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

Rhea-AI Summary

Alexandria Real Estate Equities (ARE) reported strong financial results for Q4 2021, with total revenues of $576.9 million, a 24.4% increase year-over-year. Net income for the quarter was $72.8 million, down from $435.9 million in Q4 2020. Funds from operations rose to $303.6 million, reflecting a per-share increase to $1.97. The company achieved historic leasing volumes, with a total of 4 million RSF leased in Q4 2021. Operating income increased 24.2% year-over-year, and the dividend was raised to $1.15 per share. Alexandria's liquidity stands at $5.4 billion.

Positive

• Total revenues increased by 24.4% to $576.9 million in Q4 2021.
• Funds from operations increased to $303.6 million, or $1.97 per share.
• Historic leasing volume reached 4 million RSF in Q4 2021, the highest in company history.
• Net operating income (cash basis) increased by 24.2% year-over-year.
• The company raised its quarterly dividend to $1.15 per share, up 6% from 2020.

Negative

• Net income attributable to common stockholders decreased significantly to $72.8 million from $435.9 million in Q4 2020.

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

 

 

 

 

 

 

 

 

 

 

 

 

Key highlights
Operating results	4Q21		4Q20		2021		2020
Total revenues:
In millions	$  576.9		$     463.7		$  2,114.2		$  1,885.6
Growth	24.4%				12.1%
Net income attributable to Alexandria's common stockholders – diluted
In millions	$    72.8		$     435.9		$     563.4		$     760.8
Per share	$    0.47		$       3.26		$       3.82		$       6.01
Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted
In millions	$  303.6		$     246.6		$  1,144.9		$     923.8
Per share	$    1.97		$       1.84		$       7.76		$       7.30

Historic leasing volume and rental rate growth

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

		4Q21		Previous Quarterly Record		2021		Previous Annual Record
Total leasing activity – RSF		4,094,174	(1)	1,933,838		9,516,301	(1)	5,062,722
Leasing of development and redevelopment    space – RSF		1,795,633	(1)	1,063,951		3,867,383	(1)	2,258,262
Lease renewals and re-leasing of space:
RSF (included in total leasing activity above)		1,947,727	(1)	1,472,713		4,614,040	(1)	2,562,178
Rental rate increases		35.9%				37.9%	(1)	37.6%
Rental rate increases (cash basis)		22.9%				22.6%	(1)	18.3%
(1)     Represents the highest leasing volume and rental rate growth in Company history.

Continued strong net operating income and internal growth

• Net operating income (cash basis) of $1.4 billion for 4Q21 annualized, up $279.9 million, or 24.2%, compared to 4Q20 annualized.
• 95% of our leases contain contractual annual rent escalations approximating 3%.
• Same property net operating income growth:
• 5.0% and 7.5% (cash basis) for 4Q21 over 4Q20.
• 4.2% and 7.1% (cash basis) for 2021 over 2020.

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

Percentage of total annual rental revenue in effect from investment-grade or    publicly traded large cap tenants		51%
Occupancy of operating properties in North America		94.0%
Occupancy of operating properties in North America (excluding vacancy at    recently acquired properties)		98.7%	(1)
Operating margin		70%
Adjusted EBITDA margin		71%
Weighted-average remaining lease term:
All tenants		7.5	years
Top 20 tenants		10.9	years

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

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

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

• 7.4 million RSF of our value-creation projects are either under construction or expected to commence construction in the next six quarters.
• 83% leased/negotiating.

Strong and flexible balance sheet with significant liquidity

• Investment-grade credit ratings ranked in the top 10% among all publicly traded U.S. REITs as of December 31, 2021.
• Net debt and preferred stock to Adjusted EBITDA of 5.2x and fixed-charge coverage ratio of 5.3x for 4Q21 annualized, representing the best ratios in the past 10 years.
• Total debt and preferred stock to gross assets of 26% as of December 31, 2021.
• $5.4 billion liquidity as of December 31, 2021, including our outstanding forward equity sales agreements entered into in January 2022.

Strategic value harvesting and asset recycling

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

Continued dividend strategy to share growth in cash flows with stockholders

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

Key items included in operating results

Key items included in net income attributable to Alexandria's common stockholders:
	4Q21		4Q20		4Q21		4Q20		2021		2020		2021		2020
(In millions, except per share      amounts)	Amount				Per Share – Diluted				Amount				Per Share – Diluted
Unrealized (losses) gains on   non-real estate investments	$ (139.7)		$ 233.5		$ (0.91)		$ 1.75		$  43.6		$  374.0		$  0.30		$ 2.96
Significant realized gains on   non-real estate investments	—		—		—		—		110.1		—		0.75		—
Gain on sales of real estate	124.2	(1)	152.5		0.80		1.14		126.6		154.1		0.86		1.22
Impairment of real estate	—		(25.2)		—		(0.19)		(52.7)		(55.7)		(0.35)		(0.44)
Impairment of non-real estate   investments	—		—		—		—		—		(24.5)		—		(0.19)
Loss on early extinguishment   of debt	—		(7.9)		—		(0.06)		(67.3)		(60.7)		(0.46)		(0.48)
Termination fee	—		—		—		—		—		86.2		—		0.68
Acceleration of stock   compensation expense due to   executive officer resignation	—		—		—		—		—		(4.5)		—		(0.04)
Total	$  (15.5)		$ 352.9		$ (0.11)		$ 2.64		$  160.3		$  468.9		$  1.10		$ 3.71
(1)     Refer to "Funds from operations and funds from operations per share" of this Earnings Press Release for additional details.

External growth and investment in real estate

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

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

Delivery and commencement of value-creation projects

• During 4Q21, we placed into service development and redevelopment projects aggregating 600,768 RSF that are 100% leased across multiple submarkets.
• Annual net operating income (cash basis) is expected to increase by $39 million upon the burn-off of initial free rent from recently delivered projects.
• During 4Q21, we commenced construction on four value-creation projects aggregating 1.1 million RSF, including a 403,892 RSF recently acquired redevelopment project at One Rogers Street, which expands our Alexandria Center^® at Kendall Square mega campus in Cambridge. We pre-leased the entire building by executing leases aggregating 403,892 RSF prior to the closing of the acquisition in December 2021.
• In January 2022, we completed the acquisition of 202,997 SF additional development entitlements, for an aggregate of 507,997 SF, at our 421 Park Drive future development site in our Alexandria Center^® for Life Science – Fenway mega campus in our Fenway submarket.

Value-creation pipeline of new Class A development and redevelopment projects as a percentage of gross assets		4Q21
Under construction projects 82% leased/negotiating		9%
Pre-leased/negotiating near-term projects 89% leased/negotiating		2%
Income-producing/potential cash flows/covered land play(1)		6%
Land		2%

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

Balance sheet management

Credit rating outlook improvement

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

Key metrics as of December 31, 2021

• $44.0 billion of total market capitalization.
• $35.2 billion of total equity capitalization; represents top 10% in total equity capitalization among all publicly traded U.S. REITs as of December 31, 2021.
• No debt maturities prior to 2024.
• 12.1 years weighted-average remaining term of debt as of December 31, 2021.

		4Q21					Goal
		Quarter			Trailing		4Q22
		Annualized			12 Months		Annualized
Net debt and preferred stock to    Adjusted EBITDA		5.2x   (1)			5.6x		Less than or equal to 5.1x
Fixed-charge coverage ratio		5.3x   (1)			5.0x		Greater than or equal to 5.1x

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

Key capital events

• In December 2021, we entered into a new ATM common stock offering program, which allows us to sell up to an aggregate of $1.0 billion of our common stock. As of January 31, 2022, the full amount remains available for future sales of our common stock.
• In December 2021, we settled the outstanding forward equity sales agreements by issuing 4.6 million shares of common stock and received net proceeds of $770.6 million.
• In January 2022, we entered into new forward equity sales agreements aggregating $1.7 billion to sell 8.1 million shares of our common stock (including the exercise of underwriters' option) at a public offering price of $210.00 per share, before underwriting discounts and commissions.

Investments

• As of December 31, 2021, our investments aggregated $1.9 billion, including unrealized gains of $797.7 million.
• Investment income of $259.5 million for the year ended December 31, 2021 included $215.8 million in realized gains and $43.6 million in unrealized gains.

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

• In January 2022, Alexandria Venture Investments, our strategic venture capital platform, was recognized by Silicon Valley Bank in its "Healthcare Investments and Exits: 2022 Annual Report" as the #1 most active corporate investor in biopharma by new deal volume (2020-2021) for the fifth consecutive year. Alexandria's venture activity provides us with, among other things, mission-critical data and knowledge on key industry innovations and trends.
• In December 2021, Alexandria established a new social responsibility pillar to address America's growing mental health crisis, with a focus on helping children cope with the loss of a parent or family member to suicide. By partnering with Camp Kita, a tuition-free summer camp for 8- to 17-year-olds who are impacted by the loss of a family member to suicide, we have enabled the non-profit to have long-term access to 28 acres in Acton, Maine that will serve as the camp's future home. The dedicated space will allow Camp Kita to expand its programming, advance its mission, and support the mental health of a community of young survivors.
• As a testament to Alexandria's operational excellence and exceptional team, in November 2021, we were recognized at the 2021 BOMA Boston TOBY (The Outstanding Building of the Year) & Industry Awards for the Laboratory Building of the Year (100 Binney Street) and the Corporate Facility of the Year (200 Technology Square). Five members from our Greater Boston team were also honored for their individual achievements. The TOBY & Industry Awards recognize excellence in property management, building operations, and service in the commercial real estate industry.
• In November 2021, Alexandria's executive chairman and founder, Joel S. Marcus, joined the National Medal of Honor Museum Foundation at the Dallas Cowboys' "Salute to Service" game to support the future National Medal of Honor Museum in Arlington, Texas and its mission to inspire visitors with the stories of our country's Medal of Honor recipients for generations to come. Mr. Marcus has served on the foundation's board of directors since 2019.
• In October 2021, OneFifteen, an innovative, data-driven non-profit evidence-based healthcare ecosystem dedicated to the full and sustained recovery of people living with addiction, celebrated its second anniversary. Since seeing its first patients in October 2019 at its pioneering campus in Dayton, Ohio, which was designed and developed by Alexandria, OneFifteen has treated over 4,000 patients and conducted over 11,500 telehealth visits.
• In October 2021, STEAM:Coders honored Alexandria with the Corporate Vanguard Award, recognizing our longstanding commitment to the non-profit's mission to inspire underrepresented and underserved students and their families through science, technology, engineering, art, and math (STEAM) education in preparation for academic and career opportunities.

 

Acquisitions December 31, 2021 (Dollars in thousands)
											Square Footage
											Acquisitions With Development/Redevelopment Opportunities(1)
Property		Submarket/Market		Date of Purchase		Number of Properties		Operating Occupancy			Future Development		Active Development/ Redevelopment		Operating With Future Development/ Redevelopment		Operating(2)		Operating		Total(3)		Purchase Price
Completed in YTD 3Q21						76		93%			7,946,121		1,434,803		2,823,087		2,801,041		238,948		14,272,878		$	3,941,902
Completed in 4Q21:
One Rogers Street		Cambridge/Inner Suburbs/    Greater Boston		12/30/21		1		100   (4)			TBD		403,892		—		4,367		—		408,259			849,422
1178 El Camino Real		South San Francisco/    San Francisco Bay Area		11/5/21		—		N/A			620,000		—		—		—		—		620,000			128,000
3420 and 3440 Hillview    Avenue		Greater Stanford/San     Francisco Bay Area		10/5/21		2		75			—		—		185,228		—		—		185,228			203,800
888 Bransten Road		Greater Stanford/San    Francisco Bay Area		11/4/21		—		N/A			210,830		—		—		—		—		210,830			55,000
Other		Various		Various		8		75			1,888,874		144,113		489,466		—		187,512		2,709,965			291,030
						11		75			2,719,704		548,005		674,694	(5)	4,367	(5)	187,512	(5)	4,134,282			1,527,252
2021 acquisitions						87		91%			10,665,825		1,982,808		3,497,781		2,805,408		426,460		18,407,160		$	5,469,154

(1)	We expect to provide total estimated costs and related yields for development and redevelopment projects in the future, subsequent to the commencement of construction. Refer to "New Class A development and redevelopment properties: current projects" in our Supplemental Information for additional details on active development and redevelopment projects.
(2)	Represents the operating component of our value-creation acquisitions that is not expected to undergo development or redevelopment.
(3)	Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operations with future development or redevelopment opportunities. We intend to demolish and develop or to redevelop the existing properties upon expiration of the existing in-place leases. Refer to "Definitions and reconciliations" in our Supplemental Information for additional details on value-creation square feet currently included in rental properties.
(4)	We pre-leased the entire building by executing leases aggregating 403,892 RSF prior to closing of the acquisition in December 2021.
(5)	We expect the acquisitions completed during the three months ended December 31, 2021 to generate initial annual net operating income of $14.8 million for the twelve months following acquisition. These acquisitions included 11 operating properties with a weighted-average acquisition date of October 19, 2021 (weighted by initial annual net operating income).

 

Acquisitions (continued) December 31, 2021 (Dollars in thousands)
											Square Footage
											Acquisitions With Development/Redevelopment Opportunities(1)
Property		Submarket/Market		Date of Purchase		Number of Properties		Operating Occupancy			Future Development		Active Development/ Redevelopment		Operating With Future Development/ Redevelopment		Operating(2)		Operating		Total(3)		Purchase Price
Completed in January 2022:
421 Park Drive(4)		Fenway/Greater Boston		1/13/22		—		N/A			202,997	(4)	—		—		—		—		202,997		$	81,119
225 and 235 Presidential Way		Route 128/Greater Boston		1/28/22		2		100%			—		—		440,130		—		—		440,130			124,673
3301, 3303, 3305, and 3307 Hillview    Avenue		Greater Stanford/    San Francisco Bay Area		1/6/22		4		100			—		—		292,013		—		—		292,013			446,000
Costa Verde by Alexandria		University Town Center/    San Diego		1/11/22		1		100			537,000		—		8,730		—		—		545,730			125,000
Alexandria Center® for Life Science –    Durham		Research Triangle/Research    Triangle		1/11/22		—		N/A			1,175,000		—		—		—		—		1,175,000			99,428
104 and 108/110/112/114 TW    Alexander Drive, 2752 East NC    Highway 54, and 10 South Triangle    Drive(5)		Research Triangle/Research    Triangle		1/6/22		4		88			750,000		—		69,484		—		—		819,484			80,000
Other		Various		Various		7		92			228,250		—		428,097		381,760		—		1,038,107			263,620
						18		96%			2,893,247		—		1,238,454		381,760		—		4,513,461			1,219,840
Pending acquisitions:
Mercer Mega Block		Lake Union/Seattle		February 2022		—		N/A			800,000		—		—		—		—		800,000			143,500
Intersection Campus		Texas		February 2022		9		81%			—		—		998,304		—		—		998,304			402,000
																								545,500
Other targeted acquisitions(6)																								1,234,660
2022 acquisitions (midpoint)																							$	3,000,000
2022 guidance range																					$2,500,000 – $3,500,000

(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)	Represents the operating component of our value-creation acquisitions that is not expected to undergo development or redevelopment.
(3)	Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operation with future development or redevelopment opportunities. We intend to demolish and develop or to redevelop the existing properties upon expiration of the existing in-place leases. Refer to "Definitions and reconciliations" in our Supplemental Information for additional details on value-creation square feet currently included in rental properties.
(4)	Represents the incremental purchase price related to the achievement of additional entitlement rights of 202,997 SF at our Alexandria Center® for Life Science – Fenway mega campus.
(5)	Represents the acquisition of fee simple interests in the land underlying our recently acquired 108/110/112/114 TW Alexander Drive buildings, which were previously subject to ground leases.
(6)	Includes a land parcel aggregating 680,000 RSF of future development opportunity at 1150 El Camino Real in our South San Francisco submarket. The property is a transit-oriented opportunity with a BART station located on premises that will combine with other contiguous land that was recently acquired, including 1122 and 1178 El Camino Real, to create a new mega campus consisting of 2.0 million RSF of future development opportunities.

 

Dispositions and Sales of Partial Interest December 31, 2021 (Dollars in thousands)
Property		Submarket/Market		Date of Sale		Interest Sold			RSF		Capitalization     Rate			Capitalization    Rate    (Cash Basis)			Sales Price(1)				Sales Price per RSF		Gain or Consideration in Excess of Book Value
Completed in YTD 3Q21									1,011,263								$                       663,283						$     201,490
Completed in 4Q21:
50 and 60 Binney Street		Cambridge/Inner Suburbs/    Greater Boston		12/15/21		66%			532,395		4.3%			3.9%			782,259				$       2,226		457,529	(3)
409 and 499 Illinois Street		Mission Bay/San Francisco Bay Area		10/5/21		35%	(2)		455,069		5.0%			4.2%			274,681				$       1,366		113,756	(3)
1500 Owens Street		Mission Bay/San Francisco Bay Area				25.1%	(2)		158,267
455 Mission Bay Boulevard    South		Mission Bay/San Francisco Bay Area		12/16/21		75%			228,140		4.1%			3.8%			381,355				$       1,295		221,868	(3)
1700 Owens Street		Mission Bay/San Francisco Bay Area							164,513
Menlo Gateway		Greater Stanford/San Francisco Bay    Area		12/21/21		(4)			772,983		5.4%			5.1%			397,851			(5)	$       1,430		101,050	(6)
2301 5th Avenue		Lake Union/Seattle		12/22/21		100%			197,135		6.3%			4.9%			118,707				$          602		23,175	(6)
Other		Various		Various		100%			79,007		N/A			N/A			12,000				N/A		—
									2,587,509								1,966,853						917,378
2021 dispositions and sales of partial interest									3,598,772								$                    2,630,136			(7)			$  1,118,868	(8)

(1)	For sales of partial interests; represents the contractual sales price for the percentage interest of the property sold by us.
(2)	We recapitalized these consolidated real estate joint ventures and sold: (i) a 35% interest in 409 and 499 Illinois Street and (ii) a 25.1% interest in 1500 Owens Street, resulting in an acquisition by the investor of a 75% ownership interest in each joint venture, including the interest held by our previous joint venture partners.
(3)	For each partial interest sale, we retained control over the newly formed real estate joint venture and therefore continued to consolidate this property. We accounted for the difference between the consideration received and the book value of the interest sold as an equity transaction, with no gain or loss recognized in earnings.
(4)	We sold our 49.0% interest in Menlo Gateway, which represents our entire equity interest in the unconsolidated real estate joint venture.
(5)	Represents a sales price of $541.5 million less our share of the debt held by the unconsolidated real estate joint venture assumed by the buyer aggregating $143.6 million.
(6)	We sold our entire interest in this property and recognized the related gain in earnings, classified within gain (loss) on sales of real estate in our consolidated statements of operations.
(7)	Represents the highest total volume of dispositions in Company history, at a weighted-average capitalization rate (cash basis) of 4.1%.
(8)	We achieved a weighted-average value-creation margin of 75% on our completed dispositions and sales of partial interest.

 

Dispositions and Sales of Partial Interest (continued) December 31, 2021 (Dollars in thousands)

Property

Market

Date of Sale

Interest Sold

RSF

Sales Price

Partial interest sale

Greater Boston

1Q22

TBD

TBD

$         650,000

–

$         750,000

Other real estate dispositions and partial interest sales

1Q22

TBD

TBD

50,000

–

150,000

Other targeted real estate dispositions and partial interest sales

600,000

–

1,200,000

2022 guidance range

$      1,300,000

–

$      2,100,000

 

Guidance December 31, 2021 (Dollars in millions, except per share amounts)
The following guidance is based on our current view of existing market conditions and assumptions for the year ending December 31, 2022. There can be no assurance that actual amounts will not be materially higher or lower than these expectations. Also, refer to our discussion of "forward-looking statements" on page 9 of this Earnings Press Release for additional details.
Projected 2022 Earnings per Share and Funds From Operations per Share Attributable to    Alexandria's Common Stockholders – Diluted
Earnings per share(1)		$2.65 to $2.85
Depreciation and amortization of real estate assets		5.65
Allocation to unvested restricted stock awards		(0.04)
Funds from operations per share(2)		$8.26 to $8.46
Midpoint		$8.36

Key Assumptions		Low		High
Occupancy percentage in North America as of December 31, 2022		95.2%		95.8%
Lease renewals and re-leasing of space:
Rental rate increases		30.0%		35.0%
Rental rate increases (cash basis)		18.0%		23.0%
Same property performance:
Net operating income increase		5.5%		7.5%
Net operating income increase (cash basis)		6.5%		8.5%
Straight-line rent revenue		$            150		$            160
General and administrative expenses		$            168		$            176
Capitalization of interest		$            269		$            279
Interest expense		$              90		$            100

Key Credit Metrics		2022 Guidance
Net debt and preferred stock to Adjusted EBITDA – 4Q22 annualized		Less than or equal to 5.1x
Fixed-charge coverage ratio – 4Q22 annualized		Greater than or equal to 5.1x

Key Sources and Uses of Capital		Range				Midpoint			Certain Completed Items
Sources of capital:
Net cash provided by operating activities after    dividends		$    275		$    325		$	300
Incremental debt		1,375		1,025			1,200
Real estate dispositions and partial interest sales    (refer to page 7)		1,300		2,100			1,700
Common equity		2,250		3,250			2,750		$  1,691
Total sources of capital		$ 5,200		$ 6,700		$	5,950
Uses of capital:
Construction		$ 2,700		$ 3,200		$	2,950
Acquisitions (refer to page 5)		2,500		3,500			3,000		$  1,220
Total uses of capital		$ 5,200		$ 6,700		$	5,950
Incremental debt (included above):
Issuance of unsecured senior notes payable		$ 1,200		$ 1,700		$	1,450
Unsecured senior line of credit, commercial paper,    and other		175		(675)			(250)
Incremental debt		$ 1,375		$ 1,025		$	1,200

(1)	Excludes unrealized gains or losses after December 31, 2021 that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted.
(2)	Refer to "Funds from operations and funds from operations, as adjusted, attributable to Alexandria's common stockholders" in the "Definitions and reconciliations" of our Supplemental Information for additional details.

Earnings Call Information and About the Company
December 31, 2021

We will host a conference call on Tuesday, February 1, 2022, at 3:00 p.m. Eastern Time ("ET")/noon Pacific Time ("PT"), which is open to the general public, to discuss our financial and operating results for the fourth quarter and year ended December 31, 2021. To participate in this conference call, dial (833) 366-1125 or (412) 902-6738 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the call for Alexandria Real Estate Equities, Inc. The audio webcast can be accessed at www.are.com in the "For Investors" section. A replay of the call will be available for a limited time from 5:00 p.m. ET/2:00 p.m. PT on Tuesday, February 1, 2022. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 10161869.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the fourth quarter and year ended December 31, 2021, is available in the "For Investors" section of our website at www.are.com or by following this link: http://www.are.com/fs/2021q4.pdf.

For any questions, please contact Joel S. Marcus, executive chairman and founder; Stephen A. Richardson, co-chief executive officer; Peter M. Moglia, co-chief executive officer and co-chief investment officer; Dean A. Shigenaga, president and chief financial officer; Paula Schwartz, managing director of Rx Communications Group, at (917) 322-2216; or Sara M. Kabakoff, vice president – communications, at (626) 578-0777.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500^® urban office real estate investment trust ("REIT"), is the first, longest-tenured, and pioneering owner, operator, and developer uniquely focused on collaborative life science, agtech, and technology campuses in AAA innovation cluster locations, with a total market capitalization of $44.0 billion as of December 31, 2021, and an asset base in North America of 67.0 million square feet ("SF"). The asset base in North America includes 38.8 million RSF of operating properties and 4.8 million RSF of Class A properties undergoing construction, 8.7 million RSF of near-term and intermediate-term development and redevelopment projects, and 14.7 million SF of future development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science, agtech, and technology campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science, agtech, and technology companies through our venture capital platform. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.

***********

This document includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2022 earnings per share attributable to Alexandria's common stockholders – diluted, 2022 funds from operations per share attributable to Alexandria's common stockholders – diluted, net operating income, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as "forecast," "guidance," "goals," "projects," "estimates," "anticipates," "believes," "expects," "intends," "may," "plans," "seeks," "should," "targets," or "will," or the negative of those words or similar words. These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. There can be no assurance that actual results will not be materially higher or lower than these expectations. These statements are subject to risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, lower than expected yields, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully place into service and lease any properties undergoing development or redevelopment and our existing space held for future development or redevelopment (including new properties acquired for that purpose), our failure to successfully operate or lease acquired properties, decreased rental rates, increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, adverse general and local economic conditions, an unfavorable capital market environment, decreased leasing activity or lease renewals, failure to obtain LEED and other healthy building certifications and efficiencies, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission ("SEC"). Accordingly, you are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are made as of the date of this Earnings Press Release and Supplemental Information, and unless otherwise stated, we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.

Alexandria^®, Lighthouse Design^® logo, Building the Future of Life-Changing Innovation™, That's What's in Our DNA^®, Labspace^®, Alexandria Center^®, Alexandria Technology Square^®, Alexandria Technology Center^®, and Alexandria Innovation Center^® are copyrights and trademarks of Alexandria Real Estate Equities, Inc. All other company names, trademarks, and logos referenced herein are the property of their respective owners.

 

Consolidated Statements of Operations December 31, 2021 (Dollars in thousands, except per share amounts)
		Three Months Ended										Year Ended
		12/31/21		9/30/21		6/30/21		3/31/21		12/31/20		12/31/21		12/31/20
Revenues:
Income from rentals		$       574,656		$       546,527		$       508,371		$       478,695		$       461,335		$    2,108,249		$    1,878,208
Other income		2,267		1,232		1,248		1,154		2,385		5,901		7,429
Total revenues		576,923		547,759		509,619		479,849		463,720		2,114,150		1,885,637
Expenses:
Rental operations		175,717		165,995		143,955		137,888		136,767		623,555		530,224
General and administrative		41,654		37,931		37,880		33,996		32,690		151,461		133,341
Interest		34,862		35,678		35,158		36,467		37,538		142,165		171,609
Depreciation and amortization		239,254		210,842		190,052		180,913		177,750		821,061		698,104
Impairment of real estate		—		42,620		4,926		5,129		25,177		52,675		48,078
Loss on early extinguishment of debt		—		—		—		67,253		7,898		67,253		60,668
Total expenses		491,487		493,066		411,971		461,646		417,820		1,858,170		1,642,024
Equity in earnings of unconsolidated real estate joint ventures		3,018		3,091		2,609		3,537		3,593		12,255		8,148
Investment (loss) income		(112,884)		67,084		304,263		1,014		255,137		259,477		421,321
Gain (loss) on sales of real estate		124,226	(1)	(435)		—		2,779		152,503		126,570	(1)	154,089
Net income		99,796		124,433		404,520		25,533		457,133		654,282		827,171
Net income attributable to noncontrolling interests		(24,901)		(21,286)		(19,436)		(17,412)		(15,649)		(83,035)		(56,212)
Net income attributable to Alexandria Real Estate Equities, Inc.'s    stockholders		74,895		103,147		385,084		8,121		441,484		571,247		770,959
Net income attributable to unvested restricted stock awards		(2,098)		(1,883)		(4,521)		(2,014)		(5,561)		(7,848)		(10,168)
Net income attributable to Alexandria Real Estate Equities, Inc.'s common    stockholders		$         72,797		$       101,264		$       380,563		$           6,107		$       435,923		$       563,399		$       760,791
Net income per share attributable to Alexandria Real Estate Equities, Inc.'s    common stockholders:
Basic		$             0.47		$             0.67		$             2.61		$             0.04		$             3.26		$             3.83		$             6.03
Diluted		$             0.47		$             0.67		$             2.61		$             0.04		$             3.26		$             3.82		$             6.01
Weighted-average shares of common stock outstanding:
Basic		153,464		150,854		145,825		137,319		133,688		146,921		126,106
Diluted		154,307		151,561		146,058		137,688		133,827		147,460		126,490
Dividends declared per share of common stock		$             1.15		$             1.12		$             1.12		$             1.09		$             1.09		$             4.48		$             4.24

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

 

Consolidated Balance Sheets December 31, 2021 (In thousands)
		12/31/21		9/30/21		6/30/21		3/31/21		12/31/20
Assets
Investments in real estate		$  24,980,669		$  23,071,514		$  21,692,385		$  20,253,418		$  18,092,372
Investments in unconsolidated real estate joint ventures		38,483		321,737		323,622		325,928		332,349
Cash and cash equivalents		361,348		325,872		323,876		492,184		568,532
Restricted cash		53,879		42,182		33,697		42,219		29,173
Tenant receivables		7,379		7,749		6,710		7,556		7,333
Deferred rent		839,335		816,219		781,600		751,967		722,751
Deferred leasing costs		402,898		329,952		321,005		294,328		272,673
Investments		1,876,564		2,046,878		1,999,283		1,641,811		1,611,114
Other assets		1,658,818		1,596,615		1,536,672		1,424,935		1,191,581
Total assets		$  30,219,373		$  28,558,718		$  27,018,850		$  25,234,346		$  22,827,878
Liabilities, Noncontrolling Interests, and Equity
Secured notes payable		$       205,198		$       198,758		$       227,984		$       229,406		$       230,925
Unsecured senior notes payable		8,316,678		8,314,851		8,313,025		8,311,512		7,232,370
Unsecured senior line of credit and commercial paper		269,990		749,978		299,990		—		99,991
Accounts payable, accrued expenses, and other liabilities		2,210,410		2,149,450		1,825,387		1,750,687		1,669,832
Dividends payable		183,847		173,560		170,647		160,779		150,982
Total liabilities		11,186,123		11,586,597		10,837,033		10,452,384		9,384,100
Commitments and contingencies
Redeemable noncontrolling interests		9,612		11,681		11,567		11,454		11,342
Alexandria Real Estate Equities, Inc.'s stockholders' equity:
Common stock		1,580		1,532		1,507		1,457		1,367
Additional paid-in capital		16,195,256		14,727,735		14,194,023		12,994,748		11,730,970
Accumulated other comprehensive loss		(7,294)		(6,029)		(4,508)		(5,799)		(6,625)
Alexandria Real Estate Equities, Inc.'s stockholders' equity		16,189,542		14,723,238		14,191,022		12,990,406		11,725,712
Noncontrolling interests		2,834,096		2,237,202		1,979,228		1,780,102		1,706,724
Total equity		19,023,638		16,960,440		16,170,250		14,770,508		13,432,436
Total liabilities, noncontrolling interests, and equity		$  30,219,373		$  28,558,718		$  27,018,850		$  25,234,346		$  22,827,878

 

Funds From Operations and Funds From Operations per Share December 31, 2021 (In thousands)
The following table presents a reconciliation of net income (loss) attributable to Alexandria's common stockholders, the most directly comparable financial measure presented in accordance with U.S. generally accepted accounting principles ("GAAP"), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria's common stockholders – diluted, and funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted, for the periods below:
		Three Months Ended										Year Ended
		12/31/21		9/30/21		6/30/21		3/31/21		12/31/20		12/31/21		12/31/20
Net income attributable to Alexandria's common stockholders		$     72,797		$   101,264		$   380,563		$       6,107		$   435,923		$   563,399		$   760,791
Depreciation and amortization of real estate assets		234,979		205,436		186,498		177,720		173,392		804,633		684,682
Noncontrolling share of depreciation and amortization from consolidated real    estate JVs		(21,265)		(17,871)		(16,301)		(15,443)		(15,032)		(70,880)		(61,933)
Our share of depreciation and amortization from unconsolidated real estate JVs		3,058		3,465		4,135		3,076		2,976		13,734		11,413
(Gain) loss on sales of real estate		(124,226)	(1)	435		—		(2,779)		(152,503)		(126,570)	(1)	(154,089)
Impairment of real estate – rental properties		—		18,602		1,754		5,129		25,177		25,485		40,501
Allocation to unvested restricted stock awards		—		(1,472)		(2,191)		(201)		(420)		(6,315)		(7,018)
Funds from operations attributable to Alexandria's common stockholders –     diluted(2)		165,343		309,859		554,458		173,609		469,513		1,203,486		1,274,347
Unrealized losses (gains) on non-real estate investments		139,716		14,432		(244,031)		46,251		(233,538)		(43,632)		(374,033)
Significant realized gains on non-real estate investments		—		(52,427)		(34,773)		(22,919)		—		(110,119)		—
Impairment of non-real estate investments		—		—		—		—		—		—		24,482
Impairment of real estate		—		24,018		3,172		—		—		27,190		15,221
Loss on early extinguishment of debt		—		—		—		67,253		7,898		67,253		60,668
Termination fee		—		—		—		—		—		—		(86,179)
Acceleration of stock compensation expense due to executive officer resignation		—		—		—		—		—		—		4,499
Allocation to unvested restricted stock awards		(1,432)		149		3,428		(1,208)		2,774		710		4,790
Funds from operations attributable to Alexandria's common stockholders –     diluted, as adjusted		$   303,627		$   296,031		$   282,254		$   262,986		$   246,647		$  1,144,888		$   923,795

(1)	Includes $101.1 million related to the sale of our entire 49.0% interest in the unconsolidated real estate joint venture at Menlo Gateway.
(2)	Calculated in accordance with standards established by the Nareit Board of Governors.

 

Funds From Operations and Funds From Operations per Share (continued) December 31, 2021 (In thousands, except per share amounts)
The following table presents a reconciliation of net income (loss) per share attributable to Alexandria's common stockholders, the most directly comparable financial measure presented in accordance with GAAP, including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations per share attributable to Alexandria's common stockholders – diluted, and funds from operations per share attributable to Alexandria's common stockholders – diluted, as adjusted, for the periods below. Per share amounts may not add due to rounding.
		Three Months Ended										Year Ended
		12/31/21		9/30/21		6/30/21		3/31/21		12/31/20		12/31/21		12/31/20
Net income per share attributable to Alexandria's common stockholders –    diluted		$         0.47		$         0.67		$         2.61		$         0.04		$         3.26		$         3.82		$         6.01
Depreciation and amortization of real estate assets		1.40		1.26		1.19		1.20		1.21		5.07		5.01
(Gain) loss on sales of real estate		(0.80)		—		—		(0.02)		(1.14)		(0.86)		(1.22)
Impairment of real estate – rental properties		—		0.12		0.01		0.04		0.19		0.17		0.32
Allocation to unvested restricted stock awards		—		(0.01)		(0.01)		—		(0.01)		(0.04)		(0.05)
Funds from operations per share attributable to Alexandria's common    stockholders – diluted		1.07		2.04		3.80		1.26		3.51		8.16		10.07
Unrealized losses (gains) on non-real estate investments		0.91		0.10		(1.67)		0.34		(1.75)		(0.30)		(2.96)
Significant realized gains on non-real estate investments		—		(0.35)		(0.24)		(0.17)		—		(0.75)		—
Impairment of non-real estate investments		—		—		—		—		—		—		0.19
Impairment of real estate		—		0.16		0.02		—		—		0.18		0.12
Loss on early extinguishment of debt		—		—		—		0.49		0.06		0.46		0.48
Termination fee		—		—		—		—		—		—		(0.68)
Acceleration of stock compensation expense due to executive officer resignation		—		—		—		—		—		—		0.04
Allocation to unvested restricted stock awards		(0.01)		—		0.02		(0.01)		0.02		0.01		0.04
Funds from operations per share attributable to Alexandria's common    stockholders – diluted, as adjusted		$         1.97		$         1.95		$         1.93		$         1.91		$         1.84		$         7.76		$         7.30
Weighted-average shares of common stock outstanding – diluted		154,307		151,561		146,058		137,688		133,827		147,460		126,490

 

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