Alexandria Real Estate Equities, Inc. Reports: 2Q24 and 1H24 Net Income per Share - Diluted of $0.25 and $1.22, respectively; and 2Q24 and 1H24 FFO per Share - Diluted, as Adjusted, of $2.36 and $4.71, respectively

Rhea-AI Summary

Alexandria Real Estate Equities (NYSE: ARE) announced its financial results for Q2 2024 and the first half of 2024. Key figures include a net income per share of $0.25 for Q2 and $1.22 for H1, while funds from operations (FFO) per share reached $2.36 and $4.71, respectively. Total revenues for Q2 were $766.7 million, up 7.4% YoY, and $1.54 billion for H1, up 8.6% YoY. The company's leasing volume exceeded 1.1 million RSF in Q2 and 2.26 million RSF in H1, with rental rate increases of 7.4% and 26.2% (cash basis). Alexandria maintains a strong balance sheet with $5.6 billion in liquidity, a fixed-charge coverage ratio of 4.5x, and 97.3% of debt at fixed rates. The company declared a Q2 dividend of $1.30 per share, yielding 4.4%. Alexandria's development pipeline is robust, with projects delivering $480 million in incremental annual net operating income by Q1 2028. The company also executed key capital events, including extending a senior line of credit and entering new forward equity sales agreements.

Positive

• Total revenues for Q2 2024 were $766.7 million, up 7.4% YoY.
• Total revenues for H1 2024 were $1.54 billion, up 8.6% YoY.
• FFO per share for Q2 2024 was $2.36, up from $2.24 in Q2 2023.
• FFO per share for H1 2024 was $4.71, up from $4.43 in H1 2023.
• Leasing volume exceeded 1.1 million RSF in Q2 and 2.26 million RSF in H1.
• Strong balance sheet with $5.6 billion in liquidity.
• Q2 dividend declared at $1.30 per share, yielding 4.4%.
• Development pipeline to deliver $480 million in incremental annual NOI by Q1 2028.

Negative

• Net income per share for Q2 2024 was $0.25, down from $0.51 in Q2 2023.
• Net income per share for H1 2024 was $1.22, down from $1.95 in H1 2023.
• Investment loss of $43.7 million for Q2 2024, including $12.8 million in impairment charges.

Insights

Financial Analyst

Alexandria Real Estate Equities, Inc. (NYSE: ARE) has reported strong and stable financial performance for Q2 and the first half of 2024. The company's revenue has grown by 7.4% in Q2 2024 and 8.6% for the first half of 2024, compared to the same periods in 2023. This indicates healthy operational performance and demand within the life science real estate sector.

The net income per share diluted shows a reduction compared to previous periods, dropping from $0.51 to $0.25 in Q2, reflective of some impairment charges and losses from non-real estate investments. However, the Funds From Operations (FFO) per share - diluted, as adjusted, which is a important metric for REITs, shows a positive trend with $2.36 for Q2 and $4.71 for the first half, indicating stable cash flow generation capabilities.

Importantly, the company maintains a robust balance sheet with a significant liquidity position of $5.6 billion and continues to manage its debt with a fixed-charge coverage ratio of 4.5x. The consistent dividend strategy with a yield of 4.4% and a dividend payout ratio of 55% reveals a strong commitment to returning value to shareholders while retaining cash for reinvestment. This strategic balance is critical for long-term growth and investor confidence.

Market Research Analyst

Alexandria's focus on mega campuses and their high occupancy levels (94.6%) demonstrate the company's strategic prowess in securing long-term, stable tenants. The percentage of leases containing annual rent escalations (96%) and the long weighted-average remaining lease term (7.4 years for all tenants) highlight the company's ability to maintain consistent rental income growth.

The strong leasing volume of 1.1 million RSF in Q2, combined with substantial rental rate increases, shows a positive market demand for Alexandria's properties. Additionally, 79% of leasing activity being generated from existing tenants indicates strong tenant satisfaction and retention, which is important for sustained growth.

The company’s ongoing development projects are expected to deliver significant incremental annual net operating income of $480 million by Q1 2028, reinforcing its growth potential. Alexandria's ability to execute and deliver leased projects on time will be key to achieving these projections and securing future revenue streams.

Tech Expert

Alexandria's strategic focus on life science real estate positions it well within a high-growth sector driven by ongoing advancements in biotechnology and pharmaceuticals. The company's properties support dynamic and collaborative environments, important for innovation in the life sciences domain.

Securing a long-term ground lease extension for the Alexandria Technology Square mega campus until 2088 underscores the company's commitment to maintaining and enhancing strategic assets in key innovation clusters. This move ensures long-term value enhancement for the company's investments and provides a stable foundation for its operations in one of the world's leading biotech hubs.

The company's investment in energy efficiency and renewable electricity initiatives is noteworthy. These efforts not only align with increasing regulatory and societal emphasis on sustainability but also position Alexandria as a forward-thinking entity in the life science real estate market, potentially attracting ESG-conscious investors and tenants.

PASADENA, Calif., July 22, 2024 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE: ARE) announced financial and operating results for the second quarter ended June 30, 2024.

Key highlights
Operating results	2Q24		2Q23		1H24		1H23
Total revenues:
In millions	$        766.7		$        713.9		$      1,535.8		$      1,414.7
Growth	7.4 %				8.6 %
Net income attributable to Alexandria's common stockholders – diluted:
In millions	$          42.9		$          87.3		$         209.8		$         162.5
Per share	$          0.25		$          0.51		$           1.22		$           0.95
Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted:
In millions	$        405.5		$        382.4		$         809.4		$         756.1
Per share	$          2.36		$          2.24		$           4.71		$           4.43

An operationally excellent, industry-leading REIT with a high-quality, diverse client base to support growing revenues, stable cash flows, and strong margins

(As of June 30, 2024, unless stated otherwise)
Percentage of annual rental revenue in effect from mega campuses		74 %
Percentage of annual rental revenue in effect from investment-grade or publicly     traded large cap tenants		53 %
Sustained strength in tenant collections:
Tenant receivables as a percentage of 2Q24 rental revenues		0.9 %
July 2024 tenant rents and receivables collected as of July 22, 2024		99.7 %
2Q24 tenant rents and receivables collected as of July 22, 2024		99.9 %
Occupancy of operating properties in North America		94.6 %
Operating margin		72 %
Adjusted EBITDA margin		72 %
Percentage of leases containing annual rent escalations		96 %
Weighted-average remaining lease term:
Top 20 tenants		9.4	years
All tenants		7.4	years

Strong leasing volume and solid rental rate increases

• Strong leasing volume aggregating 1.1 million RSF during 2Q24.
• Solid rental rate increases of 7.4% and 3.7% (cash basis) for 2Q24 and 26.2% and 15.0% (cash basis) for 1H24.
• 79% of our leasing activity during the last twelve months was generated from our existing tenant base.

					2Q24			1H24
			Total leasing activity – RSF		1,114,001			2,256,858
			Leasing of development and redevelopment space – RSF		340,989			441,221
			Lease renewals and re-leasing of space:
			RSF (included in total leasing activity above)		589,650			1,584,420
			Rental rate increase		7.4 %			26.2 %
			Rental rate increase (cash basis)		3.7 %			15.0 %

Continued solid net operating income and internal growth

• Net operating income (cash basis) of $1.9 billion for 2Q24 annualized, up $122.7 million, or 6.9%, compared to 2Q23 annualized.
• Same property net operating income growth of 1.5% and 3.9% (cash basis) for 2Q24 over 2Q23 and 1.1% and 3.7% (cash basis) for 1H24 over 1H23.
• 96% of our leases contain contractual annual rent escalations approximating 3%.

Strong and flexible balance sheet with significant liquidity; top 10% credit rating ranking among all publicly traded U.S. REITs

• Net debt and preferred stock to Adjusted EBITDA of 5.4x and fixed-charge coverage ratio of 4.5x for 2Q24 annualized.
• Significant liquidity of $5.6 billion.
• 32% of our total debt matures in 2049 and beyond.
• 13.0 years weighted-average remaining term of debt.
• 97.3% of our debt has a fixed rate.
• Total debt and preferred stock to gross assets of 29%.
• $1.1 billion of expected capital contribution commitments from existing consolidated real estate joint venture partners to fund construction from 3Q24 through 2027.

Consistent dividend strategy with a focus on retaining significant net cash flows from operating activities after dividends for reinvestment

• Common stock dividend declared for 2Q24 of $1.30 per common share aggregating $5.08 per common share for the twelve months ended June 30, 2024, up 24 cents, or 5%, over the twelve months ended June 30, 2023.
• Dividend yield of 4.4% as of June 30, 2024.
• Dividend payout ratio of 55% for the three months ended June 30, 2024.
• Average annual dividend per-share growth of 5% from 2020 through 2Q24 annualized.
• Significant net cash flows from operating activities after dividends retained for reinvestment aggregating $2.1 billion for the years ended December 31, 2020 through 2023 and including the midpoint of our 2024 guidance range for net cash provided by operating activities after dividends.

Ongoing execution of Alexandria's 2024 capital strategy

We expect to continue pursuing our strategy to fund a significant portion of our capital requirements for the year ending December 31, 2024 with dispositions and sales of partial interests and are actively pursuing several dispositions and partial interest sale opportunities.

(in millions)
Completed dispositions of 100% interest in properties not integral to our mega campus     strategy		$           77	(1)
Pending transactions subject to letters of intent or purchase and sale agreement     negotiations		807
Forward equity sales agreements expected to be settled in 2024		27
		911
Additional targeted dispositions, sales of partial interests, and common equity		639
2024 guidance midpoint for dispositions, sales of partial interests, and common equity		$      1,550

(1)	Refer to "Dispositions and sales of partial interests" in the Earnings Press Release for additional details.

Alexandria's highly leased value-creation pipeline delivered incremental annual net operating income of $16 million commencing during 2Q24 and is expected to deliver incremental annual net operating income aggregating $480 million by 1Q28

• During 2Q24, we placed into service development and redevelopment projects aggregating 284,982 RSF that are 100% leased across multiple submarkets and delivered incremental annual net operating income of $16 million. 2Q24 deliveries included:
  • 195,435 and 25,655 RSF at 9810 Darnestown Road and 9808 Medical Center Drive, respectively, located on the Alexandria Center^® for Life Science – Shady Grove mega campus in our Rockville submarket.
• Annual net operating income (cash basis) is expected to increase by $80 million upon the burn-off of initial free rent, with a weighted-average burn-off period of approximately seven months, from recently delivered projects.
• 69% of the RSF in our total value-creation pipeline is within our mega campuses.

			Development and Redevelopment Projects		Incremental Annual Net Operating Income		RSF		Leased/ Negotiating Percentage
			(dollars in millions)
			Placed into service:
			1Q24		$                       26		343,445			100 %
			2Q24		16		284,982			100
			Placed into service in 1H24		$                       42		628,427			100 %
			Expected to be placed into service(1):
			3Q24 through 4Q25		$                     187	(2)	5,432,915
			1Q26 through 1Q28		293					61 %	(3)
					$                     480

			(1)	Represents expected incremental annual net operating income to be placed into service from deliveries of projects undergoing construction and one committed near-term project expected to commence construction in the next two years.
			(2)	Includes 1.5 million RSF that is expected to stabilize through 2025 and is 87% leased, and partial deliveries through 4Q25 from projects expected to stabilize in 2026 and beyond. In addition to the projects represented, we are evaluating one priority anticipated development project that could commence active construction in 2H24 and may have initial delivery in 2025. Refer to the initial and stabilized occupancy years under "New Class A/A+ development and redevelopment properties: current projects" in the Supplemental Information for additional details.
			(3)	71% of the leased RSF of our value-creation projects was generated from our existing tenant base.

Strong balance sheet management
Key metrics as of or for the three months ended June 30, 2024

• $32.5 billion in total market capitalization.
• $20.1 billion in total equity capitalization, which ranks in the top 10% among all publicly traded U.S. REITs.

		2Q24				Target
		Quarter Annualized		Trailing 12 Months		4Q24 Annualized
Net debt and preferred stock to     Adjusted EBITDA		5.4x		5.6x		Less than or equal to 5.1x
Fixed-charge coverage ratio		4.5x		4.6x		Greater than or equal to 4.5x

Key capital events

• In July 2024, we executed an agreement with the lender group to amend and restate our unsecured senior line of credit to, among other changes, extend the maturity date from January 22, 2028 to January 22, 2030, including extension options that we control. We expect that the amendment and restatement will become effective in September 2024 upon the satisfaction of certain conditions.
• During 2Q24, we entered into new forward equity sales agreements aggregating $27.8 million to sell 230 thousand shares of common stock under our ATM program at an average price of $122.32 (before underwriting discounts). We expect to settle these forward equity sales agreements in 2024. As of July 22, 2024, the remaining aggregate amount available under our ATM program for future sales of common stock was $1.47 billion.

Investments

• As of June 30, 2024:
  • Our non-real estate investments aggregated $1.5 billion.
  • Unrealized gains presented in our consolidated balance sheet were $159.8 million, comprising gross unrealized gains and losses aggregating $284.2 million and $124.4 million, respectively.
• Investment loss of $43.7 million for 2Q24 presented in our consolidated statement of operations consisted of $33.4 million of realized gains, partially offset by $12.8 million of impairment charges and $64.2 million of unrealized losses.

Other key highlights

• In June 2024, Alexandria was added to the Health Care REITs industry under the Global Industry Classification Standard (GICS^®) by S&P Dow Jones Indices and MSCI, and to the FTSE NAREIT Equity Health Care Index.

Key items included in net income attributable to Alexandria's common stockholders:
		2Q24		2Q23		2Q24		2Q23		1H24		1H23		1H24		1H23
(in millions, except per share     amounts)		Amount				Per Share – Diluted				Amount				Per Share –  Diluted
Unrealized losses on non-real     estate investments		$ (64.2)		$ (77.9)		$  (0.37)		$  (0.46)		$ (35.1)		$  (143.8)		$  (0.20)		$  (0.84)
Gain on sales of real estate		—		214.8		—		1.26		0.4		214.8		—		1.26
Impairment of non-real estate     investments		(12.8)		(23.0)		(0.08)		(0.13)		(27.5)		(23.0)		(0.16)		(0.13)
Impairment of real estate		(30.8)		(168.6)		(0.18)		(0.99)		(30.8)		(168.6)		(0.18)		(0.99)
Total		$  (107.8)		$ (54.7)		$  (0.63)		$  (0.32)		$ (93.0)		$  (120.6)		$  (0.54)		$  (0.70)
Refer to "Funds from operations and funds from operations per share" in the Earnings Press Release for additional details.

Subsequent event

• In July 2024, we executed an amendment to our existing ground lease agreement at the Alexandria Technology Square^® mega campus aggregating 1.2 million RSF in our Cambridge submarket to extend the term by 24 years from January 1, 2065 to December 31, 2088. The amendment requires that we prepay our entire rent obligation for the extended lease term aggregating $270.0 million in two equal installments during the fourth quarter of 2024 and the first quarter of 2025. This amount will be amortized on a straight-line basis over the remaining lease term from July 2024 through December 2088, and the amended operating lease will result in an incremental annual rent expense of approximately $3.6 million. Alexandria Technology Square^® is a foundational mega campus in the heart of the global life science ecosystem in Cambridge and is the Greater Boston base of operations of key strategic long-tenured tenants such as Novartis AG, GlaxoSmithKline plc, Massachusetts Institute of Technology, and Mass General Brigham. Securing this ground lease through December 2088 significantly enhances the long-term value of our investment in this critical mega campus.

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

• In June 2024, we released our 2023 Corporate Responsibility Report, which reinforces our longstanding operational excellence across our differentiated Labspace^® platform and highlights:
  • Our new target to reduce operational greenhouse gas (GHG) emissions intensity by advancing our energy efficiency, electrification, alternative energy, and renewable electricity initiatives. As an example of our renewable electricity initiatives, a recent long-term power purchase agreement in our Greater Boston market is expected to enable us to meet 100% of the electricity needs for Alexandria-paid accounts in this market with renewable energy.
  • Our pioneering corporate responsibility pillars, which aim to address the most pressing issues facing our nation, including the mental health and addiction crises.
• In April 2024, Alexandria earned several 2024 regional TOBY (The Outstanding Building of the Year) Awards from BOMA (Building Owners and Managers Association). The TOBY Awards are the commercial real estate industry's highest recognition honoring excellence in commercial building management and operations.
  • In the BOMA Mid-Atlantic region, 60 Binney Street on the Alexandria Center^® at Kendall Square mega campus won in the Life Science category and Building 1400 on the Alexandria Center^® at One Kendall Square mega campus won in the Renovated Building category.
  • In the BOMA Pacific Southwest region, the Alexandria Center^® for Life Science – San Carlos mega campus won in the Life Science category.
  • In the BOMA Pacific Northwest region, 1165 Eastlake Avenue East on the Alexandria Center^® for Life Science – Eastlake mega campus won in the Life Science category.
• Additionally, our innovative energy district at the Alexandria Center^® for Life Science – South Lake Union mega campus received the Seattle 2030 District's 2024 Vision Award for Energy, and 6040 George Watts Hill Drive, Phase II, in Research Triangle was recognized as the Best Development Project in the 2024 Triangle Commercial Real Estate Women's (TCREW) Champion Awards.

About Alexandria Real Estate Equities, Inc. 

Alexandria Real Estate Equities, Inc. (NYSE: ARE), an S&P 500^® company, is a best-in-class, mission-driven life science REIT making a positive and lasting impact on the world. As the pioneer of the life science real estate niche with our founding in 1994, Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative life science mega campuses in AAA innovation cluster locations, including Greater Boston, the San Francisco Bay Area, San Diego, Seattle, Maryland, Research Triangle, and New York City. As of June 30, 2024, Alexandria has a total market capitalization of $32.5 billion and an asset base in North America that includes 42.1 million RSF of operating properties and 5.3 million RSF of Class A/A+ properties undergoing construction and one committed near-term project expected to commence construction in the next two years. Alexandria has a longstanding and proven track record of developing Class A/A+ properties clustered in life science mega 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 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. 

Guidance  June 30, 2024 (Dollars in millions, except per share amounts)

The following guidance for 2024 has been updated to reflect our current view of existing market conditions and assumptions for the year ending December 31, 2024. There can be no assurance that actual results will not be materially higher or lower than these expectations. Also, refer to our discussion of "forward-looking statements" on page 7 of the Earnings Press Release for additional details.

Changes to our guidance for 2024 key sources and uses of capital include a $150 million increase to the midpoint of our guidance range for dispositions, sales of partial interests, and common equity primarily to fund the first $135 million installment of the ground lease prepayment at our Alexandria Technology Square® mega campus aggregating 1.2 million RSF in our Cambridge submarket due in the fourth quarter of 2024 in connection with an amendment of our existing ground lease agreement to extend the term of the lease by 24 years from January 1, 2065 to December 31, 2088. Refer to "Subsequent event" in the Earnings Press Release for additional information.

								2024 Guidance Midpoint
Summary of Key Changes in Guidance		As of 7/22/24		As of 4/22/24		Summary of Key Changes in Sources and Uses of Capital		As of 7/22/24		As of 4/22/24
EPS, FFO per share, and FFO per share, as adjusted		See updates below				Dispositions, sales of partial interests, and common equity		$1,550		$1,400
						Ground lease prepayment(1)		$135		$—

Key Credit Metric Targets(2)
Net debt and preferred stock to Adjusted EBITDA – 4Q24 annualized		Less than or equal to 5.1x
Fixed-charge coverage ratio – 4Q24 annualized		Greater than or equal to 4.5x

Projected 2024 Earnings per Share and Funds From Operations per Share Attributable to     Alexandria's Common Stockholders – Diluted
		As of 7/22/24				As of 4/22/24
Earnings per share(3)		$2.98 to $3.10				$3.60 to $3.72
Depreciation and amortization of real estate assets		5.95					5.95
Impairment of real estate – rental properties and land		0.01					—
Allocation to unvested restricted stock awards		(0.05)					(0.06)
Funds from operations per share(2)		$8.89 to $9.01					$9.49 to $9.61
Unrealized losses (gains) on non-real estate investments		0.20					(0.17)
Impairment of non-real estate investments		0.16					0.09
Impairment of real estate		0.17					—
Allocation to unvested restricted stock awards		(0.01)					—
Funds from operations per share, as adjusted(2)		$9.41 to $9.53					$9.41 to $9.53
Midpoint		$9.47					$9.47

								Certain Completed Items
Key Sources and Uses of Capital		Range				Midpoint
Sources of capital:
Incremental debt		$       885		$       885		$       885		See below
Net cash provided by operating activities after     dividends		400		500		450
Dispositions, sales of partial interests, and     common equity(4) (refer to page 6)		1,050		2,050		1,550		(4)
Total sources of capital		$    2,335		$    3,435		$    2,885
Uses of capital:
Construction		$    1,950		$    2,550		$    2,250
Acquisitions (refer to page 5)		250		750		500		$       202
Ground lease prepayment(1)		135		135		135
Total uses of capital		$    2,335		$    3,435		$    2,885
Incremental debt (included above):
Issuance of unsecured senior notes payable(5)		$    1,000		$    1,000		$    1,000		$    1,000	(5)
Unsecured senior line of credit, commercial     paper, and other		(115)		(115)		(115)
Net incremental debt		$       885		$       885		$       885

Key Assumptions		Low		High
Occupancy percentage in North America as of December 31, 2024		94.6 %		95.6 %
Lease renewals and re-leasing of space:
Rental rate increases		11.0 %		19.0 %
Rental rate increases (cash basis)		5.0 %		13.0 %
Same property performance:
Net operating income increases		0.5 %		2.5 %
Net operating income increases (cash basis)		3.0 %		5.0 %
Straight-line rent revenue		$            169		$            184
General and administrative expenses		$            181		$            191
Capitalization of interest		$            325		$            355
Interest expense		$            154		$            184
Realized gains on non-real estate investments(6)		$              95		$            125

(1)	Refer to "Subsequent event" in the Earnings Press Release for additional details.
(2)	Refer to "Definitions and reconciliations" in the Supplemental Information for additional details.
(3)	Excludes unrealized gains or losses on non-real estate investments after June 30, 2024 that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted.
(4)	We expect to continue pursuing our strategy to fund a significant portion of our capital requirements for the year ending December 31, 2024 with dispositions and sales of partial interests in properties not integral to our mega campus strategy and are actively pursuing several dispositions and partial interest sale opportunities. As of July 22, 2024, we completed dispositions aggregating $77.2 million, have additional pending transactions subject to letters of intent or purchase and sale agreement negotiations aggregating $806.7 million, and entered into new forward equity sales agreements aggregating $27.8 million, which, in aggregate, represents 59% of the $1.55 billion midpoint of our guidance range.
(5)	Represents $1.0 billion of unsecured senior notes payable issued in February 2024. Subject to market conditions, we may seek additional opportunities in 2024 to fund the repayment of our $600.0 million of 3.45% unsecured senior notes payable due on April 30, 2025 through issuance of additional unsecured senior notes payable, which is not assumed in our current 2024 guidance.
(6)	Represents realized gains and losses included in funds from operations per share – diluted, as adjusted, and excludes significant impairments realized on non-real estate investments, if any. Refer to "Investments" in the Supplemental Information for additional details.

 

Acquisitions June 30, 2024 (Dollars in thousands)

Property

Submarket/Market

Date of Purchase

Operating Occupancy

Future Development  RSF(1)

Purchase Price

Completed in 1Q24:

285, 299, 307, and 345 Dorchester Avenue (60% interest in consolidated JV)

Seaport Innovation District/Greater Boston

1/30/24

N/A

1,040,000

$

155,321

Other

39,490

194,811

Completed in 2Q24:

Other

7,000

201,811

Pending acquisitions subject to signed letters of intent or purchase and sale     agreements

47,600

$

249,411

2024 guidance range

$250,000 – $750,000

(1)	We expect to provide total estimated costs and related yields for development and redevelopment projects in the future, subsequent to the commencement of construction.

 

Dispositions and Sales of Partial Interests June 30, 2024 (Dollars in thousands)

Property

Submarket/Market

Date of Sale

Interest Sold

RSF

Sales Price

Dispositions of 100% interest in properties not integral to our mega campus strategy

Completed in 1H24:

99 A Street(1)

Seaport Innovation District/Greater Boston

3/8/24

100 %

235,000

$             13,350

Other

3,863

17,213

Completed in July 2024:

Other(2)

60,000

77,213

Pending transactions subject to letters of intent or purchase and sale agreement negotiations

806,728

Additional targeted dispositions and sales of partial interests

TBD

$            883,941

2024 guidance range for dispositions, sales of partial interests, and common equity

$1,050,000 – $2,050,000

(1)	We completed the sale during the three months ended March 31, 2024 and recognized no gain or loss.
(2)	The disposition completed in July 2024 was leased to a single tenant with a July 2024 lease expiration and had annual net operating income of $18.6 million based upon 2Q24 annualized. This asset was previously considered to be a potential development project upon expiration of an in-place non-laboratory space lease in July 2024.

Earnings Call Information and About the Company 
June 30, 2024

We will host a conference call on Tuesday, July 23, 2024, 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, 2024. 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 23, 2024. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 8478776.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the second quarter ended June 30, 2024 is available in the "For Investors" section of our website at www.are.com or by following this link: https://www.are.com/fs/2024q2.pdf. 

For any questions, please contact corporateinformation@are.com; Joel S. Marcus, executive chairman and founder; Peter M. Moglia, chief executive officer and chief investment officer; Marc E. Binda, chief financial officer and treasurer; Paula Schwartz, managing director of Rx Communications Group, at (917) 633-7790; or Sara M. Kabakoff, senior vice president – chief content officer.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE: ARE), an S&P 500^® company, is a best-in-class, mission-driven life science REIT making a positive and lasting impact on the world. As the pioneer of the life science real estate niche with our founding in 1994, Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative life science mega campuses in AAA innovation cluster locations, including Greater Boston, the San Francisco Bay Area, San Diego, Seattle, Maryland, Research Triangle, and New York City. As of June 30, 2024, Alexandria has a total market capitalization of $32.5 billion and an asset base in North America that includes 42.1 million RSF of operating properties and 5.3 million RSF of Class A/A+ properties undergoing construction and one committed near-term project expected to commence construction in the next two years. Alexandria has a longstanding and proven track record of developing Class A/A+ properties clustered in life science mega 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 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.

Forward-Looking Statements

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 2024 earnings per share, 2024 funds from operations per share, 2024 funds from operations per share, as adjusted, 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.

This document is not an offer to sell or a solicitation to buy securities of Alexandria Real Estate Equities, Inc. Any offers to sell or solicitations to buy our securities shall be made only by means of a prospectus approved for that purpose. Unless otherwise indicated, the "Company," "Alexandria," "ARE," "we," "us," and "our" refer to Alexandria Real Estate Equities, Inc. and our consolidated subsidiaries. Alexandria^®, Lighthouse Design^® logo, Building the Future of Life-Changing Innovation^®, That's What's in Our DNA^®, Labspace^®, 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, 2024 (Dollars in thousands, except per share amounts)
		Three Months Ended										Six Months Ended
		6/30/24		3/31/24		12/31/23		9/30/23		6/30/23		6/30/24		6/30/23
Revenues:
Income from rentals		$       755,162		$       755,551		$       742,637		$       707,531		$       704,339		$    1,510,713		$    1,392,288
Other income		11,572		13,557		14,579		6,257		9,561		25,129		22,407
Total revenues		766,734		769,108		757,216		713,788		713,900		1,535,842		1,414,695
Expenses:
Rental operations		217,254		218,314		222,726		217,687		211,834		435,568		418,767
General and administrative		44,629		47,055		59,289		45,987		45,882		91,684		94,078
Interest		45,789		40,840		31,967		11,411		17,072		86,629		30,826
Depreciation and amortization		290,720		287,554		285,246		269,370		273,555		578,274		538,857
Impairment of real estate		30,763		—		271,890		20,649		168,575		30,763		168,575
Total expenses		629,155		593,763		871,118		565,104		716,918		1,222,918		1,251,103
Equity in earnings of unconsolidated real estate joint ventures		130		155		363		242		181		285		375
Investment (loss) income		(43,660)		43,284		8,654		(80,672)		(78,268)		(376)		(123,379)
Gain on sales of real estate		—		392		62,227		—		214,810		392		214,810
Net income (loss)		94,049		219,176		(42,658)		68,254		133,705		313,225		255,398
Net income attributable to noncontrolling interests		(47,347)		(48,631)		(45,771)		(43,985)		(43,768)		(95,978)		(87,599)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s     stockholders		46,702		170,545		(88,429)		24,269		89,937		217,247		167,799
Net income attributable to unvested restricted stock awards		(3,785)		(3,659)		(3,498)		(2,414)		(2,677)		(7,444)		(5,283)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s     common stockholders		$         42,917		$       166,886		$       (91,927)		$         21,855		$         87,260		$       209,803		$       162,516
Net income (loss) per share attributable to Alexandria Real Estate Equities,     Inc.'s common stockholders:
Basic		$             0.25		$             0.97		$            (0.54)		$             0.13		$             0.51		$             1.22		$             0.95
Diluted		$             0.25		$             0.97		$            (0.54)		$             0.13		$             0.51		$             1.22		$             0.95
Weighted-average shares of common stock outstanding:
Basic		172,013		171,949		171,096		170,890		170,864		171,981		170,824
Diluted		172,013		171,949		171,096		170,890		170,864		171,981		170,824
Dividends declared per share of common stock		$             1.30		$             1.27		$             1.27		$             1.24		$             1.24		$             2.57		$             2.45

 

Consolidated Balance Sheets June 30, 2024 (In thousands)
		6/30/24		3/31/24		12/31/23		9/30/23		6/30/23
Assets
Investments in real estate		$  32,673,839		$  32,323,138		$  31,633,511		$  31,712,731		$ 31,178,054
Investments in unconsolidated real estate joint ventures		40,535		40,636		37,780		37,695		37,801
Cash and cash equivalents		561,021		722,176		618,190		532,390		924,370
Restricted cash		4,832		9,519		42,581		35,321		35,920
Tenant receivables		6,822		7,469		8,211		6,897		6,951
Deferred rent		1,190,336		1,138,936		1,050,319		1,012,666		984,366
Deferred leasing costs		519,629		520,616		509,398		512,216		520,610
Investments		1,494,348		1,511,588		1,449,518		1,431,766		1,495,994
Other assets		1,356,503		1,424,968		1,421,894		1,501,611		1,475,191
Total assets		$  37,847,865		$  37,699,046		$  36,771,402		$  36,783,293		$ 36,659,257
Liabilities, Noncontrolling Interests, and Equity
Secured notes payable		$       134,942		$       130,050		$       119,662		$       109,110		$         91,939
Unsecured senior notes payable		12,089,561		12,087,113		11,096,028		11,093,725		11,091,424
Unsecured senior line of credit and commercial paper		199,552		—		99,952		—		—
Accounts payable, accrued expenses, and other liabilities		2,529,535		2,503,831		2,610,943		2,653,126		2,494,087
Dividends payable		227,408		222,134		221,824		214,450		214,555
Total liabilities		15,180,998		14,943,128		14,148,409		14,070,411		13,892,005
Commitments and contingencies
Redeemable noncontrolling interests		16,440		16,620		16,480		51,658		52,628
Alexandria Real Estate Equities, Inc.'s stockholders' equity:
Common stock		1,720		1,720		1,719		1,710		1,709
Additional paid-in capital		18,284,611		18,434,690		18,485,352		18,651,185		18,812,318
Accumulated other comprehensive loss		(27,710)		(23,815)		(15,896)		(24,984)		(16,589)
Alexandria Real Estate Equities, Inc.'s stockholders' equity		18,258,621		18,412,595		18,471,175		18,627,911		18,797,438
Noncontrolling interests		4,391,806		4,326,703		4,135,338		4,033,313		3,917,186
Total equity		22,650,427		22,739,298		22,606,513		22,661,224		22,714,624
Total liabilities, noncontrolling interests, and equity		$  37,847,865		$  37,699,046		$  36,771,402		$  36,783,293		$ 36,659,257

 

Funds From Operations and Funds From Operations per Share June 30, 2024 (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
		6/30/24		3/31/24		12/31/23		9/30/23		6/30/23		6/30/24		6/30/23
Net income (loss) attributable to Alexandria's common stockholders – basic     and diluted		$     42,917		$   166,886		$   (91,927)		$     21,855		$     87,260		$   209,803		$   162,516
Depreciation and amortization of real estate assets		288,118		284,950		281,939		266,440		270,026		573,068		532,150
Noncontrolling share of depreciation and amortization from consolidated real     estate JVs		(31,364)		(30,904)		(30,137)		(28,814)		(28,220)		(62,268)		(56,398)
Our share of depreciation and amortization from unconsolidated real estate JVs		1,068		1,034		965		910		855		2,102		1,714
Gain on sales of real estate		—		(392)		(62,227)		—		(214,810)		(392)		(214,810)
Impairment of real estate – rental properties and land		2,182		—		263,982		19,844		166,602		2,182		166,602
Allocation to unvested restricted stock awards		(1,305)		(3,469)		(2,268)		(838)		(872)		(4,736)		(2,220)
Funds from operations attributable to Alexandria's common stockholders –     diluted(1)		301,616		418,105		360,327		279,397		280,841		719,759		589,554
Unrealized losses (gains) on non-real estate investments		64,238		(29,158)		(19,479)		77,202		77,897		35,080		143,752
Impairment of non-real estate investments		12,788	(2)	14,698		23,094		28,503		22,953		27,486		22,953
Impairment of real estate		28,581	(3)	—		7,908		805		1,973		28,581		1,973
Acceleration of stock compensation expense due to executive officer resignations		—		—		18,436		1,859		—		—		—
Allocation to unvested restricted stock awards		(1,738)		247		(472)		(1,330)		(1,285)		(1,528)		(2,164)
Funds from operations attributable to Alexandria's common stockholders –     diluted, as adjusted		$   405,485		$   403,892		$   389,814		$   386,436		$   382,379		$   809,378		$   756,068

Refer to "Definitions and reconciliations" in the Supplemental Information for additional details.
(1)	Calculated in accordance with standards established by the Nareit Board of Governors.
(2)	Primarily related to two non-real estate investments in privately held entities that do not report NAV.
(3)	Primarily related to two potential acquisitions in our Greater Boston market, which aggregated 1.4 million of future development RSF. We initially expected to close these acquisitions after 2024 for an aggregate purchase price of $366.8 million. Our intent for each site included the demolition of existing buildings upon expiration of the existing in-place leases and the development of life science properties. During the three months ended June 30, 2024, we decided to no longer proceed with these acquisitions as a result of the current macroeconomic environment that negatively impacted the financial outlooks for these projects, and recognized this impairment charge.

 

Funds From Operations and Funds From Operations per Share (continued) June 30, 2024 (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
		6/30/24		3/31/24		12/31/23		9/30/23		6/30/23		6/30/24		6/30/23
Net income (loss) per share attributable to Alexandria's common stockholders –     diluted		$         0.25		$         0.97		$        (0.54)		$         0.13		$         0.51		$         1.22		$         0.95
Depreciation and amortization of real estate assets		1.50		1.48		1.48		1.40		1.42		2.98		2.80
Gain on sales of real estate		—		—		(0.36)		—		(1.26)		—		(1.26)
Impairment of real estate – rental properties and land		0.01		—		1.54		0.12		0.98		0.01		0.98
Allocation to unvested restricted stock awards		(0.01)		(0.02)		(0.01)		(0.01)		(0.01)		(0.02)		(0.02)
Funds from operations per share attributable to Alexandria's common     stockholders – diluted		1.75		2.43		2.11		1.64		1.64		4.19		3.45
Unrealized losses (gains) on non-real estate investments		0.37		(0.17)		(0.11)		0.45		0.46		0.20		0.84
Impairment of non-real estate investments		0.08		0.09		0.13		0.17		0.13		0.16		0.13
Impairment of real estate		0.17		—		0.05		—		0.02		0.17		0.02
Acceleration of stock compensation expense due to executive officer resignations		—		—		0.11		0.01		—		—		—
Allocation to unvested restricted stock awards		(0.01)		—		(0.01)		(0.01)		(0.01)		(0.01)		(0.01)
Funds from operations per share attributable to Alexandria's common     stockholders – diluted, as adjusted		$         2.36		$         2.35		$         2.28		$         2.26		$         2.24		$         4.71		$         4.43
Weighted-average shares of common stock outstanding – diluted		172,013		171,949		171,096		170,890		170,864		171,981		170,824

Refer to "Definitions and reconciliations" in the Supplemental Information for additional details.

 

 

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FAQ

What were Alexandria Real Estate Equities' revenues for Q2 2024?

Total revenues for Q2 2024 were $766.7 million, a 7.4% increase year-over-year.

What were Alexandria Real Estate Equities' revenues for the first half of 2024?

Total revenues for the first half of 2024 were $1.54 billion, an 8.6% increase year-over-year.

What is Alexandria Real Estate Equities' FFO per share for Q2 2024?

FFO per share for Q2 2024 was $2.36, compared to $2.24 in Q2 2023.

What is Alexandria Real Estate Equities' FFO per share for the first half of 2024?

FFO per share for the first half of 2024 was $4.71, compared to $4.43 in the first half of 2023.

What was Alexandria Real Estate Equities' net income per share for Q2 2024?

Net income per share for Q2 2024 was $0.25, down from $0.51 in Q2 2023.

What was Alexandria Real Estate Equities' net income per share for the first half of 2024?

Net income per share for the first half of 2024 was $1.22, down from $1.95 in the first half of 2023.

How much was Alexandria Real Estate Equities' Q2 2024 dividend?

Alexandria Real Estate Equities declared a Q2 2024 dividend of $1.30 per share, with a yield of 4.4%.

What is the expected incremental annual net operating income from Alexandria's development pipeline?

Alexandria's development pipeline is expected to deliver $480 million in incremental annual net operating income by Q1 2028.