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): January 29, 2018


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 January 29, 2018, Alexandria Real Estate Equities, Inc. (the “Company”) issued a press release entitled “Alexandria Real Estate Equities, Inc. Reports Fourth Quarter and Year Ended December 31, 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 Fourth Quarter and Year Ended December 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.
 
 
 
 
 
 
January 29, 2018
 
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    
99.1Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the Fourth Quarter and Year Ended December 31, 2017.


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



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



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(1)    See “Definitions and Reconciliations” in our Supplemental Information. As of December 31, 2017, annual rental revenue from investment-grade tenants excluding large cap tenants and annual rental revenue from investment-grade tenants excluding large cap tenants within our top 20 tenants were 46% and 72%, respectively.

 
ii
 
 
 
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Table of Contents
December 31, 2017
 
 

 
 
EARNINGS PRESS RELEASE
Page
SUPPLEMENTAL INFORMATION
Page
Internal Growth
 
 
 
 
SUPPLEMENTAL INFORMATION (CONTINUED)
Page
External Growth / Investments in Real Estate
 
Development and Redevelopment of New Class A Properties:
 
Balance Sheet Management
 
Definitions and Reconciliations
 
This document includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Please see page 8 of this Earnings Press Release and Supplemental Information for further information.
 
This document is not an offer to sell or a solicitation to buy securities of Alexandria Real Estate Equities, Inc. Any offers to sell or solicitations to buy our securities shall be made only by means of a prospectus approved for that purpose. Unless otherwise indicated, the “Company,” “Alexandria,” “ARE,” “we,” “us,” and “our” refer to Alexandria Real Estate Equities, Inc. and its consolidated subsidiaries.

 
Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2018
iii
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Alexandria Real Estate Equities, Inc.
Reports
Fourth Quarter and Year Ended December 31, 2017, Financial and Operating Results
Strong Internal and External Growth and
Significant Strategic Acquisitions and Growing Dividends



PASADENA, Calif. – January 29, 2018 – Alexandria Real Estate Equities, Inc. (NYSE:ARE)
announced financial and operating results for the fourth quarter and year ended December 31, 2017.

Key highlights

Increased common stock dividend

Common stock dividend for 2017 of $3.45 per common share, up 22 cents, or 7%, over 2016; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Leader in the Light award

In November 2017, we were awarded Nareit’s 2017 “Most Innovative” Leader in the Light, the highest achievement in sustainability innovation for all REITs and real estate companies.

Strong internal growth

•
Total revenues:
•
$298.8 million, up 19.9%, for 4Q17, compared to $249.2 million for 4Q16
•
$1.1 billion, up 22.4%, for 2017, compared to $921.7 million for 2016
•
Continued substantial leasing activity and strong rental rate growth, in light of minimal contractual lease expirations for 4Q17 and 2017 and a highly leased value-creation pipeline:
 
 
4Q17
 
2017
Total leasing activity – RSF
 
1,379,699

 
4,569,182

Lease renewals and re-leasing of space:
 
 
 
 
Rental rate increases
 
24.8%

 
25.1%

Rental rate increases (cash basis)
 
10.4%

 
12.7%

RSF (included in total leasing activity above)
 
593,622

 
2,525,099


•
Executed key leases during 4Q17:
•
520,988 RSF leased to Facebook, Inc. at Menlo Gateway in our Greater Stanford submarket;
•
170,244 RSF renewal with Theravance Biopharma U.S., Inc. at 901 and 951 Gateway Boulevard in our South San Francisco submarket, with an average lease term of 10.2 years and rental rate increases of 59.2% and 15.1% (cash basis).
•
Same property net operating income growth:
•
4.5% and 12.5% (cash basis) for 4Q17, compared to 4Q16
•
3.1% and 6.8% (cash basis) for 2017, compared to 2016

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

•
Development projects, 100% leased, and placed into service in 4Q17:
Property
 
Submarket
 
RSF
 
 
Tenant
510 Townsend Street
 
Mission Bay/SoMa
 
295,333

 
 
Stripe, Inc.
ARE Spectrum
 
Torrey Pines
 
170,523

 
 
Vertex Pharmaceuticals Inc.
505 Brannan Street
 
Mission Bay/SoMa
 
148,146

 
 
Pinterest, Inc.
400 Dexter Avenue North
 
Lake Union
 
25,518

 
 
Juno Therapeutics, Inc.

•
Significant contractual near-term growth in annual cash rents of $96 million, of which $78 million will commence through 4Q18 ($26 million in 1Q18, $31 million in 2Q18, $10 million in 3Q18, and $11 million in 4Q18). This is related to development and redevelopment projects recently placed into service that are currently generating rental revenue.
•
4Q17 commencements of development projects aggregating 884,000 RSF, including:
•
520,988 RSF at Menlo Gateway in our Greater Stanford submarket;
•
164,000 RSF at 399 Binney Street in our Alexandria Center® at One Kendall Square campus in our Cambridge submarket; and
•
199,000 RSF at 279 East Grand Avenue in our South San Francisco submarket.
•
80% leased on 2.3 million RSF (development and redevelopment projects undergoing construction and 580,000 RSF undergoing pre-construction).

Completed strategic acquisitions

Opportunistic acquisitions completed or under contract:
•
In 4Q17, acquired five properties in three transactions for an aggregate purchase price of $146.4 million, including the Menlo Gateway joint venture:
•
Menlo Gateway real estate joint venture in our Greater Stanford submarket closed in November 2017:
•
772,983 RSF Class A office space, including 520,988 RSF of ground-up development, 100% leased to Facebook, Inc.; and
•
21% interest as of 4Q17, increasing to 49% interest by 1Q19.
•
As of January 2018, we have closed and pending acquisitions aggregating $375.5 million in key submarkets with value-add operating, redevelopment, and future development opportunities.
Operating results
4Q17
 
4Q16
 
Change
 
2017
 
2016
 
Change
Net income (loss) attributable to Alexandria’s common stockholders – diluted:
In millions
$
36.8

 
$
(25.1
)
 
N/A

 
$
145.4

 
$
(151.1
)
 
N/A

Per share
$
0.38

 
$
(0.31
)
 
N/A

 
$
1.58

 
$
(1.99
)
 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted:
In millions
$
147.0

 
$
115.5

 
27.2
%
 
$
554.5

 
$
421.3

 
31.6
%
Per share
$
1.53

 
$
1.42

 
7.7
%
 
$
6.02

 
$
5.51

 
9.3
%

 
1

 
 
 
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Fourth Quarter and Year Ended December 31, 2017, Financial and Operating Results (continued)
December 31, 2017
 
 

Items included in net income (loss) attributable to Alexandria’s common stockholders
(amounts are shown after deducting any amounts attributable to noncontrolling interests):
(In millions, except per share amounts)
Amount
 
Per Share – Diluted
 
Amount
 
Per Share – Diluted
4Q17
 
4Q16
 
4Q17
 
4Q16
 
2017
 
2016
 
2017
 
2016
Gain on sales of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate
$
—

 
$
3.7

 
$
—

 
$
0.05

 
$
14.5

 
$
3.8

 
$
0.15

 
$
0.05

Non-real estate investments
—

 
—

 
—

 
—

 
—

 
4.4

 
—

 
0.06

Impairment of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental properties
—

 
(3.5
)
 
—

 
(0.04
)
 
(0.2
)
 
(98.2
)
 
—

 
(1.29
)
Land parcels
—

 
(12.5
)
 
—

 
(0.16
)
 
—

 
(110.4
)
 
—

 
(1.45
)
Non-real estate investments
(3.8
)
 
—

 
(0.04
)
 
—

 
(8.3
)
 
(3.1
)
 
(0.09
)
 
(0.04
)
Loss on early extinguishment of debt
(2.8
)
 
—

 
(0.03
)
 
—

 
(3.5
)
 
(3.2
)
 
(0.03
)
 
(0.04
)
Preferred stock redemption charge
—

 
(35.7
)
 
—

 
(0.44
)
 
(11.3
)
 
(61.3
)
 
(0.12
)
 
(0.81
)
Total
$
(6.6
)
 
$
(48.0
)
 
$
(0.07
)
 
$
(0.59
)
 
$
(8.8
)
 
$
(268.0
)
 
$
(0.09
)
 
$
(3.52
)
Weighted-average shares of common
stock outstanding – diluted
 
95.9

 
80.8

 
 
 
 
 
92.1

 
76.1


4Q16 and 2016 per share amounts above may not agree to funds from operations per share amounts due to the different weighted-average shares used in each period and the impact of per share amounts allocable to unvested restricted stock awards. See “Definitions and Reconciliations” on page 55 of our Supplemental Information for additional information.

Core operating metrics as of 4Q17; high quality revenue and cash flows
•
Percentage of annual rental revenue in effect from:
•
Investment-grade or large cap tenants: 55%
•
Class A properties in AAA locations: 80%
•
Occupancy in North America: 96.8%
•
Operating margin: 71%
•
Adjusted EBITDA margin: 68%
•
Weighted-average remaining lease term of top 20 tenants: 13.4 years
•
See “Strong internal growth” in the key highlights section on the previous page for information on our leasing activity, rental rate growth, total revenue, and same property net operating income growth.

Balance sheet management
Key metrics
 
4Q17
 
Total market capitalization
 
$
17.9
 billion
 
Liquidity
 
$
2.0
 billion
 
 
 
 
 
Net debt to Adjusted EBITDA:
 
 
 
Quarter annualized
 
5.5x

 
Trailing 12 months
 
5.9x

 
Fixed-charge coverage ratio:
 
 
 
 
 
 
Quarter annualized
 
4.2x

 
Trailing 12 months
 
4.1x

 
 
 
 
 
Unhedged variable-rate debt as a percentage of total debt
 
1%

 
Current and future value-creation pipeline as a percentage of gross investments in real estate in North America
 
9%

 
 
Key capital events

•
In November 2017, we completed the offering of $600.0 million, 3.45%, unsecured senior notes, due in 2025, for net proceeds of $593.5 million. We used the net proceeds to repay LIBOR-based debt, including two of our secured construction loans aggregating $389.8 million and borrowings under our $1.65 billion unsecured senior line of credit. We recognized a loss on early extinguishment of debt of $2.8 million related to the early retirement of these two construction loans.
•
During 4Q17, we sold 690 thousand shares of common stock under our ATM program for gross proceeds of $86.7 million, or $125.70 per share, and received net proceeds of $85.4 million. As of 4Q17, we had $413.4 million available for future sales under the ATM program.
•
In December 2017, we issued 4.8 million shares of our common stock to settle our forward equity sales agreements executed in March 2017. Net proceeds of $484.6 million were used to fund highly leased construction projects in 2H17 and recent 2017 acquisitions.
•
In January 2018, we entered into forward equity sales agreements to sell an aggregate 6.9 million shares of our common stock (including the exercise of underwriters’ option) at a public offering price of $123.50 per share. We expect to receive proceeds of $817.3 million, to be further adjusted as provided in the sales agreements, which will fund the current and near-term value-creation pipeline and opportunistic, strategic acquisitions in 2018.
•
Completed dispositions during 4Q17, including two partial interest sales, for an aggregate sales price of $42.8 million. Refer to page 6 of this Earnings Press Release for additional information.

Corporate responsibility and industry leadership

•
In January 2018, Alexandria Venture Investments launched the Alexandria Seed Capital Platform, an innovative seed-stage life science funding model and extension of Alexandria LaunchLabs, which will focus on providing seed-stage financing in transformative life science investments.
•
In November 2017, Joel S. Marcus, Chairman, Chief Executive Officer & Founder, was elected as a member of Nareit’s 2018 Executive Board.
•
See “Leader in the Light award” on page 1 of this Earnings Press Release.
•
In November 2017, Alexandria LaunchLabs® - New York City was certified as the world’s first WELL laboratory, and achieved Gold-level recognition from the International WELL Building Institute.
•
In November 2017, the Center for Active Design, an international nonprofit organization and operator of the Fitwel Certification System, appointed us to the Fitwel Leadership Advisory Board as a founding member.
•
In January 2018, we were awarded a 2017 Governor’s Environmental and Economic Leadership Award, California’s highest environmental honor recognizing entities that have demonstrated exceptional leadership and made notable contributions to conserving precious natural resources while promoting economic growth.
•
During 4Q17, we obtained Leadership in Energy and Environmental Design (“LEED®”) Gold certifications for properties within our Alexandria Center® at Kendall Square campus at 50 and 60 Binney Street and 11 Hurley Street in our Cambridge submarket.
•
49% of annual rental revenue expected from LEED certified projects upon completion of 12 in-process projects.

 
2

 
 
 
 
Select 2017 Highlights
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December 31, 2017
 
 
 


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See our Fourth Quarter and Year Ended December 31, 2017 Earnings Press Release and Supplemental Information for additional information, non-GAAP measures, and definitions.

 
3

 
 
Acquisitions
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December 31, 2017
(Dollars in thousands)
 
 


4Q17 Acquisitions
Property
 
Submarket/Market
 
Date of Purchase
 
Number of Properties
 
Occupancy
 
Square Footage
 
Purchase Price
 
 
 
 
 
Operating
 
Development/Redevelopment
 
 
 
 
 
 
 
 
 
701 Gateway Boulevard(1)
 
South San Francisco/San Francisco
 
12/19/17
 
1
 
90.6%
 
170,862

 
 
—

 
$
76,000

 
Menlo Gateway
(unconsolidated JV)(2)
 
Greater Stanford/San Francisco
 
11/27/17
 
3
 
100%
 
251,995

 
 
520,988

 
59,936

 
4110 Campus Point Court
(55% interest)(3)
 
University Town Center/San Diego
 
12/28/17
 
1
 
100%
 
44,034

 
 
—

 
10,450

 
 
 
 
 
 
 

 
 
 
466,891

 
 
520,988

 
$
146,386

 

We expect to provide total estimated costs at completion and related yields of development and redevelopment projects in the future.

(1)
Office building located within our Alexandria Technology Center® – Gateway campus. The property is 90.6% leased as of December 31, 2017, to multiple tenants with minimal near-term lease expirations, and we expect initial stabilized yields of 7.2% and 6.3% (cash basis) upon lease-up of the existing vacant office space. In addition, the property provides future opportunities to enhance our returns through the conversion of existing office space to office/laboratory space through redevelopment, and development of a new building.
(2)
See page 5 of this Earnings Press Release for additional information on our acquisition in this real estate joint venture.
(3)
Represents a 55% interest in a real estate joint venture with TIAA, which owns a property that expands our Campus Pointe by Alexandria campus. The joint venture leased the existing 44,034 RSF property back to the seller for one year, after which the joint venture may consider options to redevelop the existing property into tech office or office/laboratory space.

1Q18 Acquisitions under purchase agreement/letter of intent
Property
 
Submarket/Market
 
Date of Purchase
 
Number of Properties
 
Anticipated Use
 
Occupancy
 
Square Footage
 
Purchase Price
 
 
 
 
Operating
 
Development/Redevelopment
 
Future Development
 
 
 
 
 
 
 
 
1455 and 1515 Third Street
(acquisition of remaining 49% interest)(1)
 
Mission Bay/SoMa/
San Francisco
 
N/A
 
2
 
Office
 
100%
 
N/A

 
 
—

 
—

 
 
 
$
37,800

 
1655 and 1715 Third Street
(10% interest in unconsolidated JV)(2)
 
Mission Bay/SoMa/
San Francisco
 
February 2018
 
2
 
Office
 
N/A
 
—

 
 
580,000

 
—

 
 
 
31,000

(2) 
2100-2400 Geng Road(3)
 
Greater Stanford/
San Francisco
 
1/25/18
 
4
 
Office/lab
 
77%
 
165,811

 
 
31,687

 
—

 
 
 
136,000

 
9965-9995 Summers Ridge Road(4)
 
Sorrento Mesa/
San Diego
 
1/5/18
 
4
 
Office/lab
 
100%
 
316,531

 
 
—

 
50,000

 
 
 
148,650

 
Pending | San Diego
 
 
 
2Q18
 
—
 
Office or lab
 
N/A
 
—

 
 
—

 
120,000

 
 
 
17,000

 
Pending | Maryland
 
 
 
March 2018
 
1
 
Office/lab
 
31%
 
24,846

 
 
54,485

 
—

 
 
 
5,000

 
 
 
 
 
 
 
 
 
 
 
 
 
507,188

 
 
666,172

 
170,000

 
 
 
375,450

 
Additional projected acquisitions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
295,000 - 395,000
2018 Guidance range
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$670,000 - $770,000

(1)
The first installment of $18.9 million related to our November 2016 acquisition was paid in 2Q17, the second installment of $18.9 million was paid in January 2018, and we expect the final installment to be paid during 1H18.
(2)
Represents a 10% interest in a joint venture with Uber and the Golden State Warriors expected to be formed in February 2018. The joint venture is developing two office buildings aggregating 580,000 RSF, adjacent to the Golden State Warriors arena, which are 100% leased to Uber. Our initial equity contribution of $31.0 million will be funded at formation of the joint venture, and the project will transfer from pre-construction to under construction, with initial occupancy expected in 2019.
(3)
Four-building office campus on 11 acres with 14 in-place leases with a weighted-average remaining lease term of three years. We are evaluating options for the conversion of existing office space into office/laboratory space through redevelopment. We expect to provide total estimated costs at completion and related yields in the future.
(4)
A campus, with on-site amenities, consisting of four operating properties aggregating 316,531 RSF. The property also includes a future development opportunity for an additional 50,000 RSF building. The properties are 100% leased as of December 31, 2017, to Quidel Corporation and Abbott Laboratories, for aggregate terms of 15 years. We expect initial stabilized yields of 8.2% and 6.3% (cash basis) with an opportunity to enhance our initial return through future development.

 
4

 
 
 
 
Acquisitions (continued): Menlo Gateway
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December 31, 2017
 
 
 



    q417menloa.jpg    
(1)    Includes our share of investment in real estate joint venture working capital.
(2)    The joint venture is in process of obtaining non-recourse construction financing for the development project for Phase II of our Menlo Gateway joint venture.

 
5

 
 
Dispositions
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December 31, 2017
(Dollars in thousands)
 
 

Property/Market/Submarket
 
Date of Sale
 
RSF
 
Net Operating
Income(1)
 
Net Operating Income
(Cash Basis)(1)
 
Contractual Sales Price
 
Gain
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
360 Longwood Avenue/Greater Boston/Longwood Medical Area
 
7/6/17
 
203,090

 
$
4,313

 
$
4,168

 
$
65,701

 
 
$
14,106

 
9625 Towne Centre Drive/San Diego/University Town Center
(sale of partial interest)(2)
 
12/19/17
 
163,648

 
N/A

 
N/A

 
 
13,470

 
 
N/A

 
Campus Point Drive, Development Rights/San Diego/University Town Center
(sale of 45% interest)(3)
 
12/19/17
 
318,383

 
N/A

 
N/A

 
 
12,895

 
 
N/A

 
6146 Nancy Ridge Drive/San Diego/Sorrento Mesa
 
1/6/17
 
21,940

 
N/A

 
N/A

 
 
3,000

 
 
270

 
1401/1413 Research Boulevard/Maryland/Rockville(4)
 
5/17/17
 
90,000

 
N/A

 
N/A

 
 
7,937

 
 
111

 
Operating property in China
 
11/27/17
 
300,184

 
$
365

 
$
392

 
 
11,167

 
 
—

 
 
 
 
 
 
 
 
 
 
 
$
114,170

 
 
$
14,487

 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 

(1)
Represents annualized amounts for the quarter ended prior to the date of sale. Net operating income (cash basis) excludes straight-line rent and amortization of acquired below-market leases.
(2)
In December 2017, we entered into a joint venture agreement to sell to TIAA a 49.9% interest in 9625 Towne Centre Drive, a 163,648 RSF redevelopment project undergoing construction in our University Town Center submarket, which is 100% leased to Takeda Pharmaceutical Company Ltd. We received an initial contribution of $13.5 million from TIAA for a 35.9% initial ownership interest as of December 31, 2017, and expect TIAA’s ownership interest to increase to 49.9% by the end of 2Q18 through additional capital contributions to fund construction.
(3)
In connection with the agreement to sell a 45% partial interest in 10290 Campus Point Drive to TIAA in 2016, we also agreed to sell to TIAA a 45% partial interest in the related development rights aggregating 318,383 RSF in our Campus Pointe by Alexandria campus at a sales price of $90 per SF. The sale of the development rights was contingent upon the completion of certain entitlement milestones. Upon completion of the entitlement milestones, we completed the 45% partial interest sale of the related development rights in December 2017.
(4)
Joint venture with a distinguished retail real estate developer for the development of a 90,000 RSF retail shopping center, with remaining construction costs to be funded from a $25.0 million non-recourse secured construction loan.

 
6

 
 
Guidance
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December 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, 2018. There can be no assurance that actual amounts will be materially higher or lower than these expectations. See our discussion of “forward-looking statements” on page 8 of this Earnings Press Release.

Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s
Common Stockholders – Diluted
 
Earnings per share
 
$2.04 to $2.24
(1)
Depreciation and amortization
 
 
4.45
 
 
Allocation to unvested restricted stock awards
 
 
(0.04)
 
 
Funds from operations per share
 
$6.45 to $6.65
(1)

Key Assumptions
 
Low
 
High
 
Occupancy percentage in North America as of December 31, 2018
 
96.9%

 
97.5%

 
 
 
 
 
 
 
Lease renewals and re-leasing of space:
 
 
 
 
 
Rental rate increases
 
13.0%

 
16.0%

 
Rental rate increases (cash basis)
 
7.5%

 
10.5%

 
Same property performance:
 
 
 
 
 
Net operating income increase
 
2.5%

 
4.5%

 
Net operating income increase (cash basis)
 
9.0%

 
11.0%

 
 
 
 
 
 
 
Straight-line rent revenue
 
$
92

 
$
102

(3)
General and administrative expenses
 
$
85

 
$
90

 
Capitalization of interest
 
$
55

 
$
65

 
Interest expense
 
$
155

 
$
165

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

 
$
180

 
$
160

 
 
 
Incremental debt
 
470

 
430

 
 
450

 
 
 
Real estate dispositions, partial interest sales, and common equity
 
1,110

 
1,310

 
 
1,210

 
$
817

(2) 
Total sources of capital
 
$
1,720

 
$
1,920

 
$
1,820

 
 
 
Uses of capital:
 
 
 
 
 
 
 
 
 
 
Construction
 
$
1,050

 
$
1,150

 
 
$
1,100

 
 
 
Acquisitions
 
670

 
770

 
 
720

 
(4)
Total uses of capital
 
$
1,720

 
$
1,920

 
$
1,820

 
 
 
Incremental debt (included above):
 
 
 
 
 
 
 
 
 
 
Issuance of unsecured senior notes payable
 
$
550

 
$
650

 
 
$
600

 
 
 
Repayments of secured notes payable
 
(10
)
 
(15
)
 
 
(13
)
 
 
 
Repayment of unsecured senior bank term loan
 
(200
)
 
(200
)
 
 
(200
)
 
 
 
$1.65 billion unsecured senior line of credit/other
 
130

 
(5
)
 
 
63

 
 
 
Incremental debt
 
$
470

 
$
430

 
$
450

 
 
 


(1)
Excludes the impact of changes in fair value for equity investments pursuant to a new accounting standard effective January 1, 2018. For a comprehensive discussion on the new accounting standard update, refer to the “Recent Accounting Pronouncements” section in Note 2 – “Summary of Significant Accounting Policies” in our September 30, 2017, Form 10-Q filed on October 31, 2017, and our 2017 annual report on Form 10-K.
(2)
Represents 6.9 million shares of our common stock subject to forward equity sales agreements executed in January 2018, with anticipated aggregate net proceeds of $817.3 million, subject to adjustments as provided in the forward equity sales agreements. The forward equity sales agreements expire no later than April 2019, and we expect to settle these agreements in 2018.
(3)
Approximately 50% of straight-line rent revenue represents initial free rent on recently delivered and expected 2018 deliveries of new Class A properties from our development and redevelopment pipeline.
(4)
See “Acquisitions” on page 4 of this Earnings Press Release.


 
7

 
 
 
q417logo2.jpg
Earnings Call Information and About the Company
December 31, 2017
 
 


We will host a conference call on Tuesday, January 30, 2018, at 3:00 p.m. Eastern Time (“ET”)/noon Pacific Time (“PT”), which is open to the general public to discuss our financial and operating results for the fourth quarter and year ended December 31, 2017. To participate in this conference call, dial (877) 270-2148 or (412) 902-6510 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the Alexandria Real Estate Equities, Inc. call. The audio webcast can be accessed at www.are.com in the “For Investors” section. A replay of the call will be available for a limited time from 5:00 p.m. ET/2:00 p.m. PT on Tuesday, January 30, 2018. The replay number is (877) 344-7529 or (412) 317-0088, and the confirmation code is 10114665.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the fourth quarter and year ended December 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/2017q4.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 $17.9 billion and an asset base in North America of 29.6 million SF as of December 31, 2017. The asset base in North America includes 22.0 million RSF of operating properties, including 1.7 million RSF of development and redevelopment of new Class A properties currently undergoing construction. Additionally, the asset base in North America includes 7.6 million SF of future development projects, including 1.6 million SF of near-term projects undergoing marketing for lease and pre-construction activities and 3.8 million SF of intermediate-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. Alexandria also provides strategic risk capital to transformative life science and technology companies through its venture capital arm. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.

***********

This document includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2018 earnings per share attributable to Alexandria’s common stockholders – diluted, 2018 funds from operations per share attributable to Alexandria’s common stockholders – diluted, net operating income, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “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.


 
8

 
 
Consolidated Statements of Income
q417logo2.jpg
December 31, 2017
(In thousands, except per share amounts)
 
 

 
 
Three Months Ended
 
Year Ended
 
 
12/31/17

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

 
 

 
 

 
 

 
 

 
 

 
 

Rental
 
$
228,025

 
$
216,021

 
$
211,942

 
$
207,193

 
$
187,315

 
$
863,181

 
$
673,820

Tenant recoveries
 
70,270

 
67,058

 
60,470

 
61,346

 
58,270

 
259,144

 
223,655

Other income
 
496

(1) 
2,291

 
647

 
2,338

 
3,577

 
5,772

 
24,231

Total revenues
 
298,791

 
285,370

 
273,059

 
270,877

 
249,162

 
1,128,097


921,706

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental operations
 
88,073

 
83,469

 
76,980

 
77,087

 
73,244

 
325,609

 
278,408

General and administrative
 
18,910

 
17,636

 
19,234

 
19,229

 
17,458

 
75,009

 
63,884

Interest
 
36,082

 
31,031

 
31,748

 
29,784

 
31,223

 
128,645

 
106,953

Depreciation and amortization
 
107,714

 
107,788

 
104,098

 
97,183

 
95,222

 
416,783

 
313,390

Impairment of real estate
 
—

 
—

 
203

 
—

 
16,024

 
203

 
209,261

Loss on early extinguishment of debt
 
2,781

 
—

 
—

 
670

 
—

 
3,451

 
3,230

Total expenses
 
253,560

 
239,924

 
232,263

 
223,953

 
233,171

 
949,700

 
975,126

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in earnings (losses) of unconsolidated real estate joint ventures
 
376

 
14,100

 
589

 
361

 
86

 
15,426

 
(184
)
Gain on sales of real estate – rental properties
 
—

 
—

 
—

 
270

 
3,715

 
270

 
3,715

Gain on sales of real estate – land parcels
 
—

 
—

 
111

 
—

 
—

 
111

 
90

Net income (loss)
 
45,607

 
59,546

 
41,496

 
47,555

 
19,792

 
194,204

 
(49,799
)
Net income attributable to noncontrolling interests
 
(6,219
)
 
(5,773
)
 
(7,275
)
 
(5,844
)
 
(4,488
)
 
(25,111
)
 
(16,102
)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s stockholders
 
39,388

 
53,773

 
34,221

 
41,711

 
15,304

 
169,093

 
(65,901
)
Dividends on preferred stock
 
(1,302
)
 
(1,302
)
 
(1,278
)
 
(3,784
)
 
(3,835
)
 
(7,666
)
 
(20,223
)
Preferred stock redemption charge
 
—

 
—

 
—

 
(11,279
)
 
(35,653
)
 
(11,279
)
 
(61,267
)
Net income attributable to unvested restricted stock awards
 
(1,255
)
 
(1,198
)
 
(1,313
)
 
(987
)
 
(943
)
 
(4,753
)
 
(3,750
)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders
 
$
36,831

 
$
51,273

 
$
31,630

 
$
25,661

 
$
(25,127
)
 
$
145,395

 
$
(151,141
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.39

 
$
0.55

 
$
0.35

 
$
0.29

 
$
(0.31
)
 
$
1.59

 
$
(1.99
)
Diluted
 
$
0.38

 
$
0.55

 
$
0.35

 
$
0.29

 
$
(0.31
)
 
$
1.58

 
$
(1.99
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
95,138

 
92,598

 
90,215

 
88,147

 
80,800

 
91,546

 
76,103

Diluted
 
95,914

 
93,296

 
90,745

 
88,200

 
80,800

 
92,063

 
76,103

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per share of common stock
 
$
0.90

 
$
0.86

 
$
0.86

 
$
0.83

 
$
0.83

 
$
3.45

 
$
3.23


(1)
Includes an impairment charge of $3.8 million related to one publicly traded non-real estate investment.


 
9

 
 
Consolidated Balance Sheets
q417logo2.jpg
December 31, 2017
(In thousands)
 
 

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

 
 

 
 

 
 

Investments in real estate
 
$
10,298,019

 
$
10,046,521

 
$
9,819,413

 
$
9,470,667

 
$
9,077,972

Investments in unconsolidated real estate joint ventures
 
110,618

 
33,692

 
58,083

 
50,457

 
50,221

Cash and cash equivalents
 
254,381

 
118,562

 
124,877

 
151,209

 
125,032

Restricted cash
 
22,805

 
27,713

 
20,002

 
18,320

 
16,334

Tenant receivables
 
10,262

 
9,899

 
8,393

 
9,979

 
9,744

Deferred rent
 
434,731

 
402,353

 
383,062

 
364,348

 
335,974

Deferred leasing costs
 
221,430

 
208,265

 
201,908

 
202,613

 
195,937

Investments
 
523,254

 
485,262

 
424,920

 
394,471

 
342,477

Other assets
 
228,453

 
213,056

 
205,009

 
206,562

 
201,197

Total assets
 
$
12,103,953

 
$
11,545,323

 
$
11,245,667

 
$
10,868,626

 
$
10,354,888

 
 
 
 
 
 
 
 
 
 
 
Liabilities, Noncontrolling Interests, and Equity
 
 
 
 
 
 
 
 
 
 
Secured notes payable
 
$
771,061

 
$
1,153,890

 
$
1,127,348

 
$
1,083,758

 
$
1,011,292

Unsecured senior notes payable
 
3,395,804

 
2,801,290

 
2,800,398

 
2,799,508

 
2,378,262

Unsecured senior line of credit
 
50,000

 
314,000

 
300,000

 
—

 
28,000

Unsecured senior bank term loans
 
547,942

 
547,860

 
547,639

 
547,420

 
746,471

Accounts payable, accrued expenses, and tenant security deposits
 
763,832

 
740,070

 
734,189

 
782,637

 
731,671

Dividends payable
 
92,145

 
83,402

 
81,602

 
78,976

 
76,914

Preferred stock redemption liability
 
—

 
—

 
—

 
130,000

 
—

Total liabilities
 
5,620,784

 
5,640,512

 
5,591,176

 
5,422,299

 
4,972,610

 
 
 
 
 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
 
11,509

 
11,418

 
11,410

 
11,320

 
11,307

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

 
74,386

 
74,386

 
74,386

 
86,914

6.45% Series E cumulative redeemable preferred stock
 
—

 
—

 
—

 
—

 
130,000

Common stock
 
998

 
943

 
921

 
899

 
877

Additional paid-in capital
 
5,824,258

 
5,287,777

 
5,059,180

 
4,855,686

 
4,672,650

Accumulated other comprehensive income
 
50,024

 
43,864

 
22,677

 
21,460

 
5,355

Alexandria Real Estate Equities, Inc.’s stockholders’ equity
 
5,949,666

 
5,406,970

 
5,157,164

 
4,952,431

 
4,895,796

Noncontrolling interests
 
521,994

 
486,423

 
485,917

 
482,576

 
475,175

Total equity
 
6,471,660

 
5,893,393

 
5,643,081

 
5,435,007

 
5,370,971

Total liabilities, noncontrolling interests, and equity
 
$
12,103,953

 
$
11,545,323

 
$
11,245,667

 
$
10,868,626

 
$
10,354,888



 
10

 
 
Funds From Operations and Funds From Operations per Share
q417logo2.jpg
December 31, 2017
(In thousands, except per share amounts)
 
 

The following tables present a reconciliation of net income (loss) attributable to Alexandria’s common stockholders, the most directly comparable financial measure presented in accordance with generally accepted accounting principles (“GAAP”), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria’s common stockholders – diluted, and funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted, and related per share amounts. Amounts allocable to unvested restricted stock awards are not material and are not presented separately within the per share table below. Per share amounts may not add due to rounding.
 
 
Three Months Ended
 
Year Ended
 
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
 
12/31/16
 
12/31/17
 
12/31/16
Net income (loss) attributable to Alexandria’s common stockholders
 
$
36,831

 
$
51,273

 
$
31,630

 
$
25,661

 
$
(25,127
)
 
$
145,395

 
$
(151,141
)
Depreciation and amortization
 
107,714

 
107,788

 
104,098

 
97,183

 
95,222

 
416,783

 
313,390

Noncontrolling share of depreciation and amortization from consolidated real estate JVs
 
(3,777
)
 
(3,608
)
 
(3,735
)
 
(3,642
)
 
(2,598
)
 
(14,762
)
 
(9,349
)
Our share of depreciation and amortization from unconsolidated real estate JVs
 
432

 
383

 
324

 
412

 
655

 
1,551

 
2,707

Gain on sales of real estate – rental properties
 
—

 
—

 
—

 
(270
)
 
(3,715
)
 
(270
)
 
(3,715
)
Our share of gain on sales of real estate from unconsolidated real estate JVs
 
—

 
(14,106
)
 
—

 
—

 
—

 
(14,106
)
 
—

Gain on sales of real estate – land parcels
 
—

 
—

 
(111
)
 
—

 
—

 
(111
)
 
(90
)
Impairment of real estate – rental properties
 
—

 
—

 
203

 
—

 
3,506

 
203

 
98,194

Allocation to unvested restricted stock awards
 
(734
)
 
(957
)
 
(685
)
 
(561
)
 
—

 
(2,920
)
 
—

Funds from operations attributable to Alexandria’s common stockholders –
diluted(1)
 
140,466

 
140,773

 
131,724

 
118,783

 
67,943

 
531,763

 
249,996

Non-real estate investment income
 
—

 
—

 
—

 
—

 
—

 
—

 
(4,361
)
Impairment of land parcels and non-real estate investments
 
3,805

(2) 
—

 
4,491

 
—

 
12,511

 
8,296

 
113,539

Loss on early extinguishment of debt
 
2,781

 
—

 
—

 
670

 
—

 
3,451

 
3,230

Preferred stock redemption charge
 
—

 
—

 
—

 
11,279

 
35,653

 
11,279

 
61,267

Allocation to unvested restricted stock awards
 
(94
)
 
—

 
(58
)
 
(150
)
 
(605
)
 
(321
)
 
(2,356
)
Funds from operations attributable to Alexandria’s common stockholders –
diluted, as adjusted
 
$
146,958

 
$
140,773

 
$
136,157

 
$
130,582

 
$
115,502

 
$
554,468

 
$
421,315


Net income (loss) per share attributable to Alexandria’s common stockholders
 
$
0.38

 
$
0.55

 
$
0.35

 
$
0.29

 
$
(0.31
)
 
$
1.58

 
$
(1.99
)
Depreciation and amortization 
 
1.08

 
1.11

 
1.10

 
1.06

 
1.15

 
4.35

 
4.02

Gain on sales of real estate – rental properties
 
—

 
—

 
—

 
—

 
(0.05
)
 
—

 
(0.05
)
Our share of gain on sales of real estate from unconsolidated real estate JVs
 
—

 
(0.15
)
 
—

 
—

 
—

 
(0.15
)
 
—

Impairment of real estate – rental properties
 
—

 
—

 
—

 
—

 
0.05

 
—

 
1.29

Funds from operations per share attributable to Alexandria’s common stockholders – diluted(1)
 
1.46

 
1.51

 
1.45

 
1.35

 
0.84

 
5.78


3.27

Non-real estate investment income
 
—

 
—

 
—

 
—

 
—

 
—

 
(0.06
)
Impairment of land parcels and non-real estate investments
 
0.04

 
—

 
0.05

 
—

 
0.15

 
0.09

 
1.47

Loss on early extinguishment of debt
 
0.03

 
—

 
—

 
0.01

 
—

 
0.03

 
0.04

Preferred stock redemption charge
 
—

 
—

 
—

 
0.12

 
0.43

 
0.12

 
0.79

Funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
1.53

 
$
1.51

 
$
1.50

 
$
1.48

 
$
1.42

 
$
6.02

 
$
5.51

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding for calculating funds from operations per share and funds from operations, as adjusted, per share – diluted
 
95,914

 
93,296

 
90,745

 
88,200

 
81,280

 
92,063

 
76,412


(1)
Calculated in accordance with standards established by the Advisory Board of Governors of the National Association of Real Estate Investment Trusts (the “Nareit Board of Governors”) in its April 2002 White Paper and related implementation guidance.
(2)
Related to one publicly traded non-real estate investment.

 
11









SUPPLEMENTAL
INFORMATION








 
 
 
q417logo2.jpg
Company Profile
December 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 $17.9 billion and an asset base in North America of 29.6 million SF as of December 31, 2017. The asset base in North America includes 22.0 million RSF of operating properties, including 1.7 million RSF of development and redevelopment of new Class A properties currently undergoing construction. Additionally, the asset base in North America includes 7.6 million SF of future development projects, including 1.6 million SF of near-term projects undergoing marketing for lease and pre-construction activities and 3.8 million SF of intermediate-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. Alexandria also provides strategic risk capital to transformative life science and technology companies through its venture capital arm. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.

Tenant base

Alexandria is known for our high-quality and diverse tenant base, with 55% of our annual rental revenue generated from investment-grade or large cap 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 in the real estate, life science, and technology industries provide Alexandria significant competitive advantages in attracting new business opportunities.
 
Alexandria’s executive and senior management team consists of 30 individuals, averaging 26 years of real estate experience, including 13 years with Alexandria. Our executive management team alone averages 18 years of experience with Alexandria.

EXECUTIVE MANAGEMENT TEAM
Joel S. Marcus
Chairman, Chief Executive Officer & Founder
Dean A. Shigenaga
Executive Vice President
Chief Financial Officer & Treasurer
Thomas J. Andrews
Executive Vice President
Regional Market Director – Greater Boston
Jennifer J. Banks
Executive Vice President
General Counsel & Corporate Secretary
Vincent R. Ciruzzi
Chief Development Officer
John H. Cunningham
Executive Vice President
Regional Market Director – New York City
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

 
13

 
 
 
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Investor Information
December 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 be incomplete and is subject to change as firms initiate or discontinue coverage of our company. Please note that any opinions, estimates, or forecasts regarding our historical or predicted performance made by these analysts are theirs alone and do not represent opinions, estimates, or forecasts of Alexandria or its management. Alexandria does not by its reference or distribution of the information below imply its endorsement of or concurrence with any opinions, estimates, or forecasts of these analysts. Interested persons may obtain copies of analysts’ reports on their own as we do not distribute these reports. Several of these firms may, from time to time, own our stock and/or hold other long or short positions in our stock and may provide compensated services to us.
Bank of America Merrill Lynch
 
Citigroup Global Markets Inc.
 
J.P. Morgan Securities LLC
 
RBC Capital Markets
Jamie Feldman / Jeffrey Spector
 
Michael Bilerman / Emmanuel Korchman
 
Anthony Paolone / Patrice Chen
 
Michael Carroll / Brian Hawthorne
(646) 855-5808 / (646) 855-1363
 
(212) 816-1383 / (212) 816-1382
 
(212) 622-6682 / (212) 622-1893
 
(440) 715-2649 / (440) 715-2653
 
 
 
 
 
 
 
Barclays Capital Inc.
 
Evercore ISI
 
Mitsubishi UFJ Securities (USA), Inc.
 
Robert W. Baird & Co. Incorporated
Ross Smotrich / Trevor Young
 
Sheila McGrath / Nathan Crossett
 
Karin Ford / Jason Twizell
 
David Rodgers / Richard Schiller
(212) 526-2306 / (212) 526-3098
 
(212) 497-0882 / (212) 497-0870
 
(212) 405-7349 / (212) 405-7160
 
(216) 737-7341 / (312) 609-5485
 
 
 
 
 
 
 
BTIG, LLC
 
Green Street Advisors, Inc.
 
Mizuho Securities USA Inc.
 
UBS Securities LLC
Tom Catherwood / James Sullivan
 
Jed Reagan / Daniel Ismail
 
Richard Anderson / Zachary Silverberg
 
Nick Yulico / Frank Lee
(212) 738-6140 / (212) 738-6139
 
(949) 640-8780 / (949) 640-8780
 
(212) 205-8445 / (212) 205-7855
 
(212) 713-3402 / (415) 352-5679
 
 
 
 
 
 
 
CFRA
 
JMP Securities – JMP Group, Inc.
 
 
 
 
Kenneth Leon
 
Peter Martin / Brian Riley
 
 
 
 
(212) 438-4638
 
(415) 835-8904 / (415) 835-8908
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Income Coverage
 
Rating Agencies
J.P. Morgan Securities LLC
 
Wells Fargo & Company
 
Moody’s Investors Service
 
S&P Global Ratings
Mark Streeter / Jonathan Rau
 
Thierry Perrein / Kevin McClure
 
Thuy Nguyen / Reed Valutas
 
Fernanda Hernandez / Anita Ogbara
(212) 834-5086 / (212) 834-5237
 
(704) 410-3262 / (704) 410-3252
 
(212) 553-7168 / (212) 553-4169
 
(212) 438-1347 / (212) 438-5077
 
 
 
 
 
 
 

 
14

 
 
 
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High-Quality, Diverse, and Innovative Tenants
December 31, 2017
 
 



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

Investment-Grade or Large Cap Tenants
 
Tenant Mix
 
 
 
 
q417clientmix4s.jpg
 
 
 
 
 
 
 
 
55%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
of ARE’s Total
 
Annual Rental Revenue(1)
 
 
 
 
 
 
 
 
 
 
 
A REIT Industry-Leading Tenant Roster
 
Percentage of ARE’s Annual Rental Revenue(1)







(1)
Represents annual rental revenue in effect as of December 31, 2017.
(2)
Leading technology entities represent investment-grade or large cap (public or private) entities.

 
15

 
 
 
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Class A Properties in AAA Locations
December 31, 2017
 
 


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

Class A Properties in
AAA Locations
 
AAA Locations
 
 
 
 
q417realestatemetrics4s.jpg
 
 
 
 
 
 
 
 
80%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
of ARE’s
 
Annual Rental Revenue(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of ARE’s Annual Rental Revenue(1)











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

 
16

 
 
 
q417logo2.jpg
Occupancy
December 31, 2017
 
 



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

Solid Historical Occupancy(1)
 
Occupancy across Key Locations
 
 
 
 
q417occupancy4s.jpg
 
 
 
 
 
 
 
 
95%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Over 10 Years
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Occupancy of Operating Properties
 
 
as of December 31, 2017








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


 
17

 
 
Financial and Asset Base Highlights
q417logo2.jpg
December 31, 2017
(Dollars in thousands, except per share amounts)
 
 

 
 
Three Months Ended (unless stated otherwise)
 
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
 
12/31/16
Selected financial data from consolidated financial statements and related information
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA – quarter annualized
 
$
817,392

 
$
773,828

 
$
755,048

 
$
723,764

 
$
662,836

Adjusted EBITDA – trailing 12 months
 
$
767,508

 
$
728,869

 
$
689,079

 
$
650,579

 
$
610,839

Adjusted EBITDA margins
 
68%

 
68%

 
68%

 
67%

 
67%

Operating margins
 
71%

 
71%

 
72%

 
72%

 
71%

 
 
 
 
 
 
 
 
 
 
 
Net debt at end of period
 
$
4,516,672

 
$
4,698,568

 
$
4,660,216

 
$
4,292,773

 
$
4,052,576

Net debt to Adjusted EBITDA – quarter annualized
 
5.5x

 
6.1x

 
6.2x

 
5.9x

 
6.1x

Net debt to Adjusted EBITDA – trailing 12 months
 
5.9x

 
6.4x

 
6.8x

 
6.6x

 
6.6x

Net debt and preferred stock to Adjusted EBITDA – quarter annualized
 
5.6x

 
6.2x

 
6.3x

 
6.0x

 
6.4x

Net debt and preferred stock to Adjusted EBITDA – trailing 12 months
 
6.0x

 
6.5x

 
6.9x

 
6.7x

 
7.0x

 
 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio – quarter annualized
 
4.2x

 
4.1x

 
4.1x

 
4.1x

 
3.8x

Fixed-charge coverage ratio – trailing 12 months
 
4.1x

 
4.0x

 
3.9x

 
3.8x

 
3.6x

Unencumbered net operating income as a percentage of total net operating income
 
86%

 
81%

 
81%

 
81%

 
82%

 
 
 
 
 
 
 
 
 
 
 
Closing stock price at end of period
 
$
130.59

 
$
118.97

 
$
120.47

 
$
110.52

 
$
111.13

Common shares outstanding (in thousands) at end of period
 
99,784

 
94,325

 
92,098

 
89,884

 
87,666

Total equity capitalization at end of period
 
$
13,140,843

 
$
11,328,163

 
$
11,202,668

 
$
10,037,702

 
$
9,991,832

Total market capitalization at end of period
 
$
17,905,650

 
$
16,145,203

 
$
15,978,053

 
$
14,468,388

 
$
14,155,857

 
 
 
 
 
 
 
 
 
 
 
Dividend per share – quarter/annualized
 
$0.90/$3.60

 
$0.86/$3.44

 
$0.86/$3.44

 
$0.83/$3.32

 
$0.83/$3.32

Dividend payout ratio for the quarter
 
61%

 
58%

 
58%

 
57%

 
63%

Dividend yield – annualized
 
2.8%

 
2.9%

 
2.9%

 
3.0%

 
3.0%

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

 
0.6%

 
0.6%

 
0.6%

 
0.6%

General and administrative expense as a percentage of total revenues – trailing 12 months
 
6.6%

 
6.8%

 
7.0%

 
7.0%

 
6.9%

 
 
 
 
 
 
 
 
 
 
 
Capitalized interest
 
$
12,897

 
$
17,092

 
$
15,069

 
$
13,164

 
$
11,659

Weighted-average interest rate for capitalization of interest during period
 
3.89%

 
3.96%

 
3.98%

 
3.95%

 
3.72%

 
 
 
 
 
 
 
 
 
 
 
 

 
18

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

 
 
Three Months Ended (unless stated otherwise)
 
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
 
12/31/16
Amounts included in funds from operations and non-revenue-enhancing capital expenditures
 
 
 
 
 
 
 
 
 
 
Straight-line rent revenue
 
$
33,281

 
$
20,865

 
$
17,905

 
$
35,592

 
$
20,993

Amortization of acquired below-market leases
 
$
4,147

 
$
4,545

 
$
5,004

 
$
5,359

 
$
2,818

Straight-line rent expense on ground leases
 
$
205

 
$
206

 
$
201

 
$
198

 
$
557

Stock compensation expense
 
$
6,961

 
$
7,893

 
$
5,504

 
$
5,252

 
$
6,426

Amortization of loan fees
 
$
2,571

 
$
2,840

 
$
2,843

 
$
2,895

 
$
3,080

Amortization of debt premiums
 
$
639

 
$
652

 
$
625

 
$
596

 
$
383

Non-revenue-enhancing capital expenditures:
 
 
 
 
 
 
 
 
 
 
Building improvements
 
$
2,469

 
$
2,453

 
$
1,840

 
$
1,138

 
$
2,135

Tenant improvements and leasing commissions
 
$
9,578

 
$
9,976

 
$
9,389

 
$
18,377

 
$
11,614

 
 
 
 
 
 
 
 
 
 
 
Operating statistics and related information (at end of period)
 
 
 
 
 
 
 
 
 
 
Number of properties – North America
 
213

 
206

 
202

 
199

 
199

RSF (including development and redevelopment projects under construction) – North America
 
21,981,133

 
20,642,042

 
20,567,473

 
20,084,195

 
19,869,729

Total square feet – North America
 
29,563,221

 
28,583,747

 
28,351,518

 
28,176,780

 
25,162,360

Annual rental revenue per occupied RSF – North America
 
$
48.01

 
$
47.19

 
$
46.55

 
$
45.94

 
$
45.15

Occupancy of operating properties – North America
 
96.8%

 
96.1%

 
95.7%

 
95.5%

 
96.6%

Occupancy of operating and redevelopment properties – North America
 
94.7%

 
93.9%

 
94.0%

 
94.7%

 
95.7%

Weighted average remaining lease term (in years)
 
8.9

 
8.8

 
8.8

 
9.0

 
8.8

 
 
 
 
 
 
 
 
 
 
 
Total leasing activity – RSF
 
1,379,699

 
786,925

 
1,081,777

 
1,320,781

 
1,501,376

Lease renewals and re-leasing of space – change in average new rental rates over expiring rates:
 
 
 
 
 
 
 
 
 
 
Rental rate increases
 
24.8%


24.2%

 
23.2%

 
27.8%

 
25.8%

Rental rate increases (cash basis)
 
10.4%

 
10.0%

 
9.4%

 
17.7%

 
9.5%

RSF (included in total leasing activity above)
 
593,622

 
448,472

 
604,142

 
878,863

 
671,222

 
 
 
 
 
 
 
 
 
 
 
Same property – percentage change over comparable quarter from prior year:
 
 
 
 
 
 
 
 
 
 
Net operating income increase
 
4.5%

 
2.2%

 
1.8%

 
2.6%

 
3.2%

Net operating income increase (cash basis)
 
12.5%

 
7.8%

 
7.0%

 
5.5%

 
4.9%

 
 
 
 
 
 
 
 
 
 
 
 


 
19

 
 
 
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Key Operating Metrics
December 31, 2017
 
 

Favorable Lease Structure(1)
 
Same Property Net Operating Income Growth
 
 
 
q417sameprop4sa.jpg
q417sameprop4sb.jpg
 
Stable cash flows
 
 
 
 
Percentage of triple
net leases
 
97%
 
 
Increasing cash flows
 
 
 
 
Percentage of leases containing
annual rent escalations
95%
 
 
Lower capex burden
 
 
 
 
Percentage of leases providing for the
recapture of capital expenditures
94%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Margins(2)
 
Rental Rate Growth:
Renewed/Re-Leased Space
 
 
 
 
 
 
 
 
 
q417rentalrate4sa.jpg
q417rentalrate4sb.jpg
 
Adjusted EBITDA
 
 
 
Operating
 
 
68%
 
 
 
71%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Percentages calculated based on RSF as of December 31, 2017.
(2)
Represents the three months ended December 31, 2017.

 
20

 
 
Same Property Performance
q417logo2.jpg
December 31, 2017
(Dollars in thousands)
 
 

Same Property Financial Data
 
4Q17
 
2017
 
Same Property Statistical Data
 
4Q17
 
2017
 
Percentage change over comparable period from prior year:
 
 
 
 
 
Number of same properties
 
169
 
166
 
Net operating income increase
 
4.5%
 
3.1%
 
Rentable square feet
 
15,177,562
 
14,414,434
 
Net operating income increase (cash basis)
 
12.5%
 
6.8%
 
Occupancy – current-period average
 
96.3%
 
96.0%
 
Operating margin
 
71%
 
70%
 
Occupancy – same-period prior-year average
 
97.1%
 
97.2%
 

 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
 
2017
 
2016
 
$ Change
 
% Change
 
2017
 
2016
 
$ Change
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
$
176,897

 
$
171,003

 
$
5,894

 
3.4
%
 
$
613,866

 
$
596,898

 
$
16,968

 
2.8
%
 
Non-same properties
 
51,128

 
16,312

 
34,816

 
213.4

 
249,315

 
76,922

 
172,393

 
224.1

 
Total rental
 
228,025

 
187,315

 
40,710

 
21.7

 
863,181

 
673,820

 
189,361

 
28.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
60,568

 
54,688

 
5,880

 
10.8

 
209,273

 
202,565

 
6,708

 
3.3

 
Non-same properties
 
9,702

 
3,582

 
6,120

 
170.9

 
49,871

 
21,090

 
28,781

 
136.5

 
Total tenant recoveries
 
70,270

 
58,270

 
12,000

 
20.6

 
259,144

 
223,655

 
35,489

 
15.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
141

 
39

 
102

 
261.5

 
447

 
117

 
330

 
282.1

 
Non-same properties
 
355

 
3,538

 
(3,183
)
 
(90.0
)
 
5,325

 
24,114

 
(18,789
)
 
(77.9
)
 
Total other income
 
496

 
3,577

 
(3,081
)
 
(86.1
)
 
5,772

 
24,231

 
(18,459
)
 
(76.2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
237,606

 
225,730

 
11,876

 
5.3

 
823,586

 
799,580

 
24,006

 
3.0

 
Non-same properties
 
61,185

 
23,432

 
37,753

 
161.1

 
304,511

 
122,126

 
182,385

 
149.3

 
Total revenues
 
298,791

 
249,162

 
49,629

 
19.9

 
1,128,097

 
921,706

 
206,391

 
22.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
70,144

 
65,541

 
4,603

 
7.0

 
244,819

 
237,960

 
6,859

 
2.9

 
Non-same properties
 
17,929

 
7,703

 
10,226

 
132.8

 
80,790

 
40,448

 
40,342

 
99.7

 
Total rental operations
 
88,073

 
73,244

 
14,829

 
20.2

 
325,609

 
278,408

 
47,201

 
17.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
167,462

 
160,189

 
7,273

 
4.5

 
578,767

 
561,620

 
17,147

 
3.1

 
Non-same properties
 
43,256

 
15,729

 
27,527

 
175.0

 
223,721

 
81,678

 
142,043

 
173.9

 
Net operating income
 
$
210,718

 
$
175,918

 
$
34,800

 
19.8
%
 
$
802,488

 
$
643,298

 
$
159,190

 
24.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating income – same properties
 
$
167,462

 
$
160,189

 
$
7,273

 
4.5
%
 
$
578,767

 
$
561,620

 
$
17,147

 
3.1
%
 
Straight-line rent revenue and amortization of acquired below-market leases
 
(10,162
)
 
(20,330
)
 
10,168

 
(50.0
)
 
(19,176
)
 
(37,424
)
 
18,248

 
(48.8
)
 
Net operating income – same properties (cash basis)
 
$
157,300

 
$
139,859

 
$
17,441

 
12.5
%
 
$
559,591

 
$
524,196

 
$
35,395

 
6.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
21

 
 
 
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Leasing Activity
December 31, 2017
 
 

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

 
 

 
 
 
 
Rental rate changes
 
24.8%

 
10.4%

 
25.1%

 
12.7%

 
27.6%

 
12.0%

New rates
 
$
50.23

 
$
47.17

 
$
51.05

 
$
47.99

 
$
48.60

 
$
45.83

Expiring rates
 
$
40.25

 
$
42.72

 
$
40.80

 
$
42.60

 
$
38.09

 
$
40.92

Rentable square footage
 
593,622

 
 
 
2,525,099

 
 
 
2,129,608

 
 
Tenant improvements/leasing commissions
 
$
14.58

 
 
 
$
18.74

 
 
 
$
15.69

 
 
Weighted-average lease term
 
5.9 years

 
 
 
6.2 years

 
 
 
5.5 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Developed/redeveloped/previously vacant space leased
 
 
 
 
 
 
 
 
 
 
 
 
New rates
 
$
65.75

(2) 
$
58.94

(2) 
$
47.56

(2) 
$
42.93

(2) 
$
50.24

 
$
38.72

Rentable square footage
 
786,077

 
 
 
2,044,083

 
 
 
1,260,459

 
 
Tenant improvements/leasing commissions
 
$
10.61


 
 
$
9.83

 
 
 
$
12.42

 
 
Weighted-average lease term
 
11.1 years

 
 
 
10.1 years

 
 
 
32.6 years

(3) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leasing activity summary (totals):
 
 
 
 
 
 
 
 
 
 
 
 
New rates
 
$
59.07

 
$
53.88

 
$
49.49

 
$
45.72

 
$
49.21

 
$
43.19

Rentable square footage
 
1,379,699

 
 
 
4,569,182

(4) 
 
 
3,390,067

 
 
Tenant improvements/leasing commissions
 
$
12.32

 
 
 
$
14.75

 
 
 
$
14.48

 
 
Weighted-average lease term
 
8.9 years

 
 
 
7.9 years

 
 
 
15.6 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease expirations:(1)
 
 
 
 
 
 
 
 
 
 
 
 
Expiring rates
 
$
39.06

 
$
41.56

 
$
39.99

 
$
41.71

 
$
36.70

 
$
39.32

Rentable square footage
 
690,388

 
 
 
2,919,259

 
 
 
2,484,169

 
 


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

(1)
Excludes 25 month-to-month leases aggregating 37,006 RSF and 20 month-to-month leases aggregating 31,207 RSF as of December 31, 2017 and 2016, respectively.
(2)
New rental rates include 100% of the RSF and rates for the 520,988 RSF lease executed for the Phase II development project of our Menlo Gateway joint venture. Adjusting for our 21% ownership of the Menlo Gateway joint venture, our weighted-average new rental rates were $49.00 and $46.15 (cash basis) and $38.84 and $35.70 (cash basis) per RSF for 4Q17 and 2017, respectively.
(3)
2016 information includes the 75-year ground lease with Uber at 1455 and 1515 Third Street in our Mission Bay/SoMa submarket. The average lease term, excluding this ground lease was 10.7 years.
(4)
During 2017, we granted tenant concessions/free rent averaging 2.5 months with respect to the 4,569,182 RSF leased. Approximately 69% of the leases executed during 2017 did not include concessions for free rent.


 
22

 
 
 
q417logo2.jpg
Contractual Lease Expirations
December 31, 2017
 
 

Year
 
Number of Leases
 
RSF
 
Percentage of
Occupied RSF
 
Annual Rental Revenue
(per RSF)(1)
 
Percentage of Total
Annual Rental Revenue
 
 
2018
(2)
 
 
98

 
 
 
1,282,567

 
 
 
6.6
%
 
 
 
$
41.57

 
 
 
5.8
%
 
 
 
2019
 
 
 
85

 
 
 
1,349,444

 
 
 
6.9
%
 
 
 
$
40.34

 
 
 
5.9
%
 
 
 
2020
 
 
 
102

 
 
 
1,682,954

 
 
 
8.6
%
 
 
 
$
38.27

 
 
 
7.0
%
 
 
 
2021
 
 
 
88

 
 
 
1,741,892

 
 
 
8.9
%
 
 
 
$
41.83

 
 
 
7.9
%
 
 
 
2022
 
 
 
81

 
 
 
1,429,544

 
 
 
7.3
%
 
 
 
$
45.13

 
 
 
7.0
%
 
 
 
2023
 
 
 
50

 
 
 
1,855,662

 
 
 
9.5
%
 
 
 
$
43.13

 
 
 
8.7
%
 
 
 
2024
 
 
 
32

 
 
 
1,402,704

 
 
 
7.2
%
 
 
 
$
48.47

 
 
 
7.4
%
 
 
 
2025
 
 
 
22

 
 
 
698,697

 
 
 
3.6
%
 
 
 
$
47.72

 
 
 
3.6
%
 
 
 
2026
 
 
 
17

 
 
 
729,295

 
 
 
3.7
%
 
 
 
$
44.38

 
 
 
3.5
%
 
 
 
2027
 
 
 
24

 
 
 
1,834,072

 
 
 
9.4
%
 
 
 
$
44.39

 
 
 
8.8
%
 
 
Thereafter
 
 
44

 
 
 
5,564,341

 
 
 
28.3
%
 
 
 
$
57.55

 
 
 
34.4
%
 
 

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

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

Negotiating/
Anticipating

Targeted for Development/
Redevelopment

Remaining
Expiring Leases
 
Total

 
 
 
 
 
 
 
 



 

 
Greater Boston
 
37,850

 
73,516

 
—

 
 
187,598

 
 
298,964

 
$
58.03

 
16,188


76,463


—

 

262,186


 
354,837


$
50.85

 
San Francisco
 
32,488

 
—

 
345,811

(3) 
 
66,903

 
 
445,202

 
35.32

 
24,612


—


—

 

155,604


 
180,216


43.12

 
New York City
 
15,517

 
3,827

 
—

 
 
12,184

 
 
31,528

 
 N/A

 
—


—


—

 

32,399


 
32,399


 N/A

 
San Diego
 
19,870

 
—

 
71,510

(4) 
 
227,503

 

318,883

 
34.54

 
17,415


—


44,034

(5) 
 
253,901

 
 
315,350


31.55

 
Seattle
 
2,468

 
—

 
—

 
 
6,272

 
 
8,740

 
52.56

 
1,283


—


—

 

212,010


 
213,293


43.67

 
Maryland
 
5,104

 
2,951

 
—

 
 
36,265

 
 
44,320

 
19.39

 
—


—


—

 

156,089


 
156,089


26.05

 
Research Triangle Park
 
3,088

 
18,833

 
—

 
 
38,399

 
 
60,320

 
26.29

 
—


—


—

 

40,235


 
40,235


20.25

 
Canada
 
—

 
—

 
—

 
 
63,465

 
 
63,465

 
19.38

 
—

 
—

 
—

 
 
6,562

 
 
6,562

 
22.16

 
Non-cluster markets
 
—

 
—

 
—

 
 
11,145

 
 
11,145

 
26.02

 
—


—


—

 

50,463


 
50,463


22.25

 
Total
 
116,385

 
99,127

 
417,321

 
 
649,734

 
 
1,282,567

 
$
41.57

 
59,498


76,463


44,034

 

1,169,449


 
1,349,444


$
40.34

 
Percentage of expiring leases
 
9
%
 
8
%
 
33
%
 
 
50
%
 
 
100
%
 
 
 
4
%
 
6
%
 
3
%
 
 
87
%

 
100
%


 
 

(1)
Represents amounts in effect as of December 31, 2017.
(2)
Excludes 25 month-to-month leases aggregating 37,006 RSF as of December 31, 2017.
(3)
Includes 195,000 RSF expiring in 1Q18 at 960 Industrial Road, a recently acquired property located in our Greater Stanford submarket, and 23,840 RSF expiring in 1Q18 at 201 Haskins Way, a recently acquired property in our South San Francisco submarket. We are pursuing entitlements aggregating 500,000 RSF for a multi-building development at 960 Industrial Road and entitlements aggregating 280,000 RSF at 201 Haskins Way. Also includes 126,971 RSF of office space targeted for redevelopment into office/laboratory space upon expiration of the existing lease in 3Q18 at 681 Gateway Boulevard in our South San Francisco submarket. Concurrent with our redevelopment, we anticipate expanding 681 Gateway Boulevard by an additional 15,000-30,000 RSF and expect initial occupancy in 2019.
(4)
Represents 71,510 RSF that expired in January 2018 at 9880 Campus Point Drive in our University Town Center submarket. We expect to demolish the existing R&D building and develop a 98,000 RSF Class A office/laboratory property.
(5)
Represents 44,034 RSF expiring in January 2019 at 4110 Campus Point Court, a recently acquired property in our University Town Center submarket, which we expect to redevelop into tech office or office/laboratory space.

 
23

 
 
Top 20 Tenants
q417logo2.jpg
December 31, 2017
(Dollars in thousands)
 
 

84% of Top 20 Annual Rental Revenue from Investment-Grade or Large Cap 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.
 
 
12.6

 
 
 
891,495

 
 
$
34,736

 
 
3.7
%
 
—
 
BBB
 
2
 
Takeda Pharmaceutical Company Ltd.
 
 
12.3

 
 
 
386,111

 
 
30,522

 
 
3.3

 
A1
 
A-
 
3
 
Eli Lilly and Company
 
 
11.9

 
 
 
469,266

 
 
29,335

 
 
3.2

 
A2
 
AA-
 
4
 
Bristol-Myers Squibb Company
 
 
9.9

 
 
 
460,050

 
 
28,800

 
 
3.1

 
A2
 
A+
 
5
 
Novartis AG
 
 
8.9

 
 
 
377,831

 
 
28,630

 
 
3.1

 
Aa3
 
AA-
 
6
 
Sanofi
 
 
10.2

 
 
 
388,242

 
 
24,821

 
 
2.7

 
 A1
 
 AA
 
7
 
Uber Technologies, Inc.
 
 
74.9

(2) 
 
 
422,980

 
 
22,150

 
 
2.4

 
(3) 
 
(3) 
 
8
 
New York University
 
 
12.7

 
 
 
209,224

 
 
20,718

 
 
2.2

 
Aa2
 
AA-
 
9
 
bluebird bio, Inc.
 
 
9.1

 
 
 
262,261

 
 
20,086

 
 
2.2

 
—
 
—
 
10
 
Stripe, Inc.
 
 
9.8

 
 
 
295,333

 
 
17,822

 
 
1.9

 
—
 
—
 
11
 
Roche
 
 
4.1

 
 
 
343,861

 
 
17,597

 
 
1.9

 
A1
 
AA
 
12
 
Amgen Inc.
 
 
6.3

 
 
 
407,369

 
 
16,838

 
 
1.8

 
Baa1
 
A
 
13
 
Massachusetts Institute of Technology
 
 
7.5

 
 
 
256,126

 
 
16,729

 
 
1.8

 
Aaa
 
AAA
 
14
 
Celgene Corporation
 
 
5.7

 
 
 
360,014

 
 
15,271

 
 
1.6

 
 Baa2
 
 BBB+
 
15
 
United States Government
 
 
7.6

 
 
 
264,358

 
 
15,018

 
 
1.6

 
Aaa
 
AA+
 
16
 
FibroGen, Inc.
 
 
5.9

 
 
 
234,249

 
 
14,198

 
 
1.5

 
—
 
—
 
17
 
Juno Therapeutics, Inc.
 
 
11.3

 
 
 
266,794

 
 
13,815

 
 
1.5

 
—
 
—
 
18
 
Biogen Inc.
 
 
10.8

 
 
 
305,212

 
 
13,278

 
 
1.4

 
 Baa1
 
 A-
 
19
 
Facebook, Inc.
 
 
11.8

 
 
 
382,883

 
 
12,718

(4) 
 
1.4

 
(3) 
 
(3) 
 
20
 
Pinterest, Inc.
 
 
15.2

 
 
 
148,146

 
 
12,015

 
 
1.3

 
(3) 
 
(3) 
 
 
 
Total/weighted average
 
 
13.4

(2) 
 
 
7,131,805

 
 
$
405,097

 
 
43.6
%
 
 
 
 
 


(1)
Based on aggregate annual rental revenue in effect as of December 31, 2017.
(2)
Represents a ground lease with Uber at 1455 and 1515 Third Street in our Mission Bay/SoMa submarket. Excluding the ground lease, the weighted-average remaining lease term for our top 20 tenants was 9.9 years as of
December 31, 2017.
(3)
Tenant with market capitalization (public or private) greater than $10 billion as of December 31, 2017.
(4)
Includes annual rental revenue based upon our 21% equity interest as of 4Q17 in the 251,995 RSF Phase I property of our Menlo Gateway joint venture. Our equity interest in this project will increase to 49% by 1Q19.

 
24

 
 
Summary of Properties and Occupancy
q417logo2.jpg
December 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
 
6,135,551

 
255,155

 
59,173

 
6,449,879

 
29
%
 
54

 
$
356,178

 
38
%
 
$
61.05

 
San Francisco
 
4,604,736

 
1,020,918

 
—

 
5,625,654

 
26

 
39

 
216,765

 
23

 
49.37

 
New York City
 
727,674

 
—

 
—

 
727,674

 
3

 
2

 
63,325

 
7

 
87.20

 
San Diego
 
4,107,487

 
—

 
163,648

 
4,271,135

 
19

 
53

 
151,871

 
16

 
39.12

 
Seattle
 
1,037,920

 
—

 
—

 
1,037,920

 
5

 
11

 
48,720

 
5

 
48.03

 
Maryland
 
2,079,450

 
—

 
45,039

 
2,124,489

 
10

 
29

 
51,931

 
6

 
26.23

 
Research Triangle Park
 
1,043,726

 
—

 
175,000

 
1,218,726

 
6

 
16

 
26,544

 
3

 
25.93

 
Canada
 
256,967

 
—

 
—

 
256,967

 
1

 
3

 
6,652

 
1

 
26.00

 
Non-cluster markets
 
268,689

 
—

 
—

 
268,689

 
1

 
6

 
5,394

 
1

 
25.60

 
North America
 
20,262,200

 
1,276,073

 
442,860

 
21,981,133

 
100
%
 
213

 
$
927,380

 
100
%
 
$
48.01

 

See our “Definitions and Reconciliations” for additional information.

Summary of occupancy
 
 
Operating Properties
 
Operating and Redevelopment Properties
Market
 
12/31/17
 
9/30/17
 
12/31/16
 
12/31/17
 
9/30/17
 
12/31/16
Greater Boston
 
96.6
%
 
95.9
%
 
96.2
%
 
95.7
%
 
95.0
%
 
96.2
%
San Francisco
 
99.6

 
100.0

 
99.9

 
99.6

 
100.0

 
99.9

New York City
 
99.8

 
99.8

 
97.3

 
99.8

 
99.8

 
97.3

San Diego
 
94.5

 
92.4

 
94.3

 
90.9

 
88.6

 
90.4

Seattle
 
97.7

 
98.2

 
97.6

 
97.7

 
98.2

 
97.6

Maryland
 
95.2

 
93.6

 
95.8

 
93.2

 
91.6

 
95.8

Research Triangle Park
 
98.1

 
98.1

 
99.0

 
84.0

 
84.0

 
99.0

Subtotal
 
97.0

 
96.1

 
96.7

 
94.9

 
93.9

 
95.8

Canada
 
99.6

 
99.2

 
99.2

 
99.6

 
99.2

 
99.2

Non-cluster markets
 
78.4

 
88.6

 
87.7

 
78.4

 
88.6

 
87.7

North America
 
96.8
%
 
96.1
%
 
96.6
%
 
94.7
%
 
93.9
%
 
95.7
%
 



 
25

 
 
Property Listing
q417logo2.jpg
December 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50, 60, 75/125, and 100 Binney Street, 161 First Street, 215 First Street, 150 Second Street, 300 Third Street, and 11 Hurley Street
 
1,990,476

 
91,155

 
—

 
2,081,631

 
9
 
$
134,312

 
98.1
%
 
 
98.1
%
 
 
 
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
 
86,607

 
99.9

 
 
99.9

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® at One Kendall Square
 
644,771

 
164,000

 
—

 
808,771

 
10
 
48,456

 
94.6

 
 
94.6

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

 
—

 
—

 
234,260

 
2
 
10,532

 
100.0

 
 
100.0

 
 
 
640 Memorial Drive
 
225,504

 
—

 
—

 
225,504

 
1
 
13,771

 
100.0

 
 
100.0

 
 
 
780 and 790 Memorial Drive
 
99,658

 
—

 
—

 
99,658

 
2
 
7,432

 
100.0

 
 
100.0

 
 
 
167 Sidney Street and 99 Erie Street
 
54,549

 
—

 
—

 
54,549

 
2
 
3,735

 
100.0

 
 
100.0

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

 
—

 
—

 
25,309

 
1
 
620

 
100.0

 
 
100.0

 
 
 
Cambridge/Inner Suburbs
 
4,761,374

 
255,155

 
—

 
5,016,529

 
35
 
318,743

 
98.5

 
 
98.5

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

 
—

 
—

 
210,709

 
1
 
2,788

 
60.3

 
 
60.3

 
 
Route 128
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Park at 128
 
343,882

 
—

 
—

 
343,882

 
8
 
10,478

 
95.6

 
 
95.6

 
 
 
3 and 6/8 Preston Court, 29, 35, and 44 Hartwell Avenue,
35 and 45/47 Wiggins Avenue, and 60 Westview Street
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
225, 266, and 275 Second Avenue
 
258,444

 
—

 
59,173

 
317,617

 
3
 
10,989

 
100.0

 
 
81.4

 
 
 
19 Presidential Way
 
144,892

 
—

 
—

 
144,892

 
1
 
3,907

 
74.4

 
 
74.4

 
 
 
100 Beaver Street
 
82,330

 
—

 
—

 
82,330

 
1
 
3,149

 
100.0

 
 
100.0

 
 
 
285 Bear Hill Road
 
26,270

 
—

 
—

 
26,270

 
1
 
1,167

 
100.0

 
 
100.0

 
 
 
Route 128
 
855,818

 
—

 
59,173

 
914,991

 
14
 
29,690

 
93.9

 
 
87.8

 
 
Route 495
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
111 and 130 Forbes Boulevard
 
155,846

 
—

 
—

 
155,846

 
2
 
1,543

 
100.0

 
 
100.0

 
 
 
20 Walkup Drive
 
91,045

 
—

 
—

 
91,045

 
1
 
649

 
100.0

 
 
100.0

 
 
 
30 Bearfoot Road
 
60,759

 
—

 
—

 
60,759

 
1
 
2,765

 
100.0

 
 
100.0

 
 
 
Route 495
 
307,650

 
—

 
—

 
307,650

 
4
 
4,957

 
100.0

 
 
100.0

 
 
 
Greater Boston
 
6,135,551

 
255,155

 
59,173

 
6,449,879

 
54
 
$
356,178

 
96.6
%
 
 
95.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
26

 
 
Property Listing (continued)
q417logo2.jpg
December 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
 
$
28,584

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

 
—

 
—

 
422,980

 
2
 
22,150

 
100.0

 
 
100.0

 
 
 
510 Townsend Street
 
295,333

 
—

 
—

 
295,333

 
1
 
17,822

 
100.0

 
 
100.0

 
 
 
88 Bluxome Street
 
232,470

 
—

 
—

 
232,470

 
1
 
3,813

 
100.0

 
 
100.0

 
 
 
455 Mission Bay Boulevard South
 
210,398

 
—

 
—

 
210,398

 
1
 
12,201

 
100.0

 
 
100.0

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

 
—

 
—

 
158,267

 
1
 
7,712

 
100.0

 
 
100.0

 
 
 
1700 Owens Street
 
157,340

 
—

 
—

 
157,340

 
1
 
10,893

 
100.0

 
 
100.0

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

 
—

 
—

 
148,146

 
1
 
12,015

 
100.0

 
 
100.0

 
 
 
Mission Bay/SoMa
 
2,080,003

 
—

 
—

 
2,080,003

 
10
 
115,190

 
100.0

 
 
100.0

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

 
499,930

 
—

 
907,299

 
5
 
16,838

 
100.0

 
 
100.0

 
 
 
Alexandria Technology Center® – Gateway
 
619,037

 
—

 
—

 
619,037

 
7
 
28,128

 
97.4

 
 
97.4

 
 
 
600, 630, 650, 681, 701, 901, and 951 Gateway Boulevard
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
400 and 450 East Jamie Court and 201 Haskins Way
 
186,875

 
—

 
—

 
186,875

 
3
 
7,755

 
100.0

 
 
100.0

 
 
 
500 Forbes Boulevard
 
155,685

 
—

 
—

 
155,685

 
1
 
6,619

 
100.0

 
 
100.0

 
 
 
7000 Shoreline Court
 
136,395

 
—

 
—

 
136,395

 
1
 
5,340

 
100.0

 
 
100.0

 
 
 
341 and 343 Oyster Point Boulevard
 
107,960

 
—

 
—

 
107,960

 
2
 
4,479

 
100.0

 
 
100.0

 
 
 
849 Mitten Road
 
103,857

 
—

 
—

 
103,857

 
1
 
3,411

 
100.0

 
 
100.0

 
 
 
South San Francisco
 
1,717,178

 
499,930

 
—

 
2,217,108

 
20
 
72,570

 
99.1

 
 
99.1

 
 
Greater Stanford
 
 
 
 
 
 
 


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

 
520,988

 
—

 
772,983

 
3
 
4,015

 
100.0

 
 
100.0

 
 
 
100 Independence Drive and 125 and 135 Constitution Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
960 Industrial Road
 
195,000

 
—

 
—

 
195,000

 
1
 
4,875

 
100.0

 
 
100.0

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

 
—

 
—

 
99,208

 
1
 
4,257

 
100.0

 
 
100.0

 
 
 
3165 Porter Drive
 
91,644

 
—

 
—

 
91,644

 
1
 
3,885

 
100.0

 
 
100.0

 
 
 
1450 Page Mill Road
 
77,634

 
—

 
—

 
77,634

 
1
 
8,009

 
100.0

 
 
100.0

 
 
 
3350 West Bayshore Road
 
60,000

 
—

 
—

 
60,000

 
1
 
2,211

 
100.0

 
 
100.0

 
 
 
2625/2627/2631 Hanover Street
 
32,074

 
—

 
—

 
32,074

 
1
 
1,753

 
100.0

 
 
100.0

 
 
 
Greater Stanford
 
807,555

 
520,988

 
—

 
1,328,543

 
9
 
29,005

 
100.0

 
 
100.0

 
 
 
San Francisco
 
4,604,736

 
1,020,918

 
—

 
5,625,654

 
39
 
216,765

 
99.6

 
 
99.6

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

 
—

 
—

 
727,674

 
2
 
63,325

 
99.8

 
 
99.8

 
 
 
430 and 450 East 29th Street
 
 
 
 
 
 




 
 
 
 
 
 
 
 
 
 
 
New York City
 
727,674

 
—

 
—

 
727,674

 
2
 
$
63,325

 
99.8
%
 
 
99.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) See page 5 of our Earnings Press Release for additional information.

 

 
27

 
 
Property Listing (continued)
q417logo2.jpg
December 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
 
336,461

 
—

 
—

 
336,461

 
3
 
$
17,352

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

 
—

 
—

 
294,993

 
3
 
11,506

 
76.4

 
 
76.4

 
 
 
10578, 10614, and 10628 Science Center Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Sunrise
 
236,082

 
—

 
—

 
236,082

 
3
 
9,401

 
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
 
8,878

 
88.9

 
 
88.9

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

 
—

 
—

 
116,556

 
1
 
4,827

 
100.0

 
 
100.0

 
 
 
11119 North Torrey Pines Road
 
72,506

 
—

 
—

 
72,506

 
1
 
3,409

 
100.0

 
 
100.0

 
 
 
Torrey Pines
 
1,280,349

 
—

 
—

 
1,280,349

 
15
 
55,373

 
92.6

 
 
92.6

 
 
University Town Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5200 Illumina Way
 
792,687

 
—

 
—

 
792,687

 
6
 
28,738

 
100.0

 
 
100.0

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

 
—

 
—

 
798,799

 
3
 
32,236

 
95.6

 
 
95.6

 
 
 
9880 Campus Point Drive
 
71,510

 
—

 
—

 
71,510

 
1
 
2,774

 
100.0

 
 
100.0

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

 
—

 
—

 
140,398

 
3
 
3,419

 
100.0

 
 
100.0

 
 
 
9625 Towne Centre Drive (consolidated joint venture)(1)
 
—

 
—

 
163,648

 
163,648

 
1
 
—

 
N/A

 
 
—

 
 
 
ARE Esplanade
 
241,963

 
—

 
—

 
241,963

 
4
 
10,036

 
100.0

 
 
100.0

 
 
 
4755, 4757, and 4767 Nexus Center Drive and 4796 Executive Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
University Town Center
 
2,045,357

 
—

 
163,648

 
2,209,005

 
18
 
77,203

 
98.3

 
 
91.0

 
 
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
 
2,057

 
69.0

 
 
69.0

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

 
—

 
—

 
102,392

 
2
 
2,681

 
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
 
12,112

 
92.7

 
 
92.7

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

 
—

 
—

 
121,655

 
6
 
3,022

 
92.8

 
 
92.8

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

 
—

 
—

 
103,111

 
4
 
1,189

 
48.2

 
 
48.2

 
 
 
Sorrento Valley
 
224,766

 
—

 
—

 
224,766

 
10
 
4,211

 
72.3

 
 
72.3

 
 
I-15 Corridor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13112 Evening Creek Drive
 
109,780

 
—

 
—

 
109,780

 
1
 
2,972

 
100.0

 
 
100.0

 
 
 
San Diego
 
4,107,487

 
—

 
163,648

 
4,271,135

 
53
 
$
151,871

 
94.5
%
 
 
90.9
%
 
(1) This property is owned by a consolidated real estate joint venture. As of 4Q17, we hold an ownership interest of 64.1% in this joint venture. TIAA’s initial ownership interest of 35.9% as of 4Q17 is expected to increase to 49.9% by the end of 2Q18 as TIAA contributes additional amounts to fund future construction.
 

 
28

 
 
Property Listing (continued)
q417logo2.jpg
December 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
 
290,111

 
—

 
—

 
290,111

 
1
 
$
14,803

 
98.0
%
 
 
98.0
%
 
 
 
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
 
8,215

 
95.6

 
 
95.6

 
 
 
1551 Eastlake Avenue East
 
117,482

 
—

 
—

 
117,482

 
1
 
4,841

 
100.0

 
 
100.0

 
 
 
199 East Blaine Street
 
115,084

 
—

 
—

 
115,084

 
1
 
6,196

 
100.0

 
 
100.0

 
 
 
219 Terry Avenue North
 
30,705

 
—

 
—

 
30,705

 
1
 
1,842

 
100.0

 
 
100.0

 
 
 
1600 Fairview Avenue East
 
27,991

 
—

 
—

 
27,991

 
1
 
1,124

 
100.0

 
 
100.0

 
 
 
Lake Union
 
953,450

 
—

 
—

 
953,450

 
8
 
45,769

 
98.6

 
 
98.6

 
 
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
 
1,112

 
71.8

 
 
71.8

 
 
 
Elliott Bay
 
84,470

 
—

 
—

 
84,470

 
3
 
2,951

 
87.7

 
 
87.7

 
 
 
Seattle
 
1,037,920

 
—

 
—

 
1,037,920

 
11
 
48,720

 
97.7

 
 
97.7

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

 
—

 
45,039

 
386,208

 
6
 
13,176

 
100.0

 
 
88.3

 
 
 
1330 Piccard Drive
 
131,511

 
—

 
—

 
131,511

 
1
 
3,065

 
87.5

 
 
87.5

 
 
 
1500 and 1550 East Gude Drive
 
90,489

 
—

 
—

 
90,489

 
2
 
1,681

 
100.0

 
 
100.0

 
 
 
14920 and 15010 Broschart Road
 
86,703

 
—

 
—

 
86,703

 
2
 
2,231

 
100.0

 
 
100.0

 
 
 
1405 Research Boulevard
 
71,669

 
—

 
—

 
71,669

 
1
 
2,310

 
100.0

 
 
100.0

 
 
 
5 Research Place
 
63,852

 
—

 
—

 
63,852

 
1
 
2,396

 
100.0

 
 
100.0

 
 
 
12301 Parklawn Drive
 
49,185

 
—

 
—

 
49,185

 
1
 
1,329

 
100.0

 
 
100.0

 
 
 
5 Research Court
 
49,160

 
—

 
—

 
49,160

 
1
 
—

 
—

 
 
—

 
 
 
Rockville
 
883,738

 
—

 
45,039

 
928,777

 
15
 
26,188

 
92.6

 
 
88.1

 
 
Gaithersburg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Gaithersburg I
 
377,401

 
—

 
—

 
377,401

 
4
 
8,093

 
91.1

 
 
91.1

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

 
—

 
—

 
237,137

 
5
 
6,278

 
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
 
1,472

 
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
 
18,116

 
95.5

 
 
95.5

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

 
—

 
—

 
191,884

 
1
 
2,489

 
100.0

 
 
100.0

 
 
Northern Virginia
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14225 Newbrook Drive
 
248,186

 
—

 
—

 
248,186

 
1
 
5,138

 
100.0

 
 
100.0

 
 
 
Maryland
 
2,079,450

 
—

 
45,039

 
2,124,489

 
29
 
$
51,931

 
95.2
%
 
 
93.2
%
 


 

 
29

 
 
Property Listing (continued)
q417logo2.jpg
December 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
 
$
3,388

 
91.0
%
 
 
91.0
%
 
 
 
100, 800, and 801 Capitola Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® for AgTech – RTP
 
—

 
—

 
175,000

 
175,000

 
1
 
—

 
N/A

 
 
—

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

 
—

 
—

 
158,417

 
1
 
4,607

 
100.0

 
 
100.0

 
 
 
Alexandria Innovation Center® – Research Triangle Park
 
135,677

 
—

 
—

 
135,677

 
3
 
3,360

 
99.2

 
 
99.2

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

 
—

 
—

 
100,000

 
1
 
1,787

 
97.7

 
 
97.7

 
 
 
7 Triangle Drive
 
96,626

 
—

 
—

 
96,626

 
1
 
3,156

 
100.0

 
 
100.0

 
 
 
2525 East NC Highway 54
 
82,996

 
—

 
—

 
82,996

 
1
 
3,680

 
100.0

 
 
100.0

 
 
 
407 Davis Drive
 
81,956

 
—

 
—

 
81,956

 
1
 
1,644

 
100.0

 
 
100.0

 
 
 
601 Keystone Park Drive
 
77,395

 
—

 
—

 
77,395

 
1
 
1,379

 
100.0

 
 
100.0

 
 
 
6040 George Watts Hill Drive
 
61,547

 
—

 
—

 
61,547

 
1
 
2,148

 
100.0

 
 
100.0

 
 
 
5 Triangle Drive
 
32,120

 
—

 
—

 
32,120

 
1
 
856

 
100.0

 
 
100.0

 
 
 
6101 Quadrangle Drive
 
30,122

 
—

 
—

 
30,122

 
1
 
539

 
100.0

 
 
100.0

 
 
 
Research Triangle Park
 
1,043,726

 
—

 
175,000

 
1,218,726

 
16
 
26,544

 
98.1

 
 
84.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Canada
 
256,967

 
—

 
—

 
256,967

 
3
 
6,652

 
99.6

 
 
99.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-cluster markets
 
268,689

 
—

 
—

 
268,689

 
6
 
5,394

 
78.4

 
 
78.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total – North America
 
20,262,200

 
1,276,073

 
442,860

 
21,981,133

 
213
 
$
927,380

 
96.8
%
 
 
94.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
30

 
 
 
q417logo2.jpg
Disciplined Management of Ground-Up Developments
December 31, 2017
 
 



q417prelease.jpg


Represents pre-leased percentage at commencement of vertical construction since January 1, 2008.



 
31

 
 
Investments in Real Estate
q417logo2.jpg
December 31, 2017
(Dollars in thousands)
 
 


 
 
Investments in Real Estate
 
Square Feet
 
 
 
 
Consolidated
 
Unconsolidated(1)
 
Total
 
 
 
 
 
 
 
 
 
 
 
Investments in real estate:
 
 
 
 
 
 
 
 
 
Rental properties
 
$
11,092,815

 
19,799,496

 
462,704

 
20,262,200

 
 
 
 
 
 
 
 
 
 
 
Development and redevelopment of new Class A properties:
 
 
 
 
 
 
 
 
 
Undergoing construction – target delivery in 2018–2020
 
 
 
 
 
 
 
 
 
Development projects
 
310,825

 
755,085

 
520,988

 
1,276,073

 
Redevelopment projects
 
72,282

 
442,860

 
—

 
442,860

 
 
 
 
 
1,197,945

 
520,988

 
1,718,933

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20,997,441

 
983,692

 
21,981,133

 
 
 
 
 
 
 
 
 
 
 
Near-term projects undergoing marketing and pre-construction – target delivery in 2019 and 2020
 
163,764

 
1,015,000

 
580,000

 
1,595,000

 
Intermediate-term development projects
 
408,347

 
3,798,961

 
—

 
3,798,961

 
Future development projects
 
96,112

 
2,639,437

 
—

 
2,639,437

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

 
(451,310
)
 
—

 
(451,310
)
 
 
 
 
 
7,002,088

 
580,000

 
7,582,088

 
 
 
 
 
 
 
 
 
 
 
Gross investments in real estate
 
12,144,145

 
27,999,529

 
1,563,692

 
29,563,221

 
 
 
 
 
 
 
 
 
 
 
Less: accumulated depreciation
 
(1,875,810
)
 
 
 
 
 
 
 
Net investments in real estate – North America
 
10,268,335

 
 
 
 
 
 
 
Net investments in real estate – Asia
 
29,684

 
 
 
 
 
 
 
Investments in real estate
 
$
10,298,019

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(1)
Our share of the cost basis associated with unconsolidated square feet is classified in investments in unconsolidated real estate joint ventures in our consolidated balance sheets.
(2)
See footnotes 5, 7, and 8 on page 40.

 
32

 
 
 
 
Development and Redevelopment of New Class A Properties: 2017 Deliveries
q417logo2.jpg
 
 
December 31, 2017
 
 
 






100 Binney Street
 
510 Townsend Street
 
505 Brannan Street, Phase I
Greater Boston/Cambridge
 
San Francisco/Mission Bay/SoMa
 
San Francisco/Mission Bay/SoMa
341,776 RSF
 
295,333 RSF
 
148,146 RSF
Bristol-Myers Squibb Company
Facebook, Inc.
 
Stripe, Inc.
 
Pinterest, Inc.
q417binney100.jpg
 
q417townsend510a.jpg
 
q417brannanphase1.jpg
ARE Spectrum
 
5200 Illumina Way, Parking Structure
 
400 Dexter Avenue North
San Diego/Torrey Pines
 
San Diego/University Town Center
 
Seattle/Lake Union
336,461 RSF
 
N/A
 
290,111 RSF
The Medicines Company
Celgene Corporation
Wellspring Biosciences LLC
Vertex Pharmaceuticals Incorporated
 
Illumina, Inc.
 
Juno Therapeutics, Inc.
ClubCorp Holdings, Inc.
q417spectrumparking.jpg
 
q417illuminawayb.jpg
 
q417dexter400.jpg

RSF represents the cumulative RSF placed into service as of 4Q17, including RSF that have been placed into service prior to January 1, 2017.

 
33

 
 
Development and Redevelopment of New Class A Properties: 2017 Deliveries (continued)
q417logo2.jpg
December 31, 2017
(Dollars in thousands)
 
 



Property/Market/Submarket
 
Our Ownership Interest
 
Date Delivered
 
RSF in Service
 
Total Project
 
Unlevered Yields
 
 
 
 
Prior to 1/1/17
 
Placed into Service
 
Total
 
 
Initial Stabilized
 
Initial Stabilized Cash Basis
 
 
 
 
 
1Q17
 
2Q17
 
3Q17
 
4Q17
 
 
Leased
 
RSF
 
Investment
 
 
 
Consolidated development projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100 Binney Street/Greater Boston/Cambridge
 
100%
 
9/21/17
 
—

 
—

 
—

 
341,776

 
—

 
 
341,776

 
100%
 
432,931

 
 
$
439,000

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

10/31/17
 
—

 
—

 
—

 
—

 
295,333

 
 
295,333

 
100%
 
295,333

 
 
$
226,000

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

10/10/17
 
—

 
—

 
—

 
—

 
148,146

 
 
148,146

 
100%
 
148,146

 
 
$
140,000

 
 
8.5
%
 
 
 
7.2
%
 
 
ARE Spectrum/San Diego/Torrey Pines
 
100%
 
Various
 
102,938

 
31,336

 
31,664

 
—

 
170,523

 
 
336,461

 
98%
 
336,461

 
 
$
277,000

 
 
6.4
%
 
 
 
6.2
%
 
 
5200 Illumina Way, Parking Structure/San Diego/University Town Center
 
100%
 
5/15/17
 
—

 
—

 
N/A

 
—

 
—

 
 
N/A

 
100%
 
N/A
 
 
$
60,000

 
 
7.0
%
 
 
 
7.0
%
 
 
400 Dexter Avenue North/Seattle/Lake Union
 
100%
 
Various
 
—

 
241,276

 
—

 
17,620

 
31,215

 
 
290,111

 
100%
 
290,111

 
 
$
223,000

 
 
7.0
%
 
 
 
7.1
%
 
 
Total
 
 
 
 
 
102,938

 
272,612

 
31,664

 
359,396

 
645,217

 
 
1,411,827

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
34

 
 
 
 
Development and Redevelopment of New Class A Properties: 2018–2020 Deliveries (Projects Undergoing Construction and Near-Term Projects Undergoing Marketing and Pre-Construction)
q417logo2.jpg
 
 
December 31, 2017
 
 
 


100 Binney Street
 
399 Binney Street
 
266 and 275 Second Avenue
 
1655 and 1715 Third Street
Greater Boston/Cambridge
 
Greater Boston/Cambridge
 
Greater Boston/Route 128
 
San Francisco/Mission Bay/SoMa
91,155 RSF
 
164,000 RSF
 
59,173 RSF
 
580,000 RSF
Foghorn Therapeutics, Inc.
Sigilon Therapeutics, Inc.
Tango Therapeutics, Inc.
TCR2 Therapeutics, Inc.
 
Rubius Therapeutics, Inc.
Relay Therapeutics, Inc.
Celsius Therapeutics, Inc.
Marketing
 
Visterra, Inc.
Marketing
 
Uber Technologies, Inc.
q417binney100.jpg
 
q417binney399.jpg
 
q417secondave.jpg
 
q417gsw.jpg
213 East Grand Avenue
 
279 East Grand Avenue
 
201 Haskins Way
 
681 Gateway Boulevard
San Francisco/South San Francisco
 
San Francisco/South San Francisco
 
San Francisco/South San Francisco
 
San Francisco/South San Francisco
300,930 RSF
 
199,000 RSF
 
280,000 RSF
 
126,971 RSF
Merck & Co., Inc.
 
Multi-Tenant
 
Marketing
 
Multi-Tenant/Marketing
q417grand213.jpg
 
q417grand279.jpg
 
q417haskins.jpg
 
q417gateway681.jpg

 
35

 
 
 
 
Development and Redevelopment of New Class A Properties: 2018–2020 Deliveries (Projects Undergoing Construction and Near-Term Projects Undergoing Marketing and Pre-Construction)
q417logo2.jpg
 
 
December 31, 2017
 
 
 


Menlo Gateway
 
825 and 835 Industrial Road
 
9625 Towne Centre Drive
San Francisco/Greater Stanford
 
San Francisco/Greater Stanford
 
San Diego/University Town Center
520,988 RSF
 
530,000 RSF
 
163,648 RSF
Facebook, Inc.
 
Marketing
 
Takeda Pharmaceutical
Company Ltd.
q417menlogateway2.jpg
 
 

9880 Campus Point Drive
 
1818 Fairview Avenue East
 
9900 Medical Center Drive
 
5 Laboratory Drive
San Diego/University Town Center
 
Seattle/Lake Union
 
Maryland/Rockville
 
Research Triangle Park/RTP
71,510 RSF
 
205,000 RSF
 
45,039 RSF
 
175,000 RSF
Marketing
 
Multi-Tenant
 
Marketing
 
Multi-Tenant
 
 
 


 
36

 
Development and Redevelopment of New Class A Properties: 2018–2020 Deliveries (Projects Undergoing Construction and Near-Term Projects Undergoing Marketing and Pre-Construction) (continued)
q417logo2.jpg
 
 
December 31, 2017
 
 
 

Property/Market/Submarket
 
Our Ownership Interest
 
Project RSF
 
Percentage
 
Project
  Start
 
Occupancy(1)
 
 
In Service
 
CIP
 
Total
 
Leased
 
Negotiating
 
Total
 
 
Initial
 
Stabilized
Consolidated developments under construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100 Binney Street/Greater Boston/Cambridge
 
100%
 
 
341,776

 
91,155

 
432,931
 
100
%
 
 
—
%
 
 
100
%
 
3Q15
 
3Q17
 
1Q18
399 Binney Street/Greater Boston/Cambridge
 
100%
 
 
—

 
164,000

 
164,000
 
75
%
 
 
—
%
 
 
75
%
 
4Q17
 
4Q18
 
2019
213 East Grand Avenue/San Francisco/South San Francisco
 
100%
 
 
—

 
300,930

 
300,930
 
100
%
 
 
—
%
 
 
100
%
 
2Q17
 
1Q19
 
2019
279 East Grand Avenue/San Francisco/South San Francisco
 
100%
 
 
—

 
199,000

 
199,000
 
—
%
 
 
52
%
 
 
52
%
 
4Q17
 
2019
 
2020
 
 
 
 
 
341,776

 
755,085

 
1,096,861
 
78
%
 
 
10
%
 
 
88
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated redevelopments under construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266 and 275 Second Avenue/Greater Boston/Route 128
 
100%
 
 
144,584

 
59,173

 
203,757
 
84
%
 
 
—
%
 
 
84
%
 
3Q17
 
2Q18
 
2018
9900 Medical Center Drive/Maryland/Rockville
 
100%
 
 
—

 
45,039

 
45,039
 
—
%
 
 
—
%
 
 
—
%
 
3Q17
 
2Q18
 
2018
5 Laboratory Drive/Research Triangle Park/RTP
 
100%
 
 
—

 
175,000

 
175,000
 
15
%
 
 
24
%
 
 
39
%
 
2Q17
 
3Q18
 
2019
9625 Towne Centre Drive/San Diego/University Town Center
 
50.1%
(2) 
 
—

 
163,648

 
163,648
 
100
%
 
 
—
%
 
 
100
%
 
3Q15
 
4Q18
 
2018
 
 
 
 
 
144,584

 
442,860

 
587,444
 
61
%
 
 
8
%
 
 
69
%
 
 
 
 
 
 
 
 
 
 
 
486,360

 
1,197,945

 
1,684,305
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated joint venture development under construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Menlo Gateway/San Francisco/Greater Stanford
 
(3)
 
 
251,995

 
520,988

 
772,983
 
100
%
 
 
—
%
 
 
100
%
 
4Q17
 
4Q19
 
4Q19
 
 
 
 
 
738,355

 
1,718,933

 
2,457,288
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated joint venture development under pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1655 and 1715 Third Street/San Francisco/Mission Bay/SoMa(4)
 
10%
 
 
—

 
580,000

 
580,000
 
100
%
(4) 
 
—
%
 
 
100
%
 
1Q18
 
2019
 
2019
Total
 
 
 
 
738,355

 
2,298,933

 
3,037,288
 
85
%
 
 
4
%
 
 
89
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Near-term development projects undergoing marketing and pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1818 Fairview Avenue East/Seattle/Lake Union
 
100%
 
 
—

 
205,000

 
205,000
 
TBD
 
TBD
 
TBD
 
2019
 
TBD
825 and 835 Industrial Road/San Francisco/Greater Stanford
 
100%
 
 
—

 
530,000

 
530,000
 
 
 
TBD
201 Haskins Way/San Francisco/South San Francisco
 
100%
 
 
—

 
280,000

 
280,000
 
 
 
 
 
 
 
 
—

 
1,015,000

 
1,015,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Near-term redevelopment projects undergoing marketing and pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
681 Gateway Boulevard/San Francisco/South San Francisco(5)
 
100%
 
 
126,971

 
—

 
126,971
 
—
%
 
 
35
%
(5) 
 
35
%
 
4Q18
 
2019
 
TBD
9880 Campus Point Drive/San Diego/University Town Center(6)
 
100%
 
 
71,510

 
—

 
71,510
 
TBD
 
 
 
 
 
198,481

 
—

 
198,481
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Near-term projects undergoing marketing and pre-construction (includes 1655 and 1715 Third Street)
 
 
 
 
198,481

 
1,595,000

 
1,793,481
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
936,836

 
3,313,933

 
4,250,769
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Initial occupancy dates are subject to leasing and/or market conditions. Stabilized occupancy may vary depending on single tenancy versus multi-tenancy.
(2)
See page 6 of our Earnings Press Release for additional information on our partial interest sale at 9625 Towne Centre Drive.
(3)
See page 5 of our Earnings Press Release for additional information on our acquisition at Menlo Gateway.
(4)
See page 4 of our Earnings Press Release for additional information.
(5)
The building is 100% occupied through September 2018, after which we expect to redevelop the building from office to office/laboratory space and expand by an additional 15,000 to 30,000 RSF. We have a letter of intent for a lease under negotiation aggregating 45,000 RSF, or 35% of the project.
(6)
This building is 100% occupied through January 2018, after which we expect to demolish the existing R&D building and develop a 98,000 RSF Class A office/laboratory property. We expect initial stabilized yields for our entire Campus Pointe by Alexandria campus to be in the low 7% range.

 
37

Development and Redevelopment of New Class A Properties: 2018–2020 Deliveries (Projects Undergoing Construction and Near-Term Projects Undergoing Marketing and Pre-Construction) (continued)
q417logo2.jpg
December 31, 2017
(Dollars in thousands)
 
 

 
 
Our Ownership Interest
 
 
 
 
 
 
 
 
 
 
Unlevered Yields
Property/Market/Submarket
 
 
In Service
 
CIP
 
Cost to
Complete
 
Total at
Completion
 
Initial Stabilized
 
Initial Stabilized (Cash Basis)
 
 
 
 
 
 
 
Consolidated developments under construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100 Binney Street/Greater Boston/Cambridge
 
100%
 
 
$
302,933

 
$
80,860

 
$
55,207

 
 
$
439,000

 
 
 
8.2
%
 
 
 
7.4
%
 
399 Binney Street/Greater Boston/Cambridge
 
100%
 
 
—

 
85,772

 
 
88,228

 
 
 
174,000

 
 
 
7.3
%
 
 
 
6.7
%
 
213 East Grand Avenue/San Francisco/South San Francisco
 
100%
 
 
—

 
102,803

 
 
157,197

 
 
 
260,000

 
 
 
7.2
%
 
 
 
6.4
%
 
279 East Grand Avenue/San Francisco/South San Francisco
 
100%
 
 
—

 
41,390

 
 
TBD

 
 
 
TBD

 
 
 
TBD

 
 
 
TBD

 
 
 
 
 
 
$
302,933

 
$
310,825

 
 
TBD

 
 
 
TBD

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated redevelopments under construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266 and 275 Second Avenue/Greater Boston/Route 128
 
100%
 
 
$
60,658

 
$
11,788

 
$
16,554

 
 
$
89,000

 
 
 
8.4
%
 
 
 
7.1
%
 
9900 Medical Center Drive/Maryland/Rockville
 
100%
 
 
—

 
7,639

 
 
6,661

 
 
 
14,300

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

 
12,748

 
 
49,752

 
 
 
62,500

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

 
40,107

 
 
52,893

(1) 
 
 
93,000

 
 
 
7.0
%
 
 
 
7.0
%
 
 
 
 
 
 
60,658

 
72,282

 
 
125,860

 
 
 
258,800

 
 
 
 
 
 
 
 
 
Total
 
 
 
 
$
363,591

 
$
383,107

 
 
TBD

 
 
 
TBD

 
 
 
 
 
 
 
 
 

 
 
Our Ownership Interest
 
 
 
 
 
 
Cost to Complete
 
 
 
 
Unlevered Yields
Property/Market/Submarket
 
 
In Service
 
CIP
 
Construction Loan
 
ARE Funding
 
Total at
Completion
 
Initial Stabilized
 
Initial Stabilized (Cash Basis)
 
 
 
 
 
 
 
 
Unconsolidated joint venture development under construction and pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Amounts represent our share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Menlo Gateway/San Francisco/Greater Stanford
 
(2)
 
 
$
49,053

 
$
41,395

 
 
$
124,223

 
$
215,329

 
 
$
430,000

 
 
6.9%
 
 
 
6.3%
 
1655 and 1715 Third Street/San Francisco/Mission Bay/SoMa(3)
 
10
%
 
 
(3)
 
(3)
 
 
 
37,500

 
 
40,500

(3)
 
 
78,000

 
 
7.8%
 
 
 
6.0%
 
 
 
 
 
 
49,053

 
41,395

 
 
 
161,723

 
 
255,829

 
 
 
508,000

 
 
 
 
 
 
 
 
Consolidated developments/redevelopments under construction
 
 
 
 
363,591

 
383,107

 
 
 
—

 
 
TBD

 
 
 
TBD

 
 
 
 
 
 
 
 
Total
 
 
 
 
$
412,644

 
$
424,502

 
 
$
161,723

 
 
TBD

 
 
 
TBD

 
 
 
 


(1)
We expect to receive contributions from our joint venture partner of $30.7 million to fund construction. See page 6 of our Earnings Press Release for additional information on our partial interest sale at 9625 Towne Centre Drive.
(2)
See page 5 of our Earnings Press Release for additional information on our acquisition at Menlo Gateway.
(3)
See page 4 of our Earnings Press Release for additional information.

 
38

 
 
Development and Redevelopment of New Class A Properties: Intermediate-Term Development Projects
q417logo2.jpg
December 31, 2017
 
 



325 Binney Street
 
88 Bluxome Street
 
505 Brannan Street, Phase II
 
960 Industrial Road
 
Alexandria Center® for Life Science
Greater Boston/Cambridge
 
San Francisco/Mission Bay/SoMa
 
San Francisco/Mission Bay/SoMa
 
San Francisco/Greater Stanford
 
New York City/Manhattan
208,965 RSF
 
1,070,925 RSF
 
165,000 RSF
 
500,000 RSF
 
420,000 RSF
 
 
 
 

5200 Illumina Way
 
Campus Point Drive
 
1150 Eastlake Avenue East
 
1165/1166 Eastlake Avenue East
 
9800 Medical Center Drive
San Diego/University Town Center
 
San Diego/University Town Center
 
Seattle/Lake Union
 
Seattle/Lake Union
 
Maryland/Rockville
386,044 RSF
 
318,383 RSF
 
260,000 RSF
 
106,000 RSF
 
180,000 RSF
 
 
 
 

 
39

 
 
Development and Redevelopment of New Class A Properties: Summary of Pipeline
q417logo2.jpg
December 31, 2017
(Dollars in thousands)
 
 



Property/Submarket
 
Our
Ownership
Interest
 
Book Value
 
Square Footage
 
 
 
 
 
 
Development Projects
 
 
 
 
 
 
Undergoing
Construction
 
Near-Term Projects Undergoing Marketing and Pre-Construction
 
Intermediate-
Term Development
 
Future Development
 
Total(1)
 
Greater Boston
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100 Binney Street/Cambridge
 
 
100
%
 
 
 
$
80,860

 
 
91,155

 
—

 
 
—

 
 
—

 
 
91,155

 
266 and 275 Second Avenue/Route 128
 
 
100
%
 
 
 
11,788

 
 
59,173

 
—

 
 
—

 
 
—

 
 
59,173

 
399 Binney Street (Alexandria Center® at One Kendall Square)
 
 
100
%
 
 
 
85,772

 
 
164,000

 
—

 
 
—

 
 
—

 
 
164,000

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
325 Binney Street/Cambridge
 
 
100
%
 
 
 
87,251

 
 
—

 
—

 
 
208,965

 
 
—

 
 
208,965

 
50 Rogers Street/Cambridge
 
 
100
%
 
 
 
6,466

(2)
 
—

 
—

 
 
183,644

 
 
—

 
 
183,644

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

 
 
—

 
—

 
 
—

 
 
100,000

 
 
100,000

 
Other future projects
 
 
100
%
 
 
 
7,612

 
 
—

 
—

 
 
—

 
 
221,955

 
 
221,955

 
 
 
 
 
 
 
 
287,536

 
 
314,328

 
—

 
 
392,609

 
 
321,955

 
 
1,028,892

 
San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
213 East Grand Avenue/South San Francisco
 
 
100
%
 
 
 
102,803

 
 
300,930

 
—

 
 
—

 
 
—

 
 
300,930

 
279 East Grand Avenue/South San Francisco
 
 
100
%
 
 
 
41,390

 
 
199,000

 
—

 
 
—

 
 
—

 
 
199,000

 
Menlo Gateway/Greater Stanford
 
 
49
%
(3) 
 
 
—

 
 
520,988

 
—

 
 
—

 
 
—

 
 
520,988

 
Near-term projects undergoing marketing and pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
825 and 835 Industrial Road/Greater Stanford
 
 
100
%
 
 
 
92,160

 
 
—

 
530,000

 
 
—

 
 
—

 
 
530,000

 
1655 and 1715 Third Street/Mission Bay/SoMa(4)
 
 
10
%
 
 
 
—

 
 
—

 
580,000

 
 
—

 
 
—

 
 
580,000

 
201 Haskins Way/South San Francisco
 
 
100
%
 
 
 
39,122

 
 
—

 
280,000

(5)
 
—

 
 
—

 
 
280,000

 
681 Gateway Boulevard/South San Francisco(6)
 
 
100
%
 
 
 
—

 
 
—

 
—

 
 
—

 
 
—

 
 
—

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
88 Bluxome Street/Mission Bay/SoMa
 
 
100
%
 
 
 
162,334

 
 
—

 
—

 
 
1,070,925

(7)
 
—

 
 
1,070,925

 
505 Brannan Street, Phase II/Mission Bay/SoMa
 
 
99.7
%
 
 
 
14,988

 
 
—

 
—

 
 
165,000

 
 
—

 
 
165,000

 
960 Industrial Road/Greater Stanford
 
 
100
%
 
 
 
69,255

 
 
—

 
—

 
 
500,000

(8)
 
—

 
 
500,000

 
Future development projects
 
 
 
 
 
 


 
 

 
 
 
 

 
 

 
 

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

 
 
—

 
—

 
 
—

 
 
90,000

 
 
90,000

 
Other future projects
 
 
100
%
 
 
 
228

 
 
—

 
—

 
 
—

 
 
95,620

 
 
95,620

 
 
 
 
 
 
 
 
528,268

 
 
1,020,918

 
1,390,000

 
 
1,735,925

 
 
185,620

 
 
4,332,463

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

 
 
—

 
—

 
 
420,000

 
 
—

 
 
420,000

 
 
 
 
 
 
 
 
$
—

 
 
—

 
—

 
 
420,000

 
 
—

 
 
420,000

 
(1)    Total pipeline SF represents operating RSF targeted for near-term and intermediate-term development plus incremental developable SF.
(2)    Represents a multifamily residential development with approximately 130-140 units (adjacent to 161 First Street). As part of our successful efforts to increase the entitlements on our Alexandria Center® at Kendall Square development, we agreed to develop two multifamily residential projects, one of which was previously completed and sold. We expect to commence construction of this project in 2018, and we are in negotiations for a potential sale.
(3)    See page 5 of our Earnings Press Release for additional information on our acquisition at Menlo Gateway.
(4)    See page 4 of our Earnings Press Release for additional information.
(5)    The near-term development project undergoing entitlements for 280,000 RSF will replace the existing 23,840 RSF operating property.
(6)    See page 23 of our Supplemental Informational for additional information on our near-term redevelopment opportunities.
(7)    The intermediate-term development project undergoing entitlements for 1,070,925 developable SF will replace the existing 232,470 RSF operating property.
(8)    The intermediate-term development project undergoing entitlements for 500,000 RSF will replace the existing 195,000 RSF operating property.

 
40

 
 
Development and Redevelopment of New Class A Properties: Summary of Pipeline (continued)
q417logo2.jpg
December 31, 2017
(Dollars in thousands)
 
 


Property/Submarket
 
Our
Ownership
Interest
 
Book Value
 
Square Footage
 
 
 
 
 
 
Development Projects
 
 
 
 
 
 
Undergoing
Construction
 
Near-Term Projects Undergoing Marketing and Pre-Construction
 
Intermediate-
Term Development
 
Future Development
 
Total(1)
 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9625 Towne Centre Drive/University Town Center
 
 
50.1
%
(2)
 
 
$
40,107

 
 
163,648

 
—

 
 
—

 
 
—

 
 
163,648

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5200 Illumina Way/University Town Center
 
 
100
%
 
 
 
11,562

 
 
—

 
—

 
 
386,044

 
 
—

 
 
386,044

 
Campus Point Drive/University Town Center
 
 
55
%
 
 
 
14,890

 
 
—

 
—

 
 
318,383

 
 
—

 
 
318,383

 
Future development projects
 
 
 
 
 
 


 
 

 
 
 
 

 
 

 
 

 
Vista Wateridge/Sorrento Mesa
 
 
100
%
 
 
 
3,971

 
 
—

 
—

 
 
—

 
 
163,000

 
 
163,000

 
Other future projects
 
 
100
%
 
 
 
30,295

 
 
—

 
—

 
 
—

 
 
259,895

 
 
259,895

 
 
 
 
 
 
 
 
100,825

 
 
163,648

 
—

 
 
704,427

 
 
422,895

 
 
1,290,970

 
Seattle
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Near-term projects undergoing marketing and pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1818 Fairview Avenue East/Lake Union
 
 
100
%
 
 
 
32,482

 
 
—

 
205,000

 
 
—

 
 
—

 
 
205,000

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1150 Eastlake Avenue East/Lake Union
 
 
100
%
 
 
 
19,269

 
 
—

 
—

 
 
260,000

 
 
—

 
 
260,000

 
1165/1166 Eastlake Avenue East/Lake Union
 
 
100
%
 
 
 
15,115

 
 
—

 
—

 
 
106,000

 
—

—

 
 
106,000

 
 
 
 
 
 
 
 
66,866

 
 
—

 
205,000

 
 
366,000

 
 
—

 
 
571,000

 
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9900 Medical Center Drive/Rockville
 
 
100
%
 
 
 
7,639

 
 
45,039

 
—

 
 
—

 
 
—

 
 
45,039

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9800 Medical Center Drive/Rockville
 
 
100
%
 
 
 
7,217

 
 
—

 
—

 
 
180,000

 
 
—

 
 
180,000

 
Future development projects
 
 
 
 
 
 


 
 

 
 
 
 

 
 

 
 

 
Other future projects
 
 
100
%
 
 
 
4,035

 
 
—

 
—

 
 
—

 
 
61,000

 
 
61,000

 
 
 
 
 
 
 
 
18,891

 
 
45,039

 
—

 
 
180,000

 

61,000

 
 
286,039

 
Research Triangle Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 Laboratory Drive/Research Triangle Park
 
 
100
%
 
 
 
12,748

 
 
175,000

 
—

 
 
—

 
 
—

 
 
175,000

 
Future development projects
 
 
 
 
 
 


 
 

 
 
 
 

 
 

 
 

 
6 Davis Drive/Research Triangle Park
 
 
100
%
 
 
 
16,671

 
 
—

 
—

 
 
—

 
 
1,000,000

 
 
1,000,000

 
Other future projects
 
 
100
%
 
 
 
4,149

 
 
—

 
—

 
 
—

 
 
76,262

 
 
76,262

 
 
 
 
 
 
 
 
33,568

 
 
175,000

 
—

 
 
—

 
 
1,076,262

 
 
1,251,262

 
Non-cluster markets – other future projects
 
 
100
%
 
 
 
15,376

 
 
—

 
—

 
 
—

 
 
571,705

 
 
571,705

 
 
 
 
 
 
 
 
$
1,051,330

 
 
1,718,933

 
1,595,000

 
 
3,798,961

 
 
2,639,437

 
 
9,752,331

 


(1)
Total pipeline SF represents operating RSF plus incremental SF targeted for near-term and intermediate-term development.
(2)
See page 6 of our Earnings Press Release for additional information on our partial interest sale at 9625 Towne Centre Drive.


 
41

 
 
 
q417logo2.jpg
Sustainability
December 31, 2017
 
 

    
(1)    Upon completion of 12 LEED® certification projects in process.
(2)    Upon completion of 3 WELL® certification projects in process.
(3)    Upon completion of 8 Fitwel® certification projects in process.

 
42

 
 
Construction Spending
q417logo2.jpg
December 31, 2017
(Dollars in thousands, except per RSF amounts)
 
 



Construction Spending
 
Year Ended
December 31, 2017
 
Additions to real estate – consolidated projects
 
$
893,685
 
 
Investments in unconsolidated real estate joint ventures
 
 
17,876
 
 
Construction spending (cash basis)(1)
 
 
911,561
 
 
Decrease in accrued construction
 
 
(11,034
)
 
Construction spending
 
$
900,527
 
 



 
 
 
 
 
 
Projected Construction Spending
 
Year Ending
December 31, 2018
 
Development and redevelopment projects
 
$
814,000
 
 
Investments in unconsolidated real estate joint ventures
 
 
149,000
 
 
Contributions from noncontrolling interests (consolidated real estate joint ventures)
 
 
(37,000
)
 
Generic laboratory infrastructure/building improvement projects
 
 
153,000
 
(2) 
Non-revenue-enhancing capital expenditures and tenant improvements
 
 
21,000
 
 
Total projected construction spending
 
 
1,100,000
 
 
Guidance range
 
$
1,050,000
–
$1,150,000
 
 
 
 
 
 
 
 
Non-Revenue-Enhancing Capital Expenditures(3)
 
Year Ended
December 31, 2017
 
Recent Average
per RSF(4)
 
Amount
 
Per RSF
 
Non-revenue-enhancing capital expenditures
 
$
7,900

 
$
0.41

 
 
$
0.46

 
 
 
 
 
 
 
 
Tenant improvements and leasing costs:
 
 
 
 
 
 
 
Re-tenanted space
 
$
17,437

 
$
25.32

 
 
$
18.47

Renewal space
 
29,884

 
16.27

 
 
10.89

Total tenant improvements and leasing costs/weighted average
 
$
47,321

 
$
18.74

(5) 
 
$
13.20





(1)
Includes revenue-enhancing projects and non-revenue-enhancing capital expenditures.
(2)
Includes $25 million to $30 million of projected construction spending related to the demolition of the existing R&D building and development of a new 98,000 RSF Class A office/laboratory property at 9880 Campus Point Drive in our University Town Center submarket.
(3)
Excludes amounts that are recoverable from tenants, revenue enhancing, or related to properties that have undergone redevelopment.
(4)
Represents the average for the five years ended December 31, 2017.
(5)
Includes approximately $12.3 million, or $16.92 per RSF, of leasing commissions related to lease renewals and re-leasing space for seven leases in our Greater Boston and San Francisco markets with a weighted-average lease term of 10 years and rental rate increases of 33.3% and 19.4% (cash basis).

 
43

 
 
Joint Venture Financial Information
q417logo2.jpg
December 31, 2017
(Dollars in thousands)
 
 


Consolidated Real Estate Joint Ventures
 
Unconsolidated Real Estate Joint Ventures
Property/Market/Submarket
 
Noncontrolling
Interest Share(1)
 
Property/Market/Submarket
 
Our Share
225 Binney Street/Greater Boston/Cambridge
 
 
70.0
%
 
 
360 Longwood Avenue/Greater Boston/Longwood Medical Area
 
 
27.5
%
 
409 and 499 Illinois Street/San Francisco/Mission Bay/SoMa
 
 
40.0
%
 
 
Menlo Gateway/San Francisco/Greater Stanford
 
 
49.0
%
(2) 
1500 Owens Street/San Francisco/Mission Bay/SoMa
 
 
49.9
%
 
 
1401/1413 Research Boulevard/Maryland/Rockville
 
 
65.0
%
 
10290 and 10300 Campus Point Drive and 4110 Campus Point Court/
San Diego/University Town Center
 
 
45.0
%
 
 
 
 
 
 
 
9625 Towne Centre Drive/San Diego/University Town Center
 
 
49.9
%
(3) 
 
 
 
 
 
 

 
 
December 31, 2017
 
 
Noncontrolling Interest Share of Consolidated Real Estate JVs
 
Our Share of Unconsolidated
Real Estate JVs
Investments in real estate
$
507,207

 
 
$
149,466

 
Cash and cash equivalents
 
19,047

 
 
 
6,440

 
Restricted cash
 
—

 
 
 
1,420

 
Other assets
 
31,966

 
 
 
11,529

 
Secured notes payable (see page 49)
 
—

 
 
 
(53,482
)
 
Other liabilities
 
(24,717
)
 
 
 
(4,755
)
 
Redeemable noncontrolling interests
 
(11,509
)
 
 
 
—

 
 
$
521,994

 
 
$
110,618

 
 
 
 
 
 
 
 
 
 
Noncontrolling Interest Share of Consolidated Real Estate JVs
 
Our Share of Unconsolidated
Real Estate JVs
 
4Q17
 
2017
 
4Q17
 
2017
Total revenues
$
13,790

 
$
54,812

 
$
1,471

 
$
7,320

Rental operations
(4,080
)
 
(15,852
)
 
(405
)
 
(2,599
)
 
9,710

 
38,960

 
1,066

 
4,721

General and administrative
(19
)
 
(145
)
 
(26
)
 
(66
)
Interest
—

 
—

 
(232
)
 
(1,784
)
Depreciation and amortization
(3,777
)
 
(14,762
)
 
(432
)
 
(1,551
)
Gain on sale of real estate
—

 
—

 
—

 
14,106

 
$
5,914

 
$
24,053

 
$
376

 
$
15,426



(1)
In addition to the consolidated real estate joint ventures listed, various partners hold insignificant noncontrolling interests in three other properties in North America.
(2)
See page 5 of our Earnings Press Release for additional information on our acquisition at Menlo Gateway.
(3)
See page 6 of our Earnings Press Release for additional information on our partial interest sale at 9625 Towne Centre Drive.

 
44

 
 
 
q417logo2.jpg
Investments
December 31, 2017
 
 


        
Public/Private Mix (Cost)
 
Tenant/Non-Tenant Mix (Cost)
 
 

 
 
 
 
 
 
Investments (in millions)
 
260
Public investments:
 
 
Cost basis
$
60

 
Holdings
Net unrealized gains
49

 
$1.8M
Private investments
414

 


 
$
523

 
 
 
 
 
 
Average Investment
Amount


 
45

 
 
 
q417logo2.jpg
Key Credit Metrics
December 31, 2017
 
 


Net Debt to Adjusted EBITDA(1)
 
Net Debt and Preferred Stock to Adjusted EBITDA(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-Charge Coverage Ratio(1)
 
Liquidity(2)
 
 
 
 
 
 
$2.0B
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in millions)
 
 
 
Availability under our $1.65 billion unsecured senior line of credit
$
1,600

 
 
Remaining construction loan commitment
25

 
 
Available-for-sale equity securities, at fair value
109

 
 
Cash, cash equivalents, and restricted cash
277

 
 
 
$
2,011

 
 
 
 
 
(1)
Quarter annualized.    
(2)
As of December 31, 2017.

 
46

 
 
 
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Summary of Debt
December 31, 2017
 
 


Debt maturities chart
(In millions)
(1)
Includes our secured construction loan for our property at 50 and 60 Binney Street in our Cambridge submarket with aggregate commitments of $350.0 million. We have two one-year options to extend the stated maturity date to January 28, 2021, subject to certain conditions. Our guidance on page 7 assumes repayment of our 2019 unsecured senior bank term loan amounts aggregating $200.0 million in 2018.

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
$
745,742

 
$
25,319

 
$
771,061

 
16.2
%
 
4.04
%
 
3.3
Unsecured senior notes payable
3,395,804

 
—

 
3,395,804

 
71.3

 
4.05

 
6.9
$1.65 billion unsecured senior line of credit
50,000

 
—

 
50,000

 
1.0

 
2.05

 
3.8
2019 Unsecured Senior Bank Term Loan
199,496

 
—

 
199,496

 
4.2

 
2.85

 
1.0
2021 Unsecured Senior Bank Term Loan
348,446

 
—

 
348,446

 
7.3

 
2.59

 
3.0
Total/weighted average
$
4,739,488

 
$
25,319

 
$
4,764,807

 
100.0
%
 
3.87
%
 
5.7
Percentage of total debt
99
%
 
1
%
 
100
%
 
 
 
 
 
 
 

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

 
47

 
 
Summary of Debt (continued)
q417logo2.jpg
December 31, 2017
(Dollars in thousands)
 
 


Debt
 
Stated 
Rate
 
Interest
Rate(1)
 
Maturity
Date(2)
 
Principal Payments Remaining for the Periods Ending December 31,
 
Principal
 
Unamortized (Deferred Financing Cost), (Discount)/Premium
 
Total
 
 
 
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
 
 
Secured notes payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater Boston
 
L+1.50
%
 
 
3.22
%
 
1/28/19
(3) 
 
$
—

 
$
325,319

 
$
—

 
$
—

 
$
—

 
$
—

 
$
325,319

 
$
(1,296
)
 
$
324,023

Greater Boston, San Diego, Seattle, and Maryland
 
7.75
%
 
 
8.13

 
4/1/20
 
 
1,979

 
2,138

 
104,352

 
—

 
—

 
—

 
108,469

 
(752
)
 
107,717

San Diego
 
4.66
%
 
 
4.97

 
1/1/23
 
 
1,479

 
1,687

 
1,762

 
1,852

 
1,942

 
26,259

 
34,981

 
(329
)
 
34,652

Greater Boston
 
3.93
%
 
 
3.19

 
3/10/23
 
 
1,091

 
1,505

 
1,566

 
1,628

 
1,693

 
74,517

 
82,000

 
2,828

 
84,828

Greater Boston
 
4.82
%
 
 
3.39

 
2/6/24
 
 
2,720

 
3,090

 
3,217

 
3,406

 
3,576

 
186,991

 
203,000

 
16,068

 
219,068

San Francisco
 
6.50
%
 
 
6.67

 
7/1/36
 
 
22

 
23

 
25

 
26

 
28

 
649

 
773

 
—

 
773

Secured debt weighted-average interest rate/subtotal
 
4.39
%
 
 
4.04

 
 
 
 
7,291

 
333,762

 
110,922

 
6,912

 
7,239

 
288,416

 
754,542

 
16,519

 
771,061

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 Unsecured Senior Bank Term Loan
 
L+1.20
%
 
 
2.85

 
1/3/19
 
 
—

 
200,000

 
—

 
—

 
—

 
—

 
200,000

 
(504
)
 
199,496

2021 Unsecured Senior Bank Term Loan
 
L+1.10
%
 
 
2.59

 
1/15/21
 
 
—

 
—

 
—

 
350,000

 
—

 
—

 
350,000

 
(1,554
)
 
348,446

$1.65 billion unsecured senior line of credit
 
L+1.00
%
 
 
2.05

 
10/29/21
 
 
—

 
—

 
—

 
50,000

 
—

 
—

 
50,000

 
—

 
50,000

Unsecured senior notes payable
 
2.75
%
 
 
2.96

 
1/15/20
 
 
—

 
—

 
400,000

 
—

 
—

 
—

 
400,000

 
(1,628
)
 
398,372

Unsecured senior notes payable
 
4.60
%
 
 
4.74

 
4/1/22
 
 
—

 
—

 
—

 
—

 
550,000

 
—

 
550,000

 
(2,760
)
 
547,240

Unsecured senior notes payable
 
3.90
%
 
 
4.04

 
6/15/23
 
 
—

 
—

 
—

 
—

 
—

 
500,000

 
500,000

 
(3,236
)
 
496,764

Unsecured senior notes payable
 
3.45
%
 
 
3.56

 
4/30/25
 
 
—

 
—

 
—

 
—

 
—

 
600,000

 
600,000

 
(4,057
)
 
595,943

Unsecured senior notes payable
 
4.30
%
 
 
4.52

 
1/15/26
 
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(6,205
)
 
293,795

Unsecured senior notes payable
 
3.95
%
 
 
4.14

 
1/15/27
 
 
—

 
—

 
—

 
—

 
—

 
350,000

 
350,000

 
(4,518
)
 
345,482

Unsecured senior notes payable
 
3.95
%
 
 
4.08

 
1/15/28
 
 
—

 
—

 
—

 
—

 
—

 
425,000

 
425,000

 
(4,231
)
 
420,769

Unsecured senior notes payable
 
4.50
%
 
 
4.62

 
7/30/29
 
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(2,561
)
 
297,439

Unsecured debt weighted average/subtotal
 
 
 
 
3.84

 
 
 
 
—

 
200,000

 
400,000

 
400,000

 
550,000

 
2,475,000

 
4,025,000

 
(31,254
)
 
3,993,746

Weighted-average interest rate/total
 
 
 
 
3.87
%
 
 
 
 
$
7,291

 
$
533,762

 
$
510,922

 
$
406,912

 
$
557,239

 
$
2,763,416

 
$
4,779,542

 
$
(14,735
)
 
$
4,764,807

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balloon payments
 
 
 
 
 
 
 
 
 
$
—

 
$
525,319

 
$
503,979

 
$
400,000

 
$
550,000

 
$
2,758,417

 
$
4,737,715

 
$
—

 
$
4,737,715

Principal amortization
 
 
 
 
 
 
 
 
 
7,291

 
8,443

 
6,943

 
6,912

 
7,239

 
4,999

 
41,827

 
(14,735
)
 
27,092

Total debt
 
 
 
 
 
 
 
 
 
$
7,291

 
$
533,762

 
$
510,922

 
$
406,912

 
$
557,239

 
$
2,763,416

 
$
4,779,542

 
$
(14,735
)
 
$
4,764,807

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-rate/hedged variable-rate debt
 
 
 
 
 
 
 
 
 
$
7,291

 
$
508,443

 
$
510,922

 
$
406,912

 
$
557,239

 
$
2,763,416

 
$
4,754,223

 
$
(14,735
)
 
$
4,739,488

Unhedged variable-rate debt
 
 
 
 
 
 
 
 
 
—

 
25,319

 
—

 
—

 
—

 
—

 
25,319

 
—

 
25,319

Total debt
 
 
 
 
 
 
 
 
 
$
7,291

 
$
533,762

 
$
510,922

 
$
406,912

 
$
557,239

 
$
2,763,416

 
$
4,779,542

 
$
(14,735
)
 
$
4,764,807

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to our interest rate hedge agreements, amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.
(2)
Reflects any extension options that we control.
(3)
Secured construction loan for our property at 50 and 60 Binney Street in our Cambridge submarket with aggregate commitments of $350.0 million. We have two one-year options to extend the stated maturity date to January 28, 2021, subject to certain conditions. As of December 31, 2017, the aggregate remaining commitments are $24.7 million.


 
48

 
 
Summary of Debt (continued)
q417logo2.jpg
December 31, 2017
(Dollars in thousands)
 
 


Unconsolidated Real Estate Joint Ventures’ Debt
Unconsolidated Joint Venture
 
Our Share
 
Initial
Maturity Date
 
Extension Option Maturity Date(1)
 
Interest Rate(2)
 
Debt Balance(3)
 
Remaining Commitments
 
360 Longwood Avenue
 
27.5%
 
9/1/22
 
9/1/24
 
 
3.54
%
 
 
$
94,040

 
$
17,000

(4) 
1401/1413 Research Boulevard
 
65.0%
 
5/17/20
 
7/1/20
 
 
4.42
%
 
 
5,972

 
18,488

 
Menlo Gateway, Phase I
 
(5)
 
3/1/19
 
3/3/20
 
 
4.66
%
 
 
111,015

 
38,926

 
 
 
 
 
 
 
 
 
 
 
 
 
$
211,027

 
$
74,414

 
The above non-recourse secured loans amounts represent 100% of the loan amounts at the joint venture level.
 

(1)
Reflects extension options that exist, which may be subject to certain conditions.
(2)
Represents interest rate, including interest expense and amortization of loan fees and discount/premium.
(3)
Represents outstanding principal, net of unamortized deferred financing costs and discount/premium.
(4)
The remaining loan commitment balance excludes an earn-out advance provision that allows for incremental borrowings up to $48.0 million, subject to certain conditions.
(5)
See page 5 of our Earnings Press Release for additional information.

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%
 
35%
 
≤ 60.0%
 
28.7%
Secured Debt to Total Assets
 
≤ 40%
 
6%
 
≤ 45.0%
 
4.6%
Consolidated EBITDA to Interest Expense
 
≥ 1.5x
 
5.9x
 
≥ 1.50x
 
3.94x
Unencumbered Total Asset Value to Unsecured Debt
 
≥ 150%
 
278%
 
N/A
 
N/A
Unsecured Leverage Ratio
 
N/A
 
N/A
 
≤ 60.0%
 
30.8%
Unsecured Interest Coverage Ratio
 
N/A
 
N/A
 
≥ 1.50x
 
6.91x

(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 swap agreements
Effective Date
 
Maturity Date
 
Number of Contracts
 
Weighted-Average Interest Pay Rate(1)
 
Fair Value
as of 12/31/17
 
Notional Amount in Effect as of
 
 
 
 
 
12/31/17
 
12/31/18
 
12/31/19
March 31, 2017
 
March 31, 2018
 
11
 
1.18%
 
$
618


 
$
700,000

 
$
—

 
$
—

March 31, 2017
 
March 31, 2018
 
4
 
1.76%
 
 
(103
)
 
 
200,000

 
—

 
—

March 29, 2018
 
March 31, 2019
 
8
 
1.16%
 
 
4,373

 
 
—

 
600,000

 
—

March 29, 2019
 
March 31, 2020
 
1
 
1.89%
 
 
269


 
—

 
—

 
100,000

Total
 
 
 
 
 
 
 
$
5,157

 
 
$
900,000

 
$
600,000

 
$
100,000


(1)
In addition to the interest pay rate for each swap agreement, interest is payable at an applicable margin over LIBOR for borrowings outstanding as of December 31, 2017, as listed under the column heading “Stated Rate” in our summary table of outstanding indebtedness and respective principal payments on the previous page.

 
49

 
 
 
q417logo2.jpg
Definitions and Reconciliations
December 31, 2017
 
 



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

Adjusted EBITDA and Adjusted EBITDA margins
 
The following table reconciles net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA:
 
Three Months Ended
(Dollars in thousands)
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
 
12/31/16
Net income
$
45,607

 
 
$
59,546

 
$
41,496

 
 
$
47,555

 
$
19,792

Interest expense
 
36,082

 
 
31,031

 
 
31,748

 
 
29,784

 
31,223

Income taxes
 
1,398

 
 
1,305

 
 
1,333

 
 
767

 
737

Depreciation and amortization
 
107,714

 
 
107,788

 
 
104,098

 
 
97,183

 
95,222

Stock compensation expense
 
6,961

 
 
7,893

 
 
5,504

 
 
5,252

 
6,426

Loss on early extinguishment of debt
 
2,781

 
 
—

 
 
—

 
 
670

 
—

Gain on sales of real estate – rental properties
 
—

 
 
—

 
 
—

 
 
(270
)
 
(3,715
)
Our share of gain on sales of real estate from unconsolidated real estate JVs
 
—

 
 
(14,106
)
 
 
—

 
 
—

 
—

Gain on sales of real estate – land parcels
 
—

 
 
—

 
 
(111
)
 
 
—

 
—

Impairment of real estate and non-real estate investments
 
3,805

 
 
—

 
 
4,694

 
 
—

 
16,024

Adjusted EBITDA
$
204,348

 
 
$
193,457

 
$
188,762

 
 
$
180,941

 
$
165,709

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
302,596

(1) 
 
$
285,370

 
$
277,550

(1) 
 
$
270,877

 
$
249,162

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA margins
 
68%

 
 
68%

 
 
68%

 
 
67%

 
67%


(1)
Excludes impairment charges aggregating $4.5 million and $3.8 million, primarily related to three non-real estate investments, during 2Q17 and 4Q17, respectively. We believe excluding impairment of non-real estate investments improves the consistency and comparability of the Adjusted EBITDA margins from period to period.

We use Adjusted EBITDA as a supplemental performance measure of our real estate rental 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 real estate rental 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 net cash flows from operations calculated and presented in accordance with GAAP, and it should not be considered as an alternative to those indicators in evaluating performance or liquidity.

Annual rental revenue

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

Cash interest

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

Class A properties and AAA locations

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

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


 
50

 
 
 
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Definitions and Reconciliations (continued)
December 31, 2017
 
 


Development, redevelopment, and pre-construction

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

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

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

Dividend payout ratio (common stock)

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

Dividend yield

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

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

The following table reconciles interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest and fixed charges:
 
Three Months Ended
(Dollars in thousands)
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
 
12/31/16
Adjusted EBITDA
$
204,348

 
$
193,457

 
$
188,762

 
$
180,941

 
$
165,709

 
 
 
 
 
 
 
 
 
 
Interest expense
$
36,082

 
$
31,031

 
$
31,748

 
$
29,784

 
$
31,223

Capitalized interest
12,897

 
17,092

 
15,069

 
13,164

 
11,659

Amortization of loan fees
(2,571
)
 
(2,840
)
 
(2,843
)
 
(2,895
)
 
(3,080
)
Amortization of debt premiums
639

 
652

 
625

 
596

 
383

Cash interest
47,047

 
45,935

 
44,599

 
40,649

 
40,185

Dividends on preferred stock
1,302

 
1,302

 
1,278

 
3,784

 
3,835

Fixed charges
$
48,349

 
$
47,237

 
$
45,877

 
$
44,433

 
$
44,020

 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio:
 
 
 
 
 
 
 
 
 
– quarter annualized
4.2x

 
4.1x

 
4.1x

 
4.1x

 
3.8x

– trailing 12 months
4.1x

 
4.0x

 
3.9x

 
3.8x

 
3.6x

 
 
 
 
 
 
 
 
 
 


 
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Definitions and Reconciliations (continued)
December 31, 2017
 
 


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

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

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

Initial stabilized yield (unlevered)
Initial stabilized yield is calculated as the quotient of the estimated amounts of net operating income at stabilization and our investment in the property. Our initial stabilized yield excludes the benefit of leverage. Our cash rents related to our value-creation projects are expected to increase over time due to contractual annual rent escalations. 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.

Investment-grade or large cap tenants

Investment-grade or large cap tenants include tenants that are investment-grade rated or have their most recently reported market capitalization (public or private) greater than $10 billion as of December 31, 2017.
 
Items included in net income (loss) attributable to Alexandria’s common stockholders
    
We present a tabular comparison of items, whether gain or loss, that may facilitate a high-level understanding of our results and provide context for the disclosures included in this Supplemental Information, our most recent annual report on Form 10-K, and our subsequent quarterly reports on Form 10-Q. We believe this tabular presentation promotes a better understanding of corporate-level decisions and activities that significantly impact comparison of our operating results from period to period. We also believe this tabular presentation will supplement an understanding of our disclosures and real estate operating results. Gains or losses on sales of real estate and impairments for held for sale assets are related to corporate-level decisions to dispose of real estate. Gains or losses on early extinguishment of debt and preferred stock redemption charges are related to corporate-level financing decisions focused on our capital structure strategy. Significant gains or losses for non-real estate investments are not related to the operating performance of our real estate as they result from strategic, corporate-level non-real estate investment decisions and market conditions. Impairments of non-real estate investments are not related to the operating performance of our real estate as they represent the write-down of a non-real estate investment when its fair value declines below its carrying value due to changes in general market or other conditions. Significant items, whether a gain or loss, included in the tabular disclosure for current periods are described in further detail in our Supplemental Information.

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

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

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

The components of balance sheet and operating results information related to joint ventures are limited as an analytical tool, as the overall economic ownership interest does not represent our legal claim to each of our joint ventures’ assets, liabilities, or results of operations. In addition, joint venture financial information may include financial information related to the unconsolidated real estate joint ventures that we do not control. We believe that in order to facilitate 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.


 
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Definitions and Reconciliations (continued)
December 31, 2017
 
 


Net cash provided by operating activities after dividends

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

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

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

The following table reconciles debt to net debt, and to net debt and preferred stock, and computes the ratio of each to Adjusted EBITDA:
(Dollars in thousands)
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
 
12/31/16
Secured notes payable
 
$
771,061

 
$
1,153,890

 
$
1,127,348

 
$
1,083,758

 
$
1,011,292

Unsecured senior notes payable
 
3,395,804

 
2,801,290

 
2,800,398

 
2,799,508

 
2,378,262

Unsecured senior line of credit
 
50,000

 
314,000

 
300,000

 
—

 
28,000

Unsecured senior bank term loans
 
547,942

 
547,860

 
547,639

 
547,420

 
746,471

Unamortized deferred financing costs
 
29,051

 
27,803

 
29,710

 
31,616

 
29,917

Cash and cash equivalents
 
(254,381
)
 
(118,562
)
 
(124,877
)
 
(151,209
)
 
(125,032
)
Restricted cash
 
(22,805
)
 
(27,713
)
 
(20,002
)
 
(18,320
)
 
(16,334
)
Net debt
 
$
4,516,672

 
$
4,698,568

 
$
4,660,216

 
$
4,292,773

 
$
4,052,576

 
 
 
 
 
 
 
 
 
 
 
Net debt
 
$
4,516,672

 
$
4,698,568

 
$
4,660,216

 
$
4,292,773

 
$
4,052,576

7.00% Series D convertible preferred stock
 
74,386

 
74,386

 
74,386

 
74,386

 
86,914

6.45% Series E redeemable preferred stock
 
—

 
—

 
—

 
—

 
130,000

Net debt and preferred stock
 
$
4,591,058

 
$
4,772,954

 
$
4,734,602

 
$
4,367,159

 
$
4,269,490

 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
$
817,392

 
$
773,828

 
$
755,048

 
$
723,764

 
$
662,836

– trailing 12 months
 
$
767,508

 
$
728,869

 
$
689,079

 
$
650,579

 
$
610,839

Net debt to Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
5.5
x
 
6.1
x
 
6.2
x
 
5.9
x
 
6.1
x
– trailing 12 months
 
5.9
x
 
6.4
x
 
6.8
x
 
6.6
x
 
6.6
x
Net debt and preferred stock to Adjusted EBITDA:
 
 
 
 
 
 
 
 
– quarter annualized
 
5.6
x
 
6.2
x
 
6.3
x
 
6.0
x
 
6.4
x
– trailing 12 months
 
6.0
x
 
6.5
x
 
6.9
x
 
6.7
x
 
7.0
x

Net operating income and operating margin

 
The following table reconciles net income (loss) to net operating income:
 
 
Three Months Ended
 
 
Year Ended
 
(Dollars in thousands)
 
12/31/17
 
 
12/31/16
 
 
12/31/17
 
 
12/31/16
 
Net income (loss)
 
$
45,607

 
 
$
19,792

 
 
$
194,204

 
 
$
(49,799
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in (earnings) losses of unconsolidated real estate joint ventures
 
(376
)
 
 
(86
)
 
 
(15,426
)
 
 
184

 
General and administrative expenses
 
18,910

 
 
17,458

 
 
75,009

 
 
63,884

 
Interest expense
 
36,082

 
 
31,223

 
 
128,645

 
 
106,953

 
Depreciation and amortization
 
107,714

 
 
95,222

 
 
416,783

 
 
313,390

 
Impairment of real estate
 
—

 
 
16,024

 
 
203

 
 
209,261

 
Loss on early extinguishment of debt
 
2,781

 
 
—

 
 
3,451

 
 
3,230

 
Gain on sales of real estate – rental properties
 
—

 
 
(3,715
)
 
 
(270
)
 
 
(3,715
)
 
Gain on sales of real estate – land parcels
 
—

 
 
—

 
 
(111
)
 
 
(90
)
 
Net operating income
 
$
210,718

 
 
$
175,918

 
 
$
802,488

 
 
$
643,298

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
298,791

 
 
$
249,162

 
 
$
1,128,097

 
 
$
921,706

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
 
71%
 
 
71%
 
 
71%
 
 
70%
 

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

Further, we believe net operating income is useful to investors as a performance measure because, when compared across periods, net operating income reflects trends in occupancy rates, rental rates, and operating costs, which provide a perspective not immediately apparent from net income. Net operating income can be used to measure the initial stabilized yields of our properties by calculating the quotient of net operating income generated by a property on a straight-line basis and our investment in the property. Net operating income excludes certain components from net income in order to provide results that are more closely related to the results of operations of our properties. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level rather than at the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort comparability of operating performance at the property level. Impairments of real estate have been excluded in deriving

 
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Definitions and Reconciliations (continued)
December 31, 2017
 
 


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

Same property comparisons

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

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

 
100 Binney Street
 
1

 
399 Binney Street
 
1

 
279 East Grand Avenue
 
1

 
Menlo Gateway
(unconsolidated real estate JV)
 
3

 
 
 
7

 
 
 
 
 
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 real estate JV)
 
1

 
1455 and 1515 Third Street
 
2

 
505 Brannan Street
 
1

 
510 Townsend Street
 
1

 
ARE Spectrum
 
3

 
400 Dexter Avenue North
 
1

 
 
 
14

 
 
 
 
 
Redevelopment – under construction
 
Properties
9625 Towne Centre Drive
 
1

5 Laboratory Drive
 
1

9900 Medical Center Drive
 
1

266 and 275 Second Avenue
 
2

 
 
5

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

11 Hurley Street
 
1

10290 Campus Point Drive
 
1

 
 
3

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

Alexandria Center® at One Kendall Square
 
9

88 Bluxome Street
 
1

960 Industrial Road
 
1

1450 Page Mill Road
 
1

201 Haskins Way
 
1

701 Gateway Boulevard
 
1

4110 Campus Point Court
 
1

 
 
18

Total properties excluded from same properties
 
47

Same properties
 
166

Total properties in North America as of December 31, 2017
 
213

 

Stabilized occupancy date

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

Total equity market capitalization
    
Total equity market capitalization is equal to the sum of outstanding shares of 7.00% Series D cumulative convertible preferred stock, 6.45% Series E cumulative redeemable preferred stock, and common stock multiplied by the related closing price of each class of security at the end of each period presented.

 
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Definitions and Reconciliations (continued)
December 31, 2017
 
 


Total market capitalization

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

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

The following table summarizes unencumbered net operating income as a percentage of total net operating income:
 
Three Months Ended
(Dollars in thousands)
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
 
12/31/16
Unencumbered net operating income
$
181,719

 
$
164,291

 
$
158,072

 
$
157,391

 
$
143,570

Encumbered net operating income
28,999

 
37,610

 
38,007

 
36,399

 
32,348

Total net operating income
$
210,718

 
$
201,901

 
$
196,079

 
$
193,790

 
$
175,918

Unencumbered net operating income as a percentage of total net operating income
86%

 
81%

 
81%

 
81%

 
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 loan fees, amortization of debt premiums (discounts), and other bank fees. A separate calculation is performed to determine our weighted-average interest rate for capitalization for each month. The rate will vary each month due to changes in variable interest rates, outstanding debt balances, the proportion of variable-rate debt to fixed-rate debt, the amount and terms of interest rate hedge agreements, and the amount of loan fee and premium (discount) amortization.

The following table presents the weighted-average interest rate for capitalization of interest:
 
Three Months Ended
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
 
12/31/16
Weighted-average interest rate for capitalization of interest
3.89%
 
3.96%
 
3.98%
 
3.95%
 
3.72%

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 issued the remaining 4.8 million shares of common stock in December 2017 for net proceeds, after underwriters’ discount and issuance costs, of $484.6 million.

Weighted-average shares of common stock outstanding – diluted for 4Q17 and 2017 used in the computation of earnings per share – diluted, and funds from operations per share – diluted for 4Q17 and 2017, include 4.8 million shares related to the forward equity sales agreements using the treasury method of accounting (which assumes an issuance at the contractual price less the assumed repurchase of common shares at the average market price by using the net proceeds of $484.6 million) through the settlement date in December 2017. In July 2016, we entered into similar forward equity sales agreements that were settled in December 2016. The weighted-average shares of common stock outstanding – diluted during each period include the following shares related to our forward equity sales agreements:
 
Three Months Ended
 
Year Ended
(In thousands)
4Q17
 
3Q17
 
2Q17
 
1Q17
 
4Q16
 
4Q17
 
4Q16
Earnings per share – diluted
776

 
698

 
530

 
53

 
—

 
517

 
—

Funds from operations – diluted
776

 
698

 
530

 
53

 
480

 
517

 
309


 
55