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

Key highlights

Increased common stock dividend

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

Leader in the Light award

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

Strong internal growth

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

 



4Q17


2017

Total leasing activity – RSF


1,379,699


4,569,182

Lease renewals and re-leasing of space:





Rental rate increases



24.8%



25.1%

Rental rate increases (cash basis)



10.4%



12.7%

RSF (included in total leasing activity above)



593,622



2,525,099

 

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

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

  • Development projects, 100% leased, and placed into service in 4Q17:

Property


Submarket


RSF



Tenant

510 Townsend Street


Mission Bay/SoMa


295,333




Stripe, Inc.

ARE Spectrum


Torrey Pines


170,523




Vertex Pharmaceuticals Inc.

505 Brannan Street


Mission Bay/SoMa


148,146




Pinterest, Inc.

400 Dexter Avenue North


Lake Union


25,518




Juno Therapeutics, Inc.

 

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

Completed strategic acquisitions

Opportunistic acquisitions completed or under contract:

  • In 4Q17, acquired five properties in three transactions for an aggregate purchase price of $146.4 million, including the Menlo Gateway joint venture:
    • Menlo Gateway real estate joint venture in our Greater Stanford submarket closed in November 2017:
      • 772,983 RSF Class A office space, including 520,988 RSF of ground-up development, 100% leased to Facebook, Inc.; and
      • 21% interest as of 4Q17, increasing to 49% interest by 1Q19.
  • As of January 2018, we have closed and pending acquisitions aggregating $375.5 million in key submarkets with value-add operating, redevelopment, and future development opportunities.

 

Operating results

4Q17


4Q16


Change


2017


2016


Change

Net income (loss) attributable to Alexandria's common stockholders – diluted:

In millions

$


36.8


$


(25.1)



N/A


$


145.4


$


(151.1)



N/A

Per share

$


0.38


$


(0.31)



N/A


$


1.58


$


(1.99)



N/A













Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted:

In millions

$


147.0


$


115.5



27.2%


$


554.5


$


421.3



31.6%

Per share

$


1.53


$


1.42



7.7%


$


6.02


$


5.51



9.3%

 


 

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


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

(amounts are shown after deducting any amounts attributable to noncontrolling interests):

(In millions, except per share amounts)

Amount


Per Share –
Diluted


Amount


Per Share –
Diluted

4Q17


4Q16


4Q17


4Q16


2017


2016


2017


2016

Gain on sales of:
















Real estate

$


—


$


 

3.7


$


—


$


0.05


$


14.5


$


3.8


$


0.15


$


0.05

Non-real estate investments


—



—



—



—



—



4.4



—



0.06

Impairment of:
















Rental properties


—



(3.5)



—



(0.04)



(0.2)



(98.2)



—



(1.29)

Land parcels


—



(12.5)



—



(0.16)



—



(110.4)



—



(1.45)

Non-real estate investments


(3.8)



—



(0.04)



—



(8.3)



(3.1)



(0.09)



(0.04)

Loss on early extinguishment of debt


(2.8)



—



(0.03)



—



(3.5)



(3.2)



(0.03)



(0.04)

Preferred stock redemption charge


—



(35.7)



—



(0.44)



(11.3)



(61.3)



(0.12)



(0.81)

Total

$


(6.6)


$


(48.0)


$


(0.07)


$


(0.59)


$


(8.8)


$


(268.0)


$


(0.09)


$


(3.52)

Weighted-average shares of common stock outstanding – diluted










95.9



80.8







92.1



76.1

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


Core operating metrics as of 4Q17; high quality revenue and cash flows

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

Balance sheet management

Key metrics


4Q17


Total market capitalization


$

17.9 billion


Liquidity


$

2.0 billion






Net debt to Adjusted EBITDA:




     Quarter annualized


5.5x


     Trailing 12 months


5.9x


Fixed-charge coverage ratio:







     Quarter annualized


4.2x


     Trailing 12 months


4.1x






Unhedged variable-rate debt as a percentage of total debt


1%


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


9%


Key capital events

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

Corporate responsibility and industry leadership 

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

Select 2017 Highlights

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

 

Acquisitions
December 31, 2017
(Dollars in thousands)


4Q17 Acquisitions


Property


Submarket/Market


Date of Purchase


Number of
Properties


Occupancy


Square Footage


Purchase Price







Operating


Development/

Redevelopment












701 Gateway Boulevard(1)


South San Francisco/San Francisco


12/19/17


1


90.6%



170,862


—



$

76,000




Menlo Gateway 
     (unconsolidated JV)(2)


Greater Stanford/San Francisco


11/27/17


3


100%



251,995


520,988



59,936




4110 Campus Point Court
(55% interest)(3)


University Town Center/San Diego


12/28/17


1


100%



44,034


—



10,450















466,891


520,988



$

146,386




 

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


(1)

Office building located within our Alexandria Technology Center® – Gateway campus. The property is 90.6% leased as of December 31, 2017, to multiple tenants with minimal near-term lease expirations, and we expect initial stabilized yields of 7.2% and 6.3% (cash basis) upon lease-up of the existing vacant office space. In addition, the property provides future opportunities to enhance our returns through the conversion of existing office space to office/laboratory space through redevelopment, and development of a new building.

(2)

See page 5 of this Earnings Press Release for additional information on our acquisition in this real estate joint venture.

(3)

Represents a 55% interest in a real estate joint venture with TIAA, which owns a property that expands our Campus Pointe by Alexandria campus. The joint venture leased the existing 44,034 RSF property back to the seller for one year, after which the joint venture may consider options to redevelop the existing property into tech office or office/laboratory space.

 

 

1Q18 Acquisitions under purchase agreement/letter of intent


Property


Submarket/Market


Date of Purchase


Number of
Properties


Anticipated Use


Occupancy


Square Footage


Purchase Price






Operating


Development/

Redevelopment


Future Development











1455 and 1515 Third Street  
     (acquisition of remaining 49% interest)(1)


Mission Bay/SoMa/
San Francisco


N/A


2


Office


100%


 N/A  


—


—





$

37,800




1655 and 1715 Third Street 
     (10% interest in unconsolidated JV)(2)


Mission Bay/SoMa/
San Francisco


February 2018


2


Office


N/A


—


580,000


—





31,000

(2)



2100-2400 Geng Road(3)


Greater Stanford/
San Francisco


1/25/18


4


Office/lab


77%


165,811


31,687


—





136,000




9965-9995 Summers Ridge Road(4)


Sorrento Mesa/
San Diego


1/5/18


4


Office/lab


100%


316,531


—


50,000





148,650




Pending | San Diego




2Q18


—


Office or lab


N/A


—


—


120,000





17,000




Pending | Maryland




March 2018


1


Office/lab


31%


24,846


54,485


—





5,000
















507,188


666,172


170,000





375,450




Additional projected acquisitions




















295,000 - 395,000


2018 Guidance range




















$670,000 - $770,000




(1)

The first installment of $18.9 million related to our November 2016 acquisition was paid in 2Q17, the second installment of $18.9 million was paid in January 2018, and we expect the final installment to be paid during 1H18.

(2)

Represents a 10% interest in a joint venture with Uber and the Golden State Warriors expected to be formed in February 2018. The joint venture is developing two office buildings aggregating 580,000 RSF, adjacent to the Golden State Warriors arena, which are 100% leased to Uber. Our initial equity contribution of $31.0 million will be funded at formation of the joint venture, and the project will transfer from pre-construction to under construction, with initial occupancy expected in 2019.

(3)

Four-building office campus on 11 acres with 14 in-place leases with a weighted-average remaining lease term of three years. We are evaluating options for the conversion of existing office space into office/laboratory space through redevelopment. We expect to provide total estimated costs at completion and related yields in the future.

(4)

A campus, with on-site amenities, consisting of four operating properties aggregating 316,531 RSF. The property also includes a future development opportunity for an additional 50,000 RSF building. The properties are 100% leased as of December 31, 2017, to Quidel Corporation and Abbott Laboratories, for aggregate terms of 15 years. We expect initial stabilized yields of 8.2% and 6.3% (cash basis) with an opportunity to enhance our initial return through future development.

 

Acquisitions (continued): Menlo Gateway

 











































MENLO GATEWAY ACQUISITION  | SAN FRANCISCO | GREATER STANFORD





773,000 RSF | CLOSED NOVEMBER 2017 


Alexandria's Share






100% LEASED TO FACEBOOK, INC. (LONG TERM)




Nov 2017


Dec 2017


At
Completion










Equity
Percentage


18%


21%


49%


251,995 RSF  | Phase I


520,988 RSF | Phase II




6.9% |Cash 6.3%















Equity
Investment


$60M


$76M

(1)

  $282M


100 Independence Drive 


125 and 135 Constitution Drive

Total Project 










Recently completed 



Undergoing development
(Occupancy expected in 4Q19)




Initial Stabilized Yields


Debt


$18M


$23M

(1)

$148M

(2)



























Total Real
Estate
Investment


$78M


$90M


  $430M


(1) Includes our share of investment in real estate joint venture working capital.

(2) The joint venture is in process of obtaining non-recourse construction financing for the development project for Phase II of our Menlo Gateway joint venture.

 

 


Dispositions
December 31, 2017
(Dollars in thousands)


Property/Market/Submarket


Date of Sale


RSF


Net Operating

Income(1)


Net Operating Income

(Cash Basis)(1)


Contractual

Sales Price


Gain




























360 Longwood Avenue/Greater Boston/Longwood Medical Area


7/6/17


203,090



$

4,313



$

4,168



$

65,701




$

14,106




9625 Towne Centre Drive/San Diego/University Town Center 
     (sale of partial interest)(2)


12/19/17


163,648



N/A



N/A




13,470




N/A




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


12/19/17


318,383



N/A



N/A




12,895




N/A




6146 Nancy Ridge Drive/San Diego/Sorrento Mesa


1/6/17


21,940



N/A



N/A




3,000




270




1401/1413 Research Boulevard/Maryland/Rockville(4)


5/17/17


90,000



N/A



N/A




7,937




111




Operating property in China


11/27/17


300,184



$

365



$

392




11,167




—














$

114,170




$

14,487





















 

 

(1)

Represents annualized amounts for the quarter ended prior to the date of sale. Net operating income (cash basis) excludes straight-line rent and amortization of acquired below-market leases.

(2)

In December 2017, we entered into a joint venture agreement to sell to TIAA a 49.9% interest in 9625 Towne Centre Drive, a 163,648 RSF redevelopment project undergoing construction in our University Town Center submarket, which is 100% leased to Takeda Pharmaceutical Company Ltd. We received an initial contribution of $13.5 million from TIAA for a 35.9% initial ownership interest as of December 31, 2017, and expect TIAA's ownership interest to increase to 49.9% by the end of 2Q18 through additional capital contributions to fund construction.

(3)

In connection with the agreement to sell a 45% partial interest in 10290 Campus Point Drive to TIAA in 2016, we also agreed to sell to TIAA a 45% partial interest in the related development rights aggregating 318,383 RSF in our Campus Pointe by Alexandria campus at a sales price of $90 per SF. The sale of the development rights was contingent upon the completion of certain entitlement milestones. Upon completion of the entitlement milestones, we completed the 45% partial interest sale of the related development rights in December 2017.

(4)

Joint venture with a distinguished retail real estate developer for the development of a 90,000 RSF retail shopping center, with remaining construction costs to be funded from a $25.0 million non-recourse secured construction loan.

 

 


Guidance
December 31, 2017
(Dollars in millions, except per share amounts)


The following updated guidance is based on our current view of existing market conditions and assumptions for the year ending December 31, 2018. There can be no assurance that actual amounts will be materially higher or lower than these expectations. See our discussion of "forward-looking statements" on page 8 of this Earnings Press Release.


Earnings per Share and Funds From Operations per Share Attributable to Alexandria's
     Common Stockholders – Diluted


Earnings per share


$2.04 to $2.24

(1)

Depreciation and amortization



4.45



Allocation to unvested restricted stock awards



(0.04)



Funds from operations per share


$6.45 to $6.65

(1)

 

Key Assumptions


Low


High


Occupancy percentage in North America as of December 31, 2018


96.9%


97.5%








Lease renewals and re-leasing of space:






Rental rate increases


13.0%


16.0%


Rental rate increases (cash basis)


7.5%


10.5%


Same property performance:






Net operating income increase


2.5%


4.5%


Net operating income increase (cash basis)


9.0%


11.0%








Straight-line rent revenue


$

92


$

102

(3)

General and administrative expenses


$

85


$

90


Capitalization of interest


$

55


$

65


Interest expense


$

155


$

165








 

Key Credit Metrics


2018 Guidance


Net debt to Adjusted EBITDA – 4Q18 annualized


Less than 5.5x


Net debt and preferred stock to Adjusted EBITDA – 4Q18 annualized


Less than 5.5x


Fixed-charge coverage ratio – 4Q18 annualized


Greater than 4.0x


Value-creation pipeline as a percentage of gross real estate as of
    December 31, 2018


8% to 12%


 

Key Sources and Uses of Capital


Range


Midpoint


Key Completed Items

Sources of capital:











Net cash provided by operating activities after dividends


$

140



$

180



$

160





Incremental debt


470



430




450





Real estate dispositions, partial interest sales, and common 
     equity


1,110



1,310




1,210



$

817

(2)

Total sources of capital


$

1,720



$

1,920



$

1,820





Uses of capital:











Construction


$

1,050



$

1,150




$

1,100





Acquisitions


670



770




720



(4)


Total uses of capital


$

1,720



$

1,920



$

1,820





Incremental debt (included above):











Issuance of unsecured senior notes payable


$

550



$

650




$

600





Repayments of secured notes payable


(10)



(15)




(13)





Repayment of unsecured senior bank term loan


(200)



(200)




(200)





$1.65 billion unsecured senior line of credit/other


130



(5)




63





Incremental debt


$

470



$

430



$

450
























 

(1)

Excludes the impact of changes in fair value for equity investments pursuant to a new accounting standard effective January 1, 2018. For a comprehensive discussion on the new accounting standard update, refer to the "Recent Accounting Pronouncements" section in Note 2 – "Summary of Significant Accounting Policies" in our September 30, 2017, Form 10-Q filed on October 31, 2017, and our 2017 annual report on Form 10-K.

(2)

 

Represents 6.9 million shares of our common stock subject to forward equity sales agreements executed in January 2018, with anticipated aggregate net proceeds of $817.3 million, subject to adjustments as provided in the forward equity sales agreements. The forward equity sales agreements expire no later than April 2019, and we expect to settle these agreements in 2018.

(3)

Approximately 50% of straight-line rent revenue represents initial free rent on recently delivered and expected 2018 deliveries of new Class A properties from our development and redevelopment pipeline.

(4)

See "Acquisitions" on page 4 of this Earnings Press Release.

 

Earnings Call Information and About the Company
December 31, 2017

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

Additionally, a copy of this Earnings Press Release and Supplemental Information for the fourth quarter and year ended December 31, 2017, is available in the "For Investors" section of our website at www.are.com or by following this link: http://www.are.com/fs/2017q4.pdf.

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

About the Company

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office real estate investment trust ("REIT") uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $17.9 billion and an asset base in North America of 29.6 million SF as of December 31, 2017. The asset base in North America includes 22.0 million RSF of operating properties, including 1.7 million RSF of development and redevelopment of new Class A properties currently undergoing construction. Additionally, the asset base in North America includes 7.6 million SF of future development projects, including 1.6 million SF of near-term projects undergoing marketing for lease and pre-construction activities and 3.8 million SF of intermediate-term development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science and technology campuses that provide its innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic risk capital to transformative life science and technology companies through its venture capital arm. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.

***********

This document includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2018 earnings per share attributable to Alexandria's common stockholders – diluted, 2018 funds from operations per share attributable to Alexandria's common stockholders – diluted, net operating income, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as "forecast," "guidance," "projects," "estimates," "anticipates," "believes," "expects," "intends," "may," "plans," "seeks," "should," or "will," or the negative of those words or similar words. These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. There can be no assurance that actual results will not be materially higher or lower than these expectations. These statements are subject to risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully place into service and lease any properties undergoing development or redevelopment and our existing space held for future development or redevelopment (including new properties acquired for that purpose), our failure to successfully operate or lease acquired properties, decreased rental rates, increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, adverse general and local economic conditions, an unfavorable capital market environment, decreased leasing activity or lease renewals, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission ("SEC"). Accordingly, you are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are made as of the date of this Earnings Press Release, and unless otherwise stated, we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.


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




Three Months Ended


Year Ended



12/31/17


9/30/17


6/30/17


3/31/17


12/31/16


12/31/17


12/31/16

Revenues:















Rental


$

228,025



$

216,021



$

211,942



$

207,193



$

187,315



$

863,181



$

673,820


Tenant recoveries


70,270



67,058



60,470



61,346



58,270



259,144



223,655


Other income


496


(1)

2,291



647



2,338



3,577



5,772



24,231


Total revenues


298,791



285,370



273,059



270,877



249,162



1,128,097



921,706

















Expenses:















Rental operations


88,073



83,469



76,980



77,087



73,244



325,609



278,408


General and administrative


18,910



17,636



19,234



19,229



17,458



75,009



63,884


Interest


36,082



31,031



31,748



29,784



31,223



128,645



106,953


Depreciation and amortization


107,714



107,788



104,098



97,183



95,222



416,783



313,390


Impairment of real estate


—



—



203



—



16,024



203



209,261


Loss on early extinguishment of debt


2,781



—



—



670



—



3,451



3,230


Total expenses


253,560



239,924



232,263



223,953



233,171



949,700



975,126

















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


376



14,100



589



361



86



15,426



(184)


Gain on sales of real estate – rental properties


—



—



—



270



3,715



270



3,715


Gain on sales of real estate – land parcels


—



—



111



—



—



111



90


Net income (loss)


45,607



59,546



41,496



47,555



19,792



194,204



(49,799)


Net income attributable to noncontrolling interests


(6,219)



(5,773)



(7,275)



(5,844)



(4,488)



(25,111)



(16,102)


Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s stockholders


39,388



53,773



34,221



41,711



15,304



169,093



(65,901)


Dividends on preferred stock


(1,302)



(1,302)



(1,278)



(3,784)



(3,835)



(7,666)



(20,223)


Preferred stock redemption charge


—



—



—



(11,279)



(35,653)



(11,279)



(61,267)


Net income attributable to unvested restricted stock awards


(1,255)



(1,198)



(1,313)



(987)



(943)



(4,753)



(3,750)


Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s common stockholders


$

36,831



$

51,273



$

31,630



$

25,661



$

(25,127)



$

145,395



$

(151,141)

















Net income (loss) per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders:















Basic


$

0.39



$

0.55



$

0.35



$

0.29



$

(0.31)



$

1.59



$

(1.99)


Diluted


$

0.38



$

0.55



$

0.35



$

0.29



$

(0.31)



$

1.58



$

(1.99)

















Weighted-average shares of common stock outstanding:















Basic


95,138



92,598



90,215



88,147



80,800



91,546



76,103


Diluted


95,914



93,296



90,745



88,200



80,800



92,063



76,103

















Dividends declared per share of common stock


$

0.90



$

0.86



$

0.86



$

0.83



$

0.83



$

3.45



$

3.23



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

 

 


Consolidated Balance Sheets
December 31, 2017
(In thousands)




12/31/17


9/30/17


6/30/17


3/31/17


12/31/16

Assets











Investments in real estate


$

10,298,019



$

10,046,521



$

9,819,413



$

9,470,667



$

9,077,972


Investments in unconsolidated real estate joint ventures


110,618



33,692



58,083



50,457



50,221


Cash and cash equivalents


254,381



118,562



124,877



151,209



125,032


Restricted cash


22,805



27,713



20,002



18,320



16,334


Tenant receivables


10,262



9,899



8,393



9,979



9,744


Deferred rent


434,731



402,353



383,062



364,348



335,974


Deferred leasing costs


221,430



208,265



201,908



202,613



195,937


Investments


523,254



485,262



424,920



394,471



342,477


Other assets


228,453



213,056



205,009



206,562



201,197


Total assets


$

12,103,953



$

11,545,323



$

11,245,667



$

10,868,626



$

10,354,888













Liabilities, Noncontrolling Interests, and Equity











Secured notes payable


$

771,061



$

1,153,890



$

1,127,348



$

1,083,758



$

1,011,292


Unsecured senior notes payable


3,395,804



2,801,290



2,800,398



2,799,508



2,378,262


Unsecured senior line of credit


50,000



314,000



300,000



—



28,000


Unsecured senior bank term loans


547,942



547,860



547,639



547,420



746,471


Accounts payable, accrued expenses, and tenant 
     security deposits


763,832



740,070



734,189



782,637



731,671


Dividends payable


92,145



83,402



81,602



78,976



76,914


Preferred stock redemption liability


—



—



—



130,000



—


Total liabilities


5,620,784



5,640,512



5,591,176



5,422,299



4,972,610













Commitments and contingencies






















Redeemable noncontrolling interests


11,509



11,418



11,410



11,320



11,307













Alexandria Real Estate Equities, Inc.'s stockholders' equity:











7.00% Series D cumulative convertible preferred stock


74,386



74,386



74,386



74,386



86,914


6.45% Series E cumulative redeemable preferred stock


—



—



—



—



130,000


Common stock


998



943



921



899



877


Additional paid-in capital


5,824,258



5,287,777



5,059,180



4,855,686



4,672,650


Accumulated other comprehensive income


50,024



43,864



22,677



21,460



5,355


Alexandria Real Estate Equities, Inc.'s stockholders' equity


5,949,666



5,406,970



5,157,164



4,952,431



4,895,796


Noncontrolling interests


521,994



486,423



485,917



482,576



475,175


Total equity


6,471,660



5,893,393



5,643,081



5,435,007



5,370,971


Total liabilities, noncontrolling interests, and equity


$

12,103,953



$

11,545,323



$

11,245,667



$

10,868,626



$

10,354,888


 


 

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


The following tables present a reconciliation of net income (loss) attributable to Alexandria's common stockholders, the most directly comparable financial measure presented in accordance with generally accepted accounting principles ("GAAP"), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria's common stockholders – diluted, and funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted, and related per share amounts. Amounts allocable to unvested restricted stock awards are not material and are not presented separately within the per share table below. Per share amounts may not add due to rounding.




Three Months Ended


Year Ended



12/31/17


9/30/17


6/30/17


3/31/17


12/31/16


12/31/17


12/31/16

Net income (loss) attributable to Alexandria's common stockholders


$

36,831



$

51,273



$

31,630



$

25,661



$

(25,127)



$

145,395



$

(151,141)


Depreciation and amortization


107,714



107,788



104,098



97,183



95,222



416,783



313,390


Noncontrolling share of depreciation and amortization from consolidated real estate JVs


(3,777)



(3,608)



(3,735)



(3,642)



(2,598)



(14,762)



(9,349)


Our share of depreciation and amortization from unconsolidated real estate JVs


432



383



324



412



655



1,551



2,707


Gain on sales of real estate – rental properties


—



—



—



(270)



(3,715)



(270)



(3,715)


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


—



(14,106)



—



—



—



(14,106)



—


Gain on sales of real estate – land parcels


—



—



(111)



—



—



(111)



(90)


Impairment of real estate – rental properties


—



—



203



—



3,506



203



98,194


Allocation to unvested restricted stock awards


(734)



(957)



(685)



(561)



—



(2,920)



—


Funds from operations attributable to Alexandria's common stockholders – diluted(1)


140,466



140,773



131,724



118,783



67,943



531,763



249,996


Non-real estate investment income


—



—



—



—



—



—



(4,361)


Impairment of land parcels and non-real estate investments


3,805


(2)

—



4,491



—



12,511



8,296



113,539


Loss on early extinguishment of debt


2,781



—



—



670



—



3,451



3,230


Preferred stock redemption charge


—



—



—



11,279



35,653



11,279



61,267


Allocation to unvested restricted stock awards


(94)



—



(58)



(150)



(605)



(321)



(2,356)


Funds from operations attributable to Alexandria's common stockholders –

diluted, as adjusted


$

146,958



$

140,773



$

136,157



$

130,582



$

115,502



$

554,468



$

421,315


Net income (loss) per share attributable to Alexandria's common stockholders


$

0.38



$

0.55



$

0.35



$

0.29



$

(0.31)



$

1.58



$

(1.99)


Depreciation and amortization


1.08



1.11



1.10



1.06



1.15



4.35



4.02


Gain on sales of real estate – rental properties


—



—



—



—



(0.05)



—



(0.05)


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


—



(0.15)



—



—



—



(0.15)



—


Impairment of real estate – rental properties


—



—



—



—



0.05



—



1.29


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


1.46



1.51



1.45



1.35



0.84



5.78



3.27


Non-real estate investment income


—



—



—



—



—



—



(0.06)


Impairment of land parcels and non-real estate investments


0.04



—



0.05



—



0.15



0.09



1.47


Loss on early extinguishment of debt


0.03



—



—



0.01



—



0.03



0.04


Preferred stock redemption charge


—



—



—



0.12



0.43



0.12



0.79


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


$

1.53



$

1.51



$

1.50



$

1.48



$

1.42



$

6.02



$

5.51

















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


95,914



93,296



90,745



88,200



81,280



92,063



76,412


 

 

 

(1)

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

(2)

Related to one publicly traded non-real estate investment.

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/alexandria-real-estate-equities-inc-reports-fourth-quarter-and-year-ended-december-31-2017-financial-and-operating-results-strong-internal-and-external-growth-and-significant-strategic-acquisitions-and-growing-dividends-300589663.html

SOURCE Alexandria Real Estate Equities, Inc.