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): April 30, 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 April 30, 2018, Alexandria Real Estate Equities, Inc. (the “Company”) issued a press release entitled “Alexandria Real Estate Equities, Inc. Reports First Quarter Ended March 31, 2018 Financial and Operating Results.”  The press release referred to certain supplemental information that is available on the Company’s website at www.are.com.  A copy of the press release and supplemental information are attached hereto as Exhibit 99.1.

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

Item 9.01.  Financial Statements and Exhibits.

(d)  Exhibits.

99.1                Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the First Quarter Ended March 31, 2018.

Forward-looking Statements

This current report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act.  These statements include words such as “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “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.
 
 
 
 
 
 
April 30, 2018
 
By:
/s/ Joel S. Marcus
 
 
 
 
Joel S. Marcus
 
 
 
 
Executive Chairman
 
 
 
 
(Principal Executive Officer)
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Stephen A. Richardson
 
 
 
 
Stephen A. Richardson
 
 
 
 
Co-Chief Executive Officer
 
 
 
 
(Principal Executive Officer)
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ Peter M. Moglia
 
 
 
 
Peter M. Moglia
 
 
 
 
Co-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 First Quarter Ended March 31, 2018.


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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 1Q18, annual rental revenue from investment-grade tenants within our overall tenant base and investment-grade tenants within our top 20 tenants were 47% and 74%, respectively.

 
ii
 
 
 
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Table of Contents
March 31, 2018
 
 

 
 
EARNINGS PRESS RELEASE
Page
Sustainability
SUPPLEMENTAL INFORMATION
Page
Internal Growth
 
 
 
 
SUPPLEMENTAL INFORMATION (CONTINUED)
Page
External Growth / Investments in Real Estate
 
New Class A Development and Redevelopment Properties:
 
Balance Sheet Management
 
Definitions and Reconciliations
 
This document includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Please see page 6 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
First Quarter Ended March 31, 2018, Financial and Operating Results
Strong Internal and External Growth,
Operational Excellence, and Growing Dividends



PASADENA, Calif. – April 30, 2018 – Alexandria Real Estate Equities, Inc. (NYSE:ARE)
announced financial and operating results for the first quarter ended March 31, 2018.

Key highlights

Increased common stock dividend

Common stock dividend for 1Q18 of $0.90 per common share, up 7 cents, or 8%, over 1Q17; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Improvement in credit rating outlook

In February 2018, S&P Global Ratings raised its credit outlook for our corporate credit rating to BBB/Positive from BBB/Stable. The positive outlook reflects S&P’s belief that “there is further ratings upside over the next couple of years stemming from the company’s high quality operating portfolio and projects under development, combined with a prudent financial policy.”

Strong internal growth

•
Total revenues of $320.1 million, up 18.2%, for 1Q18, compared to $270.9 million for 1Q17;
•
Same property net operating income growth:
•
4.0% and 14.6% (cash basis) for 1Q18, compared to 1Q17;
•
Continued solid leasing activity and strong rental rate growth, in light of modest contractual lease expirations at the beginning of 2018 and a highly leased value-creation pipeline:
 
 
1Q18
Total leasing activity – RSF
 
1,481,164

Lease renewals and re-leasing of space:
 
 
Rental rate increases
 
16.3%

Rental rate increases (cash basis)
 
19.0%

RSF (included in total leasing activity above)
 
234,548

 
 
 

•
Key leases executed during 1Q18 (included in total leasing activity above):
Property
 
Submarket
 
RSF
 
 
Tenant
1655 and 1725 Third Street
 
Mission Bay/SoMa
 
593,765

 
 
Uber Technologies, Inc.
Summers Ridge Science Park
 
Sorrento Mesa
 
192,070

 
 
Quidel Corporation
399 Binney Street
 
Cambridge
 
123,403

 
 
Three life science entities
279 East Grand Avenue
 
South San Francisco
 
104,013

 
 
Verily Life Sciences, LLC
681 Gateway Boulevard
 
South San Francisco
 
60,963

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

•
Development and redevelopment projects placed into service in 1Q18:
•
91,155 RSF at our development project at 100 Binney Street in our Cambridge submarket, 100% leased to four high-quality biotechnology entities; and
•
27,315 RSF at our redevelopment project at 266 and 275 Second Avenue in our Route 128 submarket, leased to Visterra, Inc.
•
Significant contractual near-term growth in annual cash rents of $76 million, of which $60 million will commence through 4Q18 ($35 million in 2Q18, $13 million in 3Q18, and $12 million in 4Q18). This is related to initial free rent granted on development and redevelopment projects recently placed into service (and no longer included in our value-creation pipeline) that are currently generating rental revenue.
•
1Q18 commencements of development and redevelopment projects aggregating 651,951 RSF, including:
•
593,765 RSF at 1655 and 1725 Third Street in our Mission Bay/SoMa submarket; and
•
58,186 RSF at 704 Quince Orchard Road in our Gaithersburg submarket.
•
81% leased on 2.3 million RSF of development and redevelopment projects undergoing construction (excludes RSF in service).

Completed strategic acquisitions

Acquisitions completed or under contract:
•
In 1Q18, we acquired 11 properties in four transactions for an aggregate purchase price of $320.5 million with current and future value-creation development and redevelopment opportunities.

Operating results

•
On January 1, 2018, we adopted a new accounting standard which requires us, on a prospective basis, to generally present our equity investments at fair value with changes in fair value reflected in earnings. In 1Q18, we recognized $72.2 million of unrealized gains from changes in fair value of our equity investments.
 
1Q18
 
1Q17
 
Change
Net income attributable to
Alexandria’s common stockholders – diluted:
In millions
$
132.4

 
$
25.7

 
N/A

Per share
$
1.32

 
$
0.29

 
N/A

 
 
 
 
 
 
Funds from operations attributable to
Alexandria’s common stockholders – diluted, as adjusted:
In millions
$
162.5

 
$
130.6

 
24.4
%
Per share
$
1.62

 
$
1.48

 
9.5
%
See “Items Included in Net Income Attributable to Alexandria’s Common Stockholders” on the next page of this Earnings Press Release for additional information.

 
1

 
 
 
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First Quarter Ended March 31, 2018, Financial and Operating Results (continued)
March 31, 2018
 
 

Items included in net income attributable to Alexandria’s common stockholders:

(In millions, except per share amounts)
Amount
 
Per Share – Diluted
1Q18
 
1Q17
 
1Q18
 
1Q17
Realized gain on non-real estate investment(1)
$
8.3

 
$
—

 
$
0.08

 
$
—

Unrealized gains on non-real estate investments(2)
72.2

 
—

 
0.70

 
—

Loss on early extinguishment of debt
—

 
(0.7
)
 
—

 
(0.01
)
Preferred stock redemption charge
—

 
(11.3
)
 
—

 
(0.12
)
Total
$
80.5

 
$
(12.0
)
 
$
0.78

 
$
(0.13
)
Weighted-average shares of common stock outstanding for calculation of earnings per share – diluted
 
 
 
 
100.1

 
88.2

(1) Relates to one publicly traded non-real estate investment in a life science entity. Excluding this gain, our realized investment gains were $5.1 million for 1Q18.
(2) See “Investments” on page 43 of our Supplemental Information for additional information.

Per share amounts above are shown net of the per share amounts allocable to unvested restricted stock awards.

Core operating metrics for 1Q18

High-quality revenue and cash flows and operational excellence

•
Percentage of annual rental revenue in effect from:
•
Investment-grade or large cap tenants: 57%
•
Class A properties in AAA locations: 79%
•
Occupancy of operating properties in North America: 96.6%
•
Operating margin: 71%
•
Adjusted EBITDA margin: 69%
•
Weighted-average remaining lease term:
•
Total tenants: 8.7 years
•
Top 20 tenants: 13.2 years
•
See “Strong internal growth” in the key highlights section on the previous page for information on our total revenues, same property net operating income growth, leasing activity, and rental rate growth.

Balance sheet management

Key metrics

•
$17.9 billion of total market capitalization as of 1Q18
•
$2.3 billion of liquidity as of 1Q18
 
 
1Q18
 
Trailing 12
 
4Q18
 
 
Annualized
 
Months
 
Goal
Net debt to Adjusted EBITDA
 
5.4x
 
6.1x
 
Less than 5.5x
Fixed-charge coverage ratio
 
4.6x
 
4.3x
 
Greater than 4.0x
 
 
 
 
 
 
 
Unhedged variable-rate debt as a percentage of total debt
 
15%
 
N/A
 
5%
Current and future value-creation pipeline as a percentage of gross investments in real estate in North America
 
9%
 
N/A
 
8% to 12%

 
Key capital events

•
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, before underwriting discounts. In March 2018, we settled 843,600 shares from our forward equity sales agreements and received proceeds of $100.2 million, net of underwriting discounts and adjustments provided in the forward equity sales agreements. We expect to receive proceeds of $713.7 million upon settlement of the remaining outstanding forward equity sales agreements, to be further adjusted as provided in the sales agreements, which will fund current and near-term value-creation projects and acquisitions in 2018.

Corporate responsibility and industry leadership

•
50% of annual rental revenue expected from LEED® certified projects upon completion of nine in-process projects. Two of our properties recently received LEED certifications, demonstrating our commitment to sustainability:
•
In March 2018, 505 Brannan Street in our Mission Bay/SoMa submarket received LEED Platinum certification; and
•
In April 2018, 100 Binney Street in our Cambridge submarket received LEED Gold certification.
•
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.
•
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 provides seed-stage financing to transformative life science companies. Alexandria Seed Capital Platform drives the growth of seed- and early-stage companies in New York City and across the country.
•
In February 2018, Joel S. Marcus, Executive Chairman and Founder, was appointed to the Navy SEAL Foundation board of directors.
•
In February 2018, Menlo Gateway in our Greater Stanford submarket was awarded “Development of the Year” by NAIOP San Francisco at its “Best of the Bay” awards event.
•
In March 2018, we announced elevations of key executive officers, effective in April 2018.

Subsequent events

•
During April 2018, we sold 782,967 shares of common stock under our at-the-market common stock offering program (“ATM program”) for $122.20 per share and received net proceeds of $94.2 million.
•
In April 2018, our real estate joint venture at Menlo Gateway in our Greater Stanford submarket closed a secured construction loan with commitments available for borrowing of $157.3 million, for the development of Phase II of the project. The loan matures on May 1, 2035, and bears interest at a fixed rate of 4.53%.

 
2

 
 
 
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Sustainability
March 31, 2018
 
 

q118sustainabilityb.jpg
(1)
Upon completion of nine LEED certification projects in process.
(2)
Upon completion of three WELL certification projects in process.
(3)
Upon completion of eight Fitwel certification projects in process.

 
3

 
 
Acquisitions
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March 31, 2018
(Dollars in thousands)
 
 


Property
 
Submarket/Market
 
Date of Purchase
 
Number of Properties
 
Anticipated Use
 
Operating
Occupancy
 
Square Footage
 
Unlevered Yields
 
Purchase Price
 
 
 
 
Operating
 
Development/Redevelopment
 
Future Development
 
Initial Stabilized
 
Initial Stabilized (Cash)
 
 
 
 
 
 
 
 
 
1Q18 Acquisitions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1655 and 1725 Third Street
(10% interest in unconsolidated JV)
 
Mission Bay/SoMa/
San Francisco
 
3/2/18
 
2
 
Office
 
N/A
 
—

 
593,765

 
—

 
7.8%
 
6.0%
 
 
$
31,950

 
Alexandria PARC
 
Greater Stanford/San Francisco
 
1/25/18
 
4
 
Office/lab
 
100%
 
152,383

 
45,115

 
—

 
TBD
 
 
136,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summers Ridge Science Park
 
Sorrento Mesa/
San Diego
 
1/5/18
 
4
 
Office/lab
 
100%
 
316,531

 
—

 
50,000

 
8.2%
 
6.3%
 
 
148,650

 
704 Quince Orchard Road
(56.8% interest in unconsolidated JV)

 
Gaithersburg/Maryland
 
3/16/18
 
1
 
Office/lab
 
100%
 
21,745

 
58,186

 
—

 
TBD
 
 
3,900

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
 
 
 
 
 
490,659

 
697,066

 
50,000

 
 
 
 
 
 
320,500

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1455 and 1515 Third Street
(acquisition of remaining 49% interest)(1)
 
Mission Bay/SoMa/
San Francisco
 
N/A
 
N/A
 
Office
 
100%
 
N/A

 
—

 
—

 
N/A
 
N/A
 
 
18,900

 
 
 
 
 
 
 
 
 
 
 
 
 

 

 

 
 
 
 
 
 
339,400

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q18 Acquisitions completed or under purchase agreements/letters of intent
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100 Tech Drive
 
Route 128/
Greater Boston
 
4/13/18
 
1
 
Office/lab
 
100%
 
200,431

 
—

 
300,000

 
8.7%
 
7.3%
 
 
87,250

 
1455 and 1515 Third Street
(acquisition of remaining 49% interest)(1)
 
Mission Bay/SoMa/
San Francisco
 
N/A
 
N/A
 
Office
 
100%
 
N/A

 
—

 
—

 
N/A
 
N/A
 
 
18,900

 
Pending
 
Various
 
 
 
 
 
 
 
 
 
612,747

 
—

 
253,000

 
TBD
 
 
268,050

 
 
 
 
 
 
 
 
 
 
 
 
 
813,178

 
—

 
553,000

 
 
 
 
 
 
374,200

 
Total acquisitions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

$
713,600

 
2018 Guidance range
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$670,000 – $770,000

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

(1)
The first installment of $18.9 million related to our November 2016 acquisition of 1455 and 1515 Third Street was paid in 2Q17, and the second installment of $18.9 million was paid in January 2018. We expect to pay the third and final installment during 2Q18.


 
4

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

The following updated guidance is based on our current view of existing market conditions and assumptions for the year ending December 31, 2018. Updates to guidance include: a) two cent increases to the midpoints, and reduction of the ranges from 20 cents to 10 cents for EPS - diluted, FFO per share - diluted, and FFO per share - diluted, as adjusted, and b) updating the EPS and FFO per share - diluted guidance ranges to include an investment gain of $8.3 million related to one non-real estate investment in a life science entity and unrealized gains of $72.2 million related to non-real estate investments in 1Q18. There can be no assurance that actual amounts will be materially higher or lower than these expectations. See our discussion of “forward-looking statements” on page 6 of this Earnings Press Release.

Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s
Common Stockholders – Diluted
 
Earnings per share
 
$2.88 to $2.98
 
Depreciation and amortization
 
 
4.45
 
 
Allocation to unvested restricted stock awards
 
 
(0.05)
 
 
Funds from operations per share
 
$7.28 to $7.38
 
Realized gain on non-real estate investment in 1Q18
 
 
(0.08)
 
(1)
Unrealized gains on non-real estate investments in 1Q18
 
 
(0.70)
 
(2)
Allocation to unvested restricted stock awards
 
 
0.02
 
 
Funds from operations per share, as adjusted
 
$6.52 to $6.62
 
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

(4)
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
 
Unhedged variable-rate debt as a percentage of total debt
 
5%
 
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
 
Certain 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

 
$
908

(3) 
Total sources of capital
 
$
1,720

 
$
1,920

 
$
1,820

 
 
 
Uses of capital:
 
 
 
 
 
 
 
 
 
 
Construction
 
$
1,050

 
$
1,150

 
 
$
1,100

 
 
 
Acquisitions
 
670

 
770

 
 
720

 
(5) 
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)
Represents an investment gain of $8.3 million related to one non-real estate investment in a life science entity recognized in 1Q18.
(2)
Per share amounts of unrealized gains on non-real estate investments in 1Q18 may be different for the full year ended December 31, 2018, depending on the weighted-average shares outstanding for the year ended December 31, 2018. Excludes future changes in fair value for equity investments pursuant to a new accounting standard effective January 1, 2018. See page 43 of our Supplemental Information for additional information.
(3)
We have completed transactions aggregating $908 million through April 2018. This includes completed and projected settlement of our forward equity sales agreements and completed sales under our ATM program, including 6.9 million shares of our common stock subject to forward equity sales agreements executed in January 2018. Additionally, in March 2018, we settled 843,600 shares from the forward equity sales agreements and received proceeds of $100.2 million, net of underwriting discounts and adjustments provided in the forward equity sales agreements. We expect to receive proceeds of $713.7 million upon settlement of the remaining outstanding forward equity sales agreements, to be further adjusted as provided in the sales agreements, in 2018. Also, includes 782,967 shares of common stock sold in April 2018 under our ATM program at $122.20 per share, with net proceeds of $94.2 million.
(4)
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.
(5)
See “Acquisitions” on page 4 of this Earnings Press Release.

 
5

 
 
 
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Earnings Call Information and About the Company
March 31, 2018
 
 


We will host a conference call on Tuesday, May 1, 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 first quarter ended March 31, 2018. 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, May 1, 2018. The replay number is (877) 344-7529 or (412) 317-0088, and the confirmation code is 10117375.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the first quarter ended March 31, 2018, is available in the “For Investors” section of our website at www.are.com or by following this link: http://www.are.com/fs/2018q1.pdf.

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

About the Company

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office real estate investment trust (“REIT”) uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $17.9 billion and an asset base in North America of 30.2 million SF as of March 31, 2018. The asset base in North America includes 20.8 million RSF of operating properties and 3.5 million RSF of development and redevelopment of new Class A properties currently undergoing construction and pre-construction activities with target delivery dates ranging from 2018 through 2020. Additionally, the asset base in North America includes 5.9 million SF of intermediate-term and future development projects, including 3.6 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 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.


 
6

 
 
Consolidated Statements of Income
q118logo2.jpg
March 31, 2018
(In thousands, except per share amounts)
 
 

 
 
Three Months Ended
 
 
3/31/18

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

 
 

 
 

 
 

 
 

Rental
 
$
244,485

 
$
228,025

 
$
216,021

 
$
211,942

 
$
207,193

Tenant recoveries
 
73,170

 
70,270

 
67,058

 
60,470

 
61,346

Other income
 
2,484

 
496

 
2,291

 
647

 
2,338

Total revenues
 
320,139

 
298,791

 
285,370

 
273,059

 
270,877

 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
Rental operations
 
91,771

 
88,073

 
83,469

 
76,980

 
77,087

General and administrative
 
22,421

 
18,910

 
17,636

 
19,234

 
19,229

Interest
 
36,915

 
36,082

 
31,031

 
31,748

 
29,784

Depreciation and amortization
 
114,219

 
107,714

 
107,788

 
104,098

 
97,183

Impairment of real estate
 
—

 
—

 
—

 
203

 
—

Loss on early extinguishment of debt
 
—

 
2,781

 
—

 
—

 
670

Total expenses
 
265,326

 
253,560

 
239,924

 
232,263

 
223,953

 
 
 
 
 
 
 
 
 
 
 
Equity in earnings of unconsolidated real estate joint ventures
 
1,144

 
376

 
14,100

 
589

 
361

Investment income
 
85,561

(1) 
—

 
—

 
—

 
—

Gain on sales of real estate – rental properties
 
—

 
—

 
—

 
—

 
270

Gain on sales of real estate – land parcels
 
—

 
—

 
—

 
111

 
—

Net income
 
141,518

 
45,607

 
59,546

 
41,496

 
47,555

Net income attributable to noncontrolling interests
 
(5,888
)
 
(6,219
)
 
(5,773
)
 
(7,275
)
 
(5,844
)
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders
 
135,630

 
39,388

 
53,773

 
34,221

 
41,711

Dividends on preferred stock
 
(1,302
)
 
(1,302
)
 
(1,302
)
 
(1,278
)
 
(3,784
)
Preferred stock redemption charge
 
—

 
—

 
—

 
—

 
(11,279
)
Net income attributable to unvested restricted stock awards
 
(1,941
)
 
(1,255
)
 
(1,198
)
 
(1,313
)
 
(987
)
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders
 
$
132,387

 
$
36,831

 
$
51,273

 
$
31,630

 
$
25,661

 
 
 
 
 
 
 
 
 
 
 
Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.33

 
$
0.39

 
$
0.55

 
$
0.35

 
$
0.29

Diluted
 
$
1.32

 
$
0.38

 
$
0.55

 
$
0.35

 
$
0.29

 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
 
99,855

 
95,138

 
92,598

 
90,215

 
88,147

Diluted
 
100,125

 
95,914

 
93,296

 
90,745

 
88,200

 
 
 
 
 
 
 
 
 
 
 
Dividends declared per share of common stock
 
$
0.90

 
$
0.90

 
$
0.86

 
$
0.86

 
$
0.83


(1)
See “Investments” on page 43 of our Supplemental Information for additional information.

 
7

 
 
Consolidated Balance Sheets
q118logo2.jpg
March 31, 2018
(In thousands)
 
 

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

 
 

 
 

 
 

Investments in real estate
 
$
10,671,227

 
$
10,298,019

 
$
10,046,521

 
$
9,819,413

 
$
9,470,667

Investments in unconsolidated real estate joint ventures
 
169,865

 
110,618

 
33,692

 
58,083

 
50,457

Cash and cash equivalents
 
221,645

 
254,381

 
118,562

 
124,877

 
151,209

Restricted cash
 
37,337

 
22,805

 
27,713

 
20,002

 
18,320

Tenant receivables
 
11,258

 
10,262

 
9,899

 
8,393

 
9,979

Deferred rent
 
467,112

 
434,731

 
402,353

 
383,062

 
364,348

Deferred leasing costs
 
226,803

 
221,430

 
208,265

 
201,908

 
202,613

Investments
 
724,310

(1) 
523,254

 
485,262

 
424,920

 
394,471

Other assets
 
291,639

 
228,453

 
213,056

 
205,009

 
206,562

Total assets
 
$
12,821,196

 
$
12,103,953

 
$
11,545,323

 
$
11,245,667

 
$
10,868,626

 
 
 
 
 
 
 
 
 
 
 
Liabilities, Noncontrolling Interests, and Equity
 
 
 
 
 
 
 
 
 
 
Secured notes payable
 
$
775,689

 
$
771,061

 
$
1,153,890

 
$
1,127,348

 
$
1,083,758

Unsecured senior notes payable
 
3,396,912

 
3,395,804

 
2,801,290

 
2,800,398

 
2,799,508

Unsecured senior line of credit
 
490,000

 
50,000

 
314,000

 
300,000

 
—

Unsecured senior bank term loans
 
548,197

 
547,942

 
547,860

 
547,639

 
547,420

Accounts payable, accrued expenses, and tenant security deposits
 
783,986

 
763,832

 
740,070

 
734,189

 
782,637

Dividends payable
 
93,065

 
92,145

 
83,402

 
81,602

 
78,976

Preferred stock redemption liability
 
—

 
—

 
—

 
—

 
130,000

Total liabilities
 
6,087,849

 
5,620,784

 
5,640,512

 
5,591,176

 
5,422,299

 
 
 
 
 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
 
10,212

 
11,509

 
11,418

 
11,410

 
11,320

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

 
74,386

 
74,386

 
74,386

 
74,386

Common stock
 
1,007

 
998

 
943

 
921

 
899

Additional paid-in capital
 
6,117,976

(1) 
5,824,258

 
5,287,777

 
5,059,180

 
4,855,686

Accumulated other comprehensive income
 
1,228

 
50,024

 
43,864

 
22,677

 
21,460

Alexandria Real Estate Equities, Inc.’s stockholders’ equity
 
6,194,597

 
5,949,666

 
5,406,970

 
5,157,164

 
4,952,431

Noncontrolling interests
 
528,538

 
521,994

 
486,423

 
485,917

 
482,576

Total equity
 
6,723,135

 
6,471,660

 
5,893,393

 
5,643,081

 
5,435,007

Total liabilities, noncontrolling interests, and equity
 
$
12,821,196

 
$
12,103,953

 
$
11,545,323

 
$
11,245,667

 
$
10,868,626


(1)
Includes unrealized gains aggregating $213.1 million. See “Investments” on page 43 of our Supplemental Information for additional information.

 
8

 
 
Funds From Operations and Funds From Operations per Share
q118logo2.jpg
March 31, 2018
(In thousands)
 
 

The following table presents a reconciliation of net income attributable to Alexandria’s common stockholders, the most directly comparable financial measure presented in accordance with generally accepted accounting principles (“GAAP”), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria’s common stockholders – diluted, and funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted, for the periods below:
 
 
Three Months Ended
 
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Net income attributable to Alexandria’s common stockholders
 
$
132,387

 
$
36,831

 
$
51,273

 
$
31,630

 
$
25,661

Depreciation and amortization
 
114,219

 
107,714

 
107,788

 
104,098

 
97,183

Noncontrolling share of depreciation and amortization from consolidated real estate JVs
 
(3,867
)
 
(3,777
)
 
(3,608
)
 
(3,735
)
 
(3,642
)
Our share of depreciation and amortization from unconsolidated real estate JVs
 
644

 
432

 
383

 
324

 
412

Gain on sales of real estate – rental properties
 
—

 
—

 
—

 
—

 
(270
)
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 – rental properties
 
—

 
—

 
—

 
203

 
—

Allocation to unvested restricted stock awards
 
(1,548
)
 
(734
)
 
(957
)
 
(685
)
 
(561
)
Add: effect of assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 
1,302

 
—

 
—

 
—

 
—

Funds from operations attributable to Alexandria’s common stockholders – diluted(2)
 
243,137

 
140,466

 
140,773

 
131,724

 
118,783

Less: effect of assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 
(1,302
)
 
—

 
—

 
—

 
—

Realized gain on non-real estate investment
 
(8,252
)
(3) 
—

 
—

 
—

 
—

Unrealized gains on non-real estate investments(4)
 
(72,229
)
 
—

 
—

 
—

 
—

Impairment of land parcels and non-real estate investments
 
—

 
3,805

 
—

 
4,491

 
—

Loss on early extinguishment of debt
 
—

 
2,781

 
—

 
—

 
670

Preferred stock redemption charge
 
—

 
—

 
—

 
—

 
11,279

Allocation to unvested restricted stock awards
 
1,125

 
(94
)
 
—

 
(58
)
 
(150
)
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
162,479

 
$
146,958

 
$
140,773

 
$
136,157

 
$
130,582


(1)
See definition for “Weighted-Average Shares of Common Stock Outstanding – Diluted” on page 54 of our Supplemental Information for additional information.
(2)
Calculated in accordance with standards established by the Advisory Board of Governors of the National Association of Real Estate Investment Trusts (the “Nareit Board of Governors”) in its April 2002 White Paper and related implementation guidance.
(3)
Relates to one publicly traded non-real estate investment in a life science entity. Excluding this gain, our realized non-real estate investment gains were $5.1 million for 1Q18.
(4)
See “Investments” on page 43 of our Supplemental Information for additional information.

 
9

 
 
Funds From Operations and Funds From Operations per Share (continued)
q118logo2.jpg
March 31, 2018
(In thousands, except per share amounts)
 
 


The following table presents a reconciliation of net income per share attributable to Alexandria’s common stockholders, the most directly comparable financial measure presented in accordance with GAAP, including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations per share attributable to Alexandria’s common stockholders – diluted, and funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted, for the periods below. Amounts allocable to unvested restricted stock awards are not material and are not presented separately within the per share table below. Per share amounts may not add due to rounding.
 
 
Three Months Ended
 
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Net income per share attributable to Alexandria’s common stockholders
 
$
1.32

 
$
0.38

 
$
0.55

 
$
0.35

 
$
0.29

Depreciation and amortization 
 
1.08

 
1.08

 
1.11

 
1.10

 
1.06

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

 
—

 
(0.15
)
 
—

 
—

Add: effect of assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 
0.01

 
—

 
—

 
—

 
—

Funds from operations per share attributable to Alexandria’s common stockholders – diluted(2)
 
2.41

 
1.46

 
1.51

 
1.45

 
1.35

Less: effect of assumed conversion of 7.00% Series D cumulative convertible preferred stock(1)
 
(0.01
)
 
—

 
—

 
—

 
—

Realized gain on non-real estate investment
 
(0.08
)
(3) 
—

 
—

 
—

 
—

Unrealized gains on non-real estate investments(4)
 
(0.70
)
 
—

 
—

 
—

 
—

Impairment of land parcels and non-real estate investments
 
—

 
0.04

 
—

 
0.05

 
—

Loss on early extinguishment of debt
 
—

 
0.03

 
—

 
—

 
0.01

Preferred stock redemption charge
 
—

 
—

 
—

 
—

 
0.12

Funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
1.62

 
$
1.53

 
$
1.51

 
$
1.50

 
$
1.48

 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding(1) for calculations of:
 
 
 
 
 
 
 
 
 
 
Earnings per share – diluted and funds from operations, as adjusted – diluted, per share
 
100,125

 
95,914

 
93,296

 
90,745

 
88,200

Funds from operations – diluted, per share
 
100,866

 
95,914

 
93,296

 
90,745

 
88,200


(1)
See definition for “Weighted-Average Shares of Common Stock Outstanding – Diluted” on page 54 of our Supplemental Information for additional information.
(2)
Calculated in accordance with standards established by the Nareit Board of Governors in its April 2002 White Paper and related implementation guidance.
(3)
Relates to one publicly traded non-real estate investment in a life science entity. Excluding this gain, our realized non-real estate investment gains were $5.1 million for 1Q18.
(4)
See “Investments” on page 43 of our Supplemental Information for additional information.


 
10









SUPPLEMENTAL
INFORMATION








 
 
 
q118logo2.jpg
Company Profile
March 31, 2018
 
 

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office REIT uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $17.9 billion and an asset base in North America of 30.2 million SF as of March 31, 2018. The asset base in North America includes 20.8 million RSF of operating properties and 3.5 million RSF of development and redevelopment of new Class A properties currently undergoing construction and pre-construction activities with target delivery dates ranging from 2018 through 2020. Additionally, the asset base in North America includes 5.9 million SF of intermediate-term and future development projects, including 3.6 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 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 57% 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 37 individuals, averaging 23 years of real estate experience, including 12 years with Alexandria. Our executive management team alone averages 18 years of experience with Alexandria.

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

 
12

 
 
 
q118logo2.jpg
Investor Information
March 31, 2018
 
 

Corporate Headquarters
 
New York Stock Exchange Trading Symbols
 
Information Requests
385 East Colorado Boulevard, Suite 299
 
Common stock: ARE
 
Phone:
(626) 578-0777
Pasadena, California 91101
 
7.00% Series D preferred stock: ARE PRD
 
Email:
 
 
 
 
Web:
www.are.com
 
 
 
 
 
 
Equity Research Coverage
Alexandria is currently covered by the following research analysts. This list may be incomplete and is subject to change as firms initiate or discontinue coverage of our company. Please note that any opinions, estimates, or forecasts regarding our historical or predicted performance made by these analysts are theirs alone and do not represent opinions, estimates, or forecasts of Alexandria or 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 / Wendy Ma
 
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
 
 
 
 
 
 
 

 
13

 
 
 
q118logo2.jpg
High-Quality, Diverse, and Innovative Tenants
March 31, 2018
 
 



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

Investment-Grade or Large Cap Tenants
 
Tenant Mix
 
 
 
 
q118clientmix4s.jpg
 
 
 
 
 
 
 
 
57%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 1Q18.
(2)
Leading technology entities represent investment-grade or companies with a market capitalization or private valuation greater than $10 billion as of 1Q18.

 
14

 
 
 
q118logo2.jpg
Class A Properties in AAA Locations
March 31, 2018
 
 


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

Class A Properties in
AAA Locations
 
AAA Locations
 
 
 
 
q118realestate4s.jpg
 
 
 
 
 
 
 
 
79%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
of ARE’s
 
Annual Rental Revenue(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of ARE’s Annual Rental Revenue(1)








(1)
Represents annual rental revenue in effect as of 1Q18.

 
15

 
 
 
q118logo2.jpg
Occupancy
March 31, 2018
 
 



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

Solid Historical Occupancy(1)
 
Occupancy across Key Locations
 
 
 
 
q118occupancy4s.jpg
 
 
 
 
 
 
 
 
96%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Over 10 Years
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Occupancy of Operating Properties
 
 
as of March 31, 2018








(1)
Average occupancy of operating properties in North America as of each December 31 for the last 10 years and as of 1Q18.


 
16

 
 
Financial and Asset Base Highlights
q118logo2.jpg
March 31, 2018
(Dollars in thousands, except per share amounts)
 
 

 
 
Three Months Ended (unless stated otherwise)
 
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Selected financial data from consolidated financial statements and related information
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA – quarter annualized
 
$
914,444

 
$
817,392

 
$
773,828

 
$
755,048

 
$
723,764

Adjusted EBITDA – trailing 12 months
 
$
815,178

 
$
767,508

 
$
728,869

 
$
689,079

 
$
650,579

Adjusted EBITDA margins
 
69%

 
68%

 
68%

 
68%

 
67%

Operating margins
 
71%

 
71%

 
71%

 
72%

 
72%

 
 
 
 
 
 
 
 
 
 
 
Net debt at end of period
 
$
4,979,254

 
$
4,516,672

 
$
4,698,568

 
$
4,660,216

 
$
4,292,773

Net debt to Adjusted EBITDA – quarter annualized
 
5.4x

 
5.5x

 
6.1x

 
6.2x

 
5.9x

Net debt to Adjusted EBITDA – trailing 12 months
 
6.1x

 
5.9x

 
6.4x

 
6.8x

 
6.6x

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

 
5.6x

 
6.2x

 
6.3x

 
6.0x

Net debt and preferred stock to Adjusted EBITDA – trailing 12 months
 
6.2x

 
6.0x

 
6.5x

 
6.9x

 
6.7x

 
 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio – quarter annualized
 
4.6x

 
4.2x

 
4.1x

 
4.1x

 
4.1x

Fixed-charge coverage ratio – trailing 12 months
 
4.3x

 
4.1x

 
4.0x

 
3.9x

 
3.8x

Unencumbered net operating income as a percentage of total net operating income
 
87%

 
86%

 
81%

 
81%

 
81%

 
 
 
 
 
 
 
 
 
 
 
Closing stock price at end of period
 
$
124.89

 
$
130.59

 
$
118.97

 
$
120.47

 
$
110.52

Common shares outstanding (in thousands) at end of period
 
100,696

 
99,784

 
94,325

 
92,098

 
89,884

Total equity capitalization at end of period
 
$
12,682,876

 
$
13,140,843

 
$
11,328,163

 
$
11,202,668

 
$
10,037,702

Total market capitalization at end of period
 
$
17,893,674

 
$
17,905,650

 
$
16,145,203

 
$
15,978,053

 
$
14,468,388

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

 
$0.90/$3.60

 
$0.86/$3.44

 
$0.86/$3.44

 
$0.83/$3.32

Dividend payout ratio for the quarter
 
56%

 
61%

 
58%

 
58%

 
57%

Dividend yield – annualized
 
2.9%

 
2.8%

 
2.9%

 
2.9%

 
3.0%

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

 
0.6%

 
0.6%

 
0.6%

 
0.6%

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

 
6.6%

 
6.8%

 
7.0%

 
7.0%

 
 
 
 
 
 
 
 
 
 
 
Capitalized interest
 
$
13,360

 
$
12,897

 
$
17,092

 
$
15,069

 
$
13,164

Weighted-average interest rate for capitalization of interest during period
 
3.91%

 
3.89%

 
3.96%

 
3.98%

 
3.95%

 
 
 
 
 
 
 
 
 
 
 
 

 
17

 
 
Financial and Asset Base Highlights (continued)
q118logo2.jpg
March 31, 2018
(Dollars in thousands, except annual rental revenue per occupied RSF amounts)
 
 

 
 
Three Months Ended (unless stated otherwise)
 
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Amounts included in funds from operations and non-revenue-enhancing capital expenditures
 
 
 
 
 
 
 
 
 
 
Straight-line rent revenue
 
$
32,631

 
$
33,281

 
$
20,865

 
$
17,905

 
$
35,592

Amortization of acquired below-market leases
 
$
6,170

 
$
4,147

 
$
4,545

 
$
5,004

 
$
5,359

Straight-line rent expense on ground leases
 
$
240

 
$
205

 
$
206

 
$
201

 
$
198

Stock compensation expense
 
$
7,248

 
$
6,961

 
$
7,893

 
$
5,504

 
$
5,252

Amortization of loan fees
 
$
2,543

 
$
2,571

 
$
2,840

 
$
2,843

 
$
2,895

Amortization of debt premiums
 
$
575

 
$
639

 
$
652

 
$
625

 
$
596

Non-revenue-enhancing capital expenditures:
 
 
 
 
 
 
 
 
 
 
Building improvements
 
$
2,625

 
$
2,469

 
$
2,453

 
$
1,840

 
$
1,138

Tenant improvements and leasing commissions
 
$
2,836

 
$
9,578

 
$
9,976

 
$
9,389

 
$
18,377

 
 
 
 
 
 
 
 
 
 
 
Operating statistics and related information (at end of period)
 
 
 
 
 
 
 
 
 
 
Number of properties – North America
 
222

 
213

 
206

 
202

 
199

RSF (including development and redevelopment projects under construction) – North America
 
23,066,089

 
21,981,133

 
20,642,042

 
20,567,473

 
20,084,195

Total square feet – North America
 
30,240,017

 
29,563,221

 
28,583,747

 
28,351,518

 
28,176,780

Annual rental revenue per occupied RSF – North America
 
$
48.09

 
$
48.01

 
$
47.19

 
$
46.55

 
$
45.94

Occupancy of operating properties – North America
 
96.6%

 
96.8%

 
96.1%

 
95.7%

 
95.5%

Occupancy of operating and redevelopment properties – North America
 
94.3%

 
94.7%

 
93.9%

 
94.0%

 
94.7%

Weighted average remaining lease term (in years)
 
8.7

 
8.9

 
8.8

 
8.8

 
9.0

 
 
 
 
 
 
 
 
 
 
 
Total leasing activity – RSF
 
1,481,164

 
1,379,699

 
786,925

 
1,081,777

 
1,320,781

Lease renewals and re-leasing of space – change in average new rental rates over expiring rates:
 
 
 
 
 
 
 
 
 
 
Rental rate increases
 
16.3%


24.8%

 
24.2%

 
23.2%

 
27.8%

Rental rate increases (cash basis)
 
19.0%

 
10.4%

 
10.0%

 
9.4%

 
17.7%

RSF (included in total leasing activity above)
 
234,548

 
593,622

 
448,472

 
604,142

 
878,863

 
 
 
 
 
 
 
 
 
 
 
Same property – percentage change over comparable quarter from prior year:
 
 
 
 
 
 
 
 
 
 
Net operating income increase
 
4.0%

 
4.5%

 
2.2%

 
1.8%

 
2.6%

Net operating income increase (cash basis)
 
14.6%

 
12.5%

 
7.8%

 
7.0%

 
5.5%

 
 
 
 
 
 
 
 
 
 
 
 


 
18

 
 
 
q118logo2.jpg
Key Operating Metrics
March 31, 2018
 
 

Favorable Lease Structure(1)
 
Same Property Net Operating Income Growth
 
 
 
q118sameprop4sa.jpg
q118sameprop4sb.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
 
 
 
 
 
 
 
 
 
q118rentalrate4sa.jpg
q118rentalrate4sb.jpg
 
Adjusted EBITDA
 
 
 
Operating
 
 
69%
 
 
 
71%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Percentages calculated based on RSF as of 1Q18.
(2)
Represents percentages for 1Q18.
(3)
Rental rate increase driven primarily by the successful execution of our strategy to re-lease significantly below-market leases at our Alexandria Center® at One Kendall Square campus in our Cambridge submarket. Since our acquisition of the campus in 4Q16, we have re-leased and renewed approximately 185,000 RSF of below-market space, or three times the volume we initially forecasted to be executed through 1Q18, at rental rate (cash basis) increases of approximately 26%.

 
19

 
 
Same Property Performance
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 

Same Property Financial Data
 
1Q18
 
Same Property Statistical Data
 
1Q18
 
Percentage change over comparable period from prior year:
 
 
 
Number of same properties
 
188
 
Net operating income increase
 
4.0%
 
Rentable square feet
 
17,618,620
 
Net operating income increase (cash basis)
 
14.6%
 
Occupancy – current-period average
 
96.2%
 
Operating margin
 
71%
 
Occupancy – same-period prior-year average
 
96.1%
 

 
 
Three Months Ended March 31,
 
 
 
2018
 
2017
 
$ Change
 
% Change
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
$
204,378

 
$
197,207

 
$
7,171

 
3.6
%
 
Non-same properties
 
40,107

 
9,986

 
30,121

 
301.6

 
Total rental
 
244,485

 
207,193

 
37,292

 
18.0

 
 
 
 
 
 
 
 
 
 
 
Same properties
 
66,398

 
60,186

 
6,212

 
10.3

 
Non-same properties
 
6,772

 
1,160

 
5,612

 
483.8

 
Total tenant recoveries
 
73,170

 
61,346

 
11,824

 
19.3

 
 
 
 
 
 
 
 
 
 
 
Same properties
 
69

 
58

 
11

 
19.0

 
Non-same properties
 
2,415

 
2,280

 
135

 
5.9

 
Total other income
 
2,484

 
2,338

 
146

 
6.2

 
 
 
 
 
 
 
 
 
 
 
Same properties
 
270,845

 
257,451

 
13,394

 
5.2

 
Non-same properties
 
49,294

 
13,426

 
35,868

 
267.2

 
Total revenues
 
320,139

 
270,877

 
49,262

 
18.2

 
 
 
 
 
 
 
 
 
 
 
Same properties
 
77,523

 
71,509

 
6,014

 
8.4

 
Non-same properties
 
14,248

 
5,578

 
8,670

 
155.4

 
Total rental operations
 
91,771

 
77,087

 
14,684

 
19.0

 
 
 
 
 
 
 
 
 
 
 
Same properties
 
193,322

 
185,942

 
7,380

 
4.0

 
Non-same properties
 
35,046

 
7,848

 
27,198

 
346.6

 
Net operating income
 
$
228,368

 
$
193,790

 
$
34,578

 
17.8
%
 
 
 
 
 
 
 
 
 
 
 
Net operating income – same properties
 
$
193,322

 
$
185,942

 
$
7,380

 
4.0
%
 
Straight-line rent revenue and amortization of acquired below-market leases
 
(18,013
)
 
(32,940
)
 
14,927

 
(45.3
)
 
Net operating income – same properties (cash basis)
 
$
175,309

 
$
153,002

 
$
22,307

 
14.6
%
 
 
 
 
 
 
 
 
 
 
 

See definition for “Same Property Comparisons” on page 53 of our Supplemental Information for a reconciliation of same store properties to total properties.


 
20

 
 
 
q118logo2.jpg
Leasing Activity
March 31, 2018
 
 

 
 
Three Months Ended
 
Year Ended
 
 
March 31, 2018
 
December 31, 2017
(Dollars per RSF)
 
Including
Straight-Line Rent
 
Cash Basis
 
Including
Straight-Line Rent
 
Cash Basis
Leasing activity:
 
 
 
 
 
 
 
 
Renewed/re-leased space(1)
 
 
 
 
 
 
 
 
Rental rate changes
 
16.3%

(2) 
19.0%

(2) 
25.1%

 
12.7%

New rates
 
$
50.90

 
$
49.56

 
$
51.05

 
$
47.99

Expiring rates
 
$
43.77

 
$
41.65

 
$
40.80

 
$
42.60

Rentable square footage
 
234,548

 
 
 
2,525,099

 
 
Tenant improvements/leasing commissions
 
$
12.09

 
 
 
$
18.74

 
 
Weighted-average lease term
 
3.8 years

 
 
 
6.2 years

 
 
 
 
 
 
 
 
 
 
 
Developed/redeveloped/previously vacant space leased
 
 
 
 
 
 
 
 
New rates
 
$
72.19

 
$
58.75

 
$
47.56

 
$
42.93

Rentable square footage
 
1,246,616

(3) 
 
 
2,044,083

 
 
Tenant improvements/leasing commissions
 
$
10.55


 
 
$
9.83

 
 
Weighted-average lease term
 
15.2 years

 
 
 
10.1 years

 
 
 
 
 
 
 
 
 
 
 
Leasing activity summary (totals):
 
 
 
 
 
 
 
 
New rates
 
$
68.82

 
$
57.30

 
$
49.49

 
$
45.72

Rentable square footage
 
1,481,164

(4) 
 
 
4,569,182

 
 
Tenant improvements/leasing commissions
 
$
10.79

 
 
 
$
14.75

 
 
Weighted-average lease term
 
13.4 years

 
 
 
7.9 years

 
 
 
 
 
 
 
 
 
 
 
Lease expirations:(1)
 
 
 
 
 
 
 
 
Expiring rates
 
$
42.55

 
$
43.71

 
$
39.99

 
$
41.71

Rentable square footage
 
540,033

 
 
 
2,919,259

 
 


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

(1)
Excludes 22 month-to-month leases aggregating 50,686 RSF and 25 month-to-month leases aggregating 37,006 RSF as of 1Q18, and 4Q17, respectively.
(2)
Rental rate increase driven primarily by the successful execution of our strategy to re-lease significantly below-market leases at our Alexandria Center® at One Kendall Square campus in our Cambridge submarket. Since our acquisition of the campus in 4Q16, we have re-leased and renewed approximately 185,000 RSF of below-market space, or three times the volume we initially forecasted to be executed through 1Q18, at rental rate (cash basis) increases of approximately 26%.
(3)
Includes 593,765 RSF at 1655 and 1725 Third Street in our Mission Bay/SoMa submarket, 192,070 RSF at Summers Ridge Science Park in our Sorrento Mesa submarket, 123,403 RSF at 399 Binney Street in our Cambridge submarket, 104,013 RSF at 279 East Grand Avenue, and 60,963 RSF at 681 Gateway Boulevard in our South San Francisco submarket aggregating 1,074,214 RSF of development, redevelopment, or previously vacant space leased in 1Q18.
(4)
During 1Q18, we granted tenant concessions/free rent averaging 2.7 months with respect to the 1,481,164 RSF leased. Approximately 59% of the leases executed during 1Q18 did not include concessions for free rent.

 
21

 
 
 
q118logo2.jpg
Contractual Lease Expirations
March 31, 2018
 
 

Year
 
Number of Leases
 
RSF
 
Percentage of
Occupied RSF
 
Annual Rental Revenue
(per RSF)(1)
 
Percentage of Total
Annual Rental Revenue
 
 
2018
(2)
 
 
73

 
 
 
984,083

 
 
 
4.9
%
 
 
 
$
41.91

 
 
 
4.4
%
 
 
 
2019
 
 
 
90

 
 
 
1,395,878

 
 
 
7.0
%
 
 
 
$
39.42

 
 
 
5.8
%
 
 
 
2020
 
 
 
108

 
 
 
1,762,000

 
 
 
8.8
%
 
 
 
$
37.95

 
 
 
7.1
%
 
 
 
2021
 
 
 
89

 
 
 
1,694,342

 
 
 
8.5
%
 
 
 
$
41.97

 
 
 
7.5
%
 
 
 
2022
 
 
 
86

 
 
 
1,526,328

 
 
 
7.6
%
 
 
 
$
44.93

 
 
 
7.2
%
 
 
 
2023
 
 
 
62

 
 
 
1,983,398

 
 
 
9.9
%
 
 
 
$
42.82

 
 
 
9.0
%
 
 
 
2024
 
 
 
31

 
 
 
1,410,528

 
 
 
7.0
%
 
 
 
$
48.61

 
 
 
7.2
%
 
 
 
2025
 
 
 
28

 
 
 
814,573

 
 
 
4.1
%
 
 
 
$
50.79

 
 
 
4.4
%
 
 
 
2026
 
 
 
19

 
 
 
778,993

 
 
 
3.9
%
 
 
 
$
45.61

 
 
 
3.7
%
 
 
 
2027
 
 
 
25

 
 
 
1,845,581

 
 
 
9.2
%
 
 
 
$
44.47

 
 
 
8.7
%
 
 
Thereafter
 
 
47

 
 
 
5,811,887

 
 
 
29.1
%
 
 
 
$
57.22

 
 
 
35.0
%
 
 

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
 
55,761

 
37,492

 
—

 
 
109,145

 
 
202,398

 
$
53.23

 
16,188


72,396


—

 

260,651


 
349,235


$
51.09

 
San Francisco
 
19,988

 
—

 
321,971

(3) 
 
65,637

 
 
407,596

 
35.26

 
22,882


—


—

 

183,814


 
206,696


45.01

 
New York City
 
15,517

 
577

 
—

 
 
42,015

 
 
58,109

 
N/A

 
—


—


—

 

7,601


 
7,601


N/A

 
San Diego
 
—

 
—

 
—

 
 
140,408

 

140,408

 
33.96

 
71,457


51,358


44,034

(4) 
 
201,749

 
 
368,598


31.39

 
Seattle
 
2,468

 
—

 
—

 
 
6,272

 
 
8,740

 
52.56

 
—


—


—

 

212,010


 
212,010


43.91

 
Maryland
 
8,110

 
2,618

 
—

 
 
32,491

 
 
43,219

 
21.58

 
—


—


—

 

158,433


 
158,433


26.12

 
Research Triangle Park
 
—

 
15,800

 
—

 
 
33,203

 
 
49,003

 
23.77

 
—


—


—

 

40,604


 
40,604


20.66

 
Canada
 
12,450

 
5,952

 
—

 
 
45,063

 
 
63,465

 
19.83

 
—

 
—

 
—

 
 
2,238

 
 
2,238

 
17.01

 
Non-cluster markets
 
—

 
6,721

 
—

 
 
4,424

 
 
11,145

 
26.18

 
—


—


—

 

50,463


 
50,463


22.25

 
Total
 
114,294

 
69,160

 
321,971

 
 
478,658

 
 
984,083

 
$
41.91

 
110,527


123,754


44,034

 

1,117,563


 
1,395,878


$
39.42

 
Percentage of expiring leases
 
12
%
 
7
%
 
33
%
 
 
48
%
 
 
100
%
 
 
 
8
%
 
9
%
 
3
%
 
 
80
%

 
100
%


 
 

(1)
Represents amounts in effect as of 1Q18.
(2)
Excludes 22 month-to-month leases aggregating 50,686 RSF as of 1Q18.
(3)
Includes 195,000 RSF expiring at the beginning of 2Q18 at 960 Industrial Road, a recently acquired property located in our Greater Stanford submarket, where we are pursuing entitlements aggregating 500,000 RSF for a multi-building development. Also includes 126,971 RSF of office space targeted for redevelopment into office/laboratory space upon expiration of the existing lease at the end of 3Q18 at 681 Gateway Boulevard in our South San Francisco submarket, of which 60,963 RSF, or 48%, is pre-leased to another tenant. Concurrent with our redevelopment, we anticipate expanding 681 Gateway Boulevard by an additional 15,000 RSF to 30,000 RSF and expect initial occupancy in 2019.
(4)
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.

 
22

 
 
Top 20 Tenants
q118logo2.jpg
March 31, 2018
(Dollars in thousands, except market cap/private valuation)
 
 

88% 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
 
Market Cap / Private Valuation
(in billions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Moody’s
 
S&P
 
 
1
 
Illumina, Inc.
 
 
12.3

 
 
 
891,495

 
 
 
$
34,859

 
 
3.7
%
 
—
 
BBB
 
$
34.5

 
2
 
Sanofi
 
 
9.6

 
 
 
514,450

 
 
 
30,527

 
 
3.2

 
 A1
 
 AA
 
$
100.1

 
3
 
Takeda Pharmaceutical Company Ltd.
 
 
12.0

 
 
 
386,111

 
 
 
30,522

 
 
3.2

 
A1
 
A-
 
$
41.0

 
4
 
Eli Lilly and Company
 
 
11.6

 
 
 
469,266

 
 
 
29,334

 
 
3.1

 
A2
 
AA-
 
$
84.5

 
5
 
Bristol-Myers Squibb Company
 
 
9.8

 
 
 
460,050

 
 
 
29,330

 
 
3.1

 
A2
 
A+
 
$
103.4

 
6
 
Celgene Corporation
 
 
8.3

 
 
 
614,082

 
 
 
28,881

 
 
3.0

 
 Baa2
 
 BBB+
 
$
67.1

 
7
 
Novartis AG
 
 
8.8

 
 
 
367,995

 
 
 
28,119

 
 
3.0

 
Aa3
 
AA-
 
$
190.8

 
8
 
Uber Technologies, Inc.
 
 
74.7

(2) 
 
 
422,980

 
 
 
22,162

 
 
2.3

 
(3) 
 
(3) 
 
$
69.6

(4) 
9
 
New York University
 
 
12.4

 
 
 
209,224

 
 
 
20,718

 
 
2.2

 
Aa2
 
AA-
 
$
—

 
10
 
bluebird bio, Inc.
 
 
8.9

 
 
 
262,261

 
 
 
20,093

 
 
2.1

 
—
 
—
 
$
8.6

 
11
 
Stripe, Inc.
 
 
9.5

 
 
 
295,333

 
 
 
17,822

 
 
1.9

 
—
 
—
 
$
9.2

(4) 
12
 
Roche
 
 
3.9

 
 
 
343,861

 
 
 
17,597

 
 
1.9

 
Aa3
 
AA
 
$
196.0

 
13
 
Amgen Inc.
 
 
6.0

 
 
 
407,369

 
 
 
16,838

 
 
1.8

 
Baa1
 
A
 
$
122.8

 
14
 
Massachusetts Institute of Technology
 
 
7.2

 
 
 
256,126

 
 
 
16,729

 
 
1.8

 
Aaa
 
AAA
 
$
—

 
15
 
United States Government
 
 
7.3

 
 
 
264,358

 
 
 
15,056

 
 
1.6

 
Aaa
 
AA+
 
$
—

 
16
 
FibroGen, Inc.
 
 
5.6

 
 
 
234,249

 
 
 
14,198

 
 
1.5

 
—
 
—
 
$
3.8

 
17
 
Facebook, Inc.
 
 
11.7

 
 
 
382,883

 
 
 
13,785

 
 
1.5

 
(3) 
 
(3) 
 
$
444.6

 
18
 
Biogen Inc.
 
 
10.5

 
 
 
305,212

 
 
 
13,278

 
 
1.4

 
 Baa1
 
 A-
 
$
57.5

 
19
 
Pinterest, Inc.
 
 
14.9

 
 
 
148,146

 
 
 
12,103

 
 
1.3

 
(3) 
 
(3) 
 
$
12.3

(4) 
20
 
Vertex Pharmaceuticals Incorporated
 
 
14.5

 
 
 
231,440

 
 
 
11,034

 
 
1.2

 
(3) 
 
(3) 
 
$
41.4

 
 
 
Total/weighted average
 
 
13.2

(3) 
 
 
7,466,891

 
 
 
$
422,985

 
 
44.8
%
 
 
 
 
 
 
 


(1)
Based on aggregate annual rental revenue in effect as of 1Q18. See “Definitions and Reconciliations” on page 48 for our methodology on annual rental revenue for unconsolidated properties.
(2)
Represents a ground lease with Uber Technologies, Inc. at 1455 and 1515 Third Street in our Mission Bay/SoMa submarket. Excluding the ground lease, the weighted-average remaining lease term for our top 20 tenants was 9.8 years as of March 31, 2018.
(3)
Tenant with market capitalization or private valuation greater than $10 billion as of 1Q18.
(4)
We obtained the most recently reported private valuations as of 1Q18 from PitchBook Data, Inc., a comprehensive database that provides data on private capital markets, including venture capital, private equity, and M&A transactions.

 
23

 
 
Summary of Properties and Occupancy
q118logo2.jpg
March 31, 2018
(Dollars in thousands, except per RSF amounts)
 
 

Summary of properties
Market
 
RSF
 
Number of Properties
 
Annual Rental Revenue
 
 
Operating
 
Development
 
Redevelopment
 
Total
 
% of Total
 
 
Total
 
% of Total
 
Per RSF
 
Greater Boston
 
6,237,599

 
164,000

 
31,858

 
6,433,457

 
28
%
 
54

 
$
359,063

 
38
%
 
$
61.46

 
San Francisco
 
4,733,279

 
1,627,088

 
45,115

 
6,405,482

 
28

 
44

 
226,241

 
24

 
49.84

 
New York City
 
727,674

 
—

 
—

 
727,674

 
3

 
2

 
63,555

 
7

 
87.34

 
San Diego
 
4,349,106

 
—

 
163,648

 
4,512,754

 
20

 
56

 
160,620

 
16

 
38.79

 
Seattle
 
1,037,920

 
—

 
—

 
1,037,920

 
4

 
11

 
48,530

 
5

 
48.39

 
Maryland
 
2,101,195

 
—

 
103,225

 
2,204,420

 
10

 
30

 
52,633

 
5

 
26.29

 
Research Triangle Park
 
1,043,726

 
—

 
175,000

 
1,218,726

 
5

 
16

 
26,097

 
3

 
25.84

 
Canada
 
256,967

 
—

 
—

 
256,967

 
1

 
3

 
6,824

 
1

 
26.68

 
Non-cluster markets
 
268,689

 
—

 
—

 
268,689

 
1

 
6

 
5,455

 
1

 
25.73

 
North America
 
20,756,155

 
1,791,088

 
518,846

 
23,066,089

 
100
%
 
222

 
$
949,018

 
100
%
 
$
48.09

 
 
 
 
 
2,309,934
 
 
 
 
 
 
 
 
 
 
 
 
 


Summary of occupancy
 
 
Operating Properties
 
Operating and Redevelopment Properties
Market
 
3/31/18
 
12/31/17
 
3/31/17
 
3/31/18
 
12/31/17
 
3/31/17
Greater Boston
 
95.7
%
 
96.6
%
 
96.1
%
 
95.2
%
 
95.7
%
 
96.1
%
San Francisco
 
99.9

 
99.6

 
99.8

 
98.9

 
99.6

 
99.8

New York City
 
100.0

 
99.8

 
97.8

 
100.0

 
99.8

 
97.8

San Diego
 
95.2

 
94.5

 
91.0

 
91.7

 
90.9

 
87.3

Seattle
 
96.6

 
97.7

 
98.2

 
96.6

 
97.7

 
98.2

Maryland
 
95.7

 
95.2

 
92.6

 
91.2

 
93.2

 
92.6

Research Triangle Park
 
96.8

 
98.1

 
97.5

 
82.9

 
84.0

 
97.5

Subtotal
 
96.8

 
97.0

 
95.6

 
94.4

 
94.9

 
94.7

Canada
 
99.6

 
99.6

 
99.2

 
99.6

 
99.6

 
99.2

Non-cluster markets
 
78.9

 
78.4

 
88.4

 
78.9

 
78.4

 
88.4

North America
 
96.6
%
 
96.8
%
 
95.5
%
 
94.3
%
 
94.7
%
 
94.7
%

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


 
24

 
 
Property Listing
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 

Market / Submarket / Address
 
RSF 
 
Number of Properties
 
Annual Rental Revenue
 
Occupancy Percentage 
 
 
 
 
 
 
 
 
Operating
 
Operating and Redevelopment
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
 
Greater Boston
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cambridge/Inner Suburbs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® at Kendall Square
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50, 60, 75/125, and 100 Binney Street, 161 First Street, 215 First Street, 150 Second Street, 300 Third Street, and 11 Hurley Street
 
2,060,275

 
—

 
—

 
2,060,275

 
9
 
$
140,136

 
97.0
%
 
 
97.0
%
 
 
 
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
 
86,245

 
98.9

 
 
98.9

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® at One Kendall Square
 
649,705

 
164,000

 
—

 
813,705

 
10
 
43,235

 
83.5

 
 
83.5

 
 
 
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
 
7,195

 
93.4

 
 
93.4

 
 
 
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
 
4,836,107

 
164,000

 
—

 
5,000,107

 
35
 
318,747

 
96.1

 
 
96.1

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

 
—

 
—

 
210,709

 
1
 
3,942

 
83.8

 
 
83.8

 
 
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
 
285,759

 
—

 
31,858

 
317,617

 
3
 
12,312

 
100.0

 
 
90.0

 
 
 
19 Presidential Way
 
144,892

 
—

 
—

 
144,892

 
1
 
4,311

 
80.5

 
 
80.5

 
 
 
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
 
883,133

 
—

 
31,858

 
914,991

 
14
 
31,417

 
95.1

 
 
91.8

 
 
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
 
6,237,599

 
164,000

 
31,858

 
6,433,457

 
54
 
$
359,063

 
95.7
%
 
 
95.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
25

 
 
Property Listing (continued)
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 

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

 
—

 
—

 
455,069

 
2
 
$
28,677

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

 
—

 
—

 
422,980

 
2
 
22,162

 
100.0

 
 
100.0

 
 
 
1655 and 1725 Third Street (unconsolidated joint venture – 10% ownership)
 
—

 
593,765

 
—

 
593,765

 
2
 
—

 
N/A

 
 
N/A

 
 
 
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
 
12,678

 
100.0

 
 
100.0

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

 
—

 
—

 
158,267

 
1
 
7,681

 
100.0

 
 
100.0

 
 
 
1700 Owens Street
 
157,340

 
—

 
—

 
157,340

 
1
 
10,971

 
100.0

 
 
100.0

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

 
—

 
—

 
148,146

 
1
 
12,103

 
100.0

 
 
100.0

 
 
 
Mission Bay/SoMa
 
2,080,003

 
593,765

 
—

 
2,673,768

 
12
 
115,907

 
100.0

 
 
100.0

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

 
512,335

 
—

 
919,704

 
5
 
16,838

 
100.0

 
 
100.0

 
 
 
Alexandria Technology Center® – Gateway
 
619,037

 
—

 
—

 
619,037

 
7
 
28,725

 
99.1

 
 
99.1

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

 
—

 
—

 
163,035

 
2
 
6,519

 
100.0

 
 
100.0

 
 
 
500 Forbes Boulevard
 
155,685

 
—

 
—

 
155,685

 
1
 
6,619

 
100.0

 
 
100.0

 
 
 
7000 Shoreline Court
 
136,395

 
—

 
—

 
136,395

 
1
 
5,433

 
100.0

 
 
100.0

 
 
 
341 and 343 Oyster Point Boulevard
 
107,960

 
—

 
—

 
107,960

 
2
 
4,479

 
100.0

 
 
100.0

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

 
—

 
—

 
103,857

 
1
 
3,601

 
100.0

 
 
100.0

 
 
 
South San Francisco
 
1,693,338

 
512,335

 
—

 
2,205,673

 
19
 
72,214

 
99.7

 
 
99.7

 
 
Greater Stanford
 
 
 
 
 
 
 


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

 
520,988

 
—

 
772,983

 
3
 
4,718

 
100.0

 
 
100.0

 
 
 
100 Independence Drive and 125 and 135 Constitution Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria PARC
 
152,383

 
—

 
45,115

 
197,498

 
4
 
8,412

 
100.0

 
 
77.2

 
 
 
2100, 2200, 2300, and 2400 Geng Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
959,938

 
520,988

 
45,115

 
1,526,041

 
13
 
38,120

 
100.0

 
 
95.5

 
 
 
San Francisco
 
4,733,279

 
1,627,088

 
45,115

 
6,405,482

 
44
 
226,241

 
99.9

 
 
98.9

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

 
—

 
—

 
727,674

 
2
 
63,555

 
100.0

 
 
100.0

 
 
 
430 and 450 East 29th Street
 
 
 
 
 
 




 
 
 
 
 
 
 
 
 
 
 
New York City
 
727,674

 
—

 
—

 
727,674

 
2
 
$
63,555

 
100.0
%
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
See page 42 of our Supplemental Information for additional information.

 
26

 
 
Property Listing (continued)
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 

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

 
—

 
—

 
336,461

 
3
 
$
17,502

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

 
—

 
—

 
294,993

 
3
 
13,005

 
86.9

 
 
86.9

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

 
—

 
—

 
236,635

 
3
 
8,790

 
99.8

 
 
99.8

 
 
 
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
 
1,280,902

 
—

 
—

 
1,280,902

 
15
 
56,411

 
95.0

 
 
95.0

 
 
University Town Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

 
95.7

 
 
95.7

 
 
 
5200 Illumina Way
 
792,687

 
—

 
—

 
792,687

 
6
 
28,795

 
100.0

 
 
100.0

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

 
—

 
163,648

 
163,648

 
1
 
—

 
N/A

 
 
—

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

 
—

 
—

 
140,398

 
3
 
3,164

 
90.9

 
 
90.9

 
 
 
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
 
1,973,847

 
—

 
163,648

 
2,137,495

 
17
 
74,231

 
97.6

 
 
90.1

 
 
Sorrento Mesa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summers Ridge Science Park
 
316,531

 
—

 
—

 
316,531

 
4
 
10,843

 
100.0

 
 
100.0

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

 
—

 
—

 
138,970

 
2
 
3,950

 
100.0

 
 
100.0

 
 
 
10121 and 10151 Barnes Canyon Road 
 
102,392

 
—

 
—

 
102,392

 
2
 
2,691

 
100.0

 
 
100.0

 
 
 
ARE Portola
 
101,857

 
—

 
—

 
101,857

 
3
 
2,057

 
71.7

 
 
71.7

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

 
—

 
—

 
66,244

 
1
 
2,431

 
100.0

 
 
100.0

 
 
 
5871 Oberlin Drive
 
33,817

 
—

 
—

 
33,817

 
1
 
832

 
86.8

 
 
86.8

 
 
 
Sorrento Mesa
 
759,811

 
—

 
—

 
759,811

 
13
 
22,804

 
95.6

 
 
95.6

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

 
—

 
—

 
121,655

 
6
 
2,223

 
74.6

 
 
74.6

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

 
—

 
—

 
103,111

 
4
 
1,979

 
68.0

 
 
68.0

 
 
 
Sorrento Valley
 
224,766

 
—

 
—

 
224,766

 
10
 
4,202

 
71.6

 
 
71.6

 
 
I-15 Corridor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13112 Evening Creek Drive
 
109,780

 
—

 
—

 
109,780

 
1
 
2,972

 
100.0

 
 
100.0

 
 
 
San Diego
 
4,349,106

 
—

 
163,648

 
4,512,754

 
56
 
$
160,620

 
95.2
%
 
 
91.7
%
 
(1)

See page 42 of this Supplemental Information for additional information.


 
27

 
 
Property Listing (continued)
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 

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

 
—

 
—

 
290,111

 
1
 
$
15,195

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

 
—

 
—

 
203,369

 
2
 
8,748

 
100.0

 
 
100.0

 
 
 
1616 Eastlake Avenue East
 
168,708

 
—

 
—

 
168,708

 
1
 
8,294

 
94.0

 
 
94.0

 
 
 
1551 Eastlake Avenue East
 
117,482

 
—

 
—

 
117,482

 
1
 
4,828

 
100.0

 
 
100.0

 
 
 
199 East Blaine Street
 
115,084

 
—

 
—

 
115,084

 
1
 
6,197

 
100.0

 
 
100.0

 
 
 
219 Terry Avenue North
 
30,705

 
—

 
—

 
30,705

 
1
 
1,856

 
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
 
46,242

 
98.9

 
 
98.9

 
 
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
 
449

 
32.1

 
 
32.1

 
 
 
Elliott Bay
 
84,470

 
—

 
—

 
84,470

 
3
 
2,288

 
70.5

 
 
70.5

 
 
 
Seattle
 
1,037,920

 
—

 
—

 
1,037,920

 
11
 
48,530

 
96.6

 
 
96.6

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

 
—

 
45,039

 
386,208

 
6
 
13,214

 
100.0

 
 
88.3

 
 
 
1330 Piccard Drive
 
131,511

 
—

 
—

 
131,511

 
1
 
3,537

 
100.0

 
 
100.0

 
 
 
1500 and 1550 East Gude Drive
 
90,489

 
—

 
—

 
90,489

 
2
 
1,681

 
100.0

 
 
100.0

 
 
 
14920 and 15010 Broschart Road
 
86,703

 
—

 
—

 
86,703

 
2
 
2,045

 
91.9

 
 
91.9

 
 
 
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
 
26,512

 
93.6

 
 
89.1

 
 
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
708 Quince Orchard Road, 1300 Quince Orchard Boulevard, and
19, 20, and 22 Firstfield Road
 
237,137

 
—

 
—

 
237,137

 
5
 
6,299

 
100.0

 
 
100.0

 
 
 
704 Quince Orchard Road (unconsolidated joint venture – 56.8% ownership)
 
21,745

 
—

 
58,186

 
79,931

 
1
 
306

 
100.0

 
 
27.2

 
 
 
401 Professional Drive
 
63,154

 
—

 
—

 
63,154

 
1
 
1,509

 
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
 
777,387

 
—

 
58,186

 
835,573

 
13
 
18,480

 
95.7

 
 
89.0

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

 
—

 
—

 
191,884

 
1
 
2,503

 
100.0

 
 
100.0

 
 
Northern Virginia
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14225 Newbrook Drive
 
248,186

 
—

 
—

 
248,186

 
1
 
5,138

 
100.0

 
 
100.0

 
 
 
Maryland
 
2,101,195

 
—

 
103,225

 
2,204,420

 
30
 
$
52,633

 
95.7
%
 
 
91.2
%
 


 

 
28

 
 
Property Listing (continued)
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 

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

 
—

 
—

 
186,870

 
3
 
$
3,529

 
95.6
%
 
 
95.6
%
 
 
 
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
 
3,210

 
95.8

 
 
95.8

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

 
—

 
—

 
100,000

 
1
 
1,726

 
95.0

 
 
95.0

 
 
 
7 Triangle Drive
 
96,626

 
—

 
—

 
96,626

 
1
 
3,156

 
100.0

 
 
100.0

 
 
 
2525 East NC Highway 54
 
82,996

 
—

 
—

 
82,996

 
1
 
3,680

 
100.0

 
 
100.0

 
 
 
407 Davis Drive
 
81,956

 
—

 
—

 
81,956

 
1
 
1,644

 
100.0

 
 
100.0

 
 
 
601 Keystone Park Drive
 
77,395

 
—

 
—

 
77,395

 
1
 
1,379

 
100.0

 
 
100.0

 
 
 
6040 George Watts Hill Drive
 
61,547

 
—

 
—

 
61,547

 
1
 
2,148

 
100.0

 
 
100.0

 
 
 
5 Triangle Drive
 
32,120

 
—

 
—

 
32,120

 
1
 
479

 
54.2

 
 
54.2

 
 
 
6101 Quadrangle Drive
 
30,122

 
—

 
—

 
30,122

 
1
 
539

 
100.0

 
 
100.0

 
 
 
Research Triangle Park
 
1,043,726

 
—

 
175,000

 
1,218,726

 
16
 
26,097

 
96.8

 
 
82.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Canada
 
256,967

 
—

 
—

 
256,967

 
3
 
6,824

 
99.6

 
 
99.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-cluster markets
 
268,689

 
—

 
—

 
268,689

 
6
 
5,455

 
78.9

 
 
78.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total – North America
 
20,756,155

 
1,791,088

 
518,846

 
23,066,089

 
222
 
$
949,018

 
96.6
%
 
 
94.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
29

 
 
 
q118logo2.jpg
Disciplined Management of Ground-Up Developments
March 31, 2018
 
 


    q118prelease.jpg

(1)
Represents development commencements since January 1, 2008, comprised of 27 projects aggregating 6.9 million RSF.
(2)
Represents annualized rental revenue on ground-up developments commenced since January 1, 2008, from investment-grade rated tenants and/or tenants with market capitalization or private valuation greater than $10 billion as of 1Q18. See “Definitions and Reconciliations” in our Supplemental Information for additional information
(3)
Represents developments commenced and delivered since January 1, 2008, comprising 22 projects aggregating 5.2 million RSF.

 
30

 
 
Investments in Real Estate
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 


 
 
Investments in Real Estate
 
Square Feet
 
 
 
Consolidated
 
Unconsolidated(1)
 
Total
 
 
 
 
 
 
 
 
 
Investments in real estate:
 
 
 
 
 
 
 
 
Rental properties
 
$
11,468,444

 
20,293,451

 
462,704

 
20,756,155

 
 
 
 
 
 
 
 
 
New Class A development and redevelopment properties:
 
 
 
 
 
 
 
 
2018 deliveries undergoing construction
 
172,956

 
534,506

 
—

 
534,506

 
 
 
 
2019 deliveries:
 
 
 
 
 
 
 
 
Undergoing construction
 
235,120

 
602,489

 
1,172,939

 
1,775,428

 
 
 
 
Undergoing pre-construction
 
45,946

 
331,971

 
—

 
331,971

 
 
 
 
2019 deliveries
 
 
 
934,460

 
1,172,939

 
2,107,399

 
 
 
 
 
 
 
 
 
 
 
 
 
2020 deliveries undergoing pre-construction
 
178,090

 
908,000

 
—

 
908,000

 
 
 
 
New Class A development and redevelopment properties undergoing construction and pre-construction
 
632,112

 
2,376,966

 
1,172,939

 
3,549,905

 
 
 
 
 
 
 
 
 
Intermediate-term and future development projects:
 
 
 
 
 
 
 
 
Intermediate-term development projects
 
412,265

 
3,615,317

 
—

 
3,615,317

Future development projects
 
96,813

 
2,873,081

 
—

 
2,873,081

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

 
(554,441
)
 
—

 
(554,441
)
Intermediate-term and future development projects
 
 
 
5,933,957

 
—

 
5,933,957

 
 
 
 
 
 
 
 
 
Gross investments in real estate
 
12,609,634

 
28,604,374

 
1,635,643

 
30,240,017

 
 
 
 
 
 
 
 
 
Less: accumulated depreciation
 
(1,969,084
)
 
 
 
 
 
 
Net investments in real estate – North America
 
10,640,550

 
 
 
 
 
 
Net investments in real estate – Asia
 
30,677

 
 
 
 
 
 
Investments in real estate
 
$
10,671,227

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(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 footnote 1 on page 39.

 
31

 
 
 
 
New Class A Development and Redevelopment Properties: Placed into Service in the Last 12 Months
q118logo2.jpg
 
 
March 31, 2018
 
 
 






100 Binney Street
 
266 and 275 Second Avenue
 
510 Townsend Street
Greater Boston/Cambridge
 
Greater Boston/Route 128
 
San Francisco/Mission Bay/SoMa
432,931 RSF
 
27,315 RSF
 
295,333 RSF
Bristol-Myers Squibb Company
Facebook, Inc.
 
Visterra, Inc.
 
Stripe, Inc.
q118binney100.jpg
 
q118secondave.jpg
 
q118townsend510.jpg
505 Brannan Street, Phase I
 
ARE Spectrum
 
5200 Illumina Way, Parking Structure
 
400 Dexter Avenue North
San Francisco/Mission Bay/SoMa
 
San Diego/Torrey Pines
 
San Diego/University Town Center
 
Seattle/Lake Union
148,146 RSF
 
336,461 RSF
 
N/A
 
290,111 RSF
Pinterest, Inc.
 
The Medicines Company
Celgene Corporation
Wellspring Biosciences LLC
Vertex Pharmaceuticals Incorporated
 
Illumina, Inc.
 
Juno Therapeutics, Inc.
ClubCorp Holdings, Inc.
q118brannanphase1.jpg
 
q118spectrumparking.jpg
 
q118illuminawayb.jpg
 
q118dexter400.jpg

RSF represents the cumulative RSF placed into service in the last 12 months.

 
32

 
 
New Class A Development and Redevelopment Properties: Placed into Service in the Last 12 Months (continued)
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 



Property/Market/Submarket
 
Our Ownership Interest
 
Date Delivered
 
RSF Placed into Service
 
Total Project
 
Unlevered Yields
 
 
 
 
 
 
Initial Stabilized
 
Initial Stabilized Cash Basis
 
 
 
 
Prior to 4/1/17
 
2Q17
 
3Q17
 
4Q17
 
1Q18
 
Total
 
Leased
 
RSF
 
Investment
 
 
 
Consolidated development projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100 Binney Street/Greater Boston/Cambridge
 
100%
 
Various
 
—

 
—

 
341,776

 
—

 
91,155

 
 
432,931

 
100%
 
432,931

 
 
$
436,000

 
 
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
 
134,274

 
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
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated redevelopment project
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266 and 275 Second Avenue/Greater Boston/Route 128
 
100%
 
3/31/18
 
—

 
—

 
—

 
—

 
27,315

 
 
27,315

 
84%
 
203,757

 
 
$
89,000

 
 
8.4
%
 
 
 
7.1
%
 
 
Total
 
 
 
 
 
375,550

 
31,664

 
359,396

 
645,217

 
118,470

 
 
1,530,297

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
33

 
 
 
 
New Class A Development and Redevelopment Properties: 2018 – 2020 Deliveries
q118logo2.jpg
 
 
March 31, 2018
 
 
 


399 Binney Street
 
266 and 275 Second Avenue
 
1655 and 1725 Third Street
 
213 East Grand Avenue
Greater Boston/Cambridge
 
Greater Boston/Route 128
 
San Francisco/Mission Bay/SoMa
 
San Francisco/South San Francisco
164,000 RSF
 
31,858 RSF
 
593,765 RSF
 
300,930 RSF
Rubius Therapeutics, Inc.
Relay Therapeutics, Inc.
Celsius Therapeutics, Inc.
Multi-Tenant/Negotiating
 

Marketing
 
Uber Technologies, Inc.
 
Merck & Co., Inc.
q118binney399.jpg
 
q118secondave.jpg
 
q118gsw.jpg
 
q118grand213.jpg
279 East Grand Avenue
 
201 Haskins Way
 
681 Gateway Boulevard
 
Menlo Gateway
San Francisco/South San Francisco
 
San Francisco/South San Francisco
 
San Francisco/South San Francisco
 
San Francisco/Greater Stanford
211,405 RSF
 
280,000 RSF
 
126,971 RSF
 
520,988 RSF
Verily Life Sciences, LLC
Multi-Tenant/Marketing
 
Multi-Tenant/Marketing
 
Twist Bioscience Corporation
Multi-Tenant/Marketing
 
Facebook, Inc.
q118grand279.jpg
 
q118haskins.jpg
 
q118gateway681.jpg
 
q118menlogateway.jpg

 
34

 
New Class A Development and Redevelopment Properties: 2018 – 2020 Deliveries (continued)
q118logo2.jpg
 
 
March 31, 2018
 
 
 

825 and 835 Industrial Road
 
Alexandria PARC
 
9625 Towne Centre Drive
 
9880 Campus Point Drive
San Francisco/Greater Stanford
 
San Francisco/Greater Stanford
 
San Diego/University Town Center
 
San Diego/University Town Center
530,000 RSF
 
45,115 RSF
 
163,648 RSF
 
98,000 RSF
Multi-Tenant/Marketing
 
Multi-Tenant/Negotiating
 
Takeda Pharmaceutical
Company Ltd.
 
Multi-Tenant/Marketing
 
 

 
1818 Fairview Avenue East
 
9900 Medical Center Drive
 
704 Quince Orchard Road
 
5 Laboratory Drive
Seattle/Lake Union
 
Maryland/Rockville
 
Maryland/Gaithersburg
 
Research Triangle Park/RTP
205,000 RSF
 
45,039 RSF
 
58,186 RSF
 
175,000 RSF
Multi-Tenant/Negotiating
 
Multi-Tenant/Negotiating
 
Multi-Tenant/Marketing
 
ELO Life Systems, Inc.
Boragen, Inc.
Indigo Ag, Inc.
Multi-Tenant/Negotiating
 
 
 

 
35

 
New Class A Development and Redevelopment Properties: 2018 – 2020 Deliveries (continued)
q118logo2.jpg
 
 
March 31, 2018
 
 
 

Property/Market/Submarket
 
Dev/Redev
 
Project RSF
 
Percentage
 
Project
  Start
 
Occupancy(1)
 
 
In Service
 
CIP
 
Total
 
Leased
 
Negotiating
 
Total
 
 
Initial
 
Stabilized
2018 deliveries: consolidated projects under construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266 and 275 Second Avenue/Greater Boston/Route 128
 
Redev
 
171,899

 
31,858

 
203,757

 
84
%
 
 
—
%
 
 
84
%
 
3Q17
 
1Q18
 
2018
5 Laboratory Drive/Research Triangle Park/RTP
 
Redev
 
—

 
175,000

 
175,000

 
34

 
 
6

 
 
40

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

 
163,648

 
163,648

 
100

 
 
—

 
 
100

 
3Q15
 
4Q18
 
2018
399 Binney Street/Greater Boston/Cambridge
 
Dev
 
—

 
164,000

 
164,000

 
75

 
 
14

 
 
89

 
4Q17
 
4Q18
 
2019
2018 deliveries undergoing construction
 
 
 
171,899

 
534,506

 
706,405

 
73
%
 
 
5
%
 
 
78
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries: consolidated projects under construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
213 East Grand Avenue/San Francisco/South San Francisco
 
Dev
 
—

 
300,930

 
300,930

 
100
%
 
 
—
%
 
 
100
%
 
2Q17
 
1Q19
 
2019
9900 Medical Center Drive/Maryland/Rockville
 
Redev
 
—

 
45,039

 
45,039

 
—

 
 
58

 
 
58

 
3Q17
 
1Q19
 
2019
Alexandria PARC/San Francisco/Greater Stanford
 
Redev
 
152,383

 
45,115

 
197,498

 
77

 
 
23

 
 
100

 
1Q18
 
2Q19
 
2019
279 East Grand Avenue/San Francisco/South San Francisco
 
Dev
 
—

 
211,405

 
211,405

 
49

 
 
—

 
 
49

 
4Q17
 
2019
 
2020
 
 
 
 
152,383

 
602,489

 
754,872

 
74

 
 
9

 
 
83

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries: unconsolidated joint venture projects under construction(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
704 Quince Orchard Road/Maryland/Gaithersburg
 
Redev
 
21,745

 
58,186

 
79,931

 
27

 
 
6

 
 
33

 
1Q18
 
1Q19
 
2020
Menlo Gateway/San Francisco/Greater Stanford
 
Dev
 
251,995

 
520,988

 
772,983

 
100

 
 
—

 
 
100

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

 
593,765

 
593,765

 
100

 
 
—

 
 
100

 
1Q18
 
4Q19
 
2019
 
 
 
 
273,740

 
1,172,939

 
1,446,679

 
96

 
 
—

 
 
96

 
 
 
 
 
 
Total development and redevelopment projects undergoing construction
 
 
 
598,022

 
2,309,934

 
2,907,956

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries: consolidated projects under pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
681 Gateway Boulevard/San Francisco/South San Francisco(3)
 
Redev
 
—

 
126,971

 
126,971

 
48

(3) 
 
—

 
 
48

 
4Q18
 
2019
 
TBD
1818 Fairview Avenue East/Seattle/Lake Union
 
Dev
 
—

 
205,000

 
205,000

 
—

 
 
26

(4) 
 
26

 
TBD
 
2019
 
TBD
 
 
 
 
—

 
331,971

 
331,971

 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries undergoing construction and pre-construction
 
 
 
426,123

 
2,107,399

 
2,533,522

 
79
%
 
 
5
%
 
 
84
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2020 deliveries: consolidated projects under pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
825 and 835 Industrial Road/San Francisco/Greater Stanford
 
Dev
 
—

 
530,000
 
530,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
201 Haskins Way/San Francisco/South San Francisco
 
Dev
 
—

 
280,000
 
280,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9880 Campus Point Drive/San Diego/University Town Center
 
Dev
 
—

 
98,000
 
98,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2020 deliveries undergoing pre-construction
 
 
 
—

 
908,000
 
908,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
598,022

 
3,549,905
 
4,147,927
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(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 42 of this Supplemental Information for additional information.
(3)
The building is 100% occupied through the end of 3Q18, after which we expect to redevelop the building from office to office/laboratory space and expand it by an additional 15,000 RSF to 30,000 RSF. We have executed a lease for 60,963 RSF, or 48% of the existing building RSF.
(4)
Represents an executed letter of intent with a high-quality public biotechnology tenant for 52,874 RSF, including an option to expand into 27,874 RSF.

 
36

New Class A Development and Redevelopment Properties: 2018 – 2020 Deliveries (continued)
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 


 
 
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)
 
 
 
 
 
 
 
 
2018 deliveries: consolidated projects under construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266 and 275 Second Avenue/Greater Boston/Route 128
 
100
%
 
 
$
72,713

 
$
9,336

 
$
—

 
$
6,951

 
 
$
89,000

 
 
8.4%
 
 
 
7.1%
 
5 Laboratory Drive/Research Triangle Park/RTP
 
100
%
 
 
—

 
18,926

 
 
—

 
 
43,574

 
 
 
62,500

 
 
7.7%
 
 
 
7.6%
 
9625 Towne Centre Drive/San Diego/University Town Center(1)
 
54.7
%
 
 
—

 
45,758

 
 
—

 
 
47,242

 
 
 
93,000

 
 
7.0%
 
 
 
7.0%
 
399 Binney Street/Greater Boston/Cambridge
 
100
%
 
 
—

 
98,936

 
 
—

 
 
75,064

 
 
 
174,000

 
 
7.3%
 
 
 
6.7%
 
2018 deliveries undergoing construction
 
 
 
 
72,713

 
172,956

 
 
—

 
 
172,831

 
 
 
418,500

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries: consolidated projects under construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
213 East Grand Avenue/San Francisco/South San Francisco
 
100
%
 
 
—

 
136,977

 
 
—

 
 
123,023

 
 
 
260,000

 
 
7.2%
 
 
 
6.4%
 
9900 Medical Center Drive/Maryland/Rockville
 
100
%
 
 
—

 
8,040

 
 
—

 
 
6,260

 
 
 
14,300

 
 
8.4%
 
 
 
8.4%
 
Alexandria PARC/San Francisco/Greater Stanford
 
100
%
 
 
97,550

 
29,216

 
 
—

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

 
60,887

 
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
97,550

 
235,120

 
 
—

 
 
TBD

 
 
 
TBD

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries: unconsolidated joint venture projects under construction(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Amounts represent our share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
704 Quince Orchard Road/Maryland/Gaithersburg
 
56.8
%
 
 
1,393

 
3,085

 
 
7,938

 
 
TBD
 
Menlo Gateway/San Francisco/Greater Stanford
 
25.2
%
 
 
64,880

 
58,782

 
 
117,398

 
 
188,940

 
 
 
430,000

 
 
6.9%
 
 
 
6.3%
 
1655 and 1725 Third Street/San Francisco/Mission Bay/SoMa
 
10
%
 
 
—

 
36,060

 
 
33,280

 
 
8,660

 
 
 
78,000

 
 
7.8%
 
 
 
6.0%
 
 
 
 
 
 
66,273

 
97,927

 
 
158,616

 
 
TBD

 
 
 
TBD

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries: consolidated projects under pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
681 Gateway Boulevard/San Francisco/South San Francisco
 
100
%
 
 
—

 
—

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

 
45,946

 
 
 
 
 
 
 
—

 
45,946

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 deliveries undergoing construction and pre-construction
 
 
 
 
163,823

 
378,993

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2020 deliveries: consolidated projects under pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
825 and 835 Industrial Road/San Francisco/Greater Stanford
 
100
%
 
 
—

 
94,075

 
TBD
 
201 Haskins Way/San Francisco/South San Francisco
 
100
%
 
 
—

 
40,883

 
 
9880 Campus Point Drive/San Diego/University Town Center
 
100
%
 
 
—

 
43,132

 
 
2020 deliveries undergoing pre-construction
 
 
 
 
—

 
178,090

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
$
236,536

 
$
730,039

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(1)
See page 42 of this Supplemental Information for additional information.

 
37

 
 
New Class A Development and Redevelopment Properties: Intermediate-Term Development Projects
q118logo2.jpg
March 31, 2018
 
 



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
 
 
 
 

 
38

 
 
New Class A Development and Redevelopment Properties: Summary of Pipeline
q118logo2.jpg
March 31, 2018
(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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266 and 275 Second Avenue/Route 128
 
 
100
%
 
 
 
$
9,336

 
 
31,858

 
—

 
 
—

 
 
—

 
 
31,858

 
399 Binney Street (Alexandria Center® at One Kendall Square)
 
 
100
%
 
 
 
98,936

 
 
164,000

 
—

 
 
—

 
 
—

 
 
164,000

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
325 Binney Street/Cambridge
 
 
100
%
 
 
 
89,637

 
 
—

 
—

 
 
208,965

 
 
—

 
 
208,965

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

 
 
—

 
—

 
 
—

 
 
100,000

 
 
100,000

 
Other future projects
 
 
100
%
 
 
 
7,612

 
 
—

 
—

 
 
—

 
 
405,599

 
 
405,599

 
 
 
 
 
 
 
 
213,308

 
 
195,858

 
—

 
 
208,965

 
 
505,599

 
 
910,422

 
San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
213 East Grand Avenue/South San Francisco
 
 
100
%
 
 
 
136,977

 
 
300,930

 
—

 
 
—

 
 
—

 
 
300,930

 
279 East Grand Avenue/South San Francisco
 
 
100
%
 
 
 
60,887

 
 
211,405

 
—

 
 
—

 
 
—

 
 
211,405

 
1655 and 1725 Third Street/Mission Bay/SoMa
 
 
10
%
 
 
 
—

(2) 
 
593,765

 
—

 
 
—

 
 
—

 
 
593,765

 
Menlo Gateway/Greater Stanford
 
 
25.2
%
 
 
 
—

(2) 
 
520,988

 
—

 
 
—

 
 
—

 
 
520,988

 
Alexandria PARC/Greater Stanford
 
 
100
%
 
 
 
29,216

 
 
45,115

 
—

 
 
—

 
 
—

 
 
45,115

 
Near-term projects undergoing marketing and pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
825 and 835 Industrial Road/Greater Stanford
 
 
100
%
 
 
 
94,075

 
 
—

 
530,000

 
 
—

 
 
—

 
 
530,000

 
201 Haskins Way/South San Francisco
 
 
100
%
 
 
 
40,883

 
 
—

 
280,000

 
 
—

 
 
—

 
 
280,000

 
681 Gateway Boulevard/South San Francisco(3)
 
 
100
%
 
 
 
—

 
 
—

 
126,971

 
 
—

 
 
—

 
 
126,971

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
88 Bluxome Street/Mission Bay/SoMa
 
 
100
%
 
 
 
164,966

 
 
—

 
—

 
 
1,070,925

(1)
 
—

 
 
1,070,925

 
505 Brannan Street, Phase II/Mission Bay/SoMa
 
 
99.7
%
 
 
 
15,879

 
 
—

 
—

 
 
165,000

 
 
—

 
 
165,000

 
960 Industrial Road/Greater Stanford
 
 
100
%
 
 
 
70,636

 
 
—

 
—

 
 
500,000

(1)
 
—

 
 
500,000

 
Future development
 
 
 
 
 
 


 
 

 
 
 
 

 
 

 
 

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

 
 
—

 
—

 
 
—

 
 
90,000

 
 
90,000

 
Other future projects
 
 
100
%
 
 
 
356

 
 
—

 
—

 
 
—

 
 
95,620

 
 
95,620

 
 
 
 
 
 
 
 
619,863

 
 
1,672,203

 
936,971

 
 
1,735,925

 
 
185,620

 
 
4,530,719

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

 
 
—

 
—

 
 
420,000

 
 
—

 
 
420,000

 
 
 
 
 
 
 
 
$
—

 
 
—

 
—

 
 
420,000

 
 
—

 
 
420,000

 
(1)    Represents total square footage upon completion of development of a new Class A property. RSF presented includes RSF of a building currently in operation that will be demolished upon commencement of construction.
(2)    This property is an unconsolidated real estate joint venture. See our share of the investment in real estate on page 42 of this Supplemental Information.
(3)    See page 36 of this Supplemental Information for additional information on our near-term redevelopment opportunity at this property.

 
39

 
 
New Class A Development and Redevelopment Properties: Summary of Pipeline (continued)
q118logo2.jpg
March 31, 2018
(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
 
 
54.7
%
 
 
 
$
45,758

 
 
163,648

 
—

 
 
—

 
 
—

 
 
163,648

 
Near-term projects undergoing marketing and pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9880 Campus Point Drive/University Town Center
 
 
100
%
 
 
 
43,132

 
 
—

 
98,000

 
 
—

 
 
—

 
 
98,000

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5200 Illumina Way/University Town Center
 
 
100
%
 
 
 
11,814

 
 
—

 
—

 
 
386,044

 
 
—

 
 
386,044

 
Campus Point Drive/University Town Center
 
 
55
%
 
 
 
15,216

 
 
—

 
—

 
 
318,383

 
 
—

 
 
318,383

 
Future development
 
 
 
 
 
 


 
 

 
 
 
 

 
 

 
 

 
Vista Wateridge/Sorrento Mesa
 
 
100
%
 
 
 
4,021

 
 
—

 
—

 
 
—

 
 
163,000

 
 
163,000

 
Other future projects
 
 
100
%
 
 
 
30,717

 
 
—

 
—

 
 
—

 
 
309,895

 
 
309,895

 
 
 
 
 
 
 
 
150,658

 
 
163,648

 
98,000

 
 
704,427

 
 
472,895

 
 
1,438,970

 
Seattle
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Near-term projects undergoing marketing and pre-construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1818 Fairview Avenue East/Lake Union
 
 
100
%
 
 
 
45,946

 
 
—

 
205,000

 
 
—

 
 
—

 
 
205,000

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1150 Eastlake Avenue East/Lake Union
 
 
100
%
 
 
 
19,704

 
 
—

 
—

 
 
260,000

 
 
—

 
 
260,000

 
1165/1166 Eastlake Avenue East/Lake Union
 
 
100
%
 
 
 
15,612

 
 
—

 
—

 
 
106,000

 
—

—

 
 
106,000

 
 
 
 
 
 
 
 
81,262

 
 
—

 
205,000

 
 
366,000

 
 
—

 
 
571,000

 
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9900 Medical Center Drive/Rockville
 
 
100
%
 
 
 
8,040

 
 
45,039

 
—

 
 
—

 
 
—

 
 
45,039

 
704 Quince Orchard Road/Gaithersburg
 
 
56.8
%
 
 
 
—

(2) 
 
58,186

 
—

 
 
—

 
 
—

 
 
58,186

 
Intermediate-term development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9800 Medical Center Drive/Rockville
 
 
100
%
 
 
 
8,801

 
 
—

 
—

 
 
180,000

 
 
—

 
 
180,000

 
Future development
 
 
 
 
 
 


 
 

 
 
 
 

 
 

 
 

 
Other future projects
 
 
100
%
 
 
 
4,034

 
 
—

 
—

 
 
—

 
 
61,000

 
 
61,000

 
 
 
 
 
 
 
 
20,875

 
 
103,225

 
—

 
 
180,000

 

61,000

 
 
344,225

 
Research Triangle Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undergoing construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 Laboratory Drive/Research Triangle Park
 
 
100
%
 
 
 
18,926

 
 
175,000

 
—

 
 
—

 
 
—

 
 
175,000

 
Future development
 
 
 
 
 
 


 
 

 
 
 
 

 
 

 
 

 
6 Davis Drive/Research Triangle Park
 
 
100
%
 
 
 
16,773

 
 
—

 
—

 
 
—

 
 
1,000,000

 
 
1,000,000

 
Other future projects
 
 
100
%
 
 
 
4,149

 
 
—

 
—

 
 
—

 
 
76,262

 
 
76,262

 
 
 
 
 
 
 
 
39,848

 
 
175,000

 
—

 
 
—

 
 
1,076,262

 
 
1,251,262

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

 
 
—

 
—

 
 
—

 
 
571,705

 
 
571,705

 
 
 
 
 
 
 
 
$
1,141,190

 
 
2,309,934

 
1,239,971

 
 
3,615,317

 
 
2,873,081

 
 
10,038,303

 

(1)
Represents total square footage upon completion of development of a new Class A property. RSF presented includes RSF of a building currently in operation that will be demolished upon commencement of construction.
(2)
This property is an unconsolidated real estate joint venture. See our share of the investment in real estate is on page 42 of our Supplemental Information.

 
40

 
 
Construction Spending
q118logo2.jpg
March 31, 2018
(Dollars in thousands, except per RSF amounts)
 
 



Construction Spending
 
Three Months Ended March 31, 2018
 
Additions to real estate – consolidated projects
 
$
206,404
 
 
Investments in unconsolidated real estate joint ventures
 
 
22,325
 
 
Construction spending (cash basis)(1)
 
 
228,729
 
 
Increase in accrued construction
 
 
19,565
 
 
Construction spending
 
$
248,294
 
 



 
 
 
 
 
 
Projected Construction Spending
 
Year Ending
December 31, 2018
 
Development and redevelopment projects
 
$
632,000
 
 
Investments in unconsolidated real estate joint ventures
 
 
110,000
 
 
Contributions from noncontrolling interests (consolidated real estate joint ventures)
 
 
(28,000
)
 
Generic laboratory infrastructure/building improvement projects
 
 
117,000
 
(2) 
Non-revenue-enhancing capital expenditures and tenant improvements
 
 
20,000
 
 
Projected construction spending for nine months ending December 31, 2018
 
 
851,000
 
 
Actual construction spending for three months ended March 31, 2018
 
 
248,294
 
 
Guidance range
 
$
1,050,000
–
$1,150,000
 
 
 
 
 
 
 
 
Non-Revenue-Enhancing Capital Expenditures(3)
 
Three Months Ended
March 31, 2018
 
Recent Average
per RSF(4)
 
 
Amount
 
Per RSF
 
 
Non-revenue-enhancing capital expenditures
 
$
2,625

 
$
0.13

 
 
$
0.51

 
 
 
 
 
 
 
 
 
 
Tenant improvements and leasing costs:
 
 
 
 
 
 
 
 
Re-tenanted space
 
$
2,753

 
$
20.98

 
 
$
19.30

 
Renewal space
 
83

 
0.81

(5) 
 
11.16

 
Total tenant improvements and leasing costs/weighted average
 
$
2,836

 
$
12.09

 
 
$
13.99

 


 


(1)
Includes revenue-enhancing projects and non-revenue-enhancing capital expenditures.
(2)
Includes $10 million to $15 million of projected construction spending in 2018, related to the 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, and 1Q18.
(5)
Decrease from prior year primarily related to lower volume of leasing on spaces renewed during 1Q18. We expect tenant improvement and leasing costs incurred during 2018 to be consistent with prior year.

 
41

 
 
Joint Venture Financial Information
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 


Consolidated Real Estate Joint Ventures
(controlled by us through contractual rights or majority voting rights)
 
Unconsolidated Real Estate Joint Ventures
(controlled jointly or by our JV partners through contractual rights or majority voting rights)
Property/Market/Submarket
 
Noncontrolling
Interest Share(1)
 
Property/Market/Submarket
 
Our Ownership Share
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
%
 
 
1655 and 1725 Third Street/San Francisco/Mission Bay/SoMa
 
 
10.0
%
 
1500 Owens Street/San Francisco/Mission Bay/SoMa
 
 
49.9
%
 
 
Menlo Gateway/San Francisco/Greater Stanford
 
 
25.2
%
(2) 
Campus Pointe by Alexandria/San Diego/University Town Center
 
 
45.0
%
 
 
1401/1413 Research Boulevard/Maryland/Rockville
 
 
65.0
%
(3) 
9625 Towne Centre Drive/San Diego/University Town Center
 
 
45.3
%
(4) 
 
704 Quince Orchard Road/Maryland/Gaithersburg
 
 
56.8
%
(3) 

 
 
March 31, 2018
 
 
Noncontrolling Interest Share of Consolidated Real Estate JVs
 
Our Share of Unconsolidated
Real Estate JVs
Investments in real estate
$
509,536

 
 
$
225,240

 
Cash and cash equivalents
 
21,373

 
 
 
4,193

 
Restricted cash
 
—

 
 
 
1,139

 
Other assets
 
33,229

 
 
 
20,029

 
Secured notes payable (see page 47)
 
—

 
 
 
(68,194
)
 
Other liabilities
 
(25,388
)
 
 
 
(12,542
)
 
Redeemable noncontrolling interests
 
(10,212
)
 
 
 
—

 
 
$
528,538

 
 
$
169,865

 
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2018
 
Noncontrolling Interest Share of Consolidated Real Estate JVs
 
Our Share of Unconsolidated
Real Estate JVs
Total revenues
$
13,491

 
 
$
2,461

 
Rental operations
 
(3,903
)
 
 
 
(416
)
 
 
 
9,588

 
 
 
2,045

 
General and administrative
 
(47
)
 
 
 
(25
)
 
Interest
 
—

 
 
 
(232
)
 
Depreciation and amortization
 
(3,867
)
 
 
 
(644
)
 
 
$
5,674

 
 
$
1,144

 


(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)
As of 1Q18, we have an ownership interest in Menlo Gateway of 25.2% and expect our ownership to increase to 49% through future funding of construction costs by 1Q19.
(3)
Represents our ownership interest; our voting interest is limited to 50%.
(4)
As of 1Q18, our partner’s ownership interest is 45.3% and is expected to increase to 49.9% by the end of 2Q18 through additional capital contributions to fund construction.

 
42

 
 
Investments
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 


Adoption of new accounting standard on financial instruments

On January 1, 2018, we adopted a new accounting standard which requires us, on a prospective basis, to present our equity investments at fair value whenever fair value is readily available or observable. In 1Q18, we recognized within earnings approximately $72 million of unrealized gains from changes in fair value of investments in publicly traded companies and investments in privately held entities without readily determinable fair values. See “Definitions and Reconciliations” on page 50 for information related to our adoption of this new accounting standard.
 
 
 
 
 
 
 
Public/Private Mix (Cost)
 
Tenant/Non-Tenant Mix (Cost)
 
272
 
 
 
 
Holdings
 
 
 
 
$1.9M
 
 
 
 
 
 
Average Investment
Cost
 
 
1Q18 Investment Income
 
As of March 31, 2018
 
Cost
 
Unrealized Gains
 
Total
 
Publicly traded companies
 
$
67,801

 
 
$
95,870

 
 
$
163,671

 
 
Privately held entities without readily determinable fair values:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Entities that report NAV
 
159,231

 
 
106,235

(2) 
 
265,466

 
 
Entities that do not report NAV:
 
 
 
 
 
 
 
 
 
 
Entities with observable price changes since 1/1/18
 
23,491

 
 
11,043

(3) 
 
34,534

 
 
Entities without observable price changes since 1/1/18
 
260,639

 
 
—

 
 
260,639

 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
511,162

 
 
$
213,148

 
 
$
724,310

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
 
Cost
 
Unrealized Gains
 
Total
 
Publicly traded companies
 
$
59,740

 
 
$
49,771

 
 
$
109,511

 
 
Privately held entities without readily determinable fair values:
 
 
 
 
 
 
 
 
 
 
Entities that report NAV
 
148,627

 
 
N/A

 
 
148,627

 
 
Entities that do not report NAV
 
265,116

 
 
N/A

 
 
265,116

 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
473,483

 
 
$
49,771

 
 
$
523,254

 

(1)
Includes an $8.3 million gain related to one publicly traded non-real estate investment in a life science entity.
(2)
Represents fair value adjustments (using reported NAV per share as a practical expedient to fair value) for our limited partnership investments. See definition for “Investments” on page 50 for additional information on NAV as a practical expedient.
(3)
Represents fair value adjustments for seven private investments that had observable price changes during 1Q18. See definition for “Investments” on page 50 for additional information on observable price changes.

 
43

 
 
 
q118logo2.jpg
Key Credit Metrics
March 31, 2018
 
 


Net Debt to Adjusted EBITDA(1)
 
Net Debt and Preferred Stock to Adjusted EBITDA(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-Charge Coverage Ratio(1)
 
Liquidity(2)
 
 
 
 
 
 
$2.3B
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in millions)
 
 
 
Availability under our $1.65 billion unsecured senior line of credit
$
1,160

 
 
Outstanding forward equity sales agreements
714

 
 
Cash, cash equivalents, and restricted cash
259

 
 
Investments in publicly traded companies
163

 
 
Remaining construction loan commitments
19

 
 
 
$
2,315

 
 
 
 
 
(1)
Quarter annualized.    
(2)
As of 1Q18.

 
44

 
 
 
q118logo2.jpg
Summary of Debt
March 31, 2018
 
 


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 sources and uses guidance on page 5 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
$
444,228

 
$
331,461

 
$
775,689

 
14.9
%
 
4.08
%
 
3.0
Unsecured senior notes payable
3,396,912

 
—

 
3,396,912

 
65.2

 
4.06

 
6.6
$1.65 billion unsecured senior line of credit
50,000

 
440,000

 
490,000

 
9.4

 
2.53

 
3.6
2019 Unsecured Senior Bank Term Loan
199,622

 
—

 
199,622

 
3.8

 
2.77

 
0.8
2021 Unsecured Senior Bank Term Loan
348,575

 
—

 
348,575

 
6.7

 
2.56

 
2.8
Total/weighted average
$
4,439,337

 
$
771,461

 
$
5,210,798

 
100.0
%
 
3.77
%
 
5.3
Percentage of total debt
85
%
 
15
%
(2)
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.
(2)
Our key credit metrics guidance assumes the reduction of our unhedged variable-rate debt to 5% in by 4Q18.

 
45

 
 
Summary of Debt (continued)
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 


Debt
 
Stated 
Rate
 
Interest
Rate(1)
 
Maturity
Date(2)
 
Principal Payments Remaining for the Periods Ending December 31,
 
Principal
 
Unamortized (Deferred Financing Cost), (Discount)/Premium
 
Total
 
 
 
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
 
 
Secured notes payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater Boston
 
L+1.50
%
 
 
3.36
%
 
1/28/19
(3) 
 
$
—

 
$
331,461

 
$
—

 
$
—

 
$
—

 
$
—

 
$
331,461

 
$
(998
)
 
$
330,463

Greater Boston, San Diego, Seattle, and Maryland
 
7.75
%
 
 
8.12

 
4/1/20
 
 
1,499

 
2,138

 
104,352

 
—

 
—

 
—

 
107,989

 
(668
)
 
107,321

San Diego
 
4.66
%
 
 
4.90

 
1/1/23
 
 
1,078

 
1,686

 
1,762

 
1,852

 
1,942

 
26,259

 
34,579

 
(313
)
 
34,266

Greater Boston
 
3.93
%
 
 
3.19

 
3/10/23
 
 
1,091

 
1,505

 
1,566

 
1,628

 
1,693

 
74,517

 
82,000

 
2,697

 
84,697

Greater Boston
 
4.82
%
 
 
3.39

 
2/6/24
 
 
2,178

 
3,078

 
3,204

 
3,392

 
3,561

 
187,281

 
202,694

 
15,475

 
218,169

San Francisco
 
6.50
%
 
 
6.67

 
7/1/36
 
 
22

 
23

 
25

 
26

 
28

 
649

 
773

 
—

 
773

Secured debt weighted-average interest rate/subtotal
 
4.51
%
 
 
4.08

 
 
 
 
5,868

 
339,891

 
110,909

 
6,898

 
7,224

 
288,706

 
759,496

 
16,193

 
775,689

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019 Unsecured Senior Bank Term Loan
 
L+1.20
%
 
 
2.77

 
1/3/19
 
 
—

 
200,000

 
—

 
—

 
—

 
—

 
200,000

 
(378
)
 
199,622

2021 Unsecured Senior Bank Term Loan
 
L+1.10
%
 
 
2.56

 
1/15/21
 
 
—

 
—

 
—

 
350,000

 
—

 
—

 
350,000

 
(1,425
)
 
348,575

$1.65 billion unsecured senior line of credit
 
L+1.00
%
 
 
2.53

 
10/29/21
 
 
—

 
—

 
—

 
490,000

 
—

 
—

 
490,000

 
—

 
490,000

Unsecured senior notes payable
 
2.75
%
 
 
2.96

 
1/15/20
 
 
—

 
—

 
400,000

 
—

 
—

 
—

 
400,000

 
(1,432
)
 
398,568

Unsecured senior notes payable
 
4.60
%
 
 
4.74

 
4/1/22
 
 
—

 
—

 
—

 
—

 
550,000

 
—

 
550,000

 
(2,600
)
 
547,400

Unsecured senior notes payable
 
3.90
%
 
 
4.04

 
6/15/23
 
 
—

 
—

 
—

 
—

 
—

 
500,000

 
500,000

 
(3,091
)
 
496,909

Unsecured senior notes payable
 
3.45
%
 
 
3.63

 
4/30/25
 
 
—

 
—

 
—

 
—

 
—

 
600,000

 
600,000

 
(6,167
)
 
593,833

Unsecured senior notes payable
 
4.30
%
 
 
4.51

 
1/15/26
 
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(3,765
)
 
296,235

Unsecured senior notes payable
 
3.95
%
 
 
4.14

 
1/15/27
 
 
—

 
—

 
—

 
—

 
—

 
350,000

 
350,000

 
(4,398
)
 
345,602

Unsecured senior notes payable
 
3.95
%
 
 
4.09

 
1/15/28
 
 
—

 
—

 
—

 
—

 
—

 
425,000

 
425,000

 
(4,128
)
 
420,872

Unsecured senior notes payable
 
4.50
%
 
 
4.61

 
7/30/29
 
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(2,507
)
 
297,493

Unsecured debt weighted average/subtotal
 
 
 
 
3.72

 
 
 
 
—

 
200,000

 
400,000

 
840,000

 
550,000

 
2,475,000

 
4,465,000

 
(29,891
)
 
4,435,109

Weighted-average interest rate/total
 
 
 
 
3.77
%
 
 
 
 
$
5,868

 
$
539,891

 
$
510,909

 
$
846,898

 
$
557,224

 
$
2,763,706

 
$
5,224,496

 
$
(13,698
)
 
$
5,210,798

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balloon payments
 
 
 
 
 
 
 
 
 
$
—

 
$
531,461

 
$
503,979

 
$
840,000

 
$
550,000

 
$
2,758,724

 
$
5,184,164

 
$
—

 
$
5,184,164

Principal amortization
 
 
 
 
 
 
 
 
 
5,868

 
8,430

 
6,930

 
6,898

 
7,224

 
4,982

 
40,332

 
(13,698
)
 
26,634

Total debt
 
 
 
 
 
 
 
 
 
$
5,868

 
$
539,891

 
$
510,909

 
$
846,898

 
$
557,224

 
$
2,763,706

 
$
5,224,496

 
$
(13,698
)
 
$
5,210,798

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-rate/hedged variable-rate debt
 
 
 
 
 
 
 
 
 
$
5,868

 
$
208,430

 
$
510,909

 
$
406,898

 
$
557,224

 
$
2,763,706

 
$
4,453,035

 
$
(13,698
)
 
$
4,439,337

Unhedged variable-rate debt
 
 
 
 
 
 
 
 
 
—

 
331,461

 
—

 
440,000

 
—

 
—

 
771,461

 
—

 
771,461

Total debt
 
 
 
 
 
 
 
 
 
$
5,868

 
$
539,891

 
$
510,909

 
$
846,898

 
$
557,224

 
$
2,763,706

 
$
5,224,496

 
$
(13,698
)
 
$
5,210,798

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(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 1Q18, the aggregate remaining commitments were $18.5 million.


 
46

 
 
Summary of Debt (continued)
q118logo2.jpg
March 31, 2018
(Dollars in thousands)
 
 


Unconsolidated real estate joint ventures’ debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100% at JV Level
 
Unconsolidated Joint Venture
 
Our Share
 
Initial
Maturity Date
 
Extension Option Maturity Date(1)
 
Stated
Interest Rate(2)
 
Interest Rate(2)(3)
 
Debt Balance(4)
 
Remaining Commitments
 
360 Longwood Avenue
 
 
27.5
%
 
 
9/1/22
 
9/1/24
 
3.32%
 
 
3.61
%
 
 
$
94,091

 
$
17,000

(5) 
1655 and 1725 Third Street
 
 
10.0
%
 
 
6/29/21
 
6/29/24
 
L+3.70%
 
 
4.82
%
 
 
42,197

 
332,803

 
Menlo Gateway, Phase I
 
 
25.2
%
(6) 
 
3/1/19
 
3/3/20
 
L+2.50%
 
 
4.11
%
 
 
124,382

 
23,454

 
1401/1413 Research Boulevard
 
 
65.0
%
 
 
5/17/20
 
7/1/20
 
L+2.50%
 
 
5.11
%
 
 
9,784

 
14,733

 
704 Quince Orchard Road
 
 
56.8
%
 
 
3/16/23
 
N/A
 
L+1.95%
 
 
4.26
%
 
 
836

 
13,979

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
271,290

 
$
401,969

 
Loan closed in April 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Menlo Gateway, Phase II
 
 
25.2
%
(6) 
 
5/1/35
 
N/A
 
4.53%
 
 
N/A
 
 
$
—

 
$
157,270

 

(1)
Reflects extension options that exist, which may be subject to certain conditions.
(2)
For acquired loans, interest rate includes adjustments to reflect our effective borrowing costs at the time of acquisition.
(3)
Represents interest rate, including interest expense and amortization of loan fees and discount/premium as of 1Q18.
(4)
Represents outstanding principal, net of unamortized deferred financing costs and discount/premium.
(5)
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.
(6)
See page 42 of this Supplemental Information 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
 
March 31, 2018
 
Requirement
 
March 31, 2018
Total Debt to Total Assets
 
≤ 60%
 
36%
 
≤ 60.0%
 
29.6%
Secured Debt to Total Assets
 
≤ 40%
 
5%
 
≤ 45.0%
 
4.4%
Consolidated EBITDA to Interest Expense
 
≥ 1.5x
 
5.7x
 
≥ 1.50x
 
4.07x
Unencumbered Total Asset Value to Unsecured Debt
 
≥ 150%
 
266%
 
N/A
 
N/A
Unsecured Leverage Ratio
 
N/A
 
N/A
 
≤ 60.0%
 
32.7%
Unsecured Interest Coverage Ratio
 
N/A
 
N/A
 
≥ 1.50x
 
6.70x

(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 3/31/18
 
Notional Amount in Effect as of
 
 
 
 
 
3/31/18
 
12/31/18
 
12/31/19
March 29, 2018
 
March 31, 2019
 
8
 
1.16%
 
$
5,813

 
 
$
600,000

 
$
600,000

 
$
—

March 29, 2019
 
March 31, 2020
 
1
 
1.89%
 
 
648


 
—

 
—

 
100,000

Total
 
 
 
 
 
 
 
$
6,461

 
 
$
600,000

 
$
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 1Q18, as listed under the column heading “Stated Rate” in our summary table of outstanding indebtedness and respective principal payments on the previous page.

 
47

 
 
 
q118logo2.jpg
Definitions and Reconciliations
March 31, 2018
 
 



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)
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Net income
$
141,518

 
$
45,607

 
$
59,546

 
$
41,496

 
$
47,555

Interest expense
36,915

 
36,082

 
31,031

 
31,748

 
29,784

Income taxes
940

 
1,398

 
1,305

 
1,333

 
767

Depreciation and amortization
114,219

 
107,714

 
107,788

 
104,098

 
97,183

Stock compensation expense
7,248

 
6,961

 
7,893

 
5,504

 
5,252

Loss on early extinguishment of debt
—

 
2,781

 
—

 
—

 
670

Gain on sales of real estate – rental properties
—

 
—

 
—

 
—

 
(270
)
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
)
 
—

Unrealized gain on non-real estate investments
(72,229
)
 
—

 
—

 
—

 
—

Impairment of real estate and non-real estate investments
—

 
3,805

 
—

 
4,694

 
—

Adjusted EBITDA
$
228,611

 
$
204,348

 
$
193,457

 
$
188,762

 
$
180,941

 
 
 
 
 
 
 
 
 
 
Revenues, as adjusted(1)
$
333,471

 
$
302,596

(2) 
$
285,370

 
$
277,550

(2) 
$
270,877

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA margins
69%

 
68%

 
68%

 
68%

 
67%


(1)
Revenues, as adjusted, includes realized gains or losses on non-real estate investments. We use revenues, as adjusted, in our calculation of Adjusted EBITDA margin. We believe using revenues, as adjusted, provides a more accurate Adjusted EBITDA margin calculation.
(2)
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 comparability of the Adjusted EBITDA margins from period to period.
    
We use Adjusted EBITDA as a supplemental performance measure of our 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 land parcels, unrealized gains or losses on non-real estate investments, and impairments.
 

We believe Adjusted EBITDA provides investors with relevant and useful information, as it allows investors to evaluate our operating performance without having to account for differences recognized because of real estate investment and disposition decisions, financing decisions, capital structure, capital market transactions, and variances resulting from the volatility of market conditions outside of our control. For example, we exclude gains or losses on the early extinguishment of debt to allow investors to measure our performance independent of our capital structure and indebtedness. 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 real estate investment and disposition decisions. We believe that excluding charges related to share-based compensation and unrealized gains or losses on non-real estate investments facilitates a comparison of our operations across periods without the variances caused by the volatility of the amounts (which depends on market forces outside our control). Adjusted EBITDA has limitations as a measure of our performance. Adjusted EBITDA does not reflect our historical cash expenditures or future cash requirements for capital expenditures or contractual commitments. While Adjusted EBITDA is a relevant measure of performance, it does not represent net income or cash flows from operations calculated and presented in accordance with GAAP, and it should not be considered as an alternative to those indicators in evaluating performance or liquidity.

Annual rental revenue

Annual rental revenue represents the annualized fixed base rental amount, in effect as of the end of the period, related to our operating RSF. 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 March 31, 2018, approximately 97% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Annual rental revenue excludes these operating expenses recovered from our tenants. Amounts recovered from our tenants related to these operating expenses are classified in tenant recoveries in our consolidated statements of 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.


 
48

 
 
 
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Definitions and Reconciliations (continued)
March 31, 2018
 
 


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

Development, redevelopment, and pre-construction

A key component of our business model is our disciplined allocation of capital to the development and redevelopment of new Class A properties located in 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)
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Adjusted EBITDA
$
228,611

 
$
204,348

 
$
193,457

 
$
188,762

 
$
180,941

 
 
 
 
 
 
 
 
 
 
Interest expense
$
36,915

 
$
36,082

 
$
31,031

 
$
31,748

 
$
29,784

Capitalized interest
13,360

 
12,897

 
17,092

 
15,069

 
13,164

Amortization of loan fees
(2,543
)
 
(2,571
)
 
(2,840
)
 
(2,843
)
 
(2,895
)
Amortization of debt premiums
575

 
639

 
652

 
625

 
596

Cash interest
48,307

 
47,047

 
45,935

 
44,599

 
40,649

Dividends on preferred stock
1,302

 
1,302

 
1,302

 
1,278

 
3,784

Fixed charges
$
49,609

 
$
48,349

 
$
47,237

 
$
45,877

 
$
44,433

 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio:
 
 
 
 
 
 
 
 
 
– quarter annualized
4.6x

 
4.2x

 
4.1x

 
4.1x

 
4.1x

– trailing 12 months
4.3x

 
4.1x

 
4.0x

 
3.9x

 
3.8x

 
 
 
 
 
 
 
 
 
 

 
49

 
 
 
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Definitions and Reconciliations (continued)
March 31, 2018
 
 


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

GAAP-basis accounting for real estate assets utilizes historical cost accounting and assumes that real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Nareit Board of Governors established funds from operations as an improved measurement tool. Since its introduction, funds from operations has become a widely used non-GAAP financial measure among equity REITs. We believe that funds from operations is helpful to investors as an additional measure of the performance of an equity REIT. Moreover, we believe that funds from operations, as adjusted, allows investors to compare our performance to the performance of other real estate companies on a consistent basis, without having to account for differences recognized because of real estate investment and disposition decisions, financing decisions, capital structure, capital market transactions, and variances resulting from the volatility of market conditions outside of our control. We compute funds from operations in accordance with standards established by the Nareit Board of Governors in its April 2002 White Paper and related implementation guidance (the “Nareit White Paper”). The Nareit White Paper defines funds from operations as net income (computed in accordance with GAAP), excluding gains (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. The definition of funds from operations in the Nareit White Paper does not include adjustments related to unrealized gains and losses on non-real estate investments, which are affected by market conditions outside of our control. Consequently, unrealized gains and losses on non-real estate investments recognized in earnings, affects our reported funds from operations as computed in accordance with the Nareit White Paper.

We compute funds from operations, as adjusted, as funds from operations calculated in accordance with the Nareit White Paper excluding significant realized gains or losses on the sale of non-real estate investments, unrealized gains or losses on non-real estate investments, 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.
 
Investments

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

Key differences between prior accounting standards and the new ASU:

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

Effective January 1, 2018
•
Investments in publicly traded companies are reflected at fair value in the balance sheet, with changes in fair value recognized in net income.
•
Investments in privately held entities without readily determinable fair values previously accounted for under the cost method are accounted for as follows:
•
Investments in privately held entities that report NAV are reflected at fair value using NAV as a practical expedient, with changes in fair value recognized in net income.
•
Investments in privately held entities that do not report NAV are carried at cost, adjusted for observable price changes and impairments, with changes recognized in net income.
•
One time adjustments recognized on January 1, 2018:
•
For investments in publicly traded companies, reclassification of cumulative unrealized gains and losses as of December 31, 2017, aggregating $49.8 million, from accumulated other comprehensive income to retained earnings.
•
For investments in privately held entities without readily determinable fair values that were previously accounted for under the cost method:
•
Adjustment of cumulative unrealized gains for investments in privately held entities that report NAV, representing the difference between fair values as of December 31, 2017, using NAV as a practical expedient, and the carrying value of the investments as of December 31, 2017, previously accounted for under the cost method, aggregating $90.8 million, with a corresponding adjustment to retained earnings.
•
No adjustment was required for investments in privately held entities that do not report NAV. The ASU requires a prospective transition approach for investments in privately held entities that do not report NAV. The FASB clarified that it would be difficult for entities to determine the last observable transaction price existing prior to the adoption of this ASU. Therefore, unlike our investments in privately held entities that report NAV that were adjusted to reflect fair values upon adoption of the new ASU, our investments in privately held entities that do not report NAV were not retrospectively adjusted to fair values upon adoption. As such, any initial valuation adjustments made for investments in privately held entities that do not report NAV subsequent to January 1, 2018 as a result of future observable price changes will include recognition of

 
50

 
 
 
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Definitions and Reconciliations (continued)
March 31, 2018
 
 


cumulative unrealized gains or losses equal to the difference between the carrying basis of the investment and the observable price at the date of measurement.
•
Investments in privately held entities will continue to require accounting under the equity method unless our interest in the entity was deemed to be so minor that we had virtually no influence over the entity’s operating and financial policies. Under the equity method of accounting, we recognize our investment initially at cost and adjust the carrying amount of the investment to recognize our share of the earnings or losses of the investee subsequent to the date of our investment. We had no investments accounted for under the equity method as of March 31, 2018.

Changes in fair value for investments in publicly traded companies and investments in privately held entities that report NAV, and observable price changes for investments in privately held entities that do not report NAV, are recognized as unrealized gains or losses and classified as investment income in our consolidated statements of income.

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 or private valuation greater than $10 billion as of March 31, 2018.

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

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

Joint venture financial information
    
We present components of balance sheet and operating results information related to our joint ventures, which are not 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.

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.


 
51

 
 
 
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Definitions and Reconciliations (continued)
March 31, 2018
 
 


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

Net debt to Adjusted EBITDA and net debt and preferred stock to Adjusted EBITDA are non-GAAP financial measures that we believe are useful to investors as supplemental measures in evaluating our balance sheet leverage. Net debt is equal to the sum of total consolidated debt less cash, cash equivalents, and restricted cash. Net debt and preferred stock is equal to the sum of net debt, as discussed above, plus preferred stock outstanding as of 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)
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Secured notes payable
 
$
775,689

 
$
771,061

 
$
1,153,890

 
$
1,127,348

 
$
1,083,758

Unsecured senior notes payable
 
3,396,912

 
3,395,804

 
2,801,290

 
2,800,398

 
2,799,508

Unsecured senior line of credit
 
490,000

 
50,000

 
314,000

 
300,000

 
—

Unsecured senior bank term loans
 
548,197

 
547,942

 
547,860

 
547,639

 
547,420

Unamortized deferred financing costs
 
27,438

 
29,051

 
27,803

 
29,710

 
31,616

Cash and cash equivalents
 
(221,645
)
 
(254,381
)
 
(118,562
)
 
(124,877
)
 
(151,209
)
Restricted cash
 
(37,337
)
 
(22,805
)
 
(27,713
)
 
(20,002
)
 
(18,320
)
Net debt
 
$
4,979,254

 
$
4,516,672

 
$
4,698,568

 
$
4,660,216

 
$
4,292,773

 
 
 
 
 
 
 
 
 
 
 
Net debt
 
$
4,979,254

 
$
4,516,672

 
$
4,698,568

 
$
4,660,216

 
$
4,292,773

7.00% Series D convertible preferred stock
 
74,386

 
74,386

 
74,386

 
74,386

 
74,386

Net debt and preferred stock
 
$
5,053,640

 
$
4,591,058

 
$
4,772,954

 
$
4,734,602

 
$
4,367,159

 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
$
914,444

 
$
817,392

 
$
773,828

 
$
755,048

 
$
723,764

– trailing 12 months
 
$
815,178

 
$
767,508

 
$
728,869

 
$
689,079

 
$
650,579

Net debt to Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
5.4
x
 
5.5
x
 
6.1
x
 
6.2
x
 
5.9
x
– trailing 12 months
 
6.1
x
 
5.9
x
 
6.4
x
 
6.8
x
 
6.6
x
Net debt and preferred stock to Adjusted EBITDA:
 
 
 
 
 
 
 
 
– quarter annualized
 
5.5
x
 
5.6
x
 
6.2
x
 
6.3
x
 
6.0
x
– trailing 12 months
 
6.2
x
 
6.0
x
 
6.5
x
 
6.9
x
 
6.7
x
 

Net operating income and operating margin

The following table reconciles net income to net operating income:
 
 
Three Months Ended
 
(Dollars in thousands)
 
3/31/18
 
3/31/17
 
Net income
 
$
141,518

 
$
47,555

 
 
 
 
 
 
 
Equity in earnings of unconsolidated real estate joint ventures
 
(1,144
)
 
(361
)
 
General and administrative expenses
 
22,421

 
19,229

 
Interest expense
 
36,915

 
29,784

 
Depreciation and amortization
 
114,219

 
97,183

 
Loss on early extinguishment of debt
 
—

 
670

 
Gain on sales of real estate – rental properties
 
—

 
(270
)
 
Investment income
 
(85,561
)
 
—

 
Net operating income
 
$
228,368

 
$
193,790

 
 
 
 
 
 
 
Revenues
 
$
320,139

 
$
270,877

 
 
 
 
 
 
 
Operating margin
 
71%
 
72%
 

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, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and investment income. 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 straight-line rent revenue and the amortization of acquired above- and below-market leases.

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

 
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Definitions and Reconciliations (continued)
March 31, 2018
 
 


operating expenses. Impairments of real estate relate to changes in the values of our assets and do not reflect the current operating performance with respect to related revenues or expenses. Our impairments of real estate represent the write-down in the value of the assets to the estimated fair value less cost to sell. These impairments result from investing decisions and deterioration in market conditions. We also exclude realized and unrealized investment income calculated under a new ASU effective 1/1/18, which results from investment decisions that occur at the corporate level related to non-real estate investments in publicly traded companies and certain privately held entities. Therefore, we do not consider these activities to be an indication of operating performance of our real estate assets at the property level. Our calculation of net operating income also excludes charges incurred from changes in certain financing decisions, such as 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 based on 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

 
399 Binney Street
 
1

 
279 East Grand Avenue
 
1

 
Menlo Gateway
(unconsolidated real estate JV)
 
3

 
1655 and 1725 Third Street
(unconsolidated real estate JV)
 
2

 
 
 
8

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

 
510 Townsend Street
 
1

 
ARE Spectrum
 
3

 
400 Dexter Avenue North
 
1

 
100 Binney Street
 
1

 
 
 
7

 
 
 
 
 
Redevelopment – under construction
 
Properties
 
9625 Towne Centre Drive
 
1

 
5 Laboratory Drive
 
1

 
9900 Medical Center Drive
 
1

 
266 and 275 Second Avenue
 
2

 
Alexandria PARC
 
4

 
704 Quince Orchard Road
(unconsolidated real estate JV)

 
1

 
 
 
10

 
 
 
 
 
Acquisitions after January 1, 2017
 
Properties
 
88 Bluxome Street
 
1

 
960 Industrial Road
 
1

 
1450 Page Mill Road
 
1

 
701 Gateway Boulevard
 
1

 
4110 Campus Point Court
 
1

 
Summers Ridge Science Park
 
4

 
 
 
9

 
Total properties excluded from same properties
 
34

 
Same properties
 
188

(1) 
Total properties in North America as of March 31, 2018
 
222

 
 
 
(1)
Includes 9880 Campus Point Drive, a building that was occupied through January 2018 and is currently undergoing demolition as we expect to develop a 98,000 RSF Class A office/laboratory property.

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 and common stock multiplied by the related closing price of each class of security at the end of each period presented.

Total market capitalization

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

 
53

 
 
 
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Definitions and Reconciliations (continued)
March 31, 2018
 
 


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)
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Unencumbered net operating income
$
198,599

 
$
181,719

 
$
164,291

 
$
158,072

 
$
157,391

Encumbered net operating income
29,769

 
28,999

 
37,610

 
38,007

 
36,399

Total net operating income
$
228,368

 
$
210,718

 
$
201,901

 
$
196,079

 
$
193,790

Unencumbered net operating income as a percentage of total net operating income
87%

 
86%

 
81%

 
81%

 
81%


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
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Weighted-average interest rate for capitalization of interest
3.91%
 
3.89%
 
3.96%
 
3.98%
 
3.95%

 
Weighted-average shares of common stock outstanding – diluted

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

We also consider the effect of assumed conversions of our outstanding 7.00% Series D cumulative convertible preferred stock (“Series D Convertible Preferred Stock”) when determining potentially dilutive incremental shares to our common stock. Under the assumed conversion, we add back to net income dividends paid on our Series D Convertible Preferred Stock to the numerator and then include additional common shares assumed to have been issued to the denominator of the per share calculation. On January 1, 2018, we adopted an ASU that requires changes in the fair value of our non-real estate investments to be recognized in net income. Upon adoption of the ASU, we recognized a large unrealized gain in our investment income. As a result of the significant amount of unrealized gain recognized during 1Q18, our Series D Convertible Preferred Stock had a dilutive effect on funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, computed in accordance with the definition in the Nareit White Paper.

The weighted-average shares of common stock outstanding – diluted during each period include the following shares related to our forward equity sales agreements and Series D cumulative convertible preferred incremental dilutive common stock:
 
Three Months Ended
(In thousands)
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Potential additional shares upon settlement/ conversion:
 
 
 
 
 
 
 
 
 
Outstanding forward equity sales agreements
6,056

 
4,755

 
4,755

 
4,755

 
4,755

7.00% Series D Convertible Preferred Stock
2,975

 
2,975

 
2,975

 
2,975

 
2,975

 
 
 
 
 
 
 
 
 
 
Incremental dilutive common shares:
 
 
 
 
 
 
 
 
 
Outstanding forward equity sales agreements
270

 
776

 
698

 
530

 
53

Earnings per share – diluted and funds from operations, as adjusted – diluted
270

 
776

 
698

 
530

 
53

 
 
 
 
 
 
 
 
 
 
7.00% Series D Convertible Preferred Stock
741

 
—

 
—

 
—

 
—

Funds from operations – diluted
1,011

 
776

 
698

 
530

 
53


 
54