UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 31, 2017


ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)

Maryland
 
1-12993
 
95-4502084
(State or other jurisdiction of
incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)




385 East Colorado Boulevard, Suite 299
 
 
Pasadena, California
 
91101
(Address of principal executive offices)
 
(Zip Code)


Registrant’s telephone number, including area code: (626) 578-0777
 

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o               Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o               Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o               Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o               Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4 (c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o





Item 2.02.  Results of Operations and Financial Condition.

On July 31, 2017, Alexandria Real Estate Equities, Inc. (the “Company”) issued a press release entitled “Alexandria Real Estate Equities, Inc. Reports Second Quarter Ended June 30, 2017 Financial and Operating Results.”  The press release referred to certain supplemental information that is available on the Company’s website at www.are.com.  A copy of the press release and supplemental information are attached hereto as Exhibit 99.1.

The information contained in this Item 2.02, including the exhibit referenced herein, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section.  Such information shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01.  Financial Statements and Exhibits.

(d)  Exhibits.

99.1                Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the Second Quarter Ended June 30, 2017.

Forward-looking Statements

This current report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act.  These statements include words such as “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “believes,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” or “will,” or the negative of these words or similar words.  Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in each such statement.  A number of important factors could cause actual results to differ materially from those included within or contemplated by the forward-looking statements, including, but not limited to, the factors described in the Company’s filings with the Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.  The Company does not undertake any responsibility to update any of these factors or to announce publicly any revisions to any of the forward-looking statements contained in this or any other document, whether as a result of new information, future events, or otherwise.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
ALEXANDRIA REAL ESTATE EQUITIES, INC.
 
 
 
 
 
 
July 31, 2017
 
By:
/s/ Joel S. Marcus
 
 
 
 
Joel S. Marcus
 
 
 
 
Chairman/Chief Executive Officer
 
 
 
 
(Principal Executive Officer)
 
 
 
 
 
 
 
 
 
By:
/s/ Dean A. Shigenaga
 
 
 
 
Dean A. Shigenaga
 
 
 
 
Chief Financial Officer
 
 
 
 
(Principal Financial Officer)
 




EXHIBIT INDEX

Exhibit
Number        Exhibit Title    
99.1        Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the Second Quarter Ended June 30, 2017.


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Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2017
 



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Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2017
i




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(1)    Represents annual rental revenue in effect as of June 30, 2017.

 
ii
 
 
 
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Table of Contents
June 30, 2017
 
 

 
 
EARNINGS PRESS RELEASE
Page
SUPPLEMENTAL INFORMATION
Page
Internal Growth
 
 
 
 
SUPPLEMENTAL INFORMATION (CONTINUED)
Page
External Growth / Investments in Real Estate
 
Development and Redevelopment of New Class A Properties:
 
Balance Sheet Management
 
Definitions and Reconciliations
 

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 6 of our Earnings Press Release 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. © 2017
iii
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Alexandria Real Estate Equities, Inc.
Reports
Second Quarter Ended June 30, 2017, Financial and Operating Results
Strong Internal and External Growth



PASADENA, Calif. – July 31, 2017 – Alexandria Real Estate Equities, Inc. (NYSE:ARE)
announced financial and operating results for the second quarter ended June 30, 2017.

Key highlights

20 years on the New York Stock Exchange (“NYSE”)
We celebrated our 20th anniversary as an NYSE listed REIT and achieved a total shareholder return of 1,218%, assuming reinvestment of dividends, from our initial public offering in May 1997 through 2Q17.

Increased common stock dividend
Common stock dividend for 2Q17 of $0.86 per common share, up 3 cents, or 4%, over 1Q17; 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 of $273.1 million, up 20.8%, for 2Q17, compared to $226.1 million for 2Q16, and total revenues of $543.9 million, up 23.0%, for YTD 2Q17, compared to $442.2 million for YTD 2Q16;
•
Continued substantial leasing activity and strong rental rate growth, in light of minimal contractual lease expirations for 2017, and a highly leased value-creation pipeline:
 
 
2Q17
 
1H17
Total leasing activity – RSF
 
1,081,777

 
2,402,558

Lease renewals and re-leasing of space:
 
 
 
 
Rental rate increases
 
23.2%

 
26.2%

Rental rate increases (cash basis)
 
9.4%

 
14.7%

RSF (included in total leasing activity above)
 
604,142

 
1,483,005


•
Executed key leases during 2Q17:
•
163,648 RSF, leased to Takeda Pharmaceutical Company Ltd. at our redevelopment project at 9625 Towne Centre Drive in our San Diego market; and
•
109,780 RSF, renewed with Laboratory Corporation of America at 13112 Evening Creek Drive in our San Diego market.
•
Same property net operating income growth:
•
1.8% and 7.0% (cash basis) for 2Q17, compared to 2Q16; and
•
2.2% and 6.2% (cash basis) for YTD 2Q17, compared to YTD 2Q16.

 
Strong external growth; disciplined allocation of capital to visible, multiyear, highly leased
value-creation pipeline
•
Deliveries of new Class A properties drive significant growth in net operating income:
Delivery Date
 
RSF
 
Percentage Leased
 
Incremental Annual Net Operating Income
2016
 
1,893,928

 
94%
 
 
$92 million
(1)
1H17
 
304,276

 
100%
 
 
$21 million
 
2H17
 
1,100,841

 
81%
 
$74 million to $84 million (1)
(1)    Deliveries of projects are primarily weighted toward the fourth quarter.

•
2Q17 key development project placed into service: fully leased parking structure delivered to Illumina, Inc. at 5200 Illumina Way in our University Town Center submarket;
•
100 Binney Street on track to be 100% leased in 3Q17:
•
59% leased as of July 2017, including one lease executed in 2Q17 and one lease executed in July 2017
•
Two leases were distributed with execution expected in the first week of August
•
One lease on track for execution in 3Q17
•
$95 million in contractual cash rents from recently completed development and redevelopment projects:
•
$40 million in 2Q17; and
•
$55 million relatively evenly over five quarters from 3Q17 to 3Q18.
•
Completed strategic acquisitions of two properties and two land parcels during 2Q17 for an aggregate purchase price of $244.0 million, including: (i) future development projects of over 1.0 million SF in our Greater Stanford submarket, (ii) a redevelopment project consisting of 175,000 RSF in Research Triangle Park, and (iii) an operating property consisting of 77,634 RSF in our Greater Stanford submarket. See page 3 for additional information.
Operating results
2Q17
 
2Q16
 
Change
 
1H17
 
1H16
 
Change
Net income (loss) attributable to Alexandria’s common stockholders – diluted:
In millions
$
31.6

 
$
(127.6
)
 
N/A

 
$
57.3

 
$
(131.5
)
 
N/A

Per share
$
0.35

 
$
(1.72
)
 
N/A

 
$
0.64

 
$
(1.79
)
 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted:
In millions
$
136.2

 
$
101.1

 
34.7
%
 
$
266.7

 
$
198.2

 
34.6
%
Per share
$
1.50

 
$
1.36

 
10.3
%
 
$
2.98

 
$
2.70

 
10.4
%


 
1

 
 
 
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Second Quarter Ended June 30, 2017, Financial and Operating Results (continued)
June 30, 2017
 
 

Items included in net income (loss) attributable to Alexandria’s common stockholders
(amounts are shown after deducting any amounts attributable to noncontrolling interests):
(In millions, except per share amounts)
Amount
 
Per Share – Diluted
 
Amount
 
Per Share – Diluted
2Q17
 
2Q16
 
2Q17
 
2Q16
 
1H17
 
1H16
 
1H17
 
1H16
Gain on sales of real estate
$
0.1

 
$
—

 
$
—

 
$
—

 
$
0.4

 
$
—

 
$
—

 
$
—

Impairment of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental properties
(0.2
)
 
(88.4
)
 
—

 
(1.19
)
 
(0.2
)
 
(88.4
)
 
—

 
(1.20
)
Land parcels
—

 
(67.2
)
 
—

 
(0.90
)
 
—

 
(96.1
)
 
—

 
(1.30
)
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
—

 
(9.5
)
 
—

 
(0.13
)
 
(11.3
)
 
(12.5
)
 
(0.12
)
 
(0.17
)
Total
$
(4.6
)
 
$
(165.1
)
 
$
(0.05
)
 
$
(2.22
)
 
$
(16.3
)
 
$
(197.0
)
 
$
(0.18
)
 
$
(2.67
)
Weighted-average shares of common
stock outstanding – diluted
 
90.7

 
74.3

 
 
 
 
 
89.5

 
73.5


Core operating metrics and internal growth
•
Percentage of annual rental revenue in effect as of 2Q17 from:
•
Investment-grade tenants: 51%;
•
Class A properties in AAA locations: 79%;
•
Occupancy for operating properties in North America as of 2Q17: 95.7%;
•
Operating margin for 2Q17: 72%;
•
Adjusted EBITDA margin for 2Q17: 68%; and
•
Weighted-average remaining lease term for our top 20 tenants:
•
As of 2Q17: 13.5 years;
•
As of 2Q17, excluding one long-term ground lease: 9.7 years;
•
See “Strong internal growth” in the key highlights section on page 1 of this Earnings Press Release for information on our leasing activity, rental rate growth, and net operating income.

External growth
See page 1 of this Earnings Press Release for key highlights

Balance sheet management
Key Metrics
 
 
 
 
 
2Q17
 
Total market capitalization
 
$
16.0
 billion
 
Liquidity
 
$
1.8
 billion
 
 
 
 
 
Net debt to Adjusted EBITDA:
 
 
 
Quarter annualized
 
6.2x

 
Trailing 12 months
 
6.8x

 
 
 
 
 
Fixed-charge coverage ratio:
 
 
 
Quarter annualized
 
4.1x

 
Trailing 12 months
 
3.9x

 
 
 
 
 
Unhedged variable-rate debt as a percentage of total debt
 
11%

 
Current and future value-creation pipeline as a percentage of gross investments in real estate in North America
 
13%

 

 
Key capital events

•
During 2Q17, we sold an aggregate of 2.1 million shares of common stock under our ATM program for gross proceeds of $245.8 million, or $118.97 per share, and net proceeds of approximately $241.8 million. As of 2Q17, there is no remaining availability on our ATM program. We expect to file a new ATM common stock offering program in 2H17;
•
On April 14, 2017, we completed the redemption of all 5.2 million outstanding shares of our Series E Redeemable Preferred Stock at a redemption price of $25.00 per share, or an aggregate of $130.0 million, plus accrued dividends;
•
In April 2017, we executed three interest rate swap agreements aggregating:
•
$150 million notional amount at a fixed pay rate of 1.60%, effective March 29, 2018; and
•
$100 million notional amount at a fixed pay rate of 1.89%, effective March 29, 2019.

Corporate social responsibility and industry leadership

•
49% of total annual rental revenue is expected from Leadership in Energy and Environmental Design (“LEED®”) certified projects upon completion of 14 in-process projects.
•
86 energy conservation measures were completed in 2015 and 2016. Achieved year-over-year reduction in greenhouse gases.
•
In June 2017, we celebrated the grand opening of Alexandria LaunchLabs® at the Alexandria Center® for Life Science – New York City and awarded the inaugural Alexandria LaunchLabs Entrepreneurship Prize to Neochromosome, Inc. Alexandria LaunchLabs® is NYC’s premier, full-service startup platform that satisfies the need for turn-key office/laboratory space and access to strategic risk capital for seed-stage life science companies. The grand opening was held in connection with the NYC Life Science Innovation Showcase in partnership with the New York Academic Consortium. To date, 13 initial member companies have been accepted to Alexandria LaunchLabs® from a competitive pool of applicants, indicating strong demand for Alexandria’s office/laboratory space.
•
In June 2017, we hosted former Vice President Joe Biden and Dr. Jill Biden at our Alexandria Center® for Life Science – New York City to launch the Biden Cancer Initiative, a comprehensive program to develop and accelerate progress in cancer prevention, detection, treatment, and care.
•
In June 2017, Joel S. Marcus, Chairman, Chief Executive Officer & Founder, was named one of “Commercial Real Estate’s Best Bosses of 2017” by Real Estate Forum. He was named one of 25 winners (out of more than 200 nominations) across the United States real estate industry for his leadership qualities, manifested from our founding in 1994 through the recent commemoration of our 20th anniversary on the NYSE.

 
2

 
 
Acquisitions
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June 30, 2017
(Dollars in thousands)
 
 


Property
 
Submarket/Market
 
Date of Purchase
 
Number of Properties
 
Operating Occupancy
 
Square Footage
 
Purchase Price
 
 
 
 
 
Operating
 
Redevelopment
 
Future Development
 
 
 
 
 
 
 
 
 
 
1Q17:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
303 Binney Street (1)
 
Cambridge/Greater Boston
 
3/29/17
 
—
 
N/A
 
—

 
 
—

 
208,965

 
 
$
80,250

 
88 Bluxome Street (2)
 
Mission Bay/SoMa/San Francisco
 
1/10/17
 
1
 
100%
 
232,470

(2) 
 
—

 
1,070,925

(2) 
 
130,000

 
3050 Callan Road and Vista Wateridge
 
Torrey Pines/Sorrento Mesa/San Diego
 
3/24/17
 
—
 
N/A
 
—

 
 
—

 
229,000

 
 
8,250

 
 
 
 
 
 
 
1
 
 
 
232,470

 
 
—

 
1,508,890

 
 
218,500

 
2Q17:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
960 Industrial Road (3)
 
Greater Stanford/San Francisco
 
5/17/17
 
1
 
100%
 
195,000

(3) 
 
—

 
500,000

(3) 
 
64,959

 
825 and 835 Industrial Road (4)
 
Greater Stanford/San Francisco
 
6/1/17
 
—
 
N/A
 
—

 
 
—

 
530,000

 
 
85,000

 
1450 Page Mill Road (5)
 
Greater Stanford/San Francisco
 
6/1/17
 
1
 
100%
 
77,634

 
 
—

 
—

 
 
85,300

 
5 Laboratory Drive (6)
 
Research Triangle Park/RTP
 
5/25/17
 
1
 
N/A
 
—

 
 
175,000

 
—

 
 
8,750

 
 
 
 
 
 
 
3
 
 
 
272,634

 
 
175,000

 
1,030,000

 
 
244,009

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2H17:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266 and 275 Second Avenue (7)
 
Route 128/Greater Boston
 
7/11/17
 
2
 
71%
 
146,129

 
 
57,628

 
—

 
 
71,000

 
1455 and 1515 Third Street
(acquisition of remaining 49% interest)
 
Mission Bay/SoMa/San Francisco
 
11/10/16
 
2
 
100%
 
422,980

 
 
—

 
—

 
 
56,800

(8) 
 
 
 
 
 
 

 
 
 

 
 

 

 
 
$
590,309

 

(1)
Land parcel located adjacent to our Alexandria Center® at One Kendall Square campus that is currently entitled for the development of 163,339 RSF of office or office/laboratory space and 45,626 RSF of residential space. We may seek to increase the entitlements, which may result in additional purchase price consideration.
(2)
We are currently pursuing entitlements for the development of two buildings aggregating 1,070,925 RSF in two phases. The future development project undergoing entitlements for 1,070,925 developable square feet will replace the leading tennis and fitness facility consisting of 232,470 RSF. We expect to provide total estimated project costs and related yields in the future.
(3)
We are currently pursuing entitlements of 500,000 RSF for a multi-building development. We have leased the existing 195,000 RSF property back to the seller on a short-term basis, while we obtain entitlements. The future development square footage will replace the current operating RSF. We expect to provide total estimated project costs and related yields in the future.
(4)
Fully-entitled land parcel for the development of two buildings aggregating 530,000 RSF and a parking structure. When combined with our acquisition of the 960 Industrial Road land parcel, these sites will have the ability to develop 1.0 million SF of Class A properties clustered in an urban science and technology campus.
(5)
Technology office building, subject to a 51-year ground lease, located in Stanford Research Park, a collaborative business community that supports innovative companies in their research and development pursuits. This recently constructed building is 100% leased to Infosys Limited for 12 years, and we expect initial stabilized yields of 7.3% and 5.8% (cash).
(6)
We acquired 3054 East Cornwallis Road and will redevelop and rebrand the campus along with 6 Davis Drive as the Alexandria Center® for AgTech – RTP, with its newly named address of 5 Laboratory Drive.
(7)
Property acquired with 59,656 RSF, or 29%, of vacant space, of which 57,628 RSF, or 28%, will undergo conversion from office to laboratory space through redevelopment. The property will provide an additional opportunity to increase stabilized cash yields through redevelopment of the space and the re-lease of in-place below-market leases. We expect to provide total estimated project costs and related yields in the future.
(8)
Acquisition of the remaining 49% interest in our unconsolidated real estate joint venture with Uber Technologies, Inc. (“Uber”) was completed in November 2016. A portion of the consideration is payable in 2017 in three equal installments, upon Uber’s completion of construction milestones. The first installment of $18.9 million was paid in 2Q17.

 
3

 
 
Dispositions
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June 30, 2017
(Dollars in thousands)
 
 

Property/Market/Submarket
 
Date of Sale
 
RSF
 
Net Operating
Income (1)
 
Net Operating Income
(Cash) (1)
 
Contractual Sale Price
 
Gain
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6146 Nancy Ridge Drive/San Diego/Sorrento Mesa
 
1/6/17
 
21,940

 
N/A
 
N/A
 
$
3,000

 
 
$
270

 
1401/1413 Research Boulevard/Maryland/Rockville (2)
 
5/17/17
 
90,000

 
N/A
 
N/A
 
 
7,937

 
 
111

 
360 Longwood Avenue/Greater Boston/Longwood Medical Area (3)
 
7/6/17
 
203,090

 
$
4,313

 
$
4,168

 
 
65,701

 
 
14,106

 
 
 
 
 
 
 
 
 
 
 
$
76,638

 
 
$
14,487

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Represents annualized amounts for the quarter ended prior to the date of sale. Net operating income (cash) excludes straight-line rent and amortization of acquired below-market leases.
(2)
In May 2017, we recognized a gain of $111 thousand upon the sale of a 35% interest in our land parcels at 1401/1413 Research Boulevard, located in the Rockville submarket of Maryland. The sale was executed with a distinguished retail real estate developer for the development of an approximately 90,000 SF retail shopping center. We contributed the land parcels at a fair value of $7.9 million into a new entity, our partner contributed $3.9 million, and we received a distribution of $0.7 million. In addition, the real estate joint venture obtained a non-recourse secured construction loan with aggregate commitments of $25.0 million which is expected to fund the remaining construction costs to complete the project and we do not expect to make additional equity contributions to the real estate joint venture. See page 41 of the supplemental information for additional financial information on our unconsolidated real estate joint ventures.
(3)
Represents the sale of a condominium interest for approximately 49% of the building RSF, or 203,090 RSF, in our unconsolidated real estate joint venture property. Net operating income, net operating income (cash basis), and contractual sales price represent our 27.5% share related to the sale of the condominium interest. The unconsolidated real estate joint venture expects to refinance the loan in 3Q17, secured by the remaining interest in the property. We expect to receive a cash distribution from the joint venture in the range from $35 million to $40 million for our share of the excess cash, primarily from the condominium sale and loan refinancing.

 
4

 
 
Guidance
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June 30, 2017
(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, 2017. 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 6 of this Earnings Press Release.
Summary of Key Changes in Guidance
 
As of 7/31/17
 
As of 5/1/17
 
 
Summary of Key Changes in Guidance
 
As of 7/31/17
 
As of 5/1/17
 
EPS, FFO per share, and FFO per share, as adjusted
 
See below
 
See below
 
 
Key sources and uses of capital
 
See update below
 

Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s
Common Stockholders – Diluted
 
 
 
As of 7/31/17
 
As of 5/1/17
 
Earnings per share
 
$1.40 to $1.46
 
$1.43 to $1.53
 
Depreciation and amortization
 
4.45
 
 
4.45
 
 
Allocation to unvested restricted stock awards
 
(0.04)
 
 
(0.04)
 
 
Funds from operations per share
 
$5.81 to $5.87
 
$5.84 to $5.94
 
Add: impairment of non-real estate investments
 
    0.05 (1)
 
 
—
 
 
Add: loss on early extinguishment of debt
 
0.01
 
 
0.01
 
 
Add: preferred stock redemption charge
 
    0.12 (2)
 
 
0.12
 
 
Funds from operations per share, as adjusted
 
$5.99 to $6.05
 
$5.97 to $6.07
 

Key Assumptions
 
Low
 
High
 
Occupancy percentage in North America as of December 31, 2017
 
96.6%

 
97.2%

 
 
 
 
 
 
 
Lease renewals and re-leasing of space:
 
 
 
 
 
Rental rate increases
 
19.5%

 
22.5%

 
Rental rate increases (cash basis)
 
7.5%

 
10.5%

 
Same property performance:
 
 
 
 
 
Net operating income increase
 
2.0%

 
4.0%

 
Net operating income increase (cash basis)
 
5.5%

 
7.5%

 
 
 
 
 
 
 
Straight-line rent revenue
 
$
107

 
$
112

 
General and administrative expenses
 
$
68

 
$
73

 
Capitalization of interest
 
$
48

 
$
58

 
Interest expense
 
$
131

 
$
141

 
 
Key Credit Metrics
 
As of 7/31/17
 
Net debt to Adjusted EBITDA – 4Q17 annualized
 
5.3x to 5.8x
 
Net debt and preferred stock to Adjusted EBITDA – 4Q17 annualized
 
5.3x to 5.8x
 
Fixed-charge coverage ratio – 4Q17 annualized
 
Greater than 4.0x
 
Value-creation pipeline as a percentage of gross real estate as of
December 31, 2017
 
Less than 10%
 
Key Sources and Uses of Capital
 
Range
 
Midpoint
 
Key Items Remaining After 7/31/17
 
Sources of capital:
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities after dividends
 
$
115

 
$
135

 
$
125

 
 
 
 
Incremental debt
 
350

 
330

 
340

 
 
 
 
Real estate dispositions and common equity
 
1,080

 
1,350

 
1,215

(3) 
 
$
230

 
Total sources of capital
 
$
1,545

 
$
1,815

 
$
1,680

 
 
 
 
Uses of capital:
 
 
 
 
 
 
 
 
 
 
Construction
 
$
815

 
$
915

 
$
865

 
 
$
453

 
Acquisitions
 
540

 
640

 
590

(4) 
 
$
38

(5) 
7.00% Series D preferred stock repurchases
 
60

 
130

 
95

 
 
$
77

 
6.45% Series E preferred stock redemption
 
130

 
130

 
130

 
 
 
 
Total uses of capital
 
$
1,545

 
$
1,815

 
$
1,680

 
 
 
 
Incremental debt (included above):
 
 
 
 
 
 
 
 
 
 
Issuance of unsecured senior notes payable
 
$
425

 
$
425

 
$
425

 
 
 
 
Borrowings – secured construction loans
 
200

 
250

 
225

 
 
 
 
Repayments of secured notes payable
 
(5
)
 
(10
)
 
(8
)
 
 
 
 
Repayment of unsecured senior term loan
 
(200
)
 
(200
)
 
(200
)
 
 
 
 
$1.65 billion unsecured senior line of credit/other
 
(70
)
 
(135
)
 
(102
)
 
 
 
 
Incremental debt
 
$
350

 
$
330

 
$
340

 
 
 
 

(1)
Primarily related to two non-real estate investments.
(2)
Includes charges aggregating $5.8 million related to the repurchases of 501,115 outstanding shares of our Series D Convertible Preferred Stock in 1Q17. Additionally, in March 2017, we announced the redemption of our Series E Redeemable Preferred Stock and recognized a $5.5 million preferred stock redemption charge. We completed the redemption in April 2017. Excludes any charges related to future repurchases of our Series D Convertible Preferred Stock.
(3)
Includes 2.1 million shares of common stock sold under our ATM program during 2Q17 for net proceeds of $241.8 million, the public offering of 2.1 million shares of our common stock in March 2017 for net proceeds of $217.8 million, and 4.8 million shares of our common stock subject to forward equity sales agreements with anticipated aggregate net proceeds of $495.5 million expected to be settled in 2H17, subject to adjustments as provided in the forward equity sales agreements. Also includes the estimated net cash distribution ranging from $35 million to $40 million in connection with the July 2017 sale of a condominium interest in 203,090 RSF of our unconsolidated real estate joint venture property at 360 Longwood Avenue and the related refinancing of the unconsolidated secured loan. See “Dispositions” on page 4 of this Earnings Press Release for additional information.
(4)
Acquisitions guidance increased by $160.0 million from $430.0 million in our May 1, 2017 forecast primarily for the acquisitions of 1450 Page Mill Road in our Greater Stanford submarket and 266 and 275 Second Avenue in our Route 128 submarket, which closed in June 2017 and July 2017, respectively. See “Acquisitions” on page 3 of this Earnings Press Release for additional information.
(5)
Represents the final two construction milestone installments expected to be paid during 2H17 for the 2016 acquisition of the remaining 49% interest in our unconsolidated real estate joint venture with Uber at 1455 and 1515 Third Street in our Mission Bay/SoMa submarket.

 
5

 
 
 
q217headerlogo.jpg
Earnings Call Information and About the Company
June 30, 2017
 
 


We will host a conference call on Tuesday, August 1, 2017, 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, 2017. 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, August 1, 2017. The replay number is (877) 344-7529 or (412) 317-0088, and the confirmation code is 10107612.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the second quarter ended June 30, 2017, is available in the “For Investors” section of our website at www.are.com or by following this link: http://www.are.com/fs/2017q2.pdf.

For any questions, please contact Joel S. Marcus, chairman, chief executive officer, and founder, at (626) 578-9693 or Dean A. Shigenaga, executive vice president, chief financial officer, and treasurer, 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 $16.0 billion and an asset base in North America of 28.4 million square feet, as of June 30, 2017. The asset base in North America includes 20.6 million RSF of operating properties, including 1.7 million RSF of development and redevelopment of new Class A properties currently undergoing construction. Additionally, the asset base in North America includes 7.8 million SF of future development projects, including 1.3 million SF of near-term projects undergoing marketing for lease and pre-construction activities and 2.8 million SF of intermediate 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. We believe these advantages result 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 2017 earnings per share attributable to Alexandria’s common stockholders – diluted, 2017 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,” “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.


 
6

 
 
Consolidated Statements of Income
q217headerlogo.jpg
June 30, 2017
(In thousands, except per share amounts)
 
 

 
 
Three Months Ended
 
Six Months Ended
 
 
6/30/17

3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
Revenues:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Rental
 
$
211,942

 
$
207,193

 
$
187,315

 
$
166,591

 
$
161,638

 
$
419,135

 
$
319,914

Tenant recoveries
 
60,470

 
61,346

 
58,270

 
58,681

 
54,107

 
121,816

 
106,704

Other income
 
647

(1) 
2,338

 
3,577

 
5,107

 
10,331

 
2,985

 
15,547

Total revenues
 
273,059

 
270,877

 
249,162

 
230,379

 
226,076

 
543,936


442,165

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental operations
 
76,980

 
77,087

 
73,244

 
72,002

 
67,325

 
154,067

 
133,162

General and administrative
 
19,234

 
19,229

 
17,458

 
15,854

 
15,384

 
38,463

 
30,572

Interest
 
31,748

 
29,784

 
31,223

 
25,850

 
25,025

 
61,532

 
49,880

Depreciation and amortization
 
104,098

 
97,183

 
95,222

 
77,133

 
70,169

 
201,281

 
141,035

Impairment of real estate
 
203

 
—

 
16,024

 
8,114

 
156,143

 
203

 
185,123

Loss on early extinguishment of debt
 
—

 
670

 
—

 
3,230

 
—

 
670

 
—

Total expenses
 
232,263

 
223,953

 
233,171

 
202,183

 
334,046

 
456,216

 
539,772

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in earnings (losses) of unconsolidated real estate joint ventures
 
589

 
361

 
86

 
273

 
(146
)
 
950

 
(543
)
Gain on sales of real estate – rental properties
 
—

 
270

 
3,715

 
—

 
—

 
270

 
—

Gain on sales of real estate – land parcels
 
111

 
—

 
—

 
90

 
—

 
111

 
—

Net income (loss)
 
41,496

 
47,555

 
19,792

 
28,559

 
(108,116
)
 
89,051

 
(98,150
)
Net income attributable to noncontrolling interests
 
(7,275
)
 
(5,844
)
 
(4,488
)
 
(4,084
)
 
(3,500
)
 
(13,119
)
 
(7,530
)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s stockholders
 
34,221

 
41,711

 
15,304

 
24,475

 
(111,616
)
 
75,932

 
(105,680
)
Dividends on preferred stock
 
(1,278
)
 
(3,784
)
 
(3,835
)
 
(5,007
)
 
(5,474
)
 
(5,062
)
 
(11,381
)
Preferred stock redemption charge
 
—

 
(11,279
)
 
(35,653
)
 
(13,095
)
 
(9,473
)
 
(11,279
)
 
(12,519
)
Net income attributable to unvested restricted stock awards
 
(1,313
)
 
(987
)
 
(943
)
 
(921
)
 
(1,085
)
 
(2,300
)
 
(1,886
)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders
 
$
31,630

 
$
25,661

 
$
(25,127
)
 
$
5,452

 
$
(127,648
)
 
$
57,291

 
$
(131,466
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic and diluted
 
$
0.35

 
$
0.29

 
$
(0.31
)
 
$
0.07

 
$
(1.72
)
 
$
0.64

 
$
(1.79
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
90,215

 
88,147

 
80,800

 
76,651

 
74,319

 
89,186

 
73,452

Diluted
 
90,745

 
88,200

 
80,800

 
77,402

 
74,319

 
89,479

 
73,452

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per share of common stock
 
$
0.86

 
$
0.83

 
$
0.83

 
$
0.80

 
$
0.80

 
$
1.69

 
$
1.60


(1)
Includes impairment charges aggregating $4.5 million primarily related to two non-real estate investments.

 
7

 
 
Consolidated Balance Sheets
q217headerlogo.jpg
June 30, 2017
(In thousands)
 
 

 
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
Assets
 
 
 
 

 
 

 
 

 
 

Investments in real estate
 
$
9,819,413

 
$
9,470,667

 
$
9,077,972

 
$
7,939,179

 
$
7,774,608

Investments in unconsolidated real estate joint ventures
 
58,083

 
50,457

 
50,221

 
133,580

 
132,433

Cash and cash equivalents
 
124,877

 
151,209

 
125,032

 
157,928

 
256,000

Restricted cash
 
20,002

 
18,320

 
16,334

 
16,406

 
13,131

Tenant receivables
 
8,393

 
9,979

 
9,744

 
9,635

 
9,196

Deferred rent
 
383,062

 
364,348

 
335,974

 
318,286

 
303,379

Deferred leasing costs
 
201,908

 
202,613

 
195,937

 
191,765

 
191,619

Investments
 
424,920

 
394,471

 
342,477

 
320,989

 
360,050

Other assets
 
205,009

 
206,562

 
201,197

 
206,133

 
104,414

Total assets
 
$
11,245,667

 
$
10,868,626

 
$
10,354,888

 
$
9,293,901

 
$
9,144,830

 
 
 
 
 
 
 
 
 
 
 
Liabilities, Noncontrolling Interests, and Equity
 
 
 
 
 
 
 
 
 
 
Secured notes payable
 
$
1,127,348

 
$
1,083,758

 
$
1,011,292

 
$
789,450

 
$
722,794

Unsecured senior notes payable
 
2,800,398

 
2,799,508

 
2,378,262

 
2,377,482

 
2,376,713

Unsecured senior line of credit
 
300,000

 
—

 
28,000

 
416,000

 
72,000

Unsecured senior bank term loans
 
547,639

 
547,420

 
746,471

 
746,162

 
945,030

Accounts payable, accrued expenses, and tenant security deposits
 
734,189

 
782,637

 
731,671

 
605,181

 
593,628

Dividends payable
 
81,602

 
78,976

 
76,914

 
66,705

 
67,188

Preferred stock redemption liability
 
—

 
130,000

 
—

 
—

 
—

Total liabilities
 
5,591,176

 
5,422,299

 
4,972,610

 
5,000,980

 
4,777,353

 
 
 
 
 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
 
11,410

 
11,320

 
11,307

 
9,012

 
9,218

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

 
74,386

 
86,914

 
161,792

 
188,864

6.45% Series E cumulative redeemable preferred stock
 
—

 
—

 
130,000

 
130,000

 
130,000

Common stock
 
921

 
899

 
877

 
768

 
766

Additional paid-in capital
 
5,059,180

 
4,855,686

 
4,672,650

 
3,649,263

 
3,693,807

Accumulated other comprehensive income (loss)
 
22,677

 
21,460

 
5,355

 
(31,745
)
 
8,272

Alexandria Real Estate Equities, Inc.’s stockholders’ equity
 
5,157,164

 
4,952,431

 
4,895,796

 
3,910,078

 
4,021,709

Noncontrolling interests
 
485,917

 
482,576

 
475,175

 
373,831

 
336,550

Total equity
 
5,643,081

 
5,435,007

 
5,370,971

 
4,283,909

 
4,358,259

Total liabilities, noncontrolling interests, and equity
 
$
11,245,667

 
$
10,868,626

 
$
10,354,888

 
$
9,293,901

 
$
9,144,830




 
8

 
 
Funds From Operations and Funds From Operations per Share
q217headerlogo.jpg
June 30, 2017
(In thousands, except per share amounts)
 
 

The following tables present a reconciliation of net income (loss) 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, and related per share amounts. Amounts allocable to unvested restricted stock awards are not material and are not presented separately within the per share table below. Per share amounts may not add due to rounding.
 
 
Three Months Ended
 
Six Months Ended
 
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
Net income (loss) attributable to Alexandria’s common stockholders
 
$
31,630

 
$
25,661

 
$
(25,127
)
 
$
5,452

 
$
(127,648
)
 
$
57,291

 
$
(131,466
)
Depreciation and amortization
 
104,098

 
97,183

 
95,222

 
77,133

 
70,169

 
201,281

 
141,035

Noncontrolling share of depreciation and amortization from consolidated real estate JVs
 
(3,735
)
 
(3,642
)
 
(2,598
)
 
(2,224
)
 
(2,226
)
 
(7,377
)
 
(4,527
)
Our share of depreciation and amortization from unconsolidated real estate JVs
 
324

 
412

 
655

 
658

 
651

 
736

 
1,394

Gain on sales of real estate – rental properties
 
—

 
(270
)
 
(3,715
)
 
—

 
—

 
(270
)
 
—

Gain on sales of real estate – land parcels
 
(111
)
 
—

 
—

 
(90
)
 
—

 
(111
)
 
—

Impairment of real estate – rental properties
 
203

 
—

 
3,506

 
6,293

 
88,395

 
203

 
88,395

Allocation to unvested restricted stock awards
 
(685
)
 
(561
)
 
—

 
(438
)
 
—

 
(1,245
)
 
—

Funds from operations attributable to Alexandria’s common stockholders –
diluted (1)
 
131,724

 
118,783

 
67,943

 
86,784

 
29,341

 
250,508

 
94,831

Non-real estate investment income
 
—

 
—

 
—

 
—

 
(4,361
)
 
—

 
(4,361
)
Impairment of land parcels and non-real estate investments
 
4,491

(2) 
—

 
12,511

 
4,886

 
67,162

 
4,491

(2) 
96,142

Loss on early extinguishment of debt
 
—

 
670

 
—

 
3,230

 
—

 
670

 
—

Preferred stock redemption charge
 
—

 
11,279

 
35,653

 
13,095

 
9,473

 
11,279

 
12,519

Allocation to unvested restricted stock awards
 
(58
)
 
(150
)
 
(605
)
 
(359
)
 
(530
)
 
(209
)
 
(969
)
Funds from operations attributable to Alexandria’s common stockholders –
diluted, as adjusted
 
$
136,157

 
$
130,582

 
$
115,502

 
$
107,636

 
$
101,085

 
$
266,739

 
$
198,162


Net income (loss) per share attributable to Alexandria’s common stockholders
 
$
0.35

 
$
0.29

 
$
(0.31
)
 
$
0.07

 
$
(1.72
)
 
$
0.64

 
$
(1.79
)
Depreciation and amortization 
 
1.10

 
1.06

 
1.15

 
0.97

 
0.92

 
2.16

 
1.88

Gain on sales of real estate – rental properties
 
—

 
—

 
(0.05
)
 
—

 
—

 
—

 
—

Impairment of real estate – rental properties
 
—

 
—

 
0.05

 
0.08

 
1.19

 
—

 
1.20

Funds from operations per share attributable to Alexandria’s common stockholders – diluted (1)
 
1.45

 
1.35

 
0.84

 
1.12

 
0.39

 
2.80


1.29

Non-real estate investment income
 
—

 
—

 
—

 
—

 
(0.06
)
 
—

 
(0.06
)
Impairment of land parcels and non-real estate investments
 
0.05

(2) 
—

 
0.15

 
0.06

 
0.90

 
0.05

(2) 
1.30

Loss on early extinguishment of debt
 
—

 
0.01

 
—

 
0.04

 
—

 
0.01

 
—

Preferred stock redemption charge
 
—

 
0.12

 
0.43

 
0.17

 
0.13

 
0.12

 
0.17

Funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
1.50

 
$
1.48

 
$
1.42

 
$
1.39

 
$
1.36

 
$
2.98

 
$
2.70

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding for calculating funds from operations per share and funds from operations, as adjusted, per share – diluted
 
90,745

 
88,200

 
81,280

 
77,402

 
74,319

 
89,479

 
73,452


(1)
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.
(2)
Primarily related to two non-real estate investments.


 
9









SUPPLEMENTAL
INFORMATION








 
 
 
q217headerlogo.jpg
Company Profile
June 30, 2017
 
 

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 $16.0 billion and an asset base in North America of 28.4 million square feet, as of June 30, 2017. The asset base in North America includes 20.6 million RSF of operating properties, including 1.7 million RSF of development and redevelopment of new Class A properties currently undergoing construction. Additionally, the asset base in North America includes 7.8 million SF of future development projects, including 1.3 million SF of near-term projects undergoing marketing for lease and pre-construction activities and 2.8 million SF of intermediate 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. We believe these advantages result 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 51% of our annual rental revenue generated from investment grade tenants. The impressive 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 its 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 with 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 28 individuals, averaging more than 27 years of real estate experience, including more than 13 years with Alexandria. Our executive team alone averages more than 18 years of experience with Alexandria.

EXECUTIVE MANAGEMENT TEAM
Joel S. Marcus
Chairman,
Chief Executive Officer & Founder
Dean A. Shigenaga
Executive Vice President
Chief Financial Officer & Treasurer
Thomas J. Andrews
Executive Vice President
Regional Market Director – Greater Boston
Jennifer J. Banks
Executive Vice President
General Counsel & Corporate Secretary
Vincent R. Ciruzzi
Chief Development Officer
Peter M. Moglia
Chief Investment Officer
Stephen A. Richardson
Chief Operating Officer &
Regional Market Director – San Francisco
Daniel J. Ryan
Executive Vice President
Regional Market Director – San Diego & Strategic Operations

 
11

 
 
 
q217headerlogo.jpg
Investor Information
June 30, 2017
 
 

Corporate Headquarters
 
New York Stock Exchange Trading Symbols
 
Information Requests
385 East Colorado Boulevard, Suite 299
 
Common stock: ARE
 
Phone:
(626) 396-4828
Pasadena, California 91101
 
7.00% Series D preferred stock: ARE PRD
 
Email:
 
 
 
 
Web:
www.are.com
 
 
 
 
 
 
Equity Research Coverage
Alexandria is currently covered by the following research analysts. This list may not be complete 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 its management. Alexandria does not by its reference or distribution of the information below imply its 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 / Gene Nusinzon
 
Michael Carroll / Brian Hawthorne
(646) 855-5808 / (646) 855-1363
 
(212) 816-1383 / (212) 816-1382
 
(212) 622-6682 / (212) 622-1041
 
(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 / Nathan Crossett
 
Karin Ford / Ryan Cybart
 
David Rodgers / Richard Schiller
(212) 526-2306 / (212) 526-3098
 
(212) 497-0882 / (212) 497-0870
 
(212) 405-7349 / (212) 405-6591
 
(216) 737-7341 / (312) 609-5485
 
 
 
 
 
 
 
BTIG, LLC
 
Green Street Advisors, Inc.
 
Mizuho Securities USA Inc.
 
UBS Securities LLC
Thomas Catherwood / James Sullivan
 
Jed Reagan / Daniel Ismail
 
Richard Anderson / Zachary Silverberg
 
Nick Yulico / Frank Lee
(212) 738-6140 / (212) 738-6139
 
(949) 640-8780 / (949) 640-8780
 
(212) 205-8445 / (212) 205-7855
 
(212) 713-3402 / (415) 352-5679
 
 
 
 
 
 
 
CFRA
 
JMP Securities – JMP Group, Inc.
 
 
 
 
Kenneth Leon
 
Peter Martin / Brian Riley
 
 
 
 
(212) 438-4638
 
(415) 835-8904 / (415) 835-8908
 
 
 
 


Rating Agencies
Moody’s Investors Service
 
S&P Global Ratings
Thuy Nguyen / Reed Valutas
 
Fernanda Hernandez / Anita Ogbara
(212) 553-7168 / (212) 553-4169
 
(212) 438-1347 / (212) 438-5077

 
12

 
 
 
q217headerlogo.jpg
High-Quality, Diverse, and Innovative Tenants
June 30, 2017
 
 



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


Investment-Grade Tenants
 
Tenant Mix
51%
 
q217clientmix4s.jpg
 
of ARE’s Total
Annual Rental Revenue(1)
 
 
 
 
Percentage of ARE’s Annual Rental Revenue (1)











(1)
Represents annual rental revenue in effect as of June 30, 2017.

 
13

 
 
 
q217headerlogo.jpg
Class A Properties in AAA Locations
June 30, 2017
 
 


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

Class A Properties in
AAA Locations
 
AAA Locations
79%
 
q217realestatemetrics4s.jpg
 
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, 2017.

 
14

 
 
 
q217headerlogo.jpg
Occupancy
June 30, 2017
 
 



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

Solid Historical Occupancy (1)
 
Occupancy across Key Locations
95%
 
q217occupancy4s.jpg
 
Over 10 Years
 
 
 
 
Occupancy of Operating Properties
as of June 30,2017

(1)
Average occupancy of operating properties in North America as of each December 31 for the last 10 years and as of June 30, 2017.
(2)
In December 2016, Eli Lilly and Company vacated 125,409 RSF at 10300 Campus Point Drive in our University Town Center submarket and relocated and expanded into 305,006 RSF at 10290 Campus Point Drive.

 
15

 
 
Financial and Asset Base Highlights
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands, except per share amounts)
 
 

 
 
Three Months Ended (unless stated otherwise)
 
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
Selected financial data from consolidated financial statements and related information
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA – quarter annualized
 
$
755,048

 
$
723,764

 
$
662,836

 
$
614,668

 
$
601,048

Adjusted EBITDA – trailing 12 months
 
$
689,079

 
$
650,579

 
$
610,839

 
$
591,646

 
$
579,880

Adjusted EBITDA margins
 
68%

 
67%

 
67%

 
67%

 
66%

Operating margins
 
72%

 
72%

 
71%

 
69%

 
70%

 
 
 
 
 
 
 
 
 
 
 
Net debt (excluding unamortized deferred financing costs) at end of period
 
$
4,660,216

 
$
4,292,773

 
$
4,052,576

 
$
4,186,180

 
$
3,881,708

Net debt to Adjusted EBITDA – quarter annualized
 
6.2x

 
5.9x

 
6.1x

 
6.8x

 
6.5x

Net debt to Adjusted EBITDA – trailing 12 months
 
6.8x

 
6.6x

 
6.6x

 
7.1x

 
6.7x

Net debt and preferred stock to Adjusted EBITDA – quarter annualized
 
6.3x

 
6.0x

 
6.4x

 
7.3x

 
7.0x

Net debt and preferred stock to Adjusted EBITDA – trailing 12 months
 
6.9x

 
6.7x

 
7.0x

 
7.6x

 
7.2x

 
 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio – quarter annualized
 
4.1x

 
4.1x

 
3.8x

 
3.6x

 
3.6x

Fixed-charge coverage ratio – trailing 12 months
 
3.9x

 
3.8x

 
3.6x

 
3.6x

 
3.6x

Unencumbered net operating income as a percentage of total net operating income
 
81%

 
81%

 
82%

 
87%

 
87%

 
 
 
 
 
 
 
 
 
 
 
Closing stock price at end of period
 
$
120.47

 
$
110.52

 
$
111.13

 
$
108.77

 
$
103.52

Common shares outstanding (in thousands) at end of period
 
92,098

 
89,884

 
87,666

 
76,824

 
76,615

Total equity capitalization at end of period
 
$
11,202,668

 
$
10,037,702

 
$
9,991,832

 
$
8,717,246

 
$
8,326,096

Total market capitalization at end of period
 
$
15,978,053

 
$
14,468,388

 
$
14,155,857

 
$
13,046,340

 
$
12,442,633

 
 
 
 
 
 
 
 
 
 
 
Dividend per share – quarter/annualized
 
$0.86/$3.44

 
$0.83/$3.32

 
$0.83/$3.32

 
$0.80/$3.20

 
$0.80/$3.20

Dividend payout ratio for the quarter
 
58%

 
57%

 
63%

 
57%

 
61%

Dividend yield – annualized
 
2.9%

 
3.0%

 
3.0%

 
2.9%

 
3.1%

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

 
0.6%

 
0.6%

 
0.7%

 
0.7%

General and administrative expense as a percentage of total revenues – trailing 12 months
 
7.0%

 
7.0%

 
6.9%

 
6.9%

 
6.9%

 
 
 
 
 
 
 
 
 
 
 
Capitalized interest
 
$
15,069

 
$
13,164

 
$
11,659

 
$
14,903

 
$
13,788

Weighted-average interest rate for capitalization of interest during period
 
3.98%

 
3.95%

 
3.72%

 
3.78%

 
3.70%

 
 
 
 
 
 
 
 
 
 
 
 

 
16

 
 
Financial and Asset Base Highlights (continued)
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands, except annual rental revenue per occupied RSF amounts)
 
 

 
 
Three Months Ended (unless stated otherwise)
 
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
Amounts included in funds from operations and non-revenue-enhancing capital expenditures
 
 
 
 
 
 
 
 
 
 
Straight-line rent revenue
 
$
17,905

(1) 
$
35,592

 
$
20,993

 
$
16,111

 
$
2,430

Amortization of acquired below-market leases
 
$
5,004

 
$
5,359

 
$
2,818

 
$
965

 
$
966

Straight-line rent on ground leases
 
$
201

 
$
198

 
$
557

 
$
(1,331
)
 
$
777

Stock compensation expense
 
$
5,504

 
$
5,252

 
$
6,426

 
$
7,451

 
$
6,117

Amortization of loan fees
 
$
2,843

 
$
2,895

 
$
3,080

 
$
3,080

 
$
2,953

Amortization of debt premiums
 
$
625

 
$
596

 
$
383

 
$
5

 
$
26

Non-revenue-enhancing capital expenditures:
 
 
 
 
 
 
 
 
 
 
Building improvements
 
$
1,840

 
$
1,138

 
$
2,135

 
$
1,920

 
$
2,833

Tenant improvements and leasing commissions
 
$
9,389

 
$
18,377

(2) 
$
11,614

 
$
10,289

 
$
9,041

 
 
 
 
 
 
 
 
 
 
 
Operating statistics and related information (at end of period)
 
 
 
 
 
 
 
 
 
 
Number of properties – North America
 
202

 
199

 
199

 
189

 
189

RSF (including development and redevelopment projects under construction) – North America
 
20,567,473

 
20,084,195

 
19,869,729

 
18,820,579

 
18,819,315

Total square feet – North America (see details on page 32)
 
28,351,518

 
28,176,780

 
25,162,360

 
24,499,286

 
24,400,303

Annual rental revenue per occupied RSF – North America
 
$
46.55

 
$
45.94

 
$
45.15

 
$
43.39

 
$
42.06

Occupancy of operating properties – North America
 
95.7%

 
95.5%

 
96.6%

 
97.1%

 
97.0%

Occupancy of operating and redevelopment properties – North America
 
94.0%

 
94.7%

 
95.7%

 
94.4%

 
93.9%

 
 
 
 
 
 
 
 
 
 
 
Total leasing activity – RSF
 
1,081,777

 
1,320,781

 
1,501,376

 
683,307

 
816,512

Lease renewals and re-leasing of space – change in average new rental rates over expiring rates:
 
 
 
 
 
 
 
 
 
 
Rental rate increases
 
23.2%


27.8%

 
25.8%

 
28.2%

 
27.1%

Rental rate increases (cash basis)
 
9.4%

 
17.7%

 
9.5%

 
16.2%

 
9.3%

RSF (included in total leasing activity above)
 
604,142

 
878,863

 
671,222

 
592,776

 
647,268

 
 
 
 
 
 
 
 
 
 
 
Same property – percentage change over comparable quarter from prior year:
 
 
 
 
 
 
 
 
 
 
Net operating income increase
 
1.8%

 
2.6%

 
3.2%

 
5.3%

 
4.9%

Net operating income increase (cash basis)
 
7.0%

 
5.5%

 
4.9%

 
6.1%

 
6.4%

 
 
 
 
 
 
 
 
 
 
 
(1)    The decline in straight-line rent revenue from 1Q17 to 2Q17 was primarily due to commencement of contractual cash rents on April 1, 2017 of approximately $10 million, or $40 million annually, from our recently completed development of new class A buildings at 75/125 Binney Street and 50 and 60 Binney Street in our Cambridge submarket.
(2)    Includes leasing commissions of $4.5 million, or $3.06 per square foot, related to lease renewals at two of our properties in our Cambridge submarket that generated increases in rental rates of 28.8% and 20.4% (cash basis).

 
17

 
 
 
q217headerlogo.jpg
Key Operating Metrics
June 30, 2017
 
 

Favorable Lease Structure (1)
 
Same Property Net Operating Income Growth
 
 
 
q217sameprop4sa.jpg
q217samepropb4sb.jpg
 
Stable cash flows
 
 
 
 
Percentage of triple
net leases
 
97%
 
 
Increasing cash flows
 
 
 
 
Percentage of leases containing
annual rent escalations
95%
 
 
Lower capex burden
 
 
 
 
Percentage of leases providing for the
recapture of capital expenditures
94%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Margins (2)
 
Rental Rate Growth:
Renewed/Re-Leased Space
 
 
 
 
 
 
 
 
 
q217rentalrate4sa.jpg
q217rentalrate4sb.jpg
 
Adjusted EBITDA
 
 
 
Operating
 
 
68%
 
 
 
72%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Percentages calculated based on RSF as of June 30, 2017.
(2)
Represents the three months ended June 30, 2017.

 
18

 
 
Same Property Performance
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands)
 
 

Same Property Financial Data
 
2Q17
 
YTD 2Q17
 
Same Property Statistical Data
 
2Q17
 
YTD 2Q17
 
Percentage change over comparable period from prior year:
 
 
 
 
 
Number of same properties
 
166
 
166
 
Net operating income increase
 
1.8%
 
2.2%
 
Rentable square feet
 
14,419,701
 
14,419,701
 
Net operating income increase (cash basis)
 
7.0%
(1) 
6.2%
(1) 
Occupancy – current-period average
 
95.6%
(1) 
96.1%
(1) 
Operating margin
 
71%
 
71%
 
Occupancy – same-period prior-year average
 
97.3%
 
97.2%
 

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
2017
 
2016
 
$ Change
 
% Change
 
2017
 
2016
 
$ Change
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
$
151,504

 
$
149,079

 
$
2,425

 
1.6
%
 
$
303,124

 
$
295,997

 
$
7,127

 
2.4
%
 
Non-same properties
 
60,438

 
12,559

 
47,879

 
381.2

 
116,011

 
23,917

 
92,094

 
385.1

 
Total rental
 
211,942

 
161,638

 
50,304

 
31.1

 
419,135

 
319,914

 
99,221

 
31.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
49,514

 
48,932

 
582

 
1.2

 
99,669

 
96,981

 
2,688

 
2.8

 
Non-same properties
 
10,956

 
5,175

 
5,781

 
111.7

 
22,147

 
9,723

 
12,424

 
127.8

 
Total tenant recoveries
 
60,470

 
54,107

 
6,363

 
11.8

 
121,816

 
106,704

 
15,112

 
14.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
109

 
53

 
56

 
105.7

 
250

 
62

 
188

 
303.2

 
Non-same properties
 
538

(2) 
10,278

 
(9,740
)
 
(94.8
)
 
2,735

(2) 
15,485

 
(12,750
)
 
(82.3
)
 
Total other income
 
647

 
10,331

 
(9,684
)
 
(93.7
)
 
2,985

 
15,547

 
(12,562
)
 
(80.8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
201,127

 
198,064

 
3,063

 
1.5

 
403,043

 
393,040

 
10,003

 
2.5

 
Non-same properties
 
71,932

 
28,012

 
43,920

 
156.8

 
140,893

 
49,125

 
91,768

 
186.8

 
Total revenues
 
273,059

 
226,076

 
46,983

 
20.8

 
543,936

 
442,165

 
101,771

 
23.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
58,795

 
58,311

 
484

 
0.8

 
117,988

 
114,173

 
3,815

 
3.3

 
Non-same properties
 
18,185

 
9,014

 
9,171

 
101.7

 
36,079

 
18,989

 
17,090

 
90.0

 
Total rental operations
 
76,980

 
67,325

 
9,655

 
14.3

 
154,067

 
133,162

 
20,905

 
15.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
142,332

 
139,753

 
2,579

 
1.8

 
285,055

 
278,867

 
6,188

 
2.2

 
Non-same properties
 
53,747

 
18,998

 
34,749

 
182.9

 
104,814

 
30,136

 
74,678

 
247.8

 
Net operating income
 
$
196,079

 
$
158,751

 
$
37,328

 
23.5
%
 
$
389,869

 
$
309,003

 
$
80,866

 
26.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating income – same properties
 
$
142,332

 
$
139,753

 
$
2,579

 
1.8
%
 
$
285,055

 
$
278,867

 
$
6,188

 
2.2
%
 
Straight-line rent revenue and amortization of acquired below-market leases
 
(120
)
 
(6,852
)
 
6,732

 
(98.2
)
 
(8,165
)
 
(18,255
)
 
10,090

 
(55.3
)
 
Net operating income – same properties (cash basis)
 
$
142,212

 
$
132,901

 
$
9,311

 
7.0
%
(1) 
$
276,890

 
$
260,612

 
$
16,278

 
6.2
%
(1) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Includes the effect of the end of initial rent concessions at 75/125 Binney Street in 2Q17 and was primarily offset by a temporary decline in occupancy of our Same Properties portfolio in 1Q17 and 2Q17, due to 125,409 RSF vacated by Eli Lilly and Company at 10300 Campus Point Drive in our University Town Center submarket, upon relocation and expansion into 305,006 RSF at our recently delivered redevelopment project at 10290 Campus Point Drive, a non-same property, in December 2016. We are in negotiations with a high-credit tenant to lease approximately 85,000 of the currently vacant RSF at 10300 Campus Point Drive. Additionally, 59,838 RSF became vacant in 1Q17 at 930 Clopper Road located in our Gaithersburg submarket. We are actively marketing the space for lease.
(2)
Includes impairment charges aggregating $4.5 million primarily related to two non-real estate investments.


 
19

 
 
 
q217headerlogo.jpg
Leasing Activity
June 30, 2017
 
 

 
 
Three Months Ended
 
Six Months Ended
 
Year Ended
 
 
June 30, 2017
 
June 30, 2017
 
December 31, 2016
(Dollars are per RSF)
 
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
 
23.2%

 
9.4%

 
26.2%

 
14.7%

 
27.6%

 
12.0%

New rates
 
$
40.17

 
$
38.70

 
$
48.72

 
$
45.41

 
$
48.60

 
$
45.83

Expiring rates
 
$
32.60

 
$
35.37

 
$
38.60

 
$
39.59

 
$
38.09

 
$
40.92

Rentable square footage
 
604,142

 
 
 
1,483,005

 
 
 
2,129,608

 
 
Tenant improvements/leasing commissions
 
$
15.16

 
 
 
$
18.72

(2) 
 
 
$
15.69

 
 
Weighted-average lease term
 
6.1 years

 
 
 
6.2 years

 
 
 
5.5 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Developed/redeveloped/previously vacant space leased
 
 
 
 
 
 
 
 
 
 
 
 
New rates
 
$
32.95

 
$
33.09

 
$
28.23

 
$
24.18

 
$
50.24

 
$
38.72

Rentable square footage
 
477,635

 
 
 
919,553

 
 
 
1,260,459

 
 
Tenant improvements/leasing commissions
 
$
8.80

 
 
 
$
6.63

 
 
 
$
12.42

 
 
Weighted-average lease term
 
5.1 years

 
 
 
10.0 years

 
 
 
32.6 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leasing activity summary (totals):
 
 
 
 
 
 
 
 
 
 
 
 
New rates
 
$
36.98

 
$
36.22

 
$
40.88

 
$
37.29

 
$
49.21

 
$
43.19

Rentable square footage
 
1,081,777

 
 
 
2,402,558

(3) 
 
 
3,390,067

 
 
Tenant improvements/leasing commissions
 
$
12.35

 
 
 
$
14.09

 
 
 
$
14.48

 
 
Weighted-average lease term
 
5.7 years

 
 
 
7.6 years

 
 
 
15.6 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease expirations: (1)
 
 
 
 
 
 
 
 
 
 
 
 
Expiring rates
 
$
32.57

 
$
35.30

 
$
37.73

 
$
38.70

 
$
36.70

 
$
39.32

Rentable square footage
 
613,868

 
 
 
1,758,706

 
 
 
2,484,169

 
 

Leasing activity includes 100% of results for each property managed by us.



(1)
Excludes 28 month-to-month leases for 46,902 RSF and 20 month-to-month leases for 31,207 RSF as of June 30, 2017 and December 31, 2016, respectively.
(2)
Includes approximately $4.5 million, or $3.06 per square foot, of leasing commissions related to lease renewals at two of our properties in our Cambridge submarket in 1Q17 that generated increases in rental rates of 28.8% and 20.4% (cash basis).
(3)
During YTD 2Q17, we granted tenant concessions/free rent averaging 2.6 months with respect to the 2,402,558 RSF leased. Approximately 65% of the leases executed during YTD 2Q17 did not include concessions for free rent.

 
20

 
 
 
q217headerlogo.jpg
Contractual Lease Expirations
June 30, 2017
 
 

Year
 
Number of Leases
 
RSF
 
Percentage of
Occupied RSF
 
Annual Rental Revenue
(per RSF)
 
Percentage of Total
Annual Rental Revenue
 
 
2017
(1) 
 
 
36

 
 
 
318,397

 
 
 
1.8
%
 
 
 
$
41.65

 
 
 
1.6
%
 
 
 
2018
 
 
 
105

 
 
 
1,376,083

 
 
 
7.7
%
 
 
 
$
37.98

 
 
 
6.4
%
 
 
 
2019
 
 
 
88

 
 
 
1,494,412

 
 
 
8.3
%
 
 
 
$
39.93

 
 
 
7.3
%
 
 
 
2020
 
 
 
100

 
 
 
2,052,268

 
 
 
11.4
%
 
 
 
$
38.20

 
 
 
9.6
%
 
 
 
2021
 
 
 
76

 
 
 
1,584,862

 
 
 
8.8
%
 
 
 
$
41.41

 
 
 
8.0
%
 
 
 
2022
 
 
 
65

 
 
 
1,272,145

 
 
 
7.1
%
 
 
 
$
46.13

 
 
 
7.2
%
 
 
 
2023
 
 
 
37

 
 
 
1,683,420

 
 
 
9.4
%
 
 
 
$
42.07

 
 
 
8.6
%
 
 
 
2024
 
 
 
23

 
 
 
1,269,192

 
 
 
7.1
%
 
 
 
$
49.53

 
 
 
7.7
%
 
 
 
2025
 
 
 
15

 
 
 
457,165

 
 
 
2.5
%
 
 
 
$
48.48

 
 
 
2.7
%
 
 
 
2026
 
 
 
16

 
 
 
646,397

 
 
 
3.6
%
 
 
 
$
46.42

 
 
 
3.7
%
 
 
Thereafter
 
 
54

 
 
 
5,812,046

 
 
 
32.3
%
 
 
 
$
52.73

 
 
 
37.2
%
 
 

Market
 
2017 Contractual Lease Expirations
 
Annual Rental Revenue
(per RSF)
 
2018 Contractual Lease Expirations

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

Negotiating/
Anticipating

Targeted for Development/
Redevelopment

Remaining
Expiring Leases
 
Total

 
 
 
 
 
 
 
 



 

 
Greater Boston
 
68,493

 
 
12,880

 
—

 
66,309

 
147,682

 
$
40.48

 
18,263


11,830


—

 

 
296,890

(2) 
 
326,983


$
58.59

 
San Francisco
 
—

 
 
—

 
—

 
—

 
—

 
—

 
34,623


11,114


321,971

(3) 

 
136,343


 
504,051


35.48

 
New York City
 
—

 
 
1,070

 
—

 
14,849

 
15,919

 
 N/A

 
—


915


—

 

 
4,060


 
4,975


 N/A

 
San Diego
 
31,792

 
 
—

 
—

 
30,845


62,637

 
33.13

 
15,611


—


—

 
 
 
282,520

 
 
298,131


29.99

 
Seattle
 
12,511

 
 
—

 
—

 
6,180

 
18,691

 
46.26

 
—


—


—

 

 
15,264


 
15,264


43.66

 
Maryland
 
14,141

 
 
6,289

 
—

 
8,590

 
29,020

 
25.01

 
5,104


—


—

 

 
70,297


 
75,401


19.88

 
Research Triangle Park
 
9,364

 
 
—

 
—

 
14,309

 
23,673

 
21.65

 
—


4,575


—

 

 
55,410


 
59,985


26.27

 
Canada
 
—

 
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
 
80,689

 
 
80,689

 
20.55

 
Non-cluster markets
 
—

 
 
—

 
—

 
20,775

 
20,775

 
24.45

 
—


—


—

 

 
10,604


 
10,604


26.58

 
Total
 
136,301

 
 
20,239

 
—

 
161,857

 
318,397

 
$
41.65

 
73,601


28,434


321,971

 

 
952,077

(4) 
 
1,376,083


$
37.98

 
Percentage of expiring leases
 
43
%
 
 
6
%
 
—
%
 
51
%
 
100
%
 
 
 
5
%
 
2
%
 
23
%
 
 
 
70
%

 
100
%


 
 

Lease expirations include 100% of RSF for each property managed by us in North America. Annual rental revenue (per RSF) represents amounts in effect as of June 30, 2017.


(1)
Excludes 28 month-to-month leases for 46,902 RSF as of June 30, 2017.
(2)
Includes 274,254 RSF located in our Cambridge submarket for our remaining expiring leases in 2018.
(3)
Includes 195,000 RSF expiring in 1Q18 at 960 Industrial Road, a recently acquired property located in our Greater Stanford submarket. We are pursuing entitlements aggregating 500,000 RSF for a multi-building development. Also includes 126,971 RSF of office space at 681 Gateway Boulevard in our South San Francisco submarket targeted for redevelopment into office/laboratory space upon expiration of the existing lease in 3Q18. Concurrent with our redevelopment, we anticipate expanding the building by an additional 15,000 to 30,000 RSF, and expect the project to be delivered in 2019.
(4)
The two largest remaining expiring leases in 2018 are 71,510 RSF at 9880 Campus Point Drive in our University Town Center submarket, which is under evaluation for options to create a Class A office/laboratory building at this property, and 60,917 RSF in our Canada market undergoing marketing.

 
21

 
 
Top 20 Tenants
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands)
 
 

79% of Top 20 Annual Rental Revenue from Investment-Grade Tenants
 
 
Tenant
 
Remaining Lease Term in Years (1)
 
Aggregate
RSF
 
Annual Rental Revenue (1)
 
Percentage of Aggregate Annual Rental Revenue (1)
 
Investment-Grade Ratings
 
 
 
 
 
 
 
 
 
 
 
 
Moody’s
 
S&P
1
 
Illumina, Inc.
 
 
13.1

 
 
 
891,495

 
 
$
33,958

 
4.0
%
 
—
 
BBB
2
 
Takeda Pharmaceutical Company Ltd.
 
 
12.8

 
 
 
386,111

 
 
30,516

 
3.6

 
A1
 
A-
3
 
Eli Lilly and Company
 
 
12.4

 
 
 
469,266

 
 
29,342

 
3.5

 
A2
 
AA-
4
 
Novartis AG
 
 
9.4

 
 
 
377,831

 
 
28,622

 
3.4

 
Aa3
 
AA-
5
 
Sanofi
 
 
10.8


 
 
446,975

 
 
25,166

 
3.0

 
A1
 
AA
6
 
Uber Technologies, Inc. (2)
 
 
75.4

 
 
 
422,980

 
 
22,118

 
2.6

 
—
 
—
7
 
New York University
 
 
13.1

 
 
 
209,224

 
 
20,651

 
2.5

 
 Aa2
 
 AA-
8
 
bluebird bio, Inc.
 
 
9.6

 
 
 
262,261

 
 
20,099

 
2.4

 
—
 
—
9
 
Dana-Farber Cancer Institute, Inc. (3)
 
 
13.4

 
 
 
254,130

 
 
19,512

 
2.3

 
A1
 
—
10
 
Roche
 
 
4.6

 
 
 
343,861

 
 
17,597

 
2.1

 
A1
 
AA
11
 
Amgen Inc.
 
 
6.8

 
 
 
407,369

 
 
16,838

 
2.0

 
Baa1
 
A
12
 
Massachusetts Institute of Technology
 
 
7.9

 
 
 
256,126

 
 
16,554

 
2.0

 
Aaa
 
AAA
13
 
United States Government
 
 
8.1

 
 
 
264,358

 
 
15,026

 
1.8

 
Aaa
 
AA+
14
 
Celgene Corporation
 
 
6.2

 
 
 
347,503

 
 
14,757

 
1.8

 
Baa2
 
BBB+
15
 
FibroGen, Inc.
 
 
6.4

 
 
 
234,249

 
 
14,198

 
1.7

 
—
 
—
16
 
Biogen Inc.
 
 
11.3

 
 
 
305,212

 
 
13,278

 
1.6

 
Baa1
 
A-
17
 
Juno Therapeutics, Inc.
 
 
11.8

 
 
 
241,276

 
 
12,619

 
1.5

 
—
 
—
18
 
Bristol-Myers Squibb Company
 
 
1.8

 
 
 
251,316

 
 
10,743

 
1.3

 
A2
 
A+
19
 
The Regents of the University of California
 
 
6.2

 
 
 
233,527

 
 
10,733

 
1.3

 
Aa2
 
AA
20
 
Merrimack Pharmaceuticals, Inc. (4)
 
 
1.7

 
 
 
141,432

 
 
9,998

 
1.2

 
—
 
—
 
 
Total/weighted average
 
 
13.5

(5) 
 
 
6,746,502

 
 
$
382,325

 
45.6
%
 
 
 
 

Annual rental revenue and RSF include 100% of each property managed by us in North America.

(1)
Based on percentage of aggregate annual rental revenue in effect as of June 30, 2017.
(2)
Represents a ground lease with Uber at 1455 and 1515 Third Street.
(3)
In July 2017, we completed the sale of a condominium interest to Dana-Farber for 203,090 RSF of their leased space in 360 Longwood Avenue. See page 4 of our Supplemental Information for additional information on our dispositions.
(4)
Tenant added through the acquisition of an in-place lease at One Kendall Square, located in our Cambridge submarket. During 2Q17, we early terminated 25,735 RSF of Merrimack’s lease and re-leased the space to a credit tenant at a 12.0% increase in rental rates (cash).
(5)
Excluding the ground lease to Uber, the weighted-average remaining lease term for our top 20 tenants was 9.7 years as of June 30, 2017.

 
22

 
 
Summary of Properties and Occupancy
q217headerlogo.jpg
June 30, 2017
(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
 
5,852,281

 
431,483

 
—

 
6,283,764

 
31
%
 
51

 
$
341,588

 
41
%
 
$
60.67

 
San Francisco
 
3,714,560

 
747,355

 
—

 
4,461,915

 
22

 
33

 
167,376

 
20

 
45.26

 
New York City
 
727,674

 
—

 
—

 
727,674

 
4

 
2

 
61,879

 
7

 
85.61

 
San Diego
 
3,892,451

 
170,523

 
163,648

 
4,226,622

 
21

 
52

 
134,783

 
16

 
37.78

 
Seattle
 
989,085

 
48,835

 
—

 
1,037,920

 
5

 
11

 
46,107

 
5

 
47.96

 
Maryland
 
2,085,196

 
—

 
—

 
2,085,196

 
9

 
28

 
50,132

 
6

 
25.84

 
Research Triangle Park
 
1,043,726

 
—

 
175,000

 
1,218,726

 
6

 
16

 
24,149

 
3

 
24.13

 
Canada
 
256,967

 
—

 
—

 
256,967

 
1

 
3

 
6,424

 
1

 
25.21

 
Non-cluster markets
 
268,689

 
—

 
—

 
268,689

 
1

 
6

 
6,045

 
1

 
25.45

 
North America
 
18,830,629

 
1,398,196

 
338,648

 
20,567,473

 
100
%
 
202

 
$
838,483

 
100
%
 
$
46.55

 

RSF, number of properties, and annual rental revenue include 100% of each property managed by us in North America. Annual rental revenue amounts represent amounts in effect as of June 30, 2017.

Summary of occupancy
 
 
Operating Properties
 
Operating and Redevelopment Properties
Market
 
6/30/17
 
3/31/17
 
6/30/16
 
6/30/17
 
3/31/17
 
6/30/16
Greater Boston
 
96.2
%
 
96.1
%
 
97.9
%
 
96.2
%
 
96.1
%
 
96.6
%
San Francisco
 
99.6

 
99.8

 
100.0

 
99.6

 
99.8

 
100.0

New York City
 
99.3

 
97.8

 
94.6

 
99.3

 
97.8

 
94.6

San Diego
 
91.7

 
91.0

 
93.8

 
88.0

 
87.3

 
81.8

Seattle
 
97.2

(1) 
98.2

 
99.1

 
97.2

 
98.2

 
99.1

Maryland
 
93.0

 
92.6

 
96.4

 
93.0

 
92.6

 
96.4

Research Triangle Park
 
95.9

(2) 
97.5

 
98.3

 
82.1

(3) 
97.5

 
98.3

Subtotal
 
95.7

 
95.6

 
97.2

 
94.0

 
94.7

 
93.9

Canada
 
99.2

 
99.2

 
99.3

 
99.2

 
99.2

 
99.3

Non-cluster markets
 
88.4

 
88.4

 
88.2

 
88.4

 
88.4

 
88.2

North America
 
95.7
%
 
95.5
%
 
97.0
%
 
94.0
%
 
94.7
%
 
93.9
%
Occupancy includes 100% of each property managed by us in North America.

(1)
Decline from 1Q17 primarily relates to 9,960 RSF that became vacant in 2Q17 at 219 Terry Avenue North located in our Lake Union submarket. This space has been re-leased to another tenant with commencement in 3Q17.
(2)
Decline from 1Q17 primarily relates to 17,400 RSF that became vacant in 2Q17 at 5 Triangle Drive in our Research Triangle Park submarket. This space has been re-leased to another tenant with commencement in 3Q17.
(3)
Decline from 1Q17 primarily relates to the acquisition of a vacant 175,000 RSF property at 5 Laboratory Drive undergoing redevelopment into office/laboratory space and upgrading existing greenhouse space. See page 3 of the Earnings Press Release for additional information.

 
23

 
 
Property Listing
q217headerlogo.jpg
June 30, 2017
(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
 
1,648,700

 
431,483

 
—

 
2,080,183

 
9
 
$
105,940

 
97.5
%
 
97.5
%
 
 
 
50, 60, 75/125, and 100 Binney Street, 50 Rogers Street, 215 First Street,150 Second Street, 300 Third Street, and 11 Hurley Street
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
85,903

 
99.9

 
99.9

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® at One Kendall Square
 
644,771

 
—

 
—

 
644,771

 
9
 
49,543

 
97.0

 
97.0

 
 
 
480 and 500 Arsenal Street
 
234,260

 
—

 
—

 
234,260

 
2
 
9,909

 
100.0

 
100.0

 
 
 
640 Memorial Drive
 
225,504

 
—

 
—

 
225,504

 
1
 
13,730

 
100.0

 
100.0

 
 
 
780 and 790 Memorial Drive
 
99,658

 
—

 
—

 
99,658

 
2
 
7,372

 
100.0

 
100.0

 
 
 
167 Sidney Street and 99 Erie Street
 
54,549

 
—

 
—

 
54,549

 
2
 
3,735

 
100.0

 
100.0

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

 
—

 
—

 
25,309

 
1
 
620

 
100.0

 
100.0

 
 
 
Cambridge/Inner Suburbs
 
4,419,598

 
431,483

 
—

 
4,851,081

 
34
 
290,030

 
98.6

 
98.6

 
 
Longwood Medical Area
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
360 Longwood Avenue (unconsolidated joint venture – 27.5% ownership)
 
413,799

 
—

 
—

 
413,799

 
1
 
23,720

 
75.7

 
75.7

 
 
Route 128
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Park at 128
 
343,882

 
—

 
—

 
343,882

 
8
 
9,626

 
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19 Presidential Way
 
144,892

 
—

 
—

 
144,892

 
1
 
3,644

 
68.8

 
68.8

 
 
 
225 Second Avenue
 
113,860

 
—

 
—

 
113,860

 
1
 
5,252

 
100.0

 
100.0

 
 
 
100 Beaver Street
 
82,330

 
—

 
—

 
82,330

 
1
 
3,106

 
100.0

 
100.0

 
 
 
285 Bear Hill Road
 
26,270

 
—

 
—

 
26,270

 
1
 
1,167

 
100.0

 
100.0

 
 
 
Route 128
 
711,234

 
—

 
—

 
711,234

 
12
 
22,795

 
91.5

 
91.5

 
 
Route 495
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
111 and 130 Forbes Boulevard
 
155,846

 
—

 
—

 
155,846

 
2
 
1,629

 
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
 
5,043

 
100.0

 
100.0

 
 
 
Greater Boston
 
5,852,281

 
431,483

 
—

 
6,283,764

 
51
 
$
341,588

 
96.2
%
 
96.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

RSF, annual rental revenue, and occupancy percentage include 100% of each property managed by us in North America. Annual rental revenue amounts represent amounts in effect as of June 30, 2017.
 

 
24

 
 
Property Listing (continued)
q217headerlogo.jpg
June 30, 2017
(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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
409 and 499 Illinois Street (consolidated joint venture – 60% ownership)
 
455,069

 
—

 
—

 
455,069

 
2
 
$
28,555

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

 
—

 
—

 
422,980

 
2
 
22,118

 
100.0

 
100.0

 
 
 
510 Townsend Street
 
—

 
300,000

 
—

 
300,000

 
1
 
—

 
—

 
—

 
 
 
88 Bluxome Street
 
232,470

 
—

 
—

 
232,470

 
1
 
3,813

 
100.0

 
100.0

 
 
 
455 Mission Bay Boulevard South
 
210,398

 
—

 
—

 
210,398

 
1
 
10,178

 
100.0

 
100.0

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

 
—

 
—

 
158,267

 
1
 
7,742

 
100.0

 
100.0

 
 
 
1700 Owens Street
 
157,340

 
—

 
—

 
157,340

 
1
 
10,387

 
100.0

 
100.0

 
 
 
505 Brannan Street (consolidated joint venture – 99.6% ownership)
 
—

 
150,000

 
—

 
150,000

 
1
 
—

 
—

 
—

 
 
 
Mission Bay/SoMa
 
1,636,524

 
450,000

 
—

 
2,086,524

 
10
 
82,793

 
100.0

 
100.0

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

 
297,355

 
—

 
704,724

 
4
 
16,838

 
100.0

 
100.0

 
 
 
Alexandria Technology Center® – Gateway
 
448,175

 
—

 
—

 
448,175

 
6
 
18,002

 
100.0

 
100.0

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

 
—

 
—

 
163,035

 
2
 
6,490

 
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
 
4,099

 
88.1

 
88.1

 
 
 
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
 
3,400

 
100.0

 
100.0

 
 
 
South San Francisco
 
1,522,476

 
297,355

 
—

 
1,819,831

 
17
 
59,927

 
98.9

 
98.9

 
 
Greater Stanford
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
960 Industrial Road
 
195,000

 
—

 
—

 
195,000

 
1
 
4,875

 
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
 
1,919

 
100.0

 
100.0

 
 
 
2625/2627/2631 Hanover Street
 
32,074

 
—

 
—

 
32,074

 
1
 
1,711

 
100.0

 
100.0

 
 
 
Greater Stanford
 
555,560

 
—

 
—

 
555,560

 
6
 
24,656

 
100.0

 
100.0

 
 
 
San Francisco
 
3,714,560

 
747,355

 
—

 
4,461,915

 
33
 
167,376

 
99.6

 
99.6

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

 
—

 
—

 
727,674

 
2
 
61,879

 
99.3

 
99.3

 
 
 
430 and 450 East 29th Street
 
 
 
 
 
 




 
 
 
 
 
 
 
 
 
 
New York City
 
727,674

 
—

 
—

 
727,674

 
2
 
$
61,879

 
99.3
%
 
99.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSF, annual rental revenue, and occupancy percentage include 100% of each property managed by us in North America. Annual rental revenue amounts represent amounts in effect as of June 30, 2017.
 

 
25

 
 
Property Listing (continued)
q217headerlogo.jpg
June 30, 2017
(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
 
165,938

 
170,523

 
—

 
336,461

 
3
 
$
7,496

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

 
—

 
—

 
294,993

 
3
 
11,229

 
74.3

 
74.3

 
 
 
10578, 10614, and 10628 Science Center Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Sunrise
 
235,603

 
—

 
—

 
235,603

 
3
 
9,281

 
100.0

 
100.0

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

 
—

 
—

 
223,751

 
4
 
9,856

 
100.0

 
100.0

 
 
 
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
 
3,274

 
100.0

 
100.0

 
 
 
Torrey Pines
 
1,109,347

 
170,523

 
—

 
1,279,870

 
15
 
45,963

 
93.2

 
93.2

 
 
University Town Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5200 Illumina Way
 
792,687

 
—

 
—

 
792,687

 
6
 
27,994

(1) 
100.0

 
100.0

 
 
 
Campus Pointe by Alexandria (consolidated joint venture – 55% ownership)
 
754,765

 
—

 
—

 
754,765

 
2
 
27,827

 
83.4

 
83.4

 
 
 
10290 and 10300 Campus Point Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Towne Centre
 
140,398

 
—

 
163,648

 
304,046

 
4
 
2,021

 
100.0

 
46.2

 
 
 
9363, 9373, 9393, and 9625 Towne Centre Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Esplanade
 
241,963

 
—

 
—

 
241,963

 
4
 
9,938

 
100.0

 
100.0

 
 
 
4755, 4757, and 4767 Nexus Center Drive, and 4796 Executive Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9880 Campus Point Drive
 
71,510

 
—

 
—

 
71,510

 
1
 
2,774

 
100.0

 
100.0

 
 
 
University Town Center
 
2,001,323

 
—

 
163,648

 
2,164,971

 
17
 
70,554

 
93.7

 
86.6

 
 
Sorrento Mesa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5810/5820 and 6138/6150 Nancy Ridge Drive
 
138,970

 
—

 
—

 
138,970

 
2
 
3,950

 
100.0

 
100.0

 
 
 
ARE Portola
 
105,812

 
—

 
—

 
105,812

 
3
 
1,408

 
43.1

 
43.1

 
 
 
6175, 6225, and 6275 Nancy Ridge Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10121 and 10151 Barnes Canyon Road 
 
102,392

 
—

 
—

 
102,392

 
2
 
1,987

 
100.0

 
100.0

 
 
 
7330 Carroll Road
 
66,244

 
—

 
—

 
66,244

 
1
 
2,431

 
100.0

 
100.0

 
 
 
5871 Oberlin Drive
 
33,817

 
—

 
—

 
33,817

 
1
 
993

 
100.0

 
100.0

 
 
 
Sorrento Mesa
 
447,235

 
—

 
—

 
447,235

 
9
 
10,769

 
86.5

 
86.5

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

 
—

 
—

 
121,655

 
6
 
2,922

 
92.0

 
92.0

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

 
—

 
—

 
103,111

 
4
 
1,182

 
48.2

 
48.2

 
 
 
Sorrento Valley
 
224,766

 
—

 
—

 
224,766

 
10
 
4,104

 
71.9

 
71.9

 
 
I-15 Corridor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13112 Evening Creek Drive
 
109,780

 
—

 
—

 
109,780

 
1
 
3,393

 
100.0

 
100.0

 
 
 
San Diego
 
3,892,451

 
170,523

 
163,648

 
4,226,622

 
52
 
$
134,783

 
91.7
%
 
88.0
%
 
RSF, annual rental revenue, and occupancy percentage include 100% of each property managed by us in North America. Annual rental revenue amounts represent amounts in effect as of June 30, 2017.

(1)    Cash rents in effect as of June 30, 2017 were approximately $25.70/RSF.
 

 
26

 
 
Property Listing (continued)
q217headerlogo.jpg
June 30, 2017
(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
 
241,276

 
48,835

 
—

 
290,111

 
1
 
$
12,619

 
100.0
%
 
100.0
%
 
 
 
1201 and 1208 Eastlake Avenue East
 
203,369

 
—

 
—

 
203,369

 
2
 
8,748

 
100.0

 
100.0

 
 
 
1616 Eastlake Avenue East
 
168,708

 
—

 
—

 
168,708

 
1
 
8,421

 
95.6

 
95.6

 
 
 
1551 Eastlake Avenue East
 
117,482

 
—

 
—

 
117,482

 
1
 
4,785

 
100.0

 
100.0

 
 
 
199 East Blaine Street
 
115,084

 
—

 
—

 
115,084

 
1
 
6,190

 
100.0

 
100.0

 
 
 
219 Terry Avenue North
 
30,705

 
—

 
—

 
30,705

 
1
 
1,252

 
67.6

 
67.6

 
 
 
1600 Fairview Avenue East
 
27,991

 
—

 
—

 
27,991

 
1
 
1,138

 
100.0

 
100.0

 
 
 
Lake Union
 
904,615

 
48,835

 
—

 
953,450

 
8
 
43,153

 
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
 
1,115

 
71.8

 
71.8

 
 
 
Elliott Bay
 
84,470

 
—

 
—

 
84,470

 
3
 
2,954

 
87.7

 
87.7

 
 
 
Seattle
 
989,085

 
48,835

 
—

 
1,037,920

 
11
 
46,107

 
97.2

 
97.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rockville
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9800 Medical Center Drive
 
282,436

 
—

 
—

 
282,436

 
4
 
12,734

 
100.0

 
100.0

 
 
 
1330 Piccard Drive
 
131,511

 
—

 
—

 
131,511

 
1
 
2,770

 
87.5

 
87.5

 
 
 
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
 
2,074

 
100.0

 
100.0

 
 
 
1405 Research Boulevard
 
71,669

 
—

 
—

 
71,669

 
1
 
2,088

 
100.0

 
100.0

 
 
 
5 Research Place
 
63,852

 
—

 
—

 
63,852

 
1
 
2,396

 
100.0

 
100.0

 
 
 
9920 Medical Center Drive
 
58,733

 
—

 
—

 
58,733

 
1
 
458

 
100.0

 
100.0

 
 
 
5 Research Court
 
54,906

 
—

 
—

 
54,906

 
1
 
—

 
—

 
—

 
 
 
12301 Parklawn Drive
 
49,185

 
—

 
—

 
49,185

 
1
 
1,329

 
100.0

 
100.0

 
 
 
Rockville
 
889,484

 
—

 
—

 
889,484

 
14
 
25,530

 
92.0

 
92.0

 
 
Gaithersburg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Gaithersburg I
 
377,401

 
—

 
—

 
377,401

 
4
 
7,218

 
82.3

 
82.3

 
 
 
9 West Watkins Mill Road and 910, 930, and 940 Clopper Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Gaithersburg II
 
237,137

 
—

 
—

 
237,137

 
5
 
6,048

 
96.9

 
96.9

 
 
 
708 Quince Orchard Road, 1300 Quince Orchard Boulevard, and
19, 20, and 22 Firstfield Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
401 Professional Drive
 
63,154

 
—

 
—

 
63,154

 
1
 
1,438

 
100.0

 
100.0

 
 
 
950 Wind River Lane
 
50,000

 
—

 
—

 
50,000

 
1
 
1,082

 
100.0

 
100.0

 
 
 
620 Professional Drive
 
27,950

 
—

 
—

 
27,950

 
1
 
1,191

 
100.0

 
100.0

 
 
 
Gaithersburg
 
755,642

 
—

 
—

 
755,642

 
12
 
16,977

 
90.2

 
90.2

 
 
Beltsville
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8000/9000/10000 Virginia Manor Road
 
191,884

 
—

 
—

 
191,884

 
1
 
2,487

 
100.0

 
100.0

 
 
Northern Virginia
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14225 Newbrook Drive
 
248,186

 
—

 
—

 
248,186

 
1
 
5,138

 
100.0

 
100.0

 
 
 
Maryland
 
2,085,196

 
—

 
—

 
2,085,196

 
28
 
$
50,132

 
93.0
%
 
93.0
%
 

RSF, annual rental revenue, and occupancy percentage include 100% of each property managed by us in North America. Annual rental revenue amounts represent amounts in effect as of June 30, 2017.
 

 
27

 
 
Property Listing (continued)
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
 
Research Triangle Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research Triangle Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Alston
 
186,870

 
—

 
—

 
186,870

 
3
 
3,437

 
93.6

 
93.6

 
 
 
100, 800, and 801 Capitola Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 Laboratory Drive
 
—

 
—

 
175,000

 
175,000

 
1
 
—

 
—

 
—

 
 
 
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
 
3,367

 
99.1

 
99.1

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

 
—

 
—

 
100,000

 
1
 
1,503

 
87.9

 
87.9

 
 
 
7 Triangle Drive
 
96,626

 
—

 
—

 
96,626

 
1
 
3,156

 
100.0

 
100.0

 
 
 
407 Davis Drive
 
81,956

 
—

 
—

 
81,956

 
1
 
1,644

 
100.0

 
100.0

 
 
 
2525 East NC Highway 54
 
82,996

 
—

 
—

 
82,996

 
1
 
1,992

 
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
 
377

 
45.8

 
45.8

 
 
 
6101 Quadrangle Drive
 
30,122

 
—

 
—

 
30,122

 
1
 
539

 
100.0

 
100.0

 
 
 
Research Triangle Park
 
1,043,726

 
—

 
175,000

 
1,218,726

 
16
 
24,149

 
95.9

 
82.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Canada
 
256,967

 
—

 
—

 
256,967

 
3
 
6,424

 
99.2

 
99.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-cluster markets
 
268,689

 
—

 
—

 
268,689

 
6
 
6,045

 
88.4

 
88.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total – North America
 
18,830,629

 
1,398,196

 
338,648

 
20,567,473

 
202
 
$
838,483

 
95.7
%
 
94.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSF, annual rental revenue, and occupancy percentage include 100% of each property managed by us in North America. Annual rental revenue amounts represent amounts in effect as of June 30, 2017.

 
28

 
 
 
 
Incremental Annual Net Operating Income from Development and Redevelopment of New Class A Properties
q217headerlogo.jpg
 
 
June 30, 2017
 
 
 





q217incrementalnoi.jpg


(1)
Represents incremental annual net operating income upon stabilization of our development and redevelopment of new Class A properties, including only our share of real estate joint venture projects. Partial deliveries of
multi-tenant development projects are included in the respective period. RSF and percentage leased represent 100% of each property.
(2)
Deliveries of projects are primarily weighted toward the fourth quarter.


 
29

 
 
 
q217headerlogo.jpg
Disciplined Management of Ground-Up Developments
June 30, 2017
 
 


q217prelease.jpg

 
30

 
 
 
q217headerlogo.jpg
Sustainability
June 30, 2017
 
 

    q217sustainability.jpg
    
(1)    Upon completion of 14 in-process LEED® certified projects.
(2) Completed in 2015 and 2016.

 
31

 
 
Investments in Real Estate
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands, except per SF amounts)
 
 


 
 
Investments in Real Estate
 
Square Feet
 
 
 
 
Consolidated
 
Unconsolidated (1)
 
Total
 
 
 
 
 
 
 
 
 
 
 
Investments in real estate – North America:
 
 
 
 
 
 
 
 
 
Rental properties
 
$
9,989,951

 
18,416,830

 
413,799

 
18,830,629

 
 
 
 
 
 
 
 
 
 
 
Development and redevelopment of new Class A Properties:
 
 
 
 
 
 
 
 
 
2017 deliveries undergoing construction
 
723,716

 
1,100,841

 
—

 
1,100,841

 
2018 and 2019 deliveries
 
 
 
 
 
 
 
 
 
Projects undergoing construction
 
89,460

 
636,003

 
—

 
636,003

 
Near-term projects undergoing marketing
and pre-construction
 
102,330

 
1,340,144

 
—

 
1,340,144

 
2019 and beyond – intermediate development projects
 
287,072

 
2,800,009

 
—

 
2,800,009

 
Future development projects
 
284,630

 
3,981,362

 
90,000

 
4,071,362

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

 
(427,470
)
 
—

 
(427,470
)
 
 
 
 
 
 
 
 
 
 
 
Gross investments in real estate – North America
 
11,477,159

 
27,847,719

 
503,799

 
28,351,518

 
 
 
 
 
 
 
 
 
 
 
Less: accumulated depreciation
 
(1,694,254
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investments in real estate – North America
 
9,782,905

 
 
 
 
 
 
 
Net investments in real estate – Asia
 
36,508

 
 
 
 
 
 
 
Investments in real estate
 
$
9,819,413

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(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)
Refer to footnotes 1 and 4 on pages 38 and 39, respectively.

 
32

 
 
 
 
Development and Redevelopment of New Class A Properties: Recently Placed into Service (Trailing 12 Months)
q217headerlogo.jpg
 
 
June 30, 2017
 
 
 






50 Binney Street
 
60 Binney Street
 
11 Hurley Street
 
360 Longwood Avenue
 
1455 and 1515 Third Street
Greater Boston/Cambridge
 
Greater Boston/Cambridge
 
Greater Boston/Cambridge
 
Greater Boston/Longwood Medical Area
 
San Francisco/Mission Bay/SoMa
274,734 RSF
 
255,743 RSF
 
59,783 RSF
 
413,799 RSF
 
422,980 RSF
Sanofi Genzyme
 
bluebird bio, Inc.
 
Editas Medicine, Inc.
 
Dana-Farber Cancer Institute, Inc.
The Children’s Hospital Corporation
 
Uber Technologies, Inc.
q217binney50.jpg
 
q217binney60.jpg
 
q217hurley.jpg
 
q217longwood360.jpg
 
q217uber.jpg

ARE Spectrum
 
10290 Campus Point Drive
 
5200 Illumina Way, Parking Structure
 
4796 Executive Drive
 
400 Dexter Avenue North
San Diego/Torrey Pines
 
San Diego/University Town Center
 
San Diego/University Town Center
 
San Diego/University Town Center
 
Seattle/Lake Union
165,938 RSF
 
305,006 RSF
 
N/A
 
61,755 RSF
 
241,276 RSF
The Medicines Company
Celgene Corporation
Wellspring Biosciences LLC
 
Eli Lilly and Company
 
Illumina, Inc.
 
Otonomy, Inc.
 
Juno Therapeutics, Inc.
q217spectruma.jpg
 
q217campuspoint2.jpg
 
q217illuminawayb.jpg
 
q217executive4796.jpg
 
q217dexter400.jpg

Represents projects delivered within the trailing 12 months. RSF represents the cumulative RSF that has been delivered.

 
33

 
 
Development and Redevelopment of New Class A Properties: Recently Placed into Service (Trailing 12 Months) (continued)
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands)
 
 





Property/Market/Submarket
 
Our Ownership Interest
 
Date Delivered
 
RSF in Service
 
Total Project
 
Unlevered Yields
 
 
 
Prior to 7/1/16
 
Placed into Service
 
Total
 
 
Average Cash
 
Initial Stabilized Cash Basis
 
Initial Stabilized
 
 
 
 
3Q16
 
4Q16
 
1Q17
 
2Q17
 
 
Leased
 
RSF
 
Investment
 
 
 
Consolidated development projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50 and 60 Binney Street/
Greater Boston/Cambridge
 
100%
 
9/30/16
 
—

 
530,477

 
—

 
—

 
 
—

 
 
530,477

 
99%
 
530,477
 
$
474,000

 
 
8.6
%
 
 
 
7.7
%
 
 
 
7.9
%
 
1455 and 1515 Third Street/
San Francisco/Mission Bay/SoMa
 
100%
 
11/10/16
 
—

 
—

 
422,980

 
—

 
 
—

 
 
422,980

 
100%
 
422,980
 
$
155,000

 
 
14.5
%
 
 
 
7.0
%
 
 
 
14.4
%
 
ARE Spectrum/San Diego/
Torrey Pines
 
100%
 
Various
 
102,938

 
—

 
—

 
31,336

 
 
31,664

 
 
165,938

 
98%
 
336,461
 
$
278,000

 
 
6.9
%
 
 
 
6.1
%
 
 
 
6.4
%
 
5200 Illumina Way, Parking Structure/
San Diego/University Town Center
 
100%
 
5/15/17
 
—

 
—

 
—

 
—

 
 
N/A

 
 
N/A

 
100%
 
N/A
 
$
60,000

 
 
7.0
%
 
 
 
7.0
%
 
 
 
7.0
%
 
4796 Executive Drive/
San Diego/University Town Center
 
100%
 
12/1/16
 
—

 
—

 
61,755

 
—

 
 
—

 
 
61,755

 
100%
 
61,755
 
$
41,000

 
 
8.0
%
 
 
 
7.0
%
 
 
 
7.4
%
 
400 Dexter Avenue North/Seattle/
Lake Union
 
100%
 
3/31/17
 
—

 
—

 
—

 
241,276

 
 
—

 
 
241,276

 
89%
 
290,111
 
$
232,000

 
 
7.3
%
 
 
 
6.9
%
 
 
 
7.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated redevelopment projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11 Hurley Street/
Greater Boston/Cambridge
 
100%
 
9/29/16
 
—

 
59,783

 
—

 
—

 
 
—

 
 
59,783

 
100%
 
59,783
 
$
36,500

 
 
9.8
%
 
 
 
8.8
%
 
 
 
9.7
%
 
10290 Campus Point Drive/
San Diego/University Town Center
 
55%
 
12/2/16
 
—

 
—

 
305,006

 
—

 
 
—

 
 
305,006

 
100%
 
305,006
 
$
231,000

 
 
7.7
%
 
 
 
6.8
%
 
 
 
7.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated joint venture development project
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
360 Longwood Avenue/
Greater Boston/
Longwood Medical Area
 
27.5%
 
Various
 
313,407

 
—

 
100,392

 
—

 
 
—

 
 
413,799

 
80%
 
413,799
 
$
108,965

 
 
8.2
%
 
 
 
7.3
%
 
 
 
7.8
%
 
Total
 
 
 
 
 
416,345

 
590,260

 
890,133

 
272,612

 
 
31,664

 
 
2,201,014

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



 
34

 
 
Development of New Class A Properties: 2017 Deliveries (Projects Undergoing Construction)
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands)
 
 

100 Binney Street
 
510 Townsend Street
 
505 Brannan Street, Phase I
 
ARE Spectrum
 
400 Dexter Avenue North
Greater Boston/Cambridge
 
San Francisco/Mission Bay/SoMa
 
San Francisco/Mission Bay/SoMa
 
San Diego/Torrey Pines
 
Seattle/Lake Union
431,483 RSF
 
300,000 RSF
 
150,000 RSF
 
170,523 RSF
 
48,835 RSF
Bristol-Myers Squibb Company
 
Stripe, Inc.
 
Pinterest, Inc.
 
Vertex Pharmaceuticals Incorporated
 
Juno Therapeutics, Inc.
ClubCorp Holdings, Inc.
q217binney100.jpg
 
q217townsend510.jpg
 
q217brannan505.jpg
 
q217spectrumb.jpg
 
q217dexter400.jpg

Property/Market/Submarket
 
Project RSF
 
Percentage
 
Project Start
 
Occupancy
 
In Service
 
CIP
 
Total
 
Leased
 
Negotiating
 
Total
 
 
Initial
 
Stabilized
ARE Spectrum/San Diego/Torrey Pines
 
165,938

 
170,523
 
336,461
 
98
%
 
 
—
%
 
 
98
%
 
2Q16
 
1Q17
 
4Q17
400 Dexter Avenue North/Seattle/Lake Union
 
241,276

 
48,835
 
290,111
 
89
%
 
 
11
%
 
 
100
%
 
2Q15
 
1Q17
 
4Q17
510 Townsend Street/San Francisco/Mission Bay/SoMa
 
—

 
300,000
 
300,000
 
100
%
 
 
—
%
 
 
100
%
 
3Q15
 
4Q17
 
4Q17
100 Binney Street/Greater Boston/Cambridge
 
—

 
431,483
 
431,483
 
59
%
 
 
41
%
(1) 
100
%
 
3Q15
 
4Q17
 
4Q17
505 Brannan Street, Phase I/San Francisco/Mission Bay/SoMa
 
—

 
150,000
 
150,000
 
100
%
 
 
—
%
 
 
100
%
 
1Q16
 
4Q17
 
4Q17
Total
 
407,214

 
1,100,841
 
1,508,055
 
86
%
 
 
14
%
 
 
100
%
 
 
 
 
 
 

Property/Market/Submarket
 
Our Ownership Interest
 
In Service
 
CIP
 
Cost to Complete
 
Total at Completion
 
Unlevered Yields
 
 
 
 
 
 
Average
 Cash
 
Initial Stabilized Cash Basis
 
Initial Stabilized
 
 
 
 
 
 
 
 
ARE Spectrum/San Diego/Torrey Pines
 
100%
 
$
102,651

 
$
120,396

 
$
54,953

 
$
278,000

 
6.9%
 
6.1%
 
6.4%
400 Dexter Avenue North/Seattle/Lake Union
 
100%
 
174,677

 
29,520

 
27,803

 
 
232,000

 
7.3%
 
6.9%
 
7.2%
510 Townsend Street/San Francisco/Mission Bay/SoMa
 
100%
 
—

 
158,961

 
79,039

 
 
238,000

 
7.9%
 
7.0%
 
7.2%
100 Binney Street/Greater Boston/Cambridge
 
100%
 
11,555

 
319,241

 
204,204

 
 
535,000

 
7.9%
 
7.0%
 
7.7%
505 Brannan Street, Phase I/San Francisco/Mission Bay/SoMa
 
99.6%
 
—

 
95,598

 
45,402

 
 
141,000

 
8.6%
 
7.0%
 
8.2%
Total
 
 
 
$
288,883

 
$
723,716

 
$
411,401

 
$
1,424,000

 
 
 
 
 
 
 
 
 

(1)
100 Binney Street is on track for 100% leased in 3Q17. The project is 59% leased as of July 2017, including one lease executed in 2Q17 and one lease executed in July 2017. The remaining 41% of the project is committed to three tenants and should be resolved in 3Q17. Two leases have been distributed with execution expected in the first week of August. One remaining lease is on track for execution in 3Q17.

 
35

 
 
 
 
Development and Redevelopment of New Class A Properties: 2018 & 2019 Deliveries
(Projects Undergoing Construction, and Near-Term Projects Undergoing Marketing and Pre-Construction)
q217headerlogo.jpg
 
 
June 30, 2017
 
 
 


399 Binney Street
 
1655 and 1715 Third Street
 
213 East Grand Avenue
 
279 East Grand Avenue
Greater Boston/Cambridge
 
San Francisco/Mission Bay/SoMa
 
San Francisco/South San Francisco
 
San Francisco/South San Francisco
172,500 SF
 
580,000 SF
 
297,355 SF
 
199,000 SF
Multi-tenant
 
Uber Technologies, Inc.
 
Merck & Co., Inc.
 
Multi-tenant
q217binney399.jpg
 
q217gsw.jpg
 
q217grand213.jpg
 
q217grand279.jpg
681 Gateway Boulevard
 
9625 Towne Centre Drive
 
1818 Fairview Avenue East
 
5 Laboratory Drive
San Francisco/South San Francisco
 
San Diego/University Town Center
 
Seattle/Lake Union
 
Research Triangle Park/RTP
126,971 RSF
 
163,648 SF
 
205,000 RSF
 
175,000 RSF
Marketing
 
Takeda Pharmaceuticals Company Ltd.
 
Multi-tenant
 
Multi-tenant
 
 
 


 
36

Development and Redevelopment of New Class A Properties: 2018 & 2019 Deliveries (Projects Undergoing Construction, and Near-Term Projects Undergoing Marketing and Pre-Construction) (continued)
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands)
 
 


Property/Market/Submarket
 
Dev/ Redev
 
Project RSF
 
Percentage
 
Project
  Start (1)
 
Occupancy (1)
 
 
In Service
 
CIP
 
Total
 
Leased
 
Negotiating
 
Total
 
 
Initial
 
Stabilized
Projects undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 Laboratory Drive/Research Triangle Park/RTP (2)
 
Redev
 
—

 
175,000

 
175,000

 
—
%
 
(2) 
 
—
%
 
2Q17
 
3Q18
 
2019
9625 Towne Centre Drive/San Diego/University Town Center
 
Redev
 
—

 
163,648

 
163,648

 
100
%
 
—
%
 
100
%
 
3Q15
 
4Q18
 
2018
213 East Grand Avenue/San Francisco/South San Francisco
 
Dev
 
—

 
297,355

 
297,355

 
100
%
 
—
%
 
100
%
 
2Q17
 
1Q19
 
2019
 
 
 
 
—

 
636,003

 
636,003

 
72
%
 
—
%
 
72
%
 
 
 
 
 
 
Near-term projects undergoing marketing and pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
399 Binney Street (Alexandria Center® at One Kendall Square)/Greater Boston/Cambridge
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dev
 
—

 
172,500

 
172,500

 
TBD
 
2018
 
TBD
1655 and 1715 Third Street/San Francisco/Mission Bay/SoMa (3)
 
Dev
 
—

 
580,000

 
580,000

 
—
%
 
100
%
 
100
%
 
2018
 
2019
 
2019
279 East Grand Avenue/San Francisco/South San Francisco
 
Dev
 
—

 
199,000

 
199,000

 
TBD
 
2019
 
TBD
681 Gateway Boulevard/San Francisco/South San Francisco (4)
 
Redev
 
126,971

 
—

 
126,971

 
 
2019
 
TBD
1818 Fairview Avenue East/Seattle/Lake Union
 
Dev
 
—

 
205,000

 
205,000

 
 
2019
 
TBD
50 Rogers Street/Greater Boston/Cambridge (5)
 
Dev
 
—

 
183,644

 
183,644

 
 
N/A
 
N/A
 
 
 
 
126,971

 
1,340,144

 
1,467,115

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unlevered Yields
Property/Market/Submarket
 
Our Ownership Interest
 
In Service
 
CIP
 
Cost to
Complete
 
Total at
Completion
 
Average Cash
 
Initial Stabilized Cash Basis
 
Initial Stabilized
 
 
 
 
 
 
 
 
Projects undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 Laboratory Drive/Research Triangle Park/RTP (2)
 
100%
 
$
—

 
$
9,288

 
$
(6) 
 
$
(6) 
 
 
(6) 
 
 
(6) 
 
 
(6) 
9625 Towne Centre Drive/San Diego/University Town Center
 
100%
 
—

 
28,810

 
 
(6) 
 
 
(6) 
 
 
(6) 
 
 
(6) 
 
 
(6) 
213 East Grand Avenue/San Francisco/South San Francisco
 
100%
 
—

 
51,362

 
 
208,638

 
 
260,000

 
 
7.8%
 
 
6.4%
 
 
7.2%
 
 
 
 
$
—

 
$
89,460

 
$
TBD
 
$
TBD
 
TBD
 
TBD
 
TBD
Near-term projects undergoing marketing and pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
399 Binney Street (Alexandria Center® at One Kendall Square)/
Greater Boston/Cambridge
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100%
 
$
—

 
$
69,103

 
 
TBD
1655 and 1715 Third Street/San Francisco/Mission Bay/SoMa (3)
 
10%
 
—

 
—

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

 
11,447

 
 
681 Gateway Boulevard/San Francisco/South San Francisco (4)
 
100%
 
—

 
—

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

 
15,367

 
 
50 Rogers Street/Greater Boston/Cambridge (5)
 
100%
 
—

 
6,413

 
 
 
 
 
 
$
—

 
$
102,330

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Anticipated project start dates and initial occupancy dates are subject to leasing and/or market conditions. Stabilized occupancy may vary depending on single tenancy versus multi-tenancy.
(2)
Recently acquired 3054 East Cornwallis Road and will redevelop and rebrand the campus along with 6 Davis Drive as the Alexandria Center® for AgTech – RTP, with its newly named address of 5 Laboratory Drive. We have proposals and ongoing discussions for a significant portion of the available space.
(3)
Executed an agreement to purchase a 10% interest in a joint venture with Uber and the Golden State Warriors. Our initial cash contribution is expected to be in a range from $35 million to $40 million and will be funded at closing of the joint venture in 2018. The joint venture will acquire land with completed below-grade improvements to the building foundation and parking garage, and complete vertical construction of two buildings aggregating 580,000 RSF, which will be leased to Uber.
(4)
Concurrent with our redevelopment from office to office/laboratory space, we anticipate expanding the building by an additional 15,000 to 30,000 RSF, and expect the project to be delivered in 2019.
(5)
Represents a multi-family residential development with approximately 130-140 units (previously named 161 First Street). As part of our successful efforts to increase the entitlements on our Alexandria Center® at Kendall Square development, we were required to develop two multi-family residential projects, one of which was previously completed and sold. We may market this project for sale.
(6)
The design and budget of these projects are in process, and the estimated project costs with related yields will be disclosed in 2H17.

 
37

 
 
Development of New Class A Properties: 2019 and Beyond (Intermediate Development Projects)
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands, except per SF amounts)
 
 


303 Binney Street
 
960 Industrial Road
 
825 and 835 Industrial Road
 
Alexandria Center® for Life Science
Greater Boston/Cambridge
 
San Francisco/Greater Stanford
 
San Francisco/Greater Stanford
 
New York/Manhattan
 
 
 
5200 Illumina Way
 
Campus Point Drive
 
1150 Eastlake Avenue
 
9800 Medical Center Drive
San Diego/University Town Center
 
San Diego/University Town Center
 
Seattle/Lake Union
 
Maryland/Rockville
 
 
 
Market
 
Property/Submarket
 
Book Value
 
Project SF
 
Per SF
 
Greater Boston
 
303 Binney Street/Cambridge
 
$
84,275

 
 
208,965

 
 
$
403

 
San Francisco
 
960 Industrial Road/Greater Stanford
 
66,625

 
 
500,000

(1) 
 
133

 
 
825 and 835 Industrial Road/Greater Stanford
 
88,514

 
 
530,000

 
 
167

 
New York City
 
Alexandria Center® for Life Science/Manhattan
 
—

 
 
420,000

 
 
—

 
San Diego
 
5200 Illumina Way/University Town Center
 
10,896

 
 
386,044

 
 
28

 
 
Campus Point Drive/University Town Center
 
11,991

 
 
315,000

 
 
38

 
Seattle
 
1150 Eastlake Avenue/Lake Union
 
18,688

 
 
260,000

 
 
72

 
Maryland
 
9800 Medical Center Drive/Rockville
 
6,083

 
 
180,000

 
 
34

 
Total
 
$
287,072

 
 
2,800,009

 
 
$
103

 

(1)
The intermediate development project undergoing entitlements for 500,000 RSF will replace the existing 195,000 RSF operating property.

 
38

 
 
Development and Redevelopment of New Class A Properties: Summary of Pipeline
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands)
 
 



Property/Submarket
 
Our
Ownership
Interest
 
Book Value
 
Square Footage
 
 
 
 
Undergoing
Construction
 
Near-Term Development and Redevelopment
 
Intermediate Development
 
Future Development
 
Total (1)
 
Greater Boston
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Various (2)
 
 
100%
 
 
 
$
479,032

 
 
431,483

 
356,144

 
208,965

 
 
—

 
 
996,592

 
Alexandria Technology Square®/Cambridge
 
 
100%
 
 
 
7,787

 
 
—

 
—

 
—

 
 
100,000

 
 
100,000

 
Other future projects
 
 
100%
 
 
 
6,209

 
 
—

 
—

 
—

 
 
221,955

 
 
221,955

 
 
 
 
 
 
 
 
493,028

 
 
431,483

 
356,144

 
208,965

 
 
321,955

 
 
1,318,547

 
San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Various (2)
 
 
Various
 
 
 
472,507

 
 
747,355

 
779,000

 
1,030,000

(3) 
 
—

 
 
2,556,355

 
88 Bluxome Street/Mission Bay/SoMa
 
 
100%
 
 
 
158,653

 

—

 
—

 
—

 
 
1,070,925

(4) 
 
1,070,925

 
505 Brannan Street, Phase II/Mission Bay/SoMa
 
 
99.6%
 
 
 
14,451

 
 
—

 
—

 
—

 
 
165,000

 
 
165,000

 
East Grand Avenue/South San Francisco
 
 
100%
 
 
 
5,960

 
 
—

 
—

 
—

 
 
90,000

 
 
90,000

 
Other future projects
 
 
100%
 
 
 
—

 
 
—

 
—

 
—

 
 
95,620

 
 
95,620

 
 
 
 
 
 
 
 
651,571

 
 
747,355

 
779,000

 
1,030,000

 
 
1,421,545

 
 
3,977,900

 
New York City
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® for Life Science/Manhattan
 
 
100%
 
 
 
—

 
 
—

 
—

 
420,000

 
 
—

 
 
420,000

 
 
 
 
 
 
 
 
—

 
 
—

 
—

 
420,000

 
 
—

 
 
420,000

 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Various (2)
 
 
100%
 
 
 
172,093

 
 
334,171

 
—

 
701,044

 
 
—

 
 
1,035,215

 
Vista Wateridge/Sorrento Mesa
 
 
100%
 
 
 
3,862

 
 
—

 
—

 
—

 
 
163,000

 
 
163,000

 
Other future projects
 
 
100%
 
 
 
32,492

 
 
—

 
—

 
—

 
 
259,895

 
 
259,895

 
 
 
 
 
 
 
 
208,447

 
 
334,171

 
—

 
701,044

 
 
422,895

 
 
1,458,110

 
Seattle
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Various (2)
 
 
100%
 
 
 
63,575

 
 
48,835

 
205,000

 
260,000

 
 
—

 
 
513,835

 
1165/1166 Eastlake Avenue East/Lake Union
 
 
100%
 
 
 
18,630

 
 
—

 
—

 
—

 
—

106,000

 
 
106,000

 
 
 
 
 
 
 
 
82,205

 
 
48,835

 
205,000

 
260,000

 
 
106,000

 
 
619,835

 
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Various (2)
 
 
100%
 
 
 
6,083

 
 
—

 
—

 
180,000

 
 
—

 
 
180,000

 
Other future projects
 
 
Various
 
 
 
4,035

 
 
—

 
—

 
—

 
 
151,000

(5) 
 
151,000

 
 
 
 
 
 
 
 
10,118

 
 
—

 
—

 
180,000

 
 
151,000

 
 
331,000

 
Research Triangle Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Various (2)
 
 
100%
 
 
 
9,288

 
 
175,000

 
—

 
—

 
 
—

 
 
175,000

 
6 Davis Drive/Research Triangle Park
 
 
100%
 
 
 
16,611

 
 
—

 
—

 
—

 
 
1,000,000

 
 
1,000,000

 
Other future projects
 
 
100%
 
 
 
4,149

 
 
—

 
—

 
—

 
 
76,262

 
 
76,262

 
 
 
 
 
 
 
 
30,048

 
 
175,000

 
—

 
—

 
 
1,076,262

 
 
1,251,262

 
Non-cluster markets – other future projects
 
 
100%
 
 
 
11,791

 
 
—

 
—

 
—

 
 
571,705

 
 
571,705

 
 
 
 
 
 
 
 
$
1,487,208

 
 
1,736,844

 
1,340,144

 
2,800,009

 
 
4,071,362

 
 
9,948,359

 

(1)
Total pipeline SF represents operating RSF plus incremental SF targeted for intermediate and future development.
(2)
See pages 35, 37, and 38 of our Supplemental Information for additional information on our projects undergoing construction, near-term projects undergoing marketing and pre-construction, and intermediate development projects.
(3)
Refer to footnote 1 on page 38.
(4)
The future development project undergoing entitlements for 1,070,925 developable square feet will replace the existing 232,470 RSF operating property.    
(5)
Includes 90,000 SF from our unconsolidated real estate joint venture in 1401/1413 Research Boulevard, in which we will retain a 65% ownership interest. See pages 4 and 41 for additional information.

 
39

 
 
Construction Spending
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands, except per RSF amounts)
 
 



Construction Spending
 
Six Months Ended
June 30, 2017
Additions to real estate – consolidated projects
 
$
436,377
 
Investments in unconsolidated real estate joint ventures
 
 
163
 
Construction spending (cash basis) (3)
 
 
436,540
 
Decrease in accrued construction
 
 
(25,138
)
Construction spending
 
$
411,402
 



 
 
 
 
 
Non-Revenue-Enhancing Capital Expenditures(1)
 
Six Months Ended
June 30, 2017
 
Recent Average
per RSF (2)
 
Amount
 
Per RSF
 
Non-revenue-enhancing capital expenditures
 
$
2,978

 
$
0.17

 
 
$
0.40

 
 
 
 
 
 
 
 
Tenant improvements and leasing costs:
 
 
 
 
 
 
 
Re-tenanted space
 
$
7,477

 
$
20.98

 
 
$
16.83

Renewal space
 
20,289

 
18.01

(4) 
 
10.85

Total tenant improvements and leasing costs/weighted average
 
$
27,766

 
$
18.72

 
 
$
12.54




Projected Construction Spending
 
Year Ending
December 31, 2017
Development and redevelopment projects
 
$
397,000
 
Contributions from noncontrolling interests
(consolidated joint ventures)
 
 
(12,000
)
Generic laboratory infrastructure/building improvement projects
 
 
58,000
 
Non-revenue-enhancing capital expenditures and tenant improvements
 
 
10,000
 
Projected construction spending for six months ending December 31, 2017
 
 
453,000
 
Actual construction spending for six months ended
June 30, 2017
 
 
411,402
 
Guidance range
 
$
815,000
–
915,000
 
 
 
 
 
 
2017 Disciplined Allocation of Capital (5)
89% to Urban Innovation Submarkets

(1)
Excludes amounts that are recoverable from tenants, revenue-enhancing, or related to properties that have undergone redevelopment.
(2)
Represents the average of the five years ended December 31, 2016, and the six months ended June 30, 2017.
(3)
Includes revenue-enhancing projects and non-revenue-enhancing capital expenditures.
(4)
Includes approximately $4.5 million, or $3.06 per square foot, of leasing commissions related to the lease renewals at two of our properties in our Cambridge submarket during 1Q17 that generated increases in rental rates of 28.8% and 20.4% (cash basis)
(5)
Represents the percentage of projected spending by submarket, including projected acquisitions expected in our sources and uses of capital guidance ranging from $540 million to $640 million, for the year ended December 31, 2017.


 
40

 
 
Joint Venture Financial Information
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands)
 
 


We present components of balance sheet and operating results information for the noncontrolling interests’ share of our consolidated real estate joint ventures and for our share of investments in unconsolidated real estate joint ventures to help investors estimate balance sheet and operating results information related to our partially owned entities. These amounts are estimated by computing, for each joint venture that we consolidate in our financial statements, the noncontrolling interest percentage of each financial item to arrive at the cumulative noncontrolling interest share of each component presented. In addition, for our real estate joint ventures that we do not control and do not consolidate, we apply our economic ownership percentage to the unconsolidated real estate joint ventures to arrive at our proportionate share of each component presented.
 
June 30, 2017
 
 
Noncontrolling Interest Share of Consolidated Real Estate JVs
 
Our Share of Unconsolidated
Real Estate JV
 
Investments in real estate
$
476,248

 
 
$
100,808

 
Cash and cash equivalents
12,330

 
 
3,478

 
Other assets
29,384

 
 
9,371

 
Secured notes payable
—

 
 
(51,827
)
 
Other liabilities
(20,635
)
 
 
(3,747
)
 
Redeemable noncontrolling interests
(11,410
)
(1) 
 
—

 
 
$
485,917

 
 
$
58,083

 
 
 
 
 
 
 
 
Noncontrolling Interest Share of Consolidated Real Estate JVs
 
Our Share of Unconsolidated
Real Estate JV
 
 
2Q17
 
YTD 2Q17
 
2Q17
 
YTD 2Q17
 
Total revenues
$
14,602

 
$
27,622

 
$
2,457

 
$
4,805

 
Rental operations
(3,843
)
 
(7,583
)
 
(857
)
 
(1,705
)
 
 
10,759

 
20,039

 
1,600

 
3,100

 
General and administrative
(54
)
 
(74
)
 
(7
)
 
(30
)
 
Interest
—

 
—

 
(680
)
 
(1,384
)
 
Depreciation and amortization
(3,735
)
 
(7,377
)
 
(324
)
 
(736
)
 
 
$
6,970

(1) 
$
12,588

(1) 
$
589

 
$
950

 
 
 
 
 
 
 
 
 
 
Consolidated Real Estate Joint Ventures
 
Property/Market/Submarket
 
Noncontrolling (2)
Interest Share
 
225 Binney Street/Greater Boston/Cambridge
 
 
70.0%
 
 
1500 Owens Street/San Francisco/Mission Bay/SoMa
 
 
49.9%
 
 
409 and 499 Illinois Street/San Francisco/Mission Bay/SoMa
 
 
40.0%
 
 
10290 and 10300 Campus Point Drive/San Diego/
University Town Center
 
 
45.0%
 
 
 
 
 
 
 
 
Unconsolidated Real Estate Joint Venture
 
 
Property/Market/Submarket
 
Our Share
 
360 Longwood Avenue/Greater Boston/Longwood Medical Area
 
 
27.5%
 
 
1401/1413 Research Boulevard/Maryland/Rockville
 
 
65.0%
(6) 
 
 
 
 
 
 
 
Our unconsolidated real estate joint ventures have non-recourse, secured construction loans that include the following key terms (amounts represent 100% at the joint venture level):
Debt
 
Maturity Date
 
Stated Rate
 
Outstanding Balance
 
Remaining Commitments
 
Total
360 Longwood Avenue
 
 
 
 
 
 
 
 
 
 
Fixed rate
 
 
July 2017
(3) 
 
5.25
%
 
 
$
173,226

 
$
2,015

 
$
175,241

Floating rate
 
 
July 2017
(3) 
 
L+3.75
%
 
 
13,075

 
24,884

 
37,959

 
 
 
 
 
 
 
 
 
$
186,301

 
$
26,899

 
$
213,200

 
 
 
 
 
 
 
 
 
 
 
 
 
 
1401/1413 Research Boulevard
 
 
5/17/20
(4) 
 
L+2.50
%
(5) 
 
$
1,042

 
$
23,958

 
$
25,000

Unamortized deferred financing costs
 
 
 
 
 
 
 
 
(128
)
 
 
 
 
 
 
 
 
 
 
 
 
 
$
914

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(1)
Represents redeemable noncontrolling interests in our consolidated real estate project at 213 East Grand Avenue, located in our South San Francisco submarket, aggregating 297,355 RSF. The redeemable noncontrolling interests in the real estate joint venture commenced in August 2005 and earn a fixed preferred return of 8.4%, which is excluded from operating results information on this page.
(2)
In addition to the consolidated real estate joint ventures listed, various partners hold insignificant interests in three other properties in North America.
(3)
In July 2017, our unconsolidated real estate joint venture repaid the secured construction loan in connection with the sale of a condominium interest in 203,090 RSF of 360 Longwood Avenue. See page 4 of our supplemental information for additional information on our unconsolidated real estate joint venture.
(4)
The unconsolidated real estate joint venture has an option to extend the stated maturity date to July 1, 2020. In addition, there are two one-year options to convert the construction loan to a permanent loan and extend the stated maturity date to May 17, 2022.
(5)
The borrowing bears interest at a floating rate with an interest rate floor equal to 3.15%.
(6)
See page 4 of our supplemental information for additional information on the contribution of land parcels to the real estate joint venture.


 
41

 
 
Investments
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands)
 
 


Public/Private Mix
(Cost)
 
Tenant/Non-Tenant Mix
(Cost)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment
Type
 
Cost
 
Net Unrealized Gains
 
Total
 
Number of Investments
 
 
 
 
246
Public
 
$
51,199

 
$
28,171

 
$
79,370

 
Private
 
345,550

 
—

 
345,550

 
Average Cost
 
 
 
 
$1.6M
Total
 
$
396,749

 
$
28,171

 
$
424,920

 
 
 
 
 
 
 
 
 

 
42

 
 
Key Credit Metrics
q217headerlogo.jpg
June 30, 2017
(Dollars in millions)
 
 


Net Debt to Adjusted EBITDA (1)
 
Net Debt and Preferred Stock to Adjusted EBITDA (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-Charge Coverage Ratio (1)
 
Liquidity
 
 
 
 
 
 
$1.8B
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Availability under our $1.65 billion unsecured senior line of credit
$
1,350

 
 
Remaining construction loan commitments
184

 
 
Available-for-sale equity securities, at fair value
79

 
 
Cash, cash equivalents, and restricted cash
145

 
 
 
$
1,758

 
 
 
 
 

(1)
Quarter annualized.    

 
43

 
 
 
q217headerlogo.jpg
Summary of Debt
June 30, 2017
 
 


Debt maturities chart
(Dollars in millions)

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
$
886,922

 
$
240,426

 
$
1,127,348

 
23.6
%
 
3.62
%
 
3.1

Unsecured senior notes payable
2,800,398

 
—

 
2,800,398

 
58.6

 
4.16

 
7.3

$1.65 billion unsecured senior line of credit
—

 
300,000

 
300,000

 
6.3

 
2.22

 
4.3

2019 Unsecured Senior Bank Term Loan
199,452

 
—

 
199,452

 
4.2

 
3.08

 
1.5

2021 Unsecured Senior Bank Term Loan
348,187

 
—

 
348,187

 
7.3

 
2.53

 
3.5

Total/weighted average
$
4,234,959

 
$
540,426

 
$
4,775,385

 
100.0
%
 
3.75
%
 
5.6

Percentage of total debt
89%

 
11%

 
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 debt premiums (discounts), amortization of loan fees, and other bank fees.

 
44

 
 
Summary of Debt (continued)
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands)
 
 


Debt
 
Stated 
Rate
 
Weighted-Average Interest
Rate (1)
 
Maturity
Date (2)
 
Principal Payments Remaining for the Periods Ending December 31,
 
Principal
 
Unamortized (Deferred Financing Cost), (Discount)/Premium
 
Total
 
 
 
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
 
 
Secured notes payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater Boston
 
L+1.35%

 
 
2.96
%
 
8/23/18
 
 
$
—

 
$
212,289

 
$
—

 
$
—

 
$
—

 
$
—

 
$
212,289

 
$
(840
)
 
$
211,449

Greater Boston
 
L+1.50%

 
 
2.79

 
1/28/19
(3) 
 
—

 
—

 
311,556

 
—

 
—

 
—

 
311,556

 
(1,893
)
 
309,663

Greater Boston
 
L+2.00%

 
 
3.27

 
4/20/19
(3) 
 
—

 
—

 
158,581

 
—

 
—

 
—

 
158,581

 
(2,433
)
 
156,148

Greater Boston, San Diego, Seattle, and Maryland
 
7.75
%
 
 
8.16

 
4/1/20
 
 
934

 
1,979

 
2,138

 
104,352

 
—

 
—

 
109,403

 
(919
)
 
108,484

San Diego
 
4.66
%
 
 
4.98

 
1/1/23
 
 
644

 
1,608

 
1,688

 
1,762

 
1,852

 
28,201

 
35,755

 
(362
)
 
35,393

Greater Boston
 
3.93
%
 
 
3.19

 
3/10/23
 
 
—

 
1,091

 
1,505

 
1,566

 
1,628

 
76,210

 
82,000

 
3,085

 
85,085

Greater Boston
 
4.82
%
 
 
3.39

 
2/6/24
 
 
—

 
2,720

 
3,090

 
3,217

 
3,406

 
190,567

 
203,000

 
17,343

 
220,343

San Francisco
 
6.50
%
 
 
6.74

 
7/1/36
 
 
10

 
22

 
23

 
25

 
26

 
677

 
783

 
—

 
783

Secured debt weighted-average interest rate/subtotal
 
3.81
%
 
 
3.62

 
 
 
 
1,588

 
219,709

 
478,581

 
110,922

 
6,912

 
295,655

 
1,113,367

 
13,981

 
1,127,348

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 Unsecured Senior Bank Term Loan
 
L+1.20
%
 
 
3.08

 
1/3/19
 
 
—

 
—

 
200,000

 
—

 
—

 
—

 
200,000

 
(548
)
 
199,452

2021 Unsecured Senior Bank Term Loan
 
L+1.10
%
 
 
2.53

 
1/15/21
 
 
—

 
—

 
—

 
—

 
350,000

 
—

 
350,000

 
(1,813
)
 
348,187

$1.65 billion unsecured senior line of credit
 
L+1.00
%
(4) 
 
2.22

 
10/29/21
 
 
—

 
—

 
—

 
—

 
300,000

 
—

 
300,000

 
—

 
300,000

Unsecured senior notes payable
 
2.75
%
 
 
2.96

 
1/15/20
 
 
—

 
—

 
—

 
400,000

 
—

 
—

 
400,000

 
(2,017
)
 
397,983

Unsecured senior notes payable
 
4.60
%
 
 
4.74

 
4/1/22
 
 
—

 
—

 
—

 
—

 
—

 
550,000

 
550,000

 
(3,083
)
 
546,917

Unsecured senior notes payable
 
3.90
%
 
 
4.04

 
6/15/23
 
 
—

 
—

 
—

 
—

 
—

 
500,000

 
500,000

 
(3,526
)
 
496,474

Unsecured senior notes payable
 
4.30
%
 
 
4.52

 
1/15/26
 
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(4,114
)
 
295,886

Unsecured senior notes payable
 
3.95
%
 
 
4.14

 
1/15/27
 
 
—

 
—

 
—

 
—

 
—

 
350,000

 
350,000

 
(4,757
)
 
345,243

Unsecured senior notes payable
 
3.95
%
 
 
4.09

 
1/15/28
 
 
—

 
—

 
—

 
—

 
—

 
425,000

 
425,000

 
(4,436
)
 
420,564

Unsecured senior notes payable
 
4.50
%
 
 
4.62

 
7/30/29
 
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(2,669
)
 
297,331

Unsecured debt weighted average/subtotal
 
 
 
 
3.78

 
 
 
 
—

 
—

 
200,000

 
400,000

 
650,000

 
2,425,000

 
3,675,000

 
(26,963
)
 
3,648,037

Weighted-average interest rate/total
 
 
 
 
3.75
%
 
 
 
 
$
1,588

 
$
219,709

 
$
678,581

 
$
510,922

 
$
656,912

 
$
2,720,655

 
$
4,788,367

 
$
(12,982
)
 
$
4,775,385

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balloon payments
 
 
 
 
 
 
 
 
 
$
—

 
$
212,289

 
$
670,137

 
$
503,979

 
$
650,000

 
$
2,708,417

 
$
4,744,822

 
$
—

 
$
4,744,822

Principal amortization
 
 
 
 
 
 
 
 
 
1,588

 
7,420

 
8,444

 
6,943

 
6,912

 
12,238

 
43,545

 
(12,982
)
 
30,563

Total debt
 
 
 
 
 
 
 
 
 
$
1,588

 
$
219,709

 
$
678,581

 
$
510,922

 
$
656,912

 
$
2,720,655

 
$
4,788,367

 
$
(12,982
)
 
$
4,775,385

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-rate/hedged variable-rate debt
 
 
 
 
 
 
 
 
 
$
1,588

 
$
157,420

 
$
500,444

 
$
510,922

 
$
356,912

 
$
2,720,655

 
$
4,247,941

 
$
(12,982
)
 
$
4,234,959

Unhedged variable-rate debt
 
 
 
 
 
 
 
 
 
—

 
62,289

 
178,137

 
—

 
300,000

 
—

 
540,426

 
—

 
540,426

Total debt
 
 
 
 
 
 
 
 
 
$
1,588

 
$
219,709

 
$
678,581

 
$
510,922

 
$
656,912

 
$
2,720,655

 
$
4,788,367

 
$
(12,982
)
 
$
4,775,385

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(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 debt premiums (discounts), amortization of loan fees, and other bank fees.
(2)
Reflects any extension options that we control.
(3)
See our table of secured construction loans on the following page regarding options to extend maturity dates.
(4)
Our $1.65 billion unsecured senior line of credit contains a feature that allows lenders to competitively bid on the interest rate for borrowings under the facility. This may result in an interest rate that is below the stated rate. In addition to the cost of borrowing, the facility is subject to an annual facility fee of 0.20%, based on the aggregate commitments. Unamortized deferred financing costs related to our unsecured senior line of credit are classified in other assets and are excluded from the calculation of the weighted-average interest rate.


 
45

 
 
Summary of Debt (continued)
q217headerlogo.jpg
June 30, 2017
(Dollars in thousands)
 
 


Secured construction loans
Property/Market/Submarket
 
Stated Rate
 
Maturity Date
 
Outstanding
Balance
 
Remaining Commitments
 
Aggregate
Commitments
75/125 Binney Street/Greater Boston/Cambridge
 
 
L+1.35
%
 
 
 
8/23/18
 
 
$
212,289

 
$
—

 
$
212,289

50 and 60 Binney Street/Greater Boston/Cambridge
 
 
L+1.50
%
 
 
 
1/28/19
(1) 
 
311,556

 
38,444

 
350,000

100 Binney Street/Greater Boston/Cambridge
 
 
L+2.00
%
(2) 
 
 
4/20/19
(3) 
 
158,581

 
145,700

 
304,281

 
 
 
 
 
 
 
 
 
 
$
682,426

 
$
184,144

 
$
866,570

(1)
We have two one-year options to extend the stated maturity date to January 28, 2021, subject to certain conditions.
(2)
See the interest rate cap agreements in the table at the bottom of this page.
(3)
We have two one-year options to extend the stated maturity date to April 20, 2021, 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
 
Actual
 
Requirement
 
Actual
Total Debt to Total Assets
 
≤ 60%
 
38%
 
≤ 60.0%
 
31.8%
Secured Debt to Total Assets
 
≤ 40%
 
9%
 
≤ 45.0%
 
7.4%
Consolidated EBITDA to Interest Expense
 
≥ 1.5x
 
6.3x
 
≥ 1.50x
 
3.70x
Unencumbered Total Asset Value to Unsecured Debt
 
≥ 150%
 
264%
 
N/A
 
N/A
Unsecured Leverage Ratio
 
N/A
 
N/A
 
≤ 60.0%
 
33.5%
Unsecured Interest Coverage Ratio
 
N/A
 
N/A
 
≥ 1.50x
 
6.34x

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


Interest rate hedge agreements
Interest Rate Hedge Type
 
Effective Date
 
Maturity Date
 
Number of Contracts
 
Weighted-Average Interest Pay Rate/
Cap Rate (1)
 
Fair Value
as of 6/30/17
 
Notional Amount in Effect as of
 
 
 
 
 
 
6/30/17
 
12/31/17
 
12/31/18
 
12/31/19
 
Swap
 
March 31, 2017
 
March 31, 2018
 
4
 
0.78%
 
$
1,006


 
$
250,000

 
$
250,000

 
$
—

 
$
—

 
Swap
 
March 31, 2017
 
March 31, 2018
 
11
 
1.51%
 
 
(948
)
 
 
650,000

 
650,000

 
—

 
—

 
 Cap
 
July 29, 2016
 
April 20, 2019
 
2
 
2.00%
 
 
94

 
 
92,000

 
126,000

 
150,000

 
—

 
Swap
 
March 29, 2018
 
March 31, 2019
 
8
 
1.16%
 
 
2,682

 
 
—

 
—

 
600,000

 
—

 
Swap
 
March 29, 2019
 
March 31, 2020
 
1
 
1.89%
 
 
(27
)

 
—

 
—

 
—

 
100,000

Total
 
 
 
 
 
 
 
 
 
$
2,807

 
 
$
992,000

 
$
1,026,000

 
$
750,000

 
$
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, 2017, as listed under the column heading “Stated Rate” in our summary table of outstanding indebtedness and respective principal payments on page 45.

 
46

 
 
 
q217headerlogo.jpg
Definitions and Reconciliations
June 30, 2017
 
 



This section contains additional information for sections throughout this supplemental information package, as well as explanations 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 (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA:
 
Three Months Ended
(Dollars in thousands)
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
Net income (loss)
$
41,496

 
 
$
47,555

 
$
19,792

 
$
28,559

 
$
(108,116
)
Interest expense
 
31,748

 
 
29,784

 
31,223

 
25,850

 
25,025

Income taxes
 
1,333

 
 
767

 
737

 
355

 
924

Depreciation and amortization
 
104,098

 
 
97,183

 
95,222

 
77,133

 
70,169

Stock compensation expense
 
5,504

 
 
5,252

 
6,426

 
7,451

 
6,117

Loss on early extinguishment of debt
 
—

 
 
670

 
—

 
3,230

 
—

Gain on sales of real estate – rental properties
 
—

 
 
(270
)
 
(3,715
)
 
—

 
—

Gain on sales of real estate – land parcels
 
(111
)
 
 
—

 
—

 
(90
)
 
—

Impairment of real estate and non-real estate investments
 
4,694

 
 
—

 
16,024

 
11,179

 
156,143

Adjusted EBITDA
$
188,762

 
 
$
180,941

 
$
165,709

 
$
153,667

 
$
150,262

 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
277,550

(1) 
 
$
270,877

 
$
249,162

 
$
230,379

 
$
226,076

 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA margins
 
68%

 
 
67%

 
67%

 
67%

 
66%


(1)
Excludes impairment charges aggregating $4.5 million, primarily related to two non-real estate investments. We believe excluding impairment of non-real estate investments improves the consistency and comparability of the Adjusted EBITDA margins from period to period.

We use Adjusted EBITDA as a supplemental performance measure of our core 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 impairments. We believe Adjusted EBITDA provides investors relevant and useful information because it allows investors to view income from our operations on an unleveraged basis before the effects of interest, taxes, depreciation and amortization, stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and impairments.

By excluding interest expense and gains or losses on early extinguishment of debt, Adjusted EBITDA allows investors to measure our performance independent of our capital structure and indebtedness. We believe that excluding charges related to share-based compensation facilitates a comparison of our operations across periods without the variances caused by the volatility of the expense (which depends on market forces outside our control). 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 investment and disposition decisions. 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 (using rental revenue, including straight-line rent adjustments). Annual rental revenue and measures computed using annual rental revenue are presented at 100% for all properties under our management, including properties held by our consolidated and unconsolidated real estate joint ventures. As of June 30, 2017, approximately 97% of our leases (on an RSF basis) were triple net leases, requiring 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.

Average cash yield

See definition of initial stabilized yield (unlevered).

Cash interest

Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and amortization of 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.

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.


 
47

 
 
 
q217headerlogo.jpg
Definitions and Reconciliations (continued)
June 30, 2017
 
 


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 world-class collaborative life science and technology campuses in AAA urban innovation clusters. These projects are focused on providing high-quality, generic, and reusable space 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 amortization of 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)
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
Adjusted EBITDA
$
188,762

 
$
180,941

 
$
165,709

 
$
153,667

 
$
150,262

 
 
 
 
 
 
 
 
 
 
Interest expense
$
31,748

 
$
29,784

 
$
31,223

 
$
25,850

 
$
25,025

Capitalized interest
15,069

 
13,164

 
11,659

 
14,903

 
13,788

Amortization of loan fees
(2,843
)
 
(2,895
)
 
(3,080
)
 
(3,080
)
 
(2,953
)
Amortization of debt premiums
625

 
596

 
383

 
5

 
26

Cash interest
44,599

 
40,649

 
40,185

 
37,678

 
35,886

Dividends on preferred stock
1,278

 
3,784

 
3,835

 
5,007

 
5,474

Fixed charges
$
45,877

 
$
44,433

 
$
44,020

 
$
42,685

 
$
41,360

 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio:
 
 
 
 
 
 
 
 
 
– quarter annualized
4.1x

 
4.1x

 
3.8x

 
3.6x

 
3.6x

– trailing 12 months
3.9x

 
3.8x

 
3.6x

 
3.6x

 
3.6x

 
 
 
 
 
 
 
 
 
 


 
48

 
 
 
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Definitions and Reconciliations (continued)
June 30, 2017
 
 


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 the measurement tool of funds from operations. 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 investment and disposition decisions, financing decisions, capital structures, and capital market transactions. 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.

We compute funds from operations, as adjusted, as funds from operations calculated in accordance with the NAREIT White Paper less/plus significant gains/losses on the sale of investments, plus 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, and our average cash yields are generally expected to be greater than our initial stabilized yields (cash basis). 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.

Average cash yield reflects cash rents, including contractual rent escalations after initial rental concessions have elapsed, calculated on a straight-line basis, and our total cash investment in the property.

 
Items included in net income (loss) 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 our other disclosures included in this supplemental package and our most recent annual report on Form 10-K, and subsequent quarterly reports on Form 10-Q. We believe this tabular presentation will promote a better understanding about our corporate level decisions and activities that significantly impacted comparison of our operating results period to period. We also believe this tabular presentation will supplement an understanding of our disclosures and real estate operating results. Gains or losses on sales of real estate and impairments for 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 corporate level financing decisions focused on our capital structure strategy. Impairments of non-real estate investments represent the write-down of an asset when an other-than-temporary decline in the fair value is less than the carry value due to changes in general market or other conditions and are not related to the operating performance of our real estate. Significant items, whether a gain or loss, included in the tabular disclosure, for the current periods are described in further detail in our supplemental package.

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 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. The joint venture agreement for each entity that we do not wholly own 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 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 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.


 
49

 
 
 
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Definitions and Reconciliations (continued)
June 30, 2017
 
 


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.

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

Net debt to Adjusted EBITDA is a non-GAAP financial measure that we believe is useful to investors as a supplemental measure 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 period end. Refer to “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)
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
Secured notes payable
 
$
1,127,348

 
$
1,083,758

 
$
1,011,292

 
$
789,450

 
$
722,794

Unsecured senior notes payable
 
2,800,398

 
2,799,508

 
2,378,262

 
2,377,482

 
2,376,713

Unsecured senior line of credit
 
300,000

 
—

 
28,000

 
416,000

 
72,000

Unsecured senior bank term loans
 
547,639

 
547,420

 
746,471

 
746,162

 
945,030

Unamortized deferred financing costs
 
29,710

 
31,616

 
29,917

 
31,420

 
34,302

Cash and cash equivalents
 
(124,877
)
 
(151,209
)
 
(125,032
)
 
(157,928
)
 
(256,000
)
Restricted cash
 
(20,002
)
 
(18,320
)
 
(16,334
)
 
(16,406
)
 
(13,131
)
Net debt
 
$
4,660,216

 
$
4,292,773

 
$
4,052,576

 
$
4,186,180

 
$
3,881,708

 
 
 
 
 
 
 
 
 
 
 
Net debt
 
$
4,660,216

 
$
4,292,773

 
$
4,052,576

 
$
4,186,180

 
$
3,881,708

7.00% Series D convertible preferred stock
 
74,386

 
74,386

 
86,914

 
161,792

 
188,864

6.45% Series E redeemable preferred stock
 
—

 
—

 
130,000

 
130,000

 
130,000

Net debt and preferred stock
 
$
4,734,602

 
$
4,367,159

 
$
4,269,490

 
$
4,477,972

 
$
4,200,572

 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
$
755,048

 
$
723,764

 
$
662,836

 
$
614,668

 
$
601,048

– trailing 12 months
 
$
689,079

 
$
650,579

 
$
610,839

 
$
591,646

 
$
579,880

Net debt to Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
6.2
x
 
5.9
x
 
6.1
x
 
6.8
x
 
6.5
x
– trailing 12 months
 
6.8
x
 
6.6
x
 
6.6
x
 
7.1
x
 
6.7
x
Net debt and preferred stock to Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
6.3
x
 
6.0
x
 
6.4
x
 
7.3
x
 
7.0
x
– trailing 12 months
 
6.9
x
 
6.7
x
 
7.0
x
 
7.6
x
 
7.2
x
 
 
 
 
 
 
 
 
 
 
 

    
 
Net operating income

The following table reconciles net income to total net operating income:
 
 
Three Months Ended
 
Six Months Ended
(Dollars in thousands)
 
6/30/17
 
6/30/16
 
6/30/17
 
6/30/16
Net Income (loss)
 
 
$
41,496

(1) 
 
 
$
(108,116
)
 
 
 
$
89,051

(1) 
 
 
$
(98,150
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in (earnings) losses of unconsolidated real estate joint ventures
 
 
(589
)
 
 
 
146

 
 
 
(950
)
 
 
 
543

 
General and administrative expenses
 
 
19,234

 
 
 
15,384

 
 
 
38,463

 
 
 
30,572

 
Interest expense
 
 
31,748

 
 
 
25,025

 
 
 
61,532

 
 
 
49,880

 
Depreciation and amortization
 
 
104,098

 
 
 
70,169

 
 
 
201,281

 
 
 
141,035

 
Impairment of real estate
 
 
203

 
 
 
156,143

 
 
 
203

 
 
 
185,123

 
Loss on early extinguishment of debt
 
 
—

 
 
 
—

 
 
 
670

 
 
 
—

 
Gain on sales of real estate – rental properties
 
 
—

 
 
 
—

 
 
 
(270
)
 
 
 
—

 
Gain on sales of real estate – land parcels
 
 
(111
)
 
 
 
—

 
 
 
(111
)
 
 
 
—

 
Net operating income
 
 
$
196,079

 
 
 
$
158,751

 
 
 
$
389,869

 
 
 
$
309,003

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Includes impairment charges aggregating $4.5 million primarily related to two non-real estate investments.

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, gain or loss on early extinguishment of debt, and gain or loss on sales of real estate. 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 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 the timing differences between the recognition of revenue in accordance with GAAP and the receipt of payments reflected in our consolidated results.

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

 
50

 
 
 
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Definitions and Reconciliations (continued)
June 30, 2017
 
 


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. 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 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 either of liquidity or our ability to make distributions.

Operating statistics

We present certain operating statistics related to our properties, including number of properties, annual rental revenue, annual rental revenue per occupied RSF, occupancy percentage, RSF, leasing activity, rental rates, 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 operating statistics at 100% for all properties managed by us, including properties owned by our consolidated and unconsolidated real estate joint ventures.

Stabilized occupancy date

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

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 period, we analyze the operating performance for all properties that were fully operating for the entirety of the comparative periods presented, referred to as Same Properties. These properties are analyzed separately from properties acquired subsequent to the first day in the earliest comparable period presented, properties that underwent development or redevelopment at any time during the comparative periods, 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
 
100 Binney Street
 
1

 
510 Townsend Street
 
1

 
505 Brannan Street
 
1

 
ARE Spectrum
 
3

 
213 East Grand Avenue
 
1

 
400 Dexter Avenue North
 
1

 
 
 
8

 
 
 
 
 
Development – placed into service after January 1, 2016
 
Properties
 
50 and 60 Binney Street
 
2

 
430 East 29th Street
 
1

 
5200 Illumina Way, Building 6
 
1

 
4796 Executive Drive
 
1

 
360 Longwood Avenue(unconsolidated joint venture)
 
1

 
1455 and 1515 Third Street
 
2

 
 
 
8

 
 
 
 
 
Redevelopment – under construction
 
Properties
 
9625 Towne Centre Drive
 
1

 
5 Laboratory Drive
 
1

 
 
 
2

 
Redevelopment – placed into service after January 1, 2016
 
Properties
10151 Barnes Canyon Road
 
1

11 Hurley Street
 
1

10290 Campus Point Drive
 
1

 
 
3

 
 
 
Acquisitions after January 1, 2016
 
Properties
Torrey Ridge Science Center
 
3

Alexandria Center® at One Kendall Square
 
9

88 Bluxome Street
 
1

960 Industrial Road
 
1

1450 Page Mill Road
 
1

 
 
15

Total properties excluded from same properties
 
36

Same properties
 
166

Total properties in North America as of June 30, 2017
 
202

 

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, 6.45% Series E cumulative redeemable 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.

 
51

 
 
 
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Definitions and Reconciliations (continued)
June 30, 2017
 
 


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. We use unencumbered net operating income as a percentage of total net operating income as a measure of our ability to obtain secured debt financing. 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)
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
Unencumbered net operating income
$
158,072

 
$
157,391

 
$
143,570

 
$
137,943

 
$
138,283

Encumbered net operating income
38,007

 
36,399

 
32,348

 
20,434

 
20,468

Total net operating income
$
196,079

 
$
193,790

 
$
175,918

 
$
158,377

 
$
158,751

Unencumbered net operating income as a percentage of total net operating income
81%

 
81%

 
82%

 
87%

 
87%


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 debt premiums (discounts), amortization of loan fees, 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
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
Weighted-average interest rate for capitalization of interest
3.98%
 
3.95%
 
3.72%
 
3.78%
 
3.70%

 
Weighted-average shares of common stock outstanding – diluted

In March 2017, we entered into agreements to sell an aggregate of 6.9 million shares of our common stock, consisting of an initial issuance of 2.1 million shares and the remaining 4.8 million shares subject to forward equity sales agreements, at a public offering price of $108.55 per share, less underwriters’ discount. We issued the initial 2.1 million shares at closing in March 2017 for net proceeds, after underwriters’ discount and issuance costs, of $217.8 million and expect to settle the forward equity sales agreements on the remaining 4.8 million shares of common stock no later than March 2018.

Weighted-average shares of common stock outstanding – diluted for 2Q17 used in the computation of earnings per share – diluted, and funds from operations per share – diluted for 2Q17, include 4.8 million shares related to the forward equity sales agreements using the treasury method of accounting (assumed an issuance at the contractual price less the assumed repurchase of common shares at the average market price by using the net proceeds of $495.5 million). In July 2016, we entered into similar forward equity sales agreements that were settled in December 2016. The weighted-average shares of common stock outstanding – diluted during each period include the following shares related to our forward equity sales agreements:
 
Three Months Ended
 
Six Months Ended
(In thousands)
2Q17
 
1Q17
 
4Q16
 
3Q16
 
2Q17
Earnings per share – diluted
530

 
53

 
—

 
 
751

 
293

Funds from operations – diluted
530

 
53

 
480

 
 
751

 
293


 
52