Consolidated and unconsolidated real estate joint ventures

3 Months Ended

Mar. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

Consolidated and unconsolidated real estate joint ventures

From time to time, we enter into joint venture agreements through which we own a partial interest in real estate entities that own, develop, and operate real estate properties. As of March 31, 2023, our real estate joint ventures held the following properties:

	Property	Market	Submarket	Our Ownership Interest(1)
Consolidated real estate joint ventures(2):
	50 and 60 Binney Street	Greater Boston	Cambridge/Inner Suburbs		34.0	%
	75/125 Binney Street	Greater Boston	Cambridge/Inner Suburbs		40.0	%
	100 and 225 Binney Street and 300 Third Street	Greater Boston	Cambridge/Inner Suburbs		30.0	%
	99 Coolidge Avenue	Greater Boston	Cambridge/Inner Suburbs		75.0	%
	15 Necco Street	Greater Boston	Seaport Innovation District		90.0	%	(3)
	Other Greater Boston joint venture	Greater Boston	–		60.7	%
	Alexandria Center® for Science and Technology – Mission Bay(4)	San Francisco Bay Area	Mission Bay		25.0	%
	1450 Owens Street	San Francisco Bay Area	Mission Bay		54.0	%	(5)
	601, 611, 651, 681, 685, and 701 Gateway Boulevard	San Francisco Bay Area	South San Francisco		50.0	%
	751 Gateway Boulevard	San Francisco Bay Area	South San Francisco		51.0	%
	211 and 213 East Grand Avenue	San Francisco Bay Area	South San Francisco		30.0	%
	500 Forbes Boulevard	San Francisco Bay Area	South San Francisco		10.0	%
	Alexandria Center® for Life Science – Millbrae	San Francisco Bay Area	South San Francisco		45.8	%
	3215 Merryfield Row	San Diego	Torrey Pines		30.0	%
	Campus Point by Alexandria(6)	San Diego	University Town Center		55.0	%
	5200 Illumina Way	San Diego	University Town Center		51.0	%
	9625 Towne Centre Drive	San Diego	University Town Center		50.1	%
	SD Tech by Alexandria(7)	San Diego	Sorrento Mesa		50.0	%
	Pacific Technology Park	San Diego	Sorrento Mesa		50.0	%
	Summers Ridge Science Park(8)	San Diego	Sorrento Mesa		30.0	%
	1201 and 1208 Eastlake Avenue East and 199 East Blaine Street	Seattle	Lake Union		30.0	%
	400 Dexter Avenue North	Seattle	Lake Union		30.0	%
	800 Mercer Street	Seattle	Lake Union		60.0	%
Unconsolidated real estate joint ventures(2):
	1655 and 1725 Third Street	San Francisco Bay Area	Mission Bay		10.0	%
	1401/1413 Research Boulevard	Maryland	Rockville		65.0	%	(9)
	1450 Research Boulevard	Maryland	Rockville		73.2	%	(9)
	101 West Dickman Street	Maryland	Beltsville		57.9	%	(9)

(1)Refer to the table on the next page that shows the categorization of our joint ventures under the consolidation framework.

(2)In addition to the real estate joint ventures listed, various partners hold insignificant noncontrolling interests in two other consolidated real estate joint ventures in North America and we hold an interest in one other insignificant unconsolidated real estate joint venture in North America.

(3)Refer to Note 16 – “Subsequent events” to our unaudited consolidated financial statements for additional information.

(4)Includes 409 and 499 Illinois Street, 1500 and 1700 Owens Street, and 455 Mission Bay Boulevard South.

(5)The noncontrolling interest share of our joint venture partner is anticipated to increase to 75% as our partner contributes the remaining cost to complete the project over time.

(6)Includes 10210, 10260, 10290, and 10300 Campus Point Drive and 4110, 4135, 4155, 4161, 4224, and 4242 Campus Point Court.

(7)Includes 9605, 9645, 9675, 9685, 9725, 9735, 9808, 9855, and 9868 Scranton Road and 10055, 10065, and 10075 Barnes Canyon Road.

(8)Includes 9965, 9975, 9985, and 9995 Summers Ridge Road.

(9)Represents a joint venture with a local real estate operator in which our partner manages the day-to-day activities that significantly affect the economic performance of the joint venture.

Our consolidation policy is described under the “Consolidation” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements. Consolidation accounting is highly technical, but its framework is primarily based on the controlling financial interests and benefits of the joint ventures. We generally consolidate a joint venture that is a legal entity that we control (i.e., we have the power to direct the activities of the joint venture that most significantly affect its economic performance) through contractual rights, regardless of our ownership interest, and where we determine that we have benefits through the allocation of earnings or losses and fees paid to us that could be significant to the joint venture (the “VIE model”).

We also generally consolidate joint ventures when we have a controlling financial interest through voting rights and where our voting interest is greater than 50% (the “voting model”). Voting interest differs from ownership interest for some joint ventures. We account for joint ventures that do not meet the consolidation criteria under the equity method of accounting by recognizing our share of income and losses.

The table below shows the categorization of our real estate joint ventures under the consolidation framework:

Property(1)	Consolidation Model	Voting Interest	Consolidation Analysis		Conclusion
50 and 60 Binney Street	VIE model	Not applicable under VIE model			Consolidated
75/125 Binney Street			We have:
100 and 225 Binney Street and 300 Third Street
99 Coolidge Avenue			(i)	The power to direct the activities of the joint venture that most significantly affect its economic performance; and
15 Necco Street
Other Greater Boston joint venture
Alexandria Center® for Science and Technology – Mission Bay
1450 Owens Street
601, 611, 651, 681, 685, and 701 Gateway Boulevard
751 Gateway Boulevard
211 and 213 East Grand Avenue			(ii)	Benefits that can be significant to the joint venture.
500 Forbes Boulevard
Alexandria Center® for Life Science – Millbrae
3215 Merryfield Row
Campus Point by Alexandria
5200 Illumina Way			Therefore, we are the primary beneficiary of each VIE
9625 Towne Centre Drive
SD Tech by Alexandria
Pacific Technology Park
Summers Ridge Science Park
1201 and 1208 Eastlake Avenue East and 199 East Blaine Street
400 Dexter Avenue North
800 Mercer Street
1401/1413 Research Boulevard			We do not control the joint venture and are therefore not the primary beneficiary.		Equity method of accounting
1450 Research Boulevard
101 West Dickman Street
1655 and 1725 Third Street	Voting model	Does not exceed 50%	Our voting interest is 50% or less.

(1)In addition to the real estate joint ventures listed, various partners hold insignificant noncontrolling interests in two other consolidated real estate joint ventures in North America and we hold an interest in one other insignificant unconsolidated real estate joint venture in North America.

During the three months ended March 31, 2023, we acquired two properties and entitlements aggregating 515,000 RSF with development opportunities in Greater Boston for a purchase price aggregating $58.9 million. Upon completion of these acquisitions, we formed a real estate joint venture with a local real estate operator that acquired a 39.3% interest in this joint venture in exchange for the contribution of additional entitlements and other pre-construction assets for a total contribution of $37.6 million, including a non-cash contribution aggregating $33.3 million. The entitlements contributed by our partner increased the joint venture’s aggregate development opportunities to 715,000 RSF. Our partner has the option to require of us the redemption of $35.3 million of its ownership interest at its contributed value beginning in January 2024. As a result, this portion of our partner’s ownership interest is classified in the redeemable noncontrolling interest section of our consolidated balance sheet as of March 31, 2023.

Our joint venture partner lacks kick-out rights over our role as property manager and does not have substantive participating rights. Therefore, we determined that the joint venture should be accounted for as a VIE. We also determined that we are the primary beneficiary of this joint venture because we are responsible for activities that most significantly impact its economic performance, and also have the obligation to absorb losses of, or the right to receive benefits from, the joint venture that could potentially be significant to the joint venture. Accordingly, we consolidate this real estate joint venture under the variable interest model.

Consolidated VIEs’ balance sheet information

We, together with joint venture partners, hold interests in real estate joint ventures that we consolidate in our financial statements. These existing joint ventures provide significant equity capital to fund a portion of our future construction spend, and our joint venture partners may also contribute equity into these entities for financing-related activities.

The table below aggregates the balance sheet information of our consolidated VIEs as of March 31, 2023 and December 31, 2022 (in thousands):

	March 31, 2023		December 31, 2022
Investments in real estate	$	7,082,094	$	6,771,842
Cash and cash equivalents	240,184		246,931
Other assets	695,037		684,487
Total assets	$	8,017,315	$	7,703,260
Secured notes payable	$	72,996	$	58,396
Other liabilities	485,668		430,615
Total liabilities	558,664		489,011
Redeemable noncontrolling interests	35,250		—
Alexandria Real Estate Equities, Inc.’s share of equity	3,665,490		3,513,001
Noncontrolling interests’ share of equity	3,757,911		3,701,248
Total liabilities and equity	$	8,017,315	$	7,703,260

In determining whether to aggregate the balance sheet information of consolidated VIEs, we considered the similarity of each VIE, including the primary purpose of these entities to own, manage, operate, and lease real estate properties owned by the VIEs, and the similar nature of our involvement in each VIE as a managing member. Due to the similarity of the characteristics, we present the balance sheet information of these entities on an aggregated basis. None of our consolidated VIEs’ assets have restrictions that limit their use to settle specific obligations of the VIE. There are no creditors or other partners of our consolidated VIEs that have recourse to our general credit, and our maximum exposure to our consolidated VIEs is limited to our variable interests in each VIE, except for our 99 Coolidge Avenue real estate joint venture in which the VIE’s secured construction loan is guaranteed by us. For additional information, refer to Note 10 – “Secured and unsecured senior debt” to our unaudited consolidated financial statements.

Unconsolidated real estate joint ventures

Our maximum exposure to our unconsolidated VIEs is limited to our investment in each VIE. Our investments in unconsolidated real estate joint ventures, accounted for under the equity method of accounting presented in our consolidated balance sheets as of March 31, 2023 and December 31, 2022, consisted of the following (in thousands):

Property	March 31, 2023		December 31, 2022
1655 and 1725 Third Street	$	12,878	$	12,996
1450 Research Boulevard	5,708		5,625
101 West Dickman Street	8,725		8,678
Other	11,044		11,136
	$	38,355	$	38,435

The following table presents key terms related to our unconsolidated real estate joint ventures’ secured loans as of March 31, 2023 (dollars in thousands):

					Interest Rate(1)	At 100%				Our Share
Unconsolidated Joint Venture	Maturity Date		Stated Rate			Aggregate Commitment		Debt Balance(2)
1401/1413 Research Boulevard		12/23/24	2.70%		3.31%	$	28,500	$	28,201	65.0%
1655 and 1725 Third Street		3/10/25	4.50%		4.57%	600,000		599,187		10.0%
101 West Dickman Street		11/10/26	SOFR+1.95%	(3)	6.61%	26,750		12,648		57.9%
1450 Research Boulevard		12/10/26	SOFR+1.95%	(3)	6.67%	13,000		5,245		73.2%
						$	668,250	$	645,281

(1)Includes interest expense and amortization of loan fees.

(2)Represents outstanding principal, net of unamortized deferred financing costs, as of March 31, 2023.

(3)This loan is subject to a fixed SOFR floor rate of 0.75%.