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): February 4, 2019


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 February 4, 2019, Alexandria Real Estate Equities, Inc. (the “Company”) issued a press release entitled “Alexandria Real Estate Equities, Inc. Reports Fourth Quarter and Year Ended December 31, 2018 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 Fourth Quarter and Year Ended December 31, 2018.

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,” “goals,” “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.
 
 
 
 
 
 
February 4, 2019
 
By:
/s/ Joel S. Marcus
 
 
 
 
Joel S. Marcus
 
 
 
 
Executive Chairman
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Stephen A. Richardson
 
 
 
 
Stephen A. Richardson
 
 
 
 
Co-Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Peter M. Moglia
 
 
 
 
Peter M. Moglia
 
 
 
 
Co-Chief Executive Officer and
Co-Chief Investment Officer
 
 
 
 
 
 
 
 
 
By:
/s/ Dean A. Shigenaga
 
 
 
 
Dean A. Shigenaga
 
 
 
 
Co-President and Chief Financial Officer
 




EXHIBIT INDEX

Exhibit
Number        Exhibit Title    
99.1Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the Fourth Quarter and Year Ended December 31, 2018.


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Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2019



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Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2019
i



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(1)
See definitions of “Annual Rental Revenue,” “Class A Properties and AAA Locations,” and “Investment-Grade or Publicly Traded Large Cap Tenants” in the “Definitions and Reconciliations” section of our Supplemental Information for additional information. As of December 31, 2018, annual rental revenue solely from investment-grade tenants within our overall tenant base and within our top 20 tenants was 47% and 76%, respectively.

 
ii
 
 
 
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Table of Contents
December 31, 2018
 
 

 
 
EARNINGS PRESS RELEASE
Page
SUPPLEMENTAL INFORMATION
 
Internal Growth
 
 
 
 
SUPPLEMENTAL INFORMATION (continued)
Page
External Growth / Investments in Real Estate
 
New Class A Development and Redevelopment 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 8 of this Earnings Press Release and our Supplemental Information for further information.
 
This document is not an offer to sell or a solicitation to buy securities of Alexandria Real Estate Equities, Inc. Any offers to sell or solicitations to buy our securities shall be made only by means of a prospectus approved for that purpose. Unless otherwise indicated, the “Company,” “Alexandria,” “ARE,” “we,” “us,” and “our” refer to Alexandria Real Estate Equities, Inc. and our consolidated subsidiaries.

 
Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2019
iii
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Alexandria Real Estate Equities, Inc.
Reports:
2018 Revenues of $1.3 billion, up 17.7% over 2017;
4Q18 Loss Per Share – Diluted of $(0.30) and 2018 EPS – Diluted of $3.52;
4Q18 and 2018 FFO – Diluted, As Adjusted, Per Share of $1.68 and $6.60;
Operational Excellence and Growing Dividends


PASADENA, Calif. – February 4, 2019 – Alexandria Real Estate Equities, Inc. (NYSE:ARE)
announced financial and operating results for the fourth quarter and year ended December 31, 2018.

Key highlights

Operating results
 
4Q18
 
4Q17
 
2018
 
2017
Total revenues:
 
 
 
 
 
 
 
In millions
$
340.5

 
$
298.8

 
$
1,327.5

 
$
1,128.1

Growth
13.9%

 
 
 
17.7%

 
 
 
 
 
 
 
 
 
 
Net (loss) income attributable to Alexandria’s common stockholders – diluted:
In millions
$
(31.7
)
 
$
36.8

 
$
364.0

 
$
145.4

Per share
$
(0.30
)
 
$
0.38

 
$
3.52

 
$
1.58

 
 
 
 
 
 
 
 
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted:
In millions
$
178.0

 
$
147.0

 
$
682.0

 
$
554.5

Per share
$
1.68

 
$
1.53

 
$
6.60

 
$
6.02

On January 1, 2018, we adopted a new accounting standard that requires us, on a prospective basis, to present certain equity investments at fair value with changes in fair value reflected in earnings. See “Items Included in Net (Loss) Income Attributable to Alexandria’s Common Stockholders” on the next page for additional information.

A REIT industry-leading, high-quality tenant roster

52% of annual rental revenue from investment-grade or publicly traded large cap tenants.

Continuation of strong rental rate growth and leasing activity

Strong rental rate increases of 24.1% and 14.1% (cash basis) for 2018. The rental rate increase of 14.1% (cash basis) represents our highest annual increase during the past 10 years. Our leasing activity aggregating 4.7 million RSF for 2018 represents the second highest annual leasing activity in our history.

Sale of partial interest in core Class A property

In February 2019, we executed a purchase and sale agreement to sell a 60% interest in 75/125 Binney Street, a Class A property in our Cambridge submarket, for a sales price of $438 million, or $1,880 per RSF, representing a 4.3% capitalization rate on 4Q18 net operating income (cash basis), annualized. We expect to complete this partial interest sale in 1Q19 and to reinvest these proceeds into our value-creation pipeline.

 




2018 credit rating improvement
During 2018, Moody’s Investors Service upgraded our corporate issuer credit rating to Baa1/Stable from Baa2/Stable and S&P Global Ratings raised its credit outlook for our corporate credit rating to BBB/Positive from BBB/Stable.

Increased common stock dividend

Common stock dividend declared for 4Q18 of $0.97 per common share, up 4 cents, or 4.3%, over 3Q18; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Investments

We carry our investments in publicly traded companies and certain privately held entities at fair value. As of December 31, 2018, cumulative unrealized gains related to changes in fair value aggregated $240.2 million. Investment income included the following:
•
Unrealized losses of $94.9 million and unrealized gains of $99.6 million recognized in 4Q18 and 2018, respectively; and
•
Realized gains of $11.3 million and $37.1 million recognized in 4Q18 and 2018, respectively.

Strong internal growth
•
Net operating income (cash basis) of $878.0 million for 4Q18 annualized, up $184.9 million, or 26.7%, compared to 4Q17 annualized
•
Same property net operating income growth:
•
3.8% and 7.6% (cash basis) for 4Q18, compared to 4Q17
•
3.7% and 9.2% (cash basis) for 2018, compared to 2017. Growth of 9.2% (cash basis) represents the highest annual increase during the past 10 years.
•
Continued strong leasing activity and rental rate growth in light of modest contractual lease expirations at the beginning of 2018 and a highly leased value-creation pipeline:
 
 
4Q18
 
2018
Total leasing activity – RSF
 
1,558,064

 
4,721,692

Lease renewals and re-leasing of space:
 
 
 
 
RSF (included in total leasing activity above)
 
650,540

 
2,088,216

Rental rate increases
 
17.4%

 
24.1%

Rental rate increases (cash basis)
 
11.4%

 
14.1%


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

Significant development and redevelopment projects placed into service:
Property
 
Submarket
 
RSF
 
Leased
 
Tenant
4Q18:
 
 
 
 
 
 
 
 
213 East Grand Avenue
 
South San Francisco
 
300,930
 
100%
 
Merck & Co., Inc.
9625 Towne Centre Drive
 
University Town Center
 
163,648
 
100%
 
Takeda Pharmaceutical Company Ltd.
January 2019:
 
 
 
 
 
 
 
 
399 Binney Street
 
Cambridge
 
123,403
 
100%
 
Three life science entities


 
1

 
 
 
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Fourth Quarter and Year Ended December 31, 2018, Financial and Operating Results (continued)
December 31, 2018
 
 

Future growth of net operating income (cash basis) driven by recently delivered projects

Significant near-term growth of net operating income (cash basis) of $42 million upon the burn-off of initial free rent on recently delivered projects.

Completed acquisitions

During 4Q18, we acquired three properties for an aggregate purchase price of $155.0 million in two key submarkets.

Items included in results
 
Items included in net (loss) income attributable to Alexandria’s common stockholders:
(In millions, except per share amounts)
4Q18
 
4Q17
 
4Q18
 
4Q17
 
2018
 
2017
 
2018
 
2017
Amount
 
Per Share – Diluted
 
Amount
 
Per Share – Diluted
Unrealized (losses) gains on non-real estate investments(1)
$
(94.9
)
 
$
—

 
$
(0.89
)
 
$
—

 
$
99.6

 
$
—

 
$
0.96

 
$
—

Realized gains on non-real estate investments
6.4

 
—

 
0.06

 
—

 
14.7

 
—

 
0.14

 
—

Gain on sales of real estate
8.7

 
—

 
0.08

 
—

 
44.4

(2
)
14.5

(2
)
0.43

 
0.15

Impairment of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate
—

 
—

 
—

 
—

 
(6.3
)
 
(0.2
)
 
(0.06
)
 
—

Non-real estate investments
(5.5
)
 
(3.8
)
 
(0.05
)
 
(0.04
)
 
(5.5
)
 
(8.3
)
 
(0.05
)
 
(0.09
)
Early extinguishment of debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss
—

 
(2.8
)
 
—

 
(0.03
)
 
(1.1
)
 
(3.5
)
 
(0.01
)
 
(0.03
)
Gain
—

 
—

 
—

 
—

 
0.8

(2
)
—

 
0.01

 
—

Preferred stock redemption charge
(4.2
)
 
—

 
(0.04
)
 
—

 
(4.2
)
 
(11.3
)
 
(0.04
)
 
(0.12
)
Allocation to unvested restricted stock awards
—

 
0.1

 
—

 
—

 
(2.2
)
 
0.1

 
(0.02
)
 
—

Total
$
(89.5
)
 
$
(6.5
)
 
$
(0.84
)
 
$
(0.07
)
 
$
140.2

 
$
(8.7
)
 
$
1.36

 
$
(0.09
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding for calculation of earnings per share – diluted
106.0

 
95.9

 
 
 
 
 
103.3

 
92.1

(1) See “Investments” on page 45 of our Supplemental Information for additional information.
(2) Includes our share of amounts attributable to our unconsolidated real estate joint ventures. See “Joint Venture Financial Information” in our Supplemental Information for additional information.
Core operating metrics as of or for the quarter ended December 31, 2018
High-quality revenues and cash flows and operational excellence
Percentage of annual rental revenue in effect from:
 
 
 
Investment-grade or publicly traded large cap tenants
 
52
%
 
Class A properties in AAA locations
 
77
%
 
Occupancy of operating properties in North America
 
97.3
%
 
Operating margin
 
71
%
 
Adjusted EBITDA margin
 
69
%
 
Weighted-average remaining lease term:
 
 
 
All tenants
 
8.6
 years
 
Top 20 tenants
 
12.3
 years
 
 
 
 
 
See the previous page for information on our total revenues, net operating income, same property net operating income growth, leasing activity, and rental rate growth.

Balance sheet management

Key metrics

•
$18.4 billion of total market capitalization
•
$2.4 billion of liquidity
•
3% unhedged variable-rate debt as a percentage of total debt
 
 
4Q18
 
 
 
 
Quarter
 
Trailing 12
 
4Q19
 
 
Annualized
 
Months
 
Goal
Net debt to Adjusted EBITDA
 
5.4x
 
5.6x
 
Less than or equal to 5.3x
Fixed-charge coverage ratio
 
4.1x
 
4.2x
 
Greater than 4.0x
Current and future value-creation pipeline as a percentage of gross investments in real estate in North America
 
11%
 
N/A
 
8% to 12%

Key capital events
•
During 4Q18, we executed additional interest rate hedge agreements with a notional of $250.0 million and a weighted-average fixed pay rate of 2.84%, effective March 29, 2019.
•
During 4Q18, we repurchased, in privately negotiated transactions, 402,000 shares of our 7.00% Series D cumulative convertible preferred stock for $14.0 million, or $34.77 per share, and recognized a preferred stock redemption charge of $4.2 million.
•
In November 2018, we exercised our option to extend the maturity date of our secured construction loan for our properties at 50 and 60 Binney Street in our Cambridge submarket to January 28, 2020.
•
In December 2018, we settled the remaining 5.2 million shares from our January 2018 forward equity sales agreements and received proceeds of $608.1 million, or $116.97 per share, net of underwriting discounts and adjustments as provided for in the agreements.
•
During 4Q18, there was no activity under our “at the market” common stock offering programs. As of December 31, 2018, the remaining aggregate amount available under our current programs for future sales of common stock is $658.7 million.


 
2

 
 
 
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Fourth Quarter and Year Ended December 31, 2018, Financial and Operating Results (continued)
December 31, 2018
 
 

Corporate responsibility and industry leadership

•
Our philanthropy and volunteerism efforts focus on providing mission-critical support to non-profit organizations doing impactful work in the areas of medical research, STEM education, military support services, and local communities. In 2018, our team members volunteered more than 2,600 hours to support over 250 non-profit organizations across the country.
•
We value both the health and wellness of our team members as well as supporting organizations on the leading edge of medical innovation. In November 2018, we were honored to support 49 team members in the New York City Marathon in order to benefit Memorial Sloan Kettering Cancer Center.
•
In November 2018, Robin Hood, New York City’s largest poverty-fighting organization, held its annual investor conference, at which Joel S. Marcus, our executive chairman and founder, curated and moderated the “Go Long on Ag” panel that focused on the critical need for agricultural innovation to provide more nutritious food in order to feed a rapidly growing population.
•
In November 2018, Ari Frankel, our assistant vice president of sustainability and high performance buildings, was elected 2019 Chair of Nareit’s Real Estate Sustainability Council.
•
In January 2019, we were recognized as the most active biopharma investor by new deal volume in 2017-2018 by Silicon Valley Bank in its “Trends in Healthcare Investments and Exits 2019” report and ranked by Forbes as the top venture capital investor in the healthcare sector by U.S.-based deal volume in 2018.

Subsequent events
•
In January 2019, we repaid early one secured note payable aggregating $106.7 million, originally due in 2020 and that bore interest at 7.75%, and recognized a loss on early extinguishment of debt of $7.1 million, including the write-off of unamortized loan fees.
•
In January 2019, we repurchased, in privately negotiated transactions, 275,000 shares of our 7.00% Series D cumulative convertible preferred stock for $9.2 million, or $33.60 per share, and recognized a preferred stock redemption charge of $2.6 million. As of February 4, 2019, 2.3 million shares of our Series D Convertible Preferred Stock were outstanding at a book value aggregating $57.5 million.
•
In January 2019, we completed the acquisition of five properties in key submarkets with value-add operating properties. See “Acquisitions” in this Earnings Press Release for additional information.

 
3

 
 
 
 
Select 2018 Highlights
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December 31, 2018
 
 
 


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(1)
Rental rate increase of 14.1% (cash basis) represents our highest annual increase during the past 10 years.
(2)
Leasing activity aggregating 4.7 million RSF for 2018 represents the second highest annual leasing activity in our history.

 
4

 
 
Acquisitions
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December 31, 2018
(Dollars in thousands)
 
 


Property
 
Submarket/Market
 
Date of Purchase
 
Number of Properties
 
Operating
Occupancy
 
Square Footage
 
Purchase Price
 
 
 
 
Future Development
 
Active Redevelopment
 
Operating With Future Development/Redevelopment
 
 
 
 
 
 
 
4Q18 Acquisitions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Life Science Factory at Long Island City(1)
 
New York City/New York City
 
10/9/18
 
1
 
100%
 
—

 
140,098

 
36,661

 
$
75,000

 
10260 Campus Point Drive and 4161 Campus Point Court
 
University Town Center/
San Diego
 
12/28/18
 
2
 
100%
 
378,355

(2) 
—

 
269,048

(2) 
 
15,000

(3) 
 
 
 
 
 
 
3
 
 
 
378,355

 
140,098

 
305,709

 
$
90,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Refer to the “New Class A Development and Redevelopment Properties: Summary of Pipeline” on page 41 of our Supplemental Information for additional information.
(2)
We acquired two buildings adjacent to our Campus Pointe by Alexandria campus aggregating 269,048 RSF, comprising 109,164 RSF at 10260 Campus Point Drive and 159,884 RSF at 4161 Campus Point Court which are 100% leased through 2022. At lease expiration, 10260 Campus Point Drive will be redeveloped and expanded into a 176,455 RSF Class A building, which is pre-leased 100% for 15 years with the target delivery in 2021. 4161 Campus Point Court will support future development aggregating 201,900 RSF through one or more Class A buildings at our Campus Pointe by Alexandria campus.
(3)
Total purchase price of $80.0 million was paid in two installments, $15.0 million in December 2018 and $65.0 million in January 2019.


Property
 
Submarket/Market
 
Date of Purchase
 
Number of Properties
 
Operating
Occupancy
 
Square Footage
 
Unlevered Yields
 
Purchase Price
 
 
 
 
Operating With Future Development/ Redevelopment
 
Operating
 
Initial Stabilized
 
Initial Stabilized (Cash)
 
 
 
 
 
 
 
2019 Acquisitions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3170 Porter Drive
 
Greater Stanford/
San Francisco
 
1/10/19
 
1
 
100%
 
—

 
98,626

 
7.5
%
 
 
5.1
%
 
 
$
100,250

 
Shoreway Science Center
 
Greater Stanford/
San Francisco
 
1/10/19
 
2
 
100%
 
—

 
82,462

 
7.2
%
 
 
5.5
%
 
 
 
73,200

 
10260 Campus Point Drive and 4161 Campus Point Court
 
University Town Center/San Diego
 
N/A
 
N/A
 
N/A
 
N/A

 
N/A

 
(1 
) 
 
 
(1 
) 
 
 
 
65,000

(2) 
3911 and 3931 Sorrento Valley Boulevard
 
Sorrento Mesa/San Diego
 
1/9/19
 
2
 
100%
 
53,220

 
—

 
7.2
%
 
 
6.6
%
 
 
 
23,060

 
Remaining targeted acquisitions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
368,490

 
2019 guidance midpoint
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
630,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
We expect to provide total estimated costs and related yields in the future upon the commencement of development and redevelopment.
(2)
See footnote 3 above.


 
5

 
 
Dispositions and Sale of Partial Joint Venture Interest
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December 31, 2018
(Dollars in thousands, except per RSF amounts)
 
 



Property
 
Submarket/Market
 
Date of Sale
 
RSF
 
Sales Price
 
Sales Price per RSF
 
Gain
 
4Q18 Disposition:
 
 
 
 
 
 
 
 
 
 
 
 
 
1300 Quince Orchard Boulevard
 
Gaithersburg/Maryland
 
12/13/18
 
54,874
 
$
14,441

(1) 
$
263

 
$
8,704

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 Sale of Partial Joint Venture Interest:
 
 
 
 
 
 
 
 
 
 
 
 
 
75/125 Binney Street (sale of 60% noncontrolling interest)(2)
 
Cambridge/Greater Boston
 
1Q19
 
388,270
 
$
438,000

 
$
1,880

 
(2) 
 
Targeted Dispositions Guidance Midpoint
 
 
 
 
 
 
 
312,000

 
 
 
 
 
2019 guidance midpoint
 
 
 
 
 
 
 
$
750,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
In April 2018, our tenant exercised its option to purchase this Class B property at fair market value. The capitalization rates for this sale were 6.6% and 7.0% (cash basis).
(2)
In February 2019, we executed a purchase and sale agreement to sell a 60% interest in 75/125 Binney Street, a Class A property in our Cambridge submarket, for a sales price of $438 million, or $1,880 per RSF, representing a 4.3% capitalization rate on 4Q18 net operating income (cash basis), annualized. The sale of a 60% ownership interest in this joint venture is expected to be accounted for as an equity transaction, with no gain to be recognized in earnings. Closing is expected to occur in 1Q19. Upon completion of the sale, we expect to retain control over the joint venture. We expect to reinvest the proceeds from this sale into our value-creation pipeline.

 
6

 
 
Guidance
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December 31, 2018
(Dollars in millions, except per share amounts)
 
 
 

The following updated guidance is based on our current view of existing market conditions and assumptions for the year ending December 31, 2019. There can be no assurance that actual amounts will not be materially higher or lower than these expectations. See our discussion of “forward-looking statements” on page 8 of this Earnings Press Release for additional information.
Summary of Key Changes in Guidance
 
Guidance
 
Summary of Key Changes in Key Sources and Uses of Capital Guidance
 
 
Guidance Midpoint
 
 
 
As of 2/4/19
 
As of 11/28/18
 
 
As of 2/4/19
 
As of 11/28/18
 
EPS, FFO per share, and FFO per share, as adjusted
 
See updates below
 
Common equity
 
 
$
525

 
 
 
$
625

 
 
Capitalization of interest
 
$72 to $82
 
$76 to $86
 
Construction
 
 
$
1,300

 
 
 
$
1,400

 
 
Projected Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s Common Stockholders – Diluted
 
 
 
As of 2/4/19
 
As of 11/28/18
 
Earnings per share (“EPS”)(1)
 
$1.95 to $2.15
 
$2.05 to $2.25
 
Depreciation and amortization
 
 
4.85
 
 
 
4.77
 
 
Allocation to unvested restricted stock awards
 
 
(0.03)
 
 
 
(0.03)
 
 
Funds from operations per share(1)
 
$6.77 to $6.97
 
$6.79 to $6.99
 
Loss on early extinguishment of debt in January 2019
 
 
0.06
 
 
 
0.06
 
 
Preferred stock redemption charge in January 2019
 
 
0.02
 
 
 
—
 
 
Funds from operations per share, as adjusted(2)
 
$6.85 to $7.05
 
$6.85 to $7.05
 
Midpoint
 
$6.95
 
$6.95
 
Key Assumptions
 
Low
 
High
 
Occupancy percentage in North America as of December 31, 2019
 
97.7%

 
98.3%

 
 
 
 
 
 
 
Lease renewals and re-leasing of space:
 
 
 
 
 
Rental rate increases
 
25.0%

 
28.0%

 
Rental rate increases (cash basis)
 
11.0%

 
14.0%

 
Same property performance:
 
 
 
 
 
Net operating income increase
 
1.0%

 
3.0%

 
Net operating income increase (cash basis)
 
6.0%

 
8.0%

 
 
 
 
 
 
 
Straight-line rent revenue
 
$
95

 
$
105

(5)
General and administrative expenses
 
$
108

 
$
113

 
Capitalization of interest
 
$
72

 
$
82

 
Interest expense
 
$
172

 
$
182

 
 
 
 
 
 
 
 
 
 
2019 Guidance
 
Key Credit Metrics
 
 
Net debt to Adjusted EBITDA – 4Q19 annualized
 
Less than or equal to 5.3x
 
Net debt and preferred stock to Adjusted EBITDA – 4Q19 annualized
 
Less than or equal to 5.4x
 
Fixed-charge coverage ratio – 4Q19 annualized
 
Greater than 4.0x
 
Value-creation pipeline as a percentage of gross real estate as of
December 31, 2019
 
8% to 12%
 
Key Sources and Uses of Capital
 
Range
 
Midpoint
 
Sources of capital:
 
 
 
 
 
 
 
 
Net cash provided by operating activities after dividends
 
$
170

 
$
210

 
$
190

 
Incremental debt
 
485

 
445

 
 
465

 
Real estate dispositions and partial interest sales:
 
 
 
 
 
 
 
 
Sale of partial interest in core class A property
 
438

 
438

 
 
438

(3) 
Other
 
262

 
362

 
 
312

(3) 
Common equity
 
475

 
575

 
 
525

 
Total sources of capital
 
$
1,830

 
$
2,030

 
$
1,930

 
Uses of capital:
 
 
 
 
 
 
 
 
Construction
 
$
1,250

 
$
1,350

 
$
1,300

 
Acquisitions
 
580

 
680

 
 
630

(4) 
Total uses of capital
 
$
1,830

 
$
2,030

 
$
1,930

 
Incremental debt (included above):
 
 
 
 
 
 
 
 
Issuance of unsecured senior notes payable
 
$
600

 
$
700

 
$
650

 
Repayments of secured notes payable
 
(120
)
 
(130
)
 
 
(125
)
 
$2.2 billion unsecured senior line of credit/other
 
5

 
(125
)
 
 
(60
)
 
Incremental debt
 
$
485

 
$
445

 
$
465

 



(1)
Excludes future unrealized gains or losses after December 31, 2018 that are required to be recognized in earnings from changes in fair value of equity investments.
(2)
Calculated in accordance with standards established by the Advisory Board of Governors of the National Association of Real Estate Investment Trusts (the “Nareit Board of Governors”). See definition of “Funds From Operations and Funds From Operations, As Adjusted, Attributable to Alexandria’s Common Stockholders” in the “Definitions and Reconciliations” section of our Supplemental Information for additional information.
(3)
See “Dispositions and Sale of Partial Joint Venture Interest” in this Earnings Press Release for additional information.
(4)
See “Acquisitions” in this Earnings Press Release for additional information.
(5)
Approximately 45% of straight-line rent revenue represents initial free rent on recently delivered and expected 2019 deliveries of new Class A properties from our development and redevelopment pipeline.


 
7

 
 
 
q418logo1.jpg
Earnings Call Information and About the Company
December 31, 2018
 
 


We will host a conference call on Tuesday, February 5, 2019, 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 fourth quarter and year ended December 31, 2018. To participate in this conference call, dial (833) 366-1125 or (412) 902-6738 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the call for Alexandria Real Estate Equities, Inc. The audio webcast can be accessed at www.are.com in the “For Investors” section. A replay of the call will be available for a limited time from 5:00 p.m. ET/2:00 p.m. PT on Tuesday, February 5, 2019. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 10126730.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the fourth quarter and year ended December 31, 2018, is available in the “For Investors” section of our website at www.are.com or by following this link: http://www.are.com/fs/2018q4.pdf.

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

About the Company

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office real estate investment trust (“REIT”) uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $18.4 billion and an asset base in North America of 33.1 million square feet (“SF”) as of December 31, 2018. The asset base in North America includes 22.4 million RSF of operating properties and 3.9 million RSF of development and redevelopment of new Class A properties currently undergoing construction and pre-construction activities with target delivery dates ranging from 2019 through 2020. Additionally, the asset base in North America includes 6.8 million SF of intermediate-term and future development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science and technology campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science and technology companies through our venture capital arm. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.

***********

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 2019 earnings per share attributable to Alexandria’s common stockholders – diluted, 2019 funds from operations per share attributable to Alexandria’s common stockholders – diluted, net operating income, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “goals,” “believes,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” or “will,” or the negative of those words or similar words. These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. There can be no assurance that actual results will not be materially higher or lower than these expectations. These statements are subject to risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully place into service and lease any properties undergoing development or redevelopment and our existing space held for future development or redevelopment (including new properties acquired for that purpose), our failure to successfully operate or lease acquired properties, decreased rental rates, increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, adverse general and local economic conditions, an unfavorable capital market environment, decreased leasing activity or lease renewals, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission (“SEC”). Accordingly, you are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are made as of the date of this Earnings Press Release, and unless otherwise stated, we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.

Alexandria®, Lighthouse Design® logo, Building the Future of Life-Changing Innovation™, LaunchLabs®, Alexandria Center®, Alexandria Technology Square®, Alexandria Summit®, Alexandria Technology Center®, and Alexandria Innovation Center® are trademarks of Alexandria Real Estate Equities, Inc. All other company names, trademarks, and logos referenced herein are the property of their respective owners.


 
8

 
 
Consolidated Statements of Operations
q418logo1.jpg
December 31, 2018
(In thousands, except per share amounts)
 
 

 
 
Three Months Ended
 
Year Ended
 
 
12/31/18

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

 
 

 
 

 
 

 
 

 
 

 
 

Rental
 
$
260,102

 
$
255,496

 
$
250,635

 
$
244,485

 
$
228,025

 
$
1,010,718

 
$
863,181

Tenant recoveries
 
77,683

 
81,051

 
72,159

 
73,170

 
70,270

 
304,063

 
259,144

Other income
 
2,678

 
5,276

 
2,240

 
2,484

 
496

 
12,678

 
5,772

Total revenues
 
340,463

 
341,823

 
325,034

 
320,139

 
298,791

 
1,327,459


1,128,097

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental operations
 
97,682

 
99,759

 
91,908

 
91,771

 
88,073

 
381,120

 
325,609

General and administrative
 
22,385

 
22,660

 
22,939

 
22,421

 
18,910

 
90,405

 
75,009

Interest
 
40,239

 
42,244

 
38,097

 
36,915

 
36,082

 
157,495

 
128,645

Depreciation and amortization
 
124,990

 
119,600

 
118,852

 
114,219

 
107,714

 
477,661

 
416,783

Impairment of real estate
 
—

 
—

 
6,311

 
—

 
—

 
6,311

 
203

Loss on early extinguishment of debt
 
—

 
1,122

 
—

 
—

 
2,781

 
1,122

 
3,451

Total expenses
 
285,296

 
285,385

 
278,107

 
265,326

 
253,560

 
1,114,114

 
949,700

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in earnings of unconsolidated real estate joint ventures
 
1,029

 
40,718

(1) 
1,090

 
1,144

 
376

 
43,981

 
15,426

Investment (loss) income(2)
 
(83,531
)
(2) 
122,203

 
12,530

 
85,561

 
—

 
136,763

(2) 
—

Gain on sales of real estate – rental properties
 
8,704

 
—

 
—

 
—

 
—

 
8,704

 
270

Gain on sales of real estate – land parcels
 
—

 
—

 
—

 
—

 
—

 
—

 
111

Net (loss) income
 
(18,631
)
 
219,359

 
60,547

 
141,518

 
45,607

 
402,793

 
194,204

Net income attributable to noncontrolling interests
 
(6,053
)
 
(5,723
)
 
(5,817
)
 
(5,888
)
 
(6,219
)
 
(23,481
)
 
(25,111
)
Net (loss) income attributable to Alexandria Real Estate Equities, Inc.’s stockholders
 
(24,684
)
 
213,636

 
54,730

 
135,630

 
39,388

 
379,312

 
169,093

Dividends on preferred stock
 
(1,155
)
 
(1,301
)
 
(1,302
)
 
(1,302
)
 
(1,302
)
 
(5,060
)
 
(7,666
)
Preferred stock redemption charge
 
(4,240
)
 
—

 
—

 
—

 
—

 
(4,240
)
 
(11,279
)
Net income attributable to unvested restricted stock awards
 
(1,661
)
 
(3,395
)
 
(1,412
)
 
(1,941
)
 
(1,255
)
 
(6,029
)
 
(4,753
)
Net (loss) income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders
 
$
(31,740
)
 
$
208,940

 
$
52,016

 
$
132,387

 
$
36,831

 
$
363,983

 
$
145,395

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
(0.30
)
 
$
2.01

 
$
0.51

 
$
1.33

 
$
0.39

 
$
3.53

 
$
1.59

Diluted
 
$
(0.30
)
 
$
1.99

 
$
0.51

 
$
1.32

 
$
0.38

 
$
3.52

 
$
1.58

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
106,033

 
104,179

 
101,881

 
99,855

 
95,138

 
103,010

 
91,546

Diluted
 
106,033

 
105,385

 
102,236

 
100,125

 
95,914

 
103,321

 
92,063

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per share of common stock
 
$
0.97

 
$
0.93

 
$
0.93

 
$
0.90

 
$
0.90

 
$
3.73

 
$
3.45


(1)
Includes $35.7 million related to the gain on sale of our remaining 27.5% ownership interest in the unconsolidated real estate joint venture in 360 Longwood Avenue. See “Joint Venture Financial Information” in our Supplemental Information for additional information.
(2)
See “Investments” in our Supplemental Information for additional information.

 
9

 
 
Consolidated Balance Sheets
q418logo1.jpg
December 31, 2018
(In thousands)
 
 

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

 
 

 
 

 
 

Investments in real estate
 
$
11,913,693

 
$
11,587,312

 
$
11,190,771

 
$
10,671,227

 
$
10,298,019

Investments in unconsolidated real estate joint ventures
 
237,507

 
197,970

 
192,972

 
169,865

 
110,618

Cash and cash equivalents
 
234,181

 
204,181

 
287,029

 
221,645

 
254,381

Restricted cash
 
37,949

 
29,699

 
34,812

 
37,337

 
22,805

Tenant receivables
 
9,798

 
11,041

 
8,704

 
11,258

 
10,262

Deferred rent
 
530,237

 
511,680

 
490,428

 
467,112

 
434,731

Deferred leasing costs
 
239,070

 
238,295

 
232,964

 
226,803

 
221,430

Investments
 
892,264

 
957,356

 
790,753

 
724,310

 
523,254

Other assets
 
370,257

 
368,032

 
333,757

 
291,639

 
228,453

Total assets
 
$
14,464,956

 
$
14,105,566

 
$
13,562,190

 
$
12,821,196

 
$
12,103,953

 
 
 
 
 
 
 
 
 
 
 
Liabilities, Noncontrolling Interests, and Equity
 
 
 
 
 
 
 
 
 
 
Secured notes payable
 
$
630,547

 
$
632,792

 
$
776,260

 
$
775,689

 
$
771,061

Unsecured senior notes payable
 
4,292,293

 
4,290,906

 
4,289,521

 
3,396,912

 
3,395,804

Unsecured senior line of credit
 
208,000

 
413,000

 
—

 
490,000

 
50,000

Unsecured senior bank term loans
 
347,415

 
347,306

 
548,324

 
548,197

 
547,942

Accounts payable, accrued expenses, and tenant security deposits
 
981,707

 
907,094

 
849,274

 
783,986

 
763,832

Dividends payable
 
110,280

 
101,084

 
98,676

 
93,065

 
92,145

Total liabilities
 
6,570,242

 
6,692,182

 
6,562,055

 
6,087,849

 
5,620,784

 
 
 
 
 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
 
10,786

 
10,771

 
10,861

 
10,212

 
11,509

 
 
 
 
 
 
 
 
 
 
 
Alexandria Real Estate Equities, Inc.’s stockholders’ equity:
 
 
 
 
 
 
 
 
 
 
7.00% Series D cumulative convertible preferred stock
 
64,336

 
74,386

 
74,386

 
74,386

 
74,386

Common stock
 
1,110

 
1,058

 
1,033

 
1,007

 
998

Additional paid-in capital
 
7,286,954

 
6,801,150

 
6,387,527

 
6,117,976

 
5,824,258

Accumulated other comprehensive (loss) income
 
(10,435
)
 
(3,811
)
 
(2,485
)
 
1,228

 
50,024

Alexandria Real Estate Equities, Inc.’s stockholders’ equity
 
7,341,965

 
6,872,783

 
6,460,461

 
6,194,597

 
5,949,666

Noncontrolling interests
 
541,963

 
529,830

 
528,813

 
528,538

 
521,994

Total equity
 
7,883,928

 
7,402,613

 
6,989,274

 
6,723,135

 
6,471,660

Total liabilities, noncontrolling interests, and equity
 
$
14,464,956

 
$
14,105,566

 
$
13,562,190

 
$
12,821,196

 
$
12,103,953




 
10

 
 
Funds From Operations and Funds From Operations per Share
q418logo1.jpg
December 31, 2018
(In thousands)
 
 

The following table presents a reconciliation of net (loss) income attributable to Alexandria’s common stockholders, the most directly comparable financial measure presented in accordance with generally accepted accounting principles (“GAAP”), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria’s common stockholders – diluted, and funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted, for the periods below:
 
 
Three Months Ended
 
Year Ended
 
 
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
 
12/31/17
 
12/31/18
 
12/31/17
Net (loss) income attributable to Alexandria’s common stockholders – basic
 
$
(31,740
)
 
$
208,940

 
$
52,016

 
$
132,387

 
$
36,831

 
$
363,983

 
$
145,395

Assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 
—

 
1,301

 
—

 
—

 
—

 
—

 
—

Net (loss) income attributable to Alexandria’s common stockholders – diluted
 
(31,740
)
 
210,241

 
52,016

 
132,387

 
36,831

 
363,983

 
145,395

Depreciation and amortization
 
124,990

 
119,600

 
118,852

 
114,219

 
107,714

 
477,661

 
416,783

Noncontrolling share of depreciation and amortization from consolidated real estate JVs
 
(4,252
)
 
(4,044
)
 
(3,914
)
 
(3,867
)
 
(3,777
)
 
(16,077
)
 
(14,762
)
Our share of depreciation and amortization from unconsolidated real estate JVs
 
719

 
1,011

 
807

 
644

 
432

 
3,181

 
1,551

Gain on sales of real estate – rental properties
 
(8,704
)
 
—

 
—

 
—

 
—

 
(8,704
)
 
(270
)
Our share of gain on sales of real estate from unconsolidated real estate JVs(2)
 
—

 
(35,678
)
 
—

 
—

 
—

 
(35,678
)
 
(14,106
)
Gain on sales of real estate – land parcels
 
—

 
—

 
—

 
—

 
—

 
—

 
(111
)
Impairment of real estate – rental properties
 
—

 
—

 
—

 
—

 
—

 
—

 
203

Assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 
—

 
—

 
—

 
1,302

 
—

 
5,060

 
—

Allocation to unvested restricted stock awards
 
—

 
(1,312
)
 
(1,042
)
 
(1,548
)
 
(734
)
 
(5,961
)
 
(2,920
)
Funds from operations attributable to Alexandria’s common stockholders – diluted(3)
 
81,013

 
289,818

 
166,719

 
243,137

 
140,466

 
783,465

 
531,763

Unrealized losses (gains) on non-real estate investments
 
94,850

 
(117,188
)
 
(5,067
)
 
(72,229
)
 
—

 
(99,634
)
 
—

Realized gains on non-real estate investments
 
(6,428
)
(4) 
—

 
—

 
(8,252
)
 
—

 
(14,680
)
 
—

Impairment of real estate – land parcels
 
—

 
—

 
6,311

 
—

 
—

 
6,311

 
—

Impairment of non-real estate investments
 
5,483

(4) 
—

 
—

 
—

 
3,805

 
5,483

 
8,296

Loss on early extinguishment of debt
 
—

 
1,122

 
—

 
—

 
2,781

 
1,122

 
3,451

Our share of gain on early extinguishment of debt from unconsolidated real estate JVs(2)
 
—

 
(761
)
 
—

 
—

 
—

 
(761
)
 
—

Preferred stock redemption charge
 
4,240

 
—

 
—

 
—

 
—

 
4,240

 
11,279

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

 
(1,301
)
 
—

 
(1,302
)
 
—

 
(5,060
)
 
—

Allocation to unvested restricted stock awards
 
(1,138
)
 
1,889

 
(18
)
 
1,125

 
(94
)
 
1,517

 
(321
)
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
178,020

 
$
173,579

 
$
167,945

 
$
162,479

 
$
146,958

 
$
682,003

 
$
554,468


(1)
See definition of “Weighted-Average Shares of Common Stock Outstanding – Diluted” in the “Definitions and Reconciliations” section of our Supplemental Information for additional information regarding our 7.00% Series D cumulative convertible preferred stock.
(2)
Classified in equity in earnings (losses) of unconsolidated real estate joint ventures in our consolidated statements of operations.
(3)
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”). See definition of “Funds From Operations and Funds From Operations, As Adjusted, Attributable to Alexandria’s Common Stockholders” in the “Definitions and Reconciliations” section of our Supplemental Information for additional information.
(4)
Realized gain of $6.4 million relates to one publicly traded non-real estate investment in a biopharmaceutical entity and impairments of $5.5 million primarily relates to one privately held non-real estate investment. Both line items are classified in investment (loss) income in our consolidated statements of operations. Excluding these gains and impairments, our realized gains on non-real estate investments were $10.4 million for the three months ended December 31, 2018.

 
11

 
 
Funds From Operations and Funds From Operations per Share (continued)
q418logo1.jpg
December 31, 2018
(In thousands, except per share amounts)
 
 


The following table presents a reconciliation of net (loss) income per share attributable to Alexandria’s common stockholders, the most directly comparable financial measure presented in accordance with GAAP, including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations per share attributable to Alexandria’s common stockholders – diluted, and funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted, for the periods below. Per share amounts may not add due to rounding.
 
 
Three Months Ended
 
Year Ended
 
 
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
 
12/31/17
 
12/31/18
 
12/31/17
Net (loss) income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted
 
$
(0.30
)
 
$
1.99

 
$
0.51

 
$
1.32

 
$
0.38

 
$
3.52

 
$
1.58

Depreciation and amortization 
 
1.14

 
1.11

 
1.13

 
1.08

 
1.08

 
4.50

 
4.35

Gain on sale of real estate – rental properties
 
(0.08
)
 
—

 
—

 
—

 
—

 
(0.08
)
 
—

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

 
(0.34
)
 
—

 
—

 
—

 
(0.35
)
 
(0.15
)
Assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 
—

 
—

 
—

 
0.01

 
—

 
—

(2) 
—

Allocation to unvested restricted stock awards
 
—

 
(0.01
)
 
(0.01
)
 
—

 
—

 
(0.06
)
 
—

Funds from operations per share attributable to Alexandria’s common stockholders – diluted(3)
 
0.76

 
2.75

 
1.63

 
2.41

 
1.46

 
7.53


5.78

Unrealized losses (gains) on non-real estate investments
 
0.89

 
(1.11
)
 
(0.05
)
 
(0.70
)
 
—

 
(0.96
)
 
—

Realized gains on non-real estate investments
 
(0.06
)
(4) 
—

 
—

 
(0.08
)
 
—

 
(0.14
)
 
—

Impairment of real estate – land parcels
 
—

 
—

 
0.06

 
—

 
—

 
0.06

 
—

Impairment of non-real estate investments
 
0.05

(4) 
—

 
—

 
—

 
0.04

 
0.05

 
0.09

Loss on early extinguishment of debt
 
—

 
0.01

 
—

 
—

 
0.03

 
0.01

 
0.03

Our share of gain on early extinguishment of debt from unconsolidated real estate JVs
 
—

 
(0.01
)
 
—

 
—

 
—

 
(0.01
)
 
—

Preferred stock redemption charge
 
0.04

 
—

 
—

 
—

 
—

 
0.04

 
0.12

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

 
—

 
—

 
(0.01
)
 
—

 
—

 
—

Allocation to unvested restricted stock awards
 
—

 
0.02

 
—

 
—

 
—

 
0.02

 
—

Funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
1.68

 
$
1.66

 
$
1.64

 
$
1.62

 
$
1.53

 
$
6.60

 
$
6.02

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding(1) for calculations of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share – diluted
 
106,033

 
105,385

 
102,236

 
100,125

 
95,914

 
103,321

 
92,063

Funds from operations – diluted, per share
 
106,244

 
105,385

 
102,236

 
100,866

 
95,914

 
104,048

 
92,063

Funds from operations – diluted, as adjusted, per share
 
106,244

 
104,641

 
102,236

 
100,125

 
95,914

 
103,321

 
92,063


(1)
See footnote 1 on the previous page for additional information.
(2)
The assumed conversion of our 7.00% Series D cumulative convertible preferred stock required the addition of $5.1 million of dividends on preferred stock to the numerator, and the addition of 727 thousand shares to the denominator while calculating funds from operations per share attributable to Alexandria’s common stockholders – diluted. These amounts had approximately no dilutive impact on a per share basis.
(3)
Calculated in accordance with standards established by the Nareit Board of Governors. See definition of “Funds From Operations and Funds From Operations, As Adjusted, Attributable to Alexandria’s Common Stockholders” in the “Definitions and Reconciliations” section of our Supplemental Information for additional information.
(4)
See footnote 4 on the previous page for additional information.




 
12









SUPPLEMENTAL
INFORMATION








 
 
 
q418logo1.jpg
Company Profile
December 31, 2018
 
 

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office REIT uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $18.4 billion and an asset base in North America of 33.1 million SF as of December 31, 2018. The asset base in North America includes 22.4 million RSF of operating properties and 3.9 million RSF of development and redevelopment of new Class A properties currently undergoing construction and pre-construction activities with target delivery dates ranging from 2019 through 2020. Additionally, the asset base in North America includes 6.8 million SF of intermediate-term and future development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science and technology campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science and technology companies through our venture capital arm. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.

Tenant base

Alexandria is known for our high-quality and diverse tenant base, with 52% of our annual rental revenue generated from entities with an investment-grade credit rating or publicly traded large cap tenants. The quality, diversity, breadth, and depth of our significant relationships with our tenants provide Alexandria with high-quality and stable cash flows. Alexandria’s underwriting team and long-term industry relationships positively distinguish us from all other publicly traded REITs and real estate companies.

Executive and senior management team

Alexandria’s executive and senior management team has unique experience and expertise in creating highly dynamic and collaborative campuses in key urban life science and technology cluster locations that inspire innovation. From the development of high-quality, sustainable real estate, to the ongoing cultivation of collaborative environments with unique amenities and events, the Alexandria team has a first-in-class reputation of excellence in our niche. Alexandria’s highly experienced management team also includes regional market directors with leading reputations and longstanding relationships within the life science and technology communities in their respective urban innovation clusters. We believe that our expertise, experience, reputation, and key relationships in the real estate, life science, and technology industries provide Alexandria significant competitive advantages in attracting new business opportunities.
 
Alexandria’s executive and senior management team consists of 37 individuals, averaging 24 years of real estate experience, including 12 years with Alexandria. Our executive management team alone averages 19 years of experience with Alexandria.

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

 
14

 
 
 
q418logo1.jpg
Investor Information
December 31, 2018
 
 

Corporate Headquarters
 
New York Stock Exchange Trading Symbols
 
Information Requests
385 East Colorado Boulevard, Suite 299
 
Common stock: ARE
 
Phone:
(626) 578-0777
Pasadena, California 91101
 
7.00% Series D preferred stock: ARE PRD
 
Email:
 
 
 
 
Web:
www.are.com
 
 
 
 
 
 
Equity Research Coverage
Alexandria is currently covered by the following research analysts. This list may be incomplete and is subject to change as firms initiate or discontinue coverage of our company. Please note that any opinions, estimates, or forecasts regarding our historical or predicted performance made by these analysts are theirs alone and do not represent opinions, estimates, or forecasts of Alexandria or our management. Alexandria does not by our reference or distribution of the information below imply our endorsement of or concurrence with any opinions, estimates, or forecasts of these analysts. Interested persons may obtain copies of analysts’ reports on their own as we do not distribute these reports. Several of these firms may, from time to time, own our stock and/or hold other long or short positions in our stock and may provide compensated services to us.
Bank of America Merrill Lynch
 
Citigroup Global Markets Inc.
 
J.P. Morgan Securities LLC
 
RBC Capital Markets
Jamie Feldman / Jeffrey Spector
 
Michael Bilerman / Emmanuel Korchman
 
Anthony Paolone / Patrice Chen
 
Michael Carroll / Jason Idoine
(646) 855-5808 / (646) 855-1363
 
(212) 816-1383 / (212) 816-1382
 
(212) 622-6682 / (212) 622-1893
 
(440) 715-2649 / (440) 715-2651
 
 
 
 
 
 
 
Barclays Capital Inc.
 
Evercore ISI
 
Mitsubishi UFJ Securities (USA), Inc.
 
Robert W. Baird & Co. Incorporated
Ross Smotrich / Trevor Young
 
Sheila McGrath / Wendy Ma
 
Karin Ford / Ryan Cybart
 
David Rodgers
(212) 526-2306 / (212) 526-3098
 
(212) 497-0882 / (212) 497-0870
 
(212) 405-7249 / (212) 405-6591
 
(216) 737-7341
 
 
 
 
 
 
 
BTIG, LLC
 
Green Street Advisors, Inc.
 
Mizuho Securities USA Inc.
 
UBS Securities LLC
Tom Catherwood / James Sullivan
 
Daniel Ismail / Chris Darling
 
Haendel St. Juste / Zachary Silverberg
 
Frank Lee
(212) 738-6140 / (212) 738-6139
 
(949) 640-8780 / (949) 640-8780
 
(212) 209-9300 / (212) 205-7855
 
(415) 352-5679
 
 
 
 
 
 
 
CFRA
 
JMP Securities – JMP Group, Inc.
 
 
 
 
Kenneth Leon
 
Peter Martin
 
 
 
 
(212) 438-4638
 
(415) 835-8904
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Income Coverage
 
Rating Agencies
J.P. Morgan Securities LLC
 
Wells Fargo & Company
 
Moody’s Investors Service
 
S&P Global Ratings
Mark Streeter / Ian Snyder
 
Thierry Perrein / Kevin McClure
 
(212) 553-0376
 
Fernanda Hernandez / Michael Souers
(212) 834-5086 / (212) 834-3798
 
(704) 410-3262 / (704) 410-3252
 
 
 
(212) 438-1347 / (212) 438-2508
 
 
 
 
 
 
 

 
15

 
 
 
q418logo1.jpg
Sustainability
December 31, 2018
 
 

q418sustainability.jpg

(1)
For the years ended December 31, 2016 and 2017. We expect to disclose data for the year ended December 31, 2018, in 2019.
(2)
Upon completion of 15 projects in process targeting LEED certification.
(3)
Upon completion of three projects in process targeting WELL certification.
(4)
Upon completion of 12 projects in process targeting Fitwel certification.

 
16

 
 
 
q418logo1.jpg
High-Quality, Diverse, and Innovative Tenants
December 31, 2018
 
 



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

Investment-Grade or
Publicly Traded Large Cap Tenants
 
Tenant Mix
 
 
 
 
q418clienttenantmix4s.jpg
 
 
 
 
 
 
 
 
52%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
of ARE’s Total
 
Annual Rental Revenue(1)
 
 
 
 
 
 
 
 
 
 
 
A REIT Industry-Leading Tenant Roster
 
Percentage of ARE’s Annual Rental Revenue(1)






(1)
Represents annual rental revenue in effect as of December 31, 2018.
(2)
Our annual rental revenue from technology tenants consists of:
•
39% from investment-grade credit rated or publicly traded large cap tenants
•
49% from Uber Technologies, Inc., Stripe, Inc., and Pinterest, Inc.
•
12% from all other technology tenants

 
17

 
 
 
q418logo1.jpg
Class A Properties in AAA Locations
December 31, 2018
 
 


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

Class A Properties in
AAA Locations
 
AAA Locations
 
 
 
 
q418realestate4s.jpg
 
 
 
 
 
 
 
 
77%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
of ARE’s
 
Annual Rental Revenue(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of ARE’s Annual Rental Revenue(1)








(1)
Represents annual rental revenue in effect as of December 31, 2018.

 
18

 
 
 
q418logo1.jpg
Occupancy
December 31, 2018
 
 



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

Solid Historical Occupancy(1)
 
Occupancy Across Key Locations
 
 
 
 
q418occupancy4s.jpg
 
 
 
 
 
 
 
 
96%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Over 10 Years
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 








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


 
19

 
 
Financial and Asset Base Highlights
q418logo1.jpg
December 31, 2018
(Dollars in thousands, except per share amounts)
 
 

 
 
Three Months Ended (unless stated otherwise)
 
 
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
 
12/31/17
Selected financial data from consolidated financial statements and related information
 
 
 
 
 
 
 
 
 
 
Operating margin
 
71%

 
71%

 
72%

 
71%

 
71%

Adjusted EBITDA margin
 
69%

 
69%

 
69%

 
69%

 
68%

Adjusted EBITDA – quarter annualized
 
$
968,888

 
$
957,008

 
$
911,284

 
$
914,444

 
$
817,392

Adjusted EBITDA – trailing 12 months
 
$
937,906

 
$
900,032

 
$
854,237

 
$
815,178

 
$
767,508

 
 
 
 
 
 
 
 
 
 
 
Net debt at end of period
 
$
5,237,538

 
$
5,483,132

 
$
5,326,039

 
$
4,979,254

 
$
4,516,672

Net debt to Adjusted EBITDA – quarter annualized
 
5.4x

 
5.7x

 
5.8x

 
5.4x

 
5.5x

Net debt to Adjusted EBITDA – trailing 12 months
 
5.6x

 
6.1x

 
6.2x

 
6.1x

 
5.9x

Net debt and preferred stock to Adjusted EBITDA – quarter annualized
 
5.5x

 
5.8x

 
5.9x

 
5.5x

 
5.6x

Net debt and preferred stock to Adjusted EBITDA – trailing 12 months
 
5.7x

 
6.2x

 
6.3x

 
6.2x

 
6.0x

 
 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio – quarter annualized
 
4.1x

 
4.1x

 
4.3x

 
4.6x

 
4.2x

Fixed-charge coverage ratio – trailing 12 months
 
4.2x

 
4.3x

 
4.3x

 
4.3x

 
4.1x

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

 
88%

 
88%

 
87%

 
86%

 
 
 
 
 
 
 
 
 
 
 
Closing stock price at end of period
 
$
115.24

 
$
125.79

 
$
126.17

 
$
124.89

 
$
130.59

Common shares outstanding (in thousands) at end of period
 
111,012

 
105,804

 
103,346

 
100,696

 
99,784

Total equity capitalization at end of period
 
$
12,879,366

 
$
13,412,222

 
$
13,142,725

 
$
12,682,876

 
$
13,140,843

Total market capitalization at end of period
 
$
18,357,621

 
$
19,096,226

 
$
18,756,830

 
$
17,893,674

 
$
17,905,650

 
 
 
 
 
 
 
 
 
 
 
Dividend per share – quarter/annualized
 
$0.97/$3.88

 
$0.93/$3.72

 
$0.93/$3.72

 
$0.90/$3.60

 
$0.90/$3.60

Dividend payout ratio for the quarter
 
60%

 
57%

 
57%

 
56%

 
61%

Dividend yield – annualized
 
3.4%

 
3.0%

 
2.9%

 
2.9%

 
2.8%

 
 
 
 
 
 
 
 
 
 
 
General and administrative expenses as a percentage of net operating income –
trailing 12 months
 
9.6%

 
9.5%

 
9.4%

 
9.3%

 
9.3%

 
 
 
 
 
 
 
 
 
 
 
Capitalized interest
 
$
19,902

 
$
17,431

 
$
15,527

 
$
13,360

 
$
12,897

Weighted-average interest rate for capitalization of interest during the period
 
4.01%

 
4.06%

 
3.92%

 
3.91%

 
3.89%

 
 
 
 
 
 
 
 
 
 
 
 

 
20

 
 
Financial and Asset Base Highlights (continued)
q418logo1.jpg
December 31, 2018
(Dollars in thousands, except annual rental revenue per occupied RSF amounts)
 
 

 
 
Three Months Ended (unless stated otherwise)
 
 
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
 
12/31/17
Amounts included in funds from operations and non-revenue-enhancing capital expenditures
 
 
 
 
 
 
 
 
 
 
Straight-line rent revenue
 
$
17,923

 
$
20,070

 
$
23,259

 
$
32,631

 
$
33,281

Amortization of acquired below-market leases
 
$
5,350

 
$
5,220

 
$
5,198

 
$
6,170

 
$
4,147

Straight-line rent expense on ground leases
 
$
272

 
$
272

 
$
252

 
$
240

 
$
205

Stock compensation expense
 
$
9,810

 
$
9,986

 
$
7,975

 
$
7,248

 
$
6,961

Amortization of loan fees
 
$
2,401

 
$
2,734

 
$
2,593

 
$
2,543

 
$
2,571

Amortization of debt premiums
 
$
611

 
$
614

 
$
606

 
$
575

 
$
639

Non-revenue-enhancing capital expenditures:
 
 
 
 
 
 
 
 
 
 
Building improvements
 
$
3,256

 
$
3,032

 
$
2,827

 
$
2,625

 
$
2,469

Tenant improvements and leasing commissions
 
$
11,758

 
$
17,748

 
$
10,686

 
$
2,836

 
$
9,578

 
 
 
 
 
 
 
 
 
 
 
Operating statistics and related information (at end of period)
 
 
 
 
 
 
 
 
 
 
Number of properties – North America
 
237

 
235

 
234

 
222

 
213

RSF – North America (including development and redevelopment projects under construction)
 
24,587,438

 
24,196,505

 
24,007,981

 
23,066,089

 
21,981,133

Total square feet – North America
 
33,097,210

 
32,186,813

 
31,976,194

 
30,240,017

 
29,563,221

Annual rental revenue per occupied RSF – North America
 
$
48.42

 
$
48.36

 
$
48.22

 
$
48.09

 
$
48.01

Occupancy of operating properties – North America
 
97.3%

 
97.3%

 
97.1%

 
96.6%

 
96.8%

Occupancy of operating and redevelopment properties – North America
 
95.1%

 
94.6%

 
95.0%

 
94.3%

 
94.7%

Weighted average remaining lease term (in years)
 
8.6

 
8.6

 
8.6

 
8.7

 
8.9

 
 
 
 
 
 
 
 
 
 
 
Total leasing activity – RSF
 
1,558,064

 
696,468

 
985,996

 
1,481,164

 
1,379,699

Lease renewals and re-leasing of space – change in average new rental rates over expiring rates:
 
 
 
 
 
 
 
 
 
 
Rental rate increases
 
17.4%


35.4%

 
24.0%

 
16.3%

 
24.8%

Rental rate increases (cash basis)
 
11.4%

 
16.9%

 
12.8%

 
19.0%

 
10.4%

RSF (included in total leasing activity above)
 
650,540

 
475,863

 
727,265

 
234,548

 
593,622

 
 
 
 
 
 
 
 
 
 
 
Same property – percentage change over comparable quarter from prior year:
 
 
 
 
 
 
 
 
 
 
Net operating income increase
 
3.8%

 
3.4%

 
4.1%

 
4.0%

 
4.5%

Net operating income increase (cash basis)
 
7.6%

 
8.9%

 
6.3%

 
14.6%

 
12.5%

 
 
 
 
 
 
 
 
 
 
 
 



 
21

 
 
 
q418logo1.jpg
Key Operating Metrics
December 31, 2018
 
 

Favorable Lease Structure(1)
 
Same Property Net Operating Income Growth
 
 
 
q418sameprop4sa.jpg
q418sameprop4sb.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
96%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Margins(2)
 
Rental Rate Growth:
Renewed/Re-Leased Space
 
 
 
 
 
 
 
 
 
q418rentalrate4sa.jpg
q418rentalrate4sb.jpg
 
Operating
 
 
 
Adjusted EBITDA
 
 
71%
 
 
 
69%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Percentages calculated based on RSF as of December 31, 2018.
(2)
Represents percentages for the three months ended December 31, 2018.

 
22

 
 
Same Property Performance
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 

Same Property Financial Data
 
4Q18
 
2018
 
Same Property Statistical Data
 
4Q18
 
2018
Percentage change over comparable period from prior year:
 
 
 
 
 
Number of same properties
 
188
 
185
Net operating income increase
 
3.8%
 
3.7%
 
Rentable square feet
 
17,641,401
 
17,221,297
Net operating income increase (cash basis)
 
7.6%
 
9.2%
 
Occupancy – current-period average
 
97.0%
 
96.6%
Operating margin
 
71%
 
71%
 
Occupancy – same-period prior-year average
 
96.3%
 
96.1%
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
 
2018
 
2017
 
$ Change
 
% Change
 
2018
 
2017
 
$ Change
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
$
212,897

 
$
204,729

 
$
8,168

 
4.0
%
 
$
818,706

 
$
788,169

 
$
30,537

 
3.9
%
 
Non-same properties
 
47,205

 
23,296

 
23,909

 
102.6

 
192,012

 
75,012

 
117,000

 
156.0

 
Total rental
 
260,102

 
228,025

 
32,077

 
14.1

 
1,010,718

 
863,181

 
147,537

 
17.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
67,344

 
65,979

 
1,365

 
2.1

 
266,378

 
247,502

 
18,876

 
7.6

 
Non-same properties
 
10,339

 
4,291

 
6,048

 
140.9

 
37,685

 
11,642

 
26,043

 
223.7

 
Total tenant recoveries
 
77,683

 
70,270

 
7,413

 
10.5

 
304,063

 
259,144

 
44,919

 
17.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
115

 
59

 
56

 
94.9

 
314

 
201

 
113

 
56.2

 
Non-same properties
 
2,563

 
437

 
2,126

 
486.5

 
12,364

 
5,571

 
6,793

 
121.9

 
Total other income
 
2,678

 
496

 
2,182

 
439.9

 
12,678

 
5,772

 
6,906

 
119.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
280,356

 
270,767

 
9,589

 
3.5

 
1,085,398

 
1,035,872

 
49,526

 
4.8

 
Non-same properties
 
60,107

 
28,024

 
32,083

 
114.5

 
242,061

 
92,225

 
149,836

 
162.5

 
Total revenues
 
340,463

 
298,791

 
41,672

 
13.9

 
1,327,459

 
1,128,097

 
199,362

 
17.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
80,289

 
77,954

 
2,335

 
3.0

 
314,121

 
292,178

 
21,943

 
7.5

 
Non-same properties
 
17,393

 
10,119

 
7,274

 
71.9

 
66,999

 
33,431

 
33,568

 
100.4

 
Total rental operations
 
97,682

 
88,073

 
9,609

 
10.9

 
381,120

 
325,609

 
55,511

 
17.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
200,067

 
192,813

 
7,254

 
3.8

 
771,277

 
743,694

 
27,583

 
3.7

 
Non-same properties
 
42,714

 
17,905

 
24,809

 
138.6

 
175,062

 
58,794

 
116,268

 
197.8

 
Net operating income
 
$
242,781

 
$
210,718

 
$
32,063

 
15.2
%
 
$
946,339

 
$
802,488

 
$
143,851

 
17.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating income – same properties
 
$
200,067

 
$
192,813

 
$
7,254

 
3.8
%
 
$
771,277

 
$
743,694

 
$
27,583

 
3.7
%
 
Straight-line rent revenue
 
(10,614
)
 
(15,671
)
 
5,057

 
(32.3
)
 
(48,061
)
 
(77,580
)
 
29,519

 
(38.0
)
 
Amortization of acquired below-market leases
 
(3,210
)
 
(3,982
)
 
772

 
(19.4
)
 
(9,548
)
 
(12,842
)
 
3,294

 
(25.7
)
 
Net operating income – same properties
(cash basis)
 
$
186,243

 
$
173,160

 
$
13,083

 
7.6
%
 
$
713,668

 
$
653,272

 
$
60,396

 
9.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

See definition of “Same Property Comparisons” in the “Definitions and Reconciliations” section of our Supplemental Information for a reconciliation of same properties to total properties.


 
23

 
 
Leasing Activity
q418logo1.jpg
December 31, 2018
(Dollars per RSF)
 
 

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

 
 
 
 

 
 
 
 
 
 
 
 
 
Rental rate changes
 
 
17.4%

(2) 
 
 
11.4%

 
 
 
24.1%

 
 
 
14.1%

 
 
 
25.1%

 
 
 
12.7%

 
New rates
 
 

$52.66

 
 
 

$51.35

 
 
 

$55.05

 
 
 

$52.79

 
 
 

$51.05

 
 
 

$47.99

 
Expiring rates
 
 

$44.85

 
 
 

$46.08

 
 
 

$44.35

 
 
 

$46.25

 
 
 

$40.80

 
 
 

$42.60

 
Rentable square footage
 
 
650,540

 
 
 
 
 
 
 
2,088,216

 
 
 
 
 
 
 
2,525,099

 
 
 
 
 
Tenant improvements/leasing commissions
 
 

$17.01

 
 
 
 
 
 
 

$20.61

 
 
 
 
 
 
 

$18.74

 
 
 
 
 
Weighted-average lease term
 
 
6.7 years

 
 
 
 
 
 
 
6.1 years

 
 
 
 
 
 
 
6.2 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Developed/redeveloped/previously vacant space leased
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New rates
 
 

$43.15

 
 
 

$34.45

 
 
 

$58.45

 
 
 

$48.73

 
 
 

$47.56

 
 
 

$42.93

 
Rentable square footage
 
 
907,524

 
 
 
 
 
 
 
2,633,476

 
 
 
 
 
 
 
2,044,083

 
 
 
 
 
Tenant improvements/leasing commissions
 
 

$9.79

 

 
 
 
 
 

$12.57

 
 
 
 
 
 
 

$9.83

 
 
 
 
 
Weighted-average lease term
 
 
8.9 years

 
 
 
 
 
 
 
11.5 years

 
 
 
 
 
 
 
10.1 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leasing activity summary (totals):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New rates
 
 

$47.12

 
 
 

$41.51

 
 
 

$56.94

 
 
 

$50.52

 
 
 

$49.49

 
 
 

$45.72

 
Rentable square footage
 
 
1,558,064

 
 
 
 
 
 
 
4,721,692

(3) 
 
 
 
 
 
 
4,569,182

 
 
 
 
 
Tenant improvements/leasing commissions
 
 

$12.80

 
 
 
 
 
 
 

$16.13

 
 
 
 
 
 
 

$14.75

 
 
 
 
 
Weighted-average lease term
 
 
8.0 years

 
 
 
 
 
 
 
9.1 years

 
 
 
 
 
 
 
7.9 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease expirations:(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expiring rates
 
 

$42.88

 
 
 

$44.46

 
 
 

$42.98

 
 
 

$45.33

 
 
 

$39.99

 
 
 

$41.71

 
Rentable square footage
 
 
738,569

 
 
 
 
 
 
 
2,811,021

 
 
 
 
 
 
 
2,919,259

 
 
 
 
 


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

(1)
Excludes month-to-month leases aggregating 50,548 RSF and 37,006 RSF as of December 31, 2018, and 2017, respectively.
(2)
Includes rental rate increases related to the early re-leasing and re-tenanting of space subject to significantly below-market leases at our Alexandria Center® at One Kendall Square campus in our Cambridge submarket. Excluding amortization of acquired below-market leases on renewed/re-leased space at our Alexandria Center® at One Kendall Square campus, rental rate change for the three months ended December 31, 2018 was 24.1%.
(3)
During the year ended December 31, 2018, we granted tenant concessions/free rent averaging 2.2 months with respect to the 4,721,692 RSF leased. Approximately 58% of the leases executed during the year ended December 31, 2018, did not include concessions for free rent.

 
24

 
 
 
q418logo1.jpg
Contractual Lease Expirations
December 31, 2018
 
 

Year
 
Number of Leases
 
RSF
 
Percentage of
Occupied RSF
 
Annual Rental Revenue
(per RSF)(1)
 
Percentage of Total
Annual Rental Revenue
 
 
2019
(2)
 
 
94

 
 
 
1,232,553

 
 
 
5.7
%
 
 
 
$
43.36

 
 
 
5.2
%
 
 
 
2020
 
 
 
116

 
 
 
1,766,578

 
 
 
8.1
%
 
 
 
$
37.43

 
 
 
6.4
%
 
 
 
2021
 
 
 
92

 
 
 
1,492,897

 
 
 
6.9
%
 
 
 
$
39.47

 
 
 
5.7
%
 
 
 
2022
 
 
 
89

 
 
 
1,733,458

 
 
 
8.0
%
 
 
 
$
42.15

 
 
 
7.1
%
 
 
 
2023
 
 
 
84

 
 
 
2,279,590

 
 
 
10.5
%
 
 
 
$
43.23

 
 
 
9.5
%
 
 
 
2024
 
 
 
59

 
 
 
1,868,399

 
 
 
8.6
%
 
 
 
$
47.69

 
 
 
8.6
%
 
 
 
2025
 
 
 
36

 
 
 
1,500,433

 
 
 
6.9
%
 
 
 
$
47.52

 
 
 
6.9
%
 
 
 
2026
 
 
 
27

 
 
 
933,745

 
 
 
4.3
%
 
 
 
$
42.40

 
 
 
3.8
%
 
 
 
2027
 
 
 
24

 
 
 
1,928,376

 
 
 
8.9
%
 
 
 
$
43.85

 
 
 
8.2
%
 
 
 
2028
 
 
 
25

 
 
 
1,530,627

 
 
 
7.0
%
 
 
 
$
59.94

 
 
 
8.9
%
 
 
Thereafter
 
 
37

 
 
 
5,449,007

 
 
 
25.1
%
 
 
 
$
56.58

 
 
 
29.7
%
 
 

Market
 
2019 Contractual Lease Expirations (in RSF)
 
Annual Rental Revenue
(per RSF)(1)
 
2020 Contractual Lease Expirations (in RSF)

Annual Rental Revenue
(per RSF)(1)
 
Leased
 
Negotiating/
Anticipating
 
Targeted for Redevelopment
 
Remaining
Expiring
Leases(3)
 
Total(2)
 
 
Leased

Negotiating/
Anticipating

Targeted for Redevelopment

Remaining
Expiring Leases
 
Total

 
 
 
 
 
 
 



 

Greater Boston
 
129,890

 
18,507

 
—

 
 
199,689

 
 
348,086

 
$
55.41

 
69,673


—


—

 

444,742

(4) 
 
514,415


$
45.84

San Francisco
 
83,817

 
60,605

 
—

 
 
115,790

 
 
260,212

 
41.80

 
16,759


—


—

 

280,176

 
 
296,935


41.67

New York City
 
—

 
—

 
—

 
 
8,931

 
 
8,931

 
N/A

 
—


—


—

 

46,461


 
46,461


88.91

San Diego
 
114,952

 
—

 
—

 
 
165,969

 

280,921

 
32.32

 
679


—


—

 
 
252,678

 
 
253,357


28.09

Seattle
 
106,003

 
—

 
—

 
 
56,179

 
 
162,182

 
45.82

 
—


—


—

 

143,068


 
143,068


50.53

Maryland
 
14,933

 
14,075

 
—

 
 
46,621

 
 
75,629

 
26.82

 
—


18,468


—

 

267,856


 
286,324


23.17

Research Triangle Park
 
—

 
7,685

 
—

 
 
25,787

 
 
33,472

 
23.25

 
—


—


—

 

119,503


 
119,503


16.48

Canada
 
—

 
—

 
—

 
 
—

 
 
—

 
—

 
54,941

 
—

 
—

 
 
43,976

 
 
98,917

 
28.78

Non-cluster markets
 
3,508

 
11,247

 
—

 
 
48,365

 
 
63,120

 
26.15

 
—


—


—

 

7,598


 
7,598


25.37

Total
 
453,103

 
112,119

 
—

 
 
667,331

 
 
1,232,553

 
$
43.36

 
142,052


18,468


—

 

1,606,058


 
1,766,578


$
37.43

Percentage of expiring leases
 
37
%
 
9
%
 
—
%
 
 
54
%
 
 
100
%
 
 
 
8
%
 
1
%
 
—
%
 
 
91
%

 
100
%


 

(1)
Represents amounts in effect as of December 31, 2018.
(2)
Excludes month-to-month leases aggregating 50,548 RSF as of December 31, 2018.
(3)
Includes 116,556 RSF expiring in June 2019 at 3545 Cray Court in our Torrey Pines submarket, which is under evaluation for options to renovate as a Class A office/laboratory building. Any renovation we may undertake at this property will not be classified as a redevelopment, and as such the property will remain in our same properties. The next largest contractual lease expiration in 2019 is 50,400 RSF, which is under evaluation for renewal.
(4)
Includes 223,007 RSF, or 50%, of 444,742 RSF of remaining expiring leases in 2020 that are located in our Cambridge submarket. The largest contractual remaining expiring lease in 2020 is 36,309 RSF at 215 First Street.

 
25

 
 
Top 20 Tenants
q418logo1.jpg
December 31, 2018
(Dollars in thousands, except average market cap amounts)
 
 

79% of Top 20 Annual Rental Revenue From Investment-Grade
or Publicly Traded Large Cap Tenants(1) 

 
 
Tenant
 
Remaining Lease Term in Years(1)
 
Aggregate
RSF
 
Annual Rental Revenue(1)
 
Percentage of Aggregate Annual Rental Revenue(1)
 
Investment-Grade
Credit Ratings
 
Average Market Cap(2)
(in billions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Moody’s
 
S&P
 
 
1
 
Takeda Pharmaceutical Company Ltd.
 
 
11.0

 
 
 
549,759

 
 
 
$
37,142

 
 
3.6
%
 
Baa2
 
A-
 
$
35.3

 
2
 
Illumina, Inc.
 
 
11.6

 
 
 
891,495

 
 
 
34,830

 
 
3.3

 
—
 
BBB
 
$
42.1

 
3
 
Sanofi
 
 
9.2

 
 
 
494,693

 
 
 
30,324

 
 
2.9

 
A1
 
AA
 
$
105.2

 
4
 
Eli Lilly and Company
 
 
10.9

 
 
 
467,521

 
 
 
29,203

 
 
2.8

 
A2
 
AA-
 
$
101.2

 
5
 
Celgene Corporation(3)
 
 
7.4

 
 
 
614,082

 
 
 
29,201

 
 
2.8

 
Baa2
 
BBB+
 
$
62.2

 
6
 
Novartis AG
 
 
8.1

 
 
 
361,180

 
 
 
27,724

 
 
2.7

 
A1
 
AA-
 
$
213.3

 
7
 
Bristol-Myers Squibb Company(3)
 
 
10.4

 
 
 
378,295

 
 
 
26,746

 
 
2.6

 
A2
 
A+
 
$
94.4

 
8
 
Merck & Co., Inc.
 
 
12.1

 
 
 
454,752

 
 
 
25,439

 
 
2.4

 
A1
 
AA
 
$
171.3

 
9
 
Uber Technologies, Inc.
 
 
73.9

(4) 
 
 
422,980

 
 
 
22,197

 
 
2.1

 
—
 
—
 
$
—

 
10
 
bluebird bio, Inc.
 
 
8.1

 
 
 
262,261

 
 
 
20,100

 
 
1.9

 
—
 
—
 
$
8.3

 
11
 
Moderna Therapeutics, Inc.
 
 
9.9

 
 
 
356,975

 
 
 
19,857

 
 
1.9

 
—
 
—
 
$
5.4

 
12
 
New York University
 
 
12.4

 
 
 
203,666

 
 
 
19,544

 
 
1.9

 
Aa2
 
AA-
 
$
—

 
13
 
Roche
 
 
4.9

 
 
 
366,996

 
 
 
19,524

 
 
1.9

 
Aa3
 
AA
 
$
204.9

 
14
 
Stripe, Inc.
 
 
8.8

 
 
 
295,333

 
 
 
17,736

 
 
1.7

 
—
 
—
 
$
—

 
15
 
Pfizer Inc.
 
 
5.8

 
 
 
416,226

 
 
 
17,410

 
 
1.7

 
A1
 
AA
 
$
230.0

 
16
 
Amgen Inc.
 
 
5.3

 
 
 
407,369

 
 
 
16,838

 
 
1.6

 
Baa1
 
A
 
$
125.9

 
17
 
Massachusetts Institute of Technology
 
 
6.5

 
 
 
256,126

 
 
 
16,729

 
 
1.6

 
Aaa
 
AAA
 
$
—

 
18
 
Facebook, Inc.
 
 
11.4

 
 
 
382,883

 
 
 
16,262

 
 
1.6

 
—
 
—
 
$
495.6

 
19
 
United States Government
 
 
9.2

 
 
 
264,358

 
 
 
15,428

 
 
1.5

 
Aaa
 
AA+
 
$
—

 
20
 
FibroGen, Inc.
 
 
4.9

 
 
 
234,249

 
 
 
14,198

 
 
1.4

 
—
 
—
 
$
4.4

 
 
 
Total/weighted average
 
 
12.3

(4) 
 
 
8,081,199

 
 
 
$
456,432

 
 
43.9
%
 
 
 
 
 
 
 

(1)
Based on aggregate annual rental revenue in effect as of December 31, 2018. See “Definitions and Reconciliations” for our methodology on annual rental revenue for unconsolidated properties for additional information.
(2)
Average daily market capitalization for the 12 months ended December 31, 2018. See “Definitions and Reconciliations” for additional information.
(3)
In January 2019, Bristol-Myers Squibb Company entered into a definitive agreement to acquire Celgene Corporation. The transaction is expected to close in 3Q19, subject to the approval of Bristol-Myers Squibb Company and Celgene Corporation shareholders. Our lease to Bristol-Myers Squibb Company at 1208 Eastlake Avenue East in our Lake Union submarket expired on December 31, 2018, and we have re-leased 78% of the expired 97,366 RSF to a life science pharmaceutical company. Bristol-Myers Squibb Company also currently leases 106,003 RSF at 1201 Eastlake Avenue East in our Lake Union submarket that expires during the first half of 2019 and we have re-leased 100% of this RSF to an investment-grade institutional research center. Subsequent to the close of the transaction, our future remaining annual rental revenue from Bristol-Myers Squibb Company is expected to be approximately 4.7%.
(4)
Represents a ground lease with Uber Technologies, Inc. at 1455 and 1515 Third Street in our Mission Bay/SoMa submarket. Excluding the ground lease, the weighted-average remaining lease term for our top 20 tenants was 9.2 years as of December 31, 2018.

 
26

 
 
Summary of Properties and Occupancy
q418logo1.jpg
December 31, 2018
(Dollars in thousands, except per RSF amounts)
 
 

Summary of properties
Market
 
RSF
 
Number of Properties
 
Annual Rental Revenue
 
 
Operating
 
Development
 
Redevelopment
 
Total
 
% of Total
 
 
Total
 
% of Total
 
Per RSF
 
Greater Boston
 
6,236,036

 
164,000

 
31,858

 
6,431,894

 
26
%
 
55

 
$
383,817

 
37
%
 
$
62.36

 
San Francisco
 
4,818,806

 
1,326,158

 
190,947

 
6,335,911

 
26

 
44

 
241,111

 
23

 
51.71

 
New York City
 
1,114,282

 
—

 
140,098

 
1,254,380

 
5

 
4

 
78,430

 
7

 
71.58

 
San Diego
 
4,776,849

 
—

 
—

 
4,776,849

 
20

 
58

 
172,025

 
16

 
38.05

 
Seattle
 
1,235,055

 
198,000

 
—

 
1,433,055

 
6

 
13

 
60,477

 
6

 
50.13

 
Maryland
 
2,509,994

 
—

 
55,347

 
2,565,341

 
10

 
37

 
67,820

 
6

 
28.04

 
Research Triangle Park
 
1,097,249

 
—

 
121,477

 
1,218,726

 
5

 
16

 
27,830

 
3

 
26.58

 
Canada
 
256,967

 
—

 
—

 
256,967

 
1

 
3

 
7,284

 
1

 
29.77

 
Non-cluster markets
 
314,315

 
—

 
—

 
314,315

 
1

 
7

 
7,158

 
1

 
28.82

 
North America
 
22,359,553

 
1,688,158

 
539,727

 
24,587,438

 
100
%
 
237

 
$
1,045,952

 
100
%
 
$
48.42

 
 
 
 
 
2,227,885
 
 
 
 
 
 
 
 
 
 
 
 
 


Summary of occupancy
 
 
Operating Properties
 
Operating and Redevelopment Properties
Market
 
12/31/18
 
9/30/18
 
12/31/17
 
12/31/18
 
9/30/18
 
12/31/17
Greater Boston
 
98.7
%
 
98.4
%
 
96.6
%
 
98.2
%
 
97.9
%
 
95.7
%
San Francisco
 
100.0

 
100.0

 
99.6

 
96.2

 
95.9

 
99.6

New York City
 
98.3

 
97.2

 
99.8

 
87.3

 
97.2

 
99.8

San Diego
 
94.7

 
94.2

 
94.5

 
94.7

 
90.8

 
90.9

Seattle
 
97.7

 
97.6

 
97.7

 
97.7

 
97.6

 
97.7

Maryland
 
96.8

 
97.2

 
95.2

 
94.7

 
93.3

 
93.2

Research Triangle Park
 
95.4

 
96.6

 
98.1

 
85.9

 
86.3

 
84.0

Subtotal
 
97.6

 
97.5

 
97.0

 
95.3

 
94.7

 
94.9

Canada
 
95.2

 
98.6

 
99.6

 
95.2

 
98.6

 
99.6

Non-cluster markets
 
79.0

 
82.2

 
78.4

 
79.0

 
82.2

 
78.4

North America
 
97.3
%
 
97.3
%
 
96.8
%
 
95.1
%
 
94.6
%
 
94.7
%

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


 
27

 
 
Property Listing
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
Greater Boston
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cambridge/Inner Suburbs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® at Kendall Square
 
2,365,487

 
—

 
—

 
2,365,487

 
10
 
$
162,570

 
98.8
%
 
 
98.8
%
 
 
 
50, 60, 75/125, and 100 Binney Street, 225 Binney Street(1), 161 First Street, 215 First Street, 150 Second Street, 300 Third Street, and 11 Hurley Street
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Square®
 
1,181,635

 
—

 
—

 
1,181,635

 
7
 
88,137

 
99.8

 
 
99.8

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® at One Kendall Square
 
649,705

 
164,000

 
—

 
813,705

 
10
 
49,606

 
95.2

`
 
95.2

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

 
—

 
—

 
234,260

 
2
 
10,647

 
100.0

 
 
100.0

 
 
 
640 Memorial Drive
 
225,504

 
—

 
—

 
225,504

 
1
 
13,771

 
100.0

 
 
100.0

 
 
 
780 and 790 Memorial Drive
 
99,658

 
—

 
—

 
99,658

 
2
 
7,779

 
100.0

 
 
100.0

 
 
 
167 Sidney Street and 99 Erie Street
 
54,549

 
—

 
—

 
54,549

 
2
 
4,014

 
100.0

 
 
100.0

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

 
—

 
—

 
25,309

 
1
 
620

 
100.0

 
 
100.0

 
 
 
Cambridge/Inner Suburbs
 
4,836,107

 
164,000

 
—

 
5,000,107

 
35
 
337,144

 
98.7

 
 
98.7

 
 
Seaport Innovation District
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
99 A Street
 
8,715

 
—

 
—

 
8,715

 
1
 
850

 
100.0

 
 
100.0

 
 
Route 128
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Park at 128
 
343,882

 
—

 
—

 
343,882

 
8
 
10,503

 
95.6

 
 
95.6

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

 
—

 
31,858

 
317,617

 
3
 
12,328

 
100.0

 
 
90.0

 
 
 
100 Tech Drive
 
200,431

 
—

 
—

 
200,431

 
1
 
8,455

 
100.0

 
 
100.0

 
 
 
19 Presidential Way
 
144,892

 
—

 
—

 
144,892

 
1
 
5,134

 
96.8

 
 
96.8

 
 
 
100 Beaver Street
 
82,330

 
—

 
—

 
82,330

 
1
 
3,279

 
100.0

 
 
100.0

 
 
 
285 Bear Hill Road
 
26,270

 
—

 
—

 
26,270

 
1
 
1,167

 
100.0

 
 
100.0

 
 
 
Route 128
 
1,083,564

 
—

 
31,858

 
1,115,422

 
15
 
40,866

 
98.2

 
 
95.4

 
 
Route 495
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
111 and 130 Forbes Boulevard
 
155,846

 
—

 
—

 
155,846

 
2
 
1,543

 
100.0

 
 
100.0

 
 
 
20 Walkup Drive
 
91,045

 
—

 
—

 
91,045

 
1
 
649

 
100.0

 
 
100.0

 
 
 
30 Bearfoot Road
 
60,759

 
—

 
—

 
60,759

 
1
 
2,765

 
100.0

 
 
100.0

 
 
 
Route 495
 
307,650

 
—

 
—

 
307,650

 
4
 
4,957

 
100.0

 
 
100.0

 
 
 
Greater Boston
 
6,236,036

 
164,000

 
31,858

 
6,431,894

 
55
 
$
383,817

 
98.7
%
 
 
98.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) We own a partial interest in this property through a real estate joint venture. See “Joint Venture Financial Information” of this Supplemental Information for additional information.

 
28

 
 
Property Listing (continued)
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mission Bay/SoMa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1655 and 1725 Third Street(1)
 
—

 
593,765

 
—

 
593,765

 
2
 
$
—

 
N/A

 
 
N/A

 
 
 
409 and 499 Illinois Street(1)
 
455,069

 
—

 
—

 
455,069

 
2
 
28,698

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

 
—

 
—

 
422,980

 
2
 
22,197

 
100.0

 
 
100.0

 
 
 
510 Townsend Street
 
295,333

 
—

 
—

 
295,333

 
1
 
17,736

 
100.0

 
 
100.0

 
 
 
88 Bluxome Street
 
232,470

 
—

 
—

 
232,470

 
1
 
3,813

 
100.0

 
 
100.0

 
 
 
455 Mission Bay Boulevard South
 
210,398

 
—

 
—

 
210,398

 
1
 
13,192

 
100.0

 
 
100.0

 
 
 
1500 Owens Street(1)
 
158,267

 
—

 
—

 
158,267

 
1
 
7,681

 
100.0

 
 
100.0

 
 
 
1700 Owens Street
 
157,340

 
—

 
—

 
157,340

 
1
 
11,097

 
99.9

 
 
99.9

 
 
 
505 Brannan Street
 
148,146

 
—

 
—

 
148,146

 
1
 
12,093

 
100.0

 
 
100.0

 
 
 
Mission Bay/SoMa
 
2,080,003

 
593,765

 
—

 
2,673,768

 
12
 
116,507

 
100.0

 
 
100.0

 
 
South San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
213, 249, 259, 269, and 279 East Grand Avenue
 
708,299

 
211,405

 
—

 
919,704

 
5
 
35,751

 
100.0

 
 
100.0

 
 
 
Alexandria Technology Center® – Gateway
 
492,066

 
—

 
142,400

 
634,466

 
7
 
23,251

 
100.0

 
 
77.6

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

 
—

 
—

 
163,035

 
2
 
6,519

 
100.0

 
 
100.0

 
 
 
500 Forbes Boulevard
 
155,685

 
—

 
—

 
155,685

 
1
 
6,619

 
100.0

 
 
100.0

 
 
 
7000 Shoreline Court
 
136,395

 
—

 
—

 
136,395

 
1
 
5,692

 
100.0

 
 
100.0

 
 
 
341 and 343 Oyster Point Boulevard
 
107,960

 
—

 
—

 
107,960

 
2
 
4,479

 
100.0

 
 
100.0

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

 
—

 
—

 
103,857

 
1
 
3,979

 
100.0

 
 
100.0

 
 
 
South San Francisco
 
1,867,297

 
211,405

 
142,400

 
2,221,102

 
19
 
86,290

 
100.0

 
 
92.9

 
 
Greater Stanford
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
Menlo Gateway(1)
 
251,995

 
520,988

 
—

 
772,983

 
3
 
7,153

 
100.0

 
 
100.0

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

 
—

 
48,547

 
197,498

 
4
 
8,297

 
100.0

 
 
75.4

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

 
—

 
—

 
110,000

 
1
 
2,749

 
100.0

 
 
100.0

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

 
—

 
—

 
99,208

 
1
 
4,257

 
100.0

 
 
100.0

 
 
 
3165 Porter Drive
 
91,644

 
—

 
—

 
91,644

 
1
 
3,885

 
100.0

 
 
100.0

 
 
 
1450 Page Mill Road
 
77,634

 
—

 
—

 
77,634

 
1
 
8,009

 
100.0

 
 
100.0

 
 
 
3350 West Bayshore Road
 
60,000

 
—

 
—

 
60,000

 
1
 
2,211

 
100.0

 
 
100.0

 
 
 
2625/2627/2631 Hanover Street
 
32,074

 
—

 
—

 
32,074

 
1
 
1,753

 
100.0

 
 
100.0

 
 
 
Greater Stanford
 
871,506

 
520,988

 
48,547

 
1,441,041

 
13
 
38,314

 
100.0

 
 
94.7

 
 
 
San Francisco
 
4,818,806

 
1,326,158

 
190,947

 
6,335,911

 
44
 
241,111

 
100.0

 
 
96.2

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

 
—

 
—

 
727,674

 
2
 
63,407

 
97.4

 
 
97.4

 
 
 
430 and 450 East 29th Street
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
219 East 42nd Street
 
349,947

 
—

 
—

 
349,947

 
1
 
14,006

 
100.0

 
 
100.0

 
 
 
Alexandria Life Science Factory at Long Island City
 
36,661

 
—

 
140,098

 
176,759

 
1
 
1,017

 
100.0

 
 
20.7

 
 
 
30-02 48th Avenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New York City
 
1,114,282

 
—

 
140,098

 
1,254,380

 
4
 
$
78,430

 
98.3
%
 
 
87.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) We own a partial interest in this property through a real estate joint venture. See “Joint Venture Financial Information” of this Supplemental Information for additional information.

 
29

 
 
Property Listing (continued)
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 

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

 
—

 
—

 
336,461

 
3
 
$
17,173

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

 
—

 
—

 
294,993

 
3
 
13,271

 
89.6

 
 
89.6

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

 
—

 
—

 
236,635

 
3
 
8,834

 
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
 
10,599

 
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
 
3,409

 
100.0

 
 
100.0

 
 
 
Torrey Pines
 
1,280,902

 
—

 
—

 
1,280,902

 
15
 
58,113

 
97.6

 
 
97.6

 
 
University Town Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Campus Pointe by Alexandria
 
1,067,847

 
—

 
—

 
1,067,847

 
5
 
36,539

 
92.6

 
 
92.6

 
 
 
10260 Campus Point Drive, 10290 and 10300 Campus Point Drive(1),
4110  Campus Point Court(1), and 4161 Campus Point Court
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5200 Illumina Way
 
792,687

 
—

 
—

 
792,687

 
6
 
28,901

 
100.0

 
 
100.0

 
 
 
ARE Esplanade
 
241,963

 
—

 
—

 
241,963

 
4
 
10,036

 
100.0

 
 
100.0

 
 
 
4755, 4757, and 4767 Nexus Center Drive and 4796 Executive Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Towne Centre
 
304,046

 
—

 
—

 
304,046

 
4
 
8,249

 
85.9

 
 
85.9

 
 
 
9363, 9373, and 9393 Towne Centre Drive and 9625 Towne Centre Drive(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
University Town Center
 
2,406,543

 
—

 
—

 
2,406,543

 
19
 
83,725

 
94.9

 
 
94.9

 
 
Sorrento Mesa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summers Ridge Science Park
 
316,531

 
—

 
—

 
316,531

 
4
 
10,843

 
100.0

 
 
100.0

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

 
—

 
—

 
138,970

 
2
 
2,364

 
59.2

 
 
59.2

 
 
 
10121 and 10151 Barnes Canyon Road 
 
102,392

 
—

 
—

 
102,392

 
2
 
2,689

 
100.0

 
 
100.0

 
 
 
ARE Portola
 
101,857

 
—

 
—

 
101,857

 
3
 
3,234

 
100.0

 
 
100.0

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

 
—

 
—

 
66,244

 
1
 
2,431

 
100.0

 
 
100.0

 
 
 
5871 Oberlin Drive
 
33,817

 
—

 
—

 
33,817

 
1
 
832

 
86.8

 
 
86.8

 
 
 
Sorrento Mesa
 
759,811

 
—

 
—

 
759,811

 
13
 
22,393

 
92.0

 
 
92.0

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

 
—

 
—

 
121,655

 
6
 
2,262

 
74.6

 
 
74.6

 
 
 
3985, 4025, 4031, and 4045 Sorrento Valley Boulevard
 
98,158

 
—

 
—

 
98,158

 
4
 
2,560

 
88.9

 
 
88.9

 
 
 
Sorrento Valley
 
219,813

 
—

 
—

 
219,813

 
10
 
4,822

 
81.0

 
 
81.0

 
 
I-15 Corridor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13112 Evening Creek Drive
 
109,780

 
—

 
—

 
109,780

 
1
 
2,972

 
100.0

 
 
100.0

 
 
 
San Diego
 
4,776,849

 
—

 
—

 
4,776,849

 
58
 
$
172,025

 
94.7
%
 
 
94.7
%
 
 
(1) We own a partial interest in this property through a real estate joint venture. See “Joint Venture Financial Information” of this Supplemental Information for additional information.

 
30

 
 
Property Listing (continued)
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 

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

 
—

 
—

 
290,111

 
1
 
$
15,068

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

 
—

 
—

 
203,369

 
2
 
10,193

 
100.0

 
 
100.0

 
 
 
188 East Blaine Street(1)
 
—

 
198,000

 
—

 
198,000

 
1
 
—

 
N/A

 
 
N/A

 
 
 
2301 5th Avenue
 
197,135

 
—

 
—

 
197,135

 
1
 
10,015

 
97.4

 
 
97.4

 
 
 
1616 Eastlake Avenue East
 
168,708

 
—

 
—

 
168,708

 
1
 
8,287

 
93.8

 
 
93.8

 
 
 
1551 Eastlake Avenue East
 
117,482

 
—

 
—

 
117,482

 
1
 
4,837

 
100.0

 
 
100.0

 
 
 
199 East Blaine Street
 
115,084

 
—

 
—

 
115,084

 
1
 
6,186

 
100.0

 
 
100.0

 
 
 
219 Terry Avenue North
 
30,705

 
—

 
—

 
30,705

 
1
 
1,837

 
100.0

 
 
100.0

 
 
 
1600 Fairview Avenue East
 
27,991

 
—

 
—

 
27,991

 
1
 
1,245

 
100.0

 
 
100.0

 
 
 
Lake Union
 
1,150,585

 
198,000

 
—

 
1,348,585

 
10
 
57,668

 
98.7

 
 
98.7

 
 
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
 
970

 
63.9

 
 
63.9

 
 
 
Elliott Bay
 
84,470

 
—

 
—

 
84,470

 
3
 
2,809

 
84.3

 
 
84.3

 
 
 
Seattle
 
1,235,055

 
198,000

 
—

 
1,433,055

 
13
 
60,477

 
97.7

 
 
97.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rockville
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9800, 9900, and 9920 Medical Center Drive
 
386,208

 
—

 
—

 
386,208

 
6
 
14,105

 
95.1

 
 
95.1

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

 
—

 
—

 
214,725

 
4
 
7,862

 
100.0

 
 
100.0

 
 
 
1330 Piccard Drive
 
131,511

 
—

 
—

 
131,511

 
1
 
3,562

 
100.0

 
 
100.0

 
 
 
1500 and 1550 East Gude Drive
 
90,489

 
—

 
—

 
90,489

 
2
 
1,681

 
100.0

 
 
100.0

 
 
 
14920 and 15010 Broschart Road
 
86,703

 
—

 
—

 
86,703

 
2
 
2,260

 
100.0

 
 
100.0

 
 
 
1405 Research Boulevard
 
71,669

 
—

 
—

 
71,669

 
1
 
2,334

 
100.0

 
 
100.0

 
 
 
5 Research Place
 
63,852

 
—

 
—

 
63,852

 
1
 
2,734

 
100.0

 
 
100.0

 
 
 
9920 Belward Campus Drive
 
51,181

 
—

 
—

 
51,181

 
1
 
1,568

 
100.0

 
 
100.0

 
 
 
12301 Parklawn Drive
 
49,185

 
—

 
—

 
49,185

 
1
 
1,329

 
100.0

 
 
100.0

 
 
 
5 Research Court
 
49,160

 
—

 
—

 
49,160

 
1
 
—

 
—

 
 
—

 
 
 
Rockville
 
1,194,683

 
—

 
—

 
1,194,683

 
20
 
37,435

 
94.3

 
 
94.3

 
 
Gaithersburg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Gaithersburg I
 
377,585

 
—

 
—

 
377,585

 
4
 
9,411

 
100.0

 
 
100.0

 
 
 
9 West Watkins Mill Road and 910, 930, and 940 Clopper Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Gaithersburg II
 
259,637

 
—

 
55,347

 
314,984

 
6
 
6,894

 
97.7

 
 
80.6

 
 
 
704 Quince Orchard Road(2), 708 Quince Orchard Road, and
19, 20, 21, and 22 Firstfield Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50 and 55 West Watkins Mill Road
 
96,915

 
—

 
—

 
96,915

 
2
 
2,706

 
100.0

 
 
100.0

 
 
 
401 Professional Drive
 
63,154

 
—

 
—

 
63,154

 
1
 
1,602

 
100.0

 
 
100.0

 
 
 
950 Wind River Lane
 
50,000

 
—

 
—

 
50,000

 
1
 
1,004

 
100.0

 
 
100.0

 
 
 
620 Professional Drive
 
27,950

 
—

 
—

 
27,950

 
1
 
1,191

 
100.0

 
 
100.0

 
 
 
Gaithersburg
 
875,241

 
—

 
55,347

 
930,588

 
15
 
$
22,808

 
99.3
%
 
 
93.4
%
 
 
(1) Formerly 1818 Fairview Avenue East.
(2) We own a partial interest in this property through a real estate joint venture. See “Joint Venture Financial Information” of this Supplemental Information for additional information.

 
31

 
 
Property Listing (continued)
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 

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

 
—

 
—

 
191,884

 
1
 
$
2,439

 
96.6
%
 
 
96.6
%
 
 
Northern Virginia
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14225 Newbrook Drive
 
248,186

 
—

 
—

 
248,186

 
1
 
5,138

 
100.0

 
 
100.0

 
 
 
Maryland
 
2,509,994

 
—

 
55,347

 
2,565,341

 
37
 
67,820

 
96.8

 
 
94.7

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

 
—

 
—

 
186,870

 
3
 
3,559

 
92.3

 
 
92.3

 
 
 
100, 800, and 801 Capitola Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® for AgTech – RTP
 
53,523

 
—

 
121,477

 
175,000

 
1
 
1,499

 
100.0

 
 
30.6

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

 
—

 
—

 
158,417

 
1
 
4,682

 
100.0

 
 
100.0

 
 
 
Alexandria Innovation Center® – Research Triangle Park
 
135,677

 
—

 
—

 
135,677

 
3
 
3,566

 
97.8

 
 
97.8

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

 
—

 
—

 
100,000

 
1
 
1,498

 
81.9

 
 
81.9

 
 
 
7 Triangle Drive
 
96,626

 
—

 
—

 
96,626

 
1
 
3,156

 
100.0

 
 
100.0

 
 
 
2525 East NC Highway 54
 
82,996

 
—

 
—

 
82,996

 
1
 
3,680

 
100.0

 
 
100.0

 
 
 
407 Davis Drive
 
81,956

 
—

 
—

 
81,956

 
1
 
1,644

 
100.0

 
 
100.0

 
 
 
601 Keystone Park Drive
 
77,395

 
—

 
—

 
77,395

 
1
 
1,379

 
100.0

 
 
100.0

 
 
 
6040 George Watts Hill Drive
 
61,547

 
—

 
—

 
61,547

 
1
 
2,148

 
100.0

 
 
100.0

 
 
 
5 Triangle Drive
 
32,120

 
—

 
—

 
32,120

 
1
 
479

 
54.2

 
 
54.2

 
 
 
6101 Quadrangle Drive
 
30,122

 
—

 
—

 
30,122

 
1
 
540

 
100.0

 
 
100.0

 
 
 
Research Triangle Park
 
1,097,249

 
—

 
121,477

 
1,218,726

 
16
 
27,830

 
95.4

 
 
85.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Canada
 
256,967

 
—

 
—

 
256,967

 
3
 
7,284

 
95.2

 
 
95.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-cluster markets
 
314,315

 
—

 
—

 
314,315

 
7
 
7,158

 
79.0

 
 
79.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total – North America
 
22,359,553

 
1,688,158

 
539,727

 
24,587,438

 
237
 
$
1,045,952

 
97.3
%
 
 
95.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
32

 
 
 
q418logo1.jpg
Disciplined Management of Ground-Up Developments
December 31, 2018
 
 


q418prelease.jpg
(1)
Represents developments commenced since January 1, 2008, comprising 28 projects aggregating 7.1 million RSF.
(2)
Represents developments commenced and delivered since January 1, 2008, comprising 23 projects aggregating 5.5 million RSF.

 
33

 
 
Investments in Real Estate
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 

 
 
Investments in Real Estate
 
Square Footage
Investments in real estate:
 
 
Operating
 
Construction
 
Pre-
Construction
 
Intermediate-
Term and Future Projects
 
Total
Rental properties:
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
12,588,611

 
22,082,974

 
—

 
—

 
—

 
22,082,974

Unconsolidated(1)
 
N/A

 
276,579

 
—

 
—

 
—

 
276,579

 
 
12,588,611

 
22,359,553

 
—

 
—

 
—

 
22,359,553

 
 
 
 
 
 
 
 
 
 
 
 
 
New Class A development and redevelopment properties:
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
558,675

 
—

 
1,057,785

 
—

 
—

 
1,057,785

Unconsolidated(1)
 
N/A

 
—

 
1,170,100

 
—

 
—

 
1,170,100

2019 deliveries
 
558,675

 
—

 
2,227,885

 
—

 
—

 
2,227,885

 
 
 
 
 
 
 
 
 
 
 
 
 
2020 deliveries
 
317,388

 
—

 
—

 
1,658,777

 
—

 
1,658,777

New Class A development and redevelopment properties undergoing construction and pre-construction
 
876,063

 
—

 
2,227,885

 
1,658,777

 
—

 
3,886,662

 
 
 
 
 
 
 
 
 
 
 
 
 
Intermediate-term and future development and redevelopment projects:
 
 
 
 
 
 
 
 
 
 
 
 
2021-2022 deliveries
 
584,751

 
—

 
—

 
—

 
4,737,389

 
4,737,389

Future
 
98,802

 
—

 
—

 
—

 
3,083,786

 
3,083,786

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

 
—

 
—

 
—

 
(970,180
)
 
(970,180
)
Intermediate-term and future development and redevelopment projects, excluding RSF related to rental properties
 
683,553

 
—

 
—

 
—

 
6,850,995

 
6,850,995

 
 
 
 
 
 
 
 
 
 
 
 
 
Gross investments in real estate
 
14,148,227

 
22,359,553

 
2,227,885

 
1,658,777

 
6,850,995

 
33,097,210

 
 
 
 
24,587,438
 
 
 
 
 
 
Less: accumulated depreciation
 
(2,263,797
)
 
 
 
 
 
 
 
 
 
 
Net investments in real estate – North America
 
11,884,430

 
 
 
 
 
 
 
 
 
 
Net investments in real estate – Asia
 
29,263

 
 
 
 
 
 
 
 
 
 
Investments in real estate
 
$
11,913,693

 
 
 
 
 
 
 
 
 
 
(1)
Our share of the cost basis associated with square footage of our unconsolidated properties is classified in investments in unconsolidated real estate joint ventures in our consolidated balance sheets.
(2)
Represents RSF of buildings currently in operation that will be redeveloped or replaced with new development RSF upon commencement of future construction, as follows:
 
Property/Submarket
 
RSF
 
 
99 A Street/Seaport Innovation District
 
8,715

 
 
219 East 42nd Street/New York City
 
349,947

 
 
88 Bluxome Street/Mission Bay/SoMa
 
232,470

 
 
960 Industrial Road/Greater Stanford
 
110,000

 
 
10260 Campus Point Drive/University Town Center
 
109,164

 
 
4161 Campus Point Court/University Town Center
 
159,884

 
 
 
 
970,180

 

 
34

 
 
New Class A Development and Redevelopment Properties: Deliveries
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 



399 Binney Street
 
213 East Grand Avenue
 
9625 Towne Centre Drive
 
9900 Medical Center Drive
 
5 Laboratory Drive
Greater Boston/Cambridge
 
San Francisco/South San Francisco
 
San Diego/University Town Center
 
Maryland/Rockville
 
Research Triangle Park/RTP
123,403 RSF
 
300,930 RSF
 
163,648 RSF
 
45,039 RSF
 
53,523 RSF
Rubius Therapeutics, Inc.
Relay Therapeutics, Inc.
Celsius Therapeutics, Inc.
 
Merck & Co., Inc.
 
Takeda Pharmaceutical Company Ltd.
 
Lonza Walkersville, Inc.
 
Boragen, Inc.
Elo Life Systems, Inc.
Indigo Ag, Inc.
q418binney399.jpg
 
q418egrand213.jpg
 
q418towne9625.jpg
 
 
q418laboratory5.jpg

Property/Market/Submarket
 
Our Ownership Interest
 
Date Delivered
 
RSF Placed Into Service
 
Operating Property Leased Percentage
 
Total Project
 
Unlevered Yields
 
 
 
 
 
 
Initial Stabilized
 
Initial Stabilized (Cash)
 
 
 
Prior to 10/1/18
 
4Q18
 
1Q19
 
Total
 
 
RSF
 
Investment
 
 
4Q18 deliveries:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated development projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
213 East Grand Avenue/San Francisco/South San Francisco
 
100%
 
12/31/18
 
—

 
300,930

 
 
—

 
300,930

 
100%
 
300,930

 
 
$
256,600

 
 
7.4
%
 
 
 
6.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated redevelopment project
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9625 Towne Centre Drive/San Diego/University Town Center
 
50.1%
 
11/1/18
 
—

 
163,648

 
 
—

 
163,648

 
100%
 
163,648

 
 
$
89,000

 
 
7.3
%
 
 
 
7.3
%
 
9900 Medical Center Drive/Maryland/Rockville
 
100%
 
11/19/18
 
—

 
45,039

 
 
—

 
45,039

 
58%
 
45,039

 
 
$
16,800

 
 
8.6
%
 
 
 
8.4
%
 
5 Laboratory Drive/Research Triangle Park/RTP
 
100%
 
Various
 
45,143

 
8,380

 
 
—

 
53,523

 
100%
 
175,000

 
 
$
62,500

 
 
7.7
%
 
 
 
7.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated joint venture redevelopment project
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
704 Quince Orchard Road/Maryland/Gaithersburg
 
56.8%
 
12/31/18
 
—

 
4,762

 
 
—

 
4,762

 
100%
 
79,931

 
 
$
13,300

 
 
8.9
%
 
 
 
8.8
%
 
 
 
 
 
 
 
45,143

 
522,759

 
 
—

 
567,902

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
January 2019 delivery:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated development projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
399 Binney Street/Greater Boston/Cambridge
 
100%
 
1/25/19
 
—

 
—

 
 
123,403

 
123,403

 
100%
 
164,000

 
 
$
174,000

 
 
7.3
%
 
 
 
6.7
%
 
Total
 
 
 
 
 
45,143

 
522,759

 
 
123,403

 
691,305

 
 
 
 
 
 
 
 
 
7.5
%
 
 
 
6.9
%
 




 
35

 
New Class A Development and Redevelopment Properties: 2019 Deliveries
q418logo1.jpg
 
 
December 31, 2018
 
 
 


399 Binney Street
 
266 and 275 Second Avenue
 
1655 and 1725 Third Street
Greater Boston/Cambridge
 
Greater Boston/Route 128
 
San Francisco/Mission Bay/SoMa
164,000 RSF
 
31,858 RSF
 
593,765 RSF
Rubius Therapeutics, Inc.
Relay Therapeutics, Inc.
Celsius Therapeutics, Inc.
 
Blossom Innovations, LLC
Multi-Tenant/Marketing
 
Uber Technologies, Inc.
q418binney399.jpg
 
q418secondave.jpg
 
q418gsw.jpg

279 East Grand Avenue
 
681 Gateway Boulevard
 
Menlo Gateway
San Francisco/South San Francisco
 
San Francisco/South San Francisco
 
San Francisco/Greater Stanford
211,405 RSF
 
142,400 RSF
 
520,988 RSF
Verily Life Sciences, LLC
insitro, Inc.
 
Eli Lilly and Company
Twist Bioscience Corporation
Multi-Tenant/Marketing
 
Facebook, Inc.
q418grand279.jpg
 
q418gateway681.jpg
 
q418menlogateway.jpg

 
36

 
New Class A Development and Redevelopment Properties: 2019 Deliveries
q418logo1.jpg
 
 
December 31, 2018
 
 
 


Alexandria PARC
 
Alexandria Life Science Factory at
Long Island City
 
188 East Blaine Street
San Francisco/Greater Stanford
 
New York City/New York City
 
Seattle/Lake Union
48,547 RSF
 
140,098 RSF
 
198,000 RSF
Adaptive Insights, Inc.
 
Multi-Tenant/Marketing
 
bluebird bio, Inc.
Seattle Cancer Care Alliance
Sana Biotechnology, Inc.
Multi-Tenant/Marketing
 
q418bindery.jpg
 
q418eastblaine188.jpg

704 Quince Orchard Road
 
5 Laboratory Drive
Maryland/Gaithersburg
 
Research Triangle Park/RTP
55,347 RSF
 
121,477 RSF
Multi-Tenant/Marketing
 
Arysta LifeScience Inc.
StrideBio, Inc.
GreenLight Biosciences, Inc.
q418quince.jpg
 
q418laboratory5.jpg

 
37

New Class A Development and Redevelopment Properties: 2019 Deliveries (continued)
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 

Property/Market/Submarket
 
Dev/Redev
 
RSF
 
Percentage
 
Project Start
 
Occupancy(1)
 
 
In Service
 
Construction
 
Total
 
Leased
 
Leased/Negotiating
 
 
Initial
 
Stabilized
Consolidated projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266 and 275 Second Avenue/Greater Boston/Route 128
 
Redev
 
171,899

 
31,858

 
203,757

 
90
%
 
 
90
%
 
 
3Q17
 
1Q18
 
2019
5 Laboratory Drive/Research Triangle Park/RTP
 
Redev
 
53,523

 
121,477

 
175,000

 
93

 
 
100

 
 
2Q17
 
2Q18
 
2019
399 Binney Street/Greater Boston/Cambridge
 
Dev
 
—

 
164,000

(2) 
164,000

 
98

 
 
98

 
 
4Q17
 
1Q19
 
2019
279 East Grand Avenue/San Francisco/South San Francisco
 
Dev
 
—

 
211,405

 
211,405

 
100

 
 
100

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

 
48,547

 
197,498

 
100

 
 
100

 
 
1Q18
 
2Q19
 
2Q19
188 East Blaine Street/Seattle/Lake Union
 
Dev
 
—

 
198,000

 
198,000

 
49

 
 
68

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

 
142,400

 
142,400

 
89

 
 
97

 
 
3Q18
 
2Q19
 
2020
Alexandria Life Science Factory at Long Island City/New York City/New York City
 
Redev
 
36,661

 
140,098

 
176,759

 
21

 
 
21

 
 
4Q18
 
4Q19
 
2020
 
 
 
 
411,034

 
1,057,785

 
1,468,819

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated joint venture projects(4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(amounts represent 100%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
704 Quince Orchard Road/Maryland/Gaithersburg
 
Redev
 
24,584

 
55,347

 
79,931

 
44

 
 
48

 
 
1Q18
 
4Q18
 
2020
Menlo Gateway/San Francisco/Greater Stanford
 
Dev
 
251,995

 
520,988

 
772,983

 
100

 
 
100

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

 
593,765

 
593,765

 
100

 
 
100

 
 
1Q18
 
4Q19
 
4Q19
 
 
 
 
276,579

 
1,170,100

 
1,446,679

 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries
 
 
 
687,613

 
2,227,885

 
2,915,498

 
88
%
 
 
91
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our Ownership Interest
 
 
 
 
 
Cost to Complete
 
 
 
 
Unlevered Yields
Property/Market/Submarket
 
 
In Service
 
CIP
 
Construction Loan
 
ARE
Funding
 
Total at
Completion
 
Initial Stabilized
 
Initial Stabilized (Cash)
 
 
 
 
 
 
 
 
Consolidated projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266 and 275 Second Avenue/Greater Boston/Route 128
 
100
%
 
 
$
72,991

 
$
10,568

 
 
$
—

 
 
$
5,441

 
 
$
89,000

 
 
8.4
%
 
 
 
7.1
%
 
5 Laboratory Drive/Research Triangle Park/RTP
 
100
%
 
 
17,155

 
37,151

 
 
—

 
 
8,194

 
 
62,500

 
 
7.7

 
 
 
7.6

 
399 Binney Street/Greater Boston/Cambridge
 
100
%
 
 
—

 
160,705

 
 
—

 
 
13,295

 
 
174,000

 
 
7.3

 
 
 
6.7

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

 
98,277

 
 
—

 
 
52,723

 
 
151,000

 
 
7.8

 
 
 
8.1

 
Alexandria PARC/San Francisco/Greater Stanford
 
100
%
 
 
95,545

 
36,764

 
 
—

 
 
17,691

 
 
150,000

 
 
7.3

 
 
 
6.1

 
188 East Blaine Street/Seattle/Lake Union
 
100
%
 
 
—

 
97,855

 
 
—

 
 
92,145

 
 
190,000

 
 
6.7

 
 
 
6.7

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

 
55,812

 
 
—

 
 
52,188

 
 
108,000

 
 
8.5

 
 
 
7.9

 
Alexandria Life Science Factory at Long Island City/New York City/New York City
 
100
%
 
 
16,986

 
61,543

 
 
—

 
 
105,771

 
 
184,300

 
 
5.5

 
 
 
5.6

 
 
 
 
 
 
202,677

 
558,675

 
 
—

 
 
347,448

 
 
1,108,800

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated joint venture projects(4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(amounts represent our share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
704 Quince Orchard Road/Maryland/Gaithersburg
 
56.8
%
 
 
1,827

 
5,800

 
 
4,809

 
 
864

 
 
13,300

 
 
8.9

 
 
 
8.8

 
Menlo Gateway/San Francisco/Greater Stanford
 
38.5
%
 
 
100,196

 
138,452

 
 
92,205

 
 
99,147

 
 
430,000

 
 
6.9

 
 
 
6.3

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

 
55,542

 
 
20,097

 
 
2,361

 
 
78,000

 
 
7.8

 
 
 
6.0

 
 
 
 
 
 
102,023

 
199,794

 
 
117,111

 
 
102,372

 
 
521,300

 
 
 
 
 
 
 
 
2019 deliveries
 
 
 
 
$
304,700

 
$
758,469

 
 
$
117,111

 
 
$
449,820

 
 
$
1,630,100

 
 
7.2
%
 
 
 
6.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Initial occupancy dates are subject to leasing and/or market conditions. Stabilized occupancy may vary depending on single tenancy versus multi-tenancy.
(2)
We delivered 123,403 RSF during January 2019 to three life science entities.
(3)
Conversion of single-tenant office space to multi-tenant office/laboratory space through redevelopment.
(4)
See “Joint Venture Financial Information” in this Supplemental Information for additional information.

 
38

 
New Class A Development and Redevelopment Properties: Projected 2020 Deliveries
q418logo1.jpg
 
 
December 31, 2018
 
 
 


201 Haskins Way
 
825 and 835 Industrial Road
 
ARE Spectrum
 
Campus Pointe by Alexandria
San Francisco/South San Francisco
 
San Francisco/Greater Stanford
 
San Diego/Torrey Pines
 
San Diego/University Town Center
280,000 RSF
 
530,000 RSF
 
87,000 RSF
 
98,000 RSF
q418haskinsway.jpg
 
q418industrialroad.jpg
 
q418spectrum.jpg
 
q418campus9880.jpg

1165 Eastlake Avenue East
 
9800 Medical Center Drive
 
9950 Medical Center Drive
 
6 Davis Drive
 
9 Laboratory Drive
Seattle/Lake Union
 
Maryland/Rockville
 
Maryland/Rockville
 
Research Triangle Park/RTP
 
Research Triangle Park/RTP
106,000 RSF
 
174,640 RSF
 
83,137 RSF
 
200,000 RSF
 
100,000 RSF
 
 
 
 









 
39

 
New Class A Development and Redevelopment Properties: Projected 2020 Deliveries (continued)
q418logo1.jpg
 
 
December 31, 2018
 
 
 



Property/Market/Submarket
 
Dev/Redev
 
RSF
 
 
 
In Service
 
CIP
 
Total
 
2020 deliveries: consolidated projects
 
 
 
 
 
 
 
 
 
201 Haskins Way/San Francisco/South San Francisco
 
Dev
 
—

 
280,000

 
280,000
 
825 and 835 Industrial Road/Greater Stanford/San Francisco
 
Dev
 
—

 
530,000

 
530,000
 
ARE Spectrum/San Diego/Torrey Pines
 
Dev
 
336,461

 
87,000

 
423,461
 
Campus Pointe by Alexandria/San Diego/University Town Center
 
Dev
 
1,067,847

 
98,000

 
1,165,847
 
1165 Eastlake Avenue East/Lake Union/Seattle
 
Dev
 
—

 
106,000

 
106,000
 
9800 Medical Center Drive/Maryland/Rockville
 
Dev
 
—

 
174,640

 
174,640
 
9950 Medical Center Drive/Maryland/Rockville
 
Dev
 
—

 
83,137

 
83,137
 
6 Davis Drive/Research Triangle Park/RTP
 
Dev
 
—

 
200,000

 
200,000
 
9 Laboratory Drive/Research Triangle Park/RTP
 
Dev
 
—

 
100,000

 
100,000
 
2020 deliveries
 
 
 
1,404,308

 
1,658,777

 
3,063,085
 
 
 
 
 
 
 
 
 
 
 



 
40

 
 
New Class A Development and Redevelopment Properties: Summary of Pipeline
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 



Property/Submarket
 
Our Ownership Interest
 
Book Value
 
Square Footage
 
 
 
 
Projected Deliveries
 
Future
 
 
 
 
 
 
2019
 
2020
 
2021–2022
 
 
Total
 
Greater Boston
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction or pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
399 Binney Street (Alexandria Center® at One Kendall Square)/Cambridge
 
100
%
 
 
 
$
160,705

 
 
164,000

 
—

 
—

 
 
—

 
 
164,000

 
266 and 275 Second Avenue/Route 128
 
100
%
 
 
 
10,568

 
 
31,858

 
—

 
—

 
 
—

 
 
31,858

 
325 Binney Street/Cambridge
 
100
%
 
 
 
99,977

 
 
—

 
—

 
208,965

(1) 
 
—

 
 
208,965

 
99 A Street/Seaport Innovation District
 
97.4
%
 
 
 
35,747

 
 
—

 
—

 
235,000

(2) 
 
—

 
 
235,000

 
215 Presidential Way/Route 128
 
100
%
 
 
 
5,373

 
 
—

 
—

 
130,000

 
 
—

 
 
130,000

 
231 Second Avenue/Route 128
 
100
%
 
 
 
1,251

 
 
—

 
—

 
32,000

 
 
—

 
 
32,000

 
Future development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Alexandria Technology Square®/Cambridge
 
100
%
 
 
 
7,787

 
 
—

 
—

 
—

 
 
100,000

 
 
100,000

 
100 Tech Drive/Route 128
 
100
%
 
 
 
—

 
 
—

 
—

 
—

 
 
300,000

 
 
300,000

 
Other value-creation projects
 
100
%
 
 
 
7,280

 
 
—

 
—

 
—

 
 
225,599

 
 
225,599

 
 
 
 
 
 
 
328,688

 
 
195,858

 
—

 
605,965

 
 
625,599

 
 
1,427,422

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

(3) 
 
593,765

 
—

 
—

 
 
—

 
 
593,765

 
279 East Grand Avenue/South San Francisco
 
100
%
 
 
 
98,277

 
 
211,405

 
—

 
—

 
 
—

 
 
211,405

 
681 Gateway Boulevard/South San Francisco
 
100
%
 
 
 
55,812

 
 
142,400

 
—

 
—

 
 
—

 
 
142,400

 
Menlo Gateway/Greater Stanford
 
38.5
%
 
 
 
—

(3) 
 
520,988

 
—

 
—

 
 
—

 
 
520,988

 
Alexandria PARC/Greater Stanford
 
100
%
 
 
 
36,764

 
 
48,547

 
—

 
—

 
 
—

 
 
48,547

 
201 Haskins Way/South San Francisco
 
100
%
 
 
 
51,782

 
 
—

 
280,000

 
—

 
 
—

 
 
280,000

 
825 and 835 Industrial Road/Greater Stanford
 
100
%
 
 
 
137,856

 
 
—

 
530,000

 
—

 
 
—

 
 
530,000

 
88 Bluxome Street/Mission Bay/SoMa
 
100
%
 
 
 
177,530

 
 
—

 
—

 
1,070,925

(2) 
 
—

 
 
1,070,925

 
505 Brannan Street, Phase II/Mission Bay/SoMa
 
99.7
%
 
 
 
16,459

 
 
—

 
—

 
165,000

 
 
—

 
 
165,000

 
960 Industrial Road/Greater Stanford
 
100
%
 
 
 
82,830

 
 
—

 
—

 
533,000

(2)(4) 
 
—

 
 
533,000

 
Future development
 
 
 
 
 


 
 

 
 
 

 
 

 
 

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

 
 
—

 
—

 
—

 
 
90,000

 
 
90,000

 
Other value-creation projects
 
100
%
 
 
 
34,266

 
 
—

 
—

 
418,000

 
 
25,000

 
 
443,000

 
 
 
 
 
 
 
697,564

 
 
1,517,105

 
810,000

 
2,186,925

 
 
115,000

 
 
4,629,030

 
New York City
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction or pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Life Science Factory at Long Island City – New York City/
New York City
 
100
%
 
 
 
61,543

 
 
140,098

 
—

 
—

 
 
—

 
 
140,098

 
Alexandria Center® for Life Science – New York City/New York City
 
100
%
 
 
 
15,194

 
 
—

 
—

 
550,000

 
 
—

 
 
550,000

 
Future redevelopment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
219 East 42nd Street/New York City
 
100
%
 
 
 
—

 
 
—

 
—

 
—

 
 
579,947

(5) 
 
579,947

 
 
 
 
 
 
 
$
76,737

 
 
140,098

 
—

 
550,000

 
 
579,947

 
 
1,270,045

 
(1)    We are seeking additional entitlements to at least double the density on the site from its current 208,965 RSF.
(2)    Represents total square footage upon completion of development of a new Class A property. RSF presented includes RSF of a building currently in operation that will be demolished upon commencement of construction.
(3)    This property is held by an unconsolidated real estate joint venture. See “Joint Venture Financial Information” within this Supplemental Information for additional information on our ownership interest.
(4)    Represents total RSF available for future development in either (i) one phase aggregating 533,000 RSF or (ii) two phases consisting of 423,000 RSF and 110,000 RSF, upon receiving entitlements.
(5)    Includes 349,947 RSF in operation with an opportunity to either convert the existing office space into office/laboratory space through future redevelopment or to expand the building by an additional 230,000 RSF through ground-up development. The building is currently occupied by Pfizer Inc. with a remaining lease term of six years.

 
41

 
 
New Class A Development and Redevelopment Properties: Summary of Pipeline (continued)
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 


Property/Submarket
 
Our Ownership Interest
 
Book Value
 
Square Footage
 
 
 
 
Projected Deliveries
 
Future
 
 
 
 
 
 
2019
 
2020
 
2021–2022
 
 
Total
 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction or pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Spectrum/Torrey Pines
 
100
%
 
 
 
$
29,698

 
 
—

 
87,000

 
—

 
 
—

 
 
87,000

 
Campus Pointe by Alexandria/University Town Center
 
(1
)
 
 
 
82,147

 
 
—

 
98,000

 
406,455

(2) 
 
—

 
 
504,455

 
5200 Illumina Way/University Town Center
 
100
%
 
 
 
11,716

 
 
—

 
—

 
386,044

 
 
—

 
 
386,044

 
Townsgate by Alexandria/Del Mar Heights
 
100
%
 
 
 
17,858

 
 
—

 
—

 
125,000

 
 
—

 
 
125,000

 
Future development
 
 
 
 
 


 
 

 
 
 

 
 

 
 

 
Campus Pointe by Alexandria/University Town Center
 
(1
)
 
 
 
43,389

 
 
—

 
—

 
—

 
 
290,283

(3) 
 
290,283

 
Vista Wateridge/Sorrento Mesa
 
100
%
 
 
 
4,022

 
 
—

 
—

 
—

 
 
163,000

 
 
163,000

 
Other value-creation projects
 
100
%
 
 
 
5,931

 
 
—

 
—

 
—

 
 
222,895

 
 
222,895

 
 
 
 
 
 
 
194,761

 
 
—

 
185,000

 
917,499

 
 
676,178

 
 
1,778,677

 
Seattle
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction or pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
188 East Blaine Street/Lake Union
 
100
%
 
 
 
97,855

 
 
198,000

 
—

 
—

 
 
—

 
 
198,000

 
1165 Eastlake Avenue East/Lake Union
 
100
%
 
 
 
18,010

 
 
—

 
106,000

 
—

 
 
—

 
 
106,000

 
1150 Eastlake Avenue East/Lake Union
 
100
%
 
 
 
23,313

 
 
—

 
—

 
260,000

 
 
—

 
 
260,000

 
701 Dexter Avenue North/Lake Union
 
100
%
 
 
 
37,701

 
 
—

 
—

 
217,000

 
 
—

 
 
217,000

 
 
 
 
 
 
 
176,879

 
 
198,000

 
106,000

 
477,000

 
 
—

 
 
781,000

 
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction or pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
704 Quince Orchard Road/Gaithersburg
 
56.8
%
 
 
 
—

(4) 
 
55,347

 
—

 
—

 
 
—

 
 
55,347

 
9800 Medical Center Drive/Rockville
 
100
%
 
 
 
14,116

 
 
—

 
174,640

 
—

 
 
—

 
 
174,640

 
9950 Medical Center Drive/Rockville
 
100
%
 
 
 
5,375

 
 
—

 
83,137

 
—

 
 
—

 
 
83,137

 
Future development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9800 Medical Center Drive/Rockville
 
100
%
 
 
 
1,214

 
 
—

 
—

 
—

 
 
64,000

 
 
64,000

 
 
 
 
 
 
 
20,705

 
 
55,347

 
257,777

 
—

 

64,000

 
 
377,124

 
Research Triangle Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction or pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 Laboratory Drive/Research Triangle Park
 
100
%
 
 
 
37,151

 
 
121,477

 
—

 
—

 
 
—

 
 
121,477

 
6 Davis Drive/Research Triangle Park
 
100
%
 
 
 
2,306

 
 
—

 
200,000

 
—

 
 
—

 
 
200,000

 
9 Laboratory Drive/Research Triangle Park
 
100
%
 
 
 
1,634

 
 
—

 
100,000

 
—

 
 
—

 
 
100,000

 
Future development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6 Davis Drive/Research Triangle Park
 
100
%
 
 
 
15,317

 
 
—

 
—

 
—

 
 
800,000

 
 
800,000

 
Other value-creation projects
 
100
%
 
 
 
4,149

 
 
—

 
—

 
—

 
 
76,262

 
 
76,262

 
 
 
 
 
 
 
60,557

 
 
121,477

 
300,000

 
—

 
 
876,262

 
 
1,297,739

 
Other value-creation projects
 
100
%
 
 
 
3,725

 
 
—

 
—

 
—

 
 
146,800

 
 
146,800

 
 
 
 
 
 
 
$
1,559,616

 
 
2,227,885

 
1,658,777

 
4,737,389

 
 
3,083,786

 
 
11,707,837

(5) 


(1)
Includes current and future development projects at 9880 Campus Point Drive, 10260 Campus Point Drive, and 4161 Campus Point Court, for which our ownership interest is 100%, and land parcels adjacent to Campus Pointe by Alexandria, for which our ownership interest is 55%.
(2)
Includes RSF of our future redevelopment and expansion opportunities at our newly acquired 10260 Campus Point Drive property. RSF presented includes 109,164 RSF of the building currently in operation that will be redeveloped and expanded into a 176,455 RSF Class A building, which is pre-leased 100% for 15 years with target delivery in 2021.
(3)
Includes RSF of our newly acquired building at 4161 Campus Point Court. Upon expiration of the existing lease, 4161 Campus Point Court will support future development aggregating 201,900 RSF through one or more Class A buildings at our Campus Pointe by Alexandria campus.
(4)
This property is held by an unconsolidated real estate joint venture. See “Joint Venture Financial Information” of this Supplemental Information for additional information on our ownership interest.
(5)
Total RSF includes 970,180 RSF of buildings currently in operation that will be redeveloped or replaced with new development RSF upon commencement of future construction. See footnote 2 in “Investments in Real Estate” within this Supplemental Information for additional information.


 
42

 
 
Construction Spending
q418logo1.jpg
December 31, 2018
(Dollars in thousands, except per RSF amounts)
 
 



 
 
Year Ended
 
Construction Spending
 
December 31, 2018
 
Additions to real estate – consolidated projects
 
$
927,168
 
 
Investments in unconsolidated real estate joint ventures
 
 
116,008
 
 
Contributions from noncontrolling interests
 
 
(28,275
)
 
Construction spending (cash basis)(1)
 
 
1,014,901
 
 
Increase in accrued construction
 
 
81,177
 
 
Construction spending
 
$
1,096,078
 
 



 
 
 
 
 
 
 
 
Year Ending
 
Projected Construction Spending
 
December 31, 2019
 
Development and redevelopment projects
 
$
983,000
 
 
Investments in unconsolidated real estate joint ventures
 
 
102,000
 
 
Contributions from noncontrolling interests (consolidated real estate joint ventures)
 
 
(22,000
)
 
Generic laboratory infrastructure/building improvement projects
 
 
208,000
 
(2) 
Non-revenue-enhancing capital expenditures and tenant improvements
 
 
29,000
 
 
Total projected construction spending
 
 
1,300,000
 
 
Guidance range
 
$
1,250,000
–
$1,350,000
 
 
 
 
 
 
 
 
Non-Revenue-Enhancing Capital Expenditures(3)
 
Year Ended
 
Recent Average
per RSF(4)
 
 
December 31, 2018
 
 
 
Amount
 
Per RSF
 
 
Non-revenue-enhancing capital expenditures
 
$
11,740

 
$
0.54

 
 
$
0.51

 
 
 
 
 
 
 
 
 
 
Tenant improvements and leasing costs:
 
 
 
 
 
 
 
 
Re-tenanted space
 
$
25,244

 
$
25.82

 
 
$
20.81

 
Renewal space
 
17,784

 
16.02

 
 
12.59

 
Total tenant improvements and leasing costs/weighted average
 
$
43,028

 
$
20.61

 
 
$
15.49

 


 


(1)
Includes revenue-enhancing projects and non-revenue-enhancing capital expenditures.
(2)
Includes $45 million to $50 million of projected construction spending related to the replacement of an existing property at 9880 Campus Point Drive, in our University Town Center submarket, with a new Class A office/laboratory property aggregating 98,000 RSF.
(3)
Excludes amounts that are recoverable from tenants, related to revenue-enhancing capital expenditures, or related to properties that have undergone redevelopment.
(4)
Represents the average for a five-year period from 2014 to 2018.

 
43

 
 
Joint Venture Financial Information
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 


Consolidated Real Estate Joint Ventures
(controlled by us through contractual rights or majority voting rights)
 
Unconsolidated Real Estate Joint Ventures
(controlled jointly or by our JV partners through contractual rights or majority voting rights)
Property/Market/Submarket
 
Noncontrolling
Interest Share(1)
 
Property/Market/Submarket
 
Our Ownership Share(2)
225 Binney Street/Greater Boston/Cambridge
 
 
70.0
%
 
 
1655 and 1725 Third Street/San Francisco/Mission Bay/SoMa
 
 
10.0
%
 
409 and 499 Illinois Street/San Francisco/Mission Bay/SoMa
 
 
40.0
%
 
 
Menlo Gateway/San Francisco/Greater Stanford
 
 
38.5
%
(3) 
1500 Owens Street/San Francisco/Mission Bay/SoMa
 
 
49.9
%
 
 
1401/1413 Research Boulevard/Maryland/Rockville
 
 
65.0
%
(4) 
Campus Pointe by Alexandria/San Diego/University Town Center(5)
 
 
45.0
%
 
 
704 Quince Orchard Road/Maryland/Gaithersburg
 
 
56.8
%
(4) 
9625 Towne Centre Drive/San Diego/University Town Center
 
 
49.9
%
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 

 
 
December 31, 2018
 
 
Noncontrolling Interest Share of Consolidated Real Estate JVs
 
Our Share of Unconsolidated
Real Estate JVs
Investments in real estate
$
524,523

 
 
$
322,994

 
Cash and cash equivalents
 
19,532

 
 
 
5,316

 
Restricted cash
 
—

 
 
 
79

 
Other assets
 
34,835

 
 
 
24,663

 
Secured notes payable (see page 49)
 
—

 
 
 
(87,677
)
 
Other liabilities
 
(26,141
)
 
 
 
(27,868
)
 
Redeemable noncontrolling interests
 
(10,786
)
 
 
 
—

 
 
$
541,963

 
 
$
237,507

 
 
 
 
 
 
 
 
 
 
Noncontrolling Interest Share of Consolidated Real Estate JVs
 
Our Share of Unconsolidated Real Estate JVs
 
 
4Q18
 
 
2018
 
 
4Q18
 
 
2018
Total revenues
$
14,556

 
 
$
55,914

 
$
2,380

 
 
$
16,681

Rental operations
 
(4,436
)
 
 
(17,021
)
 
 
(371
)
 
 
(4,821
)
 
 
10,120

 
 
38,893

 
 
2,009

 
 
11,860

General and administrative
 
(36
)
 
 
(208
)
 
 
(56
)
 
 
(127
)
Interest
 
—

 
 
—

 
 
(205
)
 
 
(1,010
)
Depreciation and amortization
 
(4,252
)
 
 
(16,077
)
 
 
(719
)
 
 
(3,181
)
Gain on early extinguishment of debt
 
—

 
 
—

 
 
—

 
 
761

Gain on sales of real estate(6)
 
—

 
 
—

 
 
—

 
 
35,678

 
$
5,832

 
 
$
22,608

 
$
1,029

 
 
$
43,981



(1)
In addition to the consolidated real estate joint ventures listed, various partners hold insignificant noncontrolling interests in four other joint ventures in North America.
(2)
In addition to the unconsolidated real estate joint ventures listed, we hold one other insignificant unconsolidated real estate joint venture in North America.
(3)
As of December 31, 2018, we have an ownership interest in Menlo Gateway of 38.5% and expect our ownership to increase to 49% through future funding of construction costs in 2019.
(4)
Represents our ownership interest; our voting interest is limited to 50%.
(5)
Includes only 10290 and 10300 Campus Point Drive and 4110 Campus Point Court in our University Town Center submarket. Excludes 10260 Campus Point Drive and 4161 Campus Point Court.
(6)
Related to the sale in September 2018 of our remaining 27.5% ownership interest in the unconsolidated real estate joint venture in 360 Longwood Avenue.

 
44

 
 
Investments
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 


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

 
 
December 31, 2018
 
 
Three Months Ended
 
Year Ended
Realized gains
 
$
11,319

(1) 
 
$
37,129

 
Unrealized (losses) gains
 
(94,850
)
 
 
99,634

 
Investment (loss) income
 
$
(83,531
)
 
 
$
136,763

 
 
 
 
 
 
 
 

Investments
 
Cost
 
Adjustments
 
Carrying Amount
 
Fair value:
 
 
 
 
 
 
 
 
 
 
Publicly traded companies
 
$
121,121

 
 
$
62,884

 
 
$
184,005

 
 
Entities that report NAV
 
204,646

 
 
113,159

(2) 
 
317,805

 
 
 
 
 
 
 
 
 
 
 
 
 
Entities that do not report NAV:
 
 
 
 
 
 
 
 
 
 
Entities with observable price changes since 1/1/18
 
39,421

 
 
64,112

 
 
103,533

 
 
Entities without observable price changes
 
286,921

 
 
—

 
 
286,921

 
 
December 31, 2018
 
$
652,109

 
 
$
240,155

(3) 
 
$
892,264

 
 




(1)
Includes realized gain of $6.4 million related to one publicly traded non-real estate investment in a biopharmaceutical entity and impairment of $5.5 million primarily related to one privately held non-real estate investment. Excluding these gains and impairments, our realized gains on non-real estate investments were $10.4 million for the three months ended December 31, 2018.
(2)
Represents adjustments using reported NAV as a practical expedient to estimate fair value of our limited partnership investments.
(3)
Consists of unrealized gains recognized of (i) $50 million on our investments in publicly traded companies prior to our adoption of the new accounting standard, (ii) $91 million on our investments in privately held entities that report NAV upon our adoption of the new accounting standard, and (iii) $99 million related to total equity investments subsequent to our adoption of the new accounting standard.
 
 
Public/Private Mix (Cost)
 
 
 
 
Tenant/Non-Tenant Mix (Cost)
 
 
 
 
 
 
 
307
$2.1M
 
 
Holdings
Average Cost
of Investment
 

 
45

 
 
 
q418logo1.jpg
Key Credit Metrics
December 31, 2018
 
 


Net Debt to Adjusted EBITDA(1)
 
Net Debt and Preferred Stock to Adjusted EBITDA(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-Charge Coverage Ratio(1)
 
Liquidity(2)
 
 
 
 
 
 
$2.4B
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in millions)
 
 
 
Availability under our $2.2 billion unsecured senior line of credit
$
1,992

 
 
Cash, cash equivalents, and restricted cash
272

 
 
Investments in publicly traded companies
184

 
 
 
$
2,448

 
 
 
 
 
 
 
 
 

(1)
Quarter annualized.    
(2)
As of December 31, 2018.

 
46

 
 
 
q418logo1.jpg
Summary of Debt
December 31, 2018
 
 


Debt maturities chart
(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(4)
 
Remaining Term
(in years)
 
 
 
 
 
 
Secured notes payable
$
587,444

 
$
43,103

 
$
630,547

 
11.5
%
 
4.22
%
 
3.1
Unsecured senior notes payable
4,292,293

 
—

 
4,292,293

 
78.4

 
4.15

 
6.4
$2.2 billion unsecured senior line of credit
100,000

 
108,000

 
208,000

 
3.8

 
3.07

 
5.1
Unsecured senior bank term loan
347,415

 
—

 
347,415

 
6.3

 
2.21

 
5.1
Total/weighted average
$
5,327,152

 
$
151,103

 
$
5,478,255

 
100.0
%
 
3.99
%
 
5.9
Percentage of total debt
97
%
 
3
%
 
100
%
 
 
 
 
 
 
 


(1)
Includes our secured construction loan for our property at 50 and 60 Binney Street in our Cambridge submarket with an outstanding balance of $193.1 million as of December 31, 2018. We have the option to extend the stated maturity date to January 28, 2021, subject to certain conditions. We exercised the first right to extend the maturity date to January 28, 2020. We expect to refinance this secured construction loan prior to maturity.
(2)
We generally amend and extend our unsecured senior line of credit every two to three years.
(3)
We expect to seek opportunities to refinance our unsecured senior bank term loan through the bond market prior to maturity. Additionally, we anticipate reducing the outstanding borrowings under our unsecured senior bank term loan over the next several years.
(4)
Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.

 
47

 
 
Summary of Debt (continued)
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 


Debt
 
Stated 
Rate
 
Interest
Rate(1)
 
Maturity
Date(2)
 
Principal Payments Remaining for the Periods Ending December 31,
 
Principal
 
Unamortized (Deferred Financing Cost), (Discount)/Premium
 
Total
 
 
 
 
 
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
 
 
 
Secured notes payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater Boston
 
L+1.50
%
 
 
3.29
%
 
1/28/20
(3) 
 
$
—

 
$
193,103

 
$
—

 
$
—

 
$
—

 
$
—

 
$
193,103

 
$
(57
)
 
$
193,046

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

 
4/1/20
(4) 
 
2,309

 
104,352

 
—

 
—

 
—

 
—

 
106,661

 
(418
)
 
106,243

 
San Diego
 
4.66
%
 
 
4.91

 
1/1/23
 
 
1,686

 
1,762

 
1,852

 
1,942

 
26,259

 
—

 
33,501

 
(263
)
 
33,238

 
Greater Boston
 
3.93
%
 
 
3.19

 
3/10/23
 
 
1,505

 
1,566

 
1,628

 
1,693

 
74,517

 
—

 
80,909

 
2,303

 
83,212

 
Greater Boston
 
4.82
%
 
 
3.40

 
2/6/24
 
 
3,078

 
3,204

 
3,392

 
3,561

 
3,739

 
183,543

 
200,517

 
13,540

 
214,057

 
San Francisco
 
6.50
%
 
 
6.50

 
7/1/36
 
 
23

 
25

 
26

 
28

 
30

 
619

 
751

 
—

 
751

 
Secured debt weighted-average interest rate/subtotal
 
4.94
%
 
 
4.22

 
 
 
 
8,601

 
304,012

 
6,898

 
7,224

 
104,545

 
184,162

 
615,442

 
15,105

 
630,547

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$2.2 billion unsecured senior line of credit
 
L+0.825
%
 
 
3.07

 
1/28/24
 
 
—

 
—

 
—

 
—

 
—

 
208,000

 
208,000

 
—

 
208,000

 
Unsecured senior bank term loan
 
L+0.90
%
 
 
2.21

 
1/28/24
 
 
—

 
—

 
—

 
—

 
—

 
350,000

 
350,000

 
(2,585
)
 
347,415

 
Unsecured senior notes payable
 
2.75
%
 
 
2.96

 
1/15/20
 
 
—

 
400,000

 
—

 
—

 
—

 
—

 
400,000

 
(845
)
 
399,155

 
Unsecured senior notes payable
 
4.60
%
 
 
4.75

 
4/1/22
 
 
—

 
—

 
—

 
550,000

 
—

 
—

 
550,000

 
(2,115
)
 
547,885

 
Unsecured senior notes payable
 
3.90
%
 
 
4.04

 
6/15/23
 
 
—

 
—

 
—

 
—

 
500,000

 
—

 
500,000

 
(2,653
)
 
497,347

 
Unsecured senior notes payable
 
4.00
%
 
 
4.18

 
1/15/24
 
 
—

 
—

 
—

 
—

 
—

 
450,000

 
450,000

 
(3,685
)
 
446,315

 
Unsecured senior notes payable
 
3.45
%
 
 
3.62

 
4/30/25
 
 
—

 
—

 
—

 
—

 
—

 
600,000

 
600,000

 
(5,526
)
 
594,474

 
Unsecured senior notes payable
 
4.30
%
 
 
4.50

 
1/15/26
 
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(3,414
)
 
296,586

 
Unsecured senior notes payable
 
3.95
%
 
 
4.13

 
1/15/27
 
 
—

 
—

 
—

 
—

 
—

 
350,000

 
350,000

 
(4,037
)
 
345,963

 
Unsecured senior notes payable
 
3.95
%
 
 
4.07

 
1/15/28
 
 
—

 
—

 
—

 
—

 
—

 
425,000

 
425,000

 
(3,818
)
 
421,182

 
Unsecured senior notes payable
 
4.50
%
 
 
4.60

 
7/30/29
 
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(2,344
)
 
297,656

 
Unsecured senior notes payable
 
4.70
%
 
 
4.81

 
7/1/30
 
 
—

 
—

 
—

 
—

 
—

 
450,000

 
450,000

 
(4,270
)
 
445,730

 
Unsecured debt weighted average/subtotal
 
 
 
 
3.96

 
 
 
 
—

 
400,000

 
—

 
550,000

 
500,000

 
3,433,000

 
4,883,000

 
(35,292
)
 
4,847,708

 
Weighted-average interest rate/total
 
 
 
 
3.99
%
 
 
 
 
$
8,601

 
$
704,012

 
$
6,898

 
$
557,224

 
$
604,545

 
$
3,617,162

 
$
5,498,442

 
$
(20,187
)
 
$
5,478,255

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balloon payments
 
 
 
 
 
 
 
 
 
$
—

 
$
697,082

 
$
—

 
$
550,000

 
$
600,487

 
$
3,616,237

 
$
5,463,806

 
$
—

 
$
5,463,806

 
Principal amortization
 
 
 
 
 
 
 
 
 
8,601

 
6,930

 
6,898

 
7,224

 
4,058

 
925

 
34,636

 
(20,187
)
 
14,449

 
Total debt
 
 
 
 
 
 
 
 
 
$
8,601

 
$
704,012

 
$
6,898

 
$
557,224

 
$
604,545

 
$
3,617,162

 
$
5,498,442

 
$
(20,187
)
 
$
5,478,255

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-rate/hedged variable-rate debt
 
 
 
 
 
 
 
 
 
$
8,601

 
$
660,909

 
$
6,898

 
$
557,224

 
$
604,545

 
$
3,509,162

 
$
5,347,339

 
$
(20,187
)
 
$
5,327,152

 
Unhedged variable-rate debt
 
 
 
 
 
 
 
 
 
—

 
43,103

 
—

 
—

 
—

 
108,000

 
151,103

 
—

 
151,103

 
Total debt
 
 
 
 
 
 
 
 
 
$
8,601

 
$
704,012

 
$
6,898

 
$
557,224

 
$
604,545

 
$
3,617,162

 
$
5,498,442

 
$
(20,187
)
 
$
5,478,255

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average stated rate on maturing debt
 
 
 
 
 
 
 
 
 
N/A

 
3.86%

 
N/A

 
4.60%

 
3.95%

 
4.00%

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.
(2)
Reflects any extension options that we control.
(3)
See footnote 1 on prior page.
(4)
In January 2019, we repaid this secured note payable and recognized a loss on early extinguishment of debt of $7.1 million, including the write-off of unamortized loan fees.

 
48

 
 
Summary of Debt (continued)
q418logo1.jpg
December 31, 2018
(Dollars in thousands)
 
 


Unconsolidated real estate joint ventures’ debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100% at JV Level
 
Unconsolidated Joint Venture
 
Our Share
 
Maturity Date
 
Stated
Interest Rate
 
Interest Rate(1)
 
Debt Balance(2)
 
Remaining Commitments
 
1401/1413 Research Boulevard
 
 
65.0
%
 
 
5/17/20
 
L+2.50%
 
 
5.87
%
 
 
$
20,181

 
$
7,435

 
1655 and 1725 Third Street
 
 
10.0
%
 
 
6/29/21
 
L+3.70%
 
 
6.05
%
 
 
168,366

 
206,634

 
704 Quince Orchard Road
 
 
56.8
%
 
 
3/16/23
 
L+1.95%
 
 
4.66
%
 
 
4,903

 
9,940

 
Menlo Gateway, Phase II
 
 
38.5
%
(3) 
 
5/1/35
 
4.53%
 
 
N/A

 
 
—

 
157,270

 
Menlo Gateway, Phase I
 
 
38.5
%
(3) 
 
8/10/35
 
4.15%
 
 
4.18
%
 
 
144,338

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
337,788

 
$
381,279

 

(1)
Includes interest expense, amortization of loan fees, and amortization of premiums (discounts) as of December 31, 2018.
(2)
Represents outstanding principal, net of unamortized deferred financing costs and premiums (discounts).
(3)
See “Joint Venture Financial Information” within this Supplemental Information for additional information on our ownership interest.

Debt covenants
 
 
 
 
 
 
 
 
 
Debt Covenant Ratios(1)
 
Unsecured Senior Notes Payable
 
$2.2 Billion Unsecured Senior Line of Credit and
Unsecured Senior Bank Term Loan
 
Requirement
 
December 31, 2018
 
Requirement
 
December 31, 2018
Total Debt to Total Assets
 
≤ 60%
 
34%
 
≤ 60.0%
 
28.1%
 
Secured Debt to Total Assets
 
≤ 40%
 
4%
 
≤ 45.0%
 
3.2%
 
Consolidated EBITDA to Interest Expense
 
≥ 1.5x
 
6.3x
 
≥ 1.50x
 
3.99x
 
Unencumbered Total Asset Value to Unsecured Debt
 
≥ 150%
 
272%
 
N/A
 
N/A
 
Unsecured Interest Coverage Ratio
 
N/A
 
N/A
 
≥ 1.75x
 
6.19x
 

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

Interest rate swap agreements
 
 
 
 
 
 
 
 
 
 
 
 
Effective Date
 
Maturity Date
 
Number of Contracts
 
Weighted-Average Interest Pay Rate(1)
 
Fair Value
as of 12/31/18
 
Notional Amount in Effect as of
 
 
 
 
 
12/31/18
 
12/31/19
March 29, 2018
 
March 31, 2019
 
8
 
1.16%
 
$
1,962

 
 
$
600,000

 
$
—

March 29, 2019
 
March 31, 2020
 
1
 
1.89%
 
 
644


 
—

 
100,000

March 29, 2019
 
March 31, 2020
 
3
 
2.84%
 
 
(768
)
 
 
—

 
250,000

Total
 
 
 
 
 

 
$
1,838

 
 
$
600,000

 
$
350,000


(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 December 31, 2018, as listed under the column heading “Stated Rate” in our summary table of outstanding indebtedness and respective principal payments on the previous page.

 
49

 
 
 
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Definitions and Reconciliations
December 31, 2018
 
 



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

Adjusted EBITDA and Adjusted EBITDA margin
 
The following table reconciles net (loss) income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA:
 
Three Months Ended
(Dollars in thousands)
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
 
12/31/17
 
Net (loss) income
$
(18,631
)
 
$
219,359

 
$
60,547

 
$
141,518

 
$
45,607

 
Interest expense
40,239

 
42,244

 
38,097

 
36,915

 
36,082

 
Income taxes
613

 
568

 
1,106

 
940

 
1,398

 
Depreciation and amortization
124,990

 
119,600

 
118,852

 
114,219

 
107,714

 
Stock compensation expense
9,810

 
9,986

 
7,975

 
7,248

 
6,961

 
Loss on early extinguishment of debt
—

 
1,122

 
—

 
—

 
2,781

 
Our share of gain on early extinguishment of debt from unconsolidated real estate JVs
—

 
(761
)
 
—

 
—

 
—

 
Gain on sale of real estate – rental properties
(8,704
)
 
—

 
—

 
—

 
—

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

 
(35,678
)
 
—

 
—

 
—

 
Realized gains on non-real estate investments
(6,428
)
(1) 
—

 
—

 
—

 
—

 
Unrealized losses (gains) on non-real estate investments
94,850

 
(117,188
)
 
(5,067
)
 
(72,229
)
 
—

 
Impairment of real estate
—

 
—

 
6,311

 
—

 
—

 
Impairment of non-real estate investments
5,483

(1) 
—

 
—

 
—

 
3,805

 
Adjusted EBITDA
$
242,222

 
$
239,252

 
$
227,821

 
$
228,611

 
$
204,348

 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
340,463

 
$
341,823

 
$
325,034

 
$
320,139

 
$
298,791

 
Non-real estate investments – total realized gains
11,319

 
5,015

 
7,463

 
13,332

 
—

 
Realized gains on non-real estate investments
(6,428
)
(1) 
—

 
—

 
—

 
—

 
Impairment of non-real estate investments
5,483

(1) 
—

 
—

 
—

 
3,805

 
Revenues, as adjusted
$
350,837

 
$
346,838

 
$
332,497

 
$
333,471

 
$
302,596

 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA margin
69%

 
69%

 
69%

 
69%

 
68%

 

(1)
Realized gain of $6.4 million relates to one publicly traded non-real estate investment in a biopharmaceutical entity and impairments of $5.5 million primarily relates to one privately held non-real estate investment. Both line items are classified in investment (loss) income in our consolidated statements of operations. Excluding these gains and impairments, our realized gains on non-real estate investments were $10.4 million for the three months ended December 31, 2018.

We use Adjusted EBITDA as a supplemental performance measure of our operations, for financial and operational decision-making, and as a supplemental means of evaluating period-to-period comparisons
 
on a consistent basis. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation, and amortization (“EBITDA”), excluding stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate and land parcels, and impairments of real estate and land parcels. Adjusted EBITDA also excludes unrealized gains or losses, and significant realized gains and impairments, that result from our non-real estate investments. These non-real estate investment amounts are classified in our statement of operations outside of revenues.

We believe Adjusted EBITDA provides investors with relevant and useful information as it allows investors to evaluate the operating performance of our business activities without having to account for differences recognized because of real estate and non-real estate investment and disposition decisions, financing decisions, capital structure, capital market transactions, and variances resulting from the volatility of market conditions outside of our control. For example, we exclude gains or losses on the early extinguishment of debt to allow investors to measure our performance independent of our indebtedness and capital structure. We believe that adjusting for the effects of impairments and gains or losses on sales of real estate, and significant impairments and significant gains on the sale of non-real estate investments allows investors to evaluate performance from period to period on a consistent basis without having to account for differences recognized because of real estate and non-real estate investment and disposition decisions. We believe that excluding charges related to stock compensation and unrealized gains or losses facilitates for investors a comparison of our business activities across periods without the volatility resulting from market forces outside of our control. Adjusted EBITDA has limitations as a measure of our performance. Adjusted EBITDA does not reflect our historical expenditures or future requirements for capital expenditures or contractual commitments. While Adjusted EBITDA is a relevant measure of performance, it does not represent net (loss) 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.

Our calculation of Adjusted EBITDA margin, divides Adjusted EBITDA by our revenues, as adjusted. We believe that revenues, as adjusted provides a denominator for Adjusted EBITDA margin which is calculated on a basis more consistent with that of the Adjusted EBITDA numerator. Specifically, revenues, as adjusted includes the same realized gains on, and impairments of, non-real estate investments that are included in the reconciliation of Adjusted EBITDA. We believe that the consistent application of results from our non-real estate investments to both the numerator and denominator of Adjusted EBITDA margins provide a more useful calculation for the comparison across periods.

Annual rental revenue

Annual rental revenue represents the annualized fixed base rental amount, in effect as of the end of the period, related to our operating RSF. Annual rental revenue is presented using 100% of the annual rental revenue of our consolidated properties and our share of annual rental revenue for our unconsolidated real estate joint ventures. Annual rental revenue per RSF is computed by dividing annual rental revenue by the sum of 100% of the RSF of our consolidated properties and our share of the RSF of properties held in unconsolidated real estate joint ventures. As of December 31, 2018, approximately 97% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Annual rental revenue excludes these operating expenses recovered from our tenants. Amounts recovered from our tenants related to these operating expenses are classified in tenant recoveries in our consolidated statements of operations.


 
50

 
 
 
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Definitions and Reconciliations (continued)
December 31, 2018
 
 


Cash interest

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

Class A properties and AAA locations

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

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

Development, redevelopment, and pre-construction

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

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

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

Dividend payout ratio (common stock)

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

 
Dividend yield

Dividend yield for the quarter represents the annualized quarter dividend divided by the closing common stock price at the end of the quarter.

Fixed-charge coverage ratio

Fixed-charge coverage ratio is a non-GAAP financial measure representing the ratio of Adjusted EBITDA to fixed charges. We believe this ratio is useful to investors as a supplemental measure of our ability to satisfy fixed financing obligations and preferred stock dividends. Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and debt premiums (discounts).

The 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)
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
 
12/31/17
Adjusted EBITDA
$
242,222

 
$
239,252

 
$
227,821

 
$
228,611

 
$
204,348

 
 
 
 
 
 
 
 
 
 
Interest expense
$
40,239

 
$
42,244

 
$
38,097

 
$
36,915

 
$
36,082

Capitalized interest
19,902

 
17,431

 
15,527

 
13,360

 
12,897

Amortization of loan fees
(2,401
)
 
(2,734
)
 
(2,593
)
 
(2,543
)
 
(2,571
)
Amortization of debt premiums
611

 
614

 
606

 
575

 
639

Cash interest
58,351

 
57,555

 
51,637

 
48,307

 
47,047

Dividends on preferred stock
1,155

 
1,301

 
1,302

 
1,302

 
1,302

Fixed charges
$
59,506

 
$
58,856

 
$
52,939

 
$
49,609

 
$
48,349

 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio:
 
 
 
 
 
 
 
 
 
– quarter annualized
4.1x

 
4.1x

 
4.3x

 
4.6x

 
4.2x

– trailing 12 months
4.2x

 
4.3x

 
4.3x

 
4.3x

 
4.1x

 
 
 
 
 
 
 
 
 
 

 
51

 
 
 
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Definitions and Reconciliations (continued)
December 31, 2018
 
 


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

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

We compute funds from operations, as adjusted, as funds from operations calculated in accordance with the Nareit White Paper excluding significant realized gains or losses on the sale of non-real estate investments, unrealized gains or losses on non-real estate investments, gains or losses on early extinguishment of debt, preferred stock redemption charges, impairments of non-depreciable real estate, impairments of non-real estate investments, 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.

In November 2018, Nareit issued a restated white paper to incorporate its April 2002 White Paper and subsequent guidance into a single comprehensive guide. We adopted prospectively Nareit’s restated white paper on January 1, 2019.
 
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 generally expected to increase over time due to contractual annual rent escalations. Our estimates for initial stabilized yields, initial stabilized yields (cash basis), and total costs at completion represent our initial estimates at the commencement of the project. We expect to update this information upon completion of the project, or sooner if there are significant changes to the expected project yields or costs.

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

Investments

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

Key differences between prior accounting standards and the new ASU:

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

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

 
52

 
 
 
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Definitions and Reconciliations (continued)
December 31, 2018
 
 


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

We recognize unrealized gains and losses, and realized gains and losses within investment income in our consolidated statements of operations. Unrealized gains and losses represent changes in fair value for investments in publicly traded companies, changes in NAV, as a practical expedient to estimate fair value, for investments in privately held entities that report NAV, and observable price changes on our investments in privately held entities that do not report NAV. Impairments are realized losses, which result in an adjusted cost, and represent charges to reduce the carrying values of investments in privately held entities that do not report NAV to their estimated fair value. Realized gains and losses represent the difference between proceeds received upon disposition of investments and their historical or adjusted cost.

Investment-grade or publicly traded large cap tenants

Investment-grade or publicly traded large cap tenants represent tenants that are investment-grade rated or publicly traded companies with an average daily market capitalization greater than $10 billion for the 12 months ended December 31, 2018, as reported by Bloomberg Professional Services. In addition, we monitor the credit quality and related material changes of our tenants. Material changes that cause a tenant’s market capitalization to decline below $10 billion, which are not immediately reflected in the 12-month average, may result in their exclusion from this measure.

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

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

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

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

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

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

 
53

 
 
 
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Definitions and Reconciliations (continued)
December 31, 2018
 
 


information should not be considered an alternative to our consolidated financial statements, which are prepared in accordance with GAAP.

Net cash provided by operating activities after dividends

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

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

Net debt to Adjusted EBITDA and net debt and preferred stock to Adjusted EBITDA are non-GAAP financial measures that we believe are useful to investors as supplemental measures in evaluating our balance sheet leverage. Net debt is equal to the sum of total consolidated debt less cash, cash equivalents, and restricted cash. Net debt and preferred stock is equal to the sum of net debt, as discussed above, plus preferred stock outstanding as of the end of the period. See definition of 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)
 
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
 
12/31/17
Secured notes payable
 
$
630,547

 
$
632,792

 
$
776,260

 
$
775,689

 
$
771,061

Unsecured senior notes payable
 
4,292,293

 
4,290,906

 
4,289,521

 
3,396,912

 
3,395,804

Unsecured senior line of credit
 
208,000

 
413,000

 
—

 
490,000

 
50,000

Unsecured senior bank term loans
 
347,415

 
347,306

 
548,324

 
548,197

 
547,942

Unamortized deferred financing costs
 
31,413

 
33,008

 
33,775

 
27,438

 
29,051

Cash and cash equivalents
 
(234,181
)
 
(204,181
)
 
(287,029
)
 
(221,645
)
 
(254,381
)
Restricted cash
 
(37,949
)
 
(29,699
)
 
(34,812
)
 
(37,337
)
 
(22,805
)
Net debt
 
$
5,237,538

 
$
5,483,132

 
$
5,326,039

 
$
4,979,254

 
$
4,516,672

 
 
 
 
 
 
 
 
 
 
 
Net debt
 
$
5,237,538

 
$
5,483,132

 
$
5,326,039

 
$
4,979,254

 
$
4,516,672

7.00% Series D convertible preferred stock
 
64,336

 
74,386

 
74,386

 
74,386

 
74,386

Net debt and preferred stock
 
$
5,301,874

 
$
5,557,518

 
$
5,400,425

 
$
5,053,640

 
$
4,591,058

 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
$
968,888

 
$
957,008

 
$
911,284

 
$
914,444

 
$
817,392

– trailing 12 months
 
$
937,906

 
$
900,032

 
$
854,237

 
$
815,178

 
$
767,508

Net debt to Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
5.4
x
 
5.7
x
 
5.8
x
 
5.4
x
 
5.5
x
– trailing 12 months
 
5.6
x
 
6.1
x
 
6.2
x
 
6.1
x
 
5.9
x
Net debt and preferred stock to Adjusted EBITDA:
 
 
 
 
 
 
 
 
– quarter annualized
 
5.5
x
 
5.8
x
 
5.9
x
 
5.5
x
 
5.6
x
– trailing 12 months
 
5.7
x
 
6.2
x
 
6.3
x
 
6.2
x
 
6.0
x

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

The following table reconciles net (loss) income to net operating income and net operating income (cash basis):
 
 
Three Months Ended
 
Year Ended
(Dollars in thousands)
 
12/31/18
 
12/31/17
 
12/31/18
 
12/31/17
Net (loss) income
 
$
(18,631
)
 
$
45,607

 
$
402,793

 
$
194,204

 
 
 
 
 
 
 
 
 
Equity in earnings of unconsolidated real estate joint ventures
 
(1,029
)
 
(376
)
 
(43,981
)
 
(15,426
)
General and administrative expenses
 
22,385

 
18,910

 
90,405

 
75,009

Interest expense
 
40,239

 
36,082

 
157,495

 
128,645

Depreciation and amortization
 
124,990

 
107,714

 
477,661

 
416,783

Impairment of real estate
 
—

 
—

 
6,311

 
203

Loss on early extinguishment of debt
 
—

 
2,781

 
1,122

 
3,451

Gain on sales of real estate – rental properties
 
(8,704
)
 
—

 
(8,704
)
 
(270
)
Gain on sales of real estate – land parcels
 
—

 
—

 
—

 
(111
)
Investment loss (income)
 
83,531

 
—

 
(136,763
)
 
—

Net operating income
 
242,781

 
210,718

 
946,339

 
802,488

Straight-line rent revenue
 
(17,923
)
 
(33,281
)
 
(93,883
)
 
(107,643
)
Amortization of acquired below-market leases
 
(5,350
)
 
(4,147
)
 
(21,938
)
 
(19,055
)
Net operating income (cash basis)
 
$
219,508

 
$
173,290

 
$
830,518

 
$
675,790

 
 
 
 
 
 
 
 
 
Net operating income (cash basis) – annualized
 
$
878,032

 
$
693,160

 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating income (from above)
 
$
242,781

 
$
210,718

 
$
946,339

 
$
802,488

Revenues
 
$
340,463

 
$
298,791

 
$
1,327,459

 
$
1,128,097

Operating margin
 
71%
 
71%
 
71%
 
71%

Net operating income is a non-GAAP financial measure calculated as net (loss) income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding equity in the earnings of our unconsolidated real estate joint ventures, general and administrative expenses, interest expense, depreciation and amortization, impairment of real estate, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and investment income or loss. 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 investors to evaluate the operating performance of our consolidated real estate assets. Net operating income on a cash basis is net operating income adjusted to exclude the effect of straight-line rent and amortization of acquired above- and below-market lease revenue adjustments required by GAAP. We believe that net operating income on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent revenue and the amortization of acquired above- and below-market leases.

Furthermore, we believe net operating income is useful to investors as a performance measure for our consolidated properties because, when compared across periods, net operating income reflects trends in occupancy rates, rental rates, and operating costs, which provide a perspective not immediately apparent from net income or loss. 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-

 
54

 
 
 
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Definitions and Reconciliations (continued)
December 31, 2018
 
 


line basis and our investment in the property. Net operating income excludes certain components from net income in order to provide results that are more closely related to the results of operations of our properties. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level rather than at the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort comparability of operating performance at the property level. Impairments of real estate have been excluded in deriving net operating income because we do not consider impairments of real estate to be property-level operating expenses. Impairments of real estate relate to changes in the values of our assets and do not reflect the current operating performance with respect to related revenues or expenses. Our impairments of real estate represent the write-down in the value of the assets to the estimated fair value less cost to sell. These impairments result from investing decisions and deterioration in market conditions. We also exclude realized and unrealized investment income or loss calculated under a new ASU effective January 1, 2018, which results from investment decisions that occur at the corporate level related to non-real estate investments in publicly traded companies and certain privately held entities. Therefore, we do not consider these activities to be an indication of operating performance of our real estate assets at the property level. Our calculation of net operating income also excludes charges incurred from changes in certain financing decisions, such as losses on early extinguishment of debt, as these charges often relate to corporate strategy. Property operating expenses 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 calculate operating margin as net operating income divided by total revenues.

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

Operating statistics

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

Same property comparisons

As a result of changes within our total property portfolio during the comparative periods presented, including changes from assets acquired or sold, properties placed into development or redevelopment, and development or redevelopment properties recently placed into service, the consolidated total rental revenues, tenant recoveries, and rental operating expenses in our operating results can show significant changes from period to period. In order to supplement an evaluation of our results of operations over a given quarterly or annual period, we analyze the operating performance for all consolidated properties that were fully operating for the entirety of the comparative periods presented, referred to as same properties. We separately present quarterly and year-to-date same property results to align with the interim financial information required by the SEC in our management’s discussion and analysis of our financial condition
 
and results of operations. These same properties are analyzed separately from properties acquired subsequent to the first day in the earliest comparable quarterly or year-to-date period presented, properties that underwent development or redevelopment at any time during the comparative periods, unconsolidated real estate joint ventures, properties classified as held for sale, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results. Additionally, 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 for the year ended December 31, 2018:
Development –
under construction
 
Properties
 
399 Binney Street
 
1

 
279 East Grand Avenue
 
1

 
188 East Blaine Street
 
1

 
 
 
3

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

 
510 Townsend Street
 
1

 
ARE Spectrum
 
3

 
400 Dexter Avenue North
 
1

 
100 Binney Street
 
1

 
213 East Grand Avenue
 
1

 
 
 
8

 
 
 
 
 
Redevelopment –
under construction
 
Properties
 
5 Laboratory Drive
 
1

 
266 and 275 Second Avenue
 
2

 
Alexandria PARC
 
4

 
681 Gateway Boulevard
 
1

 
Alexandria Life Science Factory at Long Island City
 
1

 
 
 
9

 
 
 
 
 
Redevelopment – placed into service after January 1, 2017
 
Properties
 
9625 Towne Centre Drive
 
1

 
9900 Medical Center Drive
 
1

 
 
 
2

 
Acquisitions after
January 1, 2017
 
Properties
 
100 Tech Drive
 
1

 
88 Bluxome Street
 
1

 
701 Gateway Boulevard
 
1

 
960 Industrial Road
 
1

 
1450 Page Mill Road
 
1

 
219 East 42nd Street
 
1

 
4110 Campus Point Court
 
1

 
Summers Ridge Science Park
 
4

 
2301 5th Avenue
 
1

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

 
9920 Belward Campus Drive
 
1

 
21 Firstfield Road
 
1

 
50 and 55 West Watkins Mill Road
 
2

 
10260 Campus Point Drive and 4161 Campus Point Court
 
2

 
99 A Street
 
1

 
Other
 
1

 
 
 
24

 
 
 
 
 
Unconsolidated real estate JVs
 
6

 
Total properties excluded from same properties
 
52

 
Same properties
 
185

(1) 
Total properties in North America as of December 31, 2018
 
237

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

Stabilized occupancy date

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


 
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Definitions and Reconciliations (continued)
December 31, 2018
 
 


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

Total market capitalization

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

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

The following table summarizes unencumbered net operating income as a percentage of total net operating income:
 
Three Months Ended
(Dollars in thousands)
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
 
12/31/17
Unencumbered net operating income
$
213,285

 
$
213,107

 
$
204,843

 
$
198,599

 
$
181,719

Encumbered net operating income
29,496

 
28,957

 
28,283

 
29,769

 
28,999

Total net operating income
$
242,781

 
$
242,064

 
$
233,126

 
$
228,368

 
$
210,718

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

 
88%

 
88%

 
87%

 
86%


Weighted-average interest rate for capitalization of interest

The weighted-average interest rate required for calculating capitalization of interest pursuant to GAAP represents a weighted-average rate based on the rates applicable to borrowings outstanding during the period, including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees. A separate calculation is performed to determine our weighted-average interest rate for capitalization for each month. The rate will vary each month due to changes in variable interest rates, outstanding debt balances, the proportion of variable-rate debt to fixed-rate debt, the amount and terms of interest rate hedge agreements, and the amount of loan fee and premium (discount) amortization.

The following table presents the weighted-average interest rate for capitalization of interest:
 
Three Months Ended
 
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
 
12/31/17
Weighted-average interest rate for capitalization of interest
4.01%
 
4.06%
 
3.92%
 
3.91%
 
3.89%

 
Weighted-average shares of common stock outstanding – diluted

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

We also consider the effect of assumed conversion of our outstanding 7.00% Series D cumulative convertible preferred stock (“Series D Preferred Stock”) when determining potentially dilutive incremental shares to our common stock. When calculating the assumed conversion, we add back to net income or loss the dividends paid on our Series D Preferred Stock to the numerator and then include additional common shares assumed to have been issued (as displayed in the table below) to the denominator of the per share calculation. The effect of the assumed conversion is considered separately for our per share calculations of net income or loss; funds from operations, computed in accordance with the definition in the Nareit White Paper; and funds from operations, as adjusted. Our Series D Preferred Stock is dilutive and assumed to be converted when quarterly and annual basic EPS, funds from operations, or funds from operations, as adjusted exceeds approximately $1.75 and $7.00 per share, respectively, subject to conversion ratio adjustments and the impact of repurchases of our 7.00% Series D cumulative convertible preferred stock. The effect of the assumed conversion is included when it is dilutive on a per share basis. The dilutive effect to both numerator and denominator may result in a per share effect of less than a half cent, which would appear as zero in our per share calculation, even when the dilutive effect to the numerator alone appears in our reconciliation.

The weighted-average shares of common stock outstanding used in calculating EPS – diluted, FFO per share – diluted, and FFO per share – diluted, as adjusted, during each period is calculated as follows:
 
Three Months Ended
 
Year Ended
(In thousands)
12/31/18
 
9/30/18
 
6/30/18
 
3/31/18
 
12/31/17
 
12/31/18
 
12/31/17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic shares for EPS
106,033

 
104,179

 
101,881

 
99,855

 
95,138

 
103,010

 
91,546

Forward Agreements
—

 
462

 
355

 
270

 
776

 
311

 
517

Series D Preferred Stock
—

 
744

 
—

 
—

 
—

 
—

 
—

Diluted for EPS
106,033

 
105,385

 
102,236

 
100,125

 
95,914

 
103,321

 
92,063

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic shares for EPS
106,033

 
104,179

 
101,881

 
99,855

 
95,138

 
103,010

 
91,546

Forward Agreements
211

 
462

 
355

 
270

 
776

 
311

 
517

Series D Preferred Stock
—

 
744

 
—

 
741

 
—

 
727

 
—

Diluted for FFO
106,244

 
105,385

 
102,236

 
100,866

 
95,914

 
104,048

 
92,063

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic shares for EPS
106,033

 
104,179

 
101,881

 
99,855

 
95,138

 
103,010

 
91,546

Forward Agreements
211

 
462

 
355

 
270

 
776

 
311

 
517

Series D Preferred Stock
—

 
—

 
—

 
—

 
—

 
—

 
—

Diluted for FFO, as adjusted
106,244

 
104,641

 
102,236

 
100,125

 
95,914

 
103,321

 
92,063


 
56