Alexandria announces sale to Boston Children's Hospital of property that will constitute 268,000 RSF in 421 Park Drive for estimated initial proceeds of $155 million
PASADENA, Calif., June 28, 2023 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE: ARE), the first, preeminent, longest-tenured and pioneering owner, operator and developer of collaborative life science, agtech and advanced technology campuses in AAA innovation cluster locations, has been at the vanguard of Greater Boston's thriving life science ecosystem since 1997. As the pioneer of mission-critical Labspace® real estate, Alexandria has a dominant market presence in Greater Boston — the world's top life science cluster — consisting of 19.6 million RSF, with 11.2 million RSF of operating properties as of March 31, 2023. Its Greater Boston asset base is home to over 10 multinational pharmaceutical companies, such as Eli Lilly and Novartis; innovative public biotechnology companies, such as Moderna and Alnylam; and top-tier, investment-grade institutions, such as MIT and Boston Children's Hospital. Alexandria's most prominent market presence is in Cambridge's Kendall Square, which features three of the country's foremost, in-demand Alexandria mega campuses. From this base of Greater Boston mega campuses, the company expanded into the adjacent high-value, high-barrier-to-entry submarkets of Watertown and Fenway. In Fenway, Alexandria pioneered a new life science submarket in 2021 with the creation of the Alexandria Center® for Life Science – Fenway mega campus. This foundational campus, developed in partnership with Samuels & Associates, boasts a wealth of amenities, critical proximity to both Cambridge and the Longwood Medical Area, and their world-renowned medical research institutions, as well as convenient transportation access to help the campus's tenants attract and retain top talent.
Among the tenants at the Alexandria Center for Life Science – Fenway is the company's long-term strategic partner Boston Children's Hospital, which invests heavily in basic, clinical and translational research to accelerate the discovery of new treatments for devastating diseases and to improve the health of both children and adults. In fiscal year 2022, Boston Children's was #1 in National Institutes of Health (NIH) funding among all U.S. children's hospitals. Government support for life science research remains strong with an NIH budget of $47.5 billion for fiscal year 2023. Academic and medical research institutions, which represent a key bedrock sector of Alexandria's high-quality and diverse client base of over 850 tenants, compose 12% of the company's annual rental revenue as of March 31, 2023. Additionally, 49% of Alexandria's total annual rental revenue as of March 31, 2023 is from investment-grade or publicly traded large cap tenants.
Alexandria continues its strong and timely execution of its successful value harvesting and asset recycling self-funding strategy with a signed purchase and sale agreement for the disposition of property that will constitute 268,000 RSF in 421 Park Drive, a 660,034 RSF Class A development, to an affiliate of Boston Children's Hospital. 421 Park Drive is a highly sustainable state-of-the-art laboratory development that has been designed to significantly enhance the foundational campus and surrounding neighborhood through the addition of new open space, direct connections to the MBTA Fenway station, bicycle and pedestrian paths, and retail destinations on the building's ground floor. Alexandria will develop the facility, operate the entire building and manage the more than 2 million RSF highly amenitized life science mega campus. This transaction results in 48.5% of the building being committed, including ground-floor retail. Initial proceeds at closing are estimated at $155 million, along with development fees to be earned by Alexandria over the next three years. Boston Children's will continue to fund its pro rata share of the costs to develop 421 Park Drive, which is expected to commence vertical construction later this year and be substantially complete in 2026. Initial proceeds from this transaction will be reinvested into the company's highly leased value-creation pipeline. As of March 31, 2023, 6.7 million RSF of current and near-term projects that are 72% leased are expected to generate more than $610 million of annual incremental net operating income, primarily commencing from 2Q23 through 1Q26. This embedded growth enabled Alexandria to reiterate guidance of 6.4% annual growth in funds from operations per share – diluted, as adjusted, for 2023 at the midpoint of guidance as of April 24, 2023, with a strong adjusted EBITDA margin of 69% for 1Q23.
"This creative, strategic sale of 268,000 RSF of cutting-edge research space within our 421 Park life science development further illustrates the demand for our unique, mission-critical mega campus assets in high-barrier-to-entry markets and is a testament to the collaborative vibrancy of our Fenway mega campus," said Hunter L. Kass, executive vice president and regional market director of Greater Boston at Alexandria Real Estate Equities, Inc. "We value our longstanding trusted relationship with Boston Children's and proudly recognize their legacy of scientific discovery and innovation as a distinguished healthcare institution."
Innovation in medicine is a national imperative, and the opportunity to improve human health and save lives remains vast, with 10,000 diseases known to humankind, nearly 90% of which have no viable treatments. The life science industry has aggregate annual research and development funding in the range of $450 billion to $500 billion and is well positioned for continued secular growth. Alexandria's mission-critical Labspace assets, which house billions of dollars of irreplaceable tenant research and 24/7 high-intensity equipment, remain integral to supporting the advancement of life-changing and lifesaving treatments and cures.
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 since our founding in 1994, Alexandria is the preeminent and longest-tenured owner, operator and developer of collaborative life science, agtech and advanced technology campuses in AAA innovation cluster locations, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland and Research Triangle. The trusted partner to over 850 tenants, Alexandria has a total market capitalization of $33.0 billion and an asset base in North America of 75.6 million SF as of March 31, 2023, which includes 41.9 million RSF of operating properties, 5.5 million RSF of Class A properties undergoing construction and 9.7 million RSF of near-term and intermediate-term development and redevelopment projects. Alexandria has a longstanding and proven track record of developing Class A properties clustered in life science, agtech and advanced 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, agrifoodtech, climate innovation 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 more information on Alexandria, please visit www.are.com.
Forward-Looking Statements
This press release 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 the potential impacts of Alexandria's investment decisions on Alexandria and its tenants, their businesses and the advancement of treatment and cures, use of proceeds, market and industry expectations, the effectiveness of Alexandria's strategic value harvesting and asset recycling program, expectations, including timing and proceeds, relating to 421 Park Drive and expected life science research and funding levels. These forward-looking statements are based on Alexandria's present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by Alexandria's forward-looking statements as a result of a variety of factors, including, without limitation, the risks and uncertainties detailed in its filings with the Securities and Exchange Commission. All forward-looking statements are made as of the date of this press release, and Alexandria assumes no obligation to update this information. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in Alexandria's forward-looking statements, and risks and uncertainties to Alexandria's business in general, please refer to Alexandria's filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and any subsequently filed quarterly reports on Form 10-Q.
CONTACT: Sara Kabakoff, Vice President – Strategic Communications, (626) 788-5578, skabakoff@are.com
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