EX-99.1 2 a2q18ex991supp.htm EXHIBIT 99.1 Exhibit
q218frontcover.jpg

 
Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2018



q218insidecover1.jpg

 
Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2018
i



q218insidecover2.jpg
(1)    See “Definitions and Reconciliations” in our Supplemental Information for additional information. As of June 30, 2018, annual rental revenue from only investment-grade tenants within our overall tenant base and within our top 20 tenants was 46% and 72%, respectively.

 
 
 
q218logo2.jpg
Table of Contents
June 30, 2018
 
 

 
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. Please see page 8 of this Earnings Press Release and Supplemental Information for further information.
 
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 its consolidated subsidiaries.

 
Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2018
iii
q218logo1.jpg

Alexandria Real Estate Equities, Inc.
Reports
Second Quarter Ended June 30, 2018, Financial and Operating Results
Strong Internal and External Growth,
Operational Excellence and Growing Dividends



PASADENA, Calif. – July 30, 2018 – Alexandria Real Estate Equities, Inc. (NYSE:ARE)
announced financial and operating results for the second quarter ended June 30, 2018.

Key highlights

Increased common stock dividend

Common stock dividend for 2Q18 of $0.93 per common share, up 7 cents, or 8.1%, over 2Q17; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Strong internal growth

•
Total revenues:
•
$325.0 million, up 19.0%, for 2Q18, compared to $273.1 million for 2Q17
•
$645.2 million, up 18.6%, for 1H18, compared to $543.9 million for 1H17
•
Net operating income (cash basis) of $818.7 million for 2Q18 annualized, up $60.4 million, or 8.0%, compared to 1Q18 annualized, and up $125.5 million, or 18.1%, compared to 4Q17 annualized
•
Same property net operating income growth:
•
4.1% and 6.3% (cash basis) for 2Q18, compared to 2Q17
•
4.1% and 10.3% (cash basis) for 1H18, compared to 1H17
•
Continued solid leasing activity and strong rental rate growth, in light of modest contractual lease expirations at the beginning of 2018 and a highly leased value-creation pipeline:
 
 
2Q18
 
1H18
Total leasing activity – RSF
 
985,996

 
2,467,160

Lease renewals and re-leasing of space:
 
 
 
 
Rental rate increases
 
24.0%

 
21.5%

Rental rate increases (cash basis)
 
12.8%

 
13.8%

RSF (included in total leasing activity above)
 
727,265

 
961,813

 
 
 
 
 

 
•
Key leases executed during 2Q18 (included in total leasing activity above):
Property
 
Submarket
 
RSF
 
Tenant
215 First Street
 
Cambridge
 
152,157

(1) 
Sarepta Therapeutics, Inc.
960 Industrial Road
 
Greater Stanford
 
110,000

(2) 
Joby Aero, Inc.
1201 Eastlake Avenue East
 
Lake Union
 
106,106

(3) 
Fred Hutchinson Cancer Research Center
Alexandria Center® at One Kendall Square
 
Cambridge
 
69,512

(4) 
Ipsen Bioscience, Inc.
950 Wind River Lane
 
Gaithersburg
 
50,000

 
AstraZeneca PLC
 
(1)
Includes 121,476 RSF renewed/re-leased at rental rate increases of 53% and 36% (cash basis) and expansion of 30,681 RSF. 88,459 RSF represents early renewal of a lease expiration in January 2021.
(2)
Represents short-term lease for 110,000 RSF. The property also includes an additional 423,000 RSF undergoing entitlements for future development in one or two phases.
(3)
Re-leasing of space with a lease expiration in May 2019 at a rental rate increase of 35%.
(4)
Re-leasing of space with a lease expiration in June 2019 at rental rate increases of 16% and 49% (cash).

Strong external growth; disciplined allocation of capital to visible, multiyear, highly leased
value-creation pipeline

•Highly leased value-creation pipeline with deliveries targeted for 2018 and 2019:
 
 
 
 
Property
Leased %
 
Unlevered Yields
Target Delivery
 
 
Initial Stabilized
 
Initial Stabilized (Cash)
2018
 
501,325
 RSF
 
75%
 
7.5%
 
7.0%
2019
 
2,110,831
 RSF
 
86%
 
7.3%
 
6.7%
 
 
2,612,156
 RSF
 
84%
 
7.3%
 
6.8%
 
 
 
 
 
 
 
 
 
•
Includes 2Q18 commencement of vertical construction of a ground-up development project aggregating 205,000 RSF, 12% leased and 12% negotiating, at 1818 Fairview Avenue East in our Lake Union submarket.
•
New Class A development and redevelopment properties recently placed into service
•
1.6 million RSF placed into service during the last 12 months with average yields of 7.6% and 7.1% (cash).

Recent and future growth in net operating income (cash basis) driven by recently delivered projects:

•
Significant near-term contractual growth in annual cash rents of $44 million related to initial free rent granted on development and redevelopment projects recently placed into service (and no longer included in our value-creation pipeline) that are currently generating rental revenue.

 
 
 
q218logo2.jpg
Second Quarter Ended June 30, 2018, Financial and Operating Results (continued)
June 30, 2018
 
 

Completed strategic acquisitions

Acquisitions completed:
•
In 2Q18 and July 2018, we acquired 14 properties and four land parcels for an aggregate purchase price of $662.9 million in key submarkets. These acquisitions consisted of:
•
Two properties and four land parcels supporting the future development of new Class A buildings aggregating 1,010,000 RSF;
•
389,452 RSF of value-add operating properties with future redevelopment opportunities, including $203.0 million for a fee simple interest in an office building aggregating 349,947 RSF located in New York City, which is currently occupied by Pfizer Inc.; and
•
828,014 RSF of 99% occupied operating properties, including significant below-market leases.

Operating results
 
2Q18
 
2Q17
 
1H18
 
1H17
Net income attributable to Alexandria’s common stockholders – diluted:
In millions
$
52.0

 
$
31.6

 
$
185.0

 
$
57.3

Per share
$
0.51

 
$
0.35

 
$
1.83

 
$
0.64

 
 
 
 
 
 
 
 
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted:
In millions
$
167.9

 
$
136.2

 
$
330.4

 
$
266.7

Per share
$
1.64

 
$
1.50

 
$
3.27

 
$
2.98

See “Items Included in Net Income Attributable to Alexandria’s Common Stockholders” below for additional information.
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
2Q18
 
2Q17
 
2Q18
 
2Q17
 
1H18
 
1H17
 
1H18
 
1H17
Realized gain on non-real estate investment
$
—

 
$
—

 
$
—

 
$
—

 
$
8.3

 
$
—

 
$
0.08

 
$
—

Unrealized gains on non-real estate investments(1)
5.1

 
—

 
0.05

 
—

 
77.3

 
—

 
0.76

 
—

Gain on sales of real estate
—

 
0.1

 
—

 
—

 
—

 
0.4

 
—

 
—

Impairment of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate
(6.3
)
 
(0.2
)
 
(0.06
)
 
—

 
(6.3
)
 
(0.2
)
 
(0.06
)
 
—

Non-real estate investments
—

 
(4.5
)
 
—

 
(0.05
)
 
—

 
(4.5
)
 
—

 
(0.05
)
Loss on early extinguishment of debt
—

 
—

 
—

 
—

 
—

 
(0.7
)
 
—

 
(0.01
)
Preferred stock redemption charge
—

 
—

 
—

 
—

 
—

 
(11.3
)
 
—

 
(0.12
)
Total
$
(1.2
)
 
$
(4.6
)
 
$
(0.01
)
 
$
(0.05
)
 
$
79.3

 
$
(16.3
)
 
$
0.78

 
$
(0.18
)
Weighted-average shares of common stock outstanding for calculation of earnings per share – diluted
 
102.2

 
90.7

 
 
 
 
 
101.2

 
89.5


(1) See “Investments” on page 46 of our Supplemental Information for additional information.


 
Core operating metrics as of or for the quarter ended June 30, 2018

High-quality revenues and cash flows and operational excellence

•
Percentage of annual rental revenue in effect from:
•
Investment-grade or large cap tenants: 55%
•
Class A properties in AAA locations: 78%
•
Occupancy of operating properties in North America: 97.1%
•
Operating margin: 72%
•
Adjusted EBITDA margin: 69%
•
Weighted-average remaining lease term:
•
Total tenants: 8.6 years
•
Top 20 tenants: 12.8 years
•
See “Strong Internal Growth” on the previous page for information on our total revenues, same property net operating income growth, leasing activity, and rental rate growth.

Balance sheet management

Key metrics

•
$18.8 billion of total market capitalization as of June 30, 2018
•
$2.9 billion of liquidity as of June 30, 2018
 
 
2Q18
 
 
 
 
Quarter
 
Trailing 12
 
4Q18
 
Annualized
 
Months
 
Goal
Net debt to Adjusted EBITDA
 
5.8x
 
6.2x
 
Less than 5.5x
Fixed-charge coverage ratio
 
4.3x
 
4.3x
 
Greater than 4.0x
Unhedged variable-rate debt as a percentage of total debt
 
5%
 
N/A
 
Less than 5%
Current and future value-creation pipeline as a percentage of gross investments in real estate in North America
 
10%
 
N/A
 
8% to 12%

Key capital events

•
In June 2018, we completed an offering of $900.0 million of unsecured senior notes for net proceeds of $891.4 million. The unsecured senior notes consisted of:
•
$450.0 million of 4.00% unsecured senior notes, due in 2024. The net proceeds will be used to fund certain eligible green development and redevelopment projects that have received or are expected to receive LEED® Gold or Platinum certification.
•
$450.0 million of 4.70% unsecured senior notes, due in 2030.
•
During 2Q18, we sold 2.5 million shares of common stock under our at-the-market common stock offering program (“ATM program”) for $124.46 per share and received net proceeds of $300.8 million. In July 2018, we sold 703,625 shares of common stock under our ATM common stock offering program for $127.91 per share and received net proceeds of $88.7 million. As of July 30, 2018, we had $17.7 million available for future sales under the ATM program. We expect to file a new ATM program in the next few quarters.
•
In April 2018, our unconsolidated real estate joint venture at Menlo Gateway in our Greater Stanford submarket closed a secured note payable with commitments available for borrowing of $157.3 million, for the development of Phase II of the project. The loan matures on May 1, 2035, and bears interest at a fixed rate of 4.53%.


 
 
 
q218logo2.jpg
Second Quarter Ended June 30, 2018, Financial and Operating Results (continued)
June 30, 2018
 
 

Corporate responsibility and industry leadership

•
Nareit CARE Gold Award Winner
•
2018 recipient of the Nareit Gold Investor CARE (Communications and Reporting Excellence) Award in the Large Cap Equity REIT category as the best-in-class REIT that delivers transparency, quality, and efficient communications and reporting to the investment community, which is our third Nareit Gold Investor CARE Award (2015, 2016, and 2018).
•
50% of annual rental revenue is expected from LEED-certified projects upon completion of 10 in-process projects. In April 2018, 100 Binney Street in our Cambridge submarket received LEED Gold® certification, demonstrating our commitment to sustainability.
•
In May 2018, Joel S. Marcus, executive chairman and founder, served as a keynote speaker at the Research Triangle Regional Partnership’s 2018 State of the Region. The event highlighted how the region can facilitate economic growth and infrastructural improvements to prepare for more diversified expansion in the future.
•
In June 2018, Joel S. Marcus was appointed to the Emily Krzyzewski Center board of directors. The Center serves as a college access hub propelling academically focused, low-income K-12 students and graduates toward success in college.
•
In June 2018, Circulate San Diego awarded 9880 Campus Point Drive in our University Town Center submarket the Circulate Mobility Certification, formerly known as the MOVE Alliance Certification. The certification is awarded for transit-oriented, smart growth projects in the San Diego region.
•
In June 2018, we released our inaugural 2017 Corporate Responsibility Report that highlights our continual efforts to make a positive, meaningful and purposeful impact on the health, safety and well-being of our tenants, stockholders and employees, as well as on the communities in which we live and work.

Subsequent events

•
During 2Q18, we entered into a contract to sell a land parcel located in Northern Virginia and recognized an impairment of $6.3 million to lower the carrying amount to the estimated fair value less selling costs. We completed the sale, at a price of $6.0 million, in July 2018 with no gain or loss.
•
In July 2018, we repaid $150.0 million of the outstanding balance of one secured construction loan. In connection with the partial repayment of the secured construction loan, we recognized a loss on early extinguishment of debt of $299 thousand related to the write-off of unamortized loan fees.

 
 
 
q218logo2.jpg
Sustainability
June 30, 2018
 
 

q218sustainability.jpg
(1)
Upon completion of 10 LEED certification projects in process.
(2)
Upon completion of three WELL certification projects in process.
(3)
Upon completion of eight Fitwel certification projects in process.

 
 
Acquisitions
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 


Property
 
Submarket/Market
 
Date of Purchase
 
Number of Properties
 
Operating
Occupancy
 
Square Footage
 
Unlevered Yields
 
Purchase Price
 
 
 
 
Operating
 
Operating with Future Redevelopment
 
Future
Development
 
Initial Stabilized
 
Initial Stabilized (Cash)
 
 
 
 
 
 
 
 
Future Development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
701 Dexter Avenue North
 
Lake Union/Seattle
 
7/20/18
 
1
 
N/A
 
—

 
—

 
217,000

 
(1
)
 
 
(1
)
 
 
$
33,500

 
Other
 
Various
 
Various
 
—
 
N/A
 
—

 
—

 
493,000

 
(1
)
 
 
(1
)
 
 
 
58,205

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating with Value-Creation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
219 East 42nd Street
 
Manhattan/New York City
 
7/10/18
 
1
 
100%
 
—

 
349,947

(2) 
—

 
6.8
%
(2) 
 
6.7
%
(2) 
 
 
203,000

 
100 Tech Drive
 
Route 128/Greater Boston
 
4/13/18
 
1
 
100%
 
200,431

 
—

 
300,000

 
8.7
%
 
 
7.3
%
 
 
 
87,250

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maryland Life Science Portfolio
 
Rockville/Gaithersburg/Maryland
 
5/8/18
 
8
 
100%
 
376,106

 
39,505

 
—

 
9.1
%
 
 
7.0
%
(3) 
 
 
146,500

 
2301 5th Avenue
 
Lake Union/Seattle
 
6/1/18
 
1
 
97%
 
197,136

 
—

 
—

 
8.3
%
 
 
5.1
%
(3) 
 
 
95,000

 
Other
 
Various
 
Various
 
2
 
100%
 
54,341

 
—

 
—

 
N/A

 
 
N/A

 
 
 
39,400

(4) 
 
 
 
 
 
 
14
 
 
 
828,014

 
389,452

 
1,010,000

 
 
 
 
 
 
 
 
662,855

 
1Q18 acquisitions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
339,400

 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,002,255

 
2018 guidance midpoint
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,010,000

 

(1)
We expect to provide total estimated costs and related yields of development and redevelopment projects in the future.
(2)
We acquired a fee simple interest in this office building, which is currently occupied by Pfizer Inc. with a remaining lease term of six years. Upon expiration of the lease, we have the opportunity to increase cash flows through the conversion of office space into office/laboratory space through redevelopment. Under the Midtown East Rezoning, this property is currently entitled with an as-of-right density for an additional 230,000 developable square feet. Unlevered initial stabilized yields represent initial returns during the Pfizer, Inc. occupancy prior to any future redevelopment activities. We expect to provide total estimated costs and related yields of the development or redevelopment in the future.
(3)
These properties provide an opportunity to increase cash flows through the re-leasing of in-place leases currently 16% and 25% below market at the Maryland Life Science Portfolio and 2301 5th Avenue, respectively.
(4)
Includes, among others, the final installment related to our November 2016 acquisition of 1455 and 1515 Third Street of $18.9 million which was paid during the three months ended June 30, 2018.

 
 
 
 
Acquisitions (continued)
q218logo2.jpg
 
 
June 30, 2018
 
 
 


q218pfizeracq.jpg

 
 
Guidance
q218logo2.jpg
June 30, 2018
(Dollars in millions, except per share amounts)
 
 
 

The following updated guidance is based on our current view of existing market conditions and assumptions for the year ending December 31, 2018. There can be no assurance that actual amounts will be materially higher or lower than these expectations. See our discussion of “forward-looking statements” on page 8 of this Earnings Press Release for additional information.
 
 
Guidance
 
 
 
Guidance
Summary of Key Changes in Guidance
 
As of 7/30/18
 
As of 4/30/18
 
Summary of Key Changes in Guidance
 
As of 7/30/18
 
As of 4/30/18
EPS, FFO per share, and FFO per share, as adjusted
 
See updates below(1)
 
Key sources and uses of capital
 
(2)
 
N/A
Occupancy percentage in North America as of December 31, 2018
 
97.1% to 97.7%
 
96.9% to 97.5%
 
Rental rate increases
 
17.0% to 20.0%
 
13.0% to 16.0%
 
 
 
 
 
Rental rate increases (cash basis)
 
9.5% to 12.5%
 
7.5% to 10.5%
Projected Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s Common Stockholders – Diluted
 
 
 
As of 7/30/18
 
As of 4/30/18
 
Earnings per share
 
$2.87 to $2.93
 
$2.88 to $2.98
 
Depreciation and amortization
 
 
4.50
 
 
 
4.45
 
 
Allocation to unvested restricted stock awards
 
 
(0.05)
 
 
 
(0.05)
 
 
Funds from operations per share
 
$7.32 to $7.38
 
$7.28 to $7.38
 
Realized gain on non-real estate investment in 1Q18
 
 
(0.08)
 
 
 
(0.08)
 
 
Unrealized gains on non-real estate investments(3)
 
 
(0.76)
 
 
 
(0.70)
 
 
Impairment of real estate – land parcels(4)
 
 
0.06
 
 
 
—
 
 
Allocation to unvested restricted stock awards/other
 
 
0.03
 
 
 
0.02
 
 
Funds from operations per share, as adjusted
 
$6.57 to $6.63
 
$6.52 to $6.62
 
Midpoint
 
$6.60
 
$6.57
 
Key Assumptions
 
Low
 
High
 
Occupancy percentage in North America as of December 31, 2018
 
97.1%

 
97.7%

 
 
 
 
 
 
 
Lease renewals and re-leasing of space:
 
 
 
 
 
Rental rate increases
 
17.0%

 
20.0%

 
Rental rate increases (cash basis)
 
9.5%

 
12.5%

 
Same property performance:
 
 
 
 
 
Net operating income increase
 
2.5%

 
4.5%

 
Net operating income increase (cash basis)
 
9.0%

 
11.0%

 
 
 
 
 
 
 
Straight-line rent revenue
 
$
92

 
$
102

(7)
General and administrative expenses
 
$
85

 
$
90

 
Capitalization of interest
 
$
55

 
$
65

 
Interest expense
 
$
155

 
$
165

 
 
 
 
 
 
 
 
 
 
Guidance
as of 7/30/18
 
Key Credit Metrics
 
 
Net debt to Adjusted EBITDA – 4Q18 annualized
 
Less than 5.5x
 
Net debt and preferred stock to Adjusted EBITDA – 4Q18 annualized
 
Less than 5.5x
 
Fixed-charge coverage ratio – 4Q18 annualized
 
Greater than 4.0x
 
Unhedged variable-rate debt as a percentage of total debt as of December 31, 2018
 
Less than 5%
 
Value-creation pipeline as a percentage of gross real estate as of December 31, 2018
 
8% to 12%
 
Key Sources and Uses of Capital
 
Range
 
Midpoint
 
Certain Completed Items Through 7/30/18
Sources of capital:
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities after dividends
 
$
140

 
$
180

 
$
160

 
 
 
Incremental debt
 
540

 
500

 
 
520

 
 
 
Real estate dispositions, partial interest sales, and common equity
 
1,330

 
1,530

 
 
1,430

 
$
1,200

(5) 
Total sources of capital
 
$
2,010

 
$
2,210

 
$
2,110

 
 
 
Uses of capital:
 
 
 
 
 
 
 
 
 
 
Construction
 
$
1,050

 
$
1,150

 
 
$
1,100

 
 
 
Acquisitions
 
960

 
1,060

 
 
1,010

 
(6)
Total uses of capital
 
$
2,010

 
$
2,210

 
$
2,110

 
 
 
Incremental debt (included above):
 
 
 
 
 
 
 
 
 
 
Issuance of unsecured senior notes payable
 
$
900

 
$
900

 
 
$
900

 
$
900

 
Repayments of secured notes payable
 
(160
)
 
(165
)
 
 
(163
)
 
$
(150
)
 
Repayment of unsecured senior bank term loan
 
(200
)
 
(200
)
 
 
(200
)
 
 
 
$1.65 billion unsecured senior line of credit/other
 
—

 
(35
)
 
 
(17
)
 
 
 
Incremental debt
 
$
540

 
$
500

 
$
520

 
 
 
(1)
Midpoint of FFO per share, as adjusted guidance increased by $0.03 from $6.57 to $6.60 primarily due to the incremental acquisitions as noted in footnote 2, and the continued strength of our core and the related increases in projected occupancy and rental rate growth on leasing activity.
(2)
Updates to key sources and uses of capital guidance for 2018 include: (a) $290 million increase in the midpoint of acquisitions range from $720 million to $1.0 billion, (b) $220 million increase in the midpoint of real estate dispositions, partial interest sales, and common equity range from $1.2 billion to $1.4 billion, (c) $300 million increase in issuance of unsecured senior notes payable reflecting the June 2018 issuance of our $900 million unsecured senior notes, and (d) $150 million increase in repayments of secured notes payable reflecting the July 2018 partial repayment of our secured construction loan.
(3)
Per share amounts of unrealized gains on non-real estate investments may be different for the full year ending December 31, 2018, depending on the weighted-average shares outstanding for the year ending December 31, 2018. Excludes future unrealized gains or losses that could be recognized in earnings from changes in fair value of equity investments after June 30, 2018. See page 46 of our Supplemental Information for additional information.
(4)
Impairment of real estate aggregating $6.3 million recognized during the three months ended June 30, 2018, related to one land parcel located in Northern Virginia that was subsequently sold in July 2018 with no gain or loss.
(5)
We have completed transactions aggregating $1.2 billion through July 2018. This includes completed and projected settlement of our forward equity sales agreements and completed sales under our ATM program. In January 2018, we executed forward equity sales agreements for 6.9 million shares of our common stock. In March 2018, we settled 843,600 shares from the forward equity sales agreements and received proceeds of $100.2 million, net of underwriting discounts and adjustments provided in the forward equity sales agreements. We expect to receive proceeds of $709.9 million upon settlement of the remaining outstanding forward equity sales agreements, to be further adjusted as provided in the sales agreements, in 2018. During the three months ended June 30, 2018, we sold 2.5 million shares of common stock under our ATM program at $124.46 per share, with net proceeds of $300.8 million. In July 2018, we sold 703,625 shares of common stock under our ATM common stock offering program for $127.91 per share and received net proceeds of $88.7 million.
(6)
See “Acquisitions” on page 5 of this Earnings Press Release for additional information.
(7)
Approximately 50% of straight-line rent revenue represents initial free rent on recently delivered and expected 2018 deliveries of new Class A properties from our development and redevelopment pipeline.

 
 
 
q218logo2.jpg
Earnings Call Information and About the Company
June 30, 2018
 
 


We will host a conference call on Tuesday, July 31, 2018, 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, 2018. To participate in this conference call, dial (877) 270-2148 or (412) 902-6510 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the Alexandria Real Estate Equities, Inc. call. 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 31, 2018. The replay number is (877) 344-7529 or (412) 317-0088, and the confirmation code is 10118275.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the second quarter ended June 30, 2018, is available in the “For Investors” section of our website at www.are.com or by following this link: http://www.are.com/fs/2018q2.pdf.

For any questions, please contact Joel S. Marcus, executive chairman and founder; Stephen A. Richardson, co-chief executive officer; Peter M. Moglia, co-chief executive officer and co-chief investment officer; Dean A. Shigenaga, co-president and chief financial officer; or Sara M. Kabakoff, assistant vice president – corporate communications, at (626) 578-0777.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office real estate investment trust (“REIT”) uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $18.8 billion and an asset base in North America of 32.0 million SF as of June 30, 2018. The asset base in North America includes 21.5 million RSF of operating properties and 3.5 million RSF of development and redevelopment of new Class A properties currently undergoing construction and pre-construction activities with target delivery dates ranging from 2018 through 2020. Additionally, the asset base in North America includes 7.0 million SF of intermediate-term and future development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science and technology campuses that provide its 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 and technology companies through its venture capital arm. 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 2018 earnings per share attributable to Alexandria’s common stockholders – diluted, 2018 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,” “projects,” “estimates,” “anticipates,” “goals,” “believes,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” 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, 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, 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 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™, LaunchLabs®, Alexandria Center®, Alexandria Technology Square®, and Alexandria Summit® are 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 Income
q218logo2.jpg
June 30, 2018
(In thousands, except per share amounts)
 
 

 
 
Three Months Ended
 
Six Months Ended
 
 
6/30/18

3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
6/30/18
 
6/30/17
Revenues:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Rental
 
$
250,635

 
$
244,485

 
$
228,025

 
$
216,021

 
$
211,942

 
$
495,120

 
$
419,135

Tenant recoveries
 
72,159

 
73,170

 
70,270

 
67,058

 
60,470

 
145,329

 
121,816

Other income
 
2,240

 
2,484

 
496

 
2,291

 
647

 
4,724

 
2,985

Total revenues
 
325,034

 
320,139

 
298,791

 
285,370

 
273,059

 
645,173


543,936

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental operations
 
91,908

 
91,771

 
88,073

 
83,469

 
76,980

 
183,679

 
154,067

General and administrative
 
22,939

 
22,421

 
18,910

 
17,636

 
19,234

 
45,360

 
38,463

Interest
 
38,097

 
36,915

 
36,082

 
31,031

 
31,748

 
75,012

 
61,532

Depreciation and amortization
 
118,852

 
114,219

 
107,714

 
107,788

 
104,098

 
233,071

 
201,281

Impairment of real estate
 
6,311

 
—

 
—

 
—

 
203

 
6,311

 
203

Loss on early extinguishment of debt
 
—

 
—

 
2,781

 
—

 
—

 
—

 
670

Total expenses
 
278,107

 
265,326

 
253,560

 
239,924

 
232,263

 
543,433

 
456,216

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in earnings of unconsolidated real estate joint ventures
 
1,090

 
1,144

 
376

 
14,100

 
589

 
2,234

 
950

Investment income(1)
 
12,530

 
85,561

 
—

 
—

 
—

 
98,091

 
—

Gain on sales of real estate – rental properties
 
—

 
—

 
—

 
—

 
—

 
—

 
270

Gain on sales of real estate – land parcels
 
—

 
—

 
—

 
—

 
111

 
—

 
111

Net income
 
60,547

 
141,518

 
45,607

 
59,546

 
41,496

 
202,065

 
89,051

Net income attributable to noncontrolling interests
 
(5,817
)
 
(5,888
)
 
(6,219
)
 
(5,773
)
 
(7,275
)
 
(11,705
)
 
(13,119
)
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders
 
54,730

 
135,630

 
39,388

 
53,773

 
34,221

 
190,360

 
75,932

Dividends on preferred stock
 
(1,302
)
 
(1,302
)
 
(1,302
)
 
(1,302
)
 
(1,278
)
 
(2,604
)
 
(5,062
)
Preferred stock redemption charge
 
—

 
—

 
—

 
—

 
—

 
—

 
(11,279
)
Net income attributable to unvested restricted stock awards
 
(1,412
)
 
(1,941
)
 
(1,255
)
 
(1,198
)
 
(1,313
)
 
(2,765
)
 
(2,300
)
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders
 
$
52,016

 
$
132,387

 
$
36,831

 
$
51,273

 
$
31,630

 
$
184,991

 
$
57,291

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.51

 
$
1.33

 
$
0.39

 
$
0.55

 
$
0.35

 
$
1.83

 
$
0.64

Diluted
 
$
0.51

 
$
1.32

 
$
0.38

 
$
0.55

 
$
0.35

 
$
1.83

 
$
0.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
101,881

 
99,855

 
95,138

 
92,598

 
90,215

 
100,878

 
89,186

Diluted
 
102,236

 
100,125

 
95,914

 
93,296

 
90,745

 
101,191

 
89,479

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per share of common stock
 
$
0.93

 
$
0.90

 
$
0.90

 
$
0.86

 
$
0.86

 
$
1.83

 
$
1.69


(1)
See “Investments” on page 46 of our Supplemental Information for additional information.

 
 
Consolidated Balance Sheets
q218logo2.jpg
June 30, 2018
(In thousands)
 
 

 
 
6/30/18
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
Assets
 
 
 
 

 
 

 
 

 
 

Investments in real estate
 
$
11,190,771

 
$
10,671,227

 
$
10,298,019

 
$
10,046,521

 
$
9,819,413

Investments in unconsolidated real estate joint ventures
 
192,972

 
169,865

 
110,618

 
33,692

 
58,083

Cash and cash equivalents
 
287,029

 
221,645

 
254,381

 
118,562

 
124,877

Restricted cash
 
34,812

 
37,337

 
22,805

 
27,713

 
20,002

Tenant receivables
 
8,704

 
11,258

 
10,262

 
9,899

 
8,393

Deferred rent
 
490,428

 
467,112

 
434,731

 
402,353

 
383,062

Deferred leasing costs
 
232,964

 
226,803

 
221,430

 
208,265

 
201,908

Investments
 
790,753

 
724,310

 
523,254

 
485,262

 
424,920

Other assets
 
333,757

 
291,639

 
228,453

 
213,056

 
205,009

Total assets
 
$
13,562,190

 
$
12,821,196

 
$
12,103,953

 
$
11,545,323

 
$
11,245,667

 
 
 
 
 
 
 
 
 
 
 
Liabilities, Noncontrolling Interests, and Equity
 
 
 
 
 
 
 
 
 
 
Secured notes payable
 
$
776,260

 
$
775,689

 
$
771,061

 
$
1,153,890

 
$
1,127,348

Unsecured senior notes payable
 
4,289,521

 
3,396,912

 
3,395,804

 
2,801,290

 
2,800,398

Unsecured senior line of credit
 
—

 
490,000

 
50,000

 
314,000

 
300,000

Unsecured senior bank term loans
 
548,324

 
548,197

 
547,942

 
547,860

 
547,639

Accounts payable, accrued expenses, and tenant security deposits
 
849,274

 
783,986

 
763,832

 
740,070

 
734,189

Dividends payable
 
98,676

 
93,065

 
92,145

 
83,402

 
81,602

Total liabilities
 
6,562,055

 
6,087,849

 
5,620,784

 
5,640,512

 
5,591,176

 
 
 
 
 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
 
10,861

 
10,212

 
11,509

 
11,418

 
11,410

 
 
 
 
 
 
 
 
 
 
 
Alexandria Real Estate Equities, Inc.’s stockholders’ equity:
 
 
 
 
 
 
 
 
 
 
7.00% Series D cumulative convertible preferred stock
 
74,386

 
74,386

 
74,386

 
74,386

 
74,386

Common stock
 
1,033

 
1,007

 
998

 
943

 
921

Additional paid-in capital
 
6,387,527

 
6,117,976

 
5,824,258

 
5,287,777

 
5,059,180

Accumulated other comprehensive (loss) income
 
(2,485
)
 
1,228

 
50,024

 
43,864

 
22,677

Alexandria Real Estate Equities, Inc.’s stockholders’ equity
 
6,460,461

 
6,194,597

 
5,949,666

 
5,406,970

 
5,157,164

Noncontrolling interests
 
528,813

 
528,538

 
521,994

 
486,423

 
485,917

Total equity
 
6,989,274

 
6,723,135

 
6,471,660

 
5,893,393

 
5,643,081

Total liabilities, noncontrolling interests, and equity
 
$
13,562,190

 
$
12,821,196

 
$
12,103,953

 
$
11,545,323

 
$
11,245,667




 
 
Funds From Operations and Funds From Operations per Share
q218logo2.jpg
June 30, 2018
(In thousands)
 
 

The following table presents a reconciliation of net income attributable to Alexandria’s common stockholders, the most directly comparable financial measure presented in accordance with 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
 
 
6/30/18
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
6/30/18
 
6/30/17
Net income attributable to Alexandria’s common stockholders
 
$
52,016

 
$
132,387

 
$
36,831

 
$
51,273

 
$
31,630

 
$
184,991

 
$
57,291

Depreciation and amortization
 
118,852

 
114,219

 
107,714

 
107,788

 
104,098

 
233,071

 
201,281

Noncontrolling share of depreciation and amortization from consolidated real estate JVs
 
(3,914
)
 
(3,867
)
 
(3,777
)
 
(3,608
)
 
(3,735
)
 
(7,781
)
 
(7,377
)
Our share of depreciation and amortization from unconsolidated real estate JVs
 
807

 
644

 
432

 
383

 
324

 
1,451

 
736

Gain on sales of real estate – rental properties
 
—

 
—

 
—

 
—

 
—

 
—

 
(270
)
Our share of gain on sales of real estate from unconsolidated real estate JVs
 
—

 
—

 
—

 
(14,106
)
 
—

 
—

 
—

Gain on sales of real estate – land parcels
 
—

 
—

 
—

 
—

 
(111
)
 
—

 
(111
)
Impairment of real estate – rental properties
 
—

 
—

 
—

 
—

 
203

 
—

 
203

Allocation to unvested restricted stock awards
 
(1,042
)
 
(1,548
)
 
(734
)
 
(957
)
 
(685
)
 
(3,212
)
 
(1,245
)
Dilutive effect of assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 
—

 
1,302

 
—

 
—

 
—

 
2,604

 
—

Funds from operations attributable to Alexandria’s common stockholders – diluted(2)
 
166,719

 
243,137

 
140,466

 
140,773

 
131,724

 
411,124

 
250,508

Unrealized gains on non-real estate investments(1)
 
(5,067
)
 
(72,229
)
 
—

 
—

 
—

 
(77,296
)
 
—

Realized gain on non-real estate investment
 
—

 
(8,252
)
 
—

 
—

 
—

 
(8,252
)
 
—

Removal of dilutive effect of assumed conversion of 7.00% Series D cumulative convertible preferred stock included in funds from operations above(1)
 
—

 
(1,302
)
 
—

 
—

 
—

 
(2,604
)
 
—

Impairment of land parcels and non-real estate investments
 
6,311

(3) 
—

 
3,805

 
—

 
4,491

 
6,311

(3) 
4,491

Loss on early extinguishment of debt
 
—

 
—

 
2,781

 
—

 
—

 
—

 
670

Preferred stock redemption charge
 
—

 
—

 
—

 
—

 
—

 
—

 
11,279

Allocation to unvested restricted stock awards
 
(18
)
 
1,125

 
(94
)
 
—

 
(58
)
 
1,140

 
(209
)
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
167,945

 
$
162,479

 
$
146,958

 
$
140,773

 
$
136,157

 
$
330,423

 
$
266,739


(1)
On January 1, 2018, we adopted an ASU that requires changes in the fair value of our non-real estate investments to be recognized in net income. During the three months ended March 31, 2018, we recognized unrealized gains of $72.2 million. These unrealized gains are included in net income and funds from operations as defined by Nareit (“Nareit FFO”). For net income per share purposes, our Series D preferred stock was not assumed to be converted for the three months ended March 31, 2018, as its assumed conversion was anti-dilutive. However, for Nareit FFO per share, we assumed the conversion of the Series D preferred stock because its effect was dilutive on a per share basis.
We compute funds from operations, as adjusted, excluding unrealized gains or losses on non-real estate investments. As a result, the assumed conversion of our Series D preferred stock was reversed from our Nareit FFO calculation, as its impact was anti-dilutive on a per share basis for our funds from operations, as adjusted.
See “Investments” on page 46 of our Supplemental Information for additional information. See definitions for “Funds from operations and funds from operations, as adjusted, attributable to Alexandria’s common stockholders” and “Weighted-Average Shares of Common Stock Outstanding – Diluted” on pages 53 and 57, respectively, of our Supplemental Information for additional information.
(2)
Calculated in accordance with standards established by the Advisory Board of Governors of the National Association of Real Estate Investment Trusts (the “Nareit Board of Governors”) in its April 2002 White Paper and related implementation guidance.
(3)
Impairment of real estate recognized during the three months ended June 30, 2018, related to one land parcel located in Northern Virginia that was subsequently sold in July 2018 with no gain or loss.

 
 
Funds From Operations and Funds From Operations per Share (continued)
q218logo2.jpg
June 30, 2018
(In thousands, except per share amounts)
 
 


The following table presents a reconciliation of net income 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
 
 
6/30/18
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
6/30/18
 
6/30/17
Net income per share attributable to Alexandria’s common stockholders
 
$
0.51

 
$
1.32

 
$
0.38

 
$
0.55

 
$
0.35

 
$
1.83

 
$
0.64

Depreciation and amortization 
 
1.13

 
1.08

 
1.08

 
1.11

 
1.10

 
2.23

 
2.16

Our share of gain on sales of real estate from unconsolidated real estate JVs
 
—

 
—

 
—

 
(0.15
)
 
—

 
—

 
—

Allocation to unvested restricted stock awards
 
(0.01
)
 
—

 
—

 
—

 
—

 
(0.03
)
 
—

Dilutive effect of assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 
—

 
0.01

 
—

 
—

 
—

 
—

 
—

Funds from operations per share attributable to Alexandria’s common stockholders – diluted(2)
 
1.63

 
2.41

 
1.46

 
1.51

 
1.45

 
4.03


2.80

Unrealized gains on non-real estate investments(1)
 
(0.05
)
 
(0.70
)
 
—

 
—

 
—

 
(0.76
)
 
—

Realized gain on non-real estate investment
 
—

 
(0.08
)
 
—

 
—

 
—

 
(0.08
)
 
—

Removal of dilutive effect of assumed conversion of 7.00% Series D cumulative convertible preferred stock included in funds from operations above(1)
 
—

 
(0.01
)
 
—

 
—

 
—

 
—

 
—

Impairment of land parcels and non-real estate investments
 
0.06

(3) 
—

 
0.04

 
—

 
0.05

 
0.06

(3) 
0.05

Loss on early extinguishment of debt
 
—

 
—

 
0.03

 
—

 
—

 
—

 
0.01

Preferred stock redemption charge
 
—

 
—

 
—

 
—

 
—

 
—

 
0.12

Allocation to unvested restricted stock awards
 
—

 
—

 
—

 
—

 
—

 
0.02

 
—

Funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
1.64

 
$
1.62

 
$
1.53

 
$
1.51

 
$
1.50

 
$
3.27

 
$
2.98

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding(1) for calculations of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share – diluted and funds from operations – diluted, as adjusted, per share
 
102,236

 
100,125

 
95,914

 
93,296

 
90,745

 
101,191

 
89,479

Funds from operations – diluted, per share
 
102,236

 
100,866

 
95,914

 
93,296

 
90,745

 
101,933

 
89,479


(1)
See footnote 1 on prior page for additional information.
(2)
Calculated in accordance with standards established by the Nareit Board of Governors in its April 2002 White Paper and related implementation guidance.
(3)
See footnote 3 on prior page for additional information.











SUPPLEMENTAL
INFORMATION








 
 
 
q218logo2.jpg
Company Profile
June 30, 2018
 
 

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office REIT uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $18.8 billion and an asset base in North America of 32.0 million SF as of June 30, 2018. The asset base in North America includes 21.5 million RSF of operating properties and 3.5 million RSF of development and redevelopment of new Class A properties currently undergoing construction and pre-construction activities with target delivery dates ranging from 2018 through 2020. Additionally, the asset base in North America includes 7.0 million SF of intermediate-term and future development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science 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 and technology companies through our venture capital arm. 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.

Tenant base

Alexandria is known for our high-quality and diverse tenant base, with 55% of our annual rental revenue generated from companies with an investment-grade credit rating, or a 12-month average reported market capitalization or private valuation greater than $10 billion. The quality, diversity, breadth, and depth of our significant relationships with our tenants provide Alexandria with high-quality and stable cash flows. Alexandria’s underwriting team and long-term industry relationships positively distinguish us from all other publicly traded REITs and real estate companies.

Executive and senior management team

Alexandria’s executive and senior management team has unique experience and expertise in creating highly dynamic and collaborative campuses in key urban life science and technology cluster locations that inspire innovation. From the development of high-quality, sustainable real estate, to the ongoing cultivation of collaborative environments with unique amenities and events, the Alexandria team has a first-in-class reputation of excellence in our niche. Alexandria’s highly experienced management team also includes regional market directors with leading reputations and longstanding relationships within the life science and technology communities in their respective urban innovation clusters. We believe that our expertise, experience, reputation, and key relationships in the real estate, life science, and technology industries provide Alexandria significant competitive advantages in attracting new business opportunities.
 
Alexandria’s executive and senior management team consists of 37 individuals, averaging 23 years of real estate experience, including 12 years with Alexandria. Our executive management team alone averages 18 years of experience with Alexandria.

EXECUTIVE MANAGEMENT TEAM
Joel S. Marcus
Executive Chairman & Founder
Stephen A. Richardson
Co-Chief Executive Officer
Peter M. Moglia
Co-Chief Executive Officer & Co-Chief Investment Officer
Dean A. Shigenaga
Co-President & Chief Financial Officer
Thomas J. Andrews
Co-President & Regional Market Director – Greater Boston
Daniel J. Ryan
Co-Chief Investment Officer & Regional Market Director – San Diego
Jennifer J. Banks
Co-Chief Operating Officer, General Counsel & Corporate Secretary
Lawrence J. Diamond
Co-Chief Operating Officer & Regional Market Director – Maryland
Vincent R. Ciruzzi
Chief Development Officer
John H. Cunningham
Executive Vice President & Regional Market Director – New York City

 
 
 
q218logo2.jpg
Investor Information
June 30, 2018
 
 

Corporate Headquarters
 
New York Stock Exchange Trading Symbols
 
Information Requests
385 East Colorado Boulevard, Suite 299
 
Common stock: ARE
 
Phone:
(626) 578-0777
Pasadena, California 91101
 
7.00% Series D preferred stock: ARE PRD
 
Email:
corporateinformation@are.com
 
 
 
 
Web:
www.are.com
 
 
 
 
 
 
Equity Research Coverage
Alexandria is currently covered by the following research analysts. This list may be incomplete and is subject to change as firms initiate or discontinue coverage of our company. Please note that any opinions, estimates, or forecasts regarding our historical or predicted performance made by these analysts are theirs alone and do not represent opinions, estimates, or forecasts of Alexandria or our management. Alexandria does not by its reference or distribution of the information below imply our endorsement of or concurrence with any opinions, estimates, or forecasts of these analysts. Interested persons may obtain copies of analysts’ reports on their own as we do not distribute these reports. Several of these firms may, from time to time, own our stock and/or hold other long or short positions in our stock and may provide compensated services to us.
Bank of America Merrill Lynch
 
Citigroup Global Markets Inc.
 
J.P. Morgan Securities LLC
 
RBC Capital Markets
Jamie Feldman / Jeffrey Spector
 
Michael Bilerman / Emmanuel Korchman
 
Anthony Paolone / Patrice Chen
 
Michael Carroll / Brian Hawthorne
(646) 855-5808 / (646) 855-1363
 
(212) 816-1383 / (212) 816-1382
 
(212) 622-6682 / (212) 622-1893
 
(440) 715-2649 / (440) 715-2653
 
 
 
 
 
 
 
Barclays Capital Inc.
 
Evercore ISI
 
Mitsubishi UFJ Securities (USA), Inc.
 
Robert W. Baird & Co. Incorporated
Ross Smotrich / Trevor Young
 
Sheila McGrath / Wendy Ma
 
Karin Ford / Ryan Cybart
 
David Rodgers / Richard Schiller
(212) 526-2306 / (212) 526-3098
 
(212) 497-0882 / (212) 497-0870
 
(212) 405-7249 / (212) 405-6591
 
(216) 737-7341 / (312) 609-5485
 
 
 
 
 
 
 
BTIG, LLC
 
Green Street Advisors, Inc.
 
Mizuho Securities USA Inc.
 
UBS Securities LLC
Tom Catherwood / James Sullivan
 
Jed Reagan / Daniel Ismail
 
Richard Anderson / Zachary Silverberg
 
Frank Lee
(212) 738-6140 / (212) 738-6139
 
(949) 640-8780 / (949) 640-8780
 
(212) 205-8445 / (212) 205-7855
 
(415) 352-5679
 
 
 
 
 
 
 
CFRA
 
JMP Securities – JMP Group, Inc.
 
 
 
 
Kenneth Leon
 
Peter Martin
 
 
 
 
(212) 438-4638
 
(415) 835-8904
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Income Coverage
 
Rating Agencies
J.P. Morgan Securities LLC
 
Wells Fargo & Company
 
Moody’s Investors Service
 
S&P Global Ratings
Mark Streeter / Jonathan Rau
 
Thierry Perrein / Kevin McClure
 
Thuy Nguyen / Reed Valutas
 
Fernanda Hernandez / Anita Ogbara
(212) 834-5086 / (212) 834-5237
 
(704) 410-3262 / (704) 410-3252
 
(212) 553-7168 / (212) 553-4169
 
(212) 438-1347 / (212) 438-5077
 
 
 
 
 
 
 

 
 
 
q218logo2.jpg
High-Quality, Diverse, and Innovative Tenants
June 30, 2018
 
 



Cash Flows from High-Quality, Diverse, and Innovative Tenants

Investment-Grade or Large Cap Tenants
 
Tenant Mix
 
 
 
 
q218clienttenantmix4s.jpg
 
 
 
 
 
 
 
 
55%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
of ARE’s Total
 
Annual Rental Revenue(1)
 
 
 
 
 
 
 
 
 
 
 
A REIT Industry-Leading Tenant Roster
 
Percentage of ARE’s Annual Rental Revenue(1)







(1)
Represents annual rental revenue in effect as of June 30, 2018.
(2)
Leading Technology Entities are technology companies with an investment-grade credit rating, or a 12-month average reported market capitalization or private valuation greater than $10 billion.

 
 
 
q218logo2.jpg
Class A Properties in AAA Locations
June 30, 2018
 
 


High-Quality Cash Flows from Class A Properties in AAA Locations

Class A Properties in
AAA Locations
 
AAA Locations
 
 
 
 
q218realestate4s.jpg
 
 
 
 
 
 
 
 
78%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
of ARE’s
 
Annual Rental Revenue(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of ARE’s Annual Rental Revenue(1)








(1)
Represents annual rental revenue in effect as of June 30, 2018.

 
 
 
q218logo2.jpg
Occupancy
June 30, 2018
 
 



Solid Demand for Class A Properties in AAA Locations
Drives Solid Occupancy

Solid Historical Occupancy(1)
 
Occupancy across Key Locations
 
 
 
 
q218occupancy4s.jpg
 
 
 
 
 
 
 
 
96%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Over 10 Years
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Occupancy of Operating Properties
 
 
as of June 30, 2018








(1)
Average occupancy of operating properties in North America as of each December 31 for the last 10 years and as of June 30, 2018.


 
 
Financial and Asset Base Highlights
q218logo2.jpg
June 30, 2018
(Dollars in thousands, except per share amounts)
 
 

 
 
Three Months Ended (unless stated otherwise)
 
 
6/30/18
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
Selected financial data from consolidated financial statements and related information
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA – quarter annualized
 
$
911,284

 
$
914,444

 
$
817,392

 
$
773,828

 
$
755,048

Adjusted EBITDA – trailing 12 months
 
$
854,237

 
$
815,178

 
$
767,508

 
$
728,869

 
$
689,079

Adjusted EBITDA margins
 
69%

 
69%

 
68%

 
68%

 
68%

Operating margins
 
72%

 
71%

 
71%

 
71%

 
72%

 
 
 
 
 
 
 
 
 
 
 
Net debt at end of period
 
$
5,326,039

 
$
4,979,254

 
$
4,516,672

 
$
4,698,568

 
$
4,660,216

Net debt to Adjusted EBITDA – quarter annualized
 
5.8x

 
5.4x

 
5.5x

 
6.1x

 
6.2x

Net debt to Adjusted EBITDA – trailing 12 months
 
6.2x

 
6.1x

 
5.9x

 
6.4x

 
6.8x

Net debt and preferred stock to Adjusted EBITDA – quarter annualized
 
5.9x

 
5.5x

 
5.6x

 
6.2x

 
6.3x

Net debt and preferred stock to Adjusted EBITDA – trailing 12 months
 
6.3x

 
6.2x

 
6.0x

 
6.5x

 
6.9x

 
 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio – quarter annualized
 
4.3x

 
4.6x

 
4.2x

 
4.1x

 
4.1x

Fixed-charge coverage ratio – trailing 12 months
 
4.3x

 
4.3x

 
4.1x

 
4.0x

 
3.9x

Unencumbered net operating income as a percentage of total net operating income
 
88%

 
87%

 
86%

 
81%

 
81%

 
 
 
 
 
 
 
 
 
 
 
Closing stock price at end of period
 
$
126.17

 
$
124.89

 
$
130.59

 
$
118.97

 
$
120.47

Common shares outstanding (in thousands) at end of period
 
103,346

 
100,696

 
99,784

 
94,325

 
92,098

Total equity capitalization at end of period
 
$
13,142,725

 
$
12,682,876

 
$
13,140,843

 
$
11,328,163

 
$
11,202,668

Total market capitalization at end of period
 
$
18,756,830

 
$
17,893,674

 
$
17,905,650

 
$
16,145,203

 
$
15,978,053

 
 
 
 
 
 
 
 
 
 
 
Dividend per share – quarter/annualized
 
$0.93/$3.72

 
$0.90/$3.60

 
$0.90/$3.60

 
$0.86/$3.44

 
$0.86/$3.44

Dividend payout ratio for the quarter
 
57%

 
56%

 
61%

 
58%

 
58%

Dividend yield – annualized
 
2.9%

 
2.9%

 
2.8%

 
2.9%

 
2.9%

 
 
 
 
 
 
 
 
 
 
 
General and administrative expenses as a percentage of total assets – trailing 12 months
 
0.6%

 
0.6%

 
0.6%

 
0.6%

 
0.6%

General and administrative expenses as a percentage of total revenues – trailing 12 months
 
6.7%

 
6.6%

 
6.6%

 
6.8%

 
7.0%

 
 
 
 
 
 
 
 
 
 
 
Capitalized interest
 
$
15,527

 
$
13,360

 
$
12,897

 
$
17,092

 
$
15,069

Weighted-average interest rate for capitalization of interest during the period
 
3.92%

 
3.91%

 
3.89%

 
3.96%

 
3.98%

 
 
 
 
 
 
 
 
 
 
 
 

 
 
Financial and Asset Base Highlights (continued)
q218logo2.jpg
June 30, 2018
(Dollars in thousands, except annual rental revenue per occupied RSF amounts)
 
 

 
 
Three Months Ended (unless stated otherwise)
 
 
6/30/18
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
Amounts included in funds from operations and non-revenue-enhancing capital expenditures
 
 
 
 
 
 
 
 
 
 
Straight-line rent revenue
 
$
23,259

 
$
32,631

 
$
33,281

 
$
20,865

 
$
17,905

Amortization of acquired below-market leases
 
$
5,198

 
$
6,170

 
$
4,147

 
$
4,545

 
$
5,004

Straight-line rent expense on ground leases
 
$
252

 
$
240

 
$
205

 
$
206

 
$
201

Stock compensation expense
 
$
7,975

 
$
7,248

 
$
6,961

 
$
7,893

 
$
5,504

Amortization of loan fees
 
$
2,593

 
$
2,543

 
$
2,571

 
$
2,840

 
$
2,843

Amortization of debt premiums
 
$
606

 
$
575

 
$
639

 
$
652

 
$
625

Non-revenue-enhancing capital expenditures:
 
 
 
 
 
 
 
 
 
 
Building improvements
 
$
2,827

 
$
2,625

 
$
2,469

 
$
2,453

 
$
1,840

Tenant improvements and leasing commissions
 
$
10,686

 
$
2,836

 
$
9,578

 
$
9,976

 
$
9,389

 
 
 
 
 
 
 
 
 
 
 
Operating statistics and related information (at end of period)
 
 
 
 
 
 
 
 
 
 
Number of properties – North America
 
234

 
222

 
213

 
206

 
202

RSF (including development and redevelopment projects under construction) – North America
 
24,007,981

 
23,066,089

 
21,981,133

 
20,642,042

 
20,567,473

Total square feet – North America
 
31,976,194

 
30,240,017

 
29,563,221

 
28,583,747

 
28,351,518

Annual rental revenue per occupied RSF – North America
 
$
48.22

 
$
48.09

 
$
48.01

 
$
47.19

 
$
46.55

Occupancy of operating properties – North America
 
97.1%

 
96.6%

 
96.8%

 
96.1%

 
95.7%

Occupancy of operating and redevelopment properties – North America
 
95.0%

 
94.3%

 
94.7%

 
93.9%

 
94.0%

Weighted average remaining lease term (in years)
 
8.6

 
8.7

 
8.9

 
8.8

 
8.8

 
 
 
 
 
 
 
 
 
 
 
Total leasing activity – RSF
 
985,996

 
1,481,164

 
1,379,699

 
786,925

 
1,081,777

Lease renewals and re-leasing of space – change in average new rental rates over expiring rates:
 
 
 
 
 
 
 
 
 
 
Rental rate increases
 
24.0%


16.3%

 
24.8%

 
24.2%

 
23.2%

Rental rate increases (cash basis)
 
12.8%

 
19.0%

 
10.4%

 
10.0%

 
9.4%

RSF (included in total leasing activity above)
 
727,265

 
234,548

 
593,622

 
448,472

 
604,142

 
 
 
 
 
 
 
 
 
 
 
Same property – percentage change over comparable quarter from prior year:
 
 
 
 
 
 
 
 
 
 
Net operating income increase
 
4.1%

 
4.0%

 
4.5%

 
2.2%

 
1.8%

Net operating income increase (cash basis)
 
6.3%

 
14.6%

 
12.5%

 
7.8%

 
7.0%

 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
q218logo2.jpg
Key Operating Metrics
June 30, 2018
 
 

Favorable Lease Structure(1)
 
Same Property Net Operating Income Growth
 
 
 
q218sameprop4sa.jpg
q218sameprop4sb.jpg
 
Stable cash flows
 
 
 
 
Percentage of triple
net leases
 
97%
 
 
Increasing cash flows
 
 
 
 
Percentage of leases containing
annual rent escalations
96%
 
 
Lower capex burden
 
 
 
 
Percentage of leases providing for the
recapture of capital expenditures
95%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Margins(2)
 
Rental Rate Growth:
Renewed/Re-Leased Space
 
 
 
 
 
 
 
 
 
q218rentalrate4sa.jpg
q218rentalrate4sb.jpg
 
Adjusted EBITDA
 
 
 
Operating
 
 
69%
 
 
 
72%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Percentages calculated based on RSF as of June 30, 2018.
(2)
Represents percentages for the three months ended June 30, 2018.


 
 
Same Property Performance
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 

Same Property Financial Data
 
2Q18
 
1H18
 
Same Property Statistical Data
 
2Q18
 
1H18
Percentage change over comparable period from prior year:
 
 
 
 
 
Number of same properties
 
187
 
186
Net operating income increase
 
4.1%
 
4.1%
 
Rentable square feet
 
17,585,507
 
17,353,037
Net operating income increase (cash basis)
 
6.3%
 
10.3%
 
Occupancy – current-period average
 
96.4%
 
96.4%
Operating margin
 
72%
 
72%
 
Occupancy – same-period prior-year average
 
95.8%
 
96.2%
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
2018
 
2017
 
$ Change
 
% Change
 
2018
 
2017
 
$ Change
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
$
205,719

 
$
197,769

 
$
7,950

 
4.0
%
 
$
408,894

 
$
392,684

 
$
16,210

 
4.1
%
 
Non-same properties
 
44,916

 
14,173

 
30,743

 
216.9

 
86,226

 
26,451

 
59,775

 
226.0

 
Total rental
 
250,635

 
211,942

 
38,693

 
18.3

 
495,120

 
419,135

 
75,985

 
18.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
64,253

 
58,999

 
5,254

 
8.9

 
129,485

 
119,119

 
10,366

 
8.7

 
Non-same properties
 
7,906

 
1,471

 
6,435

 
437.5

 
15,844

 
2,697

 
13,147

 
487.5

 
Total tenant recoveries
 
72,159

 
60,470

 
11,689

 
19.3

 
145,329

 
121,816

 
23,513

 
19.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
72

 
50

 
22

 
44.0

 
140

 
107

 
33

 
30.8

 
Non-same properties
 
2,168

 
597

 
1,571

 
263.1

 
4,584

 
2,878

 
1,706

 
59.3

 
Total other income
 
2,240

 
647

 
1,593

 
246.2

 
4,724

 
2,985

 
1,739

 
58.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
270,044

 
256,818

 
13,226

 
5.1

 
538,519

 
511,910

 
26,609

 
5.2

 
Non-same properties
 
54,990

 
16,241

 
38,749

 
238.6

 
106,654

 
32,026

 
74,628

 
233.0

 
Total revenues
 
325,034

 
273,059

 
51,975

 
19.0

 
645,173

 
543,936

 
101,237

 
18.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
75,989

 
70,356

 
5,633

 
8.0

 
153,155

 
141,790

 
11,365

 
8.0

 
Non-same properties
 
15,919

 
6,624

 
9,295

 
140.3

 
30,524

 
12,277

 
18,247

 
148.6

 
Total rental operations
 
91,908

 
76,980

 
14,928

 
19.4

 
183,679

 
154,067

 
29,612

 
19.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
194,055

 
186,462

 
7,593

 
4.1

 
385,364

 
370,120

 
15,244

 
4.1

 
Non-same properties
 
39,071

 
9,617

 
29,454

 
306.3

 
76,130

 
19,749

 
56,381

 
285.5

 
Net operating income
 
$
233,126

 
$
196,079

 
$
37,047

 
18.9
%
 
$
461,494

 
$
389,869

 
$
71,625

 
18.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating income – same properties
 
$
194,055

 
$
186,462

 
$
7,593

 
4.1
%
 
$
385,364

 
$
370,120

 
$
15,244

 
4.1
%
 
Straight-line rent revenue and amortization of acquired below-market leases
 
(16,751
)
 
(19,604
)
 
2,853

 
(14.6
)
 
(33,892
)
 
(51,596
)
 
17,704

 
(34.3
)
 
Net operating income – same properties (cash basis)
 
$
177,304

 
$
166,858

 
$
10,446

 
6.3
%
 
$
351,472

 
$
318,524

 
$
32,948

 
10.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

See definition for “Same Property Comparisons” on page 56 of this Supplemental Information for a reconciliation of same store properties to total properties.


 
 
Leasing Activity
q218logo2.jpg
June 30, 2018
(Dollars per RSF)
 
 

 
 
Three Months Ended
 
Six Months Ended
 
Year Ended
 
 
June 30, 2018
 
June 30, 2018
 
December 31, 2017
 
 
Including
Straight-Line Rent
 
Cash Basis
 
Including
Straight-Line Rent
 
Cash Basis
 
Including
Straight-Line Rent
 
Cash Basis
Leasing activity:
 
 
 
 
 
 
 
 
 
 
 
 
Renewed/re-leased space(1)
 
 
 
 
 
 

 
 

 
 
 
 
Rental rate changes
 
24.0%

 
12.8%

(2) 
21.5%

 
13.8%

(2) 
25.1%

 
12.7%

New rates
 
$
48.88

 
$
47.29

 
$
49.21

 
$
47.64

 
$
51.05

 
$
47.99

Expiring rates
 
$
39.43

 
$
41.92

 
$
40.49

 
$
41.85

 
$
40.80

 
$
42.60

Rentable square footage
 
727,265

 
 
 
961,813

 
 
 
2,525,099

 
 
Tenant improvements/leasing commissions
 
$
13.60

 
 
 
$
14.06

 
 
 
$
18.74

 
 
Weighted-average lease term
 
5.7 years

 
 
 
5.3 years

 
 
 
6.2 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Developed/redeveloped/previously vacant space leased
 
 
 
 
 
 
 
 
 
 
 
 
New rates
 
$
48.48

 
$
46.75

 
$
68.12

 
$
56.69

 
$
47.56

 
$
42.93

Rentable square footage
 
258,731

 
 
 
1,505,347

 
 
 
2,044,083

 
 
Tenant improvements/leasing commissions
 
$
20.72


 
 
$
12.82

 
 
 
$
9.83

 
 
Weighted-average lease term
 
6.0 years

 
 
 
13.7 years

 
 
 
10.1 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leasing activity summary (totals):
 
 
 
 
 
 
 
 
 
 
 
 
New rates
 
$
48.78

 
$
47.15

 
$
60.75

 
$
53.16

 
$
49.49

 
$
45.72

Rentable square footage
 
985,996

 
 
 
2,467,160

(3) 
 
 
4,569,182

 
 
Tenant improvements/leasing commissions
 
$
15.47

 
 
 
$
13.30

 
 
 
$
14.75

 
 
Weighted-average lease term
 
5.8 years

 
 
 
10.4 years

 
 
 
7.9 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease expirations:(1)
 
 
 
 
 
 
 
 
 
 
 
 
Expiring rates
 
$
39.73

 
$
42.00

 
$
40.87

 
$
42.69

 
$
39.99

 
$
41.71

Rentable square footage
 
786,580

 
 
 
1,326,613

 
 
 
2,919,259

 
 


Leasing activity includes 100% of results for each property in which we have an investment in North America.

(1)
Excludes 19 month-to-month leases aggregating 23,830 RSF and 25 month-to-month leases aggregating 37,006 RSF as of June 30, 2018 and December 31, 2017, respectively.
(2)
Includes rental rate increases related to the early re-leasing and re-tenanting of space subject to significantly below-market leases at our Alexandria Center® at One Kendall Square campus in our Cambridge submarket. Since our acquisition of the campus in 4Q16, we have re-leased and renewed approximately 280,000 RSF of below-market space, or three times the volume we initially forecasted to be executed through 2Q18, at rental rate (cash basis) increases of approximately 26%. In addition, as of 2Q18, there was approximately 78,586 RSF of temporary vacancy at the campus of which 68% is committed under a lease, in lease negotiations, or identified as the location for our Alexandria Launchlabs®.
(3)
During the six months ended June 30, 2018, we granted tenant concessions/free rent averaging 2.0 months with respect to the 2,467,160 RSF leased. Approximately 61% of the leases executed during the six months ended June 30, 2018, did not include concessions for free rent.

 
 
 
q218logo2.jpg
Contractual Lease Expirations
June 30, 2018
 
 

Year
 
Number of Leases
 
RSF
 
Percentage of
Occupied RSF
 
Annual Rental Revenue
(per RSF)(1)
 
Percentage of Total
Annual Rental Revenue
 
 
2018
(2)
 
 
40

 
 
 
617,160

 
 
 
3.0
%
 
 
 
$
47.21

 
 
 
2.9
%
 
 
 
2019
 
 
 
92

 
 
 
1,307,904

 
 
 
6.3
%
 
 
 
$
40.83

 
 
 
5.4
%
 
 
 
2020
 
 
 
114

 
 
 
1,873,964

 
 
 
9.0
%
 
 
 
$
37.61

 
 
 
7.1
%
 
 
 
2021
 
 
 
96

 
 
 
1,731,707

 
 
 
8.3
%
 
 
 
$
41.09

 
 
 
7.2
%
 
 
 
2022
 
 
 
91

 
 
 
1,605,142

 
 
 
7.7
%
 
 
 
$
44.45

 
 
 
7.2
%
 
 
 
2023
 
 
 
70

 
 
 
2,081,217

 
 
 
10.0
%
 
 
 
$
42.75

 
 
 
9.0
%
 
 
 
2024
 
 
 
36

 
 
 
1,608,601

 
 
 
7.7
%
 
 
 
$
47.66

 
 
 
7.7
%
 
 
 
2025
 
 
 
33

 
 
 
1,096,663

 
 
 
5.3
%
 
 
 
$
48.66

 
 
 
5.4
%
 
 
 
2026
 
 
 
21

 
 
 
841,214

 
 
 
4.0
%
 
 
 
$
44.66

 
 
 
3.8
%
 
 
 
2027
 
 
 
26

 
 
 
1,968,087

 
 
 
9.4
%
 
 
 
$
44.16

 
 
 
8.8
%
 
 
Thereafter
 
 
54

 
 
 
6,152,830

 
 
 
29.3
%
 
 
 
$
57.00

 
 
 
35.5
%
 
 

Market
 
2018 Contractual Lease Expirations
 
Annual Rental Revenue
(per RSF)(1)
 
2019 Contractual Lease Expirations

Annual Rental Revenue
(per RSF)(1)
 
 
Leased
 
Negotiating/
Anticipating
 
Targeted for Redevelopment
 
Remaining
Expiring Leases
 
Total(2)
 
 
Leased

Negotiating/
Anticipating

Targeted for Redevelopment

Remaining
Expiring Leases
 
Total

 
 
 
 
 
 
 
 



 

 
Greater Boston
 
12,839

 
57,110

 
—

 
 
23,361

 
 
93,310

 
$
61.62

 
92,800


4,321


—

 

249,209


 
346,330


$
51.14

 
San Francisco
 
—

 
3,412

 
126,971

(3) 
 
9,122

 
 
139,505

 
48.77

 
15,669


4,111


—

 

198,784


 
218,564


42.12

 
New York City
 
11,790

 
24,443

 
—

 
 
35,985

 
 
72,218

 
108.87

 
—


—


—

 

7,900


 
7,900


114.95

 
San Diego
 
—

 
17,767

 
44,034

(4) 
 
122,641

 

184,442

 
32.30

 
72,181


—


—

 
 
202,302

 
 
274,483


33.08

 
Seattle
 
—

 
—

 
—

 
 
—

 
 
—

 
—

 
106,003


75,545


—

 

42,137


 
223,685


43.88

 
Maryland
 
—

 
2,618

 
—

 
 
19,464

 
 
22,082

 
15.70

 
—


60,710


—

 

72,606


 
133,316


28.25

 
Research Triangle Park
 
—

 
23,566

 
—

 
 
15,214

 
 
38,780

 
23.45

 
—


—


—

 

44,448


 
44,448


21.33

 
Canada
 
31,006

 
—

 
—

 
 
23,959

 
 
54,965

 
19.75

 
—

 
—

 
—

 
 
—

 
 
—

 
—

 
Non-cluster markets
 
—

 
7,721

 
—

 
 
4,137

 
 
11,858

 
26.43

 
—


—


—

 

59,178


 
59,178


33.34

 
Total
 
55,635

 
136,637

 
171,005

 
 
253,883

 
 
617,160

 
$
47.21

 
286,653


144,687


—

 

876,564


 
1,307,904


$
40.83

 
Percentage of expiring leases
 
9
%
 
22
%
 
28
%
 
 
41
%
 
 
100
%
 
 
 
22
%
 
11
%
 
—
%
 
 
67
%

 
100
%


 
 

(1)
Represents amounts in effect as of June 30, 2018.
(2)
Excludes 19 month-to-month leases aggregating 23,830 RSF as of June 30, 2018.
(3)
Relates to 126,971 RSF of office space targeted for redevelopment into office/laboratory space upon expiration of the existing lease at the end of the third quarter of 2018, at 681 Gateway Boulevard in our South San Francisco submarket, of which 60,963 RSF, or 48%, is pre-leased to another tenant. Concurrent with our redevelopment, we anticipate expanding 681 Gateway Boulevard by an additional 15,000 RSF to 30,000 RSF and expect initial occupancy in 2019.
(4)
Relates to 44,034 RSF at 4110 Campus Point Court in our University Town Center submarket, a property that was acquired during the fourth quarter of 2017.

 
 
Top 20 Tenants
q218logo2.jpg
June 30, 2018
(Dollars in thousands, except market cap/private valuation amounts)
 
 

83% of Top 20 Annual Rental Revenue from Investment-Grade or Large Cap Tenants(1) 

 
 
Tenant
 
Remaining Lease Term in Years(1)
 
Aggregate
RSF
 
Annual Rental Revenue(1)
 
Percentage of Aggregate Annual Rental Revenue(1)
 
Investment-Grade
Credit Ratings
 
Market Cap(2)
(in billions)
 
Private Valuation(2)(3)
(in billions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Moody’s
 
S&P
 
 
1
 
Illumina, Inc.
 
 
12.1

 
 
 
891,495

 
 
 
$
34,876

 
 
3.5
%
 
—
 
BBB
 
$
32.4

 
N/A

2
 
Takeda Pharmaceutical Company Ltd.
 
 
11.8

 
 
 
386,111

 
 
 
30,614

 
 
3.1

 
A2
 
A-
 
$
39.7

 
N/A

3
 
Bristol-Myers Squibb Company
 
 
9.6

 
 
 
475,661

 
 
 
30,559

 
 
3.1

 
A2
 
A+
 
$
98.0

 
N/A

4
 
Sanofi
 
 
9.6

 
 
 
494,693

 
 
 
29,787

 
 
3.0

 
A1
 
AA
 
$
110.4

 
N/A

5
 
Eli Lilly and Company
 
 
11.4

 
 
 
467,521

 
 
 
29,203

 
 
2.9

 
A2
 
AA-
 
$
91.0

 
N/A

6
 
Celgene Corporation
 
 
7.9

 
 
 
614,082

 
 
 
29,183

 
 
2.9

 
Baa2
 
BBB+
 
$
84.2

 
N/A

7
 
Novartis AG
 
 
8.6

 
 
 
361,180

 
 
 
27,732

 
 
2.8

 
Aa3
 
AA-
 
$
191.2

 
N/A

8
 
Uber Technologies, Inc.
 
 
74.4

(4) 
 
 
422,980

 
 
 
22,173

 
 
2.2

 
—
 
—
 
N/A

 
$
67.1

9
 
New York University
 
 
12.2

 
 
 
209,224

 
 
 
20,718

 
 
2.1

 
Aa2
 
AA-
 
 N/A

 
N/A

10
 
bluebird bio, Inc.
 
 
8.6

 
 
 
262,261

 
 
 
20,095

 
 
2.0

 
—
 
—
 
$
7.2

 
N/A

11
 
Moderna Therapeutics, Inc.
 
 
10.4

 
 
 
356,975

 
 
 
19,857

 
 
2.0

 
—
 
—
 
 N/A

 
$
7.9

12
 
Stripe, Inc.
 
 
9.3

 
 
 
295,333

 
 
 
17,822

 
 
1.8

 
—
 
—
 
N/A

 
$
9.2

13
 
Roche
 
 
2.8

 
 
 
343,861

 
 
 
17,597

 
 
1.8

 
Aa3
 
AA
 
$
207.2

 
N/A

14
 
Amgen Inc.
 
 
5.8

 
 
 
407,369

 
 
 
16,838

 
 
1.7

 
Baa1
 
A
 
$
124.8

 
N/A

15
 
Massachusetts Institute of Technology
 
 
7.0

 
 
 
256,126

 
 
 
16,729

 
 
1.7

 
Aaa
 
AAA
 
 N/A

 
N/A

16
 
United States Government
 
 
7.1

 
 
 
264,358

 
 
 
15,073

 
 
1.5

 
Aaa
 
AA+
 
 N/A

 
N/A

17
 
Facebook, Inc.
 
 
11.6

 
 
 
382,883

 
 
 
14,588

 
 
1.5

 
—
 
—
 
$
494.7

 
N/A

18
 
FibroGen, Inc.
 
 
5.4

 
 
 
234,249

 
 
 
14,198

 
 
1.4

 
—
 
—
 
$
3.9

 
N/A

19
 
Biogen Inc.
 
 
10.3

 
 
 
305,212

 
 
 
13,278

 
 
1.3

 
Baa1
 
A-
 
$
62.1

 
N/A

20
 
Pinterest, Inc.
 
 
14.7

 
 
 
148,146

 
 
 
12,114

 
 
1.2

 
—
 
—
 
N/A

 
$
11.3

 
 
Total/weighted average
 
 
12.8

(4) 
 
 
7,579,720

 
 
 
$
433,034

 
 
43.5
%
 
 
 
 
 
 
 
 

(1)
Based on aggregate annual rental revenue in effect as of June 30, 2018. See “Definitions and Reconciliations” on pages 51 and 54 for our methodologies on annual rental revenue for unconsolidated properties and investment-grade or large cap tenants, respectively.
(2)
12-month average reported market capitalization or private valuation as of June 30, 2018.
(3)
Private valuation provided by PitchBook Data, Inc., a comprehensive database that provides data on private capital markets, which represents an estimate of the company’s valuation following its most recently completed equity financing. Uber Technologies, Inc. completed a Series G financing in January 2018, Moderna Therapeutics, Inc. completed a Series H financing in May 2018, Stripe, Inc. completed a Series D financing in November 2016, and Pinterest, Inc. completed a Series H financing in June 2017.
(4)
Represents a ground lease with Uber Technologies, Inc. at 1455 and 1515 Third Street in our Mission Bay/SoMa submarket. Excluding the ground lease, the weighted-average remaining lease term for our top 20 tenants was 9.5 years as of June 30, 2018.

 
 
Summary of Properties and Occupancy
q218logo2.jpg
June 30, 2018
(Dollars in thousands, except per RSF amounts)
 
 

Summary of properties
Market
 
RSF
 
Number of Properties
 
Annual Rental Revenue
 
 
Operating
 
Development
 
Redevelopment
 
Total
 
% of Total
 
 
Total
 
% of Total
 
Per RSF
 
Greater Boston
 
6,438,030

 
164,000

 
31,858

 
6,633,888

 
28
%
 
55

 
$
376,114

 
38
%
 
$
61.38

 
San Francisco
 
4,644,847

 
1,627,088

 
48,547

 
6,320,482

 
26

 
44

 
226,095

 
23

 
50.69

 
New York City
 
727,674

 
—

 
—

 
727,674

 
3

 
2

 
63,380

 
6

 
87.10

 
San Diego
 
4,349,106

 
—

 
163,648

 
4,512,754

 
19

 
56

 
161,989

 
16

 
38.88

 
Seattle
 
1,235,055

 
205,000

 
—

 
1,440,055

 
6

 
13

 
57,777

 
6

 
48.14

 
Maryland
 
2,461,932

 
—

 
103,225

 
2,565,157

 
11

 
37

 
64,884

 
6

 
27.64

 
Research Triangle Park
 
1,076,907

 
—

 
141,819

 
1,218,726

 
5

 
16

 
27,056

 
3

 
26.04

 
Canada
 
256,967

 
—

 
—

 
256,967

 
1

 
3

 
6,767

 
1

 
26.72

 
Non-cluster markets
 
277,404

 
—

 
—

 
277,404

 
1

 
7

 
6,227

 
1

 
28.83

 
Properties held for sale
 
54,874

 
—

 
—

 
54,874

 
—

 
1

 
997

 
—

 
—

 
North America
 
21,522,796

 
1,996,088

 
489,097

 
24,007,981

 
100
%
 
234

 
$
991,286

 
100
%
 
$
48.22

 
 
 
 
 
2,485,185
 
 
 
 
 
 
 
 
 
 
 
 
 


Summary of occupancy
 
 
Operating Properties
 
Operating and Redevelopment Properties
Market
 
6/30/18
 
3/31/18
 
6/30/17
 
6/30/18
 
3/31/18
 
6/30/17
Greater Boston
 
97.2
%
 
95.7
%
 
96.2
%
 
96.7
%
 
95.2
%
 
96.2
%
San Francisco
 
99.8

 
99.9

 
99.6

 
98.8

 
98.9

 
99.6

New York City
 
100.0

 
100.0

 
99.3

 
100.0

 
100.0

 
99.3

San Diego
 
95.8

 
95.2

 
91.7

 
92.3

 
91.7

 
88.0

Seattle
 
97.2

 
96.6

 
97.2

 
97.2

 
96.6

 
97.2

Maryland
 
95.7

 
95.7

 
93.0

 
91.9

 
91.2

 
93.0

Research Triangle Park
 
96.5

 
96.8

 
95.9

 
85.3

 
82.9

 
82.1

Subtotal
 
97.4

 
96.8

 
95.7

 
95.2

 
94.4

 
94.0

Canada
 
98.6

 
99.6

 
99.2

 
98.6

 
99.6

 
99.2

Non-cluster markets
 
77.9

 
78.9

 
88.4

 
77.9

 
78.9

 
88.4

North America
 
97.1
%
 
96.6
%
 
95.7
%
 
95.0
%
 
94.3
%
 
94.0
%

See “Definitions and Reconciliations” in this Supplemental Information for additional information.


 
 
Property Listing
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
Greater Boston
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cambridge/Inner Suburbs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® at Kendall Square
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50, 60, 75/125, and 100 Binney Street, 161 First Street, 215 First Street, 150 Second Street, 300 Third Street, and 11 Hurley Street
 
2,060,275

 
—

 
—

 
2,060,275

 
9
 
$
143,920

 
98.4
%
 
 
98.4
%
 
 
 
225 Binney Street (consolidated joint venture – 30% ownership)
 
305,212

 
—

 
—

 
305,212

 
1
 
13,278

 
100.0

 
 
100.0

 
 
 
Alexandria Technology Square®
 
1,181,635

 
—

 
—

 
1,181,635

 
7
 
87,334

 
99.7

 
 
99.7

 
 
 
100, 200, 300, 400, 500, 600, and 700 Technology Square

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® at One Kendall Square
 
649,705

 
164,000

 
—

 
813,705

 
10
 
46,241

 
87.9

 
 
87.9

 
 
 
One Kendall Square – Buildings 100, 200, 300, 400, 500, 600/700, 1400, 1800, 2000, and 399 Binney Street
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
480 and 500 Arsenal Street
 
234,260

 
—

 
—

 
234,260

 
2
 
10,532

 
100.0

 
 
100.0

 
 
 
640 Memorial Drive
 
225,504

 
—

 
—

 
225,504

 
1
 
13,771

 
100.0

 
 
100.0

 
 
 
780 and 790 Memorial Drive
 
99,658

 
—

 
—

 
99,658

 
2
 
7,201

 
92.6

 
 
92.6

 
 
 
167 Sidney Street and 99 Erie Street
 
54,549

 
—

 
—

 
54,549

 
2
 
3,737

 
100.0

 
 
100.0

 
 
 
79/96 13th Street (Charlestown Navy Yard)
 
25,309

 
—

 
—

 
25,309

 
1
 
620

 
100.0

 
 
100.0

 
 
 
Cambridge/Inner Suburbs
 
4,836,107

 
164,000

 
—

 
5,000,107

 
35
 
326,634

 
97.5

 
 
97.5

 
 
Longwood Medical Area
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
360 Longwood Avenue (unconsolidated joint venture – 27.5% ownership)
 
210,709

 
—

 
—

 
210,709

 
1
 
3,970

 
83.8

 
 
83.8

 
 
Route 128
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Park at 128
 
343,882

 
—

 
—

 
343,882

 
8
 
10,478

 
95.6

 
 
95.6

 
 
 
3 and 6/8 Preston Court, 29, 35, and 44 Hartwell Avenue,
35 and 45/47 Wiggins Avenue, and 60 Westview Street
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
225, 266, and 275 Second Avenue
 
285,759

 
—

 
31,858

 
317,617

 
3
 
12,311

 
100.0

 
 
90.0

 
 
 
100 Tech Drive
 
200,431

 
—

 
—

 
200,431

 
1
 
8,455

 
100.0

 
 
100.0

 
 
 
19 Presidential Way
 
144,892

 
—

 
—

 
144,892

 
1
 
4,863

 
93.0

 
 
93.0

 
 
 
100 Beaver Street
 
82,330

 
—

 
—

 
82,330

 
1
 
3,279

 
100.0

 
 
100.0

 
 
 
285 Bear Hill Road
 
26,270

 
—

 
—

 
26,270

 
1
 
1,167

 
100.0

 
 
100.0

 
 
 
Route 128
 
1,083,564

 
—

 
31,858

 
1,115,422

 
15
 
40,553

 
97.7

 
 
94.9

 
 
Route 495
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
111 and 130 Forbes Boulevard
 
155,846

 
—

 
—

 
155,846

 
2
 
1,543

 
100.0

 
 
100.0

 
 
 
20 Walkup Drive
 
91,045

 
—

 
—

 
91,045

 
1
 
649

 
100.0

 
 
100.0

 
 
 
30 Bearfoot Road
 
60,759

 
—

 
—

 
60,759

 
1
 
2,765

 
100.0

 
 
100.0

 
 
 
Route 495
 
307,650

 
—

 
—

 
307,650

 
4
 
4,957

 
100.0

 
 
100.0

 
 
 
Greater Boston
 
6,438,030

 
164,000

 
31,858

 
6,633,888

 
55
 
$
376,114

 
97.2
%
 
 
96.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Property Listing (continued)
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mission Bay/SoMa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1655 and 1725 Third Street (unconsolidated joint venture – 10% ownership)
 
—

 
593,765

 
—

 
593,765

 
2
 
$
—

 
N/A

 
 
N/A

 
 
 
409 and 499 Illinois Street (consolidated joint venture – 60% ownership)
 
455,069

 
—

 
—

 
455,069

 
2
 
28,710

 
100.0
%
 
 
100.0
%
 
 
 
1455 and 1515 Third Street
 
422,980

 
—

 
—

 
422,980

 
2
 
22,173

 
100.0

 
 
100.0

 
 
 
510 Townsend Street
 
295,333

 
—

 
—

 
295,333

 
1
 
17,822

 
100.0

 
 
100.0

 
 
 
88 Bluxome Street
 
232,470

 
—

 
—

 
232,470

 
1
 
3,813

 
100.0

 
 
100.0

 
 
 
455 Mission Bay Boulevard South
 
210,398

 
—

 
—

 
210,398

 
1
 
13,126

 
100.0

 
 
100.0

 
 
 
1500 Owens Street (consolidated joint venture – 50.1% ownership)
 
158,267

 
—

 
—

 
158,267

 
1
 
7,681

 
100.0

 
 
100.0

 
 
 
1700 Owens Street
 
157,340

 
—

 
—

 
157,340

 
1
 
11,114

 
100.0

 
 
100.0

 
 
 
505 Brannan Street (consolidated joint venture – 99.7% ownership)
 
148,146

 
—

 
—

 
148,146

 
1
 
12,114

 
100.0

 
 
100.0

 
 
 
Mission Bay/SoMa
 
2,080,003

 
593,765

 
—

 
2,673,768

 
12
 
116,553

 
100.0

 
 
100.0

 
 
South San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
213, 249, 259, 269, and 279 East Grand Avenue
 
407,369

 
512,335

 
—

 
919,704

 
5
 
16,838

 
100.0

 
 
100.0

 
 
 
Alexandria Technology Center® – Gateway
 
619,037

 
—

 
—

 
619,037

 
7
 
28,945

 
98.9

 
 
98.9

 
 
 
600, 630, 650, 681, 701, 901, and 951 Gateway Boulevard
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
400 and 450 East Jamie Court
 
163,035

 
—

 
—

 
163,035

 
2
 
6,519

 
100.0

 
 
100.0

 
 
 
500 Forbes Boulevard
 
155,685

 
—

 
—

 
155,685

 
1
 
6,619

 
100.0

 
 
100.0

 
 
 
7000 Shoreline Court
 
136,395

 
—

 
—

 
136,395

 
1
 
5,653

 
100.0

 
 
100.0

 
 
 
341 and 343 Oyster Point Boulevard
 
107,960

 
—

 
—

 
107,960

 
2
 
4,479

 
100.0

 
 
100.0

 
 
 
849/863 Mitten Road/866 Malcolm Road
 
103,857

 
—

 
—

 
103,857

 
1
 
3,816

 
100.0

 
 
100.0

 
 
 
South San Francisco
 
1,693,338

 
512,335

 
—

 
2,205,673

 
19
 
72,869

 
99.6

 
 
99.6

 
 
Greater Stanford
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
Menlo Gateway (unconsolidated joint venture)(1)
 
251,995

 
520,988

 
—

 
772,983

 
3
 
5,521

 
100.0

 
 
100.0

 
 
 
100 Independence Drive and 125 and 135 Constitution Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria PARC
 
148,951

 
—

 
48,547

 
197,498

 
4
 
8,288

 
100.0

 
 
75.4

 
 
 
2100, 2200, 2300, and 2400 Geng Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
960 Industrial Road
 
110,000

 
—

 
—

 
110,000

 
1
 
2,749

 
100.0

 
 
100.0

 
 
 
2425 Garcia Avenue/2400/2450 Bayshore Parkway
 
99,208

 
—

 
—

 
99,208

 
1
 
4,257

 
100.0

 
 
100.0

 
 
 
3165 Porter Drive
 
91,644

 
—

 
—

 
91,644

 
1
 
3,885

 
100.0

 
 
100.0

 
 
 
1450 Page Mill Road
 
77,634

 
—

 
—

 
77,634

 
1
 
8,009

 
100.0

 
 
100.0

 
 
 
3350 West Bayshore Road
 
60,000

 
—

 
—

 
60,000

 
1
 
2,211

 
100.0

 
 
100.0

 
 
 
2625/2627/2631 Hanover Street
 
32,074

 
—

 
—

 
32,074

 
1
 
1,753

 
100.0

 
 
100.0

 
 
 
Greater Stanford
 
871,506

 
520,988

 
48,547

 
1,441,041

 
13
 
36,673

 
100.0

 
 
94.7

 
 
 
San Francisco
 
4,644,847

 
1,627,088

 
48,547

 
6,320,482

 
44
 
226,095

 
99.8

 
 
98.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New York City
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Manhattan
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® for Life Science – New York City
 
727,674

 
—

 
—

 
727,674

 
2
 
63,380

 
100.0

 
 
100.0

 
 
 
430 and 450 East 29th Street
 
 
 
 
 
 




 
 
 
 
 
 
 
 
 
 
 
New York City
 
727,674

 
—

 
—

 
727,674

 
2
 
$
63,380

 
100.0
%
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
See page 45 of this Supplemental Information for our ownership percentage.

 
 
Property Listing (continued)
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Torrey Pines
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Spectrum
 
336,461

 
—

 
—

 
336,461

 
3
 
$
17,388

 
100.0
%
 
 
100.0
%
 
 
 
3215 Merryfield Row and 3013 and 3033 Science Park Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Torrey Ridge
 
294,993

 
—

 
—

 
294,993

 
3
 
13,397

 
89.8

 
 
89.8

 
 
 
10578, 10614, and 10628 Science Center Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Sunrise
 
236,635

 
—

 
—

 
236,635

 
3
 
8,834

 
99.7

 
 
99.7

 
 
 
10931/10933 and 10975 North Torrey Pines Road,
3010 Science Park Road, and 10996 Torreyana Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Nautilus
 
223,751

 
—

 
—

 
223,751

 
4
 
9,214

 
88.9

 
 
88.9

 
 
 
3530 and 3550 John Hopkins Court and 3535 and 3565 General Atomics Court
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3545 Cray Court
 
116,556

 
—

 
—

 
116,556

 
1
 
4,827

 
100.0

 
 
100.0

 
 
 
11119 North Torrey Pines Road
 
72,506

 
—

 
—

 
72,506

 
1
 
3,409

 
100.0

 
 
100.0

 
 
 
Torrey Pines
 
1,280,902

 
—

 
—

 
1,280,902

 
15
 
57,069

 
95.6

 
 
95.6

 
 
University Town Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Campus Pointe by Alexandria (consolidated joint venture – 55% ownership)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10290 and 10300 Campus Point Drive and 4110 Campus Point Court
 
798,799

 
—

 
—

 
798,799

 
3
 
32,236

 
95.7

 
 
95.7

 
 
 
5200 Illumina Way
 
792,687

 
—

 
—

 
792,687

 
6
 
28,840

 
100.0

 
 
100.0

 
 
 
ARE Esplanade
 
241,963

 
—

 
—

 
241,963

 
4
 
10,036

 
100.0

 
 
100.0

 
 
 
4755, 4757, and 4767 Nexus Center Drive and 4796 Executive Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Towne Centre
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9625 Towne Centre Drive (consolidated joint venture – 50.1% ownership)
 
—

 
—

 
163,648

 
163,648

 
1
 
—

 
N/A

 
 
—

 
 
 
9363, 9373, and 9393 Towne Centre Drive
 
140,398

 
—

 
—

 
140,398

 
3
 
3,181

 
91.3

 
 
91.3

 
 
 
University Town Center
 
1,973,847

 
—

 
163,648

 
2,137,495

 
17
 
74,293

 
97.6

 
 
90.1

 
 
Sorrento Mesa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summers Ridge Science Park
 
316,531

 
—

 
—

 
316,531

 
4
 
10,843

 
100.0

 
 
100.0

 
 
 
9965, 9975, 9985, and 9995 Summers Ridge Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5810/5820 and 6138/6150 Nancy Ridge Drive
 
138,970

 
—

 
—

 
138,970

 
2
 
3,950

 
100.0

 
 
100.0

 
 
 
10121 and 10151 Barnes Canyon Road 
 
102,392

 
—

 
—

 
102,392

 
2
 
2,691

 
100.0

 
 
100.0

 
 
 
ARE Portola
 
101,857

 
—

 
—

 
101,857

 
3
 
2,092

 
71.7

 
 
71.7

 
 
 
6175, 6225, and 6275 Nancy Ridge Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7330 Carroll Road
 
66,244

 
—

 
—

 
66,244

 
1
 
2,431

 
100.0

 
 
100.0

 
 
 
5871 Oberlin Drive
 
33,817

 
—

 
—

 
33,817

 
1
 
832

 
86.8

 
 
86.8

 
 
 
Sorrento Mesa
 
759,811

 
—

 
—

 
759,811

 
13
 
22,839

 
95.6

 
 
95.6

 
 
Sorrento Valley
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11025, 11035, 11045, 11055, 11065, and 11075 Roselle Street
 
121,655

 
—

 
—

 
121,655

 
6
 
2,223

 
74.6

 
 
74.6

 
 
 
3985, 4025, 4031, and 4045 Sorrento Valley Boulevard
 
103,111

 
—

 
—

 
103,111

 
4
 
2,593

 
84.6

 
 
84.6

 
 
 
Sorrento Valley
 
224,766

 
—

 
—

 
224,766

 
10
 
4,816

 
79.2

 
 
79.2

 
 
I-15 Corridor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13112 Evening Creek Drive
 
109,780

 
—

 
—

 
109,780

 
1
 
2,972

 
100.0

 
 
100.0

 
 
 
San Diego
 
4,349,106

 
—

 
163,648

 
4,512,754

 
56
 
$
161,989

 
95.8
%
 
 
92.3
%
 
 
 

 
 
Property Listing (continued)
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
Seattle
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lake Union
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
400 Dexter Avenue North
 
290,111

 
—

 
—

 
290,111

 
1
 
$
15,077

 
100.0
%
 
 
100.0
%
 
 
 
1818 Fairview Avenue East
 
—

 
205,000

 
—

 
205,000

 
1
 
—

 
N/A

 
 
N/A

 
 
 
1201 and 1208 Eastlake Avenue East
 
203,369

 
—

 
—

 
203,369

 
2
 
8,748

 
100.0

 
 
100.0

 
 
 
2301 5th Avenue
 
197,135

 
—

 
—

 
197,135

 
1
 
9,097

 
97.4

 
 
97.4

 
 
 
1616 Eastlake Avenue East
 
168,708

 
—

 
—

 
168,708

 
1
 
7,944

 
90.2

 
 
90.2

 
 
 
1551 Eastlake Avenue East
 
117,482

 
—

 
—

 
117,482

 
1
 
4,842

 
100.0

 
 
100.0

 
 
 
199 East Blaine Street
 
115,084

 
—

 
—

 
115,084

 
1
 
6,191

 
100.0

 
 
100.0

 
 
 
219 Terry Avenue North
 
30,705

 
—

 
—

 
30,705

 
1
 
1,843

 
100.0

 
 
100.0

 
 
 
1600 Fairview Avenue East
 
27,991

 
—

 
—

 
27,991

 
1
 
1,243

 
100.0

 
 
100.0

 
 
 
Lake Union
 
1,150,585

 
205,000

 
—

 
1,355,585

 
10
 
54,985

 
98.1

 
 
98.1

 
 
Elliott Bay
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3000/3018 Western Avenue
 
47,746

 
—

 
—

 
47,746

 
1
 
1,839

 
100.0

 
 
100.0

 
 
 
410 West Harrison Street and 410 Elliott Avenue West
 
36,724

 
—

 
—

 
36,724

 
2
 
953

 
63.9

 
 
63.9

 
 
 
Elliott Bay
 
84,470

 
—

 
—

 
84,470

 
3
 
2,792

 
84.3

 
 
84.3

 
 
 
Seattle
 
1,235,055

 
205,000

 
—

 
1,440,055

 
13
 
57,777

 
97.2

 
 
97.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rockville
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9800, 9900, and 9920 Medical Center Drive
 
341,169

 
—

 
45,039

 
386,208

 
6
 
13,220

 
100.0

 
 
88.3

 
 
 
9704, 9708, 9712, and 9714 Medical Center Drive
 
214,725

 
—

 
—

 
214,725

 
4
 
7,862

 
100.0

 
 
100.0

 
 
 
1330 Piccard Drive
 
131,511

 
—

 
—

 
131,511

 
1
 
3,537

 
100.0

 
 
100.0

 
 
 
1500 and 1550 East Gude Drive
 
90,489

 
—

 
—

 
90,489

 
2
 
1,681

 
100.0

 
 
100.0

 
 
 
14920 and 15010 Broschart Road
 
86,703

 
—

 
—

 
86,703

 
2
 
2,045

 
91.9

 
 
91.9

 
 
 
1405 Research Boulevard
 
71,669

 
—

 
—

 
71,669

 
1
 
2,315

 
100.0

 
 
100.0

 
 
 
5 Research Place
 
63,852

 
—

 
—

 
63,852

 
1
 
2,407

 
100.0

 
 
100.0

 
 
 
9920 Belward Campus Drive
 
51,181

 
—

 
—

 
51,181

 
1
 
1,568

 
100.0

 
 
100.0

 
 
 
12301 Parklawn Drive
 
49,185

 
—

 
—

 
49,185

 
1
 
1,329

 
100.0

 
 
100.0

 
 
 
5 Research Court
 
49,160

 
—

 
—

 
49,160

 
1
 
—

 
—

 
 
—

 
 
 
Rockville
 
1,149,644

 
—

 
45,039

 
1,194,683

 
20
 
35,964

 
95.1

 
 
91.5

 
 
Gaithersburg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Gaithersburg I
 
377,401

 
—

 
—

 
377,401

 
4
 
8,262

 
91.1

 
 
91.1

 
 
 
9 West Watkins Mill Road and 910, 930, and 940 Clopper Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Gaithersburg II
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
708 Quince Orchard Road and 19, 20, 21, and 22 Firstfield Road
 
235,053

 
—

 
—

 
235,053

 
5
 
6,329

 
95.0

 
 
95.0

 
 
 
704 Quince Orchard Road (unconsolidated joint venture – 56.8% ownership)
 
21,745

 
—

 
58,186

 
79,931

 
1
 
306

 
100.0

 
 
27.2

 
 
 
50 and 55 West Watkins Mill Road
 
96,915

 
—

 
—

 
96,915

 
2
 
2,670

 
100.0

 
 
100.0

 
 
 
401 Professional Drive
 
63,154

 
—

 
—

 
63,154

 
1
 
1,558

 
100.0

 
 
100.0

 
 
 
950 Wind River Lane
 
50,000

 
—

 
—

 
50,000

 
1
 
1,004

 
100.0

 
 
100.0

 
 
 
620 Professional Drive
 
27,950

 
—

 
—

 
27,950

 
1
 
1,191

 
100.0

 
 
100.0

 
 
 
Gaithersburg
 
872,218

 
—

 
58,186

 
930,404

 
15
 
$
21,320

 
94.8
%
 
 
88.8
%
 

 
 
Property Listing (continued)
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
Maryland (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beltsville
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8000/9000/10000 Virginia Manor Road
 
191,884

 
—

 
—

 
191,884

 
1
 
$
2,462

 
98.4
%
 
 
98.4
%
 
 
Northern Virginia
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14225 Newbrook Drive
 
248,186

 
—

 
—

 
248,186

 
1
 
5,138

 
100.0

 
 
100.0

 
 
 
Maryland
 
2,461,932

 
—

 
103,225

 
2,565,157

 
37
 
64,884

 
95.7

 
 
91.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research Triangle Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research Triangle Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Alston
 
186,870

 
—

 
—

 
186,870

 
3
 
3,463

 
92.3

 
 
92.3

 
 
 
100, 800, and 801 Capitola Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® for AgTech – RTP
 
33,181

 
—

 
141,819

 
175,000

 
1
 
914

 
100.0

 
 
19.0

 
 
 
5 Laboratory Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
108/110/112/114 TW Alexander Drive
 
158,417

 
—

 
—

 
158,417

 
1
 
4,607

 
100.0

 
 
100.0

 
 
 
Alexandria Innovation Center® – Research Triangle Park
 
135,677

 
—

 
—

 
135,677

 
3
 
3,307

 
96.7

 
 
96.7

 
 
 
7010, 7020, and 7030 Kit Creek Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6 Davis Drive
 
100,000

 
—

 
—

 
100,000

 
1
 
1,740

 
95.7

 
 
95.7

 
 
 
7 Triangle Drive
 
96,626

 
—

 
—

 
96,626

 
1
 
3,156

 
100.0

 
 
100.0

 
 
 
2525 East NC Highway 54
 
82,996

 
—

 
—

 
82,996

 
1
 
3,680

 
100.0

 
 
100.0

 
 
 
407 Davis Drive
 
81,956

 
—

 
—

 
81,956

 
1
 
1,644

 
100.0

 
 
100.0

 
 
 
601 Keystone Park Drive
 
77,395

 
—

 
—

 
77,395

 
1
 
1,379

 
100.0

 
 
100.0

 
 
 
6040 George Watts Hill Drive
 
61,547

 
—

 
—

 
61,547

 
1
 
2,148

 
100.0

 
 
100.0

 
 
 
5 Triangle Drive
 
32,120

 
—

 
—

 
32,120

 
1
 
479

 
54.2

 
 
54.2

 
 
 
6101 Quadrangle Drive
 
30,122

 
—

 
—

 
30,122

 
1
 
539

 
100.0

 
 
100.0

 
 
 
Research Triangle Park
 
1,076,907

 
—

 
141,819

 
1,218,726

 
16
 
27,056

 
96.5

 
 
85.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Canada
 
256,967

 
—

 
—

 
256,967

 
3
 
6,767

 
98.6

 
 
98.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-cluster markets
 
277,404

 
—

 
—

 
277,404

 
7
 
6,227

 
77.9

 
 
77.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total – North America excluding properties held for sale
 
21,467,922

 
1,996,088

 
489,097

 
23,953,107

 
233
 
990,289

 
97.1
%
 
 
95.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties held for sale in North America
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1300 Quince Orchard Boulevard
 
54,874

 
—

 
—

 
54,874

 
1
 
997

 
100.0
%
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total – North America
 
21,522,796

 
1,996,088

 
489,097

 
24,007,981

 
234
 
$
991,286

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
q218logo2.jpg
Disciplined Management of Ground-Up Developments
June 30, 2018
 
 


q218prelease.jpg
(1)
Represents developments commenced since January 1, 2008, comprising 28 projects aggregating 7.1 million RSF.
(2)
Represents annual rental revenue on ground-up developments commenced since January 1, 2008, from tenants with investment-grade credit rating, or a 12-month average reported market cap capitalization or private valuation greater than $10 billion as of June 30, 2018. See “Definitions and Reconciliations” in this Supplemental Information for additional information.
(3)
Represents developments commenced and delivered since January 1, 2008, comprising 22 projects aggregating 5.2 million RSF.

 
 
Investments in Real Estate
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 

 
 
Investments in Real Estate
 
Square Feet
 
 
 
Operating
 
Construction
 
Pre-Construction
 
Intermediate-Term & Future Projects
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments in real estate:
 
 
 
 
 
 
 
 
 
 
 
 
Rental properties:
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
11,882,062

 
21,038,347

 
—

 
—

 
—

 
21,038,347

Unconsolidated(1)
 
N/A

 
484,449

 
—

 
—

 
—

 
484,449

 
 
11,882,062

 
21,522,796

 
—

 
—

 
—

 
21,522,796

 
 
 
 
 
 
 
 
 
 
 
 
 
New Class A development and redevelopment properties:
 
 
 
 
 
 
 
 
 
 
 
 
2018 deliveries
 
214,560

 
—

 
501,325

 
—

 
—

 
501,325

2019 deliveries
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
352,871

 
—

 
810,921

 
126,971

 
—

 
937,892

Unconsolidated(1)
 
N/A

 
—

 
1,172,939

 
—

 
—

 
1,172,939

2019 deliveries
 
352,871

 
—

 
1,983,860

 
126,971

 
—

 
2,110,831

2018 and 2019 deliveries
 
567,431

 
—

 
2,485,185

 
126,971

 
—

 
2,612,156

 
 
 
 
 
 
 
 
 
 
 
 
 
2020 deliveries
 
191,050

 
—

 
—

 
908,000

 
—

 
908,000

New Class A development and redevelopment properties undergoing construction and pre-construction
 
758,481

 
—

 
2,485,185

 
1,034,971

 
—

 
3,520,156

 
 
 
 
 
 
 
 
 
 
 
 
 
Intermediate-term and future development and redevelopment projects:
 
 
 
 
 
 
 
 
 
 
 
 
Intermediate-term
 
494,938

 
—

 
—

 
—

 
4,138,317

 
4,138,317

Future
 
92,473

 
—

 
—

 
—

 
3,273,081

 
3,273,081

Portion of development and redevelopment square feet that will replace existing RSF included in rental properties(2)
 
N/A

 
—

 
—

 
(126,971
)
 
(351,185
)
 
(478,156
)
Intermediate-term and future development and redevelopment projects, excluding RSF related to rental properties
 
587,411

 
—

 
—

 
(126,971
)
 
7,060,213

 
6,933,242

 
 
 
 
 
 
 
 
 
 
 
 
 
Gross investments in real estate
 
13,227,954

 
21,522,796

 
2,485,185

 
908,000

 
7,060,213

 
31,976,194

 
 
 
 
24,007,981
 
 
 
 
 
 
Less: accumulated depreciation
 
(2,066,333
)
 
 
 
 
 
 
 
 
 
 
Net investments in real estate – North America
 
11,161,621

 
 
 
 
 
 
 
 
 
 
Net investments in real estate – Asia
 
29,150

 
 
 
 
 
 
 
 
 
 
Investments in real estate
 
$
11,190,771

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Our share of the cost basis associated with unconsolidated square feet is classified in investments in unconsolidated real estate joint ventures in our consolidated balance sheets.
(2)
See footnotes 1, 3, and 4 on page 42 and footnote 1 on page 43 of this Supplemental Information for additional information.

 
 
 
 
New Class A Development and Redevelopment Properties: Placed into Service in the Last 12 Months
q218logo2.jpg
 
 
June 30, 2018
 
 
 






100 Binney Street
 
266 and 275 Second Avenue
 
510 Townsend Street
Greater Boston/Cambridge
 
Greater Boston/Route 128
 
San Francisco/Mission Bay/SoMa
432,931 RSF
 
27,315 RSF
 
295,333 RSF
Bristol-Myers Squibb Company
Facebook, Inc.
 
Visterra, Inc.(1)
 
Stripe, Inc.
q218binney100.jpg
 
q218secondave.jpg
 
q218townsend510.jpg
505 Brannan Street, Phase I
 
ARE Spectrum
 
400 Dexter Avenue North
 
5 Laboratory Drive
San Francisco/Mission Bay/SoMa
 
San Diego/Torrey Pines
 
Seattle/Lake Union
 
Research Triangle Park/RTP
148,146 RSF
 
336,461 RSF
 
290,111 RSF
 
33,181 RSF
Pinterest, Inc.
 
Celgene Corporation
Vertex Pharmaceuticals Incorporated
The Medicines Company
Wellspring Biosciences LLC
 
Celgene Corporation
ClubCorp Holdings, Inc.
 
Boragen, Inc.
Elo Life Systems, Inc.
Indigo Ag, Inc.
q218brannanphase1.jpg
 
q218spectrumvertexa01.jpg
 
q218dexter400.jpg
 
q218laboratory5.jpg

RSF represents the cumulative RSF placed into service.
 
(1)
In July 2018, Otsuka Pharmaceutical Co., Ltd. entered into a definitive agreement to acquire Visterra, Inc. The transaction is expected to be completed during the third quarter of 2018. As of July 17, 2018, Otsuka Pharmaceutical Co., Ltd. had a market capitalization of $25.6 billion.

 
 
New Class A Development and Redevelopment Properties: Placed into Service in the Last 12 Months (continued)
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 



Property/Market/Submarket
 
Our Ownership Interest
 
Date Delivered
 
RSF Placed into Service
 
Operating Property Leased Percentage
 
Total Project
 
Unlevered Yields
 
 
 
 
 
 
Initial Stabilized
 
Initial Stabilized (Cash)
 
 
 
Prior to 7/1/17
 
3Q17
 
4Q17
 
1Q18
 
2Q18
 
Total
 
 
RSF
 
Investment
 
 
Consolidated development projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100 Binney Street/Greater Boston/Cambridge
 
100%
 
Various
 
—

 
341,776

 
—

 
91,155

 
—

 
 
432,931

 
100%
 
432,931

 
 
$
436,000

 
 
8.2
%
 
 
7.4
%
 
510 Townsend Street/San Francisco/
Mission Bay/SoMa
 
100%

10/31/17
 
—

 
—

 
295,333

 
—

 
—

 
 
295,333

 
100%
 
295,333

 
 
$
226,000

 
 
7.9
%
 
 
7.5
%
 
505 Brannan Street, Phase I/San Francisco/Mission Bay/SoMa
 
99.7%

10/10/17
 
—

 
—

 
148,146

 
—

 
—

 
 
148,146

 
100%
 
148,146

 
 
$
140,000

 
 
8.5
%
 
 
7.2
%
 
ARE Spectrum/San Diego/Torrey Pines
 
100%
 
Various
 
165,938

 
—

 
170,523

 
—

 
—

 
 
336,461

 
98%
 
336,461

 
 
$
277,000

 
 
6.4
%
 
 
6.2
%
 
400 Dexter Avenue North/Seattle/Lake Union
 
100%
 
Various
 
241,276

 
17,620

 
31,215

 
—

 
—

 
 
290,111

 
100%
 
290,111

 
 
$
223,000

 
 
7.0
%
 
 
7.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated redevelopment project
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266 and 275 Second Avenue/Greater Boston/Route 128
 
100%
 
3/31/18
 
—

 
—

 
—

 
27,315

 
—

 
 
27,315

 
100%
 
203,757

 
 
$
89,000

 
 
8.4
%
 
 
7.1
%
 
5 Laboratory Drive/Research Triangle Park/RTP
 
100%
 
Various
 
—

 
—

 
—

 
—

 
33,181

 
 
33,181

 
100%
 
175,000

 
 
$
62,500

 
 
7.7
%
 
 
7.6
%
 
Total
 
 
 
 
 
407,214

 
359,396

 
645,217

 
118,470

 
33,181

 
 
1,563,478

 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
New Class A Development and Redevelopment Properties: 2018 Deliveries
q218logo2.jpg
 
 
June 30, 2018
 
 
 


399 Binney Street
 
266 and 275 Second Avenue
 
9625 Towne Centre Drive
Greater Boston/Cambridge
 
Greater Boston/Route 128
 
San Diego/University Town Center
164,000 RSF
 
31,858 RSF
 
163,648 RSF
Rubius Therapeutics, Inc.
Relay Therapeutics, Inc.
Celsius Therapeutics, Inc.
 
Marketing
 
Takeda Pharmaceutical
Company Ltd.
q218binney399.jpg
 
q218secondave.jpg
 
q218towne9625.jpg
 
 
5 Laboratory Drive
 
 
Research Triangle Park/RTP
 
 
141,819 RSF
 
 
Boragen, Inc.
Indigo Ag, Inc.
AgTech Accelerator Corporation
Multi-Tenant/Marketing
 
 
 
 
q218laboratory5.jpg
 
501,325
 
RSF
 
75%
 
Leased

 
New Class A Development and Redevelopment Properties: 2019 Deliveries
q218logo2.jpg
 
 
June 30, 2018
 
 
 



213 East Grand Avenue
 
9900 Medical Center Drive
 
279 East Grand Avenue
 
Alexandria PARC
 
1818 Fairview Avenue East
San Francisco/South San Francisco
 
Maryland/Rockville
 
San Francisco/South San Francisco
 
San Francisco/Greater Stanford
 
Seattle/Lake Union
300,930 RSF
 
45,039 RSF
 
211,405 RSF
 
48,547 RSF
 
205,000 RSF
Merck & Co., Inc.
 
Lonza Walkersville, Inc.
Multi-Tenant/Marketing
 
Verily Life Sciences, LLC
insitro, Inc.
Multi-Tenant/Marketing
 
Adaptive Insights, Inc.
 
bluebird bio, Inc.
Multi-Tenant/Marketing
q218egrand213.jpg
 
q218medical9900.jpg
 
q218grand279.jpg
 
q218parc.jpg
 
q218fairview1818.jpg
 
 
 
 
 
 
 
 
 
681 Gateway Boulevard
 
704 Quince Orchard Road
 
Menlo Gateway
 
1655 and 1725 Third Street
 
 
San Francisco/South San Francisco
 
Maryland/Gaithersburg
 
San Francisco/Greater Stanford
 
San Francisco/Mission Bay/SoMa
 
 
126,971 RSF
 
58,186 RSF
 
520,988 RSF
 
593,765 RSF
 
2,110,831 RSF
Twist Bioscience Corporation
Multi-Tenant/Marketing
 
Multi-Tenant/Marketing
 
Facebook, Inc.
 
Uber Technologies, Inc.
 
q218gateway681.jpg
 
q218quince.jpg
 
q218menlogateway.jpg
 
q218gsw.jpg
 
 
 
 
 
86% Leased

 
 
New Class A Development and Redevelopment Properties: 2020 Deliveries
q218logo2.jpg
June 30, 2018
 

825 and 835 Industrial Road
 
201 Haskins Way
 
San Francisco/Greater Stanford
 
San Francisco/South San Francisco
 
530,000 RSF
 
280,000 RSF
 
Multi-Tenant/Marketing
 
Multi-Tenant/Marketing
 
q218industrial825.jpg
 
q218haskins.jpg
 
 
 
 
 
9880 Campus Point Drive
 
 
 
San Diego/University Town Center
 
908,000
 
98,000 RSF
 
 
Multi-Tenant/Marketing
 
 
q218campuspoint9880.jpg
 
 
 
RSF
 
 
Under
Pre-Construction and Marketing
 
 
 

 
New Class A Development and Redevelopment Properties: 2018–2020 Deliveries
q218logo2.jpg
 
 
June 30, 2018
 
 
 

Property/Market/Submarket
 
Dev/
Redev
 
RSF
 
 
 
Project
  Start
 
 
 
 
 
 
CIP
 
 
 
Percentage
 
 
Occupancy(1)
 
 
In Service
 
Construction
 
Pre-construction
 
Total
 
Total Project
 
Leased
 
Leased/Negotiating
 
 
Initial
 
Stabilized
2018 deliveries: consolidated projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266 and 275 Second Avenue/Greater Boston/Route 128
 
Redev
 
171,899

 
31,858

 
—

 
31,858

 
203,757

 
85
%
 
 
85
%
 
 
3Q17
 
1Q18
 
2018
5 Laboratory Drive/Research Triangle Park/RTP
 
Redev
 
33,181

 
141,819

 
—

 
141,819

 
175,000

 
38

 
 
38

 
 
2Q17
 
2Q18
 
2019
9625 Towne Centre Drive/San Diego/University Town Center(2)
 
Redev
 
—

 
163,648

 
—

 
163,648

 
163,648

 
100

 
 
100

 
 
3Q15
 
4Q18
 
4Q18
399 Binney Street/Greater Boston/Cambridge
 
Dev
 
—

 
164,000

 
—

 
164,000

 
164,000

 
75

 
 
98

 
 
4Q17
 
4Q18
 
2019
2018 deliveries
 
 
 
205,080

 
501,325

 
—

 
501,325

 
706,405

 
75
%
 
 
80
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries: consolidated projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
213 East Grand Avenue/San Francisco/South San Francisco
 
Dev
 
—

 
300,930

 
—

 
300,930

 
300,930

 
100
%
 
 
100
%
 
 
2Q17
 
1Q19
 
1Q19
9900 Medical Center Drive/Maryland/Rockville
 
Redev
 
—

 
45,039

 
—

 
45,039

 
45,039

 
58

 
 
58

 
 
3Q17
 
1Q19
 
2019
279 East Grand Avenue/San Francisco/South San Francisco
 
Dev
 
—

 
211,405

 
—

 
211,405

 
211,405

 
83

 
 
83

 
 
4Q17
 
1Q19
 
2020
Alexandria PARC/San Francisco/Greater Stanford
 
Redev
 
148,951

 
48,547

 
—

 
48,547

 
197,498

 
100

 
 
100

 
 
1Q18
 
2Q19
 
2Q19
1818 Fairview Avenue East/Seattle/Lake Union
 
Dev
 
—

 
205,000

 
—

 
205,000

 
205,000

 
12

 
 
24

 
 
2Q18
 
2Q19
 
2020
681 Gateway Boulevard/San Francisco/South San Francisco(3)
 
Redev
 
—

 
—

 
126,971

 
126,971

 
126,971

 
48

 
 
48

 
 
4Q18
 
2Q19
 
2020
 
 
 
 
148,951

 
810,921

 
126,971

 
937,892

 
1,086,843

 
72

 
 
75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries: unconsolidated joint venture projects(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
704 Quince Orchard Road/Maryland/Gaithersburg
 
Redev
 
21,745

 
58,186

 
—

 
58,186

 
79,931

 
36

 
 
40

 
 
1Q18
 
1Q19
 
2020
Menlo Gateway/San Francisco/Greater Stanford
 
Dev
 
251,995

 
520,988

 
—

 
520,988

 
772,983

 
100

 
 
100

 
 
4Q17
 
4Q19
 
4Q19
1655 and 1725 Third Street/San Francisco/Mission Bay/SoMa
 
Dev
 
—

 
593,765

 
—

 
593,765

 
593,765

 
100

 
 
100

 
 
1Q18
 
4Q19
 
4Q19
 
 
 
 
273,740

 
1,172,939

 
—

 
1,172,939

 
1,446,679

 
96

 
 
97

 
 
 
 
 
 
 
2019 deliveries
 
 
422,691

 
1,983,860

 
126,971

 
2,110,831

 
2,533,522

 
86
%
 
 
87
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018 and 2019 deliveries
 
 
 
627,771

 
2,485,185
 
126,971
 
2,612,156
 
3,239,927
 
84
%
 
 
86
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2020 deliveries: consolidated projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
825 and 835 Industrial Road/San Francisco/Greater Stanford
 
Dev
 
—

 
—

 
530,000
 
530,000
 
530,000
 
 
 
 
 
 
 
 
 
 
 
 
201 Haskins Way/San Francisco/South San Francisco
 
Dev
 
—

 
—

 
280,000
 
280,000
 
280,000
 
 
 
 
 
 
 
 
 
 
 
 
9880 Campus Point Drive/San Diego/University Town Center
 
Dev
 
—

 
—

 
98,000
 
98,000
 
98,000
 
 
 
 
 
 
 
 
 
 
 
 
2020 deliveries
 
 
 
—

 
—

 
908,000
 
908,000
 
908,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
627,771

 
2,485,185
 
1,034,971
 
3,520,156
 
4,147,927
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Initial occupancy dates are subject to leasing and/or market conditions. Stabilized occupancy may vary depending on single tenancy versus multi-tenancy.
(2)
See page 45 of this Supplemental Information for additional information.
(3)
The building is 100% occupied through the end of the third quarter of 2018, after which we expect to redevelop the building from office space to office/laboratory space and expand it by an additional 15,000 RSF to 30,000 RSF. We have executed a lease for 60,963 RSF, or 48% of the existing building’s RSF.

 
New Class A Development and Redevelopment Properties: 2018–2020 Deliveries (continued)
q218logo2.jpg
 
 
June 30, 2018
 
 
 

 
 
Our Ownership Interest
 
 
 
 
 
Cost to Complete
 
 
 
 
Unlevered Yields
Property/Market/Submarket
 
 
In Service
 
CIP
 
Construction Loan
 
ARE
Funding
 
Total at
Completion
 
Initial Stabilized
 
Initial Stabilized (Cash)
 
 
 
 
 
 
 
 
2018 deliveries: consolidated projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266 and 275 Second Avenue/Greater Boston/Route 128
 
100
%
 
 
$
73,527

 
$
9,970

 
$
—

 
$
5,503

 
$
89,000

 
 
8.4%
 
 
 
7.1%
 
5 Laboratory Drive/Research Triangle Park/RTP
 
100
%
 
 
4,771

 
21,239

 
 
—

 
 
36,490

 
 
62,500

 
 
7.7%
 
 
 
7.6%
 
9625 Towne Centre Drive/San Diego/University Town Center(1)
 
50.1
%
 
 
—

 
65,517

 
 
—

 
 
27,483

 
 
93,000

 
 
7.0%
 
 
 
7.0%
 
399 Binney Street/Greater Boston/Cambridge
 
100
%
 
 
—

 
117,834

 
 
—

 
 
56,166

 
 
174,000

 
 
7.3%
 
 
 
6.7%
 
2018 deliveries undergoing construction
 
 
 
 
78,298

 
214,560

 
 
—

 
 
125,642

 
 
418,500

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries: consolidated projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
213 East Grand Avenue/San Francisco/South San Francisco
 
100
%
 
 
—

 
173,962

 
 
—

 
 
86,038

 
 
260,000

 
 
7.2%
 
 
 
6.4%
 
9900 Medical Center Drive/Maryland/Rockville
 
100
%
 
 
—

 
8,370

 
 
—

 
 
5,930

 
 
14,300

 
 
8.4%
 
 
 
8.4%
 
279 East Grand Avenue/San Francisco/South San Francisco
 
100
%
 
 
—

 
79,924

 
 
—

 
 
71,076

 
 
151,000

 
 
7.8%
 
 
 
8.1%
 
Alexandria PARC/San Francisco/Greater Stanford
 
100
%
 
 
95,085

 
32,402

 
 
—

 
 
22,513

 
 
150,000

 
 
7.3%
 
 
 
6.1%
 
1818 Fairview Avenue East/Seattle/Lake Union
 
100
%
 
 
—

 
58,213

 
 
—

 
 
131,787

 
 
190,000

 
 
6.7%
 
 
 
6.7%
 
681 Gateway Boulevard/San Francisco/South San Francisco
 
100
%
 
 
—

 
—

 
 
—

 
 
108,000

 
 
108,000

 
 
8.5%
 
 
 
7.9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
95,085

 
352,871

 
 
—

 
 
425,344

 
 
873,300

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries: unconsolidated joint venture projects(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(amounts represent our share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
704 Quince Orchard Road/Maryland/Gaithersburg
 
56.8
%
 
 
1,207

 
3,838

 
 
7,274

 
 
981

 
 
13,300

 
 
8.9%
 
 
 
8.8%
 
Menlo Gateway/San Francisco/Greater Stanford
 
29.4
%
 
 
76,490

 
79,436

 
 
109,240

 
 
164,834

 
 
430,000

 
 
6.9%
 
 
 
6.3%
 
1655 and 1725 Third Street/San Francisco/Mission Bay/SoMa
 
10.0
%
 
 
—

 
43,078

 
 
29,948

 
 
4,974

 
 
78,000

 
 
7.8%
 
 
 
6.0%
 
 
 
 
 
 
77,697

 
126,352

 
 
146,462

 
 
170,789

 
 
521,300

 
 
 
 
 
 
 
 
2019 deliveries
 
 
 
172,782

 
479,223

 
 
146,462

 
 
596,133

 
 
1,394,600

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018 and 2019 deliveries
 
 
 
 
251,080

 
693,783

 
$
146,462

 
$
721,775

 
$
1,813,100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2020 deliveries: consolidated projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
825 and 835 Industrial Road/San Francisco/Greater Stanford
 
100
%
 
 
—

 
105,303

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
201 Haskins Way/San Francisco/South San Francisco
 
100
%
 
 
—

 
42,215

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9880 Campus Point Drive/San Diego/University Town Center
 
100
%
 
 
—

 
43,532

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2020 deliveries
 
 
 
 
—

 
191,050

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
$
251,080

 
$
884,833

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(1)
See page 45 of this Supplemental Information for additional information.

 
 
New Class A Development and Redevelopment Properties: Intermediate-Term Development Projects
q218logo2.jpg
June 30, 2018
 
 



325 Binney Street
 
88 Bluxome Street
 
505 Brannan Street, Phase II
 
960 Industrial Road
 
Alexandria Center® for Life Science
Greater Boston/Cambridge
 
San Francisco/Mission Bay/SoMa
 
San Francisco/Mission Bay/SoMa
 
San Francisco/Greater Stanford
 
New York City/Manhattan
208,965 RSF
 
1,070,925 RSF
 
165,000 RSF
 
533,000 RSF
 
550,000 RSF
q218binney325.jpg
 
q218bluxome.jpg
 
q218brannan505phaseii.jpg
 
q218industrial960.jpg
 
q218manhattan.jpg

5200 Illumina Way
 
Campus Pointe by Alexandria
 
1150 Eastlake Avenue East
 
1165/1166 Eastlake Avenue East
 
9800 Medical Center Drive
San Diego/University Town Center
 
San Diego/University Town Center
 
Seattle/Lake Union
 
Seattle/Lake Union
 
Maryland/Rockville
386,044 RSF
 
318,383 RSF
 
260,000 RSF
 
106,000 RSF
 
180,000 RSF
q218illuminaway.jpg
 
q218campuspoint.jpg
 
q218eastlake1150.jpg
 
q218eastlake1165.jpg
 
q218medical9800.jpg

 
 
New Class A Development and Redevelopment Properties: Summary of Pipeline
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 



Property/Submarket
 
Our Ownership Interest
 
Book Value
 
Square Footage
 
 
 
 
Projected Deliveries
 
Intermediate-
Term Development
 
Future Development/Redevelopment
 
 
 
 
 
 
2018
 
2019
 
2020
 
 
 
Total(1)
 
Greater Boston
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
399 Binney Street (Alexandria Center® at One Kendall Square)/Cambridge
 
100
%
 
 
 
$
117,834

 
 
164,000

 
—

 
 
—

 
—

 
 
—

 
 
164,000

 
266 and 275 Second Avenue/Route 128
 
100
%
 
 
 
9,970

 
 
31,858

 
—

 
 
—

 
—

 
 
—

 
 
31,858

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
325 Binney Street/Cambridge
 
100
%
 
 
 
94,956

 
 
—

 
—

 
 
—

 
208,965

 
 
—

 
 
208,965

 
Future development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Square®/Cambridge
 
100
%
 
 
 
7,787

 
 
—

 
—

 
 
—

 
—

 
 
100,000

 
 
100,000

 
100 Tech Drive/Route 128
 
100
%
 
 
 
—

 
 
—

 
—

 
 
—

 
—

 
 
300,000

 
 
300,000

 
Other value-creation projects
 
100
%
 
 
 
7,754

 
 
—

 
—

 
 
—

 
—

 
 
405,599

 
 
405,599

 
 
 
 
 
 
 
238,301

 
 
195,858

 
—

 
 
—

 
208,965

 
 
805,599

 
 
1,210,422

 
San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction or pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1655 and 1725 Third Street/Mission Bay/SoMa
 
10.0
%
 
 
 
—

(2) 
 
—

 
593,765

 
 
—

 
—

 
 
—

 
 
593,765

 
213 East Grand Avenue/South San Francisco
 
100
%
 
 
 
173,962

 
 
—

 
300,930

 
 
—

 
—

 
 
—

 
 
300,930

 
279 East Grand Avenue/South San Francisco
 
100
%
 
 
 
79,924

 
 
—

 
211,405

 
 
—

 
—

 
 
—

 
 
211,405

 
201 Haskins Way/South San Francisco
 
100
%
 
 
 
42,215

 
 
—

 
—

 
 
280,000

 
—

 
 
—

 
 
280,000

 
681 Gateway Boulevard/South San Francisco
 
100
%
 
 
 
—

 
 
—

 
126,971

(3) 
 
—

 
—

 
 
—

 
 
126,971

 
Menlo Gateway/Greater Stanford
 
29.4
%
 
 
 
—

(2) 
 
—

 
520,988

 
 
—

 
—

 
 
—

 
 
520,988

 
825 and 835 Industrial Road/Greater Stanford
 
100
%
 
 
 
105,303

 
 
—

 
—

 
 
530,000

 
—

 
 
—

 
 
530,000

 
Alexandria PARC/Greater Stanford
 
100
%
 
 
 
32,402

 
 
—

 
48,547

 
 
—

 
—

 
 
—

 
 
48,547

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
88 Bluxome Street/Mission Bay/SoMa
 
100
%
 
 
 
169,361

 
 
—

 
—

 
 
—

 
1,070,925

(1) 
 
—

 
 
1,070,925

 
505 Brannan Street, Phase II/Mission Bay/SoMa
 
99.7
%
 
 
 
16,018

 
 
—

 
—

 
 
—

 
165,000

 
 
—

 
 
165,000

 
960 Industrial Road/Greater Stanford
 
100
%
 
 
 
78,516

 
 
—

 
—

 
 
—

 
533,000

(4) 
 
—

 
 
533,000

 
Future development
 
 
 
 
 


 
 

 
 
 
 
 
 

 
 

 
 

 
East Grand Avenue/South San Francisco
 
100
%
 
 
 
5,988

 
 
—

 
—

 
 
—

 
—

 
 
90,000

 
 
90,000

 
Other value-creation projects
 
100
%
 
 
 
733

 
 
—

 
—

 
 
—

 
—

 
 
95,620

 
 
95,620

 
 
 
 
 
 
 
704,422

 
 
—

 
1,802,606

 
 
810,000

 
1,768,925

 
 
185,620

 
 
4,567,151

 
New York City
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® for Life Science – New York City/Manhattan
 
100
%
 
 
 
10,163

 
 
—

 
—

 
 
—

 
550,000

 
 
—

 
 
550,000

 
 
 
 
 
 
 
$
10,163

 
 
—

 
—

 
 
—

 
550,000

 
 
—

 
 
550,000

 
(1)    Represents total square footage upon completion of development of a new Class A property. RSF presented includes RSF of a building currently in operation that will be demolished upon commencement of construction.
(2)    This property is an unconsolidated real estate joint venture. See our share of the investment in real estate on page 45 of this Supplemental Information for additional information.
(3)    See page 39 of this Supplemental Information for additional information on our near-term redevelopment opportunity at this property. RSF represents an existing operating building to be redeveloped upon expiration of the existing lease at the end of the third quarter 2018.
(4)    Represents total RSF available for future development in either (i) one phase aggregating 533,000 RSF or (ii) two phases consisting of 423,000 RSF and 110,000 RSF, upon receiving entitlements.

 
 
New Class A Development and Redevelopment Properties: Summary of Pipeline (continued)
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 


Property/Submarket
 
Our Ownership Interest
 
Book Value
 
Square Footage
 
 
 
 
Projected Deliveries
 
Intermediate-
Term Development
 
Future Development/Redevelopment
 
 
 
 
 
 
2018
 
2019
 
2020
 
 
 
Total(1)
 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction or pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9625 Towne Centre Drive/University Town Center
 
50.1
%
 
 
 
$
65,517

 
 
163,648

 
—

 
 
—

 
—

 
 
—

 
 
163,648

 
9880 Campus Point Drive/University Town Center
 
100
%
 
 
 
43,532

 
 
—

 
—

 
 
98,000

 
—

 
 
—

 
 
98,000

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5200 Illumina Way/University Town Center
 
100
%
 
 
 
11,814

 
 
—

 
—

 
 
—

 
386,044

 
 
—

 
 
386,044

 
Campus Point Drive/University Town Center
 
55.0
%
 
 
 
16,377

 
 
—

 
—

 
 
—

 
318,383

 
 
—

 
 
318,383

 
Future development
 
 
 
 
 


 
 

 
 
 
 
 
 

 
 

 
 

 
Vista Wateridge/Sorrento Mesa
 
100
%
 
 
 
4,022

 
 
—

 
—

 
 
—

 
—

 
 
163,000

 
 
163,000

 
Other value-creation projects
 
100
%
 
 
 
48,050

 
 
—

 
—

 
 
—

 
125,000

 
 
309,895

 
 
434,895

 
 
 
 
 
 
 
189,312

 
 
163,648

 
—

 
 
98,000

 
829,427

 
 
472,895

 
 
1,563,970

 
Seattle
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1818 Fairview Avenue East/Lake Union
 
100
%
 
 
 
58,213

 
 
—

 
205,000

 
 
—

 
—

 
 
—

 
 
205,000

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1150 Eastlake Avenue East/Lake Union
 
100
%
 
 
 
20,884

 
 
—

 
—

 
 
—

 
260,000

 
 
—

 
 
260,000

 
1165/1166 Eastlake Avenue East/Lake Union
 
100
%
 
 
 
15,830

 
 
—

 
—

 
 
—

 
106,000

 
—

—

 
 
106,000

 
 
 
 
 
 
 
94,927

 
 
—

 
205,000

 
 
—

 
366,000

 
 
—

 
 
571,000

 
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9900 Medical Center Drive/Rockville
 
100
%
 
 
 
8,370

 
 
—

 
45,039

 
 
—

 
—

 
 
—

 
 
45,039

 
704 Quince Orchard Road/Gaithersburg
 
56.8
%
 
 
 
—

(2) 
 
—

 
58,186

 
 
—

 
—

 
 
—

 
 
58,186

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9800 Medical Center Drive/Rockville
 
100
%
 
 
 
11,680

 
 
—

 
—

 
 
—

 
180,000

 
 
—

 
 
180,000

 
Future development
 
 
 
 
 


 
 

 
 
 
 
 
 

 
 

 
 

 
Other value-creation projects
 
100
%
 
 
 
4,037

 
 
—

 
—

 
 
—

 
—

 
 
61,000

 
 
61,000

 
 
 
 
 
 
 
24,087

 
 
—

 
103,225

 
 
—

 
180,000

 

61,000

 
 
344,225

 
Research Triangle Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 Laboratory Drive/Research Triangle Park
 
100
%
 
 
 
21,239

 
 
141,819

 
—

 
 
—

 
—

 
 
—

 
 
141,819

 
Future development
 
 
 
 
 


 
 

 
 
 
 
 
 

 
 

 
 

 
6 Davis Drive/Research Triangle Park
 
100
%
 
 
 
16,952

 
 
—

 
—

 
 
—

 
—

 
 
1,000,000

 
 
1,000,000

 
Other value-creation projects
 
100
%
 
 
 
5,053

 
 
—

 
—

 
 
—

 
—

 
 
176,262

 
 
176,262

 
 
 
 
 
 
 
43,244

 
 
141,819

 
—

 
 
—

 
—

 
 
1,176,262

 
 
1,318,081

 
Other value-creation projects
 
Various

 
 
 
41,436

 
 
—

 
—

 
 
—

 
235,000

(1) 
 
571,705

 
 
806,705

 
 
 
 
 
 
 
$
1,345,892

 
 
501,325

 
2,110,831

 
 
908,000

 
4,138,317

 
 
3,273,081

 
 
10,931,554

 

(1)
Represents total square footage upon completion of development of a new Class A property.
(2)
This property is an unconsolidated real estate joint venture. See our share of the investment in real estate is on page 45 of this Supplemental Information for additional information.


 
 
Construction Spending
q218logo2.jpg
June 30, 2018
(Dollars in thousands, except per RSF amounts)
 
 



 
 
Six Months Ended
 
Construction Spending
 
June 30, 2018
 
Additions to real estate – consolidated projects
 
$
431,225
 
 
Investments in unconsolidated real estate joint ventures
 
 
44,486
 
 
Construction spending (cash basis)(1)
 
 
475,711
 
 
Increase in accrued construction
 
 
48,074
 
 
Construction spending
 
$
523,785
 
 



 
 
 
 
 
 
Projected Construction Spending
 
Year Ending
December 31, 2018
 
Development and redevelopment projects
 
$
414,000
 
 
Investments in unconsolidated real estate joint ventures
 
 
69,000
 
 
Contributions from noncontrolling interests (consolidated real estate joint ventures)
 
 
(21,000
)
 
Generic laboratory infrastructure/building improvement projects
 
 
102,000
 
 
Non-revenue-enhancing capital expenditures and tenant improvements
 
 
12,000
 
 
Projected construction spending for six months ending December 31, 2018
 
 
576,000
 
 
Actual construction spending for six months ended June 30, 2018
 
 
523,785
 
 
Guidance range
 
$
1,050,000
–
$1,150,000
 
 
 
 
 
 
 
 
Non-Revenue-Enhancing Capital Expenditures(2)
 
Six Months Ended
 
Recent Average
per RSF(3)
 
 
June 30, 2018
 
 
 
Amount
 
Per RSF
 
 
Non-revenue-enhancing capital expenditures
 
$
5,452

 
$
0.27

 
 
$
0.51

 
 
 
 
 
 
 
 
 
 
Tenant improvements and leasing costs:
 
 
 
 
 
 
 
 
Re-tenanted space
 
$
11,533

 
$
21.97

 
 
$
19.81

 
Renewal space
 
1,989

 
4.55

 
 
10.93

 
Total tenant improvements and leasing costs/weighted average
 
$
13,522

 
$
14.06

 
 
$
14.18

 


 


(1)
Includes revenue-enhancing projects and non-revenue-enhancing capital expenditures.
(2)
Excludes amounts that are recoverable from tenants, related to revenue-enhancing capital expenditures, or related to properties that have undergone redevelopment.
(3)
Represents the average of 2014 through 2017 and the six months ended June 30, 2018, annualized.

 
 
Joint Venture Financial Information
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 


Consolidated Real Estate Joint Ventures
(controlled by us through contractual rights or majority voting rights)
 
Unconsolidated Real Estate Joint Ventures
(controlled jointly or by our JV partners through contractual rights or majority voting rights)
Property/Market/Submarket
 
Noncontrolling
Interest Share(1)
 
Property/Market/Submarket
 
Our Ownership Share
225 Binney Street/Greater Boston/Cambridge
 
 
70.0
%
 
 
360 Longwood Avenue/Greater Boston/Longwood Medical Area
 
 
27.5
%
 
409 and 499 Illinois Street/San Francisco/Mission Bay/SoMa
 
 
40.0
%
 
 
1655 and 1725 Third Street/San Francisco/Mission Bay/SoMa
 
 
10.0
%
 
1500 Owens Street/San Francisco/Mission Bay/SoMa
 
 
49.9
%
 
 
Menlo Gateway/San Francisco/Greater Stanford
 
 
29.4
%
(2) 
Campus Pointe by Alexandria/San Diego/University Town Center
 
 
45.0
%
 
 
1401/1413 Research Boulevard/Maryland/Rockville
 
 
65.0
%
(3) 
9625 Towne Centre Drive/San Diego/University Town Center
 
 
49.9
%
 
 
704 Quince Orchard Road/Maryland/Gaithersburg
 
 
56.8
%
(3) 
 
 
 
 

 
 
 
 
 
 

 
 
June 30, 2018
 
 
Noncontrolling Interest Share of Consolidated Real Estate JVs
 
Our Share of Unconsolidated
Real Estate JVs
Investments in real estate
$
519,351

 
 
$
271,000

 
Cash and cash equivalents
 
18,749

 
 
 
2,807

 
Restricted cash
 
—

 
 
 
533

 
Other assets
 
32,730

 
 
 
23,043

 
Secured notes payable (see page 50)
 
—

 
 
 
(82,671
)
 
Other liabilities
 
(31,156
)
 
 
 
(21,740
)
 
Redeemable noncontrolling interests
 
(10,861
)
 
 
 
—

 
 
$
528,813

 
 
$
192,972

 
 
 
 
 
 
 
 
 
 
Noncontrolling Interest Share of Consolidated Real Estate JVs
 
Our Share of Unconsolidated Real Estate JVs
 
 
2Q18
 
 
1H18
 
 
2Q18
 
 
1H18
Total revenues
$
13,883

 
 
$
27,374

 
$
3,066

 
 
$
5,527

Rental operations
 
(4,279
)
 
 
(8,182
)
 
 
(910
)
 
 
(1,326
)
 
 
9,604

 
 
19,192

 
 
2,156

 
 
4,201

General and administrative
 
(85
)
 
 
(132
)
 
 
(22
)
 
 
(47
)
Interest
 
—

 
 
—

 
 
(237
)
 
 
(469
)
Depreciation and amortization
 
(3,914
)
 
 
(7,781
)
 
 
(807
)
 
 
(1,451
)
 
$
5,605

 
 
$
11,279

 
$
1,090

 
 
$
2,234



(1)
In addition to the consolidated real estate joint ventures listed, various partners hold insignificant noncontrolling interests in four other properties in North America.
(2)
As of June 30, 2018, we have an ownership interest in Menlo Gateway of 29.4% and expect our ownership to increase to 49% through future funding of construction costs by March 31, 2019.
(3)
Represents our ownership interest; our voting interest is limited to 50%.

 
 
Investments
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 


On January 1, 2018, we adopted a new accounting standard that requires us, on a prospective basis, to present our equity investments at fair value whenever fair value (or NAV) is readily available. For investments without readily available fair values, we adjust the cost basis whenever such investments have an observable price change. Further adjustments are not made until another price change, if any, is observed. See “Definitions and Reconciliations” on page 53 for information related to our adoption of this new accounting standard.


 
 
June 30, 2018
 
 
Three Months Ended
 
Six Months Ended
Realized gains
 
$
7,463

 
 
$
20,795

 
Unrealized gains
 
5,067

 
 
77,296

 
Investment income
 
$
12,530

 
 
$
98,091

 
 
 
 
 
 
 
 


 
 
Cost
 
Adjustments
 
Carrying Amount
 
Investments at fair value:
 
 
 
 
 
 
 
 
 
 
Publicly traded companies
 
$
101,603

 
 
$
97,013

 
 
$
198,616

 
 
Entities that report NAV
 
173,813

 
 
110,843

(1) 
 
284,656

 
 
 
 
 
 
 
 
 
 
 
 
 
Entities that do not report NAV:
 
 
 
 
 
 
 
 
 
 
Entities with observable price changes since 1/1/18
 
12,811

 
 
10,289

 
 
23,100

 
 
Entities without observable price changes
 
284,381

 
 
—

 
 
284,381

 
 
June 30, 2018
 
$
572,608

 
 
$
218,145

(2) 
 
$
790,753

 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2018
 
$
511,162

 
 
$
213,148

 
 
$
724,310

 
 




(1)
Represents adjustments, using reported NAV as a practical expedient to estimate fair value, for our limited partnership investments.
(2)
Comprises (i) $50 million of unrealized gains recognized prior to adoption of the new accounting standard, (ii) $91 million of unrealized gains recognized upon adoption of the new accounting standard, and (iii) $77 million of unrealized gains recognized subsequent to adoption of the new accounting standard.
 
 
Public/Private Mix (Cost)
 
 
q218pubprimix4s.jpg
 
 
Tenant/Non-Tenant Mix (Cost)
 
 
    q218tenant4s.jpg
 
 
287
$2.0M
 
 
Holdings
Average Cost
of Investment
 

 
 
 
q218logo2.jpg
Key Credit Metrics
June 30, 2018
 
 


Net Debt to Adjusted EBITDA(1)
 
Net Debt and Preferred Stock to Adjusted EBITDA(1)
 
q218netdebt4s.jpg
 
q218netdebtprefstock4s.jpg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-Charge Coverage Ratio(1)
 
Liquidity(2)
 
q218fixedcharge4s.jpg
 
 
 
 
 
$2.9B
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in millions)
 
 
 
Availability under our $1.65 billion unsecured senior line of credit
$
1,650

 
 
Outstanding forward equity sales agreements
710

 
 
Cash, cash equivalents, and restricted cash
322

 
 
Investments in publicly traded companies
199

 
 
Remaining construction loan commitments
15

 
 
 
$
2,896

 
 
 
 
 

(1)
Quarter annualized.    
(2)
As of June 30, 2018.

 
 
 
q218logo2.jpg
Summary of Debt
June 30, 2018
 
 


Debt maturities chart
(In millions)
q218debtmaturities.jpg
(1)
Includes our secured construction loan for our property at 50 and 60 Binney Street in our Cambridge submarket with an outstanding balance of $334.4 million as of June 30, 2018. In July 2018, we completed a partial repayment of $150.0 million on this secured construction loan. We have two one-year options to extend the stated maturity date to January 28, 2021, subject to certain conditions. Our guidance on sources and uses of capital on page 7 also assumes repayment of our 2019 unsecured senior bank term loan amounts aggregating $200.0 million in 2018.
(2)
In 2H18, we expect to amend our $1.65 billion unsecured senior line of credit and our 2021 Unsecured Senior Bank Term Loan to extend the maturity date of both facilities to 2024, among other changes.

Fixed-rate/hedged and unhedged variable-rate debt
(Dollars in thousands)
 
Fixed-Rate/Hedged
Variable-Rate Debt
 
Unhedged
Variable-Rate Debt
 
Total
 
Percentage
 
Weighted-Average
 
 
 
 
 
Interest Rate(1)
 
Remaining Term
(in years)
 
 
 
 
 
 
Secured notes payable
$
491,897

 
$
284,363

 
$
776,260

 
13.8
%
 
4.28
%
 
2.8
Unsecured senior notes payable
4,289,521

 
—

 
4,289,521

 
76.4

 
4.15

 
6.9
$1.65 billion unsecured senior line of credit(2)
—

 
—

 
—

 
—

 
N/A

 
3.3
2019 Unsecured Senior Bank Term Loan
199,620

 
—

 
199,620

 
3.6

 
2.75

 
0.5
2021 Unsecured Senior Bank Term Loan(2)
348,704

 
—

 
348,704

 
6.2

 
2.41

 
2.5
Total/weighted average
$
5,329,742

 
$
284,363

 
$
5,614,105

 
100.0
%
 
4.01
%
 
5.8
Percentage of total debt
95
%
 
5
%
 
100
%
 
 
 
 
 
 
 

(1)
Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.
(2)
See footnote 2 above.


 
 
Summary of Debt (continued)
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 


Debt
 
Stated 
Rate
 
Interest
Rate(1)
 
Maturity
Date(2)
 
Principal Payments Remaining for the Periods Ending December 31,
 
Principal
 
Unamortized (Deferred Financing Cost), (Discount)/Premium
 
Total
 
 
 
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
 
 
Secured notes payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater Boston
 
L+1.50
%
 
 
3.82
%
 
1/28/19
(3) 
 
$
—

 
$
334,363

 
$
—

 
$
—

 
$
—

 
$
—

 
$
334,363

 
$
(698
)
 
$
333,665

Greater Boston, San Diego, Seattle, and Maryland
 
7.75
%
 
 
8.15

 
4/1/20
 
 
1,009

 
2,138

 
104,352

 
—

 
—

 
—

 
107,499

 
(585
)
 
106,914

San Diego
 
4.66
%
 
 
4.90

 
1/1/23
 
 
674

 
1,686

 
1,762

 
1,852

 
1,942

 
26,259

 
34,175

 
(296
)
 
33,879

Greater Boston
 
3.93
%
 
 
3.19

 
3/10/23
 
 
731

 
1,505

 
1,566

 
1,628

 
1,693

 
74,517

 
81,640

 
2,566

 
84,206

Greater Boston
 
4.82
%
 
 
3.40

 
2/6/24
 
 
1,470

 
3,078

 
3,204

 
3,392

 
3,561

 
187,281

 
201,986

 
14,848

 
216,834

San Francisco
 
6.50
%
 
 
6.50

 
7/1/36
 
 
11

 
23

 
25

 
26

 
28

 
649

 
762

 
—

 
762

Secured debt weighted-average interest rate/subtotal
 
4.60
%
 
 
4.28

 
 
 
 
3,895

 
342,793

 
110,909

 
6,898

 
7,224

 
288,706

 
760,425

 
15,835

 
776,260

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 Unsecured Senior Bank Term Loan
 
L+1.20
%
 
 
2.75

 
1/3/19
 
 
—

 
200,000

 
—

 
—

 
—

 
—

 
200,000

 
(380
)
 
199,620

2021 Unsecured Senior Bank Term Loan
 
L+1.10
%
 
 
2.41

 
1/15/21
(4) 
 
—

 
—

 
—

 
350,000

 
—

 
—

 
350,000

 
(1,296
)
 
348,704

$1.65 billion unsecured senior line of credit
 
L+1.00
%
 
 
N/A

 
10/29/21
(4) 
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Unsecured senior notes payable
 
2.75
%
 
 
2.96

 
1/15/20
 
 
—

 
—

 
400,000

 
—

 
—

 
—

 
400,000

 
(1,237
)
 
398,763

Unsecured senior notes payable
 
4.60
%
 
 
4.75

 
4/1/22
 
 
—

 
—

 
—

 
—

 
550,000

 
—

 
550,000

 
(2,438
)
 
547,562

Unsecured senior notes payable
 
3.90
%
 
 
4.04

 
6/15/23
 
 
—

 
—

 
—

 
—

 
—

 
500,000

 
500,000

 
(2,945
)
 
497,055

Unsecured senior notes payable
 
4.00
%
 
 
4.18

 
1/15/24
 
 
—

 
—

 
—

 
—

 
—

 
450,000

 
450,000

 
(4,050
)
 
445,950

Unsecured senior notes payable
 
3.45
%
 
 
3.62

 
4/30/25
 
 
—

 
—

 
—

 
—

 
—

 
600,000

 
600,000

 
(5,954
)
 
594,046

Unsecured senior notes payable
 
4.30
%
 
 
4.50

 
1/15/26
 
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(3,648
)
 
296,352

Unsecured senior notes payable
 
3.95
%
 
 
4.13

 
1/15/27
 
 
—

 
—

 
—

 
—

 
—

 
350,000

 
350,000

 
(4,278
)
 
345,722

Unsecured senior notes payable
 
3.95
%
 
 
4.07

 
1/15/28
 
 
—

 
—

 
—

 
—

 
—

 
425,000

 
425,000

 
(4,024
)
 
420,976

Unsecured senior notes payable
 
4.50
%
 
 
4.60

 
7/30/29
 
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(2,452
)
 
297,548

Unsecured senior notes payable
 
4.70
%
 
 
4.81

 
7/1/30
 
 
—

 
—

 
—

 
—

 
—

 
450,000

 
450,000

 
(4,453
)
 
445,547

Unsecured debt weighted average/subtotal
 
 
 
 
3.96

 
 
 
 
—

 
200,000

 
400,000

 
350,000

 
550,000

 
3,375,000

 
4,875,000

 
(37,155
)
 
4,837,845

Weighted-average interest rate/total
 
 
 
 
4.01
%
 
 
 
 
$
3,895

 
$
542,793

 
$
510,909

 
$
356,898

 
$
557,224

 
$
3,663,706

 
$
5,635,425

 
$
(21,320
)
 
$
5,614,105

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balloon payments
 
 
 
 
 
 
 
 
 
$
—

 
$
534,363

 
$
503,979

 
$
350,000

 
$
550,000

 
$
3,658,724

 
$
5,597,066

 
$
—

 
$
5,597,066

Principal amortization
 
 
 
 
 
 
 
 
 
3,895

 
8,430

 
6,930

 
6,898

 
7,224

 
4,982

 
38,359

 
(21,320
)
 
17,039

Total debt
 
 
 
 
 
 
 
 
 
$
3,895

 
$
542,793

 
$
510,909

 
$
356,898

 
$
557,224

 
$
3,663,706

 
$
5,635,425

 
$
(21,320
)
 
$
5,614,105

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-rate/hedged variable-rate debt
 
 
 
 
 
 
 
 
 
$
3,895

 
$
258,430

 
$
510,909

 
$
356,898

 
$
557,224

 
$
3,663,706

 
$
5,351,062

 
$
(21,320
)
 
$
5,329,742

Unhedged variable-rate debt
 
 
 
 
 
 
 
 
 
—

 
284,363

 
—

 
—

 
—

 
—

 
284,363

 
—

 
284,363

Total debt
 
 
 
 
 
 
 
 
 
$
3,895

 
$
542,793

 
$
510,909

 
$
356,898

 
$
557,224

 
$
3,663,706

 
$
5,635,425

 
$
(21,320
)
 
$
5,614,105

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.
(2)
Reflects any extension options that we control.
(3)
Secured construction loan for our property at 50 and 60 Binney Street in our Cambridge submarket with aggregate commitments of $350.0 million. We have two one-year options to extend the stated maturity date to January 28, 2021, subject to certain conditions. In July 2018, we completed a partial repayment of $150.0 million of the outstanding balance and reduced aggregate commitments to $200.0 million.
(4)
See footnote 2 on page 48.

 
 
Summary of Debt (continued)
q218logo2.jpg
June 30, 2018
(Dollars in thousands)
 
 


Unconsolidated real estate joint ventures’ debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100% at JV Level
 
Unconsolidated Joint Venture
 
Our Share
 
Maturity Date
 
Stated
Interest Rate(1)
 
Interest Rate(1)(2)
 
Debt Balance(3)
 
Remaining Commitments
 
Menlo Gateway, Phase I
 
 
29.4
%
(4) 
 
3/1/19
 
L+2.50%
 
 
4.49
%
 
 
$
134,564

 
$
13,290

 
1401/1413 Research Boulevard
 
 
65.0
%
 
 
5/17/20
 
L+2.50%
 
 
5.39
%
 
 
14,682

 
9,892

 
1655 and 1725 Third Street
 
 
10.0
%
 
 
6/29/21
 
L+3.70%
 
 
5.68
%
 
 
75,520

 
299,480

 
360 Longwood Avenue
 
 
27.5
%
 
 
9/1/22
 
3.32%
 
 
3.54
%
 
 
94,143

 
17,000

(5) 
704 Quince Orchard Road
 
 
56.8
%
 
 
3/16/23
 
L+1.95%
 
 
4.29
%
 
 
1,016

 
13,809

 
Menlo Gateway, Phase II
 
 
29.4
%
(4) 
 
5/1/35
 
4.53%
 
 
4.56
%
 
 
—

 
157,270

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
319,925

 
$
510,741

 

(1)
For acquired loans, interest rate includes adjustments to reflect our effective borrowing costs at the time of acquisition.
(2)
Includes interest expense, amortization of loan fees, and amortization of premiums (discounts) as of June 30, 2018.
(3)
Represents outstanding principal, net of unamortized deferred financing costs and discount/premium.
(4)
See page 45 of this Supplemental Information for additional information.
(5)
The remaining loan commitment balance excludes an earn-out advance provision that allows for incremental borrowings up to $48.0 million, subject to certain conditions.

Debt covenants
 
 
 
 
 
 
 
 
Debt Covenant Ratios(1)
 
Unsecured Senior Notes Payable
 
$1.65 Billion Unsecured Senior Line of Credit and
Unsecured Senior Bank Term Loans
 
Requirement
 
June 30, 2018
 
Requirement
 
June 30, 2018
Total Debt to Total Assets
 
≤ 60%
 
37%
 
≤ 60.0%
 
30.0%
Secured Debt to Total Assets
 
≤ 40%
 
5%
 
≤ 45.0%
 
4.1%
Consolidated EBITDA to Interest Expense
 
≥ 1.5x
 
5.2x
 
≥ 1.50x
 
4.01x
Unencumbered Total Asset Value to Unsecured Debt
 
≥ 150%
 
258%
 
N/A
 
N/A
Unsecured Leverage Ratio
 
N/A
 
N/A
 
≤ 60.0%
 
33.3%
Unsecured Interest Coverage Ratio
 
N/A
 
N/A
 
≥ 1.50x
 
6.64x

(1)
All covenant ratio titles utilize terms as defined in the respective debt agreements. EBITDA is not calculated under the definition set forth by the SEC in Exchange Act Release No. 47226.

Interest rate swap agreements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Date
 
Maturity Date
 
Number of Contracts
 
Weighted-Average Interest Pay Rate(1)
 
Fair Value
as of 6/30/18
 
Notional Amount in Effect as of
 
 
 
 
 
6/30/18
 
12/31/18
 
12/31/19
March 29, 2018
 
March 31, 2019
 
8
 
1.16%
 
$
5,142

 
 
$
600,000

 
$
600,000

 
$
—

March 29, 2019
 
March 31, 2020
 
1
 
1.89%
 
 
849


 
—

 
—

 
100,000

Total
 
 
 
 
 
 
 
$
5,991

 
 
$
600,000

 
$
600,000

 
$
100,000


(1)
In addition to the interest pay rate for each swap agreement, interest is payable at an applicable margin over LIBOR for borrowings outstanding as of June 30, 2018, as listed under the column heading “Stated Rate” in our summary table of outstanding indebtedness and respective principal payments on the previous page.

 
 
 
q218logo2.jpg
Definitions and Reconciliations
June 30, 2018
 
 



This section contains additional information for sections throughout this Supplemental Information package and the accompanying earnings press release, as well as explanations and reconciliations of certain non-GAAP financial measures and the reasons why we use these supplemental measures of performance and believe they provide useful information to investors. Additional detail can be found in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, as well as other documents filed with or furnished to the SEC from time to time.

Adjusted EBITDA and Adjusted EBITDA margins
 
The following table reconciles net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA:
 
Three Months Ended
(Dollars in thousands)
6/30/18
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
Net income
$
60,547

 
$
141,518

 
$
45,607

 
$
59,546

 
$
41,496

 
Interest expense
38,097

 
36,915

 
36,082

 
31,031

 
31,748

 
Income taxes
1,106

 
940

 
1,398

 
1,305

 
1,333

 
Depreciation and amortization
118,852

 
114,219

 
107,714

 
107,788

 
104,098

 
Stock compensation expense
7,975

 
7,248

 
6,961

 
7,893

 
5,504

 
Loss on early extinguishment of debt
—

 
—

 
2,781

 
—

 
—

 
Our share of gain on sales of real estate from unconsolidated real estate JVs
—

 
—

 
—

 
(14,106
)
 
—

 
Gain on sales of real estate – land parcels
—

 
—

 
—

 
—

 
(111
)
 
Unrealized gains on non-real estate investments
(5,067
)
 
(72,229
)
 
—

 
—

 
—

 
Impairment of real estate and non-real estate investments
6,311

 
—

 
3,805

 
—

 
4,694

 
Adjusted EBITDA
$
227,821

 
$
228,611

 
$
204,348

 
$
193,457

 
$
188,762

 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
325,034

 
$
320,139

 
$
298,791

 
$
285,370

 
$
273,059

 
Realized gains on non real-estate investments
7,463

 
13,332

 
—

 
—

 
—

 
Impairment of non-real estate investments
—

 
—

 
3,805

 
—

 
4,491

 
Revenues, as adjusted(1)
$
332,497

 
$
333,471

 
$
302,596

 
$
285,370

 
$
277,550

 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA margins
69%

 
69%

 
68%

 
68%

 
68%

 

(1)
Revenues, as adjusted, includes realized gains or losses on non-real estate investments. We use revenues, as adjusted, in our calculation of Adjusted EBITDA margin. We believe using revenues, as adjusted, provides a more accurate Adjusted EBITDA margin calculation.
    
We use Adjusted EBITDA as a supplemental performance measure of our operations, for financial and operational decision-making, and as a supplemental or additional means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation, and amortization (“EBITDA”), excluding stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate and land parcels, unrealized gains or losses on non-real estate investments, and impairments.
 

We believe Adjusted EBITDA provides investors with relevant and useful information as it allows investors to evaluate our operating performance without having to account for differences recognized because of real estate investment and disposition decisions, financing decisions, capital structure, capital market transactions, and variances resulting from the volatility of market conditions outside of our control. For example, we exclude gains or losses on the early extinguishment of debt to allow investors to measure our performance independent of our capital structure and indebtedness. We believe that adjusting for the effects of impairments and gains or losses on sales of real estate allows investors to evaluate performance from period to period on a consistent basis without having to account for differences recognized because of real estate investment and disposition decisions. We believe that excluding charges related to share-based compensation and unrealized gains or losses on non-real estate investments facilitates for investors a comparison of our operations across periods without the variances caused by the volatility of the amounts (which depends on market forces outside our control). Adjusted EBITDA has limitations as a measure of our performance. Adjusted EBITDA does not reflect our historical cash expenditures or future cash requirements for capital expenditures or contractual commitments. While Adjusted EBITDA is a relevant measure of performance, it does not represent net income or cash flows from operations calculated and presented in accordance with GAAP, and it should not be considered as an alternative to those indicators in evaluating performance or liquidity.

Annual rental revenue

Annual rental revenue represents the annualized fixed base rental amount, in effect as of the end of the period, related to our operating RSF. Annual rental revenue is presented using 100% of the annual rental revenue of our consolidated properties and our share of annual rental revenue for our unconsolidated real estate joint ventures. Annual rental revenue per RSF is computed by dividing annual rental revenue by the sum of 100% of the RSF of our consolidated properties and our share of the RSF of properties held in unconsolidated real estate joint ventures. As of June 30, 2018, approximately 97% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Annual rental revenue excludes these operating expenses recovered from our tenants. Amounts recovered from our tenants related to these operating expenses are classified in tenant recoveries in our consolidated statements of income.

Cash interest

Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and debt premiums/discounts. See definition of fixed-charge coverage ratio for a reconciliation of interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest.


 
 
 
q218logo2.jpg
Definitions and Reconciliations (continued)
June 30, 2018
 
 


Class A properties and AAA locations

Class A properties are properties clustered in AAA locations that provide innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Class A properties generally command higher annual rental rates than other classes of similar properties.

AAA locations are in close proximity to concentrations of specialized skills, knowledge, institutions, and related businesses. Such locations are generally characterized by high barriers to entry for new landlords, high barriers to exit for tenants, and a limited supply of available space.

Development, redevelopment, and pre-construction

A key component of our business model is our disciplined allocation of capital to the development and redevelopment of new Class A properties located in collaborative life science and technology campuses in AAA urban innovation clusters. These projects are focused on providing high-quality, generic, and reusable spaces that meet the real estate requirements of, and are reusable by, a wide range of tenants. Upon completion, each value-creation project is expected to generate a significant increase in rental income, net operating income, and cash flows. Our development and redevelopment projects are generally in locations that are highly desirable to high-quality entities, which we believe results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.

Development projects consist of the ground-up development of generic and reusable facilities. Redevelopment projects consist of the permanent change in use of office, warehouse, and shell space into office/laboratory or tech office space. We generally will not commence new development projects for aboveground construction of new Class A office/laboratory and tech office space without first securing significant pre-leasing for such space, except when there is solid market demand for high-quality Class A properties.

Pre-construction activities include entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building improvements. The advancement of pre-construction efforts is focused on reducing the time required to deliver projects to prospective tenants. These critical activities add significant value for future ground-up development and are required for the vertical construction of buildings. Ultimately, these projects will provide high-quality facilities and are expected to generate significant revenue and cash flows.

Dividend payout ratio (common stock)

Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (shares of common stock outstanding on the respective record dates multiplied by the related dividend per share) to funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted.

Dividend yield

Dividend yield for the quarter represents the annualized quarter dividend divided by the closing common stock price at the end of the quarter.
 
Fixed-charge coverage ratio

Fixed-charge coverage ratio is a non-GAAP financial measure representing the ratio of Adjusted EBITDA to fixed charges. We believe this ratio is useful to investors as a supplemental measure of our ability to satisfy fixed financing obligations and preferred stock dividends. Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and debt premiums/discounts. The fixed-charge coverage ratio calculation below is not directly comparable to the computation of ratio of earnings to fixed charges as defined in Item 503(d) of Regulation S-K and to the “Computation of Consolidated Ratio of Earnings to Fixed Charges and Consolidated Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends” included in Exhibit 12.1 to our annual report on Form 10-K.

The following table reconciles interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest and fixed charges:
 
Three Months Ended
(Dollars in thousands)
6/30/18
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
Adjusted EBITDA
$
227,821

 
$
228,611

 
$
204,348

 
$
193,457

 
$
188,762

 
 
 
 
 
 
 
 
 
 
Interest expense
$
38,097

 
$
36,915

 
$
36,082

 
$
31,031

 
$
31,748

Capitalized interest
15,527

 
13,360

 
12,897

 
17,092

 
15,069

Amortization of loan fees
(2,593
)
 
(2,543
)
 
(2,571
)
 
(2,840
)
 
(2,843
)
Amortization of debt premiums
606

 
575

 
639

 
652

 
625

Cash interest
51,637

 
48,307

 
47,047

 
45,935

 
44,599

Dividends on preferred stock
1,302

 
1,302

 
1,302

 
1,302

 
1,278

Fixed charges
$
52,939

 
$
49,609

 
$
48,349

 
$
47,237

 
$
45,877

 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio:
 
 
 
 
 
 
 
 
 
– quarter annualized
4.3x

 
4.6x

 
4.2x

 
4.1x

 
4.1x

– trailing 12 months
4.3x

 
4.3x

 
4.1x

 
4.0x

 
3.9x

 
 
 
 
 
 
 
 
 
 

 
 
 
q218logo2.jpg
Definitions and Reconciliations (continued)
June 30, 2018
 
 


Funds from operations and funds from operations, as adjusted, attributable to Alexandria’s common stockholders

GAAP-basis accounting for real estate assets utilizes historical cost accounting and assumes that real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Nareit Board of Governors established funds from operations as an improved measurement tool. Since its introduction, funds from operations has become a widely used non-GAAP financial measure among equity REITs. We believe that funds from operations is helpful to investors as an additional measure of the performance of an equity REIT. Moreover, we believe that funds from operations, as adjusted, allows investors to compare our performance to the performance of other real estate companies on a consistent basis, without having to account for differences recognized because of real estate investment and disposition decisions, financing decisions, capital structure, capital market transactions, and variances resulting from the volatility of market conditions outside of our control. We compute funds from operations in accordance with standards established by the Nareit Board of Governors in its April 2002 White Paper and related implementation guidance (the “Nareit White Paper”). The Nareit White Paper defines funds from operations as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciable real estate and land parcels, and impairments of depreciable real estate (excluding land parcels), plus real estate-related depreciation and amortization, and after adjustments for our share of consolidated and unconsolidated partnerships and real estate joint ventures. Impairments represent the write-down of assets when fair value over the recoverability period is less than the carrying value due to changes in general market conditions and do not necessarily reflect the operating performance of the properties during the corresponding period. The definition of funds from operations in the Nareit White Paper does not include adjustments related to unrealized gains and losses on non-real estate investments, which are affected by market conditions outside of our control. Consequently, unrealized gains and losses on non-real estate investments recognized in earnings affect our reported funds from operations as computed in accordance with the Nareit White Paper.

We compute funds from operations, as adjusted, as funds from operations calculated in accordance with the Nareit White Paper excluding significant realized gains or losses on the sale of non-real estate investments, unrealized gains or losses on non-real estate investments, losses on early extinguishment of debt, preferred stock redemption charges, impairments of non-depreciable real estate, impairments of non-real estate investments, and deal costs, and the amount of such items that is allocable to our unvested restricted stock awards. Neither funds from operations nor funds from operations, as adjusted, should be considered as alternatives to net income (determined in accordance with GAAP) as indications of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as measures of liquidity, nor are they indicative of the availability of funds for our cash needs, including our ability to make distributions.

 
Initial stabilized yield (unlevered)
Initial stabilized yield is calculated as the quotient of the estimated amounts of net operating income at stabilization and our investment in the property. Our initial stabilized yield excludes the benefit of leverage. Our cash rents related to our value-creation projects are expected to increase over time due to contractual annual rent escalations. Our estimates for initial stabilized yields, initial stabilized yields (cash basis), and total costs at completion represent our initial estimates at the commencement of the project. We expect to update this information upon completion of the project, or sooner if there are significant changes to the expected project yields or costs.

•
Initial stabilized yield reflects rental income, including contractual rent escalations and any rent concessions over the term(s) of the lease(s), calculated on a straight-line basis.
•
Initial stabilized yield (cash basis) reflects cash rents at the stabilization date after initial rental concessions, if any, have elapsed and our total cash investment in the property.

Investments

We hold investments in publicly traded companies and privately held entities primarily involved in the life science and technology industries. On January 1, 2018, we adopted a new accounting standard update (“ASU”) on financial instruments that prospectively changed how we recognize, measure, present, and disclose these investments.

Key differences between prior accounting standards and the new ASU:

Prior to January 1, 2018:
•
Investments in publicly traded companies were presented at fair value in the balance sheet, with changes in fair value classified in other comprehensive income within equity.
•
Investments in privately held entities were accounted for under the cost method of accounting.
•
Gains or losses were recognized in net income upon the sale of an investment.
•
Investments in privately held entities required accounting under the equity method unless our interest in the entity was deemed to be so minor that we had virtually no influence over the entity’s operating and financial policies. Under the equity method of accounting, we recognized our investment initially at cost and adjusted the carrying amount of the investment to recognize our share of the earnings or losses of the investee subsequent to the date of our investment. We had no investments accounted for under the equity method as of December 31, 2017.
•
Investments were evaluated for impairment, with other-than-temporary impairments recognized in net income.

Effective January 1, 2018:
•
Investments in publicly traded companies are presented at fair value in the balance sheet, with changes in fair value for investments in publicly traded companies and investments in privately held entities that report NAV, and observable price changes for investments in privately held entities that do not report NAV, are recognized as unrealized gains or losses and classified as investment income in our consolidated statements of income.
•
Investments in privately held entities without readily determinable fair values previously accounted for under the cost method are accounted for as follows:
•
Investments in privately held entities that report NAV are presented at fair value using NAV as a practical expedient, with changes in fair value recognized in net income.
•
Investments in privately held entities that do not report NAV are carried at cost, adjusted for observable price changes and impairments, with changes recognized in net income.

 
 
 
q218logo2.jpg
Definitions and Reconciliations (continued)
June 30, 2018
 
 


•
One time adjustments recognized on January 1, 2018:
•
For investments in publicly traded companies, reclassification of cumulative unrealized gains and losses as of December 31, 2017, aggregating $49.8 million, from accumulated other comprehensive income to retained earnings.
•
For investments in privately held entities without readily determinable fair values that were previously accounted for under the cost method:
•
Adjustment of cumulative unrealized gains for investments in privately held entities that report NAV, representing the difference between fair values as of December 31, 2017, using NAV as a practical expedient, and the carrying value of the investments as of December 31, 2017, previously accounted for under the cost method, aggregating $90.8 million, with a corresponding adjustment to retained earnings.
•
No adjustment was required for investments in privately held entities that do not report NAV. The ASU requires a prospective transition approach for investments in privately held entities that do not report NAV. The Financial Accounting Standards Board (“FASB”) clarified that it would be difficult for entities to determine the last observable transaction price existing prior to the adoption of this ASU. Therefore, unlike our investments in privately held entities that report NAV that were adjusted to reflect fair values upon adoption of the new ASU, our investments in privately held entities that do not report NAV were not retrospectively adjusted to fair values upon adoption. As such, any initial valuation adjustments made for investments in privately held entities that do not report NAV subsequent to January 1, 2018, as a result of future observable price changes will include recognition of cumulative unrealized gains or losses equal to the difference between the carrying basis of the investment and the observable price at the date of measurement.
•
Investments in privately held entities will continue to require accounting under the equity method unless our interest in the entity was deemed to be so minor that we had virtually no influence over the entity’s operating and financial policies. Under the equity method of accounting, we recognize our investment initially at cost and adjust the carrying amount of the investment to recognize our share of the earnings or losses of the investee subsequent to the date of our investment. We had no investments accounted for under the equity method as of June 30, 2018.

Investment-grade or large cap tenants

Investment-grade or large cap tenants include tenants that are investment-grade rated or have a 12-month average reported market capitalization or private valuation greater than $10 billion.

Items included in net income attributable to Alexandria’s common stockholders

We present a tabular comparison of items, whether gain or loss, that may facilitate a high-level understanding of our results and provide context for the disclosures included in this Supplemental Information, our most recent annual report on Form 10-K, and our subsequent quarterly reports on Form 10-Q. We believe such tabular presentation promotes for investors a better understanding of the corporate-level decisions made and activities performed that significantly affect comparison of our operating results from period to period. We also believe this tabular presentation will supplement for investors an understanding of our disclosures and real estate operating results. Gains or losses on sales of real estate and impairments of held for sale assets are related to corporate-level decisions to dispose of real estate. Gains or losses on early extinguishment of debt and preferred stock redemption charges are related to corporate-level financing decisions focused on our capital structure strategy. Significant realized and unrealized gains or losses on non-real estate investments and impairments of real estate and non-real estate investments are not related to the operating performance of our real estate assets as they result from strategic, corporate-level non-real estate investment decisions and external market conditions. Impairments of non-real estate investments are not related to the operating performance of our real estate as they represent the write-down of a non-real estate investment when
 
its fair value declines below its carrying value due to changes in general market or other conditions outside of our control. Significant items, whether a gain or loss, included in the tabular disclosure for current periods are described in further detail in this Supplemental Information.

Joint venture financial information
    
We present components of balance sheet and operating results information related to our joint ventures, which are not in accordance with, or intended to be presentations in accordance with, GAAP. We present the proportionate share of certain financial line items as follows: (i) for each real estate joint venture that we consolidate in our financial statements, but of which we own less than 100%, we apply the noncontrolling interest economic ownership percentage to each financial item to arrive at the amount of such cumulative noncontrolling interest share of each component presented; and (ii) for each real estate joint venture that we do not control, and do not consolidate, we apply our economic ownership percentage to each financial item to arrive at our proportionate share of each component presented.

The components of balance sheet and operating results information related to joint ventures do not represent our legal claim to those items. For each entity that we do not wholly own, the joint venture agreement generally determines what equity holders can receive upon capital events, such as sales or refinancing, or in the event of a liquidation. Equity holders are normally entitled to their respective legal ownership of any residual cash from a joint venture only after all liabilities, priority distributions, and claims have been repaid or satisfied.

We believe this information can help investors estimate the balance sheet and operating results information related to our partially owned entities. Presenting this information provides a perspective not immediately available from consolidated financial statements and one that can supplement an understanding of joint venture assets, liabilities, revenues, and expenses included in our consolidated results.

The components of balance sheet and operating results information related to joint ventures are limited as an analytical tool as the overall economic ownership interest does not represent our legal claim to each of our joint ventures’ assets, liabilities, or results of operations. In addition, joint venture financial information may include financial information related to the unconsolidated real estate joint ventures that we do not control. We believe that in order to facilitate for investors a clear understanding of our operating results and our total assets and liabilities, joint venture financial information should be examined in conjunction with our consolidated statements of income and balance sheets. Joint venture financial information should not be considered an alternative to our consolidated financial statements, which are prepared in accordance with GAAP.

Net cash provided by operating activities after dividends

Net cash provided by operating activities after dividends includes the deduction for distributions to noncontrolling interests. For purposes of this calculation, changes in operating assets and liabilities are excluded as they represent timing differences.


 
 
 
q218logo2.jpg
Definitions and Reconciliations (continued)
June 30, 2018
 
 


Net debt to Adjusted EBITDA and net debt and preferred stock to Adjusted EBITDA

Net debt to Adjusted EBITDA and net debt and preferred stock to Adjusted EBITDA are non-GAAP financial measures that we believe are useful to investors as supplemental measures in evaluating our balance sheet leverage. Net debt is equal to the sum of total consolidated debt less cash, cash equivalents, and restricted cash. Net debt and preferred stock is equal to the sum of net debt, as discussed above, plus preferred stock outstanding as of the end of the period. See definition Adjusted EBITDA for further information on the calculation of Adjusted EBITDA.

The following table reconciles debt to net debt, and to net debt and preferred stock, and computes the ratio of each to Adjusted EBITDA:
(Dollars in thousands)
 
6/30/18
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
Secured notes payable
 
$
776,260

 
$
775,689

 
$
771,061

 
$
1,153,890

 
$
1,127,348

Unsecured senior notes payable
 
4,289,521

 
3,396,912

 
3,395,804

 
2,801,290

 
2,800,398

Unsecured senior line of credit
 
—

 
490,000

 
50,000

 
314,000

 
300,000

Unsecured senior bank term loans
 
548,324

 
548,197

 
547,942

 
547,860

 
547,639

Unamortized deferred financing costs
 
33,775

 
27,438

 
29,051

 
27,803

 
29,710

Cash and cash equivalents
 
(287,029
)
 
(221,645
)
 
(254,381
)
 
(118,562
)
 
(124,877
)
Restricted cash
 
(34,812
)
 
(37,337
)
 
(22,805
)
 
(27,713
)
 
(20,002
)
Net debt
 
$
5,326,039

 
$
4,979,254

 
$
4,516,672

 
$
4,698,568

 
$
4,660,216

 
 
 
 
 
 
 
 
 
 
 
Net debt
 
$
5,326,039

 
$
4,979,254

 
$
4,516,672

 
$
4,698,568

 
$
4,660,216

7.00% Series D convertible preferred stock
 
74,386

 
74,386

 
74,386

 
74,386

 
74,386

Net debt and preferred stock
 
$
5,400,425

 
$
5,053,640

 
$
4,591,058

 
$
4,772,954

 
$
4,734,602

 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
$
911,284

 
$
914,444

 
$
817,392

 
$
773,828

 
$
755,048

– trailing 12 months
 
$
854,237

 
$
815,178

 
$
767,508

 
$
728,869

 
$
689,079

Net debt to Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
5.8
x
 
5.4
x
 
5.5
x
 
6.1
x
 
6.2
x
– trailing 12 months
 
6.2
x
 
6.1
x
 
5.9
x
 
6.4
x
 
6.8
x
Net debt and preferred stock to Adjusted EBITDA:
 
 
 
 
 
 
 
 
– quarter annualized
 
5.9
x
 
5.5
x
 
5.6
x
 
6.2
x
 
6.3
x
– trailing 12 months
 
6.3
x
 
6.2
x
 
6.0
x
 
6.5
x
 
6.9
x


 
Net operating income, net operating income (cash basis), and operating margin

The following table reconciles net income to net operating income:
 
 
Three Months Ended
 
Six Months Ended
(Dollars in thousands)
 
6/30/18
 
3/31/18
 
12/31/17
 
6/30/17
 
6/30/18
 
6/30/17
Net income
 
$
60,547

 
$
141,518

 
$
45,607

 
$
41,496

 
$
202,065

 
$
89,051

 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in earnings of unconsolidated real estate joint ventures
 
(1,090
)
 
(1,144
)
 
(376
)
 
(589
)
 
(2,234
)
 
(950
)
General and administrative expenses
 
22,939

 
22,421

 
18,910

 
19,234

 
45,360

 
38,463

Interest expense
 
38,097

 
36,915

 
36,082

 
31,748

 
75,012

 
61,532

Depreciation and amortization
 
118,852

 
114,219

 
107,714

 
104,098

 
233,071

 
201,281

Impairment of real estate
 
6,311

 
—

 
—

 
203

 
6,311

 
203

Loss on early extinguishment of debt
 
—

 
—

 
2,781

 
—

 
—

 
670

Gain on sales of real estate – rental properties
 
—

 
—

 
—

 
—

 
—

 
(270
)
Gain on sales of real estate – land parcels
 
—

 
—

 
—

 
(111
)
 
—

 
(111
)
Investment income
 
(12,530
)
 
(85,561
)
 
—

 
—

 
(98,091
)
 
—

Net operating income
 
233,126

 
228,368

 
210,718

 
196,079

 
461,494

 
389,869

Straight-line rent revenue and amortization of acquired below-market leases
 
(28,457
)
 
(38,801
)
 
(37,428
)
 
(22,909
)
 
(67,258
)
 
(63,860
)
Net operating income (cash basis)
 
$
204,669

 
$
189,567

 
$
173,290

 
$
173,170

 
$
394,236

 
$
326,009

 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating income (cash basis) – annualized
 
$
818,676

 
$
758,268

 
$
693,160

 
$
692,680

 
$
788,472

 
$
652,018

 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
325,034

 
$
320,139

 
$
298,791

 
$
273,059

 
$
645,173

 
$
543,936

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
 
72%
 
71%
 
71%
 
72%
 
72%
 
72%

Net operating income is a non-GAAP financial measure calculated as net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding equity in the earnings (losses) of our unconsolidated real estate joint ventures, general and administrative expenses, interest expense, depreciation and amortization, impairment of real estate, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and investment income. We believe net operating income provides useful information to investors regarding our financial condition and results of operations because it primarily reflects those income and expense items that are incurred at the property level. Therefore, we believe net operating income is a useful measure for evaluating the operating performance of our consolidated real estate assets. Net operating income on a cash basis is net operating income adjusted to exclude the effect of straight-line rent and amortization of acquired above- and below-market lease revenue adjustments required by GAAP. We believe that net operating income on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent revenue and the amortization of acquired above- and below-market leases.

Further, we believe net operating income is useful to investors as a performance measure for our consolidated properties because, when compared across periods, net operating income reflects trends in occupancy rates, rental rates, and operating costs, which provide a perspective not

 
 
 
q218logo2.jpg
Definitions and Reconciliations (continued)
June 30, 2018
 
 


immediately apparent from net income. Net operating income can be used to measure the initial stabilized yields of our properties by calculating the quotient of net operating income generated by a property on a straight-line basis and our investment in the property. Net operating income excludes certain components from net income in order to provide results that are more closely related to the results of operations of our properties. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level rather than at the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort comparability of operating performance at the property level. Impairments of real estate have been excluded in deriving net operating income because we do not consider impairments of real estate to be property-level operating expenses. Impairments of real estate relate to changes in the values of our assets and do not reflect the current operating performance with respect to related revenues or expenses. Our impairments of real estate represent the write-down in the value of the assets to the estimated fair value less cost to sell. These impairments result from investing decisions and deterioration in market conditions. We also exclude realized and unrealized investment income calculated under a new ASU effective January 1, 2018, which results from investment decisions that occur at the corporate level related to non-real estate investments in publicly traded companies and certain privately held entities. Therefore, we do not consider these activities to be an indication of operating performance of our real estate assets at the property level. Our calculation of net operating income also excludes charges incurred from changes in certain financing decisions, such as loss on early extinguishment of debt, as these charges often relate to corporate strategy. Property operating expenses that are included in determining net operating income primarily consist of costs that are related to our operating properties, such as utilities, repairs, and maintenance; rental expense related to ground leases; contracted services, such as janitorial, engineering, and landscaping; property taxes and insurance; and property-level salaries. General and administrative expenses consist primarily of accounting and corporate compensation, corporate insurance, professional fees, office rent, and office supplies that are incurred as part of corporate office management.

We believe that in order to facilitate for investors a clear understanding of our operating results, net operating income should be examined in conjunction with net income as presented in our consolidated statements of income. Net operating income should not be considered as an alternative to net income as an indication of our performance, nor as an alternative to cash flows as a measure of our liquidity or our ability to make distributions.

Operating statistics

We present certain operating statistics related to our properties, including number of properties, RSF, occupancy percentage, leasing activity, and contractual lease expirations as of the end of the period. We believe these measures are useful to investors because they facilitate an understanding of certain trends for our properties. We compute the number of properties, RSF, occupancy percentage, leasing activity, and contractual lease expirations at 100% for all properties in which we have an investment, including properties owned by our consolidated and unconsolidated real estate joint ventures. For operating metrics based on annual rental rate revenue, see our discussion of annual rental revenue herein.

Same property comparisons

As a result of changes within our total property portfolio during the comparative periods presented, including changes from assets acquired or sold, properties placed into development or redevelopment, and development or redevelopment properties recently placed into service, the consolidated total rental revenues, tenant recoveries, and rental operating expenses in our operating results can show significant changes from period to period. In order to supplement an evaluation of our results of operations over a given quarterly or annual period, we analyze the operating performance for
 
all consolidated properties that were fully operating for the entirety of the comparative periods presented, referred to as same properties. We separately present quarterly and annual same property results to align with the interim financial information required by the SEC in our management’s discussion and analysis of our financial condition and results of operations. These same properties are analyzed separately from properties acquired subsequent to the first day in the earliest comparable quarterly or annual period presented, properties that underwent development or redevelopment at any time during the comparative periods, unconsolidated real estate joint ventures, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results. Additionally, rental revenues from lease termination fees, if any, are excluded from the results of same properties.

The following table reconciles the number of same properties to total properties:
Development –
under construction
 
Properties
 
213 East Grand Avenue
 
1

 
399 Binney Street
 
1

 
279 East Grand Avenue
 
1

 
1818 Fairview Avenue East
 
1

 
Menlo Gateway
(unconsolidated real estate JV)
 
3

 
1655 and 1725 Third Street
(unconsolidated real estate JV)
 
2

 
 
 
9

 
 
 
 
 
Development – placed into service after January 1, 2017
 
Properties
 
505 Brannan Street
 
1

 
510 Townsend Street
 
1

 
ARE Spectrum
 
3

 
400 Dexter Avenue North
 
1

 
100 Binney Street
 
1

 
 
 
7

 
 
 
 
 
Redevelopment –
under construction
 
Properties
 
9625 Towne Centre Drive
 
1

 
5 Laboratory Drive
 
1

 
9900 Medical Center Drive
 
1

 
266 and 275 Second Avenue
 
2

 
Alexandria PARC
 
4

 
704 Quince Orchard Road
(unconsolidated real estate JV)
 
1

 
 
 
10

 
 
 
 
 
Acquisitions after
January 1, 2017
 
Properties
 
40 West Third Street
 
1

 
100 Tech Drive
 
1

 
88 Bluxome Street
 
1

 
701 Gateway Boulevard
 
1

 
960 Industrial Road
 
1

 
1450 Page Mill Road
 
1

 
4110 Campus Point Court
 
1

 
Summers Ridge Science Park
 
4

 
2301 5th Avenue
 
1

 
9704, 9708, 9712, and 9714 Medical Center Drive
 
4

 
9920 Belward Campus Drive
 
1

 
21 Firstfield Road
 
1

 
50 and 55 West Watkins Mill Road
 
2

 
 
 
20

 
 
 
 
 
Unconsolidated real estate JVs
 
1

 
 
 
 
 
Properties held for sale
 
1

 
Total properties excluded from same properties
 
48

 
Same properties
 
186

(1) 
Total properties in North America as of June 30, 2018
 
234

 
 
 
(1)
Includes 9880 Campus Point Drive, a building we acquired in 2001, occupied through January 2018 and subsequently demolished in anticipation of developing a 98,000 RSF Class A office/laboratory property.


 
 
 
q218logo2.jpg
Definitions and Reconciliations (continued)
June 30, 2018
 
 


Stabilized occupancy date

The stabilized occupancy date represents the estimated date on which the project is expected to reach occupancy of 95% or greater.

Total equity market capitalization
    
Total equity market capitalization is equal to the sum of outstanding shares of 7.00% Series D cumulative convertible preferred stock and common stock multiplied by the related closing price of each class of security at the end of each period presented.

Total market capitalization

Total market capitalization is equal to the sum of total equity market capitalization and total debt.

Unencumbered net operating income as a percentage of total net operating income
    
Unencumbered net operating income as a percentage of total net operating income is a non-GAAP financial measure that we believe is useful to investors as a performance measure of the results of operations of our unencumbered real estate assets as it reflects those income and expense items that are incurred at the unencumbered property level. Unencumbered net operating income is derived from assets classified in continuing operations, which are not subject to any mortgage, deed of trust, lien, or other security interest, as of the period for which income is presented.

The following table summarizes unencumbered net operating income as a percentage of total net operating income:
 
Three Months Ended
(Dollars in thousands)
6/30/18
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
Unencumbered net operating income
$
204,843

 
$
198,599

 
$
181,719

 
$
164,291

 
$
158,072

Encumbered net operating income
28,283

 
29,769

 
28,999

 
37,610

 
38,007

Total net operating income
$
233,126

 
$
228,368

 
$
210,718

 
$
201,901

 
$
196,079

Unencumbered net operating income as a percentage of total net operating income
88%

 
87%

 
86%

 
81%

 
81%


Weighted-average interest rate for capitalization of interest

The weighted-average interest rate required for calculating capitalization of interest pursuant to GAAP represents a weighted-average rate based on the rates applicable to borrowings outstanding during the period, including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees. A separate calculation is performed to determine our weighted-average interest rate for capitalization for each month. The rate will vary each month due to changes in variable interest rates, outstanding debt balances, the proportion of variable-rate debt to fixed-rate debt, the amount and terms of interest rate hedge agreements, and the amount of loan fee and premium (discount) amortization.
 
The following table presents the weighted-average interest rate for capitalization of interest:
 
Three Months Ended
 
6/30/18
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
Weighted-average interest rate for capitalization of interest
3.92%
 
3.91%
 
3.89%
 
3.96%
 
3.98%

Weighted-average shares of common stock outstanding – diluted

We enter into capital market transactions from time to time to fund acquisitions, fund construction of our highly leased development and redevelopment projects, and for general working capital purposes. In March 2017 and January 2018, we entered into forward equity sales agreements to sell shares of our common stock. We are required to consider the potential dilutive effect of our forward equity sales agreements under the treasury stock method while the forward equity sales agreements are outstanding.

We also consider the effect of assumed conversions of our outstanding 7.00% Series D cumulative convertible preferred stock (“Series D Convertible Preferred Stock”) when determining potentially dilutive incremental shares to our common stock. When calculating the assumed conversion, we add back to net income dividends paid on our Series D Convertible Preferred Stock to the numerator and then include additional common shares assumed to have been issued to the denominator of the per share calculation. The effect of assumed conversion is considered separately for our per share calculations of net income, funds from operations, computed in accordance with the definition in the Nareit White Paper, and funds from operations, as adjusted. The effect of assumed conversion is included when it is dilutive on a per share basis.

The weighted-average shares of common stock outstanding – diluted for EPS, FFO, and FFO, as adjusted, during each period include the following shares related to our forward equity sales agreements and Series D Convertible Preferred Stock incremental dilutive common stock:
(In thousands)
6/30/18
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
Potential additional shares upon settlement/conversion:
 
 
 
 
 
 
 
 
 
Outstanding forward equity sales agreements
6,056

 
6,056

 
4,755

 
4,755

 
4,755

7.00% Series D Convertible Preferred Stock
2,975

 
2,975

 
2,975

 
2,975

 
2,975

 
Three Months Ended
 
Six Months Ended
(In thousands)
6/30/18
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
6/30/18
 
6/30/17
Incremental dilutive common shares:
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding forward equity sales agreements
355

 
270

 
776

 
698

 
530

 
313

 
293

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share – diluted and funds from operations – diluted, as adjusted
355

 
270

 
776

 
698

 
530

 
313

 
293

Assumed conversion of Series D Convertible Preferred Stock
—

 
741

 
—

 
—

 
—

 
742

 
—

Funds from operations – diluted
355

 
1,011

 
776

 
698

 
530

 
1,055

 
293