Alexandria Real Estate Equities, Inc. Reports: 2Q22 and 1H22 Net Income per Share - Diluted of $1.67 and $0.74, respectively; and 2Q22 and 1H22 FFO per Share - Diluted, As Adjusted, of $2.10 and $4.15, respectively

Rhea-AI Summary

On July 25, 2022, Alexandria Real Estate Equities (NYSE:ARE) reported robust financial results for Q2 2022. Total revenues surged by 26.3% year-over-year to $643.8 million, while funds from operations rose 20% to $338.8 million. However, net income attributable to common stockholders fell to $269.3 million from $380.6 million in Q2 2021. The company celebrated its 25th anniversary with significant stockholder returns of 1,902%. During the quarter, Alexandria maintained strong occupancy rates at 94.6% and announced $665 million in incremental annual rental revenue from ongoing projects.

Positive

• Total revenues increased by 26.3% to $643.8 million.
• Funds from operations rose 20% to $338.8 million.
• Celebrated 25th anniversary with a total stockholder return of 1,902%.
• Maintained high occupancy rate at 94.6%.
• Expected to generate $665 million in incremental annual rental revenue from projects.

Negative

• Net income attributable to common stockholders declined to $269.3 million from $380.6 million.
• Per share earnings dropped from $2.61 to $1.67.
• Unrealized losses on non-real estate investments totaled $68.1 million.

PASADENA, Calif., July 25, 2022 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE:ARE) announced financial and operating results for the second quarter ended June 30, 2022.

 

Key highlights
Operating results	2Q22		2Q21		1H22		1H21
Total revenues:
In millions	$  643.8		$     509.6		$  1,258.8		$     989.5
Growth	26.3 %				27.2 %
Net income attributable to Alexandria's common stockholders – diluted
In millions	$  269.3		$     380.6		$     118.5		$     388.5
Per share	$    1.67		$       2.61		$       0.74		$       2.74
Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted
In millions	$  338.8		$     282.3		$     663.4		$     545.2
Per share	$    2.10		$       1.93		$       4.15		$       3.84

Ringing of the New York Stock Exchange Opening Bell to celebrate our 25th anniversary

In celebration of our 25th anniversary as a publicly traded company, we recently rang The Opening Bell^® at the New York Stock Exchange to mark this momentous milestone. From our initial public offering on May 27, 1997 through May 27, 2022, we have generated a total stockholder return ("TSR") of 1,902%, assuming reinvestment of dividends, substantially outperforming the MSCI U.S. REIT Index TSR of 803% and the FTSE Nareit Equity Office Index TSR of 457%.

A REIT industry-leading high-quality roster of over 1,000 tenants with high-quality revenues and cash flows, strong margins, and operational excellence

Percentage of total annual rental revenue in effect from investment-grade or      publicly traded large cap tenants		50 %
Sustained strength in tenant collections:
Tenant receivables as of June 30, 2022		$     7.1	million
July tenant rent and receivables collected as of July 25, 2022		99.9 %
Occupancy of operating properties in North America		94.6 %
Occupancy of operating properties in North America (excluding vacancy at      recently acquired properties)		98.4 %	(1)
Operating margin		70 %
Adjusted EBITDA margin		70 %
Weighted-average remaining lease term:
All tenants		7.1	years
Top 20 tenants		10.2	years

(1)	Excludes 1.6 million RSF, or 3.8%, of vacancy at recently acquired properties representing lease-up opportunities that are expected to provide incremental annual rental revenue. Refer to "Occupancy" in our Supplemental Information.

Record rental rate increases and continued historic high leasing volume

• For 2Q22, rental rate increases of 45.4% and 33.9% (cash basis) represent the second- highest and the highest quarterly increases in Company history, respectively.
• During 2Q22, we executed 2,279,758 RSF of leasing activity, representing the third-highest quarter of leasing volume in Company history; 87% of this leasing activity was generated from a roster of over 1,000 tenants and other relationships.

		2Q22		1H22
Total leasing activity – RSF		2,279,758		4,743,196
Leasing of development and redevelopment space – RSF		916,436		2,356,132
Lease renewals and re-leasing of space:
RSF (included in total leasing activity above)		1,087,082		1,951,159
Rental rate increases		45.4 %		39.0 %
Rental rate increases (cash basis)		33.9 %		25.2 %

Continued strong net operating income and internal growth

• Net operating income (cash basis) of $1.6 billion for 2Q22 annualized, up $315.5 million, or 24.3%, compared to 2Q21 annualized.
• 97% of our leases contain contractual annual rent escalations approximating 3%.
• Same property net operating income increases:
• 7.5% and 10.2% (cash basis) for 2Q22 over 2Q21, representing the second- and third-highest increases in the past 10 years, respectively.
• 7.7% and 8.6% (cash basis) for 1H22 over 1H21.

Strong valuations for partial interest sale and dispositions

During 2Q22, we completed a partial interest sale and dispositions aggregating $548.7 million, including:

• Sale of a 70% interest in 300 Third Street in our Cambridge/Inner Suburbs submarket for a sales price of $166.5 million, or $1,802 per RSF, representing capitalization rates of 4.6% and 4.3% (cash basis).
• Sale of 12 properties in our Route 128 and Route 495 suburban submarkets of Greater Boston for an aggregate sales price of $334.4 million, or $542 per RSF, representing a capitalization rate (cash basis) of 5.1%.

Strong and flexible balance sheet with significant liquidity as of June 30, 2022

• Investment-grade credit ratings ranked in the top 10% among all publicly traded U.S. REITs.
• Net debt and preferred stock to Adjusted EBITDA of 5.5x and fixed-charge coverage ratio of 5.1x for 2Q22 annualized.
• Total debt and preferred stock to gross assets of 28%.
• 98.3% of our debt has a fixed rate.
• 13.6 years weighted-average remaining term of debt.
• $5.5 billion of liquidity.

Continued high demand for Alexandria's brand drives visibility for future growth aggregating $665 million of incremental annual rental revenue

Our highly leased value-creation pipeline of current and key near-term projects that are under construction or that will commence construction in the next six quarters is expected to generate greater than $665 million of incremental annual rental revenue, primarily commencing from 3Q22 through 2Q25.

• 7.8 million RSF of our value-creation projects, which are 78% leased/negotiating, are either under construction or expected to commence construction in the next six quarters.

Continued dividend strategy to share growth in cash flows with stockholders

Common stock dividend declared for 2Q22 of $1.18 per common share, aggregating $4.60 per common share for the twelve months ended June 30, 2022, up 24 cents, or 6%, over the twelve months ended June 30, 2021. Our FFO payout ratio of 56% for the three months ended June 30, 2022 allows us to continue to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Seventh overall Nareit Investor CARE Award winner

We received the 2022 Nareit Investor CARE (Communications and Reporting Excellence) Silver Award in the Large Cap Equity REIT category for superior shareholder communications and reporting. This represents our fifth consecutive and seventh overall Nareit Investor CARE Award since 2015, demonstrating consistency in delivering best-in-class transparency, quality, and efficiency in communications and reporting to the investment community.

Key items included in operating results

Key items included in net income attributable to Alexandria's common stockholders:
(In millions, except per share      amounts)	Amount				Per Share – Diluted				Amount				Per Share – Diluted
	2Q22		2Q21		2Q22		2Q21		1H22		1H21		1H22		1H21
Unrealized (losses) gains   on non-real estate   investments	$  (68.1)		$ 244.0		$  (0.42)		$   1.67		$  (331.6)		$ 197.8		$  (2.07)		$   1.39
Significant realized gains   on non-real estate   investments	—		34.8		—		0.24		—		57.7		—		0.41
Gain on sales of real estate	214.2		—		1.33		—		214.2		2.8		1.34		0.02
Impairment of real estate	—		(4.9)		—		(0.03)		—		(10.1)		—		(0.07)
Loss on early   extinguishment of debt	(3.3)		—		(0.02)		—		(3.3)		(67.3)		(0.02)		(0.47)
Total	$ 142.8		$ 273.9		$   0.89		$   1.88		$  (120.7)		$ 180.9		$  (0.75)		$   1.28

External growth and investment in real estate

Delivery and commencement of value-creation projects

• During 2Q22, we placed into service development and redevelopment projects aggregating 375,394 RSF across multiple submarkets.
• 80% of construction costs related to active development and redevelopment projects aggregating 5.9 million RSF are under a guaranteed maximum price ("GMP") contract or other fixed contracts. Our budgets also include construction cost contingencies in GMP contracts plus additional landlord contingencies that generally range between 3% and 5%.
• 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 2Q22, we commenced construction on six value-creation projects aggregating 917,599 RSF, including the following development projects:
• 320,809 RSF, 36% leased, at 99 Coolidge Avenue in our Cambridge/Inner Suburbs submarket;
• 248,018 RSF, 85% leased, at 500 North Beacon Street and 4 Kingsbury Avenue in our Cambridge/Inner Suburbs submarket;
• 90,000 RSF, 29% leased, at 9808 Medical Center Drive in our Rockville submarket; and
• 88,038 RSF, 100% leased, at our expansion at 6040 George Watts Hill Drive in our Research Triangle submarket.
• As of 2Q22, our highly leased value-creation pipeline of current and key near-term projects that are under construction or that will commence construction in the next six quarters aggregates 7.8 million RSF and is 78% leased/negotiating.

Value-creation pipeline of new Class A development and redevelopment projects as a percentage of gross assets		2Q22
Under construction projects 75% leased/negotiating		10 %
Pre-leased/negotiating near-term projects expected to commence construction in     the next six quarters 89% leased/negotiating		1 %
Income-producing/potential cash flows/covered land play(1)		8 %
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.

Alexandria is at the vanguard of innovation for a high-quality roster of over 1,000 tenants, with a focus on accommodating their current needs and providing them with a path for future growth

• Reduced the upper end of our range of 2022 guidance for acquisitions by $750 million to a range from $2.6 billion to $2.8 billion.
• During 2Q22, we completed acquisitions in our key life science cluster submarkets aggregating 1.1 million RSF of future development and redevelopment opportunities for an aggregate purchase price of $280.1 million.

Balance sheet management

Key metrics as of June 30, 2022

• $33.7 billion in total market capitalization.
• $23.4 billion in total equity capitalization, which ranks in the top 10% among all publicly traded U.S. REITs.
• No debt maturities prior to 2025.
• 13.6 years weighted-average remaining term of debt.

		2Q22					Goal
		Quarter			Trailing		4Q22
		Annualized			12 Months		Annualized
Net debt and preferred stock to     Adjusted EBITDA		5.5x			5.9x		Less than or equal to 5.1x
Fixed-charge coverage ratio		5.1x			5.1x		Greater than or equal to 5.1x

Key capital events

• During 2Q22, we entered into new forward equity sales agreements aggregating $403.4 million to sell 2.4 million shares under our ATM program at an average price of $169.38 per share (before underwriting discounts). As of June 30, 2022, the remaining aggregate amount available under our ATM program for future sales of common stock was $246.6 million.
• During 2Q22, we did not issue shares to settle our outstanding forward equity agreements. We expect to issue an aggregate of 9.0 million shares at an average price of $187.91 per share to settle all our outstanding forward equity sales agreements and receive net proceeds of approximately $1.7 billion in 2H22.
• In April 2022, we repaid two secured notes payable aggregating $195.0 million due in 2024 with an effective interest rate of 3.40%. As a result, we recognized a loss on early extinguishment of debt of $3.3 million.

Investments

• As of June 30, 2022:
• Our investments aggregated $1.7 billion.
• Unrealized gains presented in our consolidated balance sheets were $459.8 million, comprising gross unrealized gains and losses aggregating $565.5 million and $105.7 million, respectively.
• Investment loss of $39.5 million, presented in our consolidated statements of operations, consisted of $28.6 million of realized gains and $68.1 million of unrealized losses/changes in fair value.

Subsequent event

• On July 1, 2022, Stephen A. Richardson, our Co-Chief Executive Officer, tendered his resignation from all of his positions with the Company and its subsidiaries, effective July 31, 2022, and notified the Company of his intent to retire from full-time employment and his professional career for family and personal reasons.

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

• In June 2022, we released our 2021 ESG Report, which highlights our longstanding ESG leadership. The report details our efforts to advance our ESG impact, including by driving high-performance building design and operations to reduce carbon emissions, mitigating climate-related risk in our real estate portfolio, and investing in and providing essential infrastructure for sustainable agrifoodtech companies. It also showcases Alexandria's comprehensive efforts to catalyze the health, wellness, safety, and productivity of our employees, tenants, local communities, and the world through the built environment and beyond, including through our visionary social responsibility endeavors. Notable initiatives presented in the report that highlight our innovative approach include:
• Furthering the development of our approach to physical and transitional climate-related risk by initiating a process to assess and understand potential physical risk and pathways to mitigate and adapt to climate change, as well as preparing for the transition to a low-carbon economy and continuing to develop science-based targets;
• Implementing innovative solutions to minimize fossil fuel use in our state-of-the-art laboratory development projects, such as at 325 Binney Street, which will harness geothermal energy to target a LEED Zero Energy certification and a 92% reduction in fossil fuel use as a key component of its design to be the most sustainable laboratory building in Cambridge; at 751 Gateway Boulevard, which is pursuing electrification and is tracking to be the first all-electric laboratory building in South San Francisco; and at the Alexandria Center^® for Life Science – South Lake Union mega campus in Seattle, where the Company is incorporating an innovative wastewater heat recovery system; and
• Increasing our investment in renewable electricity to mitigate carbon emissions in our existing asset base, including through a large-scale solar power purchase agreement that will significantly increase the supply of renewable electricity to our Greater Boston market starting in 2024.

About Alexandria Real Estate Equities, Inc. 

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500^® urban office 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 $33.7 billion and an asset base in North America of 74.1 million SF as of June 30, 2022. The asset base in North America includes 41.1 million RSF of operating properties and 5.9 million RSF of Class A properties undergoing construction, 9.9 million RSF of near-term and intermediate-term development and redevelopment projects, and 17.2 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.

Acquisitions June 30, 2022 (Dollars in thousands)
											Square Footage
											Acquisitions With Development/Redevelopment Opportunities(1)
Property		Submarket/Market		Date of Purchase		Number of Properties		Operating Occupancy			Future Development		Operating With Future Development/ Redevelopment		Operating(2)		Operating		Total(3)		Purchase Price
Completed in 1Q22						29		91 %			4,617,991		2,668,494		451,760		—		7,306,305		$	1,840,717
Completed in 2Q22:
One Hampshire Street(4)		Cambridge/Inner Suburbs/      Greater Boston		6/23/22		1		100 %			—		88,591		—		—		88,591			140,000
Other		Various		Various		2		76			869,000		109,557		—		—		978,557			140,146
						3		87 %			869,000		198,148	(5)	—	(5)	—	(5)	1,067,148			280,146
Completed in July 2022																						9,561
																						2,130,424
Pending(6)		Various		3Q22																		275,000
Other																						244,576
2022 acquisitions (midpoint)																					$	2,650,000
2022 guidance range(7)																			$2,550,000 – $2,750,000

(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)	Represents the operating component of our value-creation acquisitions that is not expected to undergo future 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 acquisition of a condominium in two floors of a seven-story building.
(5)	We expect the acquisitions completed during the three months ended June 30, 2022 to generate initial annual net operating income of approximately $9 million for the twelve months following acquisition. These acquisitions included three operating properties with a weighted-average acquisition date of June 16, 2022 (weighted by initial annual net operating income).
(6)	Represents acquisitions of land parcels to expand our mega campuses in our Cambridge and University Town Center submarkets.
(7)	We reduced the upper end of our range of 2022 guidance for acquisitions by $750 million. Refer to "Guidance" on page 6 of this Earnings Press Release for additional information.

Dispositions and Sales of Partial Interest June 30, 2022 (Dollars in thousands)
														Capitalization Rate (Cash Basis)							Sales Price per RSF			Gain or Consideration in Excess of Book Value
Property		Submarket/Market		Date of Sale		Interest Sold			RSF		Capitalization Rate						Sales Price
Completed 1H22:
100 Binney Street		Cambridge/Inner Suburbs/Greater      Boston		3/30/22		70 %			432,931		3.6 %			3.5 %			$                713,228			(1)	$    2,353			$     413,615	(2)
300 Third Street		Cambridge/Inner Suburbs/Greater      Boston		6/27/22		70 %			131,963		4.6 %			4.3 %			166,485			(1)	$    1,802			113,020	(2)
Alexandria Park at 128, 285 Bear Hill      Road, 111 and 130 Forbes      Boulevard, and 20 Walkup Drive		Route 128 and Route 495/Greater      Boston		6/8/22		100 %			617,043		5.1 %			5.1 %			334,397				$       542			202,325
Other											N/A			N/A			47,800				N/A			11,895
																	1,261,910							$     740,855
Completed in July 2022:
1450 Owens Street		Mission Bay/San Francisco Bay Area		7/1/22		20 %	(3)		191,000		N/A			N/A			25,039			(1)	N/A			$       10,083	(2)
																	1,286,949
Pending		San Diego		3Q22		TBD			TBD								140,000 – 160,000							TBD
Other				TBD		TBD			TBD								588,051							TBD
2022 dispositions (midpoint)																	$             2,025,000
2022 guidance range														$1,450,000 – $2,600,000

(1)	Represents the contractual sales price for the percentage interest of the property sold by us.
(2)	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.
(3)	Relates to the sale of a land parcel. Upon completion of the transaction, the noncontrolling interest share for our joint venture partner is 20% and is anticipated to increase to 75% as our partner contributes capital for construction over time.

Guidance
June 30, 2022
(Dollars in millions)

The following updated 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 8 of this Earnings Press Release for additional details.

Key changes to our guidance include the reduction of an aggregate $635 million to our uses of capital, comprising a $350 million reduction in acquisitions and a $285 million reduction in construction spending. This reduction was offset by construction spending from January through June 2022, which increased by $335 million to slightly above the high end of our previous guidance range, as a result of construction spending associated with the leasing of our development and redevelopment projects under construction and our near-term pipeline projects. In addition, the midpoint of our guidance for funds from operations per share, as adjusted increased by three cents driven by strong same property performance and general and administrative savings in 2H22 resulting from the retirement of Stephen A. Richardson, our Co-Chief Executive Officer.

2022 Guidance

Reduction in uses of capital

Reduction

Summary of key changes in guidance

As of 7/25/22

As of 4/25/22

Construction

$285

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

Refer to page 7

Acquisitions

$350

Same property net operating income increase

6.0% to 8.0%

5.9% to 7.9%

Same property net operating income increase (cash basis)

6.8% to 8.8%

6.5% to 8.5%

General and administrative expenses

$172 to $180

$168 to $176

		As of 7/25/22
Key Sources and Uses of Capital		Range				Midpoint			Certain Completed Items			As of 4/25/22 Midpoint		Key Changes to Midpoint
Sources of capital:
Net cash provided by operating activities after dividends		$             275		$             325		$	300					$              300
Net incremental debt		1,361		561			961		See below			950
Dispositions and sales of partial interest (refer to page 5)		1,450		2,600			2,025		$        1,287			1,950		$                75
Common equity		2,364		2,364			2,364		$        2,364	(1)		2,750		$             (386)
Total sources of capital		$          5,450		$          5,850		$	5,650					$           5,950
Uses of capital:
Construction		$          2,900		$          3,100		$	3,000					$           2,950		$                50
Acquisitions (refer to page 4)		2,550		2,750			2,650		$        2,130			3,000		$             (350)
Total uses of capital		$          5,450		$          5,850		$	5,650					$           5,950
Incremental debt (included above):
Issuance of unsecured senior notes payable		$          1,800		$          1,800		$	1,800		$        1,800			$           1,800
Repayments of secured notes payable		(195)		(195)			(195)		$          (195)			(195)
Unsecured senior line of credit, commercial paper, and other		(44)		(744)			(394)					(655)
Incremental cash expected to be held at December 31, 2022(2)		(200)		(300)			(250)					—		$             (250)
Net incremental debt		$          1,361		$             561		$	961					$              950

(1)	Refer to "Key capital events" on page 3 of this Earnings Press Release for additional details. During the six months ended June 30, 2022, we entered into new forward equity sales agreements aggregating $2.4 billion to sell 12.3 million shares of our common stock. During 1Q22, we settled a portion of these forward equity sales agreements by issuing 3.2 million shares and received net proceeds of $648.2 million. We expect to issue 9.0 million shares to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $1.7 billion in 2022.
(2)	We expect this forecasted cash at December 31, 2022 to result in a reduction of our 2023 debt capital needs.

Projected 2022 Earnings per Share and Funds From Operations per Share Attributable to Alexandria's Common Stockholders – Diluted
		As of 7/25/22				As of 4/25/22
Earnings per share(1)		$2.14 to $2.20				$1.08 to $1.18
Depreciation and amortization of real estate assets			5.50				5.65
Gain on sales of real estate			(1.34)				—
Allocation to unvested restricted stock awards			(0.02)				(0.02)
Funds from operations per share(2)		$6.28 to $6.34				$6.71 to $6.81
Unrealized losses on non-real estate investments			2.07				1.67
Loss on early extinguishment of debt(3)			0.02				0.02
Acceleration of stock compensation due to executive officer resignation(4)			0.04				—
Allocation to unvested restricted stock awards			(0.02)				(0.02)
Other			(0.01)				(0.05)
Funds from operations per share, as adjusted(1)		$8.38 to $8.44				$8.33 to $8.43
Midpoint		$8.41				$8.38

		As of 7/25/22				As of 4/25/22
Key Assumptions		Low		High		Low		High
Occupancy percentage in North America as of December 31, 2022		95.2 %		95.8 %		95.2 %		95.8 %
Lease renewals and re-leasing of space:
Rental rate increases		30.0 %		35.0 %		30.0 %		35.0 %
Rental rate increases (cash basis)		18.0 %		23.0 %		18.0 %		23.0 %
Same property performance:
Net operating income increase		6.0 %		8.0 %		5.9 %		7.9 %
Net operating income increase (cash basis)		6.8 %		8.8 %		6.5 %		8.5 %
Straight-line rent revenue(5)		$              144		$              154		$              154		$              164
General and administrative expenses(4)		$              172		$              180		$              168		$              176
Capitalization of interest		$              269		$              279		$              269		$              279
Interest expense		$                90		$              100		$                90		$              100

Key Credit Metrics		As of 7/25/22		As of 4/25/22
Net debt and preferred stock to Adjusted EBITDA – 4Q22 annualized		Less than or equal to 5.1x		Less than or equal to 5.1x
Fixed-charge coverage ratio – 4Q22 annualized		Greater than or equal to 5.1x		Greater than or equal to 5.1x

(1)	Excludes unrealized gains or losses after June 30, 2022 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.
(3)	Refer to "Key capital events" on page 3 of this Earnings Press Release for additional details.
(4)	Relates to the resignation of an executive officer in July 2022. General & administrative expenses increased by $4 million, including $7 million related to the acceleration of stock compensation due to the resignation of Stephen A. Richardson, our Co-Chief Executive Officer, partially offset by compensation savings in 2H22. Refer to "Subsequent event" on page 3 of this Earnings Press release for additional information.
(5)	The $10 million reduction in our guidance range for straight-line rent revenue includes reductions attributable to the following items:
	Changes to our capital plan for 2022 as highlighted in our updated guidance for key sources and uses of capital on the previous page, including the following: Lower acquisitions with operating activities in 2022 as well as the $350 million reduction in the midpoint of our guidance range for acquisitions; and Higher dispositions compared to sales of partial interest. Acceleration of $2 million contractual rental payments due under one long-term lease in our Cambridge/Inner Suburbs submarket. Early terminations of below-market leases: Includes two spaces aggregating 141,649 RSF in two markets, of which 51% has been re-leased at aggregate rental rate increases of 114% and 140% (cash basis). We expect the re-leased spaces to take occupancy by 3Q22.

Earnings Call Information and About the Company
June 30, 2022

We will host a conference call on Tuesday, July 26, 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 second quarter ended June 30, 2022. 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, July 26, 2022. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 7939670.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the second quarter ended June 30, 2022 is available in the "For Investors" section of our website at www.are.com or by following this link: https://www.are.com/fs/2022q2.pdf.

For any questions, please contact Joel S. Marcus, executive chairman and founder; Peter M. Moglia, co-chief executive officer and co-chief investment officer; Stephen A. Richardson, co-chief executive officer; Dean A. Shigenaga, president and chief financial officer; Paula Schwartz, managing director of Rx Communications Group, at (917) 633-7790; 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 $33.7 billion and an asset base in North America of 74.1 million square feet ("SF") as of June 30, 2022. The asset base in North America includes 41.1 million RSF of operating properties and 5.9 million RSF of Class A properties undergoing construction, 9.9 million RSF of near-term and intermediate-term development and redevelopment projects, and 17.2 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^®, At the Vanguard and Heart of the Life Science Ecosystem™, 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 June 30, 2022 (Dollars in thousands, except per share amounts)
		Three Months Ended										Six Months Ended
		6/30/22		3/31/22		12/31/21		9/30/21		6/30/21		6/30/22		6/30/21
Revenues:
Income from rentals		$       640,959		$       612,554		$       574,656		$       546,527		$       508,371		$    1,253,513		$       987,066
Other income		2,805		2,511		2,267		1,232		1,248		5,316		2,402
Total revenues		643,764		615,065		576,923		547,759		509,619		1,258,829		989,468
Expenses:
Rental operations		196,284		181,328		175,717		165,995		143,955		377,612		281,843
General and administrative		43,397		40,931		41,654		37,931		37,880		84,328		71,876
Interest		24,257		29,440		34,862		35,678		35,158		53,697		71,625
Depreciation and amortization		242,078		240,659		239,254		210,842		190,052		482,737		370,965
Impairment of real estate		—		—		—		42,620		4,926		—		10,055
Loss on early extinguishment of debt		3,317		—		—		—		—		3,317		67,253
Total expenses		509,333		492,358		491,487		493,066		411,971		1,001,691		873,617
Equity in earnings of unconsolidated real estate joint ventures		213		220		3,018		3,091		2,609		433		6,146
Investment (loss) income		(39,481)		(240,319)		(112,884)		67,084		304,263		(279,800)		305,277
Gain (loss) on sales of real estate		214,219		—		124,226		(435)		—		214,219		2,779
Net income (loss)		309,382		(117,392)		99,796		124,433		404,520		191,990		430,053
Net income attributable to noncontrolling interests		(37,168)		(32,177)		(24,901)		(21,286)		(19,436)		(69,345)		(36,848)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s    stockholders		272,214		(149,569)		74,895		103,147		385,084		122,645		393,205
Net income attributable to unvested restricted stock awards		(2,934)		(2,081)		(2,098)		(1,883)		(4,521)		(4,134)		(4,663)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s    common stockholders		$       269,280		$     (151,650)		$         72,797		$       101,264		$       380,563		$       118,511		$       388,542
Net income (loss) per share attributable to Alexandria Real Estate Equities,      Inc.'s common stockholders:
Basic		$             1.67		$            (0.96)		$             0.47		$             0.67		$             2.61		$             0.74		$             2.74
Diluted		$             1.67		$            (0.96)		$             0.47		$             0.67		$             2.61		$             0.74		$             2.74
Weighted-average shares of common stock outstanding:
Basic		161,412		158,198		153,464		150,854		145,825		159,814		141,596
Diluted		161,412		158,198		154,307		151,561		146,058		159,814		141,896
Dividends declared per share of common stock		$             1.18		$             1.15		$             1.15		$             1.12		$             1.12		$             2.33		$             2.21

Consolidated Balance Sheets June 30, 2022 (In thousands)
		6/30/22		3/31/22		12/31/21		9/30/21		6/30/21
Assets
Investments in real estate		$  27,952,931		$  27,100,009		$  24,980,669		$  23,071,514		$  21,692,385
Investments in unconsolidated real estate joint ventures		37,587		38,456		38,483		321,737		323,622
Cash and cash equivalents		420,258		775,060		361,348		325,872		323,876
Restricted cash		97,404		95,106		53,879		42,182		33,697
Tenant receivables		7,069		7,570		7,379		7,749		6,710
Deferred rent		905,699		881,743		839,335		816,219		781,600
Deferred leasing costs		498,434		484,184		402,898		329,952		321,005
Investments		1,657,461		1,661,101		1,876,564		2,046,878		1,999,283
Other assets		1,667,210		1,801,027		1,658,818		1,596,615		1,536,672
Total assets		$  33,244,053		$  32,844,256		$  30,219,373		$  28,558,718		$  27,018,850
Liabilities, Noncontrolling Interests, and Equity
Secured notes payable		$         24,986		$       208,910		$       205,198		$       198,758		$       227,984
Unsecured senior notes payable		10,096,462		10,094,337		8,316,678		8,314,851		8,313,025
Unsecured senior line of credit and commercial paper		149,958		—		269,990		749,978		299,990
Accounts payable, accrued expenses, and other liabilities		2,317,940		2,172,692		2,210,410		2,149,450		1,825,387
Dividends payable		192,571		187,701		183,847		173,560		170,647
Total liabilities		12,781,917		12,663,640		11,186,123		11,586,597		10,837,033
Commitments and contingencies
Redeemable noncontrolling interests		9,612		9,612		9,612		11,681		11,567
Alexandria Real Estate Equities, Inc.'s stockholders' equity:
Common stock		1,615		1,614		1,580		1,532		1,507
Additional paid-in capital		17,149,571		16,934,094		16,195,256		14,727,735		14,194,023
Accumulated other comprehensive loss		(11,851)		(5,727)		(7,294)		(6,029)		(4,508)
Alexandria Real Estate Equities, Inc.'s stockholders' equity		17,139,335		16,929,981		16,189,542		14,723,238		14,191,022
Noncontrolling interests		3,313,189		3,241,023		2,834,096		2,237,202		1,979,228
Total equity		20,452,524		20,171,004		19,023,638		16,960,440		16,170,250
Total liabilities, noncontrolling interests, and equity		$  33,244,053		$  32,844,256		$  30,219,373		$  28,558,718		$  27,018,850

Funds From Operations and Funds From Operations per Share June 30, 2022 (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										Six Months Ended
		6/30/22		3/31/22		12/31/21		9/30/21		6/30/21		6/30/22		6/30/21
Net income (loss) attributable to Alexandria's common stockholders		$   269,280		$  (151,650)		$     72,797		$   101,264		$   380,563		$   118,511		$   388,542
Depreciation and amortization of real estate assets		238,565		237,160		234,979		205,436		186,498		475,725		364,218
Noncontrolling share of depreciation and amortization from consolidated real   estate JVs		(26,418)		(23,681)		(21,265)		(17,871)		(16,301)		(50,099)		(31,744)
Our share of depreciation and amortization from unconsolidated real estate JVs		934		955		3,058		3,465		4,135		1,889		7,211
(Gain) loss on sales of real estate		(214,219)		—		(124,226)		435		—		(214,219)		(2,779)
Impairment of real estate – rental properties		—		—		—		18,602		1,754		—		6,883
Allocation to unvested restricted stock awards		—		—		—		(1,472)		(2,191)		—		(4,427)
Funds from operations attributable to Alexandria's common stockholders –    diluted(1)		268,142		62,784		165,343		309,859		554,458		331,807		727,904
Unrealized losses (gains) on non-real estate investments		68,128		263,433		139,716		14,432		(244,031)		331,561		(197,780)
Significant realized gains on non-real estate investments		—		—		—		(52,427)		(34,773)		—		(57,692)
Impairment of real estate		—		—		—		24,018		3,172		—		3,172
Loss on early extinguishment of debt		3,317		—		—		—		—		3,317		67,253
Allocation to unvested restricted stock awards		(778)		(1,604)		(1,432)		149		3,428		(3,264)		2,382
Funds from operations attributable to Alexandria's common stockholders –    diluted, as adjusted		$   338,809		$   324,613		$   303,627		$   296,031		$   282,254		$   663,421		$   545,239

(1)	Calculated in accordance with standards established by the Nareit Board of Governors.

Funds From Operations and Funds From Operations per Share (continued) June 30, 2022 (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										Six Months Ended
		6/30/22		3/31/22		12/31/21		9/30/21		6/30/21		6/30/22		6/30/21
Net income (loss) per share attributable to Alexandria's common     stockholders – diluted		$         1.67		$        (0.96)		$         0.47		$         0.67		$         2.61		$         0.74		$         2.74
Depreciation and amortization of real estate assets		1.32		1.36		1.40		1.26		1.19		2.68		2.39
Gain on sales of real estate		(1.33)		—		(0.80)		—		—		(1.34)		(0.02)
Impairment of real estate – rental properties		—		—		—		0.12		0.01		—		0.05
Allocation to unvested restricted stock awards		—		—		—		(0.01)		(0.01)		—		(0.03)
Funds from operations per share attributable to Alexandria's common     stockholders – diluted		1.66		0.40		1.07		2.04		3.80		2.08		5.13
Unrealized losses (gains) on non-real estate investments		0.42		1.67		0.91		0.10		(1.67)		2.07		(1.39)
Significant realized gains on non-real estate investments		—		—		—		(0.35)		(0.24)		—		(0.41)
Impairment of real estate		—		—		—		0.16		0.02		—		0.02
Loss on early extinguishment of debt		0.02		—		—		—		—		0.02		0.47
Allocation to unvested restricted stock awards		—		(0.02)		(0.01)		—		0.02		(0.02)		0.02
Funds from operations per share attributable to Alexandria's common      stockholders – diluted, as adjusted		$         2.10		$         2.05		$         1.97		$         1.95		$         1.93		$         4.15		$         3.84
Weighted-average shares of common stock outstanding for calculation of:
Earnings per share – diluted		161,412		158,198		154,307		151,561		146,058		159,814		141,896
Funds from operations, diluted, per share		161,412		158,209		154,307		151,561		146,058		159,814		141,896
Funds from operations, diluted, as adjusted, per share		161,412		158,209		154,307		151,561		146,058		159,814		141,896

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SOURCE Alexandria Real Estate Equities, Inc.

FAQ

What were Alexandria Real Estate Equities' total revenues for Q2 2022?

The total revenues for Alexandria Real Estate Equities in Q2 2022 were $643.8 million.

How much did Alexandria Real Estate Equities' net income decline in Q2 2022?

Net income attributable to common stockholders declined to $269.3 million in Q2 2022 from $380.6 million in Q2 2021.

What is Alexandria Real Estate Equities' expected incremental annual rental revenue?

Alexandria Real Estate Equities expects to generate $665 million in incremental annual rental revenue from its current projects.

What was Alexandria Real Estate Equities' occupancy rate as of June 30, 2022?

The occupancy rate for Alexandria Real Estate Equities' operating properties in North America was 94.6% as of June 30, 2022.

What was the increase in funds from operations for Alexandria Real Estate Equities in Q2 2022?

Funds from operations for Alexandria Real Estate Equities increased by 20% to $338.8 million in Q2 2022.