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): May 1, 2017


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

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




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


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

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

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

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

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

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

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

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

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





Item 2.02.  Results of Operations and Financial Condition.

On May 1, 2017, Alexandria Real Estate Equities, Inc. (the “Company”) issued a press release entitled “Alexandria Real Estate Equities, Inc. Reports First Quarter Ended March 31, 2017 Financial and Operating Results.”  The press release referred to certain supplemental information that is available on the Company’s website at www.are.com.  A copy of the press release and supplemental information are attached hereto as Exhibit 99.1.

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

Item 9.01.  Financial Statements and Exhibits.

(d)  Exhibits.

99.1                Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the First Quarter Ended March 31, 2017.

Forward-looking Statements

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




SIGNATURES

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

 
 
ALEXANDRIA REAL ESTATE EQUITIES, INC.
 
 
 
 
 
 
May 1, 2017
 
By:
/s/ Joel S. Marcus
 
 
 
 
Joel S. Marcus
 
 
 
 
Chairman/Chief Executive Officer
 
 
 
 
(Principal Executive Officer)
 
 
 
 
 
 
 
 
 
By:
/s/ Dean A. Shigenaga
 
 
 
 
Dean A. Shigenaga
 
 
 
 
Chief Financial Officer
 
 
 
 
(Principal Financial Officer)
 




EXHIBIT INDEX

Exhibit
Number        Exhibit Title    
99.1        Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the First Quarter Ended March 31, 2017.


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



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



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(1)    Represents annual rental revenue in effect as of March 31, 2017.

 
ii
 
 
 
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Table of Contents
March 31, 2017
 
 

 
 
EARNINGS PRESS RELEASE
Page
SUPPLEMENTAL INFORMATION
 
Internal Growth
 
 
 
 
SUPPLEMENTAL INFORMATION (CONTINUED)
Page
External Growth
 
Development and Redevelopment of New Class A Properties:
 
2017 Deliveries (Undergoing Construction)
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 7 of our Earnings Press Release for further information.
 
This document is not an offer to sell or a solicitation to buy securities of Alexandria Real Estate Equities, Inc. Any offers to sell or solicitations to buy our securities shall be made only by means of a prospectus approved for that purpose. Unless otherwise indicated, the “Company,” “Alexandria,” “ARE,” “we,” “us,” and “our” refer to Alexandria Real Estate Equities, Inc. and its consolidated subsidiaries.

 
Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2017
iii
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Alexandria Real Estate Equities, Inc.
Reports
First Quarter Ended March 31, 2017, Financial and Operating Results
Strong Internal and External Growth

PASADENA, Calif. – May 1, 2017 – Alexandria Real Estate Equities, Inc. (NYSE:ARE)
announced financial and operating results for the first quarter ended March 31, 2017.

Key highlights

Addition to S&P 500 Index
We achieved another significant milestone with the announcement that the S&P Dow Jones Indices added Alexandria to the S&P 500® Index. This significant and important recognition reflects our best-in-class team’s ability to successfully execute our differentiated business strategy, which drives our successful operating and financial performance.

Credit rating upgrade
S&P Global Ratings upgraded our corporate credit rating to BBB/Stable from
BBB-/Positive.

Strong internal growth
•
Total revenues of $270.9 million, up 25.4%, for 1Q17, compared to $216.1 million for 1Q16;
•
Substantial leasing activity and strong rental rate growth, in light of minimal contractual lease expirations at the beginning of 2017 and a highly leased value-creation pipeline:
 
 
1Q17
Total leasing activity – RSF
 
1,320,781

Lease renewals and re-leasing of space:
 
 
Rental rate increases
 
27.8%

Rental rate increases (cash basis)
 
17.7%

RSF (included in total leasing activity above)
 
878,863


•
Executed key leases at average rental rate increases of 25.9% and 17.4% (cash basis) during 1Q17, included in the statistics above:
•
302,626 RSF, leased to Novartis AG at 100 and 200 Technology Square in our Cambridge submarket;
•
155,685 RSF, leased to Genentech, Inc., a subsidiary of Roche, at 500 Forbes Boulevard in our South San Francisco submarket; and
•
43,625 RSF, leased to Vir Biotechnology, Inc. at 499 Illinois Street in our Mission Bay/SoMa submarket.
•
Same property net operating income growth:
•
2.6% and 5.5% (cash basis) for 1Q17, compared to 1Q16.

 
Strong external growth; disciplined allocation of capital to visible, multiyear, highly leased
value-creation pipeline
•
Current and recent deliveries of Class A properties in our urban innovation clusters from our value-creation pipeline is expected to significantly increase net operating income:
Delivery Date
 
RSF
 
Percentage Leased
 
Incremental Annual Net Operating Income
2016
 
1,893,928

 
94%
 
 
$92 million
(1)
1Q17
 
272,612

 
100%
 
 
$16 million
 
2Q17–4Q17
 
1,132,505

 
78%
 
$79 million to $89 million
(1) Delivery of 2016 projects were primarily weighted toward 4Q16.

•
1Q17 key development project placed into service: 241,276 RSF, leased to Juno Therapeutics, Inc. at 400 Dexter Avenue North in our Lake Union submarket; and
•
Incremental contractual cash rents of $10 million per quarter, or $40 million annually, commenced in April 2017 primarily from our recently developed buildings at 75/125 Binney Street and 50 and 60 Binney Street in our Cambridge submarket.

Increased common stock dividend
Common stock dividend for 1Q17 of $0.83 per common share, up 3 cents, or 4%, over 1Q16; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Operating results
 
1Q17
 
1Q16
 
Change
Net income (loss) attributable to Alexandria’s common stockholders – diluted:
In millions
$
25.7

 
$
(3.8
)
 
N/A

Per share
$
0.29

 
$
(0.05
)
 
N/A

 
 
 
 
 
 
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted:
In millions
$
130.6

 
$
97.1

 
34.5
%
Per share
$
1.48

 
$
1.34

 
10.4
%
Items included in net income (loss) attributable to Alexandria’s common stockholders
(amounts are shown after deducting any amounts attributable to noncontrolling interests):
(In millions, except per share amounts)
Amount
 
Per Share – Diluted
1Q17
 
1Q16
 
1Q17
 
1Q16
Impairment of real estate – Asia
$
—

 
$
(29.0
)
 
$
—

 
$
(0.40
)
Loss on early extinguishment of debt
(0.7
)
 
—

 
(0.01
)
 
—

Preferred stock redemption charge
(11.3
)
 
(3.0
)
 
(0.12
)
 
(0.04
)
Total
$
(12.0
)
 
$
(32.0
)
 
$
(0.13
)
 
$
(0.44
)
Weighted-average shares of common stock
outstanding – diluted
 
 
 
 
88.2

 
72.6


 
1

 
 
 
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First Quarter Ended March 31, 2017, Financial and Operating Results (continued)
March 31, 2017
 
 

Core operating metrics and internal growth

•
Percentage of annual rental revenue in effect from investment-grade tenants as of 1Q17: 51%;
•
Percentage of annual rental revenue in effect from Class A properties in AAA locations as of
1Q17: 79%;
•
Occupancy for operating properties in North America as of 1Q17: 95.5%; a decline of 1.1% from 4Q16 primarily relating to 125,409 RSF vacated in 1Q17 by Eli Lilly and Company at 10300 Campus Point Drive located in our University Town Center submarket as they relocated and expanded into 305,006 RSF at 10290 Campus Point Drive in December 2016;
•
Operating margin for 1Q17: 72%;
•
Adjusted EBITDA margin for 1Q17: 67%;
•
See “Strong internal growth” in the Key highlights section on page 1 of this Earnings Press Release for information on our leasing activity, rental rate growth, and same property net operating income growth.

External growth

Disciplined allocation of capital to visible, multiyear, highly leased value-creation pipeline
•
See page 1 of this Earnings Press Release for key highlights

Disciplined management of development pipeline
•
Solid pre-leasing of 5.2 million RSF of ground-up developments that commenced since January 1, 2009:
•
100% pre-leasing on 2.7 million RSF for 16 single-tenant buildings; and
•
38% pre-leasing on 2.5 million RSF for nine multi-tenant buildings.

Strategic acquisitions
•
We completed or entered into several agreements to acquire real estate consisting primarily of land parcels and a redevelopment property aggregating 3.2 million SF across our AAA urban innovation cluster locations for an aggregate purchase price of $412.2 million; and
•
See page 4 of this Earnings Press Release for additional information on our completed and pending strategic acquisitions.

Balance sheet management

•
In February 2017, S&P Global Ratings upgraded our corporate credit rating to BBB/Stable from BBB-/Positive;
•
$14.5 billion total market capitalization as of 1Q17;
•
$2.2 billion of liquidity as of 1Q17;
•
Net debt to Adjusted EBITDA:
•
1Q17 annualized: 5.9x; 1Q17 trailing 12 months: 6.6x; and
•
4Q17 annualized target range: 5.3x to 5.8x;
•
Fixed-charge coverage ratio:
•
1Q17 annualized: 4.1x; 1Q17 trailing 12 months: 3.8x; and
•
4Q17 annualized target: greater than 4.0x;
•
Current and future value-creation pipeline was 11% of gross investments in real estate in North America as of 1Q17, with a 4Q17 target of less than 10%; and
•
5% unhedged variable-rate debt as a percentage of total debt as of 1Q17.

 
Balance sheet management (continued)

Key capital events
•
In March 2017, we completed the offering of $425.0 million of unsecured senior notes, due in 2028, at an interest rate of 3.95% for net proceeds of $420.5 million;
•
In March 2017, we entered into an offering to sell an aggregate 6.9 million shares of our common stock, at a public offering price of $108.55 per share. Approximately 60% of the proceeds will fund value-creation acquisitions and construction and 40% will fund balance sheet improvements, including reduction in our projected net debt to Adjusted EBITDA – 4Q17 annualized by 0.2x, and redemption of our Series E Redeemable Preferred Stock. Aggregate net proceeds from the sale, after underwriters’ discount and issuance costs, of $713.3 million consisted of the following:
•
2.1 million shares issued at closing with net proceeds of $217.8 million; and
•
4.8 million shares subject to forward equity sales agreements expiring no later than March 2018 with net proceeds of $495.5 million, which will be further adjusted as provided in the sales agreements.
•
In March 2017, we announced the redemption of all 5.2 million outstanding shares of our Series E Redeemable Preferred Stock at a redemption price of $25.00 per share plus accrued dividends. As a result of this announcement, we reclassified the $130.0 million par value outstanding to a preferred stock redemption liability and recognized a preferred stock redemption charge of $5.5 million related to the write-off of original issuance costs. We completed the redemption on April 14, 2017;
•
Repurchased, in privately negotiated transactions, 501,115 shares of our 7.00% Series D cumulative convertible preferred stock for $17.9 million, or $35.79 per share, and recognized a preferred stock redemption charge of $5.8 million in 1Q17; and
•
In March 2017, we repaid $200 million of our 2019 Unsecured Senior Bank Term Loan, reducing the total outstanding balance from $400 million to $200 million, and recognized a loss of $670 thousand related to the write-off of unamortized loan fees.

Corporate social responsibility/thought leadership

•
50% of total annual rental revenue expected from Leadership in Energy and Environmental Design (“LEED”) certified projects upon completion of in-process projects;
•
In January 2017, 75/125 Binney Street at Alexandria Center® at Kendall Square achieved LEED GOLD certification from the U.S. Green Building Council;
•
In March 2017, Alexandria and Joel S. Marcus were honored to chair the U.S. Navy SEAL Foundation’s Ninth Annual Benefit Dinner in New York City. The event raised a record-breaking $12.8 million to support the Navy SEAL Foundation’s mission-critical work providing vital services for U.S. Navy SEAL families and included support from 100% of Alexandria’s employees;
•
In February 2017, Alexandria convened the Alexandria Summit® – Innovate Ag 2017 in New York City.

Subsequent events in April 2017

•
Executed three interest rate swap agreements:
•
$150 million notional amount at a fixed pay rate of 1.60% effective March 29, 2018; and
•
$100 million notional amount at a fixed pay rate of 1.89% effective March 29, 2019.

 
2

 
 
 
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Incremental Annual Net Operating Income from Development and Redevelopment of New Class A Properties
March 31, 2017
 
 



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(1)
Represents incremental annual net operating income upon stabilization of our development and redevelopment of new Class A properties, including only our share of real estate joint venture projects. RSF and percentage leased represent 100% of each property.
(2)
Delivery of 2016 projects were primarily weighted toward 4Q16.





 
3

 
 
Acquisitions
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March 31, 2017
(Dollars in thousands)
 
 


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

 
—

 
208,965

 
$
80,250

 
$
—

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

 
—

 
1,070,925

 
130,000

 
—

 
 
1655 and 1715 Third Street (3)
(10% interest in real estate joint venture)
 
1H18
 
—
 
—

 
—

 
580,000

 
—

 
35,000

 
Greater Stanford/San Francisco
 
960 Industrial Road (4)
 
2Q17
 
1
 
195,000

 
—

 
500,000

 
—

 
64,959

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

 
—

 
229,000

 
8,250

 
—

 
Research Triangle Park/RTP
 
3054 East Cornwallis Road
 
2Q17
 
1
 
—

 
150,000

 
—

 
—

 
8,750

 
Pending acquisition (5)
 
 
 
2Q17
 
—
 
—

 
—

 
500,000

 
—

 
85,000

 
 
 
 
 
 
 
3
 
427,470

 
150,000

 
3,088,890

 
$
218,500

 
$
193,709

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$412,209
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Land parcels located adjacent to our Alexandria Center® at One Kendall Square campus that are currently entitled for the development of 163,339 RSF of office or office/laboratory space and 45,626 RSF of residential space. We may seek to increase the entitlements, which may result in additional purchase price consideration.
(2)
We are currently pursuing entitlements for the development of two buildings aggregating 1,070,925 RSF in two phases. The existing 232,470 RSF building is operating as a leading tennis and fitness facility. The future development square footage is inclusive of the current operating RSF.
(3)
Executed an agreement to purchase a 10% interest in a joint venture with Uber Technologies, Inc. (“Uber”) and the Golden State Warriors. Our initial cash contribution of $35 million will be funded at closing of the joint venture in 2018. The joint venture will acquire land with completed below-grade improvements, building foundation and parking garage, and will complete vertical construction of two buildings aggregating 580,000 RSF, which will be leased to Uber.
(4)
Future ground-up development site with an operating component. We expect to pursue entitlements aggregating 500,000 RSF for a multi-building development. We anticipate leasing the existing property back to the seller on a short-term basis until we obtain entitlements.
(5)
Land parcel for the development of two buildings aggregating 500,000 RSF. Details of the pending acquisition will be disclosed in our 2Q17 Earnings Press Release and Supplemental Information.

 
4

 
 
 
 
Acquisitions (continued)
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March 31, 2017
 
 
 


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(1)    172,500 SF redevelopment parcel acquired in November 2016 with the acquisition of Alexandria Center® at One Kendall Square.

 
5

 
 
Guidance
p2017headerlogo.jpg
March 31, 2017
(Dollars in millions, except per share amounts)
 
 
 

The following updated guidance is based on our current view of existing market conditions and assumptions for the year ending December 31, 2017. There can be no assurance that actual amounts will be materially higher or lower than these expectations. See our discussion of “forward-looking statements” on page 7 of this Earnings Press Release.
Summary of Key Changes in Guidance
 
As of 5/1/17
 
As of 3/9/17
 
 
Summary of Key Changes in Guidance
 
As of 5/1/17
 
As of 3/9/17
 
EPS, FFO per share, and FFO per share, as adjusted
 
See below
 
See below
 
 
Key sources and uses of capital
 
See update below
 
Rental rate increases up 1%
 
19.5% to 22.5%
 
18.5% to 21.5%
 
 
Same property NOI increase up 0.5%
 
2.0% to 4.0%
 
1.5% to 3.5%
 
Rental rate increases (cash basis) up 1%
 
7.5% to 10.5%
 
6.5% to 9.5%
 
 
Capitalization of interest (1)
 
$48 to $58 million
 
$42 to $52 million
 

Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s
Common Stockholders – Diluted
 
 
 
As of 5/1/17
 
As of 3/9/17
 
Earnings per share
 
$1.43 to $1.53
 
$1.39 to $1.59
 
Depreciation and amortization
 
4.45
 
 
4.45
 
 
Allocation to unvested restricted stock awards
 
(0.04)
 
 
(0.04)
 
 
Funds from operations per share
 
$5.84 to $5.94
 
$5.80 to $6.00
 
Add: loss on early extinguishment of debt
 
0.01
 
 
0.01
 
 
Add: preferred stock redemption charge
 
    0.12 (2)
 
 
0.09
 
 
Funds from operations per share, as adjusted
 
$5.97 to $6.07
 
$5.90 to $6.10
 

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

 
97.2%

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

 
22.5%

 
Rental rate increases (cash basis)
 
7.5%

 
10.5%

 
Same property performance:
 
 
 
 
 
Net operating income increase
 
2.0%

 
4.0%

 
Net operating income increase (cash basis)
 
5.5%

 
7.5%

 
 
 
 
 
 
 
Straight-line rent revenue
 
$
107

 
$
112

 
General and administrative expenses
 
$
68

 
$
73

 
Capitalization of interest (1)
 
$
48

 
$
58

 
Interest expense
 
$
131

 
$
141

 
 
Key Credit Metrics
 
As of 5/1/17
 
Net debt to Adjusted EBITDA – 4Q17 annualized
 
5.3x to 5.8x
 
Net debt and preferred stock to Adjusted EBITDA – 4Q17 annualized
 
5.3x to 5.8x
 
Fixed-charge coverage ratio – 4Q17 annualized
 
Greater than 4.0x
 
Value-creation pipeline as a percentage of gross real estate as of
December 31, 2017
 
Less than 10%
 
Key Sources and Uses of Capital
 
Range
 
Midpoint
 
Sources of capital:
 
 
 
 
 
 
 
Net cash provided by operating activities after dividends
 
$
115

 
$
135

 
$
125

 
Incremental debt
 
300

 
280

 
290

 
Real estate dispositions and common equity
 
970

 
1,240

 
1,105

(3)(4) 
Total sources of capital
 
$
1,385

 
$
1,655

 
$
1,520

 
Uses of capital:
 
 
 
 
 
 
 
Construction
 
$
815

 
$
915

 
$
865

 
Acquisitions
 
380

 
480

 
430

(4) 
7.00% Series D convertible preferred stock repurchases
 
60

 
130

 
95

 
6.45% Series E redeemable preferred stock redemption
 
130

 
130

 
130

 
Total uses of capital
 
$
1,385

 
$
1,655

 
$
1,520

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

 
$
425

 
$
425

 
Borrowings – secured construction loans
 
200

 
250

 
225

 
Repayments of secured notes payable
 
(5
)
 
(10
)
 
(8
)
 
Repayment of unsecured senior term loan
 
(200
)
 
(200
)
 
(200
)
 
$1.65 billion unsecured senior line of credit/other
 
(120
)
 
(185
)
 
(152
)
 
Incremental debt
 
$
300

 
$
280

 
$
290

 


(1)
Increased from a range from $42 million to $52 million to a range from $48 million to $58 million to reflect capitalization of interest related to the completed and projected acquisitions of 303 Binney Street, 3054 East Cornwallis Road, 3050 Callan Road, Vista Wateridge, and a pending acquisition of a land parcel. See “Acquisitions” on page 4 of this Earnings Press Release for additional information. There was no change in our guidance for interest expense.
(2)
Includes charges aggregating $5.8 million related to the repurchases of 501,115 outstanding shares of our Series D Convertible Preferred Stock in 1Q17 and $5.5 million related to the redemption of our Series E Redeemable Preferred Stock in April 2017. Excludes any charges related to future repurchases of our Series D Convertible Preferred Stock.
(3)
Includes the public offering of 6.9 million shares of our common stock in March 2017, of which 4.8 million shares are subject to forward equity sales agreements, with anticipated aggregate net proceeds of $713.3 million, subject to adjustments as provided in the forward equity sales agreements. Also includes our share of the proceeds from the anticipated sale of a condominium interest in 203,090 RSF of our unconsolidated real estate joint venture property at 360 Longwood Avenue, aggregating approximately $65.7 million, pursuant to the exercise of a purchase option by the anchor tenant. The sale is expected to close in July 2017.
(4)
Increase since March 9, 2017, is related to the pending $85.0 million acquisition of a land parcel for the development of 500,000 RSF of new Class A properties. Also includes remaining purchase price of $56.8 million related to the acquisition of the remaining 49% interest in our unconsolidated real estate joint venture with Uber completed in November 2016. This amount will be paid in three equal installments in 2017, upon Uber’s completion of construction milestones. See “Acquisitions” on page 4 of this Earnings Press Release for additional information.

 
6

 
 
 
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Earnings Call Information and About the Company
March 31, 2017
 
 


We will host a conference call on Tuesday, May 2, 2017, at 3:00 p.m. Eastern Time (“ET”)/noon Pacific Time (“PT”), which is open to the general public to discuss our financial and operating results for the first quarter ended March 31, 2017. To participate in this conference call, dial (866) 524-3160 or (412) 317-6760 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the Alexandria Real Estate Equities, Inc. call. The audio webcast can be accessed at www.are.com, in the “For Investors” section. A replay of the call will be available for a limited time from 5:00 p.m. ET/2:00 p.m. PT on Tuesday, May 2, 2017. The replay number is (877) 344-7529 or (412) 317-0088, and the confirmation code is 10102394.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the first quarter ended March 31, 2017, is available in the “For Investors” section of our website at www.are.com or by following this link: http://www.are.com/fs/2017q1.pdf.

For any questions, please contact Joel S. Marcus, chairman, chief executive officer, and founder, at (626) 578-9693 or Dean A. Shigenaga, executive vice president, chief financial officer, and treasurer, at (626) 578-0777.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office real estate investment trust (“REIT”) uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $14.5 billion and an asset base in North America of 28.2 million square feet, as of March 31, 2017. The asset base in North America includes 20.1 million RSF of operating properties, including 1.6 million RSF of development and redevelopment of new Class A properties currently undergoing construction. Additionally, the asset base in North America includes 8.1 million SF of future development projects, including 1.5 million SF of near-term projects undergoing marketing for lease and preconstruction activities and 2.0 million SF of other near-term development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science and technology campuses that provide its innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. We believe these advantages result in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.

***********

This document includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2017 earnings per share attributable to Alexandria’s common stockholders – diluted, 2017 funds from operations per share attributable to Alexandria’s common stockholders – diluted, net operating income, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “believes,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” or “will,” or the negative of those words or similar words. These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. There can be no assurance that actual results will not be materially higher or lower than these expectations. These statements are subject to risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully place into service and lease any properties undergoing development or redevelopment and our existing space held for future development or redevelopment (including new properties acquired for that purpose), our failure to successfully operate or lease acquired properties, decreased rental rates, increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, adverse general and local economic conditions, an unfavorable capital market environment, decreased leasing activity or lease renewals, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission (“SEC”). Accordingly, you are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are made as of the date of this earnings press release, and unless otherwise stated, we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.


 
7

 
 
Consolidated Statements of Income
p2017headerlogo.jpg
March 31, 2017
(In thousands, except per share amounts)
 
 

 
 
Three Months Ended
 
 
3/31/17

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

 
 

 
 

 
 

 
 

Rental
 
$
207,193

 
$
187,315

 
$
166,591

 
$
161,638

 
$
158,276

Tenant recoveries
 
61,346

 
58,270

 
58,681

 
54,107

 
52,597

Other income
 
2,338

 
3,577

 
5,107

 
10,331

 
5,216

Total revenues
 
270,877

 
249,162

 
230,379

 
226,076

 
216,089

 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
Rental operations
 
77,087

 
73,244

 
72,002

 
67,325

 
65,837

General and administrative
 
19,229

 
17,458

 
15,854

 
15,384

 
15,188

Interest
 
29,784

 
31,223

 
25,850

 
25,025

 
24,855

Depreciation and amortization
 
97,183

 
95,222

 
77,133

 
70,169

 
70,866

Impairment of real estate
 
—

 
16,024

 
8,114

 
156,143

 
28,980

Loss on early extinguishment of debt
 
670

 
—

 
3,230

 
—

 
—

Total expenses
 
223,953

 
233,171

 
202,183

 
334,046

 
205,726

 
 
 
 
 
 
 
 
 
 
 
Equity in earnings (losses) of unconsolidated real estate joint ventures
 
361

 
86

 
273

 
(146
)
 
(397
)
Gain on sales of real estate – rental properties
 
270

 
3,715

 
—

 
—

 
—

Income (loss) from continuing operations
 
47,555

 
19,792

 
28,469

 
(108,116
)
 
9,966

Gain on sales of real estate – land parcels
 
—

 
—

 
90

 
—

 
—

Net income (loss)
 
47,555

 
19,792

 
28,559

 
(108,116
)
 
9,966

Net income attributable to noncontrolling interests
 
(5,844
)
 
(4,488
)
 
(4,084
)
 
(3,500
)
 
(4,030
)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s stockholders
 
41,711

 
15,304

 
24,475

 
(111,616
)
 
5,936

Dividends on preferred stock
 
(3,784
)
 
(3,835
)
 
(5,007
)
 
(5,474
)
 
(5,907
)
Preferred stock redemption charge
 
(11,279
)
 
(35,653
)
 
(13,095
)
 
(9,473
)
 
(3,046
)
Net income attributable to unvested restricted stock awards
 
(987
)
 
(943
)
 
(921
)
 
(1,085
)
 
(801
)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders
 
$
25,661

 
$
(25,127
)
 
$
5,452

 
$
(127,648
)
 
$
(3,818
)
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic and diluted
 
$
0.29

 
$
(0.31
)
 
$
0.07

 
$
(1.72
)
 
$
(0.05
)
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
 
88,147

 
80,800

 
76,651

 
74,319

 
72,584

Diluted
 
88,200

 
80,800

 
77,402

 
74,319

 
72,584

 
 
 
 
 
 
 
 
 
 
 
Dividends declared per share of common stock
 
$
0.83

 
$
0.83

 
$
0.80

 
$
0.80

 
$
0.80





 
8

 
 
Consolidated Balance Sheets
p2017headerlogo.jpg
March 31, 2017
(In thousands)
 
 

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

 
 

 
 

 
 

Investments in real estate
 
$
9,470,667

 
$
9,077,972

 
$
7,939,179

 
$
7,774,608

 
$
7,741,466

Investments in unconsolidated real estate joint ventures
 
50,457

 
50,221

 
133,580

 
132,433

 
127,165

Cash and cash equivalents
 
151,209

 
125,032

 
157,928

 
256,000

 
146,197

Restricted cash
 
18,320

 
16,334

 
16,406

 
13,131

 
14,885

Tenant receivables
 
9,979

 
9,744

 
9,635

 
9,196

 
9,979

Deferred rent
 
364,348

 
335,974

 
318,286

 
303,379

 
293,144

Deferred leasing costs
 
202,613

 
195,937

 
191,765

 
191,619

 
192,418

Investments
 
394,471

 
342,477

 
320,989

 
360,050

 
316,163

Other assets
 
206,562

 
201,197

 
206,133

 
104,414

 
130,115

Total assets
 
$
10,868,626

 
$
10,354,888

 
$
9,293,901

 
$
9,144,830

 
$
8,971,532

 
 
 
 
 
 
 
 
 
 
 
Liabilities, Noncontrolling Interests, and Equity
 
 
 
 
 
 
 
 
 
 
Secured notes payable
 
$
1,083,758

 
$
1,011,292

 
$
789,450

 
$
722,794

 
$
816,578

Unsecured senior notes payable
 
2,799,508

 
2,378,262

 
2,377,482

 
2,376,713

 
2,031,284

Unsecured senior line of credit
 
—

 
28,000

 
416,000

 
72,000

 
299,000

Unsecured senior bank term loans
 
547,420

 
746,471

 
746,162

 
945,030

 
944,637

Accounts payable, accrued expenses, and tenant security deposits
 
782,637

 
731,671

 
605,181

 
593,628

 
628,467

Dividends payable
 
78,976

 
76,914

 
66,705

 
67,188

 
64,275

Preferred stock redemption liability
 
130,000

 
—

 
—

 
—

 
—

Total liabilities
 
5,422,299

 
4,972,610

 
5,000,980

 
4,777,353

 
4,784,241

 
 
 
 
 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
 
11,320

 
11,307

 
9,012

 
9,218

 
14,218

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

 
86,914

 
161,792

 
188,864

 
213,864

6.45% Series E cumulative redeemable preferred stock
 
—

 
130,000

 
130,000

 
130,000

 
130,000

Common stock
 
899

 
877

 
768

 
766

 
729

Additional paid-in capital
 
4,855,686

 
4,672,650

 
3,649,263

 
3,693,807

 
3,529,660

Accumulated other comprehensive income (loss)
 
21,460

 
5,355

 
(31,745
)
 
8,272

 
(8,533
)
Alexandria Real Estate Equities, Inc.’s stockholders’ equity
 
4,952,431

 
4,895,796

 
3,910,078

 
4,021,709

 
3,865,720

Noncontrolling interests
 
482,576

 
475,175

 
373,831

 
336,550

 
307,353

Total equity
 
5,435,007

 
5,370,971

 
4,283,909

 
4,358,259

 
4,173,073

Total liabilities, noncontrolling interests, and equity
 
$
10,868,626

 
$
10,354,888

 
$
9,293,901

 
$
9,144,830

 
$
8,971,532




 
9

 
 
Funds From Operations and Funds From Operations per Share
p2017headerlogo.jpg
March 31, 2017
(In thousands, except per share amounts)
 
 

The following tables present a reconciliation of net income (loss) attributable to Alexandria’s common stockholders – basic, the most directly comparable financial measure presented in accordance with generally accepted accounting principles (“GAAP”), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria’s common stockholders – diluted, and funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted, and related per share amounts. Amounts allocable to unvested restricted stock awards are not material and are not presented separately within the per share table below. Per share amounts may not add due to rounding.
 
 
Three Months Ended
 
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
3/31/16
Net income (loss) attributable to Alexandria’s common stockholders
 
$
25,661

 
$
(25,127
)
 
$
5,452

 
$
(127,648
)
 
$
(3,818
)
Depreciation and amortization
 
97,183

 
95,222

 
77,133

 
70,169

 
70,866

Noncontrolling share of depreciation and amortization from consolidated real estate JVs
 
(3,642
)
 
(2,598
)
 
(2,224
)
 
(2,226
)
 
(2,301
)
Our share of depreciation and amortization from unconsolidated real estate JVs
 
412

 
655

 
658

 
651

 
743

Gain on sales of real estate – rental properties
 
(270
)
 
(3,715
)
 
—

 
—

 
—

Gain on sales of real estate – land parcels
 
—

 
—

 
(90
)
 
—

 
—

Impairment of real estate – rental properties
 
—

 
3,506

 
6,293

 
88,395

 
—

Allocation to unvested restricted stock awards
 
(561
)
 
—

 
(438
)
 
—

 
(80
)
Funds from operations attributable to Alexandria’s common stockholders – basic and diluted (1)
 
118,783

 
67,943

 
86,784

 
29,341

 
65,410

Non-real estate investment income
 
—

 
—

 
—

 
(4,361
)
 
—

Impairment of land parcels and non-real estate investments
 
—

 
12,511

 
4,886

 
67,162

 
28,980

Loss on early extinguishment of debt
 
670

 
—

 
3,230

 
—

 
—

Preferred stock redemption charge
 
11,279

 
35,653

 
13,095

 
9,473

 
3,046

Allocation to unvested restricted stock awards
 
(150
)
 
(605
)
 
(359
)
 
(530
)
 
(358
)
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
130,582

 
$
115,502

 
$
107,636

 
$
101,085

 
$
97,078


Net income (loss) per share attributable to Alexandria’s common stockholders
 
$
0.29

 
$
(0.31
)
 
$
0.07

 
$
(1.72
)
 
$
(0.05
)
Depreciation and amortization 
 
1.06

 
1.15

 
0.97

 
0.92

 
0.95

Gain on sales of real estate – rental properties
 
—

 
(0.05
)
 
—

 
—

 
—

Impairment of real estate – rental properties
 
—

 
0.05

 
0.08

 
1.19

 
—

Funds from operations per share attributable to Alexandria’s common stockholders –
basic and diluted (1)
 
1.35

 
0.84

 
1.12

 
0.39

 
0.90

Non-real estate investment income
 
—

 
—

 
—

 
(0.06
)
 
—

Impairment of land parcels and non-real estate investments
 
—

 
0.15

 
0.06

 
0.90

 
0.40

Loss on early extinguishment of debt
 
0.01

 
—

 
0.04

 
—

 
—

Preferred stock redemption charge
 
0.12

 
0.43

 
0.17

 
0.13

 
0.04

Funds from operations per share attributable to Alexandria’s common stockholders –
diluted, as adjusted
 
$
1.48

 
$
1.42

 
$
1.39

 
$
1.36

 
$
1.34

 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding for calculating funds from operations per share and funds from operations, as adjusted, per share – diluted
 
88,200

 
81,280

 
77,402

 
74,319

 
72,584


(1)
Calculated in accordance with standards established by the Advisory Board of Governors of the National Association of Real Estate Investment Trusts (the “NAREIT Board of Governors”) in its April 2002 White Paper and related implementation guidance.


 
10









SUPPLEMENTAL
INFORMATION








 
 
 
p2017headerlogo.jpg
Company Profile
March 31, 2017
 
 

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office REIT uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $14.5 billion and an asset base in North America of 28.2 million square feet, as of March 31, 2017. The asset base in North America includes 20.1 million RSF of operating properties, including 1.6 million RSF of development and redevelopment of new Class A properties currently undergoing construction. Additionally, the asset base in North America includes 8.1 million SF of future development projects, including 1.5 million SF of near-term projects undergoing marketing for lease and preconstruction activities and 2.0 million SF of other near-term development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science and technology campuses that provide its innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. We believe these advantages result in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.

Tenant base

Alexandria is known for our high-quality and diverse tenant base, with 51% of our annual rental revenue generated from investment grade tenants. The impressive quality, diversity, breadth, and depth of our significant relationships with our tenants provide Alexandria with high-quality and stable cash flows. Alexandria’s underwriting team and long-term industry relationships positively distinguish us from all other publicly traded REITs and real estate companies.

Executive and senior management team

Alexandria’s executive and senior management team has unique experience and expertise in creating highly dynamic and collaborative campuses in key urban life science and technology cluster locations that inspire innovation. From the development of high-quality, sustainable real estate, to the ongoing cultivation of collaborative environments with unique amenities and events, the Alexandria team has a first-in-class reputation of excellence in its niche. Alexandria’s highly experienced management team also includes regional market directors with leading reputations and longstanding relationships within the life science and technology communities in their respective urban innovation clusters. We believe that our expertise, experience, reputation, and key relationships with the real estate, life science, and technology industries provide Alexandria significant competitive advantages in attracting new business opportunities.
 
Alexandria’s executive and senior management team consists of 28 individuals, averaging more than 26 years of real estate experience, including more than 13 years with Alexandria.

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

 
12

 
 
 
p2017headerlogo.jpg
Investor Information
March 31, 2017
 
 

Corporate Headquarters
 
New York Stock Exchange Trading Symbols
 
Information Requests
385 East Colorado Boulevard, Suite 299
 
Common stock: ARE
 
Phone:
(626) 396-4828
Pasadena, California 91101
 
7.00% Series D preferred stock: ARE PRD
 
Email:
 
 
 
 
Web:
www.are.com
 
 
 
 
 
 
Equity Research Coverage
Alexandria is currently covered by the following research analysts. This list may not be complete and is subject to change as firms initiate or discontinue coverage of our company. Please note that any opinions, estimates, or forecasts regarding our historical or predicted performance made by these analysts are theirs alone and do not represent opinions, estimates, or forecasts of Alexandria or its management. Alexandria does not by its reference or distribution of the information below imply its endorsement of or concurrence with any opinions, estimates, or forecasts of these analysts. Interested persons may obtain copies of analysts’ reports on their own as we do not distribute these reports. Several of these firms may, from time to time, own our stock and/or hold other long or short positions in our stock and may provide compensated services to us.
Bank of America Merrill Lynch
 
Citigroup Global Markets Inc.
 
J.P. Morgan Securities LLC
 
Robert W. Baird & Co. Incorporated
Jamie Feldman / Jeffrey Spector
 
Michael Bilerman / Emmanuel Korchman
 
Anthony Paolone / Gene Nusinzon
 
David Rodgers / Richard Schiller
(646) 855-5808 / (646) 855-1363
 
(212) 816-1383 / (212) 816-1382
 
(212) 622-6682 / (212) 622-1041
 
(216) 737-7341 / (312) 609-5485
 
 
 
 
 
 
 
Barclays Capital Inc.
 
Evercore ISI
 
Mitsubishi UFJ Securities (USA), Inc.
 
UBS Securities LLC
Ross Smotrich / Linda Tsai
 
Sheila McGrath / Nathan Crossett
 
Karin Ford / Ryan Cybart
 
Nick Yulico / Frank Lee
(212) 526-2306 / (212) 526-9937
 
(212) 497-0882 / (212) 497-0870
 
(212) 405-7349 / (212) 405-6591
 
(212) 713-3402 / (415) 352-5679
 
 
 
 
 
 
 
BTIG, LLC
 
Green Street Advisors, Inc.
 
Mizuho Securities USA Inc.
 
 
Thomas Catherwood / James Sullivan
 
Jed Reagan / Daniel Ismail
 
Richard Anderson / Zachary Silverberg
 
 
(212) 738-6140 / (212) 738-6139
 
(949) 640-8780 / (949) 640-8780
 
(212) 205-8445 / (212) 205-7855
 
 
 
 
 
 
 
 
 
CFRA
 
JMP Securities – JMP Group, Inc.
 
RBC Capital Markets
 
 
Kenneth Leon
 
Peter Martin / Brian Riley
 
Michael Carroll / Brian Hawthorne
 
 
(212) 438-4638
 
(415) 835-8904 / (415) 835-8908
 
(440) 715-2649 / (440) 715-2653
 
 


Rating Agencies
Moody’s Investors Service
 
S&P Global Ratings
Philip Kibel / Reed Valutas
 
Fernanda Hernandez / Anita Ogbara
(212) 553-4402 / (212) 553-4169
 
(212) 438-1347 / (212) 438-5077

 
13

 
 
 
p2017headerlogo.jpg
High-Quality, Diversified, and Innovative Tenants
March 31, 2017
 
 



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


Investment-Grade Tenants
 
Tenant Mix by Annual Rental Revenue(1)
51%
 
q117clienttenantmix4s.jpg
 
of ARE’s Total
Annual Rental Revenue(1)
 











(1)
Represents annual rental revenue in effect as of March 31, 2017.

 
14

 
 
 
p2017headerlogo.jpg
Class A Properties in AAA Locations
March 31, 2017
 
 


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

Class A Properties in
AAA Locations
 
AAA Locations
79%
 
q117realestatemetrics4s.jpg
 
of ARE’s
Annual Rental Revenue(1)
 
 
 
 
Percentage of ARE’s Annual Rental Revenue (1)




(1)
Represents annual rental revenue in effect as of March 31, 2017.

 
15

 
 
 
p2017headerlogo.jpg
Occupancy
March 31, 2017
 
 



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

Solid Historical Occupancy (1)
 
Occupancy of Operating Properties
across Key Locations as of March 31, 2017
95%
 
q117occupancy4s.jpg
 
Over 10 Years
 











(1)
Average occupancy of operating properties in North America as of each December 31 for the last 10 years and as of March 31, 2017.

 
16

 
 
Financial and Asset Base Highlights
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands, except per share amounts)
 
 

 
 
Three Months Ended (unless stated otherwise)
 
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
3/31/16
Selected financial data from consolidated financial statements and related information
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA – quarter annualized
 
$
723,764

 
$
662,836

 
$
614,668

 
$
601,048

 
$
564,804

Adjusted EBITDA – trailing 12 months
 
$
650,579

 
$
610,839

 
$
591,646

 
$
579,880

 
$
562,454

Adjusted EBITDA margins
 
67%

 
67%

 
67%

 
66%

 
65%

Operating margins
 
72%

 
71%

 
69%

 
70%

 
70%

 
 
 
 
 
 
 
 
 
 
 
Net debt (excluding unamortized deferred financing costs) at end of period
 
$
4,292,773

 
$
4,052,576

 
$
4,186,180

 
$
3,881,708

 
$
3,958,891

Net debt to Adjusted EBITDA – quarter annualized
 
5.9x

 
6.1x

 
6.8x

 
6.5x

 
7.0x

Net debt to Adjusted EBITDA – trailing 12 months
 
6.6x

 
6.6x

 
7.1x

 
6.7x

 
7.0x

Net debt and preferred stock to Adjusted EBITDA – quarter annualized
 
6.0x

 
6.4x

 
7.3x

 
7.0x

 
7.6x

Net debt and preferred stock to Adjusted EBITDA – trailing 12 months
 
6.7x

 
7.0x

 
7.6x

 
7.2x

 
7.6x

 
 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio – quarter annualized
 
4.1x

 
3.8x

 
3.6x

 
3.6x

 
3.5x

Fixed-charge coverage ratio – trailing 12 months
 
3.8x

 
3.6x

 
3.6x

 
3.6x

 
3.5x

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

 
82%

 
87%

 
87%

 
82%

 
 
 
 
 
 
 
 
 
 
 
Closing stock price at end of period
 
$
110.52

 
$
111.13

 
$
108.77

 
$
103.52

 
$
90.89

Common shares outstanding (in thousands) at end of period
 
89,884

 
87,666

 
76,824

 
76,615

 
72,874

Total equity capitalization at end of period
 
$
10,037,702

 
$
9,991,832

 
$
8,717,246

 
$
8,326,096

 
$
7,008,376

Total market capitalization at end of period
 
$
14,468,388

 
$
14,155,857

 
$
13,046,340

 
$
12,442,633

 
$
11,099,875

 
 
 
 
 
 
 
 
 
 
 
Dividend per share – quarter/annualized
 
$0.83/$3.32

 
$0.83/$3.32

 
$0.80/$3.20

 
$0.80/$3.20

 
$0.80/$3.20

Dividend payout ratio for the quarter
 
57%

 
63%

 
57%

 
61%

 
60%

Dividend yield – annualized
 
3.0%

 
3.0%

 
2.9%

 
3.1%

 
3.5%

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

 
0.6%

 
0.7%

 
0.7%

 
0.7%

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

 
6.9%

 
6.9%

 
6.9%

 
7.0%

 
 
 
 
 
 
 
 
 
 
 
Capitalized interest
 
$
13,164

 
$
11,659

 
$
14,903

 
$
13,788

 
$
12,099

Weighted-average interest rate for capitalization of interest during period
 
3.95%

 
3.72%

 
3.78%

 
3.70%

 
3.60%

 
 
 
 
 
 
 
 
 
 
 
 

 
17

 
 
Financial and Asset Base Highlights (continued)
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands, except annual rental revenue per occupied RSF amounts)
 
 

 
 
Three Months Ended (unless stated otherwise)
 
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
3/31/16
Amounts included in funds from operations and non-revenue-enhancing capital expenditures
 
 
 
 
 
 
 
 
 
 
Straight-line rent revenue
 
$
35,592

(1) 
$
20,993

 
$
16,111

 
$
2,430

 
$
12,138

Amortization of acquired below-market leases
 
$
5,359

 
$
2,818

 
$
965

 
$
966

 
$
974

Straight-line rent on ground leases
 
$
198

 
$
557

 
$
(1,331
)
 
$
777

 
$
592

Stock compensation expense
 
$
5,252

 
$
6,426

 
$
7,451

 
$
6,117

 
$
5,439

Amortization of loan fees
 
$
2,895

 
$
3,080

 
$
3,080

 
$
2,953

 
$
2,759

Amortization of debt premiums
 
$
596

 
$
383

 
$
5

 
$
26

 
$
86

Non-revenue-enhancing capital expenditures:
 
 
 
 
 
 
 
 
 
 
Building improvements
 
$
1,138

 
$
2,135

 
$
1,920

 
$
2,833

 
$
2,318

Tenant improvements and leasing commissions
 
$
18,377

(2) 
$
11,614

 
$
10,289

 
$
9,041

 
$
2,475

 
 
 
 
 
 
 
 
 
 
 
Operating statistics and related information (at end of period)
 
 
 
 
 
 
 
 
 
 
Number of properties – North America
 
199

 
199

 
189

 
189

 
190

RSF (including development and redevelopment projects under construction) – North America
 
20,084,195

 
19,869,729

 
18,820,579

 
18,819,315

 
18,903,424

Total square feet – North America (see details on page 32)
 
28,176,780

 
25,162,360

 
24,499,286

 
24,400,303

 
24,509,859

Annual rental revenue per occupied RSF – North America
 
$
45.94

 
$
45.15

 
$
43.39

 
$
42.06

 
$
41.67

Occupancy of operating properties – North America
 
95.5%

 
96.6%

 
97.1%

 
97.0%

 
97.3%

Occupancy of operating and redevelopment properties – North America
 
94.7%

 
95.7%

 
94.4%

 
93.9%

 
93.8%

 
 
 
 
 
 
 
 
 
 
 
Total leasing activity – RSF
 
1,320,781

 
1,501,376

 
683,307

 
816,512

 
388,872

Lease renewals and re-leasing of space – change in average new rental rates over expiring rates:
 
 
 
 
 
 
 
 
 
 
Rental rate increases
 
27.8%


25.8%

 
28.2%

 
27.1%

 
33.6%

Rental rate increases (cash basis)
 
17.7%

 
9.5%

 
16.2%

 
9.3%

 
16.9%

RSF (included in total leasing activity above)
 
878,863

 
671,222

 
592,776

 
647,268

 
218,342

 
 
 
 
 
 
 
 
 
 
 
Same property – percentage change over comparable quarter from prior year:
 
 
 
 
 
 
 
 
 
 
Net operating income increase
 
2.6%

 
3.2%

 
5.3%

 
4.9%

 
5.3%

Net operating income increase (cash basis)
 
5.5%

 
4.9%

 
6.1%

 
6.4%

 
6.2%

 
 
 
 
 
 
 
 
 
 
 
(1)    The increase from 4Q16 relates primarily to free rent granted on our 1455 and 1515 Third Street, 10290 Campus Point Drive, and 4796 Executive Drive projects placed into service during 4Q16. We expect a decline in straight-line rent revenue from 1Q17 to 2Q17 primarily related to the increase in contractual cash rents at our 75/125 Binney Street and 50 and 60 Binney Street properties by approximately $10.0 million per quarter, or $40.0 million annually, as a result of the end of previously granted free rent.
(2)    Increase from 4Q16 primarily relates to tenant improvements granted and leasing commissions incurred for leases executed that generated average increases in rental rates of 25.9% and 17.4% (cash basis), respectively. Includes approximately $3.8 million, or $4.30 per square foot, related to base building work to be performed by tenants for enhancements to common areas and building energy efficiency projects at two of our properties in Cambridge.
 

 
18

 
 
 
p2017headerlogo.jpg
Key Operating Metrics
March 31, 2017
 
 

Favorable Lease Structure (1)
 
Same Property Net Operating Income Increases
 
 
 
q117samepropa4s.jpg
q117samepropb4s.jpg
 
Stable cash flows
 
 
 
 
Percentage of triple
net leases
 
97%
 
 
Increasing cash flows
 
 
 
 
Percentage of leases containing
annual rent escalations
96%
 
 
Lower capex burden
 
 
 
 
Percentage of leases providing for the
recapture of capital expenditures
95%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Margins (2)
 
Rental Rate Increases:
Renewed/Re-Leased Space
 
 
 
 
 
 
 
 
 
q117rentalratea4s.jpg
q117rentalrateb4s.jpg
 
Adjusted EBITDA
 
 
 
Operating
 
 
67%
 
 
 
72%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Percentages calculated based on RSF as of March 31, 2017.
(2)
Represents the three months ended March 31, 2017.

 
19

 
 
 
p2017headerlogo.jpg
Same Property Performance
March 31, 2017
 
 

Same Property Financial Data
 
1Q17
 
Same Property Statistical Data
 
1Q17
 
Percentage change over comparable period from prior year:
 
 
 
Number of same properties
 
166
 
Net operating income increase
 
2.6%
 
Rentable square feet
 
14,385,549
 
Net operating income increase (cash basis)
 
5.5%
 
Occupancy – current-period average
 
96.5%
(1) 
Operating margin
 
71%
 
Occupancy – same-period prior-year average
 
97.1%
 

 
 
Three Months Ended March 31,
 
 
 
2017
 
2016
 
$ Change
 
% Change
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
$
151,620

 
$
146,917

 
$
4,703

 
3.2
%
 
Non-same properties
 
55,573

 
11,359

 
44,214

 
389.2

 
Total rental
 
207,193

 
158,276

 
48,917

 
30.9

 
 
 
 
 
 
 
 
 
 
 
Same properties
 
50,415

 
48,148

 
2,267

 
4.7

 
Non-same properties
 
10,931

 
4,449

 
6,482

 
145.7

 
Total tenant recoveries
 
61,346

 
52,597

 
8,749

 
16.6

 
 
 
 
 
 
 
 
 
 
 
Same properties
 
141

 
9

 
132

 
1,466.7

 
Non-same properties
 
2,197

 
5,207

 
(3,010
)
 
(57.8
)
 
Total other income
 
2,338

 
5,216

 
(2,878
)
 
(55.2
)
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
202,176

 
195,074

 
7,102

 
3.6

 
Non-same properties
 
68,701

 
21,015

 
47,686

 
226.9

 
Total revenues
 
270,877

 
216,089

 
54,788

 
25.4

 
 
 
 
 
 
 
 
 
 
 
Same properties
 
59,449

 
55,949

 
3,500

 
6.3

 
Non-same properties
 
17,638

 
9,888

 
7,750

 
78.4

 
Total rental operations
 
77,087

 
65,837

 
11,250

 
17.1

 
 
 
 
 
 
 
 
 
 
 
Same properties
 
142,727

 
139,125

 
3,602

 
2.6

 
Non-same properties
 
51,063

 
11,127

 
39,936

 
358.9

 
Net operating income
 
$
193,790

 
$
150,252

 
$
43,538

 
29.0
%
 
 
 
 
 
 
 
 
 
 
 
Net operating income – same properties
 
$
142,727

 
$
139,125

 
$
3,602

 
2.6
%
 
Straight-line rent revenue and amortization of acquired
below-market leases
 
(8,044
)
 
(11,456
)
 
3,412

 
(29.8
)
 
Net operating income – same properties (cash basis)
 
$
134,683

 
$
127,669

 
$
7,014

 
5.5
%
 
 
 
 
 
 
 
 
 
 
 


(1)
The decline in Same Property occupancy from 1Q16 primarily relates to 125,409 RSF vacated in 1Q17 by Eli Lilly and Company at 10300 Campus Point Drive located in our University Town Center submarket. Eli Lilly and Company relocated and expanded into 305,006 RSF at our recently delivered redevelopment project at 10290 Campus Point Drive, a non-same property, in December 2016. Additionally, 59,838 RSF became vacant in 1Q17 at 930 Clopper Road located in our Gaithersburg submarket. We are actively marketing these spaces for lease.

 
20

 
 
 
p2017headerlogo.jpg
Leasing Activity
March 31, 2017
 
 

 
 
Three Months Ended
 
Year Ended
 
 
March 31, 2017
 
December 31, 2016
(Dollars are per RSF)
 
Including
Straight-Line Rent
 
Cash Basis
 
Including
Straight-Line Rent
 
Cash Basis
Leasing activity:
 
 
 
 
 
 
 
 
Renewed/re-leased space (1)
 
 
 
 
 
 
 
 
Rental rate changes
 
27.8%

 
17.7%

 
27.6%

 
12.0%

New rates
 
$
54.59

 
$
50.03

 
$
48.60

 
$
45.83

Expiring rates
 
$
42.72

 
$
42.49

 
$
38.09

 
$
40.92

Rentable square footage
 
878,863

 
 
 
2,129,608

 
 
Number of leases
 
41

 
 
 
126

 
 
Tenant improvements/leasing commissions
 
$
20.91

(2) 
 
 
$
15.69

 
 
Weighted-average lease term
 
6.2 years

 
 
 
5.5 years

 
 
 
 
 
 
 
 
 
 
 
Developed/redeveloped/previously vacant space leased
 
 
 
 
 
 
 
 
New rates
 
$
23.13

(3) 
$
14.55

(3) 
$
50.24

 
$
38.72

Rentable square footage
 
441,918

(3) 
 
 
1,260,459

 
 
Number of leases
 
16

 
 
 
53

 
 
Tenant improvements/leasing commissions
 
$
2.51

 
 
 
$
12.42

 
 
Weighted-average lease term
 
15.3 years

 
 
 
32.6 years

 
 
 
 
 
 
 
 
 
 
 
Leasing activity summary (totals):
 
 
 
 
 
 
 
 
New rates
 
$
44.06

 
$
38.16

 
$
49.21

 
$
43.19

Rentable square footage
 
1,320,781

(4) 
 
 
3,390,067

 
 
Number of leases
 
57

(5) 
 
 
179

 
 
Tenant improvements/leasing commissions
 
$
14.75

 
 
 
$
14.48

 
 
Weighted-average lease term
 
9.2 years

 
 
 
15.6 years

 
 
 
 
 
 
 
 
 
 
 
Lease expirations: (1)
 
 
 
 
 
 
 
 
Expiring rates
 
$
40.50

 
$
40.53

 
$
36.70

 
$
39.32

Rentable square footage
 
1,144,838

 
 
 
2,484,169

 
 
Number of leases
 
49

 
 
 
166

 
 

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

(1)
Excludes 21 month-to-month leases for 35,665 RSF and 20 month-to-month leases for 31,207 RSF as of March 31, 2017, and December 31, 2016, respectively.
(2)
Includes approximately $3.8 million, or $4.30 per square foot, related to base building work to be performed by tenants for enhancements to common areas and building energy efficiency projects at two of our properties in Cambridge.
(3)
1Q17 amounts reflect our lease of the existing 232,470 RSF with a leading tennis and fitness facility at 88 Bluxome Street in our Mission Bay/SoMa submarket of San Francisco. Excluding this lease, new rental rates on developed/redeveloped/previously vacant space were $30.60 and $27.84 (cash basis) on 209,448 RSF of total developed/redeveloped/previously vacant space leasing activity.
(4)
During the three months ended March 31, 2017, we granted tenant concessions/free rent averaging 2.6 months with respect to the 1,320,781 RSF leased.
(5)
Approximately 68% of the 57 leases executed during the three months ended March 31, 2017, did not include concessions for free rent.

 
21

 
 
 
p2017headerlogo.jpg
Contractual Lease Expirations
March 31, 2017
 
 

Year
 
Number of Leases
 
RSF
 
Percentage of
Occupied RSF
 
Annual Rental Revenue
(per RSF)
 
Percentage of Total
Annual Rental Revenue
 
2017
 
 
59

(1) 
 
 
593,561

(1) 
 
 
3.4
%
(1) 
 
 
$
31.79

(1) 
 
 
2.7
%
(1) 
 
2018
 
 
117

 
 
 
1,426,548

 
 
 
8.1
%
 
 
 
$
38.83

 
 
 
7.0
%
 
 
2019
 
 
83

 
 
 
1,454,711

 
 
 
8.3
%
 
 
 
$
41.03

 
 
 
7.5
%
 
 
2020
 
 
90

 
 
 
1,892,243

 
 
 
10.7
%
 
 
 
$
38.79

 
 
 
9.2
%
 
 
2021
 
 
74

 
 
 
1,629,965

 
 
 
9.2
%
 
 
 
$
42.46

 
 
 
8.7
%
 
 
2022
 
 
57

 
 
 
1,193,068

 
 
 
6.8
%
 
 
 
$
46.09

 
 
 
6.9
%
 
 
2023
 
 
33

 
 
 
1,618,375

 
 
 
9.2
%
 
 
 
$
42.78

 
 
 
8.7
%
 
 
2024
 
 
20

 
 
 
1,121,672

 
 
 
6.4
%
 
 
 
$
45.17

 
 
 
6.4
%
 
 
2025
 
 
15

 
 
 
453,982

 
 
 
2.6
%
 
 
 
$
48.45

 
 
 
2.8
%
 
 
2026
 
 
17

 
 
 
716,922

 
 
 
4.1
%
 
 
 
$
43.85

 
 
 
4.0
%
 
 
Thereafter
 
 
49

 
 
 
5,527,161

 
 
 
31.2
%
 
 
 
$
51.99

 
 
 
36.1
%
 
 

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

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

Negotiating/
Anticipating

Targeted for
Redevelopment

Remaining
Expiring Leases
 
Total

 
 
 
 
 
 
 
 



 

 
Greater Boston
 
8,893

 
 
42,054

 
—

 
62,329

 
113,276

 
$
41.27

 
18,263


71,025


—


 
426,774

(2) 
 
516,062


$
50.54

 
San Francisco
 
68,079

 
 
—

 
—

 
1,184

 
69,263

 
58.75

 
34,623


—


—


 
268,641


 
303,264


42.17

 
New York City
 
—

 
 
—

 
—

 
15,919

 
15,919

 
N/A

 
—


—


—


 
4,941


 
4,941


 N/A

 
San Diego
 
129,687

(3) 
 
11,932

 
—

 
50,776


192,395

 
27.04

 
15,611


—


—

 
 
240,341

 
 
255,952


33.88

 
Seattle
 
22,471

 
 
—

 
—

 
6,180

 
28,651

 
47.69

 
7,770


—


—


 
15,264


 
23,034


49.04

 
Maryland
 
—

 
 
24,027

 
—

 
3,868

 
27,895

 
19.03

 
—


4,925


—


 
167,411


 
172,336


15.20

 
Research Triangle Park
 
53,167

 
 
33,916

 
—

 
31,714

 
118,797

 
16.01

 
—


—


—


 
59,666


 
59,666


26.28

 
Canada
 
—

 
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
80,689

 
 
80,689

 
20.71

 
Non-cluster markets
 
—

 
 
—

 
—

 
27,365

 
27,365

 
22.58

 
—


—


—


 
10,604


 
10,604


26.58

 
Total
 
282,297

 
 
111,929

 
—

 
199,335

 
593,561

 
$
31.79

 
76,267


75,950


—


 
1,274,331


 
1,426,548


$
38.83

 
Percentage of expiring leases
 
48
%
 
 
19
%
 
—
%
 
33
%
 
100
%
 
 
 
5
%
 
5
%
 
—
%
 
 
90
%

 
100
%


 
 

Lease expirations include 100% of RSF for each property managed by us in North America. Annual rental revenue (per RSF) represents amounts in effect as of March 31, 2017.


(1)
Excludes 21 month-to-month leases for 35,665 RSF.
(2)
Includes 297,191 RSF located in our Cambridge submarket for our remaining expiring leases in 2018.
(3)    Includes one lease aggregating 109,780 RSF that was renewed in April 2017.


 
22

 
 
Top 20 Tenants
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 

78% of Top 20 Annual Rental Revenue from Investment-Grade Tenants
 
 
Tenant
 
Remaining Lease Term in Years (1)
 
Aggregate
RSF
 
Annual Rental Revenue (1)
 
Percentage of Aggregate Annual Rental Revenue (1)
 
Investment-Grade Ratings
 
 
 
 
 
 
 
 
 
 
 
 
Moody’s
 
S&P
1
 
Illumina, Inc.
 
 
13.2

 
 
 
891,495

 
 
$
31,301

 
3.9
%
 
—
 
BBB
2
 
Takeda Pharmaceutical Company Ltd.
 
 
13.0

 
 
 
386,111

 
 
30,051

 
3.7

 
 A1
 
A-
3
 
Eli Lilly and Company
 
 
12.6

 
 
 
469,266

 
 
29,342

 
3.6

 
A2
 
AA-
4
 
Novartis AG
 
 
9.6

 
 
 
377,831

 
 
28,630

 
3.5

 
Aa3
 
AA-
5
 
Sanofi
 
 
10.7


 
 
446,975

 
 
25,163

 
3.1

 
A1
 
AA
6
 
bluebird bio, Inc.
 
 
8.9

 
 
 
338,911

 
 
23,566

 
2.9

 
—
 
—
7
 
Uber Technologies, Inc.
 
 
75.7

 
 
 
422,980

 
 
22,107

 
2.7

 
—
 
—
8
 
New York University
 
 
13.4

 
 
 
209,224

 
 
20,651

 
2.5

 
Aa3
 
AA-
9
 
Dana-Farber Cancer Institute, Inc.
 
 
13.6

 
 
 
254,130

 
 
19,512

 
2.4

 
A1
 
—
10
 
Roche
 
 
4.9

 
 
 
343,861

 
 
17,597

 
2.2

 
A1
 
AA
11
 
Amgen Inc.
 
 
7.0

 
 
 
407,369

 
 
16,838

 
2.1

 
Baa1
 
A
12
 
Massachusetts Institute of Technology
 
 
8.2

 
 
 
256,126

 
 
16,554

 
2.0

 
Aaa
 
AAA
13
 
United States Government
 
 
8.2

 
 
 
263,147

 
 
14,816

 
1.8

 
Aaa
 
AA+
14
 
Celgene Corporation
 
 
6.4

 
 
 
344,320

 
 
14,608

 
1.8

 
Baa2
 
BBB+
15
 
FibroGen, Inc.
 
 
6.6

 
 
 
234,249

 
 
14,198

 
1.7

 
—
 
—
16
 
Biogen Inc.
 
 
11.5

 
 
 
305,212

 
 
13,278

 
1.6

 
Baa1
 
A-
17
 
Juno Therapeutics, Inc.
 
 
12.0

 
 
 
241,276

 
 
12,619

 
1.6

 
—
 
—
18
 
Merrimack Pharmaceuticals, Inc.
 
 
2.3

 
 
 
167,167

 
 
11,246

 
1.4

 
—
 
—
19
 
Bristol-Myers Squibb Company
 
 
1.9

 
 
 
251,316

 
 
10,743

 
1.3

 
A2
 
A+
20
 
The Regents of the University of California
 
 
6.4

 
 
 
233,527

 
 
10,707

 
1.3

 
Aa2
 
AA
 
 
Total/weighted average
 
 
13.6

(2) 
 
 
6,844,493

 
 
$
383,527

 
47.1
%
 
 
 
 

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

(1)
Based on percentage of aggregate annual rental revenue in effect as of March 31, 2017.
(2)
Excluding Uber Technologies, Inc., the weighted-average remaining lease term for our top 20 tenants is 9.8 years.

 
23

 
 
Summary of Properties and Occupancy
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands, except per RSF amounts)
 
 

Summary of properties
Market
 
RSF
 
Number of Properties
 
Annual Rental Revenue
 
 
Operating
 
Development
 
Redevelopment
 
Total
 
% of Total
 
 
Total
 
% of Total
 
Per RSF
 
Greater Boston
 
5,852,281

 
431,483

 
—

 
6,283,764

 
31
%
 
51

 
$
334,603

 
41
%
 
$
59.50

 
San Francisco
 
3,441,926

 
747,355

 
—

 
4,189,281

 
21

 
31

 
153,943

 
19

 
44.81

 
New York City
 
727,674

 
—

 
—

 
727,674

 
4

 
2

 
62,011

 
8

 
87.12

 
San Diego
 
3,826,635

 
202,187

 
162,156

 
4,190,978

 
21

 
52

 
128,395

 
16

 
36.89

 
Seattle
 
989,085

 
48,835

 
—

 
1,037,920

 
5

 
11

 
46,484

 
5

 
47.88

 
Maryland
 
2,085,196

 
—

 
—

 
2,085,196

 
11

 
28

 
49,711

 
6

 
25.74

 
Research Triangle Park
 
1,043,726

 
—

 
—

 
1,043,726

 
5

 
15

 
23,775

 
3

 
23.36

 
Canada
 
256,967

 
—

 
—

 
256,967

 
1

 
3

 
6,474

 
1

 
25.41

 
Non-cluster markets
 
268,689

 
—

 
—

 
268,689

 
1

 
6

 
6,052

 
1

 
25.48

 
North America
 
18,492,179

 
1,429,860

 
162,156

 
20,084,195

 
100
%
 
199

 
$
811,448

 
100
%
 
$
45.94

 

RSF, number of properties, and annual rental revenue include 100% of each property managed by us in North America. Annual rental revenue amounts represent amounts in effect as of March 31, 2017.

Summary of occupancy
 
 
Operating Properties
 
Operating and Redevelopment Properties
Market
 
3/31/17
 
12/31/16
 
3/31/16
 
3/31/17
 
12/31/16
 
3/31/16
Greater Boston
 
96.1
%
 
96.2
%
 
97.6
%
 
96.1
%
 
96.2
%
 
96.3
%
San Francisco
 
99.8

 
99.9

 
100.0

 
99.8

 
99.9

 
100.0

New York City
 
97.8

 
97.3

 
99.7

 
97.8

 
97.3

 
99.7

San Diego
 
91.0

(1) 
94.3

 
94.5

 
87.3

(1) 
90.4

 
80.1

Seattle
 
98.2

 
97.6

 
99.2

 
98.2

 
97.6

 
99.2

Maryland
 
92.6

(2) 
95.8

 
95.9

 
92.6

(2) 
95.8

 
95.9

Research Triangle Park
 
97.5

 
99.0

 
98.6

 
97.5

 
99.0

 
98.6

Subtotal
 
95.6

 
96.7

 
97.5

 
94.7

 
95.8

 
93.8

Canada
 
99.2

 
99.2

 
99.3

 
99.2

 
99.2

 
99.3

Non-cluster markets
 
88.4

 
87.7

 
88.1

 
88.4

 
87.7

 
88.1

North America
 
95.5
%
 
96.6
%
 
97.3
%
 
94.7
%
 
95.7
%
 
93.8
%
Occupancy includes 100% of each property managed by us in North America.

(1)
The decline from 4Q16 primarily relates to 125,409 RSF vacated in 1Q17 by Eli Lilly and Company (“Eli Lilly”) at 10300 Campus Point Drive located in our University Town Center submarket. Eli Lilly and Company relocated and expanded into 305,006 RSF at 10290 Campus Point Drive in December 2016. We are in negotiations with a tenant to lease 86,010 RSF.
(2)
The decline from 4Q16 primarily relates to 59,838 RSF that became vacant at 930 Clopper Road located in our Gaithersburg submarket. We are actively marketing the property for lease and do not anticipate significant additional capital to be invested to re-tenant the space.

 
24

 
 
Property Listing
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
 
Greater Boston
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cambridge/Inner Suburbs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® at Kendall Square
 
1,648,700

 
431,483

 
—

 
2,080,183

 
9
 
$
104,245

 
98.9
%
 
98.9
%
 
 
 
50, 60, 75/125, and 100 Binney Street, 161 and 215 First Street,150 Second Street, 300 Third Street, and 11 Hurley Street
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
225 Binney Street (consolidated joint venture – 30% ownership)
 
305,212

 
—

 
—

 
305,212

 
1
 
13,278

 
100.0

 
100.0

 
 
 
Alexandria Technology Square®
 
1,181,635

 
—

 
—

 
1,181,635

 
7
 
82,397

 
99.1

 
99.1

 
 
 
100, 200, 300, 400, 500, 600, and 700 Technology Square
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® at One Kendall Square
 
644,771

 
—

 
—

 
644,771

 
9
 
49,060

 
97.0

 
97.0

 
 
 
480 and 500 Arsenal Street
 
234,260

 
—

 
—

 
234,260

 
2
 
9,539

 
100.0

 
100.0

 
 
 
640 Memorial Drive
 
225,504

 
—

 
—

 
225,504

 
1
 
13,730

 
100.0

 
100.0

 
 
 
780 and 790 Memorial Drive
 
99,658

 
—

 
—

 
99,658

 
2
 
7,338

 
100.0

 
100.0

 
 
 
167 Sidney Street and 99 Erie Street
 
54,549

 
—

 
—

 
54,549

 
2
 
3,656

 
100.0

 
100.0

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

 
—

 
—

 
25,309

 
1
 
620

 
100.0

 
100.0

 
 
 
Cambridge/Inner Suburbs
 
4,419,598

 
431,483

 
—

 
4,851,081

 
34
 
283,863

 
98.9

 
98.9

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

 
—

 
—

 
413,799

 
1
 
23,713

 
75.7

 
75.7

 
 
Route 128
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Park at 128
 
343,882

 
—

 
—

 
343,882

 
8
 
9,546

 
93.8

 
93.8

 
 
 
3 and 6/8 Preston Court, 29, 35, and 44 Hartwell Avenue,
35 and 45/47 Wiggins Avenue, and 60 Westview Street
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19 Presidential Way
 
144,892

 
—

 
—

 
144,892

 
1
 
3,052

 
59.8

 
59.8

 
 
 
225 Second Avenue
 
113,860

 
—

 
—

 
113,860

 
1
 
5,115

 
100.0

 
100.0

 
 
 
100 Beaver Street
 
82,330

 
—

 
—

 
82,330

 
1
 
3,104

 
100.0

 
100.0

 
 
 
285 Bear Hill Road
 
26,270

 
—

 
—

 
26,270

 
1
 
1,167

 
100.0

 
100.0

 
 
 
Route 128
 
711,234

 
—

 
—

 
711,234

 
12
 
21,984

 
88.8

 
88.8

 
 
Route 495
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
111 and 130 Forbes Boulevard
 
155,846

 
—

 
—

 
155,846

 
2
 
1,629

 
100.0

 
100.0

 
 
 
20 Walkup Drive
 
91,045

 
—

 
—

 
91,045

 
1
 
649

 
100.0

 
100.0

 
 
 
30 Bearfoot Road
 
60,759

 
—

 
—

 
60,759

 
1
 
2,765

 
100.0

 
100.0

 
 
 
Route 495
 
307,650

 
—

 
—

 
307,650

 
4
 
5,043

 
100.0

 
100.0

 
 
 
Greater Boston
 
5,852,281

 
431,483

 
—

 
6,283,764

 
51
 
$
334,603

 
96.1
%
 
96.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

RSF, annual rental revenue, and occupancy percentage include 100% of each property managed by us in North America. Annual rental revenue amounts represent amounts in effect as of March 31, 2017.
 

 
25

 
 
Property Listing (continued)
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
 
San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mission Bay/SoMa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
409 and 499 Illinois Street (consolidated joint venture – 60% ownership)
 
455,069

 
—

 
—

 
455,069

 
2
 
$
28,203

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

 
—

 
—

 
422,980

 
2
 
22,107

 
100.0

 
100.0

 
 
 
510 Townsend Street
 
—

 
300,000

 
—

 
300,000

 
1
 
—

 
—

 
—

 
 
 
88 Bluxome Street
 
232,470

 
—

 
—

 
232,470

 
1
 
3,813

 
100.0

 
100.0

 
 
 
455 Mission Bay Boulevard South
 
210,398

 
—

 
—

 
210,398

 
1
 
10,105

 
100.0

 
100.0

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

 
—

 
—

 
158,267

 
1
 
7,724

 
100.0

 
100.0

 
 
 
1700 Owens Street
 
157,340

 
—

 
—

 
157,340

 
1
 
10,324

 
100.0

 
100.0

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

 
150,000

 
—

 
150,000

 
1
 
—

 
—

 
—

 
 
 
Mission Bay/SoMa
 
1,636,524

 
450,000

 
—

 
2,086,524

 
10
 
82,276

 
100.0

 
100.0

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

 
297,355

 
—

 
704,724

 
4
 
16,838

 
100.0

 
100.0

 
 
 
Alexandria Technology Center® – Gateway
 
448,175

 
—

 
—

 
448,175

 
6
 
17,895

 
100.0

 
100.0

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

 
—

 
—

 
163,035

 
2
 
6,453

 
100.0

 
100.0

 
 
 
500 Forbes Boulevard
 
155,685

 
—

 
—

 
155,685

 
1
 
6,619

 
100.0

 
100.0

 
 
 
7000 Shoreline Court
 
136,395

 
—

 
—

 
136,395

 
1
 
4,582

 
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
 
3,089

 
94.1

 
94.1

 
 
 
South San Francisco
 
1,522,476

 
297,355

 
—

 
1,819,831

 
17
 
59,955

 
99.6

 
99.6

 
 
Greater Stanford
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
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

 
 
 
3350 West Bayshore Road
 
60,000

 
—

 
—

 
60,000

 
1
 
1,919

 
100.0

 
100.0

 
 
 
2625/2627/2631 Hanover Street
 
32,074

 
—

 
—

 
32,074

 
1
 
1,651

 
100.0

 
100.0

 
 
 
Greater Stanford
 
282,926

 
—

 
—

 
282,926

 
4
 
11,712

 
100.0

 
100.0

 
 
 
San Francisco
 
3,441,926

 
747,355

 
—

 
4,189,281

 
31
 
153,943

 
99.8

 
99.8

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

 
—

 
—

 
727,674

 
2
 
62,011

 
97.8

 
97.8

 
 
 
430 and 450 East 29th Street
 
 
 
 
 
 




 
 
 
 
 
 
 
 
 
 
New York City
 
727,674

 
—

 
—

 
727,674

 
2
 
$
62,011

 
97.8
%
 
97.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSF, annual rental revenue, and occupancy percentage include 100% of each property managed by us in North America. Annual rental revenue amounts represent amounts in effect as of March 31, 2017.
 

 
26

 
 
Property Listing (continued)
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Torrey Pines
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Spectrum
 
134,274

 
202,187

 
—

 
336,461

 
3
 
$
5,772

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

 
—

 
—

 
294,993

 
3
 
11,229

 
74.3

 
74.3

 
 
 
10578, 10614, and 10628 Science Center Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Sunrise
 
234,596

 
—

 
—

 
234,596

 
3
 
9,160

 
100.0

 
100.0

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

 
—

 
—

 
223,751

 
4
 
9,284

 
94.4

 
94.4

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

 
—

 
—

 
116,556

 
1
 
4,827

 
100.0

 
100.0

 
 
 
11119 North Torrey Pines Road
 
72,506

 
—

 
—

 
72,506

 
1
 
3,274

 
100.0

 
100.0

 
 
 
Torrey Pines
 
1,076,676

 
202,187

 
—

 
1,278,863

 
15
 
43,546

 
91.8

 
91.8

 
 
University Town Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5200 Illumina Way
 
792,687

 
—

 
—

 
792,687

 
6
 
25,371

 
100.0

 
100.0

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

 
—

 
—

 
754,765

 
2
 
27,801

 
83.4

 
83.4

 
 
 
10290 and 10300 Campus Point Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Towne Centre
 
107,253

 
—

 
162,156

 
269,409

 
4
 
2,048

 
100.0

 
39.8

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

 
—

 
—

 
241,963

 
4
 
9,517

 
96.3

 
96.3

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

 
—

 
—

 
71,510

 
1
 
2,774

 
100.0

 
100.0

 
 
 
University Town Center
 
1,968,178

 
—

 
162,156

 
2,130,334

 
17
 
67,511

 
93.2

 
86.1

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

 
—

 
—

 
138,970

 
2
 
3,950

 
100.0

 
100.0

 
 
 
ARE Portola
 
105,812

 
—

 
—

 
105,812

 
3
 
1,408

 
43.1

 
43.1

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

 
—

 
—

 
102,392

 
2
 
1,987

 
100.0

 
100.0

 
 
 
7330 Carroll Road
 
66,244

 
—

 
—

 
66,244

 
1
 
2,431

 
100.0

 
100.0

 
 
 
5871 Oberlin Drive
 
33,817

 
—

 
—

 
33,817

 
1
 
993

 
100.0

 
100.0

 
 
 
Sorrento Mesa
 
447,235

 
—

 
—

 
447,235

 
9
 
10,769

 
86.5

 
86.5

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

 
—

 
—

 
121,655

 
6
 
2,900

 
92.0

 
92.0

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

 
—

 
—

 
103,111

 
4
 
1,174

 
48.2

 
48.2

 
 
 
Sorrento Valley
 
224,766

 
—

 
—

 
224,766

 
10
 
4,074

 
71.9

 
71.9

 
 
I-15 Corridor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13112 Evening Creek Drive
 
109,780

 
—

 
—

 
109,780

 
1
 
2,495

 
100.0

 
100.0

 
 
 
San Diego
 
3,826,635

 
202,187

 
162,156

 
4,190,978

 
52
 
$
128,395

 
91.0
%
 
87.3
%
 
RSF, annual rental revenue, and occupancy percentage include 100% of each property managed by us in North America.  Annual rental revenue amounts represent amounts in effect as of March 31, 2017.
 

 
27

 
 
Property Listing (continued)
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
 
Seattle
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lake Union
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
400 Dexter Avenue North
 
241,276

 
48,835

 
—

 
290,111

 
1
 
$
12,619

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

 
—

 
—

 
203,369

 
2
 
8,748

 
100.0

 
100.0

 
 
 
1616 Eastlake Avenue East
 
168,708

 
—

 
—

 
168,708

 
1
 
8,396

 
95.4

 
95.4

 
 
 
1551 Eastlake Avenue East
 
117,482

 
—

 
—

 
117,482

 
1
 
4,778

 
100.0

 
100.0

 
 
 
199 East Blaine Street
 
115,084

 
—

 
—

 
115,084

 
1
 
6,188

 
100.0

 
100.0

 
 
 
219 Terry Avenue North
 
30,705

 
—

 
—

 
30,705

 
1
 
1,750

 
100.0

 
100.0

 
 
 
1600 Fairview Avenue East
 
27,991

 
—

 
—

 
27,991

 
1
 
1,138

 
100.0

 
100.0

 
 
 
Lake Union
 
904,615

 
48,835

 
—

 
953,450

 
8
 
43,617

 
99.1

 
99.1

 
 
Elliott Bay
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3000/3018 Western Avenue
 
47,746

 
—

 
—

 
47,746

 
1
 
1,839

 
100.0

 
100.0

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

 
—

 
—

 
36,724

 
2
 
1,028

 
71.1

 
71.1

 
 
 
Elliott Bay
 
84,470

 
—

 
—

 
84,470

 
3
 
2,867

 
87.5

 
87.5

 
 
 
Seattle
 
989,085

 
48,835

 
—

 
1,037,920

 
11
 
46,484

 
98.2

 
98.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rockville
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9800 Medical Center Drive
 
282,436

 
—

 
—

 
282,436

 
4
 
12,573

 
100.0

 
100.0

 
 
 
1330 Piccard Drive
 
131,511

 
—

 
—

 
131,511

 
1
 
2,433

 
75.7

 
75.7

 
 
 
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
 
2,078

 
100.0

 
100.0

 
 
 
1405 Research Boulevard
 
71,669

 
—

 
—

 
71,669

 
1
 
2,104

 
100.0

 
100.0

 
 
 
5 Research Place
 
63,852

 
—

 
—

 
63,852

 
1
 
2,390

 
100.0

 
100.0

 
 
 
9920 Medical Center Drive
 
58,733

 
—

 
—

 
58,733

 
1
 
455

 
100.0

 
100.0

 
 
 
5 Research Court
 
54,906

 
—

 
—

 
54,906

 
1
 
—

 
—

 
—

 
 
 
12301 Parklawn Drive
 
49,185

 
—

 
—

 
49,185

 
1
 
1,329

 
100.0

 
100.0

 
 
 
Rockville
 
889,484

 
—

 
—

 
889,484

 
14
 
25,043

 
90.2

 
90.2

 
 
Gaithersburg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Gaithersburg I
 
377,401

 
—

 
—

 
377,401

 
4
 
7,225

 
82.3

 
82.3

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

 
—

 
—

 
237,137

 
5
 
6,131

 
100.0

 
100.0

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

 
—

 
—

 
63,154

 
1
 
1,438

 
100.0

 
100.0

 
 
 
950 Wind River Lane
 
50,000

 
—

 
—

 
50,000

 
1
 
1,082

 
100.0

 
100.0

 
 
 
620 Professional Drive
 
27,950

 
—

 
—

 
27,950

 
1
 
1,191

 
100.0

 
100.0

 
 
 
Gaithersburg
 
755,642

 
—

 
—

 
755,642

 
12
 
17,067

 
91.2

 
91.2

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

 
—

 
—

 
191,884

 
1
 
2,463

 
100.0

 
100.0

 
 
Northern Virginia
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14225 Newbrook Drive
 
248,186

 
—

 
—

 
248,186

 
1
 
5,138

 
100.0

 
100.0

 
 
 
Maryland
 
2,085,196

 
—

 
—

 
2,085,196

 
28
 
$
49,711

 
92.6
%
 
92.6
%
 

RSF, annual rental revenue, and occupancy percentage include 100% of each property managed by us in North America. Annual rental revenue amounts represent amounts in effect as of March 31, 2017.
 

 
28

 
 
Property Listing (continued)
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 

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

 
—

 
—

 
186,870

 
3
 
$
3,409

 
93.0
%
 
93.0
%
 
 
 
100, 800, and 801 Capitola Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
108/110/112/114 TW Alexander Drive
 
158,417

 
—

 
—

 
158,417

 
1
 
4,607

 
100.0

 
100.0

 
 
 
Alexandria Innovation Center® – Research Triangle Park
 
135,677

 
—

 
—

 
135,677

 
3
 
3,339

 
99.1

 
99.1

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

 
—

 
—

 
100,000

 
1
 
1,272

 
88.5

 
88.5

 
 
 
7 Triangle Drive
 
96,626

 
—

 
—

 
96,626

 
1
 
3,156

 
100.0

 
100.0

 
 
 
407 Davis Drive
 
81,956

 
—

 
—

 
81,956

 
1
 
1,644

 
100.0

 
100.0

 
 
 
2525 East NC Highway 54
 
82,996

 
—

 
—

 
82,996

 
1
 
1,690

 
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
 
2,051

 
100.0

 
100.0

 
 
 
5 Triangle Drive
 
32,120

 
—

 
—

 
32,120

 
1
 
689

 
100.0

 
100.0

 
 
 
6101 Quadrangle Drive
 
30,122

 
—

 
—

 
30,122

 
1
 
539

 
100.0

 
100.0

 
 
 
Research Triangle Park
 
1,043,726

 
—

 
—

 
1,043,726

 
15
 
23,775

 
97.5

 
97.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Canada
 
256,967

 
—

 
—

 
256,967

 
3
 
6,474

 
99.2

 
99.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-cluster markets
 
268,689

 
—

 
—

 
268,689

 
6
 
6,052

 
88.4

 
88.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total – North America
 
18,492,179

 
1,429,860

 
162,156

 
20,084,195

 
199
 
$
811,448

 
95.5
%
 
94.7
%
 
RSF, annual rental revenue, and occupancy percentage include 100% of each property managed by us in North America.  Annual rental revenue amounts represent amounts in effect as of March 31, 2017.

 
29

 
 
 
 
Incremental Annual Net Operating Income from Development and Redevelopment of New Class A Properties
p2017headerlogo.jpg
 
 
March 31, 2017
 
 
 






q117incrementalnoi4s.jpg


(1)
Represents incremental annual net operating income upon stabilization of our development and redevelopment of new Class A properties, including only our share of real estate joint venture projects. RSF and percentage leased represent 100% of each property.
(2)
Delivery of 2016 projects were primarily weighted toward 4Q16.


 
30

 
 
 
p2017headerlogo.jpg
Green Building, Sustainability, and Health and Wellness
March 31, 2017
 
 

q117sustainability.jpg
(1)    Upon completion of 14 in-process LEED certified projects.

 
31

 
 
Investments in Real Estate
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands, except per SF amounts)
 
 


 
 
Investments in Real Estate
 
Occupancy/
Percentage
Leased
 
Square Feet
 
 
 
 
 
Consolidated
 
Unconsolidated
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments in real estate – North America:
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental properties
 
$
9,801,318

 
95.5
%
 
 
 
18,078,380

 
413,799

 
18,492,179

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and redevelopment of New Class A Properties:
 
 
 
 
 
 
 
 
 
 
 
 
 
2017 deliveries
 
675,206

 
83.0
%
 
79.0%
 
1,132,505

 
—

 
1,132,505

 
2018 and 2019 deliveries
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
69,015

 
65.0
%
 
 
459,511

 
—

 
459,511

 
Marketing and pre-construction
 
91,872

 
N/A

 
 
 
1,473,634

 
—

 
1,473,634

 
2019 and beyond – near-term developments
 
111,113

 
N/A

 
 
 
2,010,009

 
—

 
2,010,009

 
Future development projects
 
309,343

 
N/A

 
 
 
4,608,942

 
—

 
4,608,942

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross investments in real estate – North America
 
11,057,867

 
 
 
 
 
27,762,981

 
413,799

 
28,176,780

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less: accumulated depreciation
 
(1,623,228
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investments in real estate – North America
 
9,434,639

 
 
 
 
 
 
 
 
 
 
 
Net investments in real estate – Asia
 
36,028

 
 
 
 
 
 
 
 
 
 
 
Investments in real estate
 
$
9,470,667

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
32

 
 
Solid Pre-Leasing of Ground-Up Developments
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 


Solid Pre-Leased Percentage: 5.2 Million RSF of Ground-Up Developments Commenced Since January 1, 2009

q117prelease.jpg

 
33

 
 
 
 
Development and Redevelopment of New Class A Properties: Recently Placed into Service (Trailing 12 Months)
p2017headerlogo.jpg
 
 
March 31, 2017
 
 
 






50 Binney Street
 
60 Binney Street
 
11 Hurley Street
 
1455 and 1515 Third Street
 
430 East 29th Street
Greater Boston/Cambridge
 
Greater Boston/Cambridge
 
Greater Boston/Cambridge
 
San Francisco/Mission Bay/SoMa
 
New York City/Manhattan
274,734 RSF
 
255,743 RSF
 
59,783 RSF
 
422,980 RSF
 
418,639 RSF
Sanofi Genzyme
 
bluebird bio, Inc.
 
Editas Medicine, Inc.
 
Uber Technologies, Inc.
 
Roche/New York University/Others
q117binney50.jpg
 
q117binney60.jpg
 
q117hurley.jpg
 
q117uber.jpg
 
q117westtower430.jpg

ARE Spectrum
 
10290 Campus Point Drive
 
5200 Illumina Way, Building 6
 
4796 Executive Drive
 
400 Dexter Avenue North
San Diego/Torrey Pines
 
San Diego/University Town Center
 
San Diego/University Town Center
 
San Diego/University Town Center
 
Seattle/Lake Union
31,336 RSF
 
305,006 RSF
 
295,609 RSF
 
61,755 RSF
 
241,276 RSF
The Medicines Company
 
Eli Lilly and Company
 
Illumina, Inc.
 
Otonomy, Inc.
 
Juno Therapeutics, Inc.
q117spectrum.jpg
 
q117campuspoint2.jpg
 
q117illuminawaya.jpg
 
q117executive4796.jpg
 
q117dexter.jpg




 
34

 
 
Development and Redevelopment of New Class A Properties: Recently Placed into Service (Trailing 12 Months) (continued)
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 




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

 
—

 
530,477

 
—

 
—

 
530,477

 
99%
 
530,477
 
$
474,000

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

 
—

 
—

 
422,980

 
—

 
422,980

 
100%
 
422,980
 
$
155,000

 
 
14.5
%
 
 
 
7.0
%
 
 
 
14.4
%
 
430 East 29th Street/
New York City/ Manhattan
 
100%
 
Various
 
356,044

 
62,595

 
—

 
—

 
—

 
418,639

 
100%
 
418,639
 
$
471,000

 
 
7.6
%
 
 
 
7.0
%
 
 
 
7.1
%
 
ARE Spectrum/San Diego/
Torrey Pines
 
100%
 
Various
 
102,938

 
—

 
—

 
—

 
31,336

 
134,274

 
98%
 
336,461
 
$
278,000

 
 
6.9
%
 
 
 
6.1
%
 
 
 
6.4
%
 
5200 Illumina Way, Building 6/
San Diego/University Town Center
 
100%
 
6/20/16
 
—

 
295,609

 
—

 
—

 
—

 
295,609

 
100%
 
295,609
 
$
68,000

 
 
8.8
%
 
 
 
7.2
%
 
 
 
8.6
%
 
4796 Executive Drive/
San Diego/University Town Center
 
100%
 
12/1/16
 
—

 
—

 
—

 
61,755

 
—

 
61,755

 
100%
 
61,755
 
$
41,000

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

 
—

 
—

 
—

 
241,276

 
241,276

 
89%
 
290,111
 
$
232,000

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

 
—

 
59,783

 
—

 
—

 
59,783

 
100%
 
59,783
 
$
36,500

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

 
—

 
—

 
305,006

 
—

 
305,006

 
100%
 
305,006
 
$
231,000

 
 
7.7
%
 
 
 
6.8
%
 
 
 
7.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated joint venture development project
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
360 Longwood Avenue/
Greater Boston/
Longwood Medical Area
 
27.5%
 
Various
 
262,367

 
51,040

 
—

 
100,392

 
—

 
413,799

 
80%
 
413,799
 
$
108,965

 
 
8.2
%
 
 
 
7.3
%
 
 
 
7.8
%
 
Total
 
 
 
 
 
721,349

 
409,244

 
590,260

 
890,133

 
272,612

 
2,883,598

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



 
35

 
 
Development of New Class A Properties: 2017 Deliveries (Undergoing Construction)
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 

100 Binney Street
 
510 Townsend Street
 
505 Brannan Street, Phase I
 
ARE Spectrum
 
400 Dexter Avenue North
Greater Boston/Cambridge
 
San Francisco/Mission Bay/SoMa
 
San Francisco/Mission Bay/SoMa
 
San Diego/Torrey Pines
 
Seattle/Lake Union
431,483 RSF
 
300,000 RSF
 
150,000 RSF
 
202,187 RSF
 
48,835 RSF
Bristol-Myers Squibb Company
 
Stripe, Inc.
 
Pinterest, Inc.
 
Celgene Corporation
Vertex Pharmaceuticals Incorporated
Wellspring Biosciences LLC
 
Juno Therapeutics, Inc.
ClubCorp Holdings, Inc.
q117binney100.jpg
 
q117townsend510.jpg
 
q117brannan505.jpg
 
q117spectrum.jpg
 
q117dexter.jpg

Property/Market/Submarket
 
Project RSF
 
Percentage
 
Project Start
 
Occupancy
 
In Service
 
CIP
 
Total
 
Leased
 
Negotiating
 
Total
 
 
Initial
 
Stabilized
ARE Spectrum/San Diego/Torrey Pines
 
134,274

 
202,187
 
336,461
 
98
%
 
—
%
 
98
%
 
2Q16
 
1Q17
 
4Q17
400 Dexter Avenue North/Seattle/Lake Union
 
241,276

 
48,835
 
290,111
 
89
%
 
11
%
 
100
%
 
2Q15
 
1Q17
 
4Q17
5200 Illumina Way, Parking Structure/San Diego/University Town Center
 
—

 
N/A
 
N/A
 
100
%
 
—
%
 
100
%
 
2Q16
 
2Q17
 
2Q17
510 Townsend Street/San Francisco/Mission Bay/SoMa
 
—

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

 
431,483
 
431,483
 
48
%
 
47
%
 
95
%
 
3Q15
 
4Q17
 
4Q17
505 Brannan Street, Phase I/San Francisco/Mission Bay/SoMa
 
—

 
150,000
 
150,000
 
100
%
 
—
%
 
100
%
 
1Q16
 
4Q17
 
4Q17
Total
 
375,550

 
1,132,505
 
1,508,055
 
83
%
 
15
%
 
98
%
 
 
 
 
 
 

Property/Market/Submarket
 
Our Ownership Interest
 
In Service
 
CIP
 
Cost to Complete
 
Total at Completion
 
Unlevered Yields
 
 
 
 
 
 
Average
 Cash
 
Initial Stabilized Cash Basis
 
Initial Stabilized
 
 
 
 
 
 
 
 
ARE Spectrum/San Diego/Torrey Pines
 
100%
 
$
88,115

 
$
106,506

 
$
83,379

 
$
278,000

 
6.9%
 
6.1%
 
6.4%
400 Dexter Avenue North/Seattle/Lake Union
 
100%
 
160,862

 
28,296

 
42,842

 
 
232,000

 
7.3%
 
6.9%
 
7.2%
5200 Illumina Way, Parking Structure/San Diego/University Town Center
 
100%
 
—

 
34,761

 
35,239

 
 
70,000

 
7.0%
 
7.0%
 
7.0%
510 Townsend Street/San Francisco/Mission Bay/SoMa
 
100%
 
—

 
131,955

 
106,045

 
 
238,000

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

 
296,917

 
226,528

 
 
535,000

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

 
76,771

 
64,229

 
 
141,000

 
8.6%
 
7.0%
 
8.2%
Total
 
 
 
$
260,532

 
$
675,206

 
$
558,262

 
$
1,494,000

 
 
 
 
 
 
 
 
 

 
36

 
 
 
 
Development and Redevelopment of New Class A Properties: 2018 & 2019 Deliveries
(Including Marketing and Pre-Construction Projects)
p2017headerlogo.jpg
 
 
March 31, 2017
 
 
 


399 Binney Street
 
161 First Street
 
1655 and 1715 Third Street
 
213 East Grand Avenue
Greater Boston/Cambridge
 
Greater Boston/Cambridge
 
San Francisco/Mission Bay/SoMa
 
San Francisco/South San Francisco
172,500 SF
 
183,644 SF
 
580,000 SF
 
297,355 RSF
q117binney399.jpg
 
q1171616first.jpg
 
q117gsw.jpg
 
q117grand213.jpg
279 East Grand Avenue
 
9625 Towne Centre Drive
 
1818 Fairview Avenue East
 
3054 Cornwallis Road
 
San Francisco/South San Francisco
 
San Diego/University Town Center
 
Seattle/Lake Union
 
Research Triangle Park/RTP
 
199,000 SF
 
162,156 SF
 
188,490 SF
 
150,000 SF
 
q117grand279.jpg
 
q117towne9625.jpg
 
q117fairview1818.jpg
 
q117cornwallisa.jpg
 


 
37

Development and Redevelopment of New Class A Properties: 2018 & 2019 Deliveries
(Including Marketing and Pre-Construction Projects) (continued)
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 


Property/Market/Submarket
 
Dev/ Redev
 
Project RSF
 
Percentage
 
Project
  Start (1)
 
Occupancy (1)
 
 
In Service
 
CIP
 
Total
 
Leased
 
Negotiating
 
Total
 
 
Initial
 
Stabilized
Active construction projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9625 Towne Centre Drive/San Diego/University Town Center
 
Redev
 
—

 
162,156

 
162,156
 
—
%
 
100
%
 
100
%
 
3Q15
 
4Q18
 
2018
213 East Grand Avenue/San Francisco/South San Francisco
 
Dev
 
—

 
297,355

 
297,355
 
100
%
 
—
%
 
100
%
 
2Q17
 
1Q19
 
2019
 
 
 
 
—

 
459,511

 
459,511
 
65
%
 
35
%
 
100
%
 
 
 
 
 
 
Marketing and pre-construction projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
399 Binney Street (Alexandria Center® at One Kendall Square)/Greater Boston/Cambridge
 
Dev
 
—

 
172,500

 
172,500
 
TBD
 
2018
 
TBD
3054 Cornwallis Road/Research Triangle Park/RTP (2)
 
Redev
 
—

 
150,000

 
150,000
 
 
2018
 
TBD
1655 and 1715 Third Street/San Francisco/Mission Bay/SoMa (3)
 
Dev
 
—

 
580,000

 
580,000
 
—
%
 
100
%
 
100
%
 
2018
 
2019
 
2019
279 East Grand Avenue/San Francisco/South San Francisco
 
Dev
 
—

 
199,000

 
199,000
 
TBD
 
2019
 
TBD
1818 Fairview Avenue East/Seattle/Lake Union
 
Dev
 
—

 
188,490

 
188,490
 
 
2019
 
TBD
161 First Street/Greater Boston/Cambridge (4)
 
Dev
 
—

 
183,644

 
183,644
 
 
N/A
 
N/A
 
 
 
 
—

 
1,473,634

 
1,473,634
 
 
 
 
 
 
 
 
 
 
 
 

Property/Market/Submarket
 
Our Ownership Interest
 
In Service
 
CIP
 
Cost to Complete (5)
 
Total at
Completion (5)
 
Unlevered
Yields (5)
 
 
 
 
 
 
 
 
Active construction projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9625 Towne Centre Drive/San Diego/University Town Center
 
100%
 
$
—

 
$
26,540

 
TBD
 
 
TBD
 
TBD
 
213 East Grand Avenue/San Francisco/South San Francisco
 
100%
 
—

 
42,475

 
TBD
 
 
TBD
 
TBD
 
 
 
 
 
$
—

 
$
69,015

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

 
$
64,984

 
TBD
 
3054 Cornwallis Road/Research Triangle Park/RTP (2)
 
100%

—


—

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

 
—

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

 
9,842

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

 
11,308

 
 
161 First Street/Greater Boston/Cambridge (4)
 
100%
 
—

 
5,738

 
 
 
 
 
 
$
—

 
$
91,872

 
 
 
 
 
 
 
 

(1)
Anticipated project start dates and initial occupancy dates are subject to leasing and/or market conditions. Stabilized occupancy may vary depending on single tenancy versus multi-tenancy.
(2)
Represents acquisition under contract as of 1Q17, we expect to complete the acquisition during 2Q17.
(3)
Executed an agreement to purchase a 10% interest in a joint venture with Uber and the Golden State Warriors. Our initial cash contribution of $35 million will be funded at closing of the joint venture in 2018. The joint venture will acquire land with completed below-grade improvements to the building foundation and parking garage, and complete vertical construction of two buildings aggregating 580,000 RSF, which will be leased to Uber.
(4)
Represents a multi-family residential development with approximately 130-140 units. As part of our successful efforts to increase the entitlements on our Alexandria Center® at Kendall Square development, we were required to develop two multi-family residential projects, one of which was previously completed and sold. We may market this project for sale.
(5)
The design and budget of these projects are in process, and the estimated project costs with related yields will be disclosed in the future.



 
38

 
 
Development of New Class A Properties: 2019 and Beyond – Near-Term Development Projects
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands, except per SF amounts)
 
 


303 Binney Street
 
960 Industrial Road
 
East 29th Street
q117binney303.jpg
 
q117industrial960.jpg
 
q117manhattan.jpg
 
 
 
 
 
5200 Illumina Way
 
Campus Point Drive
 
9800 Medical Center Drive
q117illuminwayb.jpg
 
q117campuspoint.jpg
 
q117medical9800.jpg
Property/Submarket
 
Book Value
 
Project SF
 
Per SF
 
Greater Boston
 
 
 
 
 
 
 
 
 
 
303 Binney Street/Cambridge
 
 
$
82,882

(1) 
 
208,965

 
 
$
397

 
San Francisco
 
 
 
 
 
 
 
 
 
 
960 Industrial Road/Greater Stanford
 
 
—

(1) 
 
500,000

 
 
—

 
New York City
 
 
 
 
 
 
 
 
 
 
East 29th Street/Manhattan
 
 
—

 
 
420,000

 
 
—

 
San Diego
 
 
 
 
 
 
 
 
 
 
5200 Illumina Way/University Town Center
 
 
10,846

 
 
386,044

 
 
28

 
Campus Point Drive/University Town Center
 
 
11,653

 
 
315,000

 
 
37

 
Maryland
 
 
 
 
 
 
 
 
 
 
9800 Medical Center Drive/Rockville
 
 
5,732

 
 
180,000

 
 
32

 
Total near-term value-creation projects
 
 
$
111,113

 
 
2,010,009

 
 
$
55

 
 
 
 
 
 
 
 
 
 
 
 

(1)
See page 4 of our Earnings Press Release for additional information on our completed and pending acquisitions.

 
39

 
 
Development and Redevelopment of New Class A Properties: Summary of Pipeline
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands, except per SF amounts)
 
 



Property/Submarket
 
Our
Ownership
Interest
 
Book Value
 
Square Feet
 
 
 
 
Undergoing
Construction
 
Near-Term Developments
 
Future Development
 
Total
 
 
 
 
 
Marketing and
Pre-construction
 
2019 and Beyond
 
 
 
Greater Boston
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Various near-term deliveries
 
 
100%
 
 
 
$
450,521

 
 
431,483

 
356,144

 
208,965

 
—

 
996,592

 
Alexandria Technology Square®/Cambridge
 
 
100%
 
 
 
7,787

 
 
—

 
—

 
—

 
100,000

 
100,000

 
Other future projects
 
 
100%
 
 
 
5,614

 
 
—

 
—

 
—

 
221,955

 
221,955

 
 
 
 
 
 
 
 
463,922

 
 
431,483

 
356,144

 
208,965

 
321,955

 
1,318,547

 
San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Various near-term deliveries
 
 
Various
 
 
 
261,043

 
 
747,355

 
779,000

 
500,000

 
—

 
2,026,355

 
88 Bluxome Street/Mission Bay/SoMa
 
 
100%
 
 
 
155,977

 

—

 
—

 
—

 
1,070,925

 
1,070,925

 
505 Brannan Street, Phase II/Mission Bay/SoMa
 
 
99.6%
 
 
 
13,996

 
 
—

 
—

 
—

 
165,000

 
165,000

 
East Grand Avenue/South San Francisco
 
 
100%
 
 
 
5,805

 
 
—

 
—

 
—

 
90,000

 
90,000

 
Other future projects
 
 
100%
 
 
 
—

 
 
—

 
—

 
—

 
95,620

 
95,620

 
 
 
 
 
 
 
 
436,821

 
 
747,355

 
779,000

 
500,000

 
1,421,545

 
3,447,900

 
New York City
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
East 29th Street/Manhattan
 
 
100%
 
 
 
—

 
 
—

 
—

 
420,000

 
—

 
420,000

 
 
 
 
 
 
 
 
—

 
 
—

 
—

 
420,000

 
—

 
420,000

 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Various near-term deliveries
 
 
100%
 
 
 
190,306

 
 
364,343

 
—

 
701,044

 
—

 
1,065,387

 
Vista Wateridge/Sorrento Mesa
 
 
100%
 
 
 
3,752

 
 
—

 
—

 
—

 
163,000

 
163,000

 
Other future projects
 
 
100%
 
 
 
31,894

 
 
—

 
—

 
—

 
259,895

 
259,895

 
 
 
 
 
 
 
 
225,952

 
 
364,343

 
—

 
701,044

 
422,895

 
1,488,282

 
Seattle
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Various near-term deliveries
 
 
100%
 
 
 
39,604

 
 
48,835

 
188,490

 
—

 
—

 
237,325

 
1150/1165/1166 Eastlake Avenue East/Lake Union
 
 
100%
 
 
 
36,633

 
 
—

 
—

 
 
—

366,000

 
366,000

 
 
 
 
 
 
 
 
76,237

 
 
48,835

 
188,490

 
—

 
366,000

 
603,325

 
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Various near-term deliveries
 
 
100%
 
 
 
5,732

 
 
—

 
—

 
180,000

 
—

 
180,000

 
Other future projects
 
 
100%
 
 
 
15,376

 
 
—

 
—

 
—

 
408,000

 
408,000

 
 
 
 
 
 
 
 
21,108

 
 
—

 
—

 
180,000

 
408,000

 
588,000

 
Research Triangle Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Various near-term deliveries
 
 
100%
 
 
 
—

 
 
—

 
150,000

 
—

 
—

 
150,000

 
6 Davis Drive/Research Triangle Park
 
 
100%
 
 
 
16,568

 
 
—

 
—

 
—

 
1,000,000

 
1,000,000

 
Other future projects
 
 
100%
 
 
 
4,150

 
 
—

 
—

 
—

 
76,262

 
76,262

 
 
 
 
 
 
 
 
20,718

 
 
—

 
150,000

 
—

 
1,076,262

 
1,226,262

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

 
 
—

 
—

 
—

 
592,285

 
592,285

 
 
 
 
 
 
 
 
$
1,256,549

 
 
1,592,016

 
1,473,634

 
2,010,009

 
4,608,942

 
9,684,601

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
40

 
 
Construction Spending
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands, except per RSF amounts)
 
 


Construction Spending
 
Three Months Ended March 31, 2017
Construction spending (cash basis) (3)
 
$
218,473
 
Decrease in accrued construction
 
 
(1,693
)
Construction spending
 
$
216,780
 



 
 
 
 
 
Non-Revenue-Enhancing Capital Expenditures(1)
 
Three Months Ended March 31, 2017
 
Recent Average
per RSF (2)
 
Amount
 
Per RSF
 
Non-revenue-enhancing capital expenditures
 
$
1,138

 
$
0.07

 
$
0.39

 
 
 
 
 
 
 
Tenant improvements and leasing costs:
 
 
 
 
 
 
Re-tenanted space
 
$
4,582

 
$
25.79

 
$
17.86

Renewal space
 
13,795

 
19.67

 
11.79

Total tenant improvements and leasing costs/weighted average
 
$
18,377

(4) 
$
20.91

(4) 
$
13.42



Projected Construction Spending
 
Year Ending
December 31, 2017
Development and redevelopment projects
 
$
552,000
 
Contributions from noncontrolling interests
(consolidated joint ventures)
 
 
(9,000
)
Generic laboratory infrastructure/building improvement projects
 
 
95,000
 
Non-revenue-enhancing capital expenditures and tenant improvements
 
 
10,000
 
Projected construction spending for nine months ending December 31, 2017
 
 
648,000
 
Actual construction spend for three months ended
March 31, 2017
 
 
216,780
 
Guidance range
 
$
815,000
–
915,000
 
 
 
 
 
 
2017 Disciplined Allocation of Capital (5)
93% to Urban Innovation Submarkets
q117capitalallocation4s.jpg

(1)
Excludes amounts that are recoverable from tenants, revenue-enhancing, or related to properties that have undergone redevelopment.
(2)
Represents the average of the five years ended December 31, 2016, and the three months ended March 31, 2017.
(3)
Includes revenue-enhancing projects and non-revenue-enhancing capital expenditures.
(4)
Increase from 4Q16 primarily relates to tenant improvement commitments and leasing commissions incurred for leases executed that generated average increases in rental rates of 25.9% and 17.4% (cash basis). Includes approximately $3.8 million, or $4.30 per square foot, related to base building work to be performed by tenants for enhancements to common areas and building energy efficiency projects at two of our properties in Cambridge.
(5)
Represents the percentage of projected spending by submarket, including projected acquisitions expected in our sources and uses of capital guidance ranging from $380 million to $480 million.


 
41

 
 
Dispositions
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 

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

 
N/A
 
N/A
 
$
3,000

 
360 Longwood Avenue/Greater Boston/Longwood Medical Area
 
July 2017
 
203,090

(2) 
$
4,134

(2) 
$
3,990

(2) 
 
65,701

(2) 
 
 
 
 
 
 
 
 
 
 
$
68,701

 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Represents annualized amounts for the quarter ended prior to the date of sale. Cash net operating income excludes straight-line rent and amortization of acquired below-market leases.
(2)
Represents the sale of a condominium interest for approximately 49% of the building RSF, or 203,090 RSF, in our unconsolidated real estate joint venture property. Net operating income, net operating income (cash basis), and contractual sales price represent our 27.5% share related to the sale of the condominium interest. In March 2017, the unconsolidated real estate joint venture extended the maturity date of the existing secured construction loan to July 5, 2017. We expect to refinance the secured construction loan in connection with the condominium sale and to receive a net distribution from the joint venture. RSF represents 100% of the property.

 
42

 
 
Joint Venture Financial Information
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 


We present components of operating results and balance sheet information for our share of the consolidated real estate joint ventures attributable to noncontrolling interests and for our share of investment in an unconsolidated real estate joint venture to help investors estimate operating results and balance sheet information related to our partially owned entities. These amounts are estimated by computing, for each joint venture that we consolidate in our financial statements, the noncontrolling interest percentage of each financial item to arrive at the cumulative noncontrolling interest share of each component presented. In addition, for our real estate joint venture that we do not control and do not consolidate, we apply our economic ownership percentage to the unconsolidated real estate joint venture to arrive at our proportionate share of each component presented.
 
March 31, 2017
 
 
Noncontrolling Interest Share of Consolidated Real Estate JVs
 
Our Share of Unconsolidated
Real Estate JV
 
Investments in real estate
$
476,969

 
 
$
92,542

 
Cash and cash equivalents
12,797

 
 
3,477

 
Other assets
29,328

 
 
8,545

 
Secured notes payable
—

 
 
(51,233
)
 
Other liabilities
(25,198
)
 
 
(2,874
)
 
Redeemable noncontrolling interests
(11,320
)
(1) 
 
—

 
 
$
482,576

 
 
$
50,457

 
 
 
 
 
 
 
 
Three Months Ended March 31, 2017
 
 
 
Noncontrolling Interest Share of Consolidated Real Estate JVs
 
Our Share of Unconsolidated
Real Estate JV
 
 
Total revenues
$
13,020

 
$
2,348

 
 
Rental operations
(3,740
)
 
(848
)
 
 
 
9,280

 
1,500

 
 
General and administrative
(20
)
 
(23
)
 
 
Interest
—

 
(704
)
 
 
Depreciation and amortization
(3,642
)
 
(412
)
 
 
Net income (1)
$
5,618

 
$
361

 
 
 
 
 
 
 
 

Consolidated Real Estate Joint Ventures
 
Property/Market/Submarket
 
Noncontrolling (2)
Interest Share
 
225 Binney Street/Greater Boston/Cambridge
 
70%
 
1500 Owens Street/San Francisco/Mission Bay/SoMa
 
49.9%
 
409 and 499 Illinois Street/San Francisco/Mission Bay/SoMa
 
40%
 
10290 and 10300 Campus Point Drive/San Diego/
University Town Center
 
45%
 
 
 
 
 
Unconsolidated Real Estate Joint Venture
 
Property/Market/Submarket
 
Our Share
 
360 Longwood Avenue/Greater Boston/Longwood Medical Area
 
27.5%
 
 
 
 
 
Our unconsolidated real estate joint venture at 360 Longwood Avenue has a non-recourse, secured construction loan that includes the following key terms (amounts represent 100% at the joint venture level):
Tranche
 
Maturity Date
 
Stated Rate
 
Outstanding Balance
 
Remaining Commitments
 
Total
Fixed rate
 
 
July 5, 2017
(3) 
 
5.25
%
 
 
$
173,226

 
$
2,015

 
$
175,241

Floating rate (4)
 
 
July 5, 2017
(3) 
 
L+3.75
%
 
 
13,075

 
24,884

 
37,959

 
 
 
 
 
 
 
 
 
$
186,301

 
$
26,899

 
$
213,200

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(1)
Represents a redeemable noncontrolling interest in our consolidated real estate project at 213 East Grand Avenue, located in our South San Francisco submarket, aggregating 297,355 RSF. The noncontrolling interests in the real estate joint venture commenced in August 2005 and earn a fixed preferred return of 8.4%, which is excluded from our net income calculation.
(2)
In addition to the consolidated real estate joint ventures listed, various partners hold insignificant interests in three other properties.
(3)
In March 2017, the unconsolidated real estate joint venture extended the maturity date of the existing secured construction loan to July 5, 2017. We expect to refinance the secured construction loan in connection with the sale of a condominium interest in 203,090 RSF of 360 Longwood Avenue and to receive a net distribution from the joint venture. See page 6 of our Earnings Press Release for additional discussion.
(4)
Borrowings under the floating rate tranche have an interest rate floor equal to 5.25% and are subject to an interest rate cap on LIBOR of 3.50%.


 
43

 
 
Investments
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 


Public/Private Mix
(Cost)
 
Tenant/Non-Tenant Mix
(Cost)
 
 
 
 
 
 
 
 
 
q117pubprimix.jpg
 
q117tenantmix.jpg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment
Type
 
Cost
 
Net Unrealized Gains
 
Total
 
Number of Investments
 
 
 
 
235
Public
 
$
44,383

 
$
29,847

 
$
74,230

 
Private
 
320,241

 
—

 
320,241

 
Average Cost
 
 
 
 
$1.6M
Total
 
$
364,624

 
$
29,847

 
$
394,471

 
 
 
 
 
 
 
 
 

 
44

 
 
Key Credit Metrics
p2017headerlogo.jpg
March 31, 2017
(Dollars in millions)
 
 


Net Debt to Adjusted EBITDA (1)
 
Net Debt and Preferred Stock to Adjusted EBITDA (1)
 
q117netdebt4s.jpg
 
 
 
 
 
q117prefstock4s.jpg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-Charge Coverage Ratio (1)
 
Liquidity
 
q117fixedcharge4s.jpg
 
 
 
 
 
$2.2B
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Availability under our $1.65 billion unsecured senior line of credit
$
1,650

 
 
Remaining construction loan commitments
267

 
 
Available-for-sale equity securities, at fair value
74

 
 
Cash, cash equivalents, and restricted cash
170

 
 
 
$
2,161

 
 
 
 
 

(1)
Quarter annualized.    

 
45

 
 
 
p2017headerlogo.jpg
Summary of Debt
March 31, 2017
 
 


Debt maturities chart
(Dollars in millions)
q117debtmaturities.jpg

Fixed-rate/hedged and unhedged variable-rate debt
(Dollars in thousands)
 
Fixed-Rate/Hedged
Variable-Rate Debt
 
Unhedged
Variable-Rate Debt
 
Total
 
Percentage
 
Weighted-Average
 
 
 
 
 
Interest Rate (1)
 
Remaining Term
(in years)
 
 
 
 
 
 
Secured notes payable
$
868,597

 
$
215,161

 
$
1,083,758

 
24.5
%
 
3.64
%
 
3.3

Unsecured senior notes payable
2,799,508

 
—

 
2,799,508

 
63.1

 
4.16

 
7.5

$1.65 Billion unsecured senior line of credit
—

 
—

 
—

 
—

 
N/A

 
4.6

2019 Unsecured Senior Bank Term Loan
199,361

 
—

 
199,361

 
4.5

 
3.00

 
1.8

2021 Unsecured Senior Bank Term Loan
348,059

 
—

 
348,059

 
7.9

 
2.44

 
3.8

Total/weighted average
$
4,215,525

 
$
215,161

 
$
4,430,686

 
100.0
%
 
3.84
%
 
6.0

Percentage of total debt
95%

 
5%

 
100%

 
 
 
 
 
 
 

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

 
46

 
 
Summary of Debt (continued)
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 


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

 
 
2.93
%
 
8/23/18
 
 
$
—

 
$
212,289

 
$
—

 
$
—

 
$
—

 
$
—

 
$
212,289

 
$
(1,020
)
 
$
211,269

Greater Boston
 
L+1.50%

 
 
2.77

 
1/28/19
(3) 
 
—

 
—

 
288,269

 
—

 
—

 
—

 
288,269

 
(2,188
)
 
286,081

Greater Boston
 
L+2.00%

 
 
3.34

 
4/20/19
(3) 
 
—

 
—

 
137,603

 
—

 
—

 
—

 
137,603

 
(2,764
)
 
134,839

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

 
4/1/20
 
 
1,387

 
1,979

 
2,138

 
104,352

 
—

 
—

 
109,856

 
(1,002
)
 
108,854

San Diego
 
4.66
%
 
 
4.93

 
1/1/23
 
 
1,026

 
1,608

 
1,687

 
1,762

 
1,852

 
28,201

 
36,136

 
(378
)
 
35,758

Greater Boston
 
3.93
%
 
 
3.19

 
3/10/23
 
 
—

 
1,091

 
1,505

 
1,566

 
1,628

 
76,210

 
82,000

 
3,212

 
85,212

Greater Boston
 
4.82
%
 
 
3.36

 
2/6/24
 
 
—

 
2,720

 
3,090

 
3,217

 
3,406

 
190,567

 
203,000

 
17,952

 
220,952

San Francisco
 
6.50
%
 
 
6.66

 
7/1/36
 
 
20

 
22

 
23

 
25

 
26

 
677

 
793

 
—

 
793

Secured debt weighted-average interest rate/subtotal
 
3.95
%
 
 
3.64

 
 
 
 
2,433

 
219,709

 
434,315

 
110,922

 
6,912

 
295,655

 
1,069,946

 
13,812

 
1,083,758

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 Unsecured Senior Bank Term Loan
 
L+1.20
%
 
 
3.00

 
1/3/19
 
 
—

 
—

 
200,000

 
—

 
—

 
—

 
200,000

 
(639
)
 
199,361

2021 Unsecured Senior Bank Term Loan
 
L+1.10
%
 
 
2.44

 
1/15/21
 
 
—

 
—

 
—

 
—

 
350,000

 
—

 
350,000

 
(1,941
)
 
348,059

$1.65 billion unsecured senior line of credit
 
L+1.00
%
(4) 
 
N/A

 
10/29/21
 
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Unsecured senior notes payable
 
2.75
%
 
 
2.96

 
1/15/20
 
 
—

 
—

 
—

 
400,000

 
—

 
—

 
400,000

 
(2,211
)
 
397,789

Unsecured senior notes payable
 
4.60
%
 
 
4.75

 
4/1/22
 
 
—

 
—

 
—

 
—

 
—

 
550,000

 
550,000

 
(3,244
)
 
546,756

Unsecured senior notes payable
 
3.90
%
 
 
4.04

 
6/15/23
 
 
—

 
—

 
—

 
—

 
—

 
500,000

 
500,000

 
(3,669
)
 
496,331

Unsecured senior notes payable
 
4.30
%
 
 
4.52

 
1/15/26
 
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(4,229
)
 
295,771

Unsecured senior notes payable
 
3.95
%
 
 
4.14

 
1/15/27
 
 
—

 
—

 
—

 
—

 
—

 
350,000

 
350,000

 
(4,876
)
 
345,124

Unsecured senior notes payable
 
3.95
%
 
 
4.10

 
1/15/28
 
 
—

 
—

 
—

 
—

 
—

 
425,000

 
425,000

 
(4,539
)
 
420,461

Unsecured senior notes payable
 
4.50
%
 
 
4.62

 
7/30/29
 
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(2,724
)
 
297,276

Unsecured debt weighted average/subtotal
 
 
 
 
3.91

 
 
 
 
—

 
—

 
200,000

 
400,000

 
350,000

 
2,425,000

 
3,375,000

 
(28,072
)
 
3,346,928

Weighted-average interest rate/total
 
 
 
 
3.84
%
 
 
 
 
$
2,433

 
$
219,709

 
$
634,315

 
$
510,922

 
$
356,912

 
$
2,720,655

 
$
4,444,946

 
$
(14,260
)
 
$
4,430,686

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balloon payments
 
 
 
 
 
 
 
 
 
$
—

 
$
212,289

 
$
625,872

 
$
503,979

 
$
350,000

 
$
2,708,417

 
$
4,400,557

 
$
—

 
$
4,400,557

Principal amortization
 
 
 
 
 
 
 
 
 
2,433

 
7,420

 
8,443

 
6,943

 
6,912

 
12,238

 
44,389

 
(14,260
)
 
30,129

Total debt
 
 
 
 
 
 
 
 
 
$
2,433

 
$
219,709

 
$
634,315

 
$
510,922

 
$
356,912

 
$
2,720,655

 
$
4,444,946

 
$
(14,260
)
 
$
4,430,686

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-rate/hedged variable-rate debt
 
 
 
 
 
 
 
 
 
$
2,433

 
$
157,420

 
$
481,443

 
$
510,922

 
$
356,912

 
$
2,720,655

 
$
4,229,785

 
$
(14,260
)
 
$
4,215,525

Unhedged variable-rate debt
 
 
 
 
 
 
 
 
 
—

 
62,289

 
152,872

 
—

 
—

 
—

 
215,161

 
—

 
215,161

Total debt
 
 
 
 
 
 
 
 
 
$
2,433

 
$
219,709

 
$
634,315

 
$
510,922

 
$
356,912

 
$
2,720,655

 
$
4,444,946

 
$
(14,260
)
 
$
4,430,686

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to our interest rate hedge agreements, amortization of debt premiums (discounts), amortization of loan fees, and other bank fees.
(2)
Reflects any extension options that we control.
(3)
See our table of secured construction loans on the following page regarding options to extend maturity dates.
(4)
Our $1.65 billion unsecured senior line of credit contains a feature that allows lenders to competitively bid on the interest rate for borrowings under the facility. This may result in an interest rate that is below the stated rate. In addition to the cost of borrowing, the facility is subject to an annual facility fee of 0.20%, based on the aggregate commitments. Unamortized deferred financing costs related to our unsecured senior line of credit are classified in other assets and are excluded from the calculation of the weighted-average interest rate.


 
47

 
 
Summary of Debt (continued)
p2017headerlogo.jpg
March 31, 2017
(Dollars in thousands)
 
 


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

 
$
38,111

 
$
250,400

50 and 60 Binney Street/Greater Boston/Cambridge
 
 
L+1.50
%
 
 
 
1/28/19
(1) 
 
288,269

 
61,731

 
350,000

100 Binney Street/Greater Boston/Cambridge
 
 
L+2.00
%
(2) 
 
 
4/20/19
(3) 
 
137,603

 
166,678

 
304,281

 
 
 
 
 
 
 
 
 
 
$
638,161

 
$
266,520

 
$
904,681

(1)
We have two, one-year options to extend the stated maturity date to January 28, 2021, subject to certain conditions.
(2)
See the interest rate cap agreements in table at the bottom of this page.
(3)
We have two, one-year options to extend the stated maturity date to April 20, 2021, subject to certain conditions.


Debt covenants
Debt Covenant Ratios (1)
 
Unsecured Senior Notes Payable
 
$1.65 Billion Unsecured Senior Line of Credit and
Unsecured Senior Bank Term Loans
 
Requirement
 
Actual
 
Requirement
 
Actual
Total Debt to Total Assets
 
≤ 60%
 
36%
 
≤ 60.0%
 
31.6%
Secured Debt to Total Assets
 
≤ 40%
 
9%
 
≤ 45.0%
 
7.3%
Consolidated EBITDA to Interest Expense
 
≥ 1.5x
 
5.8x
 
≥ 1.50x
 
3.58x
Unencumbered Total Asset Value to Unsecured Debt
 
≥ 150%
 
279%
 
N/A
 
N/A
Unsecured Leverage Ratio
 
N/A
 
N/A
 
≤ 60.0%
 
30.3%
Unsecured Interest Coverage Ratio
 
N/A
 
N/A
 
≥ 1.50x
 
6.37x

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


Interest rate hedge agreements
Interest Rate Hedge Type
 
Effective Date
 
Maturity Date
 
Number of Contracts
 
Weighted-Average Interest Pay Rate/
Cap Rate (1)
 
Fair Value
as of 3/31/17
 
Notional Amount in Effect as of
 
 
 
 
 
 
3/31/17
 
12/31/17
 
12/31/18
 
12/31/19
Swap
 
March 31, 2017
 
March 31, 2018
 
15
 
1.31%
 
$
(682
)

 
$
900,000

 
$
900,000

 
$
—

 
$
—

        Cap
 
July 29, 2016
 
April 20, 2019
 
2
 
2.00%
 
231

 
 
73,000

 
126,000

 
150,000

 
—

Swap
 
March 29, 2018
 
March 31, 2019
 
6
 
1.01%
 
3,101

 
 
—

 
—

 
450,000

 
—

Swap
 
March 29, 2018

March 31, 2019

2

1.60%

N/A

(2) 
 
—


—


150,000


—

Swap
 
March 29, 2019
 
March 31, 2020
 
1
 
1.89%
 
N/A

(2) 
 
—

 
—

 
—

 
100,000

        Total
 
 
 
 
 
 
 
 
 
$
2,650

(3) 
 
$
973,000

 
$
1,026,000

 
$
750,000

 
$
100,000


(1)
In addition to the interest pay rate for each swap agreement, interest is payable at an applicable margin over LIBOR for borrowings outstanding as of March 31, 2017, as listed under the column heading “Stated Rate” in our summary table of outstanding indebtedness and respective principal payments on page 47.
(2)
These interest rate swap agreements were executed in April 2017.
(3)
This total represents the net of the fair value of interest rate hedges in an asset position of $4.5 million and fair value of interest rate hedges in a liability position of $1.8 million.

 
48

 
 
 
p2017headerlogo.jpg
Definitions and Reconciliations
March 31, 2017
 
 



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

Adjusted EBITDA and Adjusted EBITDA margins
 
The following table reconciles net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA:
 
Three Months Ended
(Dollars in thousands)
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
3/31/16
Net income (loss)
$
47,555

 
$
19,792

 
$
28,559

 
$
(108,116
)
 
$
9,966

Interest expense
29,784

 
31,223

 
25,850

 
25,025

 
24,855

Income taxes
767

 
737

 
355

 
924

 
1,095

Depreciation and amortization
97,183

 
95,222

 
77,133

 
70,169

 
70,866

Stock compensation expense
5,252

 
6,426

 
7,451

 
6,117

 
5,439

Loss on early extinguishment of debt
670

 
—

 
3,230

 
—

 
—

Gain on sales of real estate – rental properties
(270
)
 
(3,715
)
 
—

 
—

 
—

Gain on sales of real estate – land parcels
—

 
—

 
(90
)
 
—

 
—

Impairment of real estate and non-real estate investments
—

 
16,024

 
11,179

 
156,143

 
28,980

Adjusted EBITDA
$
180,941

 
$
165,709

 
$
153,667

 
$
150,262

 
$
141,201

 
 
 
 
 
 
 
 
 
 
Revenues
$
270,877

 
$
249,162

 
$
230,379

 
$
226,076

 
$
216,089

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA margins
67%

 
67%

 
67%

 
66%

 
65%


We use Adjusted EBITDA as a supplemental performance measure of our core operations for financial and operational decision making, and as a supplemental or additional means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation, and amortization (“EBITDA”), excluding stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and impairments. We believe Adjusted EBITDA provides investors relevant and useful information because it allows investors to view income from our operations on an unleveraged basis before the effects of interest, taxes, depreciation and amortization, stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and impairments.

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

Annual rental revenue

Annual rental revenue represents the annualized fixed base rental amount in effect as of the end of the period, related to our operating RSF (using rental revenue, including straight-line rent adjustments). Annual rental revenue and measures computed using annual rental revenue are presented at 100% for all properties under our management, including properties held by our consolidated and unconsolidated real estate joint ventures. As of March 31, 2017, approximately 97% of our leases (on an RSF basis) were triple net leases, requiring tenants to pay substantially all real estate taxes, insurance, utilities, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Annual rental revenue excludes these operating expenses recovered from our tenants. Amounts recovered from our tenants related to these operating expenses are classified in tenant recoveries in our consolidated statements of income.

Average cash yield

See definition of initial stabilized yield (unlevered).

Cash interest

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

Class A properties and AAA locations

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

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.

 
49

 
 
 
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Definitions and Reconciliations (continued)
March 31, 2017
 
 


Fixed-charge coverage ratio

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

The following table reconciles interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest and fixed charges:
 
Three Months Ended
(Dollars in thousands)
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
3/31/16
Adjusted EBITDA
$
180,941

 
$
165,709

 
$
153,667

 
$
150,262

 
$
141,201

 
 
 
 
 
 
 
 
 
 
Interest expense
$
29,784

 
$
31,223

 
$
25,850

 
$
25,025

 
$
24,855

Capitalized interest
13,164

 
11,659

 
14,903

 
13,788

 
12,099

Amortization of loan fees
(2,895
)
 
(3,080
)
 
(3,080
)
 
(2,953
)
 
(2,759
)
Amortization of debt premiums
596

 
383

 
5

 
26

 
86

Cash interest
40,649

 
40,185

 
37,678

 
35,886

 
34,281

Dividends on preferred stock
3,784

 
3,835

 
5,007

 
5,474

 
5,907

Fixed charges
$
44,433

 
$
44,020

 
$
42,685

 
$
41,360

 
$
40,188

 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio:
 
 
 
 
 
 
 
 
 
– quarter annualized
4.1x

 
3.8x

 
3.6x

 
3.6x

 
3.5x

– trailing 12 months
3.8x

 
3.6x

 
3.6x

 
3.6x

 
3.5x

 
 
 
 
 
 
 
 
 
 

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

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

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

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

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

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


 
50

 
 
 
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Definitions and Reconciliations (continued)
March 31, 2017
 
 


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

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

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

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

Net cash provided by operating activities after dividends

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

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

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

The following table reconciles debt to net debt, and to net debt and preferred stock, and computes the ratio of each to Adjusted EBITDA:
(Dollars in thousands)
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
3/31/16
Secured notes payable
 
$
1,083,758

 
$
1,011,292

 
$
789,450

 
$
722,794

 
$
816,578

Unsecured senior notes payable
 
2,799,508

 
2,378,262

 
2,377,482

 
2,376,713

 
2,031,284

Unsecured senior line of credit
 
—

 
28,000

 
416,000

 
72,000

 
299,000

Unsecured senior bank term loans
 
547,420

 
746,471

 
746,162

 
945,030

 
944,637

Unamortized deferred financing costs
 
31,616

 
29,917

 
31,420

 
34,302

 
28,474

Cash and cash equivalents
 
(151,209
)
 
(125,032
)
 
(157,928
)
 
(256,000
)
 
(146,197
)
Restricted cash
 
(18,320
)
 
(16,334
)
 
(16,406
)
 
(13,131
)
 
(14,885
)
Net debt
 
$
4,292,773

 
$
4,052,576

 
$
4,186,180

 
$
3,881,708

 
$
3,958,891

 
 
 
 
 
 
 
 
 
 
 
Net debt
 
$
4,292,773

 
$
4,052,576

 
$
4,186,180

 
$
3,881,708

 
$
3,958,891

7.00% Series D convertible preferred stock
 
74,386

 
86,914

 
161,792

 
188,864

 
213,864

6.45% Series E redeemable preferred stock
 
—

 
130,000

 
130,000

 
130,000

 
130,000

Net debt and preferred stock
 
$
4,367,159

 
$
4,269,490

 
$
4,477,972

 
$
4,200,572

 
$
4,302,755

 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
$
723,764

 
$
662,836

 
$
614,668

 
$
601,048

 
$
564,804

– trailing 12 months
 
$
650,579

 
$
610,839

 
$
591,646

 
$
579,880

 
$
562,454

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

    

 
51

 
 
 
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Definitions and Reconciliations (continued)
March 31, 2017
 
 


Net operating income

The following table reconciles net income to total net operating income:
 
 
Three Months Ended
(Dollars in thousands)
 
3/31/17
 
3/31/16
Net Income
 
$
47,555

 
$
9,966

 
 
 
 
 
Equity in (earnings) losses of unconsolidated real estate joint venture
 
(361
)
 
397

General and administrative expenses
 
19,229

 
15,188

Interest expense
 
29,784

 
24,855

Depreciation and amortization
 
97,183

 
70,866

Impairment of real estate
 
—

 
28,980

Loss on early extinguishment of debt
 
670

 
—

Gain on sales of real estate – rental properties
 
(270
)
 
—

Total net operating income
 
$
193,790

 
$
150,252

 
 
 
 
 

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

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

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

Operating statistics

We present certain operating statistics related to our properties, including number of properties, annual rental revenue, annual rental revenue per occupied RSF, occupancy percentage, RSF, leasing activity, rental rates, and contractual lease expirations as of the end of the period. We believe these measures are useful to investors because they facilitate an understanding of certain trends for our properties. We compute operating statistics at 100% for all properties managed by us, including properties owned by our consolidated and unconsolidated real estate joint ventures.

Stabilized occupancy date

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

Same property comparisons

As a result of changes within our total property portfolio during the comparative periods presented, including changes from assets acquired or sold, properties placed into development or redevelopment, and development and/or redevelopment properties recently placed into service, the consolidated total rental revenues, tenant recoveries, and rental operating expenses in our operating results can show significant changes from period to period. In order to supplement an evaluation of our results of operations over a given period, we analyze the operating performance for all properties, referred to as same properties, that were fully operating for the entirety of the comparative periods presented. These properties are analyzed separately from properties acquired subsequent to the first day in the earliest comparable period presented, properties that underwent development or redevelopment at any time during the comparative periods, and corporate entities (legal entities performing general and administrative functions) that have been excluded from same property results. Additionally, rental revenues from lease termination fees, if any, are excluded from the results of same properties.


 
52

 
 
 
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Definitions and Reconciliations (continued)
March 31, 2017
 
 


The following table reconciles the number of same properties to total properties:
Development – under construction
 
Properties
 
100 Binney Street
 
1

 
510 Townsend Street
 
1

 
505 Brannan Street
 
1

 
ARE Spectrum
 
3

 
213 East Grand Avenue
 
1

 
400 Dexter Avenue North
 
1

 
 
 
8

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

 
430 East 29th Street
 
1

 
5200 Illumina Way, Building 6
 
1

 
4796 Executive Drive
 
1

 
360 Longwood Avenue
   (unconsolidated joint venture)
 
1

 
1455 and 1515 Third Street
 
2

(1) 
 
 
8

 
 
 
 
 
Redevelopment – under construction
 
Properties
 
9625 Towne Centre Drive
 
1

 
 
 
1

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

11 Hurley Street
 
1

10290 Campus Point Drive
 
1

 
 
3

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

Alexandria Center® at One Kendall Square
 
9

88 Bluxome Street
 
1

 
 
13

Total properties excluded from same properties
 
33

Same properties
 
166

Total properties in North America as of March 31, 2017
 
199

 
(1)
Represents two land parcels and a parking garage 100% leased to Uber.

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. We use unencumbered net operating income as a percentage of total net operating income in order to assess our compliance with our financial covenants under our debt obligations because the measure serves as a proxy for a financial measure under such debt obligations. 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)
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
3/31/16
Unencumbered net operating income
$
157,391

 
$
143,570

 
$
137,943

 
$
138,283

 
$
123,801

Encumbered net operating income
36,399

 
32,348

 
20,434

 
20,468

 
26,451

Total net operating income
$
193,790

 
$
175,918

 
$
158,377

 
$
158,751

 
$
150,252

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

 
82%

 
87%

 
87%

 
82%


Weighted-average interest rate for capitalization of interest

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

The following table presents the weighted-average interest rate for capitalization of interest:
 
Three Months Ended
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
3/31/16
Weighted-average interest rate for capitalization of interest
3.95%
 
3.72%
 
3.78%
 
3.70%
 
3.60%


 
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Definitions and Reconciliations (continued)
March 31, 2017
 
 


Weighted-average shares of common stock outstanding – diluted

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

Weighted-average shares of common stock outstanding – diluted for 1Q17 used in the computation of earnings per share – diluted, and funds from operations per share – diluted for 1Q17, include a portion of the shares related to the forward equity sales agreements using the treasury method of accounting for these 4.8 million shares (assumed an issuance of 4.8 million shares at the contractual price less the assumed repurchase of common shares at the average market price by using the net proceeds of $495.5 million from the forward equity sales agreements). In July 2016, we entered into similar forward equity sales agreements that were settled in December 2016. The weighted-average shares of common stock outstanding – diluted during each period includes the following shares related to our forward equity sales agreements pursuant to the treasury stock method:
(In thousands)
1Q17
 
4Q16 (1)
 
3Q16 (1)
 
Earnings per share – diluted
53

 
—

(2) 
751

 
Funds from operations – diluted
53

 
480

 
751

 
(1)
Amounts represent the dilutive impact of our forward equity sales agreements settled in December 2016 within each period.
(2)
Antidilutive for period.

 
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