 31, 2018
(Dollars in thousands)



Property


Submarket/Market


Date of
Purchase


Number of
Properties


Operating

Occupancy


Square Footage


Purchase Price






Future
Development


Active
Redevelopment


Operating With
Future
Development/
Redevelopment










4Q18 Acquisitions:



















Alexandria Life Science Factory at Long Island City(1)


New York City/New York City


10/9/18


1


100%



140,098


36,661


$

75,000





















10260 Campus Point Drive and 4161 Campus Point Court


University Town Center/ San Diego


12/28/18


2


100%


378,355

(2)


269,048

(2)


15,000

(3)







3




378,355


140,098


305,709


$

90,000























(1)

Refer to the "New Class A Development and Redevelopment Properties: Summary of Pipeline" on page 41 of our Supplemental Information for additional information.

(2)

We acquired two buildings adjacent to our Campus Pointe by Alexandria campus aggregating 269,048 RSF, comprising 109,164 RSF at 10260 Campus Point Drive and 159,884 RSF at 4161 Campus Point Court which are 100% leased through 2022. At lease expiration, 10260 Campus Point Drive will be redeveloped and expanded into a 176,455 RSF Class A building, which is pre-leased 100% for 15 years with the target delivery in 2021. 4161 Campus Point Court will support future development aggregating 201,900 RSF through one or more Class A buildings at our Campus Pointe by Alexandria campus.

(3)

Total purchase price of $80.0 million was paid in two installments, $15.0 million in December 2018 and $65.0 million in January 2019.

 

Property


Submarket/Market


Date of
Purchase


Number of
Properties


Operating

Occupancy


Square Footage


Unlevered Yields


Purchase Price






Operating With
Future
Development/
Redevelopment


Operating


Initial
Stabilized


Initial
Stabilized
(Cash)










2019 Acquisitions:














3170 Porter Drive


Greater Stanford/ San Francisco


1/10/19


1


100%



98,626


7.5%


5.1%


$

100,250


Shoreway Science Center


Greater Stanford/ San Francisco


1/10/19


2


100%



82,462


7.2%


5.5%



73,200


10260 Campus Point Drive and 4161 Campus 
     Point Court


University Town Center/ San Diego


N/A


N/A


N/A


N/A   


N/A   


(1)


(1)



65,000

(2)

3911 and 3931 Sorrento Valley Boulevard


Sorrento Mesa/ San Diego


1/9/19


2


100%


53,220



7.2%


6.6%



23,060


Remaining targeted acquisitions





















368,490


2019 guidance midpoint




















$

630,000



























(1)

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

(2)

See footnote 3 above.

 

Dispositions and Sale of Partial Joint Venture Interest
December 31, 2018
(Dollars in thousands, except per RSF amounts)


Property


Submarket/Market


Date of Sale


RSF


Sales Price


Sales Price

per RSF


Gain









4Q18 Disposition:















1300 Quince Orchard Boulevard


Gaithersburg/Maryland


12/13/18


54,874


$

14,441

(1)


$

263



$

8,704

















2019 Sale of Partial Joint Venture Interest:















75/125 Binney Street (sale of 60% noncontrolling interest)2


Cambridge/Greater Boston


1Q19


388,270


$

438,000



$

1,880




(2)


Targeted Dispositions Guidance Midpoint









312,000







2019 guidance midpoint








$

750,000









































(1)

In April 2018, our tenant exercised its option to purchase this Class B property at fair market value. The capitalization rates for this sale were 6.6% and 7.0% (cash basis).

(2)

In February 2019, we executed a purchase and sale agreement to sell a 60% interest in 75/125 Binney Street, a Class A property in our Cambridge submarket, for a sales price of $438 million, or $1,880 per RSF, representing a 4.3% capitalization rate on 4Q18 net operating income (cash basis), annualized. The sale of a 60% ownership interest in this joint venture is expected to be accounted for as an equity transaction, with no gain to be recognized in earnings. Closing is expected to occur in 1Q19. Upon completion of the sale, we expect to retain control over the joint venture. We expect to reinvest the proceeds from this sale into our value-creation pipeline.


 

Guidance
December 31, 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, 2019. There can be no assurance that actual amounts will not 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.



Summary of Key Changes in Guidance


Guidance



As of 2/4/19


As of 11/28/18


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


See updates below


Capitalization of interest


$72 to $82


$76 to $86










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




As of 2/4/19


As of 11/28/18


Earnings per share ("EPS")(1)


$1.95 to $2.15


$2.05 to $2.25


Depreciation and amortization



4.85




4.77



Allocation to unvested restricted stock awards



(0.03)




(0.03)



Funds from operations per share(1)


$6.77 to $6.97


$6.79 to $6.99


Loss on early extinguishment of debt in January 2019



0.06




0.06



Preferred stock redemption charge in January 2019



0.02






Funds from operations per share, as adjusted(2)


$6.85 to $7.05


$6.85 to $7.05


Midpoint



$6.95




$6.95























Key Assumptions


Low


High


Occupancy percentage in North America as of December 31, 2019


97.7%


98.3%








Lease renewals and re-leasing of space:






Rental rate increases


25.0%


28.0%


Rental rate increases (cash basis)


11.0%


14.0%


Same property performance:






Net operating income increase


1.0%


3.0%


Net operating income increase (cash basis)


6.0%


8.0%








Straight-line rent revenue


$

95


$

105

(5)

General and administrative expenses


$

108


$

113


Capitalization of interest


$

72


$

82


Interest expense


$

172


$

182












Summary of Key Changes in Key Sources and Uses of



Guidance Midpoint


Capital Guidance



As of 2/4/19


As of 11/28/18


Common equity


$

525


$

625


Construction


$

1,300


$

1,400













2019 Guidance


Key Credit Metrics




Net debt to Adjusted EBITDA – 4Q19 annualized



Less than or equal to 5.3x


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



Less than or equal to 5.4x


Fixed-charge coverage ratio – 4Q19 annualized



Greater than 4.0x


Value-creation pipeline as a percentage of gross real estate as of 



8% to 12%


     December 31, 2019





 

Key Sources and Uses of Capital


Range


Midpoint


Sources of capital:









Net cash provided by operating activities after dividends


$

170



$

210



$

190



Incremental debt


485



445




465



Real estate dispositions and partial interest sales:









Sale of partial interest in core class A property


438



438




438


(3)

Other


262



362




312


(3)

Common equity


475



575




525



Total sources of capital


$

1,830



$

2,030



$

1,930



Uses of capital:









Construction


$

1,250



$

1,350



$

1,300



Acquisitions


580



680




630


(4)

Total uses of capital


$

1,830



$

2,030



$

1,930



Incremental debt (included above):









Issuance of unsecured senior notes payable


$

600



$

700



$

650



Repayments of secured notes payable


(120)



(130)




(125)



$2.2 billion unsecured senior line of credit/other


5



(125)




(60)



Incremental debt


$

485



$

445



$

465






(1)

Excludes future unrealized gains or losses after December 31, 2018 that are required to be recognized in earnings from changes in fair value of equity investments.

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

(3)

See "Dispositions and Sale of Partial Joint Venture Interest" in this Earnings Press Release for additional information.

(4)

See "Acquisitions" in this Earnings Press Release for additional information.

(5)

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
December 31, 2018

We will host a conference call on Tuesday, February 5, 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 fourth quarter and year ended December 31, 2018. 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, February 5, 2019. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 10126730.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the fourth quarter and year ended December 31, 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/2018q4.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 $18.4 billion and an asset base in North America of 33.1 million square feet ("SF") as of December 31, 2018. The asset base in North America includes 22.4 million RSF of operating properties and 3.9 million RSF of development and redevelopment of new Class A properties currently undergoing construction and pre-construction activities with target delivery dates ranging from 2019 through 2020. Additionally, the asset base in North America includes 6.8 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 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," "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®, Alexandria Summit®, Alexandria Technology Center®, and Alexandria Innovation Center® 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
December 31, 2018
(In thousands, except per share amounts)




Three Months Ended


Year Ended



12/31/18


9/30/18


6/30/18


3/31/18


12/31/17


12/31/18


12/31/17

Revenues:















Rental


$

260,102



$

255,496



$

250,635



$

244,485



$

228,025



$

1,010,718



$

863,181


Tenant recoveries


77,683



81,051



72,159



73,170



70,270



304,063



259,144


Other income


2,678



5,276



2,240



2,484



496



12,678



5,772


Total revenues


340,463



341,823



325,034



320,139



298,791



1,327,459



1,128,097

















Expenses:















Rental operations


97,682



99,759



91,908



91,771



88,073



381,120



325,609


General and administrative


22,385



22,660



22,939



22,421



18,910



90,405



75,009


Interest


40,239



42,244



38,097



36,915



36,082



157,495



128,645


Depreciation and amortization


124,990



119,600



118,852



114,219



107,714



477,661



416,783


Impairment of real estate






6,311







6,311



203


Loss on early extinguishment of debt




1,122







2,781



1,122



3,451


Total expenses


285,296



285,385



278,107



265,326



253,560



1,114,114



949,700

















Equity in earnings of unconsolidated real estate joint ventures


1,029



40,718


(1)

1,090



1,144



376



43,981



15,426


Investment (loss) income(2)


(83,531)


(2)

122,203



12,530



85,561





136,763


(2)


Gain on sales of real estate – rental properties


8,704











8,704



270


Gain on sales of real estate – land parcels














111


Net (loss) income


(18,631)



219,359



60,547



141,518



45,607



402,793



194,204


Net income attributable to noncontrolling interests


(6,053)



(5,723)



(5,817)



(5,888)



(6,219)



(23,481)



(25,111)


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


(24,684)



213,636



54,730



135,630



39,388



379,312



169,093


Dividends on preferred stock


(1,155)



(1,301)



(1,302)



(1,302)



(1,302)



(5,060)



(7,666)


Preferred stock redemption charge


(4,240)











(4,240)



(11,279)


Net income attributable to unvested restricted stock awards


(1,661)



(3,395)



(1,412)



(1,941)



(1,255)



(6,029)



(4,753)


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


$

(31,740)



$

208,940



$

52,016



$

132,387



$

36,831



$

363,983



$

145,395

















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















Basic


$

(0.30)



$

2.01



$

0.51



$

1.33



$

0.39



$

3.53



$

1.59


Diluted


$

(0.30)



$

1.99



$

0.51



$

1.32



$

0.38



$

3.52



$

1.58

















Weighted-average shares of common stock outstanding:















Basic


106,033



104,179



101,881



99,855



95,138



103,010



91,546


Diluted


106,033



105,385



102,236



100,125



95,914



103,321



92,063

















Dividends declared per share of common stock


$

0.97



$

0.93



$

0.93



$

0.90



$

0.90



$

3.73



$

3.45






(1)

Includes $35.7 million related to the gain on sale of our remaining 27.5% ownership interest in the unconsolidated real estate joint venture in 360 Longwood Avenue. See "Joint Venture Financial Information" in our Supplemental Information for additional information.

(2)

See "Investments" in our Supplemental Information for additional information.

 

 

Consolidated Balance Sheets
December 31, 2018
(In thousands)




12/31/18


9/30/18


6/30/18


3/31/18


12/31/17

Assets











Investments in real estate


$

11,913,693



$

11,587,312



$

11,190,771



$

10,671,227



$

10,298,019


Investments in unconsolidated real estate joint ventures


237,507



197,970



192,972



169,865



110,618


Cash and cash equivalents


234,181



204,181



287,029



221,645



254,381


Restricted cash


37,949



29,699



34,812



37,337



22,805


Tenant receivables


9,798



11,041



8,704



11,258



10,262


Deferred rent


530,237



511,680



490,428



467,112



434,731


Deferred leasing costs


239,070



238,295



232,964



226,803



221,430


Investments


892,264



957,356



790,753



724,310



523,254


Other assets


370,257



368,032



333,757



291,639



228,453


Total assets


$

14,464,956



$

14,105,566



$

13,562,190



$

12,821,196



$

12,103,953













Liabilities, Noncontrolling Interests, and Equity











Secured notes payable


$

630,547



$

632,792



$

776,260



$

775,689



$

771,061


Unsecured senior notes payable


4,292,293



4,290,906



4,289,521



3,396,912



3,395,804


Unsecured senior line of credit


208,000



413,000





490,000



50,000


Unsecured senior bank term loans


347,415



347,306



548,324



548,197



547,942


Accounts payable, accrued expenses, and tenant security deposits


981,707



907,094



849,274



783,986



763,832


Dividends payable


110,280



101,084



98,676



93,065



92,145


Total liabilities


6,570,242



6,692,182



6,562,055



6,087,849



5,620,784













Commitments and contingencies






















Redeemable noncontrolling interests


10,786



10,771



10,861



10,212



11,509













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











7.00% Series D cumulative convertible preferred stock


64,336



74,386



74,386



74,386



74,386


Common stock


1,110



1,058



1,033



1,007



998


Additional paid-in capital


7,286,954



6,801,150



6,387,527



6,117,976



5,824,258


Accumulated other comprehensive (loss) income


(10,435)



(3,811)



(2,485)



1,228



50,024


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


7,341,965



6,872,783



6,460,461



6,194,597



5,949,666


Noncontrolling interests


541,963



529,830



528,813



528,538



521,994


Total equity


7,883,928



7,402,613



6,989,274



6,723,135



6,471,660


Total liabilities, noncontrolling interests, and equity


$

14,464,956



$

14,105,566



$

13,562,190



$

12,821,196



$

12,103,953


 

 

Funds From Operations and Funds From Operations per Share
December 31, 2018
(In thousands)


The following table presents a reconciliation of net (loss) 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


Year Ended



12/31/18


9/30/18


6/30/18


3/31/18


12/31/17


12/31/18


12/31/17

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


$

(31,740)



$

208,940



$

52,016



$

132,387



$

36,831



$

363,983



$

145,395


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




1,301












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


(31,740)



210,241



52,016



132,387



36,831



363,983



145,395


Depreciation and amortization


124,990



119,600



118,852



114,219



107,714



477,661



416,783


Noncontrolling share of depreciation and amortization from consolidated real estate JVs


(4,252)



(4,044)



(3,914)



(3,867)



(3,777)



(16,077)



(14,762)


Our share of depreciation and amortization from unconsolidated real estate JVs


719



1,011



807



644



432



3,181



1,551


Gain on sales of real estate – rental properties


(8,704)











(8,704)



(270)


Our share of gain on sales of real estate from unconsolidated real estate JVs(2)




(35,678)









(35,678)



(14,106)


Gain on sales of real estate – land parcels














(111)


Impairment of real estate – rental properties














203


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








1,302





5,060




Allocation to unvested restricted stock awards




(1,312)



(1,042)



(1,548)



(734)



(5,961)



(2,920)


Funds from operations attributable to Alexandria's common stockholders – diluted(3)


81,013



289,818



166,719



243,137



140,466



783,465



531,763


Unrealized losses (gains) on non-real estate investments


94,850



(117,188)



(5,067)



(72,229)





(99,634)




Realized gains on non-real estate investments


(6,428)


(4)





(8,252)





(14,680)




Impairment of real estate – land parcels






6,311







6,311




Impairment of non-real estate investments


5,483


(4)







3,805



5,483



8,296


Loss on early extinguishment of debt




1,122







2,781



1,122



3,451


Our share of gain on early extinguishment of debt from unconsolidated real estate JVs(2)




(761)









(761)




Preferred stock redemption charge


4,240











4,240



11,279


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




(1,301)





(1,302)





(5,060)




Allocation to unvested restricted stock awards


(1,138)



1,889



(18)



1,125



(94)



1,517



(321)


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


$

178,020



$

173,579



$

167,945



$

162,479



$

146,958



$

682,003



$

554,468






(1)

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

(2)

Classified in equity in earnings (losses) of unconsolidated real estate joint ventures in our consolidated statements of operations.

(3)

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

(4)

Realized gain of $6.4 million relates to one publicly traded non-real estate investment in a biopharmaceutical entity and impairments of $5.5 million primarily relates to one privately held non-real estate investment. Both line items are classified in investment (loss) income in our consolidated statements of operations. Excluding these gains and impairments, our realized gains on non-real estate investments were $10.4 million for the three months ended December 31, 2018.

 

 

Funds From Operations and Funds From Operations per Share (continued)
December 31, 2018
(In thousands, except per share amounts)


The following table presents a reconciliation of net (loss) 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


Year Ended



12/31/18


9/30/18


6/30/18


3/31/18


12/31/17


12/31/18


12/31/17

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


$

(0.30)



$

1.99



$

0.51



$

1.32



$

0.38



$

3.52



$

1.58


Depreciation and amortization


1.14



1.11



1.13



1.08



1.08



4.50



4.35


Gain on sale of real estate – rental properties


(0.08)











(0.08)




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




(0.34)









(0.35)



(0.15)


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








0.01






(2)


Allocation to unvested restricted stock awards




(0.01)



(0.01)







(0.06)




Funds from operations per share attributable to Alexandria's common 
     stockholders – diluted(3)


0.76



2.75



1.63



2.41



1.46



7.53



5.78


Unrealized losses (gains) on non-real estate investments


0.89



(1.11)



(0.05)



(0.70)





(0.96)




Realized gains on non-real estate investments


(0.06)


(4)





(0.08)





(0.14)




Impairment of real estate – land parcels






0.06







0.06




Impairment of non-real estate investments


0.05


(4)







0.04



0.05



0.09


Loss on early extinguishment of debt




0.01







0.03



0.01



0.03


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




(0.01)









(0.01)




Preferred stock redemption charge


0.04











0.04



0.12


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








(0.01)








Allocation to unvested restricted stock awards




0.02









0.02




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


$

1.68



$

1.66



$

1.64



$

1.62



$

1.53



$

6.60



$

6.02

















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















Earnings per share – diluted


106,033



105,385



102,236



100,125



95,914



103,321



92,063


Funds from operations – diluted, per share


106,244



105,385



102,236



100,866



95,914



104,048



92,063


Funds from operations – diluted, as adjusted, per share


106,244



104,641



102,236



100,125



95,914



103,321



92,063






(1)

See footnote 1 on the previous page for additional information.

(2)

The assumed conversion of our 7.00% Series D cumulative convertible preferred stock required the addition of $5.1 million of dividends on preferred stock to the numerator, and the addition of 727 thousand shares to the denominator while calculating funds from operations per share attributable to Alexandria's common stockholders – diluted. These amounts had approximately no dilutive impact on a per share basis.

(3)

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

(4)

See footnote 4 on the previous page for additional information.

 

Cision

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