filings.toolsItem 2. for additional details, including value-creation square feet currently included in rental properties.
220K characters. Original on sec.gov · Markdown
Item 2. for additional details, including value-creation square feet currently included in rental properties.
(2)Excluding the expiration described in footnote 5, the largest remaining contractual lease expiration in 2024 is 97,702 RSF in our Mission Bay submarket, where we are
working to retain the current tenant.
(3)Excludes month-to-month leases aggregating 129,549 RSF as of June 30, 2024.
(4)Represents amounts in effect as of June 30, 2024.
(5)Includes 349,947 RSF at 219 East 42nd Street that was classified as held for sale as of June 30, 2024 and was sold in July 2024.
(6)Key remaining expiring leases in 2025 include 600,477 RSF in three submarkets with a weighted-average expiration date of February 1, 2025 and annual rental revenue
as of June 30, 2024 aggregating approximately $37 million comprised of the following: (i) 248,700 RSF at our Alexandria Technology Square® mega campus in our
Cambridge submarket, of which 171,945 RSF is expected to be repositioned from single-tenancy to multi-tenancy, and we are evaluating options to reposition the
remaining 76,755 RSF; (ii) 247,246 RSF of industrial and R&D space in our Austin submarket for which we are evaluating options to market for re-lease or reposition the
space; and (iii) 104,531 RSF in our Research Triangle market that is currently being marketed for re-lease. We expect downtime on these spaces to range from 12 to 24
months on a weighted average basis.
(7)Includes 816,048 RSF of contractual lease expirations in our Cambridge/Inner Suburbs submarket. Refer to footnote 6 for additional details.
Top 20 tenants
92% of Top 20 Tenant Annual Rental Revenue Is From Investment-Grade
or Publicly Traded Large Cap Tenants**(1)**
Our properties are leased to a high-quality and diverse group of tenants, with no individual tenant accounting for more than 5.7%
of our annual rental revenue in effect as of June 30, 2024. The following table sets forth information regarding leases with our 20 largest
tenants in North America based upon annual rental revenue in effect as of June 30, 2024 (dollars in thousands, except average market
cap amounts):
| Remaining Lease Term(1) (in Years) | Aggregate RSF | Annual Rental Revenue(1) | Percentage of Annual Rental Revenue (1) | Investment-Grade Credit Ratings | Average Market Cap(1) (in billions) | |||||||||||||||||||
| Tenant | Moody’s | S&P | ||||||||||||||||||||||
| 1 | Moderna, Inc. | 12.9 | 1,385,536 | $ | 127,122 | 5.7% | — | — | $40.5 | |||||||||||||||
| 2 | Eli Lilly and Company | 8.6 | 1,134,349 | 92,931 | 4.2 | A2 | A+ | $620.0 | ||||||||||||||||
| 3 | Bristol-Myers Squibb Company | 6.6 | 999,379 | 76,363 | 3.4 | A2 | A+ | $107.4 | ||||||||||||||||
| 4 | Takeda Pharmaceutical Company Limited | 10.9 | 549,759 | 47,899 | 2.2 | Baa2 | BBB+ | $45.4 | ||||||||||||||||
| 5 | Roche | 5.8 | 770,279 | 45,888 | 2.1 | Aa2 | AA | $224.0 | ||||||||||||||||
| 6 | Illumina, Inc. | 6.6 | 955,669 | 41,588 | 1.9 | Baa3 | BBB | $21.4 | ||||||||||||||||
| 7 | Alphabet Inc. | 3.0 | 724,223 | 39,155 | 1.8 | Aa2 | AA+ | $1,805.5 | ||||||||||||||||
| 8 | 2seventy bio, Inc.(2) | 9.2 | 312,805 | 33,543 | 1.5 | — | — | $0.2 | ||||||||||||||||
| 9 | Novartis AG | 4.1 | 450,563 | 30,969 | 1.4 | A1 | AA- | $227.3 | ||||||||||||||||
| 10 | Harvard University | 6.3 | 343,858 | 28,872 | 1.3 | Aaa | AAA | $— | ||||||||||||||||
| 11 | Cloud Software Group, Inc. | 2.7 | (3) | 292,013 | 28,537 | 1.3 | — | — | $— | |||||||||||||||
| 12 | United States Government | 6.1 | 429,359 | 28,491 | 1.3 | Aaa | AA+ | $— | ||||||||||||||||
| 13 | Uber Technologies, Inc. | 58.3 | (4) | 1,009,188 | 27,765 | 1.3 | — | — | $123.5 | |||||||||||||||
| 14 | AstraZeneca PLC | 5.3 | 450,848 | 27,156 | 1.2 | A3 | A | $213.0 | ||||||||||||||||
| 15 | Pfizer Inc. | 0.7 | (5) | 504,716 | 23,730 | 1.1 | A1 | A+ | $171.0 | |||||||||||||||
| 16 | Sanofi | 6.5 | 267,278 | 21,444 | 1.0 | A1 | AA | $126.0 | ||||||||||||||||
| 17 | Merck & Co., Inc. | 9.0 | 337,703 | 21,401 | 1.0 | A1 | A+ | $293.8 | ||||||||||||||||
| 18 | Amgen Inc. | 8.5 | 428,227 | 21,314 | 1.0 | Baa1 | — | $148.0 | ||||||||||||||||
| 19 | New York University | 7.6 | 218,983 | 21,056 | 0.9 | Aa2 | AA- | $— | ||||||||||||||||
| 20 | Massachusetts Institute of Technology | 5.0 | 246,725 | 20,527 | 0.9 | Aaa | AAA | $— | ||||||||||||||||
| Total/weighted-average | 9.4 | (4) | 11,811,460 | $ | 805,751 | 36.5% |
Annual rental revenue and RSF include 100% of each property managed by us in North America. Refer to “Annual rental revenue” and “Investment-grade or publicly traded large
cap tenants” under “Definitions and reconciliations” in Item 2 for additional details, including our methodologies of calculating annual rental revenue from unconsolidated real
estate joint ventures and average market capitalization, respectively.
(1)Based on annual rental revenue in effect as of June 30, 2024.
(2)As of March 31, 2024, 2seventy bio, Inc. held $181.4 million of cash, cash equivalents, and marketable securities. In March 2024, Regeneron Pharmaceuticals, Inc., a
publicly traded biotechnology company with investment-grade credit ratings of Baa1 and BBB+ assigned by Moody’s and S&P, respectively, entered into a sublease for
approximately 195,000 RSF, or 69.6% of our annual rental revenue generated from 2seventy bio as of June 30, 2024. Additionally, 90.2% of the annual rental revenue
generated by 2seventy bio is guaranteed by another related public biotechnology company.
(3)Consists of one lease at a property acquired in 2022 with future development and redevelopment opportunities. This lease with Cloud Software Group, Inc. (formerly known
as TIBCO Software, Inc.) was in place when we acquired the property.
(4)Includes (i) ground leases for land at 1455 and 1515 Third Street (two buildings aggregating 422,980 RSF) and (ii) leases at 1655 and 1725 Third Street (two buildings
aggregating 586,208 RSF) in our Mission Bay submarket owned by our unconsolidated real estate joint venture in which we have an ownership interest of 10%. Annual
rental revenue is presented using 100% of the annual rental revenue from our consolidated properties and our share of annual rental revenue from our unconsolidated real
estate joint ventures. Refer to footnote 1 for additional details. Excluding these ground leases, the weighted-average remaining lease term for our top 20 tenants was 8.0
years as of June 30, 2024.
(5)Primarily relates to one office building in our New York City submarket aggregating 349,947 RSF with a contractual lease expiration in July 2024, which was classified as
held for sale as of June 30, 2024 and sold in July 2024.
Locations of properties
The locations of our properties are diversified among a number of Class A/A+ assets strategically clustered in life science
mega campuses in AAA innovation cluster markets. The following table sets forth the total RSF, number of properties, and annual rental
revenue in effect as of June 30, 2024 in each of our markets in North America (dollars in thousands, except per RSF amounts):
| RSF | Number of Properties | Annual Rental Revenue | |||||||||||||||||
| Market | Operating | Development | Redevelopment | Total | % of Total | Total | % of Total | Per RSF | |||||||||||
| Greater Boston | 10,751,016 | 764,036 | 1,638,878 | (1) | 13,153,930 | 28% | 73 | $848,799 | 38% | $83.84 | |||||||||
| San Francisco Bay Area | 7,863,964 | 498,142 | 282,054 | 8,644,160 | 18 | 66 | 449,633 | 20 | 65.52 | ||||||||||
| San Diego | 7,757,132 | 1,186,104 | — | 8,943,236 | 19 | 88 | 328,872 | 15 | 44.60 | ||||||||||
| Seattle | 3,188,135 | 31,270 | 34,306 | 3,253,711 | 7 | 44 | 138,136 | 6 | 45.73 | ||||||||||
| Maryland | 3,804,438 | 292,946 | — | 4,097,384 | 9 | 51 | 135,978 | 6 | 37.45 | ||||||||||
| Research Triangle | 3,923,169 | — | — | 3,923,169 | 8 | 40 | 123,315 | 6 | 32.27 | ||||||||||
| New York City | 922,477 | — | — | 922,477 | 2 | 4 | 72,885 | 3 | 92.89 | ||||||||||
| Texas | 1,845,159 | — | 73,298 | 1,918,457 | 4 | 15 | 57,830 | 3 | 32.83 | ||||||||||
| Canada | 933,660 | — | 139,311 | 1,072,971 | 2 | 12 | 20,353 | 1 | 22.98 | ||||||||||
| Non-cluster/other markets | 347,806 | — | — | 347,806 | 1 | 10 | 15,180 | 1 | 57.70 | ||||||||||
| Properties held for sale | 808,692 | — | — | 808,692 | 2 | 5 | 25,994 | 1 | N/A | ||||||||||
| North America | 42,145,648 | 2,772,498 | 2,167,847 | 47,085,993 | 100% | 408 | $2,216,975 | 100% | $56.87 | ||||||||||
| 4,940,345 |
(1)Primarily includes our active redevelopment projects aggregating 716,604 RSF at 40, 50, and 60 Sylvan Road and 840 Winter Street located on the Alexandria Center®
for Life Science – Waltham mega campus, which are 43% leased/negotiating on a combined basis. This mega campus project is expected to capture demand in our
Route 128 submarket.
Summary of occupancy percentages in North America
The following table sets forth the occupancy percentages for our operating properties and our operating and redevelopment
properties in each of our North America markets, excluding properties held for sale, as of the following dates:
| Operating Properties | Operating and Redevelopment Properties | |||||||||||
| Market | 6/30/24 | 3/31/24 | 6/30/23 | 6/30/24 | 3/31/24 | 6/30/23 | ||||||
| Greater Boston | 94.2% | 94.5% | 92.5% | 81.7% | 83.3% | 83.2% | ||||||
| San Francisco Bay Area | 94.0 | 94.4 | 95.5 | 90.7 | 91.2 | 91.9 | ||||||
| San Diego | 95.1 | 95.2 | 92.8 | 95.1 | 95.2 | 92.8 | ||||||
| Seattle | 94.7 | 94.9 | 95.1 | 93.7 | 93.9 | 89.5 | ||||||
| Maryland | 96.5 | 95.4 | 96.2 | 96.5 | 95.4 | 94.9 | ||||||
| Research Triangle | 97.4 | 97.8 | 94.3 | 97.4 | 97.8 | 94.3 | ||||||
| New York City | 85.1 | (1) | 84.4 | 88.9 | 85.1 | 84.4 | 88.9 | |||||
| Texas | 95.5 | 95.1 | 95.1 | 91.8 | 91.5 | 91.0 | ||||||
| Subtotal | 94.7 | 94.9 | 93.8 | 90.2 | 90.6 | 89.8 | ||||||
| Canada | 94.9 | 91.8 | 87.3 | 82.5 | 77.8 | 69.2 | ||||||
| Non-cluster/other markets | 75.6 | 75.4 | 81.3 | 75.6 | 75.4 | 81.3 | ||||||
| North America | 94.6% | 94.6% | 93.6% | 89.9% | 90.2% | 89.2% |
(1)The Alexandria Center® for Life Science – New York City mega campus is 95.5% occupied as of June 30, 2024. Occupancy percentage in our New York City market
reflects vacancy at the Alexandria Center® for Life Science – Long Island City property, which was 41.7% occupied as of June 30, 2024.
Investments in real estate
A key component of our business model is our disciplined allocation of capital to the development and redevelopment of new
Class A/A+ properties, and property enhancements identified during the underwriting of certain acquired properties, located in
collaborative life science mega campuses in AAA innovation clusters. These projects are focused on providing high-quality, generic, and
reusable spaces that meet the real estate requirements of a wide range of tenants. Upon completion, each value-creation project is
expected to generate increases in rental income, net operating income, and cash flows. Our development and redevelopment projects
are generally in locations that are highly desirable to high-quality entities, which we believe results in higher occupancy levels, longer
lease terms, higher rental income, higher returns, and greater long-term asset value. Our pre-construction activities are undertaken in
order to prepare the property for its intended use and include entitlements, permitting, design, site work, and other activities preceding
commencement of construction of aboveground building improvements.
Our investments in real estate consisted of the following as of June 30, 2024 (dollars in thousands):
| Development and Redevelopment | ||||||||||||||
| Active and Near-Term Construction | Future Opportunities Subject to Market Conditions and Leasing | |||||||||||||
| Operating | Under Construction 61% Leased/ Negotiating | Committed Near Term 51% Leased/ Negotiating(1) | Priority Anticipated | Future | Subtotal | Total | ||||||||
| Square footage | ||||||||||||||
| Operating | 41,336,956 | — | — | — | — | — | 41,336,956 | |||||||
| New Class A/A+ development and redevelopment properties | — | 4,940,345 | 492,570 | 2,670,922 | 27,261,766 | 35,365,603 | 35,365,603 | |||||||
| Value-creation square feet currently included in rental properties(2) | — | — | (159,884) | (309,148) | (2,938,815) | (3,407,847) | (3,407,847) | |||||||
| Total square footage, excluding properties held for sale | 41,336,956 | 4,940,345 | 332,686 | 2,361,774 | 24,322,951 | 31,957,756 | 73,294,712 | |||||||
| Properties held for sale | 808,692 | — | — | — | — | — | 808,692 | |||||||
| Total square footage | 42,145,648 | 4,940,345 | 332,686 | 2,361,774 | 24,322,951 | 31,957,756 | 74,103,404 | |||||||
| Investments in real estate | ||||||||||||||
| Gross book value as of June 30, 2024(3) | $29,178,679 | $3,888,714 | $58,751 | $762,507 | $4,242,602 | $8,952,574 | $38,131,253 | |||||||
(1)Represents one committed near-term project expected to commence construction during the next two years after June 30, 2024.
(2)Refer to “Investments in real estate” under “Definitions and reconciliations” in Item 2 for additional details, including value-creation square feet currently included in rental
properties.
(3)Balances exclude accumulated depreciation and our share of the cost basis associated with our properties held by our unconsolidated real estate joint ventures, which is
classified as investments in unconsolidated real estate joint ventures in our consolidated balance sheets.
Our real estate asset acquisitions during the six months ended June 30, 2024 and pending as of the date of this report consisted of the following (dollars in thousands):
| Property | Submarket/Market | Date of Purchase | Operating Occupancy | Future Development RSF(1) | Purchase Price | |||||||
| Completed during the three months ended March 31, 2024: | ||||||||||||
| 285, 299, 307, and 345 Dorchester Avenue (60% interest in consolidated JV)(2) | Seaport Innovation District/Greater Boston | 1/30/24 | N/A | 1,040,000 | $155,321 | |||||||
| Other(3) | 39,490 | |||||||||||
| 194,811 | ||||||||||||
| Completed during the three months ended June 30, 2024: | ||||||||||||
| Other | 7,000 | |||||||||||
| 201,811 | ||||||||||||
| Pending acquisitions subject to signed letters of intent or purchase and sale agreements | 47,600 | |||||||||||
| $249,411 | ||||||||||||
| 2024 guidance range | $250,000 – $750,000 |
(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.
(2)Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements in Item 1 for additional details.
(3)Includes a payment of $35.3 million to redeem our partner’s partial ownership interest in a consolidated real estate joint venture in our Greater Boston market, pursuant to our partner’s notification of their intent to exercise their put option
received in December 2023 and settled in January 2024.
Acquisitions
Our completed dispositions of and sales of partial interests in real estate assets during the six months ended June 30, 2024 and pending as of the date of this report consisted of the
following (dollars in thousands):
| Property | Submarket/Market | Date of Sale | Interest Sold | RSF | Sales Price | ||||||
| Six months ended June 30, 2024: | |||||||||||
| Dispositions of 100% interests in properties not integral to our mega campus strategy | |||||||||||
| 99 A Street(1) | Seaport Innovation District/Greater Boston | 3/8/24 | 100% | 235,000 | $13,350 | ||||||
| Other | 3,863 | ||||||||||
| 17,213 | |||||||||||
| Completed in July 2024: | |||||||||||
| Other(2) | 60,000 | ||||||||||
| 77,213 | |||||||||||
| Pending transactions subject to letters of intent or purchase and sale agreement negotiations | 806,728 | ||||||||||
| $883,941 | |||||||||||
| 2024 guidance range for dispositions, sales of partial interests, and common equity | $1,050,000 – $2,050,000 | ||||||||||
(1)We completed the sale during the three months ended March 31, 2024 and recognized no gain or loss. Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements in Item 1 for additional information.
(2)The disposition completed in July 2024 was leased to a single tenant with a July 2024 lease expiration and had annual net operating income of $18.6 million based upon three months ended June 30, 2024 annualized. This asset was
previously considered to be a potential development project upon expiration of an in-place non-laboratory space lease in July 2024.
Dispositions and sales of partial interests
Refer to “Net operating income” under “Definitions and reconciliations” in Item 2 for additional details, including its reconciliation from the most directly comparable financial measures presented in accordance with GAAP.
(1)Our share of incremental annual net operating income from development and redevelopment projects expected to be placed into service primarily commencing from 3Q24 through 1Q28 is projected to be $380 million.
(2)Represents expected incremental annual net operating income to be placed into service from deliveries of projects undergoing construction and one committed near-term project expected to commence construction in the next two
years.
(3)Includes 1.5 million RSF that is expected to stabilize through 2025 and is 87% leased, and partial deliveries through 4Q25 from projects expected to stabilize in 2026 and beyond. In addition to the projects represented, we are evaluating
one priority anticipated development project that could commence active construction in the second half of 2024 and may have initial delivery in 2025. Refer to the initial and stabilized occupancy years under “New Class A/A+ development
and redevelopment properties: current projects” in Item 2 for additional details.
New Class A/A+ development and redevelopment properties
The following table presents value-creation development and redevelopment of new Class A/A+ properties placed into service during the six months ended June 30, 2024 (dollars in
thousands):
Incremental Annual Net Operating Income Generated From 1H24 Deliveries
Aggregated $42 Million, Including $16 Million in 2Q24
| 500 North Beacon Street and 4 Kingsbury Avenue**(1)** | 1150 Eastlake Avenue East | 9810 Darnestown Road | 9808 Medical Center Drive | |||
| Greater Boston/ Cambridge/Inner Suburbs | Seattle/Lake Union | Maryland/Rockville | Maryland/Rockville | |||
| 138,537 RSF | 280,361 RSF | 195,435 RSF | 52,115 RSF | |||
| 100% Occupancy | 100% Occupancy | 100% Occupancy | 100% Occupancy | |||
 |  |  |  |
| Property/Market/Submarket | 2Q24 Delivery Date**(2)** | Our Ownership Interest | RSF Placed in Service | Occupancy Percentage**(3)** | Total Project | Unlevered Yields | ||||||||||||||||||||||
| Prior to 1/1/24 | 1Q24 | 2Q24 | Total | Initial Stabilized | Initial Stabilized (Cash Basis) | |||||||||||||||||||||||
| RSF | Investment | |||||||||||||||||||||||||||
| Development projects | ||||||||||||||||||||||||||||
| 99 Coolidge Avenue/Greater Boston/Cambridge/Inner Suburbs | N/A | 75.0% | 43,568 | 72,846 | — | 116,414 | 100% | 320,809 | $468,000 | 7.1% | 7.0% | |||||||||||||||||
| 500 North Beacon Street and 4 Kingsbury Avenue/Greater Boston/Cambridge/Inner Suburbs | 5/10/24 | 100% | — | 100,624 | 37,913 | 138,537 | 100% | 248,018 | 427,000 | 6.2 | 5.5 | |||||||||||||||||
| 1150 Eastlake Avenue East/Seattle/Lake Union | 4/13/24 | 100% | 278,282 | — | 2,079 | 280,361 | 100% | 311,631 | 443,000 | 6.6 | 6.7 | |||||||||||||||||
| 9810 Darnestown Road/Maryland/Rockville | 4/1/24 | 100% | — | — | 195,435 | 195,435 | 100% | 195,435 | 135,000 | 7.1 | 6.2 | |||||||||||||||||
| 9808 Medical Center Drive/Maryland/Rockville | 6/18/24 | 100% | 26,460 | — | 25,655 | 52,115 | 100% | 95,061 | 113,000 | 5.5 | 5.5 | |||||||||||||||||
| Redevelopment projects | ||||||||||||||||||||||||||||
| 651 Gateway Boulevard/San Francisco Bay Area/South San Francisco | N/A | 50.0% | — | 44,652 | — | 44,652 | 100% | 326,706 | 487,000 | 5.0 | 5.1 | |||||||||||||||||
| Alexandria Center® for Advanced Technologies – Monte Villa Parkway/Seattle/Bothell | N/A | 100% | 65,086 | 115,598 | — | 180,684 | 100% | 460,934 | 229,000 | 6.3 | 6.2 | |||||||||||||||||
| Canada | 4/17/24 | 100% | 44,862 | 9,725 | 23,900 | 78,487 | 100% | 250,790 | 113,000 | 6.4 | 6.3 | |||||||||||||||||
| Weighted average/total | 4/21/24 | 458,258 | 343,445 | 284,982 | 1,086,685 | 2,209,384 | $2,415,000 | 6.2% | 6.1% | |||||||||||||||||||
(1)Image represents 500 North Beacon Street on the Arsenal on the Charles mega campus.
(2)Represents the average delivery date for deliveries that occurred during the three months ended June 30, 2024, weighted by annual rental revenue.
(3)Occupancy relates to total operating RSF placed in service as of the most recent delivery.
New Class A/A+ development and redevelopment properties: recent deliveries
| 99 Coolidge Avenue | 500 North Beacon Street and 4 Kingsbury Avenue**(1)** | 311 Arsenal Street | 201 Brookline Avenue | 401 Park Drive | ||||
| Greater Boston/ Cambridge/Inner Suburbs | Greater Boston/ Cambridge/Inner Suburbs | Greater Boston/ Cambridge/Inner Suburbs | Greater Boston/Fenway | Greater Boston/Fenway | ||||
| 204,395 RSF | 109,481 RSF | 308,446 RSF | 58,149 RSF | 159,959 RSF | ||||
| 36% Leased | 92% Leased/Negotiating | 21% Leased | 99% Leased/Negotiating | 14% Leased | ||||
 | |  |  |  |
| 421 Park Drive | 40, 50, and 60 Sylvan Road**(2)** | 840 Winter Street | 1450 Owens Street**(3)** | 651 Gateway Boulevard | ||||
| Greater Boston/Fenway | Greater Boston/Route 128 | Greater Boston/Route 128 | San Francisco Bay Area/ Mission Bay | San Francisco Bay Area/ South San Francisco | ||||
| 392,011 RSF | 576,924 RSF | 139,680 RSF | 212,796 RSF | 282,054 RSF | ||||
| 13% Leased | 29% Leased | 100% Leased | —% Leased/Negotiating | 21% Leased | ||||
 |  |  |  |  |
(1)Image represents 500 North Beacon Street on the Arsenal on the Charles mega campus.
(2)Image represents 60 Sylvan Road on the Alexandria Center® for Life Science – Waltham mega campus. The project is expected to capture demand in our Route 128 submarket.
(3)Image represents a single- or multi-tenant project expanding our existing Alexandria Center® for Science and Technology – Mission Bay mega campus, where our joint venture partner will fund 100% of the construction cost until it attains an
ownership interest of 75%, after which it will contribute its respective share of additional capital. We are currently marketing the space for lease and have initial interest from publicly traded biotechnology and institutional tenants.
New Class A/A+ development and redevelopment properties: current projects
| 230 Harriet Tubman Way | 10935, 10945, and 10955 Alexandria Way**(1)** | 4135 Campus Point Court | 4155 Campus Point Court | 10075 Barnes Canyon Road | ||||
| San Francisco Bay Area/ South San Francisco | San Diego/Torrey Pines | San Diego/ University Town Center | San Diego/ University Town Center | San Diego/Sorrento Mesa | ||||
| 285,346 RSF | 334,996 RSF | 426,927 RSF | 171,102 RSF | 253,079 RSF | ||||
| 100% Leased | 100% Leased | 100% Leased | 100% Leased | 70% Leased | ||||
 |  |  |  |  |
| 1150 Eastlake Avenue East | Alexandria Center**®** for Advanced Technologies – Monte Villa Parkway**(2)** | 9820 Darnestown Road | 9808 Medical Center Drive | 8800 Technology Forest Place | ||||
| Seattle/Lake Union | Seattle/Bothell | Maryland/Rockville | Maryland/Rockville | Texas/Greater Houston | ||||
| 31,270 RSF | 34,306 RSF | 250,000 RSF | 42,946 RSF | 73,298 RSF | ||||
| 100% Leased | 98% Leased | 100% Leased | 69% Leased | 41% Leased | ||||
|  |  | |  |
(1)Image represents 10955 Alexandria Way on the One Alexandria Square mega campus.
(2)Image represents 3755 Monte Villa Parkway.
New Class A/A+ development and redevelopment properties: current projects (continued)
The following tables set forth a summary of our new Class A/A+ development and redevelopment properties under construction and pre-leased/negotiating near-term projects as of
June 30, 2024 (dollars in thousands):
| Property/Market/Submarket | Square Footage | Percentage | Occupancy**(1)** | |||||||||||||||||
| Dev/Redev | In Service | CIP | Total | Leased | Leased/ Negotiating | Initial | Stabilized | |||||||||||||
| Under construction | ||||||||||||||||||||
| 2024 and 2025 stabilization | ||||||||||||||||||||
| 99 Coolidge Avenue/Greater Boston/Cambridge/Inner Suburbs | Dev | 116,414 | 204,395 | 320,809 | 36% | 36% | 4Q23 | 2025 | ||||||||||||
| 500 North Beacon Street and 4 Kingsbury Avenue/Greater Boston/ Cambridge/Inner Suburbs | Dev | 138,537 | 109,481 | 248,018 | 85 | 92 | 1Q24 | 2025 | ||||||||||||
| 201 Brookline Avenue/Greater Boston/Fenway | Dev | 451,967 | 58,149 | 510,116 | 98 | 99 | 3Q22 | 4Q24 | ||||||||||||
| 840 Winter Street/Greater Boston/Route 128 | Redev | 28,534 | 139,680 | 168,214 | 100 | 100 | 4Q24 | 2025 | ||||||||||||
| 230 Harriet Tubman Way/San Francisco Bay Area/South San Francisco | Dev | — | 285,346 | 285,346 | 100 | 100 | 1Q25 | 1Q25 | ||||||||||||
| 4155 Campus Point Court/San Diego/University Town Center | Dev | — | 171,102 | 171,102 | 100 | 100 | 4Q24 | 4Q24 | ||||||||||||
| 1150 Eastlake Avenue East/Seattle/Lake Union | Dev | 280,361 | 31,270 | 311,631 | 100 | 100 | 4Q23 | 3Q24 | ||||||||||||
| Alexandria Center® for Advanced Technologies – Monte Villa Parkway/Seattle/Bothell | Redev | 426,628 | 34,306 | 460,934 | 98 | 98 | 1Q23 | 4Q24 | ||||||||||||
| 9820 Darnestown Road/Maryland/Rockville | Dev | — | 250,000 | 250,000 | 100 | 100 | 4Q24 | 4Q24 | ||||||||||||
| 9808 Medical Center Drive/Maryland/Rockville | Dev | 52,115 | 42,946 | 95,061 | 69 | 69 | 3Q23 | 4Q24 | ||||||||||||
| 8800 Technology Forest Place/Texas/Greater Houston | Redev | 50,094 | 73,298 | 123,392 | 41 | 41 | 2Q23 | 2025 | ||||||||||||
| Canada | Redev | 111,479 | 139,311 | 250,790 | 73 | 73 | 3Q23 | 2025 | ||||||||||||
| 1,656,129 | 1,539,284 | 3,195,413 | 87 | 87 | ||||||||||||||||
| 2026 and beyond stabilization | ||||||||||||||||||||
| 311 Arsenal Street/Greater Boston/Cambridge/Inner Suburbs | Redev | 82,216 | (2) | 308,446 | 390,662 | 21 | 21 | 2027 | 2027 | |||||||||||
| 401 Park Drive/Greater Boston/Fenway | Redev | — | 159,959 | 159,959 | 14 | 14 | 2024 | 2026 | ||||||||||||
| 421 Park Drive/Greater Boston/Fenway | Dev | — | 392,011 | 392,011 | 13 | 13 | 2026 | 2027 | ||||||||||||
| 40, 50, and 60 Sylvan Road/Greater Boston/Route 128 | Redev | — | 576,924 | 576,924 | 29 | 29 | 2025 | 2027 | ||||||||||||
| Other/Greater Boston | Redev | — | 453,869 | 453,869 | — | — | (3) | 2027 | 2027 | |||||||||||
| 1450 Owens Street/San Francisco Bay Area/Mission Bay | Dev | — | 212,796 | 212,796 | — | — | (4) | 2025 | 2026 | |||||||||||
| 651 Gateway Boulevard/San Francisco Bay Area/South San Francisco | Redev | 44,652 | 282,054 | 326,706 | 21 | 21 | 1Q24 | 2026 | ||||||||||||
| 10935, 10945, and 10955 Alexandria Way/San Diego/Torrey Pines | Dev | — | 334,996 | 334,996 | 100 | 100 | 4Q24 | 2026 | ||||||||||||
| 4135 Campus Point Court/San Diego/University Town Center | Dev | — | 426,927 | 426,927 | 100 | 100 | 2026 | 2026 | ||||||||||||
| 10075 Barnes Canyon Road/San Diego/Sorrento Mesa | Dev | — | 253,079 | 253,079 | 70 | 70 | 2025 | 2026 | ||||||||||||
| 126,868 | 3,401,061 | 3,527,929 | 38 | 38 | ||||||||||||||||
| 1,782,997 | 4,940,345 | 6,723,342 | 61 | 61 | ||||||||||||||||
| Committed near-term project expected to commence construction in the next two years | ||||||||||||||||||||
| 4165 Campus Point Court/San Diego/University Town Center | Dev | — | 492,570 | 492,570 | — | 51 | ||||||||||||||
| Total | 1,782,997 | 5,432,915 | 7,215,912 | 57% | 61% | |||||||||||||||
| (1)Initial occupancy dates are subject to leasing and/or market conditions. Stabilized occupancy may vary depending on single tenancy versus multi-tenancy. Multi-tenant projects may increase in occupancy over a period of time. (2)We expect to redevelop an additional 25,312 RSF of space occupied as of June 30, 2024 into laboratory space upon expiration of the existing leases through the second half of 2025. Refer to “Investments in real estate” under “Definitions and reconciliations” in Item 2 for additional information. (3)Represents a project focused on demand from our existing tenants in our adjacent properties/campuses and that will also address demand from other non-Alexandria properties/campuses. (4)Represents a single- or multi-tenant project expanding our existing mega campus, where our joint venture partner will fund 100% of the construction cost until it attains an ownership interest of 75%, after which it will contribute its respective share of additional capital. We are currently marketing the space for lease and have initial interest from publicly traded biotechnology and institutional tenants. |
New Class A/A+ development and redevelopment properties: current projects (continued)
| Our Ownership Interest | At 100% | Unlevered Yields | |||||||||||||||||
| Property/Market/Submarket | In Service | CIP | Cost to Complete | Total at Completion | Initial Stabilized | Initial Stabilized (Cash Basis) | |||||||||||||
| Under construction | |||||||||||||||||||
| 2024 and 2025 stabilization | |||||||||||||||||||
| 99 Coolidge Avenue/Greater Boston/Cambridge/Inner Suburbs | 75.0% | $135,922 | $184,887 | $147,191 | $468,000 | 7.1% | 7.0% | ||||||||||||
| 500 North Beacon Street and 4 Kingsbury Avenue/Greater Boston/ Cambridge/Inner Suburbs | 100% | 279,029 | 110,110 | 37,861 | 427,000 | 6.2% | 5.5% | ||||||||||||
| 201 Brookline Avenue/Greater Boston/Fenway | 99.0% | 664,823 | 88,711 | 21,466 | 775,000 | 7.2% | 6.5% | ||||||||||||
| 840 Winter Street/Greater Boston/Route 128 | 100% | 13,651 | 184,050 | 39,299 | 237,000 | 7.6% | 6.5% | ||||||||||||
| 230 Harriet Tubman Way/San Francisco Bay Area/South San Francisco | 47.7% | — | 312,344 | 197,656 | 510,000 | 7.4% | 6.4% | ||||||||||||
| 4155 Campus Point Court/San Diego/University Town Center | 55.0% | — | 124,823 | 48,177 | 173,000 | 7.4% | 6.5% | ||||||||||||
| 1150 Eastlake Avenue East/Seattle/Lake Union | 100% | 373,827 | 45,984 | 23,189 | 443,000 | 6.6% | 6.7% | ||||||||||||
| Alexandria Center® for Advanced Technologies – Monte Villa Parkway/Seattle/Bothell | 100% | 193,641 | 11,144 | 24,215 | 229,000 | 6.3% | 6.2% | ||||||||||||
| 9820 Darnestown Road/Maryland/Rockville | 100% | — | 161,736 | 15,264 | 177,000 | 6.3% | 5.6% | ||||||||||||
| 9808 Medical Center Drive/Maryland/Rockville | 100% | 63,410 | 47,451 | 2,139 | 113,000 | 5.5% | 5.5% | ||||||||||||
| 8800 Technology Forest Place/Texas/Greater Houston | 100% | 57,055 | 45,377 | 9,568 | 112,000 | 6.3% | 6.0% | ||||||||||||
| Canada | 100% | 49,303 | 44,036 | 19,661 | 113,000 | 6.4% | 6.3% | ||||||||||||
| 1,830,661 | 1,360,653 | ||||||||||||||||||
| 2026 and beyond stabilization(1) | |||||||||||||||||||
| 311 Arsenal Street/Greater Boston/Cambridge/Inner Suburbs | 100% | 60,555 | 228,799 | TBD | |||||||||||||||
| 401 Park Drive/Greater Boston/Fenway | 100% | — | 178,178 | ||||||||||||||||
| 421 Park Drive/Greater Boston/Fenway | 99.7% | — | 376,163 | ||||||||||||||||
| 40, 50, and 60 Sylvan Road/Greater Boston/Route 128 | 100% | — | 419,034 | ||||||||||||||||
| Other/Greater Boston | 100% | — | 141,776 | ||||||||||||||||
| 1450 Owens Street/San Francisco Bay Area/Mission Bay | 26.3% | — | 230,909 | ||||||||||||||||
| 651 Gateway Boulevard/San Francisco Bay Area/South San Francisco | 50.0% | 59,265 | 275,841 | 151,894 | 487,000 | 5.0% | 5.1% | ||||||||||||
| 10935, 10945, and 10955 Alexandria Way/San Diego/Torrey Pines | 100% | — | 283,079 | 219,921 | 503,000 | 6.2% | 5.8% | ||||||||||||
| 4135 Campus Point Court/San Diego/University Town Center | 55.0% | — | 236,595 | TBD | |||||||||||||||
| 10075 Barnes Canyon Road/San Diego/Sorrento Mesa | 50.0% | — | 157,687 | 163,313 | 321,000 | 5.5% | 5.7% | ||||||||||||
| 119,820 | 2,528,061 | ||||||||||||||||||
| 1,950,481 | 3,888,714 | ||||||||||||||||||
| Committed near-term project expected to commence construction in the next two years | |||||||||||||||||||
| 4165 Campus Point Court/San Diego/University Town Center | 55.0% | — | 58,751 | TBD | |||||||||||||||
| Total | $1,950,481 | $3,947,465 | $3,840,000 | (2) | $9,740,000 | (2) | |||||||||||||
| Our share of investment(2)(3) | $1,880,000 | $3,170,000 | $3,040,000 | $8,090,000 | |||||||||||||||
| Refer to “Initial stabilized yield (unlevered)” under “Definitions and reconciliations” in Item 2 for additional information. (1)We expect to provide total estimated costs and related yields for each project with estimated stabilization in 2026 and beyond over the next several quarters. (2)Represents dollar amount rounded to the nearest $10 million and includes preliminary estimated amounts for projects listed as TBD. (3)Represents our share of investment based on our ownership percentage upon completion of development or redevelopment projects. |
New Class A/A+ development and redevelopment properties: current projects (continued)
69% of Our Total Value-Creation Pipeline RSF Is Within Our Mega Campuses
The following table summarizes the key information for all our development and redevelopment projects in North America as of June 30, 2024 (dollars in thousands):
| Market Property/Submarket | Our Ownership Interest | Book Value | Square Footage | |||||||||||||
| Development and Redevelopment | Total**(1)** | |||||||||||||||
| Active and Near-Term Construction | Future Opportunities Subject to Market Conditions and Leasing | |||||||||||||||
| Under Construction | Committed Near Term | Priority Anticipated | Future | |||||||||||||
| Greater Boston | ||||||||||||||||
| Mega Campus: The Arsenal on the Charles/Cambridge/Inner Suburbs | 100% | $350,306 | 417,927 | — | 25,312 | 34,157 | 477,396 | |||||||||
| 311 Arsenal Street, 500 North Beacon Street, and 4 Kingsbury Avenue | ||||||||||||||||
| 99 Coolidge Avenue/Cambridge/Inner Suburbs | 75.0% | 184,887 | 204,395 | — | — | — | 204,395 | |||||||||
| Mega Campus: Alexandria Center**®** for Life Science – Fenway/ Fenway | (2) | 643,052 | 610,119 | — | — | — | 610,119 | |||||||||
| 201 Brookline Avenue and 401 and 421 Park Drive | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for Life Science – Waltham/ Route 128 | 100% | 665,082 | 716,604 | — | — | 515,000 | 1,231,604 | |||||||||
| 40, 50, and 60 Sylvan Road, 35 Gatehouse Drive, and 840 Winter Street | ||||||||||||||||
| Mega Campus: Alexandria Center**®** at Kendall Square/ Cambridge | 100% | 124,868 | — | — | — | 216,455 | 216,455 | |||||||||
| 100 Edwin H. Land Boulevard | ||||||||||||||||
| Mega Campus: Alexandria Technology Square**®****/Cambridge** | 100% | 7,881 | — | — | — | 100,000 | 100,000 | |||||||||
| Mega Campus: 480 Arsenal Way and 446, 458, 500, and 550 Arsenal Street/Cambridge/Inner Suburbs | 100% | 85,126 | — | — | — | 902,000 | 902,000 | |||||||||
| 446, 458, 500, and 550 Arsenal Street | ||||||||||||||||
| Mega Campus: 285, 299, 307, and 345 Dorchester Avenue/ Seaport Innovation District | 60.0% | 283,744 | — | — | — | 1,040,000 | 1,040,000 | |||||||||
| 10 Necco Street/Seaport Innovation District | 100% | 104,966 | — | — | — | 175,000 | 175,000 | |||||||||
| Mega Campus: One Moderna Way/Route 128 | 100% | 26,500 | — | — | — | 1,085,000 | 1,085,000 | |||||||||
| 215 Presidential Way/Route 128 | 100% | 6,816 | — | — | — | 112,000 | 112,000 | |||||||||
| Other value-creation projects | (3) | 295,006 | 453,869 | — | — | 1,323,541 | 1,777,410 | |||||||||
| $2,778,234 | 2,402,914 | — | 25,312 | 5,503,153 | 7,931,379 | |||||||||||
| Refer to “Mega campus” under “Definitions and reconciliations” in Item 2 for additional information. (1)Represents total square footage upon completion of development or redevelopment of one or more new Class A/A+ properties. Square footage presented includes the RSF of buildings currently in operation at properties that also have future development or redevelopment opportunities. Upon expiration of existing in-place leases, we have the intent to demolish or redevelop the existing property. Refer to “Investments in real estate” under “Definitions and reconciliations” in Item 2 for additional information, including value-creation square feet currently included in rental properties. (2)We have a 99.0% interest in 201 Brookline Avenue aggregating 58,149 RSF, a 100% interest in 401 Park Drive aggregating 159,959 RSF, and a 99.7% interest in 421 Park Drive aggregating 392,011 RSF. (3)Includes a property in which we own a partial interest through a real estate joint venture. Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements in Item 1 for additional details. | ||||||||||||||||
New Class A/A+ development and redevelopment properties: summary of pipeline
| Market Property/Submarket | Our Ownership Interest | Book Value | Square Footage | |||||||||||||
| Development and Redevelopment | Total**(1)** | |||||||||||||||
| Active and Near-Term Construction | Future Opportunities Subject to Market Conditions and Leasing | |||||||||||||||
| Under Construction | Committed Near Term | Priority Anticipated | Future | |||||||||||||
| San Francisco Bay Area | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for Science and Technology – Mission Bay/Mission Bay | 26.3% | $230,909 | 212,796 | — | — | — | 212,796 | |||||||||
| 1450 Owens Street | ||||||||||||||||
| Alexandria Center® for Life Science – Millbrae/South San Francisco | 47.7% | 469,434 | 285,346 | — | 198,188 | 150,213 | 633,747 | |||||||||
| 230 Harriet Tubman Way, 201 and 231 Adrian Road, and 6 and 30 Rollins Road | ||||||||||||||||
| Mega Campus: Alexandria Technology Center**®** – Gateway/ South San Francisco | 50.0% | 302,398 | 282,054 | — | — | 291,000 | 573,054 | |||||||||
| 651 Gateway Boulevard | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for Advanced Technologies – Tanforan/South San Francisco | 100% | 388,661 | — | — | 150,000 | 1,780,000 | 1,930,000 | |||||||||
| 1122, 1150, and 1178 El Camino Real | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for Advanced Technologies – South San Francisco/South San Francisco | 100% | 6,655 | — | — | 107,250 | 90,000 | 197,250 | |||||||||
| 211*(2)* and 269 East Grand Avenue | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for Life Science – San Carlos/Greater Stanford | 100% | 435,269 | — | — | 105,000 | 1,392,830 | 1,497,830 | |||||||||
| 960 Industrial Road, 987 and 1075 Commercial Street, and 888 Bransten Road | ||||||||||||||||
| 3825 and 3875 Fabian Way/Greater Stanford | 100% | 151,762 | — | — | — | 478,000 | 478,000 | |||||||||
| 2100, 2200, 2300, and 2400 Geng Road/Greater Stanford | 100% | 35,759 | — | — | — | 240,000 | 240,000 | |||||||||
| 901 California Avenue/Greater Stanford | 100% | 18,640 | — | — | — | 56,924 | 56,924 | |||||||||
| Mega Campus: 88 Bluxome Street/SoMa | 100% | 388,020 | — | — | — | 1,070,925 | 1,070,925 | |||||||||
| Other value-creation projects | 100% | — | — | — | — | 25,000 | 25,000 | |||||||||
| $2,427,507 | 780,196 | — | 560,438 | 5,574,892 | 6,915,526 | |||||||||||
| Refer to “Mega campus” under “Definitions and reconciliations” in Item 2 for additional information. (1)Represents total square footage upon completion of development or redevelopment of one or more new Class A/A+ properties. Square footage presented includes the RSF of buildings currently in operation at properties that also have future development or redevelopment opportunities. Upon expiration of existing in-place leases, we have the intent to demolish or redevelop the existing property. Refer to “Investments in real estate” under “Definitions and reconciliations” in Item 2 for additional information, including value-creation square feet currently included in rental properties. (2)We own a partial interest in this property through a real estate joint venture. Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements in Item 1 for additional details. | ||||||||||||||||
New Class A/A+ development and redevelopment properties: summary of pipeline (continued)
| Market Property/Submarket | Our Ownership Interest | Book Value | Square Footage | |||||||||||||
| Development and Redevelopment | Total**(1)** | |||||||||||||||
| Active and Near-Term Construction | Future Opportunities Subject to Market Conditions and Leasing | |||||||||||||||
| Under Construction | Committed Near Term | Priority Anticipated | Future | |||||||||||||
| San Diego | ||||||||||||||||
| Mega Campus: One Alexandria Square/Torrey Pines | 100% | $339,673 | 334,996 | — | — | 125,280 | 460,276 | |||||||||
| 10935, 10945, and 10955 Alexandria Way and 10975 and 10995 Torreyana Road | ||||||||||||||||
| Mega Campus: Campus Point by Alexandria/University Town Center | 55.0% | 584,337 | 598,029 | 492,570 | — | 650,000 | 1,740,599 | |||||||||
| 10010*(2), 10140(2)**, and 10260 Campus Point Drive and 4135, 4155,* 4161, 4165, and 4275*(2)* Campus Point Court | ||||||||||||||||
| Mega Campus: SD Tech by Alexandria/Sorrento Mesa | 50.0% | 283,420 | 253,079 | — | 250,000 | 243,845 | 746,924 | |||||||||
| 9805 Scranton Road and 10065 and 10075 Barnes Canyon Road | ||||||||||||||||
| 11255 and 11355 North Torrey Pines Road/Torrey Pines | 100% | 146,905 | — | — | 153,000 | 62,000 | 215,000 | |||||||||
| ARE Towne Centre/University Town Center | 100% | 19,163 | — | — | 230,000 | — | 230,000 | |||||||||
| 9363, 9373, and 9393 Towne Centre Drive | ||||||||||||||||
| Costa Verde by Alexandria/University Town Center | 100% | 135,662 | — | — | — | 537,000 | 537,000 | |||||||||
| 8410-8750 Genesee Avenue and 4282 Esplanade Court | ||||||||||||||||
| Mega Campus: 5200 Illumina Way/University Town Center | 51.0% | 17,443 | — | — | — | 451,832 | 451,832 | |||||||||
| 9625 Towne Centre Drive/University Town Center | 30.0% | 837 | — | — | — | 100,000 | 100,000 | |||||||||
| Mega Campus: Sequence District by Alexandria/Sorrento Mesa | 100% | 46,323 | — | — | — | 1,798,915 | 1,798,915 | |||||||||
| 6260, 6290, 6310, 6340, 6350, and 6450 Sequence Drive | ||||||||||||||||
| Scripps Science Park by Alexandria/Sorrento Mesa | 100% | 118,800 | — | — | — | 598,349 | 598,349 | |||||||||
| 10048, 10219, 10256, and 10260 Meanley Drive and 10277 Scripps Ranch Boulevard | ||||||||||||||||
| Pacific Technology Park/Sorrento Mesa | 50.0% | 23,845 | — | — | — | 149,000 | 149,000 | |||||||||
| 9444 Waples Street | ||||||||||||||||
| 4025, 4031, 4045, and 4075 Sorrento Valley Boulevard/Sorrento Valley | 100% | 43,064 | — | — | — | 247,000 | 247,000 | |||||||||
| Other value-creation projects | 100% | 74,588 | — | — | — | 475,000 | 475,000 | |||||||||
| $1,834,060 | 1,186,104 | 492,570 | 633,000 | 5,438,221 | 7,749,895 | |||||||||||
| Refer to “Mega campus” under “Definitions and reconciliations” in Item 2 for additional information. (1)Represents total square footage upon completion of development or redevelopment of one or more new Class A/A+ properties. Square footage presented includes the RSF of buildings currently in operation at properties that also have future development or redevelopment opportunities. Upon expiration of existing in-place leases, we have the intent to demolish or redevelop the existing property. Refer to “Investments in real estate” under “Definitions and reconciliations” in Item 2 for additional information, including value-creation square feet currently included in rental properties. (2)We have a 100% interest in this property. |
New Class A/A+ development and redevelopment properties: summary of pipeline (continued)
| Market Property/Submarket | Our Ownership Interest | Book Value | Square Footage | |||||||||||||
| Development and Redevelopment | Total**(1)** | |||||||||||||||
| Active and Near-Term Construction | Future Opportunities Subject to Market Conditions and Leasing | |||||||||||||||
| Under Construction | Committed Near Term | Priority Anticipated | Future | |||||||||||||
| Seattle | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for Life Science – Eastlake/ Lake Union | 100% | $45,984 | 31,270 | — | — | — | 31,270 | |||||||||
| 1150 Eastlake Avenue East | ||||||||||||||||
| Alexandria Center® for Advanced Technologies – Monte Villa Parkway/Bothell | 100% | 11,144 | 34,306 | — | 50,552 | — | 84,858 | |||||||||
| 3301 Monte Villa Parkway | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for Life Science – South Lake Union/Lake Union | (2) | 452,222 | — | — | 1,095,586 | 188,400 | 1,283,986 | |||||||||
| 601 and 701 Dexter Avenue North and 800 Mercer Street | ||||||||||||||||
| 830 and 1010 4th Avenue South/SoDo | 100% | 58,530 | — | — | — | 597,313 | 597,313 | |||||||||
| Mega Campus: Alexandria Center**®** for Advanced Technologies – Canyon Park/Bothell | 100% | 16,891 | — | — | — | 230,000 | 230,000 | |||||||||
| 21660 20th Avenue Southeast | ||||||||||||||||
| Other value-creation projects | 100% | 140,480 | — | — | — | 706,087 | 706,087 | |||||||||
| 725,251 | 65,576 | — | 1,146,138 | 1,721,800 | 2,933,514 | |||||||||||
| Maryland | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for Life Science – Shady Grove/Rockville | 100% | 230,578 | 292,946 | — | — | 296,000 | 588,946 | |||||||||
| 9808 Medical Center Drive and 9820 and 9830 Darnestown Road | ||||||||||||||||
| 230,578 | 292,946 | — | — | 296,000 | 588,946 | |||||||||||
| Research Triangle | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for Advanced Technologies – Research Triangle/Research Triangle | 100% | 101,026 | — | — | 180,000 | 990,000 | 1,170,000 | |||||||||
| 4 and 12 Davis Drive | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for Life Science – Durham/ Research Triangle | 100% | 174,404 | — | — | — | 2,210,000 | 2,210,000 | |||||||||
| 41 Moore Drive | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for NextGen Medicines/ Research Triangle | 100% | $106,777 | — | — | — | 1,055,000 | 1,055,000 | |||||||||
| 3029 East Cornwallis Road | ||||||||||||||||
| Refer to “Mega campus” under “Definitions and reconciliations” in Item 2 for additional information. (1)Represents total square footage upon completion of development or redevelopment of one or more new Class A/A+ properties. Square footage presented includes the RSF of buildings currently in operation at properties that also have future development or redevelopment opportunities. Upon expiration of existing in-place leases, we have the intent to demolish or redevelop the existing property. Refer to “Investments in real estate” under “Definitions and reconciliations” in Item 2 for additional information, including value-creation square feet currently included in rental properties. (2)We have a 100% interest in 601 and 701 Dexter Avenue North aggregating 414,986 RSF and a 60% interest in the priority anticipated development project at 800 Mercer Street aggregating 869,000 RSF. |
New Class A/A+ development and redevelopment properties: summary of pipeline (continued)
| Market Property/Submarket | Our Ownership Interest | Book Value | Square Footage | |||||||||||||
| Development and Redevelopment | Total**(1)** | |||||||||||||||
| Active and Near-Term Construction | Future Opportunities Subject to Market Conditions and Leasing | |||||||||||||||
| Under Construction | Committed Near Term | Priority Anticipated | Future | |||||||||||||
| Research Triangle (continued) | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for Sustainable Technologies/Research Triangle | 100% | $52,777 | — | — | — | 750,000 | 750,000 | |||||||||
| 120 TW Alexander Drive, 2752 East NC Highway 54, and 10 South Triangle Drive | ||||||||||||||||
| 100 Capitola Drive/Research Triangle | 100% | — | — | — | — | 65,965 | 65,965 | |||||||||
| Other value-creation projects | 100% | 4,185 | — | — | — | 76,262 | 76,262 | |||||||||
| 439,169 | — | — | 180,000 | 5,147,227 | 5,327,227 | |||||||||||
| New York City | ||||||||||||||||
| Mega Campus: Alexandria Center**®** for Life Science – New York City/New York City | 100% | 161,482 | — | — | — | 550,000 | (2) | 550,000 | ||||||||
| 161,482 | — | — | — | 550,000 | 550,000 | |||||||||||
| Texas | ||||||||||||||||
| Alexandria Center® for Advanced Technologies at The Woodlands/ Greater Houston | 100% | 48,250 | 73,298 | — | — | 116,405 | 189,703 | |||||||||
| 8800 Technology Forest Place | ||||||||||||||||
| 1001 Trinity Street and 1020 Red River Street/Austin | 100% | 9,929 | — | — | 126,034 | 123,976 | 250,010 | |||||||||
| Other value-creation projects | 100% | 135,323 | — | — | — | 1,694,000 | 1,694,000 | |||||||||
| 193,502 | 73,298 | — | 126,034 | 1,934,381 | 2,133,713 | |||||||||||
| Canada | 100% | 44,036 | 139,311 | — | — | 371,743 | 511,054 | |||||||||
| Other value-creation projects | 100% | 118,755 | — | — | — | 724,349 | 724,349 | |||||||||
| Total pipeline as of June 30, 2024 | $8,952,574 | (3) | 4,940,345 | 492,570 | 2,670,922 | 27,261,766 | 35,365,603 |
Refer to “Mega campus” under “Definitions and reconciliations” in Item 2 for additional information.
(1)Total square footage includes 3,407,847 RSF of buildings currently in operation that we expect to demolish or redevelop and commence future construction. Refer to “Investments in real estate” under “Definitions and reconciliations” in Item
2 for additional information, including value-creation square feet currently included in rental properties.
(2)Pursuant to an option agreement, we are currently negotiating a long-term ground lease with the City of New York for the future site of a new life science building aggregating approximately 550,000 SF.
(3)Includes $3.9 billion of projects that are currently under construction and are 61% leased/negotiating. We also expect to commence construction of one committed near-term project aggregating $58.8 million, which is 51% leased/
negotiating, in the next two years after June 30, 2024.
New Class A/A+ development and redevelopment properties: summary of pipeline (continued)
Results of operations
We present a tabular comparison of items, whether gain or loss, that may facilitate a high-level understanding of our results
and provide context for the disclosures included in our annual report on Form 10-K for the year ended December 31, 2023 and our
subsequent quarterly reports on Form 10-Q. We believe that such tabular presentation promotes a better understanding for investors of
the corporate-level decisions made and activities performed that significantly affect comparison of our operating results from period to
period. We also believe that this tabular presentation will supplement for investors an understanding of our disclosures and real estate
operating results. Gains or losses on sales of real estate and impairments of assets classified as held for sale are related to corporate-
level decisions to dispose of real estate. Gains or losses on early extinguishment of debt are related to corporate-level financing
decisions focused on our capital structure strategy. Significant realized and unrealized gains or losses on non-real estate investments,
impairments of real estate and non-real estate investments, and acceleration of stock compensation expense due to the resignations of
executive officers are not related to the operating performance of our real estate assets as they result from strategic, corporate-level
non-real estate investment decisions and external market conditions. Impairments of non-real estate investments are not related to the
operating performance of our real estate as they represent the write-down of non-real estate investments when their fair values
decrease below their respective carrying values due to changes in general market or other conditions outside of our control. Significant
items, whether a gain or loss, included in the tabular disclosure for current periods are described in further detail in Item 2. Key items
included in net income attributable to Alexandria’s common stockholders for the three and six months ended June 30, 2024 and 2023
and the related per share amounts were as follows (in millions, except per share amounts):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | ||||||||
| Amount | Per Share – Diluted | Amount | Per Share – Diluted | ||||||||||||
| Unrealized losses on non-real estate investments | $(64.2) | $(77.9) | $(0.37) | $(0.46) | $(35.1) | $(143.8) | $(0.20) | $(0.84) | |||||||
| Gain on sales of real estate | — | 214.8 | — | 1.26 | 0.4 | 214.8 | — | 1.26 | |||||||
| Impairment of non-real estate investments | (12.8) | (23.0) | (0.08) | (0.13) | (27.5) | (23.0) | (0.16) | (0.13) | |||||||
| Impairment of real estate | (30.8) | (168.6) | (0.18) | (0.99) | (30.8) | (168.6) | (0.18) | (0.99) | |||||||
| Total | $(107.8) | $(54.7) | $(0.63) | $(0.32) | $(93.0) | $(120.6) | $(0.54) | $(0.70) | |||||||
Refer to Note 3 – “Investments in real estate” and Note 7 – “Investments” to our unaudited consolidated financial statements in
Item 1 for additional information.
Same properties
We supplement an evaluation of our results of operations with an evaluation of operating performance of certain of our
properties, referred to as “Same Properties.” For additional information on the determination of our Same Properties portfolio, refer to
“Same property comparisons” under “Definitions and reconciliations” in Item 2. The following table presents information regarding our
Same Properties for the three and six months ended June 30, 2024:
| June 30, 2024 | ||||
| Three Months Ended | Six Months Ended | |||
| Percentage change in net operating income over comparable period from prior year | 1.5% | 1.1% | ||
| Percentage change in net operating income (cash basis) over comparable period from prior year | 3.9% | 3.7% | ||
| Operating margin | 70% | 70% | ||
| Number of Same Properties | 350 | 346 | ||
| RSF | 35,626,897 | 34,775,838 | ||
| Occupancy – current-period average | 94.6% | 94.2% | ||
| Occupancy – same-period prior-year average | 94.4% | 94.6% |
The following table reconciles the number of Same Properties to total properties for the six months ended June 30, 2024:
| Development – under construction | Properties | |
| 201 Brookline Avenue | 1 | |
| 1150 Eastlake Avenue East | 1 | |
| 9820 Darnestown Road | 1 | |
| 99 Coolidge Avenue | 1 | |
| 500 North Beacon Street and 4 Kingsbury Avenue | 2 | |
| 9808 Medical Center Drive | 1 | |
| 1450 Owens Street | 1 | |
| 230 Harriet Tubman Way | 1 | |
| 4155 Campus Point Court | 1 | |
| 10935, 10945, and 10955 Alexandria Way | 3 | |
| 10075 Barnes Canyon Road | 1 | |
| 421 Park Drive | 1 | |
| 4135 Campus Point Court | 1 | |
| 16 | ||
| Development – placed into service after January 1, 2023 | Properties | |
| 751 Gateway Boulevard | 1 | |
| 15 Necco Street | 1 | |
| 325 Binney Street | 1 | |
| 6040 George Watts Hill Drive | 1 | |
| 9810 Darnestown Road | 1 | |
| 5 | ||
| Redevelopment – under construction | Properties | |
| 840 Winter Street | 1 | |
| 40, 50, and 60 Sylvan Road | 3 | |
| Alexandria Center® for Advanced Technologies – Monte Villa Parkway | 6 | |
| 651 Gateway Boulevard | 1 | |
| 401 Park Drive | 1 | |
| 8800 Technology Forest Place | 1 | |
| 311 Arsenal Street | 1 | |
| Canada | 4 | |
| Other | 2 | |
| 20 |
| Redevelopment – placed into service after January 1, 2023 | Properties | |
| 20400 Century Boulevard | 1 | |
| 140 First Street | 1 | |
| 2400 Ellis Road, 40 Moore Drive, and 14 TW Alexander Drive | 3 | |
| 9601 and 9603 Medical Center Drive | 2 | |
| 7 | ||
| Acquisitions after January 1, 2023 | Properties | |
| Other | 5 | |
| 5 | ||
| Unconsolidated real estate JVs | 4 | |
| Properties held for sale | 5 | |
| Total properties excluded from Same Properties | 62 | |
| Same Properties | 346 | |
| Total properties in North America as of June 30, 2024 | 408 | |
Comparison of results for the three months ended June 30, 2024 to the three months ended June 30, 2023
The following table presents a comparison of the components of net operating income for our Same Properties and Non-Same
Properties for the three months ended June 30, 2024, compared to the three months ended June 30, 2023 (dollars in thousands). Refer
to “Definitions and reconciliations” in Item 2 for definitions of “Tenant recoveries” and “Net operating income” and their reconciliations
from the most directly comparable financial measures presented in accordance with GAAP, income from rentals and net income,
respectively.
| Three Months Ended June 30, | |||||||||
| 2024 | 2023 | $ Change | % Change | ||||||
| Income from rentals: | |||||||||
| Same Properties | $464,917 | $454,603 | $10,314 | 2.3% | |||||
| Non-Same Properties | 111,918 | 83,286 | 28,632 | 34.4 | |||||
| Rental revenues | 576,835 | 537,889 | 38,946 | 7.2 | |||||
| Same Properties | 156,945 | 153,802 | 3,143 | 2.0 | |||||
| Non-Same Properties | 21,382 | 12,648 | 8,734 | 69.1 | |||||
| Tenant recoveries | 178,327 | 166,450 | 11,877 | 7.1 | |||||
| Income from rentals | 755,162 | 704,339 | 50,823 | 7.2 | |||||
| Same Properties | 377 | 300 | 77 | 25.7 | |||||
| Non-Same Properties | 11,195 | 9,261 | 1,934 | 20.9 | |||||
| Other income | 11,572 | 9,561 | 2,011 | 21.0 | |||||
| Same Properties | 622,239 | 608,705 | 13,534 | 2.2 | |||||
| Non-Same Properties | 144,495 | 105,195 | 39,300 | 37.4 | |||||
| Total revenues | 766,734 | 713,900 | 52,834 | 7.4 | |||||
| Same Properties | 185,721 | 178,544 | 7,177 | 4.0 | |||||
| Non-Same Properties | 31,533 | 33,290 | (1,757) | (5.3) | |||||
| Rental operations | 217,254 | 211,834 | 5,420 | 2.6 | |||||
| Same Properties | 436,518 | 430,161 | 6,357 | 1.5 | |||||
| Non-Same Properties | 112,962 | 71,905 | 41,057 | 57.1 | |||||
| Net operating income | $549,480 | $502,066 | $47,414 | 9.4% | |||||
| Net operating income – Same Properties | $436,518 | $430,161 | $6,357 | 1.5% | |||||
| Straight-line rent revenue | (17,856) | (26,981) | 9,125 | (33.8) | |||||
| Amortization of acquired below-market leases | (15,910) | (15,619) | (291) | 1.9 | |||||
| Net operating income – Same Properties (cash basis) | $402,752 | $387,561 | $15,191 | 3.9% |
Income from rentals
Total income from rentals for the three months ended June 30, 2024 increased by $50.8 million, or 7.2%, to $755.2 million,
compared to $704.3 million for the three months ended June 30, 2023, as a result of an increase in rental revenues and tenant
recoveries, as discussed below.
Rental revenues
Total rental revenues for the three months ended June 30, 2024 increased by $38.9 million, or 7.2%, to $576.8 million,
compared to $537.9 million for the three months ended June 30, 2023. The increase was primarily due to an increase in rental
revenues from our Non-Same Properties related to 2.7 million RSF of development and redevelopment projects placed into service
subsequent to April 1, 2023 and four operating properties aggregating 486,610 RSF acquired subsequent to April 1, 2023.
Rental revenues from our Same Properties for the three months ended June 30, 2024 increased by $10.3 million, or 2.3%, to
$464.9 million, compared to $454.6 million for the three months ended June 30, 2023. The increase was primarily due to rental rate
increases on lease renewals and re-leasing of space since April 1, 2023.
Tenant recoveries
Tenant recoveries for the three months ended June 30, 2024 increased by $11.9 million, or 7.1%, to $178.3 million, compared
to $166.5 million for the three months ended June 30, 2023. This increase was primarily from our Non-Same Properties related to our
development and redevelopment projects placed into service and properties acquired subsequent to April 1, 2023, as discussed above
under “Rental revenues.”
Same Properties’ tenant recoveries for the three months ended June 30, 2024 increased by $3.1 million, or 2.0%, to
$156.9 million, compared to $153.8 million for the three months ended June 30, 2023, primarily due to higher operating expenses
during the three months ended June 30, 2024, as discussed under “Rental operations” below. As of June 30, 2024, 94% of our leases
(on an annual rental revenue basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance,
utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to
base rent.
Rental operations
Total rental operating expenses for the three months ended June 30, 2024 increased by $5.4 million, or 2.6%, to
$217.3 million, compared to $211.8 million for the three months ended June 30, 2023. The increase was primarily due to incremental
expenses related to our Same Properties, as discussed below.
Same Properties’ rental operating expenses increased by $7.2 million, or 4.0%, to $185.7 million during the three months
ended June 30, 2024, compared to $178.5 million for the three months ended June 30, 2023, primarily as the result of increases in
(i) utility expenses aggregating $4.2 million, due to higher rates, and (ii) property taxes aggregating $3.3 million, primarily due to annual
regulatory increases of up to 2% in California and increases from reassessments in values due to sales of partial interests.
Depreciation and amortization
Depreciation and amortization expense for the three months ended June 30, 2024 increased by $17.2 million, or 6.3%, to
$290.7 million, compared to $273.6 million for the three months ended June 30, 2023. The increase was primarily due to additional
depreciation from development and redevelopment projects placed into service and properties acquired, as discussed above under
“Rental revenues.”
General and administrative expenses
General and administrative expenses for the three months ended June 30, 2024 decreased by $1.3 million, or 2.7%, to
$44.6 million, compared to $45.9 million for the three months ended June 30, 2023. The decrease was primarily due to reduction in
compensation costs due to the resignations of two of our executive officers in the second half of 2023. As a percentage of net operating
income, our general and administrative expenses for the trailing twelve months ended June 30, 2024 and 2023 were 9.2% and 9.7%,
respectively.
Interest expense
Interest expense for the three months ended June 30, 2024 and 2023 consisted of the following (dollars in thousands):
| Three Months Ended June 30, | ||||||
| Component | 2024 | 2023 | Change | |||
| Gross interest | $126,828 | $108,746 | $18,082 | |||
| Capitalized interest | (81,039) | (91,674) | 10,635 | |||
| Interest expense | $45,789 | $17,072 | $28,717 | |||
| Average debt balance outstanding(1) | $12,454,474 | $11,346,604 | $1,107,870 | |||
| Weighted-average annual interest rate(2) | 4.1% | 3.8% | 0.3% |
(1)Represents the average debt balance outstanding during the respective periods.
(2)Represents annualized total interest incurred divided by the average debt balance outstanding during the respective periods.
The net change in interest expense during the three months ended June 30, 2024, compared to the three months ended June
30, 2023, resulted from the following (dollars in thousands):
| Component | Interest Rate(1) | Effective Date | Change | ||||||
| Increases in interest incurred due to: | |||||||||
| Issuances of debt: | |||||||||
| $600 million of unsecured senior notes payable due 2054 | 5.71% | February 2024 | $8,440 | ||||||
| $400 million of unsecured senior notes payable due 2036 | 5.38% | February 2024 | 5,264 | ||||||
| Increases in construction borrowings and interest rates under secured notes payable | 8.14% | 1,145 | |||||||
| Higher average outstanding balances and/or rate increases on borrowings under commercial paper program and unsecured senior line of credit | 2,382 | ||||||||
| Other increase in interest | 851 | ||||||||
| Change in gross interest | 18,082 | ||||||||
| Decrease in capitalized interest | 10,635 | ||||||||
| Total change in interest expense | $28,717 | ||||||||
(1)Represents the weighted-average interest rate as of the end of the applicable period, including amortization of loan fees, amortization of debt premiums (discounts), and
other bank fees.
Impairment of real estate
In 2020 and 2022, we executed purchase agreements for two potential acquisitions in our Greater Boston market, which
aggregated 1.4 million of future development RSF. The total purchase price aggregated $366.8 million, and we initially expected to
close these acquisitions after 2024. Our intent for each site included the demolition of existing buildings upon expiration of the existing
in-place leases and the development of life science properties. During the three months ended June 30, 2024, we decided to no longer
proceed with these acquisitions as a result of the current macroeconomic environment that negatively impacted the financial outlooks
for these projects. As a result, we recognized impairment charges aggregating $30.8 million, primarily consisting of the pre-acquisition
costs related to these potential acquisitions.
During the three months ended June 30, 2023, we recognized real estate impairment charges aggregating $168.6 million,
primarily to reduce the carrying amount of a three-building office campus in our Route 128 submarket to its current fair value less costs
to sell.
Investment loss
During the three months ended June 30, 2024, we recognized investment loss aggregating $43.7 million. This loss consisted
of unrealized losses of $20.2 million primarily resulting from the decrease in fair values of our investments in publicly traded entities and
a $44.1 million resulting from reclassifications of unrealized gains recognized in prior periods into realized gains upon the sales of
investments during the three months ended June 30, 2024. The investment loss also included realized gains of $33.4 million, partially
offset by impairment charges of $12.8 million primarily related to two non-real estate investments in privately held entities that do not
report NAV.
During the three months ended June 30, 2023, we recognized an investment loss aggregating $78.3 million, which consisted
of $77.9 million of unrealized losses and $371 thousand of realized losses.
For more information about our investments, refer to Note 7 – “Investments” to our unaudited consolidated financial statements
in Item 1. For our impairments accounting policy, refer to “Investments” in Note 2 – “Summary of significant accounting policies” to our
unaudited consolidated financial statements in Item 1.
Gain on sales of real estate
During the three months ended June 30, 2023, we recognized $214.8 million of gains related to the completion of six real
estate dispositions. The gains were classified in gain on sales of real estate within our consolidated statements of operations for the
three months ended June 30, 2023.
Other comprehensive loss
Total other comprehensive loss for the three months ended June 30, 2024 decreased by $7.8 million to aggregate net
unrealized losses of $3.9 million, compared to net unrealized gains of $3.9 million for the three months ended June 30, 2023, primarily
in connection with the foreign currency translation related to our operations in Canada.
Comparison of results for the six months ended June 30, 2024 to the six months ended June 30, 2023
The following table presents a comparison of the components of net operating income for our Same Properties and Non-Same
Properties for the six months ended June 30, 2024, compared to the six months ended June 30, 2023 (dollars in thousands). Refer to
“Definitions and reconciliations” in Item 2 for definitions of “Tenant recoveries” and “Net operating income” and their reconciliations from
the most directly comparable financial measures presented in accordance with GAAP, income from rentals and net income,
respectively.
| Six Months Ended June 30, | |||||||||
| 2024 | 2023 | $ Change | % Change | ||||||
| Income from rentals: | |||||||||
| Same Properties | $910,423 | $893,008 | $17,415 | 2.0% | |||||
| Non-Same Properties | 247,812 | 163,183 | 84,629 | 51.9 | |||||
| Rental revenues | 1,158,235 | 1,056,191 | 102,044 | 9.7 | |||||
| Same Properties | 311,894 | 303,702 | 8,192 | 2.7 | |||||
| Non-Same Properties | 40,584 | 32,395 | 8,189 | 25.3 | |||||
| Tenant recoveries | 352,478 | 336,097 | 16,381 | 4.9 | |||||
| Income from rentals | 1,510,713 | 1,392,288 | 118,425 | 8.5 | |||||
| Same Properties | 715 | 737 | (22) | (3.0) | |||||
| Non-Same Properties | 24,414 | 21,670 | 2,744 | 12.7 | |||||
| Other income | 25,129 | 22,407 | 2,722 | 12.1 | |||||
| Same Properties | 1,223,032 | 1,197,447 | 25,585 | 2.1 | |||||
| Non-Same Properties | 312,810 | 217,248 | 95,562 | 44.0 | |||||
| Total revenues | 1,535,842 | 1,414,695 | 121,147 | 8.6 | |||||
| Same Properties | 366,985 | 350,672 | 16,313 | 4.7 | |||||
| Non-Same Properties | 68,583 | 68,095 | 488 | 0.7 | |||||
| Rental operations | 435,568 | 418,767 | 16,801 | 4.0 | |||||
| Same Properties | 856,047 | 846,775 | 9,272 | 1.1 | |||||
| Non-Same Properties | 244,227 | 149,153 | 95,074 | 63.7 | |||||
| Net operating income | $1,100,274 | $995,928 | $104,346 | 10.5% | |||||
| Net operating income – Same Properties | $856,047 | $846,775 | $9,272 | 1.1% | |||||
| Straight-line rent revenue | (32,773) | (51,793) | 19,020 | (36.7) | |||||
| Amortization of acquired below-market leases | (30,910) | (30,758) | (152) | 0.5 | |||||
| Net operating income – Same Properties (cash basis) | $792,364 | $764,224 | $28,140 | 3.7% |
Income from rentals
Total income from rentals for the six months ended June 30, 2024 increased by $118.4 million, or 8.5%, to $1.5 billion,
compared to $1.4 billion for the six months ended June 30, 2023, as a result of increase in rental revenues and tenant recoveries, as
discussed below.
Rental revenues
Total rental revenues for the six months ended June 30, 2024 increased by $102.0 million, or 9.7%, to $1.2 billion, compared
to $1.1 billion for the six months ended June 30, 2023. The increase was primarily due to an increase in rental revenues from our Non-
Same Properties related to 3.9 million RSF of development and redevelopment projects placed into service subsequent to January 1,
2023 and five operating properties aggregating 734,353 RSF acquired subsequent to January 1, 2023.
Rental revenues from our Same Properties for the six months ended June 30, 2024 increased by $17.4 million, or 2.0%, to
$910.4 million, compared to $893.0 million for the six months ended June 30, 2023. The increase was primarily due to rental rate
increases on lease renewals and re-leasing of space since January 1, 2023.
Tenant recoveries
Tenant recoveries for the six months ended June 30, 2024 increased by $16.4 million, or 4.9%, to $352.5 million, compared to
$336.1 million for the six months ended June 30, 2023. This increase was partially from our Non-Same Properties related to our
development and redevelopment projects placed into service and properties acquired subsequent to January 1, 2023, as discussed
above under “Rental revenues.”
Same Properties’ tenant recoveries for the six months ended June 30, 2024 increased by $8.2 million, or 2.7%, to
$311.9 million, compared to $303.7 million for the six months ended June 30, 2023, primarily due to higher operating expenses during
the six months ended June 30, 2024, as discussed under “Rental operations” below. As of June 30, 2024, 94% of our leases (on an
annual rental revenue basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities,
repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent.
Rental operations
Total rental operating expenses for the six months ended June 30, 2024 increased by $16.8 million, or 4.0%, to $435.6 million,
compared to $418.8 million for the six months ended June 30, 2023, primarily due to the increase in our Same Properties’ rental
operating expenses consisting of (i) the increase in property taxes aggregating $6.5 million, primarily due to annual regulatory increases
of up to 2% in California and increases from reassessments in values due to sales of partial interests, (ii) the increase in utilities
expenses aggregating $3.3 million, primarily due to higher rates; and (iii) the increase in property insurance expenses aggregating $3.0
million, primarily due to higher insurance premiums.
Depreciation and amortization
Depreciation and amortization expense for the six months ended June 30, 2024 increased by $39.4 million, or 7.3%, to
$578.3 million, compared to $538.9 million for the six months ended June 30, 2023. The increase was primarily due to additional
depreciation from development and redevelopment projects placed into service and properties acquired, as discussed above under
“Rental revenues.”
General and administrative expenses
General and administrative expenses for the six months ended June 30, 2024 decreased by $2.4 million, or 2.5%, to
$91.7 million, compared to $94.1 million for the six months ended June 30, 2023. The decrease was primarily due to reduction in
compensation costs due to the resignations of two of our executive officers in the second half of 2023. As a percentage of net operating
income, our general and administrative expenses for the trailing twelve months ended June 30, 2024 and 2023 were 9.2% and 9.7%,
respectively.
Interest expense
Interest expense for the six months ended June 30, 2024 and 2023 consisted of the following (dollars in thousands):
| Six Months Ended June 30, | ||||||
| Component | 2024 | 2023 | Change | |||
| Gross interest | $249,508 | $209,570 | $39,938 | |||
| Capitalized interest | (162,879) | (178,744) | 15,865 | |||
| Interest expense | $86,629 | $30,826 | $55,803 | |||
| Average debt balance outstanding(1) | $12,260,781 | $11,001,895 | $1,258,886 | |||
| Weighted-average annual interest rate(2) | 4.1% | 3.8% | 0.3% | |||
(1)Represents the average debt balance outstanding during the respective periods.
(2)Represents annualized total interest incurred divided by the average debt balance outstanding during the respective periods.
The net change in interest expense during the six months ended June 30, 2024, compared to the six months ended June 30,
2023, resulted from the following (dollars in thousands):
| Component | Interest Rate(1) | Effective Date | Change | ||||||
| Increases in interest incurred due to: | |||||||||
| Issuances of debt: | |||||||||
| $500 million of unsecured senior notes payable due 2053 | 5.26% | February 2023 | $3,225 | ||||||
| $500 million of unsecured senior notes payable due 2035 | 4.88% | February 2023 | 2,982 | ||||||
| $600 million of unsecured senior notes payable due 2054 | 5.71% | February 2024 | 12,754 | ||||||
| $400 million of unsecured senior notes payable due 2036 | 5.38% | February 2024 | 7,954 | ||||||
| Increases in construction borrowings and interest rates under secured notes payable | 8.14% | 2,531 | |||||||
| Higher average outstanding balances and/or rate increases on borrowings under commercial paper program and unsecured senior line of credit | 8,801 | ||||||||
| Other increase in interest | 1,691 | ||||||||
| Change in gross interest | 39,938 | ||||||||
| Decrease in capitalized interest | 15,865 | ||||||||
| Total change in interest expense | $55,803 |
(1)Represents the weighted-average interest rate as of the end of the applicable period, including amortization of loan fees, amortization of debt premiums (discounts), and
other bank fees.
Impairment of real estate
In 2020 and 2022, we executed purchase agreements for two potential acquisitions in our Greater Boston market, which
aggregated 1.4 million of future development RSF. The total purchase price aggregated $366.8 million, and we initially expected to
close these acquisitions after 2024. Our intent for each site included the demolition of existing buildings upon expiration of the existing
in-place leases and the development of life science properties. During the three months ended June 30, 2024, we decided to no longer
proceed with these acquisitions as a result of the current macroeconomic environment that negatively impacted the financial outlooks
for these projects. As a result, we recognized impairment charges aggregating $30.8 million, primarily consisting of the pre-acquisition
costs related to these potential acquisitions.
During the six months ended June 30, 2023, we recognized real estate impairment charges aggregating $168.6 million,
primarily to reduce the carrying amount of a three-building office campus in our Route 128 submarket to its current fair value less costs
to sell.
For more information, refer to “Sales of real estate assets and impairment charges” in Note 3 – “Investments in real estate” to
our unaudited consolidated financial statements in Item 1.
Investment loss
During the six months ended June 30, 2024, we recognized an investment loss aggregating $376 thousand. This loss
consisted of unrealized losses primarily resulting from the reclassifications of unrealized gains of $35.1 million recognized in prior
periods into realized gains upon the realization of investments during the six months ended June 30, 2024. The investment loss also
included realized gains of $62.2 million, partially offset by impairment charges of $27.5 million primarily related to non-real estate
investments in privately held entities that do not report NAV.
During the six months ended June 30, 2023, we recognized investment loss aggregating $123.4 million, which consisted of
$20.4 million of realized gains and $143.8 million of unrealized losses.
For more information about our investments, refer to Note 7 – “Investments” to our unaudited consolidated financial statements
in Item 1. For our impairments accounting policy, refer to “Investments” in Note 2 – “Summary of significant accounting policies” to our
unaudited consolidated financial statements in Item 1.
Gain on sales of real estate
During the six months ended June 30, 2023, we recognized $214.8 million of gains related to the dispositions of six real estate
assets. The gains were classified in gain on sales of real estate within our consolidated statement of operations for the six months
ended June 30, 2023.
Other comprehensive loss
Total other comprehensive loss for the six months ended June 30, 2024 decreased by $16.0 million to aggregate net
unrealized losses of $11.8 million, compared to net unrealized gains of $4.2 million for the six months ended June 30, 2023, primarily in
connection with the foreign currency translation related to our operations in Canada.
Summary of capital expenditures
Our construction spending for the six months ended June 30, 2024 and projected spending for the year ending December 31,
2024 consisted of the following (in thousands):
| Six Months Ended June 30, 2024 | Projected Midpoint for the Year Ending December 31, 2024 | ||||||||
| Construction of Class A/A+ properties: | |||||||||
| Active construction projects | |||||||||
| Under construction and committed near-term projects(1) and projects expected to commence active construction in 2024(2) | $ | 888,641 | $ | 1,778,000 | |||||
| Future pipeline pre-construction | |||||||||
| Primarily mega campus expansion pre-construction work (entitlement, design, and site work) | 257,218 | 652,000 | |||||||
| Revenue- and non-revenue-enhancing capital expenditures | 115,659 | 250,000 | |||||||
| Construction spend (before contributions from noncontrolling interests) | 1,261,518 | 2,680,000 | |||||||
| Contributions from noncontrolling interests (consolidated real estate joint ventures) | (176,497) | (430,000) | (3) | ||||||
| Total construction spending | $ | 1,085,021 | $ | 2,250,000 | |||||
| 2024 guidance range | $1,950,000 – $2,550,000 | ||||||||
(1)Includes projects under construction aggregating 4.9 million RSF and one committed near-term project aggregating 492,570 RSF expected to commence construction
during the next two years after June 30, 2024, which are 61% leased/negotiating and expected to generate $480 million in incremental annual net operating income
primarily commencing from the third quarter of 2024 through the first quarter of 2028.
(2)Includes certain priority anticipated development and redevelopment projects expected to commence active construction in 2024, subject to market conditions and
leasing. Refer to “Investments in real estate” under “Definitions and reconciliations” in Item 2 for additional details, including value-creation square feet currently included
in rental properties.
(3)Represents contractual capital commitments expected from existing consolidated real estate joint venture partners to fund construction.
Projected capital contributions from partners in consolidated real estate joint ventures to fund construction
The following table summarizes projected capital contributions from partners in our existing consolidated joint ventures to fund
construction through 2027 (in thousands):
| Projected timing | Amount(1) | |
| July 1, 2024 through December 31, 2024 | $253,503 | |
| 2025 through 2027 | 804,528 | |
| Total | $1,058,031 | |
(1)Represents reductions to our consolidated construction spending.
Capitalization of interest
Our construction spending includes capitalized interest. The table below provides key categories of interest capitalized during
the six months ended June 30, 2024:
| Six Months Ended June 30, 2024 | Upon Completion of Construction | |||||||||
| Average Real Estate Basis Capitalized | Percentage of Total Capitalized Interest | RSF | Potential Growth in Operating RSF | |||||||
| Construction of Class A/A+ properties: | ||||||||||
| Active construction projects | ||||||||||
| Under construction and committed near-term projects | $2,723,268 | 34% | 5,432,915 | 77% | ||||||
| Future pipeline pre-construction | ||||||||||
| Priority anticipated projects | 624,317 | (1) | 8 | 2,670,922 | ||||||
| Primarily mega campus expansion pre-construction work (entitlement, design, and site work) | 3,579,182 | (1) | 44 | 27,261,766 | ||||||
| Smaller redevelopments and repositioning capital projects | 1,123,183 | 14 | N/A | |||||||
| $8,049,950 | 100% | 35,365,603 | ||||||||
(1)Average real estate basis capitalized related to our future pipeline pre-construction includes 32% from four key active and future value-creation projects on mega
campuses.
Projected results
We present updated guidance for EPS attributable to Alexandria’s common stockholders – diluted, 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, based on our current view of existing market conditions and other assumptions for the
year ending December 31, 2024 as set forth in the tables below. The tables below also provide a reconciliation of EPS attributable to
Alexandria’s common stockholders – diluted, the most directly comparable financial measure presented in accordance with GAAP, to
funds from operations per share and funds from operations per share, as adjusted, non-GAAP measures, and other key assumptions
included in our updated guidance for the year ending December 31, 2024. 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” at the beginning of this
Item 2.
| Projected 2024 Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s Common Stockholders – Diluted | As of 7/22/24 | As of 4/22/24 | ||||||
| Earnings per share(1) | $2.98 to $3.10 | $3.60 to $3.72 | ||||||
| Depreciation and amortization of real estate assets | 5.95 | 5.95 | ||||||
| Impairment of real estate – rental properties and land | 0.01 | — | ||||||
| Allocation of unvested restricted stock awards | (0.05) | (0.06) | ||||||
| Funds from operations per share(2) | $8.89 to $9.01 | $9.49 to $9.61 | ||||||
| Unrealized losses (gains) on non-real estate investments | 0.20 | (0.17) | ||||||
| Impairment of non-real estate investments | 0.16 | 0.09 | ||||||
| Impairment of real estate | 0.17 | — | ||||||
| Allocation to unvested restricted stock awards | (0.01) | — | ||||||
| Funds from operations per share, as adjusted(2) | $9.41 to $9.53 | $9.41 to $9.53 | ||||||
| Midpoint | $9.47 | $9.47 | ||||||
(1)Excludes unrealized gains or losses on non-real estate investments after June 30, 2024 that are required to be recognized in earnings and are excluded from funds from
operations per share, as adjusted.
(2)Refer to “Definitions and reconciliations” in Item 2 for additional information.
| Key Assumptions**(1)** (Dollars in millions) | 2024 Guidance | ||||
| Low | High | ||||
| Occupancy percentage for operating properties in North America as of December 31, 2024 | 94.6% | 95.6% | |||
| Lease renewals and re-leasing of space: | |||||
| Rental rate increases | 11.0% | 19.0% | |||
| Rental rate increases (cash basis) | 5.0% | 13.0% | |||
| Same property performance: | |||||
| Net operating income increases | 0.5% | 2.5% | |||
| Net operating income increases (cash basis) | 3.0% | 5.0% | |||
| Straight-line rent revenue | $169 | $184 | |||
| General and administrative expenses | $181 | $191 | |||
| Capitalization of interest | $325 | $355 | |||
| Interest expense | $154 | $184 | |||
| Realized gains on non-real estate investments(2) | $95 | $125 | |||
(1)Our assumptions presented in the table above are subject to a number of variables and uncertainties, including those discussed as “Forward-looking statements” under
Part I; “Item 1A. Risk factors”; and “Item 7. Management’s discussion and analysis of financial condition and results of operations” of our annual report on Form 10-K for
the year ended December 31, 2023, as well as in “Item 1A. Risk factors” within “Part II – Other information” of this quarterly report on Form 10-Q. To the extent our full-
year earnings guidance is updated during the year, we will provide additional disclosure supporting reasons for any significant changes to such guidance.
(2)Represents realized gains and losses included in funds from operations per share – diluted, as adjusted, and excludes significant impairments realized on non-real
estate investments, if any. Refer to Note 7 – “Investments” to our unaudited consolidated financial statements in Item 1 for additional details.
| Key Credit Metric Targets**(1)** | ||
| Net debt and preferred stock to Adjusted EBITDA – fourth quarter of 2024 annualized | Less than or equal to 5.1x | |
| Fixed-charge coverage ratio – fourth quarter of 2024 annualized | Greater than or equal to 4.5x | |
(1)Refer to “Definitions and reconciliations” in Item 2 for additional information.
Consolidated and unconsolidated real estate joint ventures
We present components of balance sheet and operating results information for the noncontrolling interest share of our
consolidated real estate joint ventures and for our share of investments in unconsolidated real estate joint ventures to help investors
estimate balance sheet and operating results information related to our partially owned entities. These amounts are estimated by
computing, for each joint venture that we consolidate in our financial statements, the noncontrolling interest percentage of each financial
item to arrive at the cumulative noncontrolling interest share of each component presented. In addition, for our real estate joint ventures
that we do not control and do not consolidate, we apply our economic ownership percentage to the unconsolidated real estate joint
ventures to arrive at our proportionate share of each component presented. Refer to Note 4 – “Consolidated and unconsolidated real
estate joint ventures” to our unaudited consolidated financial statements in Item 1 for further discussion.
| Consolidated Real Estate Joint Ventures | ||||||||
| Property/Market/Submarket | Noncontrolling(1) Interest Share | Operating RSF at 100% | ||||||
| 50 and 60 Binney Street/Greater Boston/Cambridge/Inner Suburbs | 66.0% | 532,395 | ||||||
| 75/125 Binney Street/Greater Boston/Cambridge/Inner Suburbs | 60.0% | 388,269 | ||||||
| 100 and 225 Binney Street and 300 Third Street/Greater Boston/Cambridge/Inner Suburbs | 70.0% | 870,106 | ||||||
| 99 Coolidge Avenue/Greater Boston/Cambridge/Inner Suburbs | 25.0% | 116,414 | (2) | |||||
| 15 Necco Street/Greater Boston/Seaport Innovation District | 43.3% | 345,996 | ||||||
| 285, 299, 307, and 345 Dorchester Avenue/Greater Boston/Seaport Innovation District | 40.0% | — | (2) | |||||
| Alexandria Center® for Science and Technology – Mission Bay/San Francisco Bay Area/ Mission Bay(3) | 75.0% | 999,866 | ||||||
| 1450 Owens Street/San Francisco Bay Area/Mission Bay | 73.7% | (4) | — | (2) | ||||
| 601, 611, 651(2), 681, 685, and 701 Gateway Boulevard/San Francisco Bay Area/ South San Francisco | 50.0% | 831,326 | ||||||
| 751 Gateway Boulevard/San Francisco Bay Area/South San Francisco | 49.0% | 230,592 | ||||||
| 211(2) and 213 East Grand Avenue/San Francisco Bay Area/South San Francisco | 70.0% | 300,930 | ||||||
| 500 Forbes Boulevard/San Francisco Bay Area/South San Francisco | 90.0% | 155,685 | ||||||
| Alexandria Center® for Life Science – Millbrae/San Francisco Bay Area/South San Francisco | 52.3% | — | (2) | |||||
| 3215 Merryfield Row/San Diego/Torrey Pines | 70.0% | 170,523 | ||||||
| Campus Point by Alexandria/San Diego/University Town Center(5) | 45.0% | 1,342,164 | ||||||
| 5200 Illumina Way/San Diego/University Town Center | 49.0% | 792,687 | ||||||
| 9625 Towne Centre Drive/San Diego/University Town Center | 70.0% | 163,648 | ||||||
| SD Tech by Alexandria/San Diego/Sorrento Mesa(6) | 50.0% | 884,270 | ||||||
| Pacific Technology Park/San Diego/Sorrento Mesa | 50.0% | 544,352 | ||||||
| Summers Ridge Science Park/San Diego/Sorrento Mesa(7) | 70.0% | 316,531 | ||||||
| 1201 and 1208 Eastlake Avenue East and 199 East Blaine Street/Seattle/Lake Union | 70.0% | 321,115 | ||||||
| 400 Dexter Avenue North/Seattle/Lake Union | 70.0% | 290,754 | ||||||
| 800 Mercer Street/Seattle/Lake Union | 40.0% | — | (2) | |||||
| Unconsolidated Real Estate Joint Ventures | ||||||||
| Property/Market/Submarket | Our Ownership Share(8) | Operating RSF at 100% | ||||||
| 1655 and 1725 Third Street/San Francisco Bay Area/Mission Bay | 10.0% | 586,208 | ||||||
| 1401/1413 Research Boulevard/Maryland/Rockville | 65.0% | (9) | (10) | |||||
| 1450 Research Boulevard/Maryland/Rockville | 73.2% | (9) | 42,679 | |||||
| 101 West Dickman Street/Maryland/Beltsville | 58.2% | (9) | 135,423 | |||||
Refer to “Joint venture financial information” under “Definitions and reconciliations” in Item 2 for additional details.
(1)In addition to the consolidated real estate joint ventures listed, various joint venture partners hold insignificant noncontrolling interests in three other real estate joint
ventures in North America.
(2)Represents a property currently under construction or in our value-creation pipeline. Refer to “New Class A/A+ development and redevelopment properties” in Item 2 for
additional details.
(3)Includes 409 and 499 Illinois Street, 1500 and 1700 Owens Street, and 455 Mission Bay Boulevard South.
(4)During the six months ended June 30, 2024, our equity ownership decreased from 40.6% to 26.3% based on continued funding of construction costs by our joint venture
partner and a reallocation of equity to our joint venture partner of $30.2 million from us. The noncontrolling interest share of our joint venture partner is anticipated to
increase to 75% and ours to decrease to 25% as our partner contributes additional equity to fund the construction of the project.
(5)Includes 10210, 10260, 10290, and 10300 Campus Point Drive and 4110, 4135, 4155, 4161, 4165, 4224, and 4242 Campus Point Court.
(6)Includes 9605, 9645, 9675, 9685, 9725, 9735, 9805, 9808, 9855, and 9868 Scranton Road and 10055, 10065, and 10075 Barnes Canyon Road.
(7)Includes 9965, 9975, 9985, and 9995 Summers Ridge Road.
(8)In addition to the unconsolidated real estate joint ventures listed, we hold an interest in one other insignificant unconsolidated real estate joint venture in North America.
(9)Represents a joint venture with a local real estate operator in which our joint venture partner manages the day-to-day activities that significantly affect the economic
performance of the joint venture.
(10)Represents a joint venture with a distinguished retail real estate developer for a retail shopping center aggregating 84,837 RSF.
The following table presents key terms related to our unconsolidated real estate joint ventures’ secured loans as of June 30,
2024 (dollars in thousands):
| Maturity Date | Stated Rate | Interest Rate(1) | At 100% | Our Share | ||||||||||
| Unconsolidated Joint Venture | Aggregate Commitment | Debt Balance(2) | ||||||||||||
| 1401/1413 Research Boulevard | 12/23/24 | 2.70% | 3.31% | $28,500 | $28,417 | 65.0% | ||||||||
| 1655 and 1725 Third Street | 3/10/25 | (3) | 4.50% | 4.57% | 600,000 | 599,718 | 10.0% | |||||||
| 101 West Dickman Street | 11/10/26 | SOFR+1.95% | (4) | 7.39% | 26,750 | 18,558 | 58.2% | |||||||
| 1450 Research Boulevard | 12/10/26 | SOFR+1.95% | (4) | 7.45% | 13,000 | 8,598 | 73.2% | |||||||
| $668,250 | $655,291 |
(1)Includes interest expense and amortization of loan fees.
(2)Represents outstanding principal, net of unamortized deferred financing costs, as of June 30, 2024.
(3)The unconsolidated joint venture is early in the process of working with prospective lenders to refinance this secured non-recourse loan. In the event that all or a portion
of the debt cannot be refinanced, we may consider contributing additional equity into this unconsolidated joint venture. As of June 30, 2024, our investment in this
unconsolidated real estate joint venture was $11.2 million.
(4)This loan is subject to a fixed SOFR floor of 0.75%.
The following tables present information related to the operating results and financial positions of our consolidated and
unconsolidated real estate joint ventures as of and for the three and six months ended June 30, 2024 (in thousands):
| Noncontrolling Interest Share of Consolidated Real Estate Joint Ventures | Our Share of Unconsolidated Real Estate Joint Ventures | ||||||
| June 30, 2024 | June 30, 2024 | ||||||
| Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | ||||
| Total revenues | $111,210 | $222,307 | $3,156 | $6,331 | |||
| Rental operations | (31,443) | (62,312) | (995) | (2,019) | |||
| 79,767 | 159,995 | 2,161 | 4,312 | ||||
| General and administrative | (1,004) | (1,682) | (30) | (70) | |||
| Interest | (253) | (469) | (933) | (1,855) | |||
| Depreciation and amortization of real estate assets | (31,364) | (62,268) | (1,068) | (2,102) | |||
| Fixed returns allocated to redeemable noncontrolling interests(1) | 201 | 402 | — | — | |||
| $47,347 | $95,978 | $130 | $285 | ||||
| Straight-line rent and below-market lease revenue | $6,225 | $15,534 | $248 | $530 | |||
| Funds from operations(2) | $78,711 | $158,246 | $1,198 | $2,387 |
Refer to “Joint venture financial information” under “Definitions and reconciliations” in Item 2 for additional details.
(1)Represents an allocation of joint venture earnings to redeemable noncontrolling interests primarily in one property in our South San Francisco submarket. These
redeemable noncontrolling interests earn a fixed return on their investment rather than participate in the operating results of the property.
(2)Refer to “Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’s common stockholders” under “Definitions
and reconciliations” in Item 2 for the definition and its reconciliation from the most directly comparable financial measure presented in accordance with GAAP.
| As of June 30, 2024 | |||
| Noncontrolling Interest Share of Consolidated Real Estate Joint Ventures | Our Share of Unconsolidated Real Estate Joint Ventures | ||
| Investments in real estate | $4,157,101 | $124,994 | |
| Cash, cash equivalents, and restricted cash | 132,692 | 4,128 | |
| Other assets | 431,584 | 12,752 | |
| Secured notes payable | (33,581) | (95,547) | |
| Other liabilities | (279,550) | (5,792) | |
| Redeemable noncontrolling interests | (16,440) | — | |
| $4,391,806 | $40,535 |
During the six months ended June 30, 2024 and 2023, our consolidated real estate joint ventures distributed an aggregate of
$119.9 million and $134.6 million, respectively, to our joint venture partners. Refer to our consolidated statements of cash flows and
Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements in Item 1 for
additional information.
Investments
We hold investments in publicly traded companies and privately held entities primarily involved in the life science industry. The
tables below summarize components of our investment income (loss) and non-real estate investments (in thousands). Refer to Note 7 –
“Investments” to our unaudited consolidated financial statements in Item 1 for additional information.
| June 30, 2024 | Year Ended December 31, 2023 | ||||||||
| Three Months Ended | Six Months Ended | ||||||||
| Realized gains | $20,578 | (1) | $34,704 | (1) | $6,078 | (2) | |||
| Unrealized losses | (64,238) | (3) | (35,080) | (4) | (201,475) | (5) | |||
| Investment loss | $(43,660) | $(376) | $(195,397) | ||||||
| June 30, 2024 | December 31, 2023 | |||||||||
| Investments | Cost | Unrealized Gains | Unrealized Losses | Carrying Amount | Carrying Amount | |||||
| Publicly traded companies | $201,321 | $42,052 | $(90,182) | $153,191 | $159,566 | |||||
| Entities that report NAV | 510,335 | 162,559 | (33,254) | 639,640 | 671,532 | |||||
| Entities that do not report NAV: | ||||||||||
| Entities with observable price changes | 94,509 | 79,609 | (1,007) | 173,111 | 174,268 | |||||
| Entities without observable price changes | 389,124 | — | — | 389,124 | 368,654 | |||||
| Investments accounted for under the equity method | N/A | N/A | N/A | 139,282 | 75,498 | |||||
| June 30, 2024 | $1,195,289 | (6) | $284,220 | $(124,443) | $1,494,348 | $1,449,518 | ||||
| December 31, 2023 | $1,177,072 | $320,445 | $(123,497) | $1,449,518 |
| Public/Private Mix (Cost) | Tenant/Non-Tenant Mix (Cost) | |
85%
Private
15%
Public
29%
Tenant
71%
Non-Tenant
(1)Consists of realized gains of $33.4 million and $62.2 million, partially offset by impairment charges of $12.8 million and $27.5 million during the three and six months
ended June 30, 2024, respectively.
(2)Consists of realized gains of $80.6 million, offset by impairment charges of $74.6 million during the year ended December 31, 2023.
(3)Consists of unrealized losses of $20.2 million primarily resulting from the decrease in fair values of our investments in publicly traded entities and $44.1 million resulting
from accounting reclassifications of unrealized gains recognized in prior periods into realized gains upon our realization of investments during the three months ended
June 30, 2024.
(4)Primarily relates to the accounting reclassifications of unrealized gains recognized in prior periods into realized gains upon our realization of investments during the six
months ended June 30, 2024.
(5)Consists of unrealized losses of $111.6 million primarily resulting from the decrease in the fair value of our investments in privately held entities that report NAV and
$89.9 million resulting from accounting reclassifications of unrealized gains recognized in prior periods into realized gains upon our sales of investments, during the year
ended December 31, 2023.
(6)Represents 2.8% of gross assets as of June 30, 2024. Refer to the definition of “Gross assets” under “Definitions and reconciliations” in Item 2 for additional details.
Liquidity
| Liquidity | Minimal Outstanding Borrowings and Significant Availability on Unsecured Senior Line of Credit | ||||
| $5.6B | (in millions) | ||||
 | |||||
| (In millions) | |||||
| Availability under our unsecured senior line of credit, net of amounts outstanding under our commercial paper program | $4,800 | ||||
| Outstanding forward equity sales agreements(1) | 27 | ||||
| Cash, cash equivalents, and restricted cash | 566 | ||||
| Availability under our secured construction loan | 61 | ||||
| Investments in publicly traded companies | 153 | ||||
| Liquidity as of June 30, 2024 | $5,607 | ||||
(1)Represents expected net proceeds from the future settlement of 230 thousand shares of common stock under forward equity sales agreements after underwriter
discounts.
We expect to meet certain long-term liquidity requirements, such as requirements for development, redevelopment, other
construction projects, capital improvements, tenant improvements, property acquisitions, leasing costs, non-revenue-enhancing capital
expenditures, scheduled debt maturities, distributions to noncontrolling interests, and payment of dividends through net cash provided
by operating activities, periodic asset sales, strategic real estate joint ventures, long-term secured and unsecured indebtedness,
borrowings under our unsecured senior line of credit, issuances under our commercial paper program, and issuances of additional debt
and/or equity securities.
We also expect to continue meeting our short-term liquidity and capital requirements, as further detailed in this section,
generally through our working capital and net cash provided by operating activities. We believe that the net cash provided by operating
activities will continue to be sufficient to enable us to make the distributions necessary to continue qualifying as a REIT.
For additional information on our liquidity requirements related to our contractual obligations and commitments, refer to
Note 5 – “Leases” and Note 10 – “Secured and unsecured senior debt” to our unaudited consolidated financial statements in Item 1.
Over the next several years, our balance sheet, capital structure, and liquidity objectives are as follows:
- Retain cash flows from operating activities after payment of dividends and distributions to noncontrolling interests for
investment in development and redevelopment projects and/or acquisitions;
-
Maintain significant balance sheet liquidity;
-
Improve credit profile and relative long-term cost of capital;
-
Maintain diverse sources of capital, including sources from net cash provided by operating activities, unsecured debt,
secured debt, selective real estate asset sales, strategic real estate joint ventures, non-real estate investment sales, and
common stock;
-
Maintain commitment to long-term capital to fund growth;
-
Maintain prudent laddering of debt maturities;
-
Maintain solid credit metrics;
-
Prudently manage variable-rate debt exposure;
-
Maintain a large, unencumbered asset pool to provide financial flexibility;
-
Fund common stock dividends and distributions to noncontrolling interests from net cash provided by operating activities;
-
Manage a disciplined level of value-creation projects as a percentage of our gross real estate assets; and
-
Maintain high levels of pre-leasing and percentage leased in value-creation projects.
The following table presents the availability under our unsecured senior line of credit, net of amounts outstanding under our
commercial paper program; outstanding forward equity sales agreements; cash, cash equivalents, and restricted cash; availability
under our secured construction loan; and investments in publicly traded companies as of June 30, 2024 (in thousands):
| Description | Stated Rate | Aggregate Commitments | Outstanding Balance(1) | Remaining Commitments/ Liquidity | ||||
| Availability under our unsecured senior line of credit, net of amounts outstanding under our commercial paper program | SOFR+0.855% | $5,000,000 | $199,552 | $4,800,000 | ||||
| Outstanding forward equity sales agreements(2) | 27,488 | |||||||
| Cash, cash equivalents, and restricted cash | 565,853 | |||||||
| Construction loan | SOFR+2.70% | $195,300 | $134,323 | 60,652 | ||||
| Investments in publicly traded companies | 153,191 | |||||||
| Liquidity as of June 30, 2024 | $5,607,184 |
(1)Represents outstanding principal, net of unamortized deferred financing costs, as of June 30, 2024.
(2)Represents expected net proceeds from the future settlement of 230 thousand shares of common stock under forward equity sales agreements after underwriter
discounts.
Cash, cash equivalents, and restricted cash
As of June 30, 2024 and December 31, 2023, we had $565.9 million and $660.8 million, respectively, of cash, cash
equivalents, and restricted cash. We expect existing cash, cash equivalents, and restricted cash, net cash provided by operating
activities, proceeds from real estate asset sales, sales of partial interests, strategic real estate joint ventures, non-real estate investment
sales, borrowings under our unsecured senior line of credit, issuances under our commercial paper program, issuances of unsecured
senior notes payable, borrowings under our secured construction loans, and issuances of common stock to continue to be sufficient to
fund our operating activities and cash commitments for investing and financing activities, such as regular quarterly dividends,
distributions to noncontrolling interests, scheduled debt repayments, acquisitions, and certain capital expenditures, including
expenditures related to construction activities.
Cash flows
We report and analyze our cash flows based on operating activities, investing activities, and financing activities. The following
table summarizes changes in our cash flows for the six months ended June 30, 2024 and 2023 (in thousands):
| Six Months Ended June 30, | |||||
| 2024 | 2023 | Change | |||
| Net cash provided by operating activities | $752,954 | $784,043 | $(31,089) | ||
| Net cash used in investing activities | $(1,468,479) | $(1,434,101) | $(34,378) | ||
| Net cash provided by financing activities | $620,460 | $752,558 | $(132,098) |
Operating activities
Cash flows provided by operating activities are primarily dependent upon the occupancy level of our asset base, the rental
rates of our leases, the collectibility of rent and recovery of operating expenses from our tenants, the timing of completion of
development and redevelopment projects, and the timing of acquisitions and dispositions of operating properties. Net cash provided by
operating activities for the six months ended June 30, 2024 decreased by $31.1 million to $753.0 million, compared to $784.0 million for
the six months ended June 30, 2023, primarily as a result of fluctuations in working capital due to timing differences.
Investing activities
Cash used in investing activities for the six months ended June 30, 2024 and 2023 consisted of the following (in thousands):
| Six Months Ended June 30, | Increase (Decrease) | ||||
| 2024 | 2023 | ||||
| Sources of cash from investing activities: | |||||
| Proceeds from sales of real estate | $16,670 | $592,630 | $(575,960) | ||
| Sales of and distributions from non-real estate investments | 86,008 | 109,335 | (23,327) | ||
| Change in escrow deposits | — | 13,663 | (13,663) | ||
| 102,678 | 715,628 | (612,950) | |||
| Uses of cash for investing activities: | |||||
| Purchases of real estate | 201,049 | 233,317 | (32,268) | ||
| Additions to real estate | 1,241,214 | 1,812,241 | (571,027) | ||
| Change in escrow deposits | 2,473 | — | 2,473 | ||
| Investments in unconsolidated real estate joint ventures | 3,713 | 332 | 3,381 | ||
| Additions to non-real estate investments | 122,708 | 103,839 | 18,869 | ||
| 1,571,157 | 2,149,729 | (578,572) | |||
| Net cash used in investing activities | $1,468,479 | $1,434,101 | $34,378 |
The increase in net cash used in investing activities for the six months ended June 30, 2024, compared to the six months
ended June 30, 2023, was primarily due to a decrease in cash used for real estate purchases and additions, partially offset by lower
proceeds from sales of real estate. Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements in
Item 1 for additional information.
Financing activities
Cash flows provided by financing activities for the six months ended June 30, 2024 and 2023 consisted of the following
(in thousands):
| Six Months Ended June 30, | |||||
| 2024 | 2023 | Change | |||
| Borrowings under secured notes payable | $14,974 | $32,550 | $(17,576) | ||
| Proceeds from issuance of unsecured senior notes payable | 998,806 | 996,205 | 2,601 | ||
| Borrowings under unsecured senior line of credit | — | 375,000 | (375,000) | ||
| Repayments of borrowings under unsecured senior line of credit | — | (375,000) | 375,000 | ||
| Proceeds from issuances under commercial paper program | 5,006,950 | 1,705,000 | 3,301,950 | ||
| Repayments of borrowings under commercial paper program | (4,906,950) | (1,705,000) | (3,201,950) | ||
| Payments of loan fees | (10,118) | (10,113) | (5) | ||
| Changes related to debt | 1,103,662 | 1,018,642 | 85,020 | ||
| Contributions from and sales of noncontrolling interests | 159,644 | 299,531 | (139,887) | ||
| Distributions to and purchases of noncontrolling interests | (171,871) | (134,617) | (37,254) | ||
| Dividends on common stock | (443,958) | (418,477) | (25,481) | ||
| Taxes paid related to net settlement of equity awards | (27,017) | (12,521) | (14,496) | ||
| Net cash provided by financing activities | $620,460 | $752,558 | $(132,098) |
Capital resources
We expect that our principal liquidity needs for the year ending December 31, 2024 will be satisfied by the following multiple
sources of capital, as shown in the table below. There can be no assurance that our sources and uses of capital will not be materially
higher or lower than these expectations.
| Key Sources and Uses of Capital (In millions) | 2024 Guidance | Certain Completed Items | |||||||
| Range | Midpoint | ||||||||
| Sources of capital: | |||||||||
| Incremental debt | $885 | $885 | $885 | See below | |||||
| Net cash provided by operating activities after dividends | 400 | 500 | 450 | ||||||
| Dispositions, sales of partial interests, and common equity(1) | 1,050 | 2,050 | 1,550 | (1) | |||||
| Total sources of capital | $2,335 | $3,435 | $2,885 | ||||||
| Uses of capital: | |||||||||
| Construction | $1,950 | $2,550 | $2,250 | ||||||
| Acquisitions | 250 | 750 | 500 | $202 | |||||
| Ground lease prepayment(2) | 135 | 135 | 135 | ||||||
| Total uses of capital | $2,335 | $3,435 | $2,885 | ||||||
| Incremental debt (included above): | |||||||||
| Issuance of unsecured senior notes payable(3) | $1,000 | $1,000 | $1,000 | $1,000 | (3) | ||||
| Unsecured senior line of credit, commercial paper program, and other | (115) | (115) | (115) | ||||||
| Incremental debt | $885 | $885 | $885 |
(1)Refer to “Dispositions and sales of partial interests” in Item 2 for additional detail. We expect to continue pursuing our strategy to fund a significant portion of our capital
requirements for the year ending December 31, 2024 with dispositions and sales of partial interests in properties not integral to our mega campus strategy and are
actively pursuing several dispositions and partial interest sale opportunities. As of the date of this report, we completed dispositions aggregating $77.2 million, have
additional pending transactions subject to letters of intent or purchase and sale agreement negotiations aggregating $806.7 million, and entered into new forward equity
sales agreements aggregating $27.8 million, which, in aggregate, represents 59% of the $1.55 billion midpoint of our guidance range.
(2)Refer to Note 16 – “Subsequent events” to our unaudited consolidated financial statements in Item 1 for additional information.
(3)Represents $1.0 billion of unsecured senior notes payable issued in February 2024. Subject to market conditions, we may seek additional opportunities in 2024 to fund
the repayment of our $600.0 million of 3.45% unsecured senior notes payable due on April 30, 2025 through issuance of additional unsecured senior notes payable,
which is not assumed in our current 2024 guidance.
The key assumptions behind the sources and uses of capital in the table above include a favorable real estate transaction and
capital market environments, performance of our core operating properties, lease-up and delivery of current and future development
and redevelopment projects, and leasing activity. Our expected sources and uses of capital are subject to a number of variables and
uncertainties, including those discussed as “Forward-looking statements” under Part I; “Item 1A. Risk factors”; and “Item 7.
Management’s discussion and analysis of financial condition and results of operations” of our annual report on Form 10-K for the year
ended December 31, 2023; as well as in “Item 1A. Risk factors” within “Part II – Other information” of this quarterly report on Form 10-
Q. We expect to update our forecast for key sources and uses of capital on a quarterly basis.
Sources of capital
Net cash provided by operating activities after dividends
We expect to retain $400 million to $500 million of net cash flows from operating activities after payment of common stock
dividends, and distributions to noncontrolling interests for the year ending December 31, 2024. For purposes of this calculation,
changes in operating assets and liabilities are excluded as they represent timing differences. For the year ending December 31, 2024,
we expect our recently delivered projects, our highly pre-leased value-creation projects expected to be delivered, contributions from
Same Properties, and recently acquired income-producing properties to contribute increases in income from rentals, net operating
income, and cash flows. We anticipate contractual near-term growth in annual net operating income (cash basis) of $80 million related
to the commencement of contractual rents on the projects recently placed into service that are near the end of their initial free rent
period. Refer to “Cash flows” in Item 2 for a discussion of cash flows provided by operating activities for the six months ended
June 30, 2024.
Debt
We expect to fund a portion of our capital needs for 2024 from issuances under our commercial paper program, issuances of
unsecured senior notes payable, borrowings under our unsecured senior line of credit, and borrowings under our secured construction
loan.
As of June 30, 2024, our unsecured senior line of credit had aggregate commitments of $5.0 billion and bore an interest rate of
SOFR plus 0.855%. In addition to the cost of borrowing, the unsecured senior line of credit is subject to an annual facility fee of 0.145%
based on the aggregate commitments outstanding. Based upon our ability to achieve certain annual sustainability targets, the interest
rate and facility fee rate are also subject to upward or downward adjustments of up to four basis points with respect to the interest rate
and up to one basis point with respect to the facility fee rate.
Based on certain sustainability metrics achieved in accordance with the terms of our unsecured senior line of credit
agreement, the borrowing rate was reduced for a one-year period by two basis points to SOFR plus 0.855%, from SOFR plus 0.875%,
and the facility fee was reduced by 0.5 basis point to 0.145% from 0.15%. As of June 30, 2024, we had no outstanding balance on our
unsecured line of credit.
In July 2024, we executed an agreement with the lender group to amend and restate our unsecured senior line of credit to,
among other changes, extend the maturity date from January 22, 2028 to January 22, 2030, including extension options that we control.
We expect that the amendment and restatement will become effective in September 2024 upon the satisfaction of certain conditions.
Our commercial paper program provides us with the ability to issue up to $2.5 billion of commercial paper notes with a maturity
of generally 30 days or less and with a maximum maturity of 397 days from the date of issuance. Our commercial paper program is
backed by our unsecured senior line of credit, and at all times we expect to retain a minimum undrawn amount of borrowing capacity
under our unsecured senior line of credit equal to any outstanding balance under our commercial paper program. We use borrowings
under the program to fund short-term capital needs. The notes issued under our commercial paper program are sold under customary
terms in the commercial paper market. They are typically issued at a discount to par, representing a yield to maturity dictated by market
conditions at the time of issuance. In the event we are unable to issue commercial paper notes or refinance outstanding commercial
paper notes under terms equal to or more favorable than those under the unsecured senior line of credit, we expect to borrow under the
unsecured senior line of credit. The commercial paper notes sold during the six months ended June 30, 2024 were issued at a
weighted-average yield to maturity of 5.59%. As of June 30, 2024, we had an outstanding balance of $199.6 million under our
commercial paper program with a weighted-average interest rate of 5.57%.
In February 2024, we issued $1.0 billion of unsecured senior notes payable with a weighted-average interest rate of 5.48%
and a weighted-average maturity of 23.1 years. The unsecured senior notes consisted of $400.0 million of 5.25% unsecured senior
notes due 2036 and $600.0 million of 5.625% unsecured senior notes due 2054.
The following table presents our average debt outstanding and weighted-average interest rates during the three and six
months ended June 30, 2024 (dollars in thousands):
| Average Debt Outstanding | Weighted-Average Interest Rate | ||||||||
| June 30, 2024 | June 30, 2024 | ||||||||
| Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | ||||||
| Long-term fixed-rate debt | $12,171,633 | $11,927,318 | 3.79% | 3.75% | |||||
| Short-term variable-rate unsecured senior line of credit and commercial paper program debt | 335,917 | 433,681 | 5.56 | 5.61 | |||||
| Blended average interest rate | 12,507,550 | 12,360,999 | 3.84 | 3.82 | |||||
| Loan fee amortization and annual facility fee related to unsecured senior line of credit | N/A | N/A | 0.12 | 0.12 | |||||
| Total/weighted average | $12,507,550 | $12,360,999 | 3.96% | 3.94% |
Real estate dispositions, sales of partial interests, and issuances of common equity
We expect to continue to focus on the disciplined execution of select sales of real estate. Future sales will provide an important
source of capital to fund a portion of pending and recently completed acquisitions and our highly leased value-creation development
and redevelopment projects, and also provide significant capital for growth. In addition, we may also consider additional sales of partial
interests in core Class A/A+ properties and/or development projects. For the year ending December 31, 2024, we expect real estate
dispositions, sales of partial interests, and issuances of common equity to range from $1.1 billion to $2.1 billion. The amount of asset
sales necessary to meet our forecasted sources of capital will vary depending upon the amount of EBITDA associated with the assets
sold.
Refer to Note 3 – “Investments in real estate,” Note 4 – “Consolidated and unconsolidated real estate joint ventures,” and
Note 13 – “Stockholders’ equity” to our unaudited consolidated financial statements in Item 1 and to “Dispositions and sales of partial
interests” in Item 2 for additional information on our real estate dispositions and sales of partial interests.
As a REIT, we are generally subject to a 100% tax on the net income from real estate asset sales that the IRS characterizes as
“prohibited transactions.” We do not expect our sales will be categorized as prohibited transactions. However, unless we meet certain
“safe harbor” requirements, whether a real estate asset sale is a “prohibited transaction” will be based on the facts and circumstances
of the sale. Our real estate asset sales may not always meet such “safe harbor” requirements. Refer to “Item 1A. Risk factors” of our
annual report on Form 10-K for the year ended December 31, 2023 for additional information about the “prohibited transaction” tax.
Common equity transactions
During the three months ended June 30, 2024, we entered into new forward equity sales agreements aggregating
$27.8 million to sell 230 thousand shares of common stock under our ATM program at an average price of $122.32 (before underwriting
discounts). We expect to settle these forward equity sales agreements in 2024. As of June 30, 2024, the remaining aggregate amount
available under our ATM program for future sales of common stock was $1.47 billion.
Other sources
As a well-known seasoned issuer, we may, from time to time, issue securities at our discretion based on our needs and market
conditions, including, as necessary, to balance our use of incremental debt capital.
Additionally, we, together with joint venture partners, hold interests in real estate joint ventures that we consolidate in our
financial statements. These existing joint ventures provide significant equity capital to fund a portion of our future construction spend,
and our joint venture partners may also contribute equity into these entities for financing-related activities. From July 1, 2024 through
December 31, 2027, we expect to receive capital contributions aggregating $1.1 billion from existing consolidated real estate joint
venture partners to fund construction. During the year ending December 31, 2024, contributions from noncontrolling interests from
existing joint venture partners are expected to aggregate $430.0 million.
Uses of capital
Summary of capital expenditures
One of our primary uses of capital relates to the development, redevelopment, pre-construction, and construction of properties.
We currently have projects in our value-creation pipeline aggregating 5.3 million RSF of Class A/A+ properties undergoing construction
and one committed near-term project expected to commence construction in the next two years, and 2.4 million RSF of priority
anticipated development and redevelopment projects. We incur capitalized construction costs related to development, redevelopment,
pre-construction, and other construction activities. We also incur additional capitalized project costs, including interest, property taxes,
insurance, and other costs directly related and essential to the development, redevelopment, pre-construction, or construction of a
project, during periods when activities necessary to prepare an asset for its intended use are in progress. Refer to “New Class A/A+
development and redevelopment properties: current projects” and “Summary of capital expenditures” in Item 2 for more information on
our capital expenditures.
We capitalize interest cost as a cost of the project only during the period in which activities necessary to prepare an asset for
its intended use are ongoing, provided that expenditures for the asset have been made and interest cost has been incurred. Capitalized
interest for the six months ended June 30, 2024 and 2023 of $162.9 million and $178.7 million, respectively, was classified in
investments in real estate in our consolidated balance sheets. The decrease in capitalized interest was related to a lower weighted-
average capitalized cost basis of $8.0 billion for the six months ended June 30, 2024, as compared to $9.4 billion for the six months
ended June 30, 2023, partially offset by an increase in weighted-average interest rate used to capitalize interest to 3.94% for the six
months ended June 30, 2024 from 3.73% for the six months ended June 30, 2023.
Property taxes, insurance on real estate, and indirect project costs, such as construction, administration, legal fees, and office
costs that clearly relate to projects under development or construction, are capitalized as incurred during the period an asset is
undergoing activities to prepare it for its intended use. We capitalized payroll and other indirect costs related to development,
redevelopment, pre-construction, and construction projects, aggregating $52.1 million and $50.3 million, and property taxes, insurance
on real estate, and indirect project costs aggregating $63.0 million and $63.0 million during the six months ended June 30, 2024 and
2023, respectively.
Our capitalized costs for the six months ended June 30, 2024, compared to the same period in 2023, were consistent primarily
due to relative consistency in the size of our value-creation pipeline during these periods. Pre-construction activities include
entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building
improvements. The advancement of pre-construction efforts is focused on reducing the time required to deliver projects to prospective
tenants. These critical activities add significant value for future ground-up development and are required for the vertical construction of
buildings. Should we cease activities necessary to prepare an asset for its intended use, the interest, taxes, insurance, and certain
other direct and indirect project costs related to the asset would be expensed as incurred. Expenditures for repairs and maintenance
are expensed as incurred.
Fluctuations in our development, redevelopment, and construction activities could result in significant changes to total
expenses and net income. For example, had we experienced a 10% reduction in development, redevelopment, and construction
activities without a corresponding decrease in indirect project costs, including interest and payroll, total expenses would have increased
by approximately $27.8 million for the six months ended June 30, 2024.
We use third-party brokers to assist in our leasing activity, who are paid on a contingent basis upon successful leasing. We are
required to capitalize initial direct costs related to successful leasing transactions that result directly from and are essential to the lease
transaction and would not have been incurred had that lease transaction not been successfully executed. During the six months ended
June 30, 2024, we capitalized total initial direct leasing costs of $47.0 million. Costs that we incur to negotiate or arrange a lease
regardless of its outcome, such as fixed employee compensation, tax, or legal advice to negotiate lease terms, and other costs, are
expensed as incurred.
Acquisitions
During the six months ended June 30, 2024, the purchase price of our completed acquisitions aggregated $201.8 million. As of
June 30, 2024, the total purchase price of our pending acquisitions under executed letters of intent or purchase and sale agreements
that are expected to be completed in 2024 aggregated $47.6 million. For the year ending December 31, 2024, we expect real estate
acquisitions to range from $250 million to $750 million.
Refer to “Acquisitions” in Note 3 – “Investments in real estate” and to Note 4 – “Consolidated and unconsolidated real estate
joint ventures” to our unaudited consolidated financial statements in Item 1, and “Acquisitions” in Item 2 for information on our
acquisitions.
Dividends
During the six months ended June 30, 2024 and 2023, we paid common stock dividends of $444.0 million and $418.5 million,
respectively. The increase of $25.5 million in dividends paid on our common stock during the six months ended June 30, 2024,
compared to the six months ended June 30, 2023, was primarily due to an increase in the number of common shares outstanding
subsequent to January 1, 2023 as a result of settled forward equity sales agreements, and an increase in the related dividends paid to
$2.54 per common share during the six months ended June 30, 2024 from $2.42 per common share during the six months ended June
30, 2023.
Secured notes payable
Secured notes payable as of June 30, 2024 consisted of three notes secured by two properties. Our secured notes payable
typically require monthly payments of principal and interest and had a weighted-average interest rate of approximately 8.13%. As of
June 30, 2024, the total book value of our investments in real estate securing debt was approximately $356.9 million. As of June 30,
2024, our secured notes payable, including unamortized discounts and deferred financing costs, comprised approximately
$619 thousand and $134.3 million of fixed-rate debt and unhedged variable-rate debt, respectively.
As of June 30, 2024, our unconsolidated real estate joint venture, in which we hold a 10% ownership interest, located at 1655
and 1725 Third Street in our Mission Bay submarket, has a $600.0 million secured loan outstanding maturing on March 10, 2025. The
unconsolidated real estate joint venture is early in the process of working with prospective lenders to refinance this debt. In the event
that all or a portion of the debt cannot be refinanced, we may consider contributing additional equity into this unconsolidated real estate
joint venture.
Unsecured senior notes payable and unsecured senior line of credit
The requirements of, and our actual performance with respect to, the key financial covenants under our unsecured senior
notes payable as of June 30, 2024 were as follows:
| Covenant Ratios(1) | Requirement | June 30, 2024 | ||
| Total Debt to Total Assets | Less than or equal to 60% | 30% | ||
| Secured Debt to Total Assets | Less than or equal to 40% | 0.3% | ||
| Consolidated EBITDA(2) to Interest Expense | Greater than or equal to 1.5x | 13.2x | ||
| Unencumbered Total Asset Value to Unsecured Debt | Greater than or equal to 150% | 328% |
(1)All covenant ratio titles utilize terms as defined in the respective debt agreements.
(2)The calculation of consolidated EBITDA is based on the definitions contained in our loan agreements and is not directly comparable to the computation of EBITDA as
described in Exchange Act Release No. 47226.
In addition, the terms of the indentures, among other things, limit the ability of the Company, Alexandria Real Estate Equities,
L.P., and the Company’s subsidiaries to (i) consummate a merger, or consolidate or sell all or substantially all of the Company’s assets,
and (ii) incur certain secured or unsecured indebtedness.
The requirements of, and our actual performance with respect to, the key financial covenants under our unsecured senior line
of credit as of June 30, 2024 were as follows:
| Covenant Ratios(1) | Requirement | June 30, 2024 | ||
| Leverage Ratio | Less than or equal to 60.0% | 29.2% | ||
| Secured Debt Ratio | Less than or equal to 45.0% | 0.2% | ||
| Fixed-Charge Coverage Ratio | Greater than or equal to 1.50x | 4.01x | ||
| Unsecured Interest Coverage Ratio | Greater than or equal to 1.75x | 15.84x |
(1)All covenant ratio titles utilize terms as defined in the credit agreement.
Estimated interest payments
Estimated interest payments on our fixed-rate debt are calculated based upon contractual interest rates, including interest
payment dates and scheduled maturity dates. As of June 30, 2024, 97.3% of our debt was fixed-rate debt. For additional information
regarding our debt, refer to Note 10 – “Secured and unsecured senior debt” to our unaudited consolidated financial statements in
Item 1.
Ground lease obligations
Ground lease obligations as of June 30, 2024 included leases for 36 of our properties and accounted for approximately 9% of
our total number of properties.
Among these 36 properties, 17 properties are subject to ground leases with a weighted-average remaining lease term of
42 years, including extension options that we are reasonably certain to exercise. These leases are with a single lessor in our Greater
Stanford submarket, with whom we have extended three ground leases over the past 10 years.
Our remaining 19 properties subject to ground leases are located across multiple submarkets and have remaining lease terms
ranging from approximately 41 to 98 years. The weighted-average remaining lease term of these ground leases is 69 years, including
extension options that we are reasonably certain to exercise.
In many cases, we seek to extend our ground leases well ahead of their scheduled contractual expirations. If we are
successful in extending ground leases, we could see significant up-front or increased recurring future payments to the ground lessor
and/or increased ground lease expense, which may require us to increase our capital funding needs.
Operating lease agreements
As of June 30, 2024, the remaining contractual payments under ground and office lease agreements in which we are the
lessee aggregated $811.0 million and $26.1 million, respectively. We are required to recognize a right-of-use asset and a related liability
to account for our future obligations under operating lease arrangements in which we are the lessee. The operating lease liability is
measured based on the present value of the remaining lease payments, including payments during the term under our extension
options that we are reasonably certain to exercise. The right-of-use asset is equal to the corresponding operating lease liability, adjusted
for the initial direct leasing cost and any other consideration exchanged with the landlord prior to the commencement of the lease, as
well as adjustments to reflect favorable or unfavorable terms of an acquired lease when compared with market terms at the time of
acquisition. As of June 30, 2024, the present value of the remaining contractual payments aggregating $837.1 million under our
operating lease agreements, including our extension options that we are reasonably certain to exercise, was $379.2 million, which was
classified in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets. As of June 30, 2024, the
weighted-average remaining lease term of operating leases in which we are the lessee was approximately 41 years, including extension
options that we are reasonably certain to exercise, and the weighted-average discount rate was 4.6%. Our corresponding operating
lease right-of-use assets, adjusted for initial direct leasing costs and other consideration exchanged with the landlord prior to the
commencement of the lease, aggregated $510.1 million. We classify the right-of-use asset in other assets in our consolidated balance
sheets. Refer to “Lease accounting” in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial
statements in Item 1 for additional information.
In July 2024, we executed an amendment to our existing ground lease agreement at the Alexandria Technology Square® mega
campus aggregating 1.2 million RSF in our Cambridge submarket to extend the term by 24 years from January 1, 2065 to
December 31, 2088. The amendment requires that we prepay our entire rent obligation for the extended lease term aggregating $270.0
million in two equal installments during the fourth quarter of 2024 and the first quarter of 2025. This amount will be amortized on a
straight-line basis over the remaining lease term from July 2024 through December 2088, and the amended operating lease will result
in an incremental annual rent expense of approximately $3.6 million.
Alexandria Technology Square® is a foundational mega campus in the heart of the global life science ecosystem in Cambridge
and is the Greater Boston base of operations of key strategic tenants such as Novartis AG, GlaxoSmithKline plc, Massachusetts
Institute of Technology, and Mass General Brigham. Securing this ground lease through December 2088 significantly enhances the
long-term value of our investment in this critical mega campus.
Commitments
As of June 30, 2024, remaining aggregate costs under contract for the construction of properties undergoing development,
redevelopment, and improvements under the terms of leases approximated $1.5 billion. In addition, we may be required to incur
construction costs associated with future development projects aggregating 643,331 RSF pursuant to an agreement whereby our
counterparty may elect to execute future lease agreements on mutually agreeable terms. We expect payments for these obligations to
occur over one to three years, subject to capital planning adjustments from time to time. We may have the ability to cease the
construction of certain projects, which would result in the reduction of our commitments.
As of June 30, 2024, the purchase price of pending acquisitions expected to be completed in 2024, which are under executed
letters of intent or purchase and sale agreements, aggregated $47.6 million. In addition, we have letters of credit and performance
obligations aggregating $29.5 million primarily related to our development and redevelopment projects.
We are committed to funding approximately $432.3 million related to our non-real estate investments. These funding
commitments are primarily associated with our investments in privately held entities that report NAV and expire at various dates over
the next 12 years, with a weighted-average expiration of 8.3 years as of June 30, 2024.
Exposure to environmental liabilities
In connection with the acquisition of all of our properties, we have obtained Phase I environmental assessments to ascertain
the existence of any environmental liabilities or other issues. The Phase I environmental assessments of our properties have not
revealed any environmental liabilities that we believe would have a material adverse effect on our financial condition or results of
operations taken as a whole, nor are we aware of any material environmental liabilities that have occurred since the Phase I
environmental assessments were completed. In addition, we carry a policy of pollution legal liability insurance covering exposure to
certain environmental losses at substantially all of our properties.
Foreign currency translation gains and losses
The following table presents the change in accumulated other comprehensive loss attributable to Alexandria Real Estate
Equities, Inc.’s stockholders during the six months ended June 30, 2024 primarily due to the changes in the foreign exchange rates for
our real estate investments in Canada (in thousands). We reclassify unrealized foreign currency translation gains and losses into net
income as we dispose of these holdings.
| Total | ||
| Balance as of December 31, 2023 | $(15,896) | |
| Other comprehensive loss before reclassifications | (11,814) | |
| Net other comprehensive loss | (11,814) | |
| Balance as of June 30, 2024 | $(27,710) |
Inflation
As of June 30, 2024, approximately 94% of our leases (on an annual rental revenue basis) were triple net leases, which
require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and
other operating expenses (including increases thereto) in addition to base rent. Approximately 96% of our leases (on an annual rental
revenue basis) contained effective annual rent escalations that were either fixed (generally ranging from 3.0% to 3.5%) or indexed
based on a consumer price index or other indices. Accordingly, we do not believe that our cash flows or earnings from real estate
operations are subject to significant risks from inflation. A period of inflation, however, could cause an increase in the cost of our
variable-rate borrowings, including borrowings under our unsecured senior line of credit and commercial paper program, issuances of
unsecured senior notes payable, and borrowings under our secured construction loans, and secured loans held by our unconsolidated
real estate joint ventures.
Issuer and guarantor subsidiary summarized financial information
Alexandria Real Estate Equities, Inc. (the “Issuer”) has sold certain debt securities registered under the Securities Act of 1933,
as amended, that are fully and unconditionally guaranteed by Alexandria Real Estate Equities, L.P. (the “LP” or the “Guarantor
Subsidiary”), an indirectly 100% owned subsidiary of the Issuer. The Issuer’s other subsidiaries, including, but not limited to, the
subsidiaries that own substantially all of its real estate (collectively, the “Combined Non-Guarantor Subsidiaries”), will not provide a
guarantee of such securities, including the subsidiaries that are partially or 100% owned by the LP. The following summarized financial
information presents, on a combined basis, balance sheet information as of June 30, 2024 and December 31, 2023, and results of
operations and comprehensive income for the six months ended June 30, 2024 and year ended December 31, 2023 for the Issuer and
the Guarantor Subsidiary. The information presented below excludes eliminations necessary to arrive at the information on a
consolidated basis. In presenting the summarized financial statements, the equity method of accounting has been applied to (i) the
Issuer’s interests in the Guarantor Subsidiary, (ii) the Guarantor Subsidiary’s interests in the Combined Non-Guarantor Subsidiaries,
and (iii) the Combined Non-Guarantor Subsidiaries’ interests in the Guarantor Subsidiary, where applicable, even though all such
subsidiaries meet the requirements to be consolidated under GAAP. All assets and liabilities have been allocated to the Issuer and the
Guarantor Subsidiary generally based on legal entity ownership.
The following tables present combined summarized financial information as of June 30, 2024 and December 31, 2023 and for
the six months ended June 30, 2024 and year ended December 31, 2023 for the Issuer and Guarantor Subsidiary. Amounts provided
do not represent our total consolidated amounts (in thousands):
| June 30, 2024 | December 31, 2023 | |||
| Assets: | ||||
| Cash, cash equivalents, and restricted cash | $181,951 | $210,755 | ||
| Other assets | 123,797 | 115,373 | ||
| Total assets | $305,748 | $326,128 | ||
| Liabilities: | ||||
| Unsecured senior notes payable | $12,089,561 | $11,096,028 | ||
| Unsecured senior line of credit and commercial paper | 199,552 | 99,952 | ||
| Other liabilities | 531,118 | 504,659 | ||
| Total liabilities | $12,820,231 | $11,700,639 | ||
| Six Months Ended June 30, 2024 | Year Ended December 31, 2023 | |||
| Total revenues | $30,900 | $54,230 | ||
| Total expenses | (176,987) | (273,990) | ||
| Net loss | (146,087) | (219,760) | ||
| Net income attributable to unvested restricted stock awards | (7,444) | (11,195) | ||
| Net loss attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | $(153,531) | $(230,955) | ||
As of June 30, 2024, 393 of our 408 properties were held indirectly by the REIT’s wholly owned consolidated subsidiary,
Alexandria Real Estate Equities, L.P.
Critical accounting estimates
Refer to our annual report on Form 10-K for the year ended December 31, 2023 for a discussion of our critical accounting
estimates related to recognition of real estate acquired, impairment of long-lived assets, impairment of non-real estate investments, and
monitoring of tenant credit quality.
Definitions and reconciliations
This section contains additional information on certain non-GAAP financial measures, including reconciliations to the most
directly comparable financial measure calculated and presented in accordance with GAAP and the reasons why we use these
supplemental measures of performance and believe they provide useful information to investors, as well as the definitions of other
terms used in this report.
Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’s common
stockholders
GAAP-basis accounting for real estate assets utilizes historical cost accounting and assumes that real estate values diminish
over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the
Nareit Board of Governors established funds from operations as an improved measurement tool. Since its introduction, funds from
operations has become a widely used non-GAAP financial measure among equity REITs. We believe that funds from operations is
helpful to investors as an additional measure of the performance of an equity REIT. Moreover, we believe that funds from operations, as
adjusted, allows investors to compare our performance to the performance of other real estate companies on a consistent basis, without
having to account for differences recognized because of real estate acquisition and disposition decisions, financing decisions, capital
structure, capital market transactions, variances resulting from the volatility of market conditions outside of our control, or other
corporate activities that may not be representative of the operating performance of our properties.
The 2018 White Paper published by the Nareit Board of Governors (the “Nareit White Paper”) defines funds from operations as
net income (computed in accordance with GAAP), excluding gains or losses on sales of real estate, and impairments of real estate, plus
depreciation and amortization of operating real estate assets, and after adjustments for our share of consolidated and unconsolidated
partnerships and real estate joint ventures. Impairments represent the write-down of assets when fair value over the recoverability
period is less than the carrying value due to changes in general market conditions and do not necessarily reflect the operating
performance of the properties during the corresponding period.
We compute funds from operations, as adjusted, as funds from operations calculated in accordance with the Nareit White
Paper, excluding significant gains, losses, and impairments realized on non-real estate investments, unrealized gains or losses on non-
real estate investments, impairment of real estate primarily consisting of pre-acquisition costs incurred in connection with acquisitions
we decided to no longer pursue, gains or losses on early extinguishment of debt, significant termination fees, acceleration of stock
compensation expense due to the resignations of executive officers, deal costs, the income tax effect related to such items, and the
amount of such items that is allocable to our unvested restricted stock awards. We compute the amount that is allocable to our
unvested restricted stock awards using the two-class method. Under the two-class method, we allocate net income (after amounts
attributable to noncontrolling interests) to common stockholders and to unvested restricted stock awards by applying the respective
weighted-average shares outstanding during each quarter-to-date and year-to-date period. This may result in a difference of the
summation of the quarter-to-date and year-to-date amounts. Neither funds from operations nor funds from operations, as adjusted,
should be considered as alternatives to net income (determined in accordance with GAAP) as indications of financial performance, or to
cash flows from operating activities (determined in accordance with GAAP) as measures of liquidity, nor are they indicative of the
availability of funds for our cash needs, including our ability to make distributions.
The following table reconciles net income to funds from operations for the share of consolidated real estate joint ventures
attributable to noncontrolling interests and our share of unconsolidated real estate joint ventures for the three and six months ended
June 30, 2024 (in thousands):
| Noncontrolling Interest Share of Consolidated Real Estate Joint Ventures | Our Share of Unconsolidated Real Estate Joint Ventures | ||||||
| June 30, 2024 | June 30, 2024 | ||||||
| Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | ||||
| Net income | $47,347 | $95,978 | $130 | $285 | |||
| Depreciation and amortization of real estate assets | 31,364 | 62,268 | 1,068 | 2,102 | |||
| Funds from operations | $78,711 | $158,246 | $1,198 | $2,387 | |||
The following tables present a reconciliation of net income attributable to Alexandria Real Estate Equities, Inc.’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 attributable to Alexandria Real Estate Equities,
Inc.’s common stockholders – diluted, and funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common
stockholders – diluted, as adjusted, and the related per share amounts for the three and six months ended June 30, 2024 and 2023 (in
thousands, except per share amounts). Per share amounts may not add due to rounding.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic and diluted | $42,917 | $87,260 | $209,803 | $162,516 | ||||
| Depreciation and amortization of real estate assets | 288,118 | 270,026 | 573,068 | 532,150 | ||||
| Noncontrolling share of depreciation and amortization from consolidated real estate JVs | (31,364) | (28,220) | (62,268) | (56,398) | ||||
| Our share of depreciation and amortization from unconsolidated real estate JVs | 1,068 | 855 | 2,102 | 1,714 | ||||
| Gain on sales of real estate | — | (214,810) | (392) | (214,810) | ||||
| Impairment of real estate – rental properties and land | 2,182 | 166,602 | 2,182 | 166,602 | ||||
| Allocation to unvested restricted stock awards | (1,305) | (872) | (4,736) | (2,220) | ||||
| Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted(1) | 301,616 | 280,841 | 719,759 | 589,554 | ||||
| Unrealized losses on non-real estate investments | 64,238 | 77,897 | 35,080 | 143,752 | ||||
| Impairment of non-real estate investments | 12,788 | (2) | 22,953 | 27,486 | 22,953 | |||
| Impairment of real estate | 28,581 | (3) | 1,973 | 28,581 | 1,973 | |||
| Allocation to unvested restricted stock awards | (1,738) | (1,285) | (1,528) | (2,164) | ||||
| Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted | $405,485 | $382,379 | $809,378 | $756,068 |
(1)Calculated in accordance with standards established by the Nareit Board of Governors.
(2)Related to non-real estate investments in privately held entities that do not report NAV. Refer to Note 7 – “Investments” to our unaudited consolidated financial
statements in Item 1 for additional information.
(3)Refer to “Sales of real estate assets and impairment charges” in Note 3 – “Investments in real estate” to our unaudited consolidated financial statements in Item 1 for
additional information.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| (Per share) | 2024 | 2023 | 2024 | 2023 | ||||
| Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | $0.25 | $0.51 | $1.22 | $0.95 | ||||
| Depreciation and amortization of real estate assets | 1.50 | 1.42 | 2.98 | 2.80 | ||||
| Gain on sales of real estate | — | (1.26) | — | (1.26) | ||||
| Impairment of real estate – rental properties and land | 0.01 | 0.98 | 0.01 | 0.98 | ||||
| Allocation to unvested restricted stock awards | (0.01) | (0.01) | (0.02) | (0.02) | ||||
| Funds from operations per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | 1.75 | 1.64 | 4.19 | 3.45 | ||||
| Unrealized losses on non-real estate investments | 0.37 | 0.46 | 0.20 | 0.84 | ||||
| Impairment of non-real estate investments | 0.08 | 0.13 | 0.16 | 0.13 | ||||
| Impairment of real estate | 0.17 | 0.02 | 0.17 | 0.02 | ||||
| Allocation to unvested restricted stock awards | (0.01) | (0.01) | (0.01) | (0.01) | ||||
| Funds from operations per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted | $2.36 | $2.24 | $4.71 | $4.43 | ||||
| Weighted-average shares of common stock outstanding – diluted(1) | 172,013 | 170,864 | 171,981 | 170,824 |
(1)Refer to “Weighted-average shares of common stock outstanding – diluted” in this section for additional information.
Adjusted EBITDA and Adjusted EBITDA margin
We use Adjusted EBITDA as a supplemental performance measure of our operations, for financial and operational decision-
making, and as a supplemental means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated
as earnings before interest, taxes, depreciation, and amortization (“EBITDA”), excluding stock compensation expense, gains or losses
on early extinguishment of debt, gains or losses on sales of real estate, impairments of real estate, and significant termination fees.
Adjusted EBITDA also excludes unrealized gains or losses and significant realized gains or losses and impairments that result from our
non-real estate investments. These non-real estate investment amounts are classified in our consolidated statements of operations
outside of total revenues.
We believe Adjusted EBITDA provides investors with relevant and useful information as it allows investors to evaluate the
operating performance of our business activities without having to account for differences recognized because of investing and
financing decisions related to our real estate and non-real estate investments, our capital structure, capital market transactions, and
variances resulting from the volatility of market conditions outside of our control. For example, we exclude gains or losses on the early
extinguishment of debt to allow investors to measure our performance independent of our indebtedness and capital structure. We
believe that adjusting for the effects of impairments and gains or losses on sales of real estate, significant impairments and realized
gains or losses on non-real estate investments, and significant termination fees allows investors to evaluate performance from period to
period on a consistent basis without having to account for differences recognized because of investing and financing decisions related
to our real estate and non-real estate investments or other corporate activities that may not be representative of the operating
performance of our properties.
In addition, we believe that excluding charges related to stock compensation and unrealized gains or losses facilitates for
investors a comparison of our business activities across periods without the volatility resulting from market forces outside of our control.
Adjusted EBITDA has limitations as a measure of our performance. Adjusted EBITDA does not reflect our historical expenditures or
future requirements for capital expenditures or contractual commitments. While Adjusted EBITDA is a relevant measure of performance,
it does not represent net income (loss) or cash flows from operations calculated and presented in accordance with GAAP, and it should
not be considered as an alternative to those indicators in evaluating performance or liquidity.
In order to calculate the Adjusted EBITDA margin, we divide Adjusted EBITDA by total revenues as presented in our
consolidated statements of operations. We believe that this supplemental performance measure provides investors with additional
useful information regarding the profitability of our operating activities.
We are not able to forecast fourth quarter net income without unreasonable effort and therefore do not provide a reconciliation
for Adjusted EBITDA on a forward-looking basis. This is due to the inherent difficulty of forecasting the timing and/or amount of items
that depend on market conditions outside of our control, including the timing of dispositions, capital events, and financing decisions, as
well as quarterly components such as gain on sales of real estate, unrealized gains or losses on non-real estate investments,
impairment of real estate, and impairment of non-real estate investments. Our attempt to predict these amounts may produce significant
but inaccurate estimates, which would be potentially misleading for our investors.
The following table reconciles net income (loss), the most directly comparable financial measure calculated and presented in
accordance with GAAP, to Adjusted EBITDA and calculates the Adjusted EBITDA margin for the three and six months ended June 30,
2024 and 2023 (dollars in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||
| 2024 | 2023 | 2024 | 2023 | ||||
| Net income | $94,049 | $133,705 | $313,225 | $255,398 | |||
| Interest expense | 45,789 | 17,072 | 86,629 | 30,826 | |||
| Income taxes | 1,182 | 2,251 | 2,946 | 3,382 | |||
| Depreciation and amortization | 290,720 | 273,555 | 578,274 | 538,857 | |||
| Stock compensation expense | 14,507 | 15,492 | 31,632 | 31,978 | |||
| Gain on sales of real estate | — | (214,810) | (392) | (214,810) | |||
| Unrealized losses on non-real estate investments | 64,238 | 77,897 | 35,080 | 143,752 | |||
| Impairment of real estate | 30,763 | 168,575 | 30,763 | 168,575 | |||
| Impairment of non-real estate investments | 12,788 | 22,953 | 27,486 | 22,953 | |||
| Adjusted EBITDA | $554,036 | $496,690 | $1,105,643 | $980,911 | |||
| Total revenues | $766,734 | $713,900 | $1,535,842 | $1,414,695 | |||
| Adjusted EBITDA margin | 72% | 70% | 72% | 69% |
Annual rental revenue
Annual rental revenue represents the annualized fixed base rental obligations, calculated in accordance with GAAP, for leases
in effect as of the end of the period, related to our operating RSF. Annual rental revenue is presented using 100% of the annual rental
revenue from our consolidated properties and our share of annual rental revenue for our unconsolidated real estate joint ventures.
Annual rental revenue per RSF is computed by dividing annual rental revenue by the sum of 100% of the RSF of our consolidated
properties and our share of the RSF of properties held in unconsolidated real estate joint ventures. As of June 30, 2024, approximately
94% of our leases (on an annual rental revenue basis) were triple net leases, which require tenants to pay substantially all real estate
taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases
thereto) in addition to base rent. Annual rental revenue excludes these operating expenses recovered from our tenants. Amounts
recovered from our tenants related to these operating expenses, along with base rent, are classified in income from rentals in our
consolidated statements of operations.
Capitalization rates
Capitalization rates are calculated based on net operating income and net operating income (cash basis) annualized,
excluding lease termination fees, on stabilized operating assets for the quarter preceding the date on which the property is sold, or
near-term prospective net operating income.
Capitalized interest
We capitalize interest cost as a cost of a project during periods for which activities necessary to develop, redevelop, or
reposition a project for its intended use are ongoing, provided that expenditures for the asset have been made and interest cost has
been incurred. Activities necessary to develop, redevelop, or reposition a project include pre-construction activities such as
entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building
improvements. The advancement of pre-construction efforts is focused on reducing the time required to deliver projects to prospective
tenants. These critical activities add significant value for future ground-up development and are required for the vertical construction of
buildings. If we cease activities necessary to prepare a project for its intended use, interest costs related to such project are expensed
as incurred.
Cash interest
Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of
loan fees and debt premiums (discounts). Refer to “Fixed-charge coverage ratio” in this section for a reconciliation of interest expense,
the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest.
Class A/A+ properties and AAA locations
Class A/A+ properties are properties clustered in AAA locations that provide 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. Class A/A+ properties generally command higher annual rental rates than other classes of similar
properties. AAA locations are in close proximity to concentrations of specialized skills, knowledge, institutions, and related businesses.
Development, redevelopment, and pre-construction
A key component of our business model is our disciplined allocation of capital to the development and redevelopment of new
Class A/A+ properties, and property enhancements identified during the underwriting of certain acquired properties, located in
collaborative life science mega campuses in AAA innovation clusters. These projects are generally focused on providing high-quality,
generic, and reusable spaces that meet the real estate requirements of a wide range of tenants. Upon completion, each value-creation
project is expected to generate increases in rental income, net operating income, and cash flows. Our development and redevelopment
projects are generally in locations that are highly desirable to high-quality entities, which we believe results in higher occupancy levels,
longer lease terms, higher rental income, higher returns, and greater long-term asset value.
Development projects generally consist of the ground-up development of generic and reusable laboratory facilities.
Redevelopment projects consist of the permanent change in use of acquired office, warehouse, or shell space into laboratory space.
We generally will not commence new development projects for aboveground construction of new Class A/A+ laboratory space without
first securing significant pre-leasing for such space, except when there is solid market demand for high-quality Class A/A+ properties.
Priority anticipated projects are those most likely to commence future ground-up development or first-time conversion from
non-laboratory space to laboratory space prior to our other future projects, pending market conditions and leasing negotiations.
Pre-construction activities include entitlements, permitting, design, site work, and other activities preceding commencement of
construction of aboveground building improvements. The advancement of pre-construction efforts is focused on reducing the time
required to deliver projects to prospective tenants. These critical activities add significant value for future ground-up development and
are required for the vertical construction of buildings. Ultimately, these projects will provide high-quality facilities and are expected to
generate significant revenue and cash flows.
Development, redevelopment, and pre-construction spending also includes the following costs: (i) amounts to bring certain
acquired properties up to market standard and/or other costs identified during the acquisition process (generally within two years of
acquisition) and (ii) permanent conversion of space for highly flexible, move-in-ready laboratory space to foster the growth of promising
early- and growth-stage life science companies.
Revenue-enhancing and repositioning capital expenditures represent spending to reposition or significantly change the use of
a property, including through improvement in the asset quality from Class B to Class A/A+.
Non-revenue-enhancing capital expenditures represent costs required to maintain the current revenues of a stabilized
property, including the associated costs for renewed and re-leased space.
Dividend payout ratio (common stock)
Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (shares of
common stock outstanding on the respective record dates multiplied by the related dividend per share) to funds from operations
attributable to Alexandria’s common stockholders – diluted, as adjusted.
Dividend yield
Dividend yield for the quarter represents the annualized quarter dividend divided by the closing common stock price at the end
of the quarter.
Fixed-charge coverage ratio
Fixed-charge coverage ratio is a non-GAAP financial measure representing the ratio of Adjusted EBITDA to cash interest and
fixed charges. We believe that this ratio is useful to investors as a supplemental measure of our ability to satisfy fixed financing
obligations and preferred stock dividends. Cash interest is equal to interest expense calculated in accordance with GAAP plus
capitalized interest, less amortization of loan fees and debt premiums (discounts).
The following table reconciles interest expense, the most directly comparable financial measure calculated and presented in
accordance with GAAP, to cash interest and computes fixed-charge coverage ratio for the three and six months ended June 30, 2024
and 2023 (dollars in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Adjusted EBITDA | $554,036 | $496,690 | $1,105,643 | $980,911 | ||||
| Interest expense | $45,789 | $17,072 | $86,629 | $30,826 | ||||
| Capitalized interest | 81,039 | 91,674 | 162,879 | 178,744 | ||||
| Amortization of loan fees | (4,146) | (3,729) | (8,288) | (7,368) | ||||
| Amortization of debt discounts | (328) | (304) | (646) | (592) | ||||
| Cash interest and fixed charges | $122,354 | $104,713 | $240,574 | $201,610 | ||||
| Fixed-charge coverage ratio: | ||||||||
| – quarter annualized | 4.5x | 4.7x | 4.6x | 4.9x | ||||
| – trailing 12 months | 4.6x | 4.9x | 4.6x | 4.9x |
We are not able to forecast fourth quarter net income without unreasonable effort and therefore do not provide a reconciliation
for fixed-charge coverage ratio on a forward-looking basis. This is due to the inherent difficulty of forecasting the timing and/or amount
of items that depend on market conditions outside of our control, including the timing of dispositions, capital events, and financing
decisions, as well as quarterly components such as gain on sales of real estate, unrealized gains or losses on non-real estate
investments, impairment of real estate, and impairment of non-real estate investments. Our attempt to predict these amounts may
produce significant but inaccurate estimates, which would be potentially misleading for our investors.
Gross assets
Gross assets are calculated as total assets plus accumulated depreciation as of June 30, 2024 and December 31, 2023 (in
thousands):
| June 30, 2024 | December 31, 2023 | ||
| Total assets | $37,847,865 | $36,771,402 | |
| Accumulated depreciation | 5,457,414 | 4,985,019 | |
| Gross assets | $43,305,279 | $41,756,421 | |
Initial stabilized yield (unlevered)
Initial stabilized yield is calculated as the estimated amounts of net operating income at stabilization divided by our investment
in the property. Our initial stabilized yield excludes the benefit of leverage. Our cash rents related to our value-creation projects are
generally expected to increase over time due to contractual annual rent escalations. Our estimates for initial stabilized yields, initial
stabilized yields (cash basis), and total costs at completion represent our initial estimates at the commencement of the project. We
expect to update this information upon completion of the project, or sooner if there are significant changes to the expected project yields
or costs.
- Initial stabilized yield reflects rental income, including contractual rent escalations and any rent concessions over the
term(s) of the lease(s), calculated on a straight-line basis.
- Initial stabilized yield (cash basis) reflects cash rents at the stabilization date after initial rental concessions, if any, have
elapsed and our total cash investment in the property.
Investment-grade or publicly traded large cap tenants
Investment-grade or publicly traded large cap tenants represent tenants that are investment-grade rated or publicly traded
companies with an average daily market capitalization greater than $10 billion for the twelve months ended June 30, 2024, as reported
by Bloomberg Professional Services. Credit ratings from Moody’s Investors Service and S&P Global Ratings reflect credit ratings of the
tenant’s parent entity, and there can be no assurance that a tenant’s parent entity will satisfy the tenant’s lease obligation upon such
tenant’s default. We monitor the credit quality and related material changes of our tenants. Material changes that cause a tenant’s
market capitalization to decrease below $10 billion, which are not immediately reflected in the twelve-month average, may result in their
exclusion from this measure.
Investments in real estate
The following table presents our value-creation pipeline of new Class A/A+ development and redevelopment projects,
excluding properties held for sale, as a percentage of gross assets as of June 30, 2024:
| Percentage of Gross Assets | |||||
| Under construction projects and one committed near-term project expected to commence construction in the next two years (61% leased/negotiating) | 9% | ||||
| Income-producing/potential cash flows/covered land play(1) | 7% | ||||
| Land | 5% | ||||
(1)Includes projects with existing buildings that are generating or can generate operating cash flows. Also includes development rights associated with existing operating
campuses. These projects aggregated 1.0% of annual rental revenue as of June 30, 2024 and are included in our industry mix chart as targeted for a future change in
use. Refer to “High-quality and diverse client base” in Item 2 for additional information.
The square footage presented in the table below is classified as operating as of June 30, 2024. These lease expirations or
vacant space at recently acquired properties represent future opportunities for which we have the intent, subject to market conditions
and leasing, to commence first-time conversion from non-laboratory space to laboratory space, or to commence future ground-up
development:
| Dev/Redev | RSF of Lease Expirations Targeted for Development and Redevelopment | |||||||||
| Property/Submarket | 2024 | 2025 | Thereafter(1) | Total | ||||||
| Committed near-term project: | ||||||||||
| 4161 Campus Point Court/University Town Center | Dev | — | 159,884 | — | 159,884 | |||||
| Priority anticipated projects: | ||||||||||
| 311 Arsenal Street/Cambridge/Inner Suburbs | Redev | — | 25,312 | — | 25,312 | |||||
| 269 East Grand Avenue/South San Francisco | Redev | 107,250 | — | — | 107,250 | |||||
| 3301 Monte Villa Parkway/Bothell | Redev | — | 50,552 | — | 50,552 | |||||
| 1020 Red River Street/Austin | Redev | — | 126,034 | — | 126,034 | |||||
| 107,250 | 201,898 | — | 309,148 | |||||||
| Future projects: | ||||||||||
| 100 Edwin H. Land Boulevard/Cambridge | Dev | 104,500 | — | — | 104,500 | |||||
| 446, 458, 500, and 550 Arsenal Street/Cambridge/Inner Suburbs | Dev | — | — | 376,698 | 376,698 | |||||
| Other/Greater Boston | Redev | — | — | 167,549 | 167,549 | |||||
| 1122 and 1150 El Camino Real/South San Francisco | Dev | — | — | 375,232 | 375,232 | |||||
| 3875 Fabian Way/Greater Stanford | Dev | — | — | 228,000 | 228,000 | |||||
| 2100, 2200, and 2400 Geng Road/Greater Stanford | Dev | — | — | 78,501 | 78,501 | |||||
| 960 Industrial Road/Greater Stanford | Dev | — | — | 112,590 | 112,590 | |||||
| Campus Point by Alexandria/University Town Center | Dev | 226,144 | 109,164 | — | 335,308 | |||||
| Sequence District by Alexandria/Sorrento Mesa | Dev/Redev | — | — | 686,290 | 686,290 | |||||
| 830 4th Avenue South/SoDo | Dev | — | — | 42,380 | 42,380 | |||||
| Other/Seattle | Dev | — | — | 76,559 | 76,559 | |||||
| 100 Capitola Drive/Research Triangle | Dev | — | — | 34,527 | 34,527 | |||||
| 1001 Trinity Street/Austin | Dev | — | 72,938 | — | 72,938 | |||||
| Canada | Redev | — | — | 247,743 | 247,743 | |||||
| 330,644 | 182,102 | 2,426,069 | 2,938,815 | |||||||
| 437,894 | 543,884 | 2,426,069 | 3,407,847 |
(1)Includes vacant square footage as of June 30, 2024.
Joint venture financial information
We present components of balance sheet and operating results information related to our real estate joint ventures, which are
not presented, or intended to be presented, in accordance with GAAP. We present the proportionate share of certain financial line items
as follows: (i) for each real estate joint venture that we consolidate in our financial statements, which are controlled by us through
contractual rights or majority voting rights, but of which we own less than 100%, we apply the noncontrolling interest economic
ownership percentage to each financial item to arrive at the amount of such cumulative noncontrolling interest share of each component
presented; and (ii) for each real estate joint venture that we do not control and do not consolidate, and are instead controlled jointly or
by our joint venture partners through contractual rights or majority voting rights, we apply our economic ownership percentage to each
financial item to arrive at our proportionate share of each component presented.
The components of balance sheet and operating results information related to our real estate joint ventures do not represent
our legal claim to those items. For each entity that we do not wholly own, the joint venture agreement generally determines what equity
holders can receive upon capital events, such as sales or refinancing, or in the event of a liquidation. Equity holders are normally
entitled to their respective legal ownership of any residual cash from a joint venture only after all liabilities, priority distributions, and
claims have been repaid or satisfied.
We believe that this information can help investors estimate the balance sheet and operating results information related to our
partially owned entities. Presenting this information provides a perspective not immediately available from consolidated financial
statements and one that can supplement an understanding of the joint venture assets, liabilities, revenues, and expenses included in
our consolidated results.
The components of balance sheet and operating results information related to our real estate joint ventures are limited as an
analytical tool as the overall economic ownership interest does not represent our legal claim to each of our joint ventures’ assets,
liabilities, or results of operations. In addition, joint venture financial information may include financial information related to the
unconsolidated real estate joint ventures that we do not control. We believe that in order to facilitate for investors a clear understanding
of our operating results and our total assets and liabilities, joint venture financial information should be examined in conjunction with our
consolidated statements of operations and balance sheets. Joint venture financial information should not be considered an alternative
to our consolidated financial statements, which are presented and prepared in accordance with GAAP.
Mega campus
Mega campuses are cluster campuses that consist of approximately 1 million RSF or more, including operating, active
development/redevelopment, and land RSF less operating RSF expected to be demolished. The following table reconciles our annual
rental revenue and value-creation pipeline RSF as of June 30, 2024 (dollars in thousands):
| Annual Rental Revenue | Value-Creation Pipeline RSF | |||
| Mega campus | $1,649,514 | 21,944,200 | ||
| Non-mega campus | 567,461 | 10,013,556 | ||
| Total | $2,216,975 | 31,957,756 | ||
| Mega campus as a percentage of annual rental revenue and of total value-creation pipeline RSF | 74% | 69% |
Net cash provided by operating activities after dividends
Net cash provided by operating activities after dividends includes the deduction for distributions to noncontrolling interests. For
purposes of this calculation, changes in operating assets and liabilities are excluded as they represent timing differences.
Net debt and preferred stock to Adjusted EBITDA
Net debt and preferred stock to Adjusted EBITDA is a non-GAAP financial measure that we believe is useful to investors as a
supplemental measure of evaluating our balance sheet leverage. Net debt and preferred stock is equal to the sum of total consolidated
debt less cash, cash equivalents, and restricted cash, plus preferred stock outstanding as of the end of the period. Refer to “Adjusted
EBITDA and Adjusted EBITDA margin” in this section for further information on the calculation of Adjusted EBITDA.
We are not able to forecast fourth quarter net income without unreasonable effort and therefore do not provide a reconciliation
for net debt and preferred stock to Adjusted EBITDA on a forward-looking basis. This is due to the inherent difficulty of forecasting the
timing and/or amount of items that depend on market conditions outside of our control, including the timing of dispositions, capital
events, and financing decisions, as well as quarterly components such as gain on sales of real estate, unrealized gains or losses on
non-real estate investments, impairment of real estate, and impairment of non-real estate investments. Our attempt to predict these
amounts may produce significant but inaccurate estimates, which would be potentially misleading for our investors.
The following table reconciles debt to net debt and preferred stock and computes the ratio to Adjusted EBITDA as of June 30,
2024 and December 31, 2023 (dollars in thousands):
| June 30, 2024 | December 31, 2023 | ||
| Secured notes payable | $134,942 | $119,662 | |
| Unsecured senior notes payable | 12,089,561 | 11,096,028 | |
| Unsecured senior line of credit and commercial paper | 199,552 | 99,952 | |
| Unamortized deferred financing costs | 81,942 | 76,329 | |
| Cash and cash equivalents | (561,021) | (618,190) | |
| Restricted cash | (4,832) | (42,581) | |
| Preferred stock | — | — | |
| Net debt and preferred stock | $11,940,144 | $10,731,200 | |
| Adjusted EBITDA: | |||
| – quarter annualized | $2,216,144 | $2,094,988 | |
| – trailing 12 months | $2,122,250 | $1,997,518 | |
| Net debt and preferred stock to Adjusted EBITDA: | |||
| – quarter annualized | 5.4x | 5.1x | |
| – trailing 12 months | 5.6x | 5.4x |
Net operating income, net operating income (cash basis), and operating margin
The following table reconciles net income to net operating income and net operating income (cash basis) and computes
operating margin for the three and six months ended June 30, 2024 and 2023 (dollars in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Net income | $94,049 | $133,705 | $313,225 | $255,398 | ||||
| Equity in earnings of unconsolidated real estate joint ventures | (130) | (181) | (285) | (375) | ||||
| General and administrative expenses | 44,629 | 45,882 | 91,684 | 94,078 | ||||
| Interest expense | 45,789 | 17,072 | 86,629 | 30,826 | ||||
| Depreciation and amortization | 290,720 | 273,555 | 578,274 | 538,857 | ||||
| Impairment of real estate | 30,763 | 168,575 | 30,763 | 168,575 | ||||
| Gain on sales of real estate | — | (214,810) | (392) | (214,810) | ||||
| Investment loss | 43,660 | 78,268 | 376 | 123,379 | ||||
| Net operating income | 549,480 | 502,066 | 1,100,274 | 995,928 | ||||
| Straight-line rent revenue | (48,338) | (29,335) | (96,589) | (62,526) | ||||
| Amortization of acquired below-market leases | (22,515) | (24,789) | (52,855) | (46,425) | ||||
| Net operating income (cash basis) | $478,627 | $447,942 | $950,830 | $886,977 | ||||
| Net operating income (cash basis) – annualized | $1,914,508 | $1,791,768 | $1,901,660 | $1,773,954 | ||||
| Net operating income (from above) | $549,480 | $502,066 | $1,100,274 | $995,928 | ||||
| Total revenues | $766,734 | $713,900 | $1,535,842 | $1,414,695 | ||||
| Operating margin | 72% | 70% | 72% | 70% |
Net operating income is a non-GAAP financial measure calculated as net income (loss), the most directly comparable financial
measure calculated and presented in accordance with GAAP, excluding equity in the earnings of our unconsolidated real estate joint
ventures, general and administrative expenses, interest expense, depreciation and amortization, impairments of real estate, gains or
losses on early extinguishment of debt, gains or losses on sales of real estate, and investment income or loss. We believe net operating
income provides useful information to investors regarding our financial condition and results of operations because it primarily reflects
those income and expense items that are incurred at the property level. Therefore, we believe net operating income is a useful measure
for investors to evaluate the operating performance of our consolidated real estate assets. Net operating income on a cash basis is net
operating income adjusted to exclude the effect of straight-line rent and amortization of acquired above- and below-market lease
revenue adjustments required by GAAP. We believe that net operating income on a cash basis is helpful to investors as an additional
measure of operating performance because it eliminates straight-line rent revenue and the amortization of acquired above- and below-
market leases.
Furthermore, we believe net operating income is useful to investors as a performance measure of our consolidated properties
because, when compared across periods, net operating income reflects trends in occupancy rates, rental rates, and operating costs,
which provide a perspective not immediately apparent from net income or loss. Net operating income can be used to measure the initial
stabilized yields of our properties by calculating net operating income generated by a property divided by our investment in the property.
Net operating income excludes certain components from net income in order to provide results that are more closely related to the
results of operations of our properties. For example, interest expense is not necessarily linked to the operating performance of a real
estate asset and is often incurred at the corporate level rather than at the property level. In addition, depreciation and amortization,
because of historical cost accounting and useful life estimates, may distort comparability of operating performance at the property level.
Impairments of real estate have been excluded in deriving net operating income because we do not consider impairments of real estate
to be property-level operating expenses. Impairments of real estate relate to changes in the values of our assets and do not reflect the
current operating performance with respect to related revenues or expenses. Our impairments of real estate represent the write-down in
the value of the assets to the estimated fair value less cost to sell. These impairments result from investing decisions or a deterioration
in market conditions. We also exclude realized and unrealized investment gain or loss, which results from investment decisions that
occur at the corporate level related to non-real estate investments in publicly traded companies and certain privately held entities.
Therefore, we do not consider these activities to be an indication of operating performance of our real estate assets at the property
level. Our calculation of net operating income also excludes charges incurred from changes in certain financing decisions, such as
losses on early extinguishment of debt, as these charges often relate to corporate strategy. Property operating expenses included in
determining net operating income primarily consist of costs that are related to our operating properties, such as utilities, repairs, and
maintenance; rental expense related to ground leases; contracted services, such as janitorial, engineering, and landscaping; property
taxes and insurance; and property-level salaries. General and administrative expenses consist primarily of accounting and corporate
compensation, corporate insurance, professional fees, rent, and supplies that are incurred as part of corporate office management. We
calculate operating margin as net operating income divided by total revenues.
We believe that in order to facilitate for investors a clear understanding of our operating results, net operating income should
be examined in conjunction with net income or loss as presented in our consolidated statements of operations. Net operating income
should not be considered as an alternative to net income or loss as an indication of our performance, nor as an alternative to cash flows
as a measure of our liquidity or our ability to make distributions.
Operating statistics
We present certain operating statistics related to our properties, including number of properties, RSF, occupancy percentage,
leasing activity, and contractual lease expirations as of the end of the period. We believe these measures are useful to investors
because they facilitate an understanding of certain trends for our properties. We compute the number of properties, RSF, occupancy
percentage, leasing activity, and contractual lease expirations at 100% for all properties in which we have an investment, including
properties owned by our consolidated and unconsolidated real estate joint ventures. For operating metrics based on annual rental
revenue, refer to “Annual rental revenue” in this section.
Same property comparisons
As a result of changes within our total property portfolio during the comparative periods presented, including changes from
assets acquired or sold, properties placed into development or redevelopment, and development or redevelopment properties recently
placed into service, the consolidated total income from rentals, as well as rental operating expenses in our operating results, can show
significant changes from period to period. In order to supplement an evaluation of our results of operations over a given quarterly or
annual period, we analyze the operating performance for all consolidated properties that were fully operating for the entirety of the
comparative periods presented, referred to as same properties. We separately present quarterly and year-to-date same property results
to align with the interim financial information required by the SEC in our management’s discussion and analysis of our financial
condition and results of operations. These same properties are analyzed separately from properties acquired subsequent to the first day
in the earliest comparable quarterly or year-to-date period presented, properties that underwent development or redevelopment at any
time during the comparative periods, unconsolidated real estate joint ventures, properties classified as held for sale, and corporate
entities (legal entities performing general and administrative functions), which are excluded from same property results. Additionally,
termination fees, if any, are excluded from the results of same properties. Refer to “Same properties” in Item 2 for additional information.
Stabilized occupancy date
The stabilized occupancy date represents the estimated date on which the project is expected to reach occupancy of 95% or
greater.
Tenant recoveries
Tenant recoveries represent revenues comprising reimbursement of real estate taxes, insurance, utilities, repairs and
maintenance, common area expenses, and other operating expenses and earned in the period during which the applicable expenses
are incurred and the tenant’s obligation to reimburse us arises.
We classify rental revenues and tenant recoveries generated through the leasing of real estate assets within revenues in
income from rentals in our consolidated statements of operations. We provide investors with a separate presentation of rental revenues
and tenant recoveries in “Results of operations” in Item 2 because we believe it promotes investors’ understanding of our operating
results. We believe that the presentation of tenant recoveries is useful to investors as a supplemental measure of our ability to recover
operating expenses under our triple net leases, including recoveries of utilities, repairs and maintenance, insurance, property taxes,
common area expenses, and other operating expenses, and of our ability to mitigate the effect to net income for any significant
variability to components of our operating expenses.
The following table reconciles income from rentals to tenant recoveries for the three and six months ended June 30, 2024 and
2023 (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Income from rentals | $755,162 | $704,339 | $1,510,713 | $1,392,288 | ||||
| Rental revenues | (576,835) | (537,889) | (1,158,235) | (1,056,191) | ||||
| Tenant recoveries | $178,327 | $166,450 | $352,478 | $336,097 |
Total equity capitalization
Total equity capitalization is equal to the outstanding shares of common stock multiplied by the closing price on the last trading
day at the end of each period presented.
Total market capitalization
Total market capitalization is equal to the sum of total equity capitalization and total debt.
Unencumbered net operating income as a percentage of total net operating income
Unencumbered net operating income as a percentage of total net operating income is a non-GAAP financial measure that we
believe is useful to investors as a performance measure of the results of operations of our unencumbered real estate assets as it
reflects those income and expense items that are incurred at the unencumbered property level. Unencumbered net operating income is
derived from assets classified in continuing operations, which are not subject to any mortgage, deed of trust, lien, or other security
interest, as of the period for which income is presented.
The following table summarizes unencumbered net operating income as a percentage of total net operating income for the
three and six months ended June 30, 2024 and 2023 (dollars in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||
| 2024 | 2023 | 2024 | 2023 | ||||
| Unencumbered net operating income | $544,268 | $500,923 | $1,091,098 | $993,783 | |||
| Encumbered net operating income | 5,212 | 1,143 | 9,176 | 2,145 | |||
| Total net operating income | $549,480 | $502,066 | $1,100,274 | $995,928 | |||
| Unencumbered net operating income as a percentage of total net operating income | 99.1% | 99.8% | 99.2% | 99.8% |
Weighted-average shares of common stock outstanding – diluted
From time to time, we enter into capital market transactions, including forward equity sales agreements (“Forward
Agreements”), to fund acquisitions, to fund construction of our highly leased development and redevelopment projects, and for general
working capital purposes. We are required to consider the potential dilutive effect of our Forward Agreements under the treasury stock
method while the Forward Agreements are outstanding. As of June 30, 2024, we had Forward Agreements outstanding to sell an
aggregate of 230 thousand shares of common stock. Refer to Note 13 – “Stockholders’ equity” to our unaudited consolidated financial
statements in Item 1 for additional information.
The weighted-average shares of common stock outstanding used in calculating EPS – diluted, funds from operations per
share – diluted, and funds from operations per share – diluted, as adjusted, for the three and six months ended June 30, 2024 and 2023
are calculated as follows. Also shown are the weighted-average unvested shares associated with restricted stock awards used in
calculating the amounts allocable to unvested stock award holders for each of the respective periods presented below (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||
| 2024 | 2023 | 2024 | 2023 | ||||
| Basic shares for earnings per share | 172,013 | 170,864 | 171,981 | 170,824 | |||
| Forward Agreements | — | — | — | — | |||
| Diluted shares for earnings per share | 172,013 | 170,864 | 171,981 | 170,824 | |||
| Basic shares for funds from operations per share and funds from operations per share, as adjusted | 172,013 | 170,864 | 171,981 | 170,824 | |||
| Forward Agreements | — | — | — | — | |||
| Diluted shares for funds from operations per share and funds from operations per share, as adjusted | 172,013 | 170,864 | 171,981 | 170,824 | |||
| Weighted-average unvested restricted shares used in calculating the allocations of net income, funds from operations, and funds from operations, as adjusted | 2,878 | 2,163 | 2,933 | 2,219 |
Previous: Item 1. FINANCIAL STATEMENTS (UNAUDITED) · Next: Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK