PASADENA, Calif., April 29, 2019 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE:ARE) announced financial and operating results for the first quarter ended March 31, 2019.
25th anniversary: an important milestone in company history
In January 2019, we celebrated the 25th anniversary of our founding. Since our initial launch in January 1994 as a garage startup with a unique, strategic business plan, $19 million in Series A capital, and a vision to create a new kind of real estate company focused on serving the life science industry, we have grown into an investment-grade rated S&P 500® company with a total market capitalization of $21.8 billion. From our initial public offering in May 1997 through March 31, 2019, we have generated a total shareholder return of 1,542%, assuming reinvestment of dividends.
A REIT industry-leading, high-quality tenant roster
50% of annual rental revenue from investment-grade or publicly traded large cap tenants.
Continuation of strong rental rate growth
Strong rental rate increases (cash basis) of 24.3% for 1Q19 represents our highest quarterly cash rental rate increase over the past 10 years.
Credit rating improvement
In February 2019, S&P Global Ratings raised our corporate issuer credit rating to BBB+/Stable from BBB/Positive. The rating upgrade reflects our consistently strong operating performance and continued successful delivery of our value-creation pipeline.
Sale of partial interest in core Class A property
In February 2019, we sold a 60% interest in 75/125 Binney Street, a Class A property in our Cambridge submarket, for a sales price of $438 million, or $1,880 per RSF, representing a 4.3% capitalization rate on 4Q18 net operating income (cash basis), annualized. We retained control over, and continue to consolidate, the new joint venture. We accounted for the $202.2 million difference between the consideration received and the book value of the 60% interest sold as an equity transaction with no gain recognized in earnings.
Anchor lease with Pinterest, Inc. at 88 Bluxome Street
In March 2019, we leased 488,899 RSF to Pinterest, Inc. at 88 Bluxome Street in our Mission Bay/SoMa submarket. The lease with Pinterest, Inc. brings pre-leasing of the 1.1 million RSF future development project to 58%.
Increased common stock dividend
Common stock dividend declared for 1Q19 of $0.97 per common share, up seven cents, or 7.8%, over 1Q18; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.
Strong internal growth
- Net operating income (cash basis) of $892.9 million for 1Q19 annualized, up $134.6 million, or 17.8%, compared to 1Q18 annualized
- Same property net operating income growth:
- 2.3% and 10.2% (cash basis) for 1Q19, compared to 1Q18
- Continued strong leasing activity and rental rate growth in light of modest contractual lease expirations at the beginning of 2019 and a highly leased value-creation pipeline:
Future growth of net operating income (cash basis) driven by recently delivered projects
Significant near-term growth of net operating income (cash basis) of $65 million upon the burn-off of initial free rent on recently delivered projects.
Strong external growth; disciplined allocation of capital to visible, highly leased value-creation pipeline
Since the beginning of 4Q18, we have placed into service 1.0 million RSF of development and redevelopment projects, including the following projects during 1Q19:
- 1Q19 commencements of development projects aggregating 356,904 RSF, including:
- 174,640 RSF at 9800 Medical Center Drive in our Rockville submarket, which is 79% leased to REGENXBIO, Inc.;
- 98,000 RSF at 9880 Campus Point Drive in our University Town Center submarket; and
- 84,264 RSF at 9950 Medical Center Drive in our Rockville submarket, which is 100% leased to Autolus Therapeutics PLC.
During 1Q19, we acquired 10 properties for an aggregate purchase price of $383.0 million in key submarkets. These acquisitions consisted of:
- Future development opportunities aggregating 175,000 RSF in our Seaport Innovation District submarket, along with 129,084 RSF of operating properties with future development and redevelopment opportunities; and
- 247,770 RSF of operating properties strategically located in our Greater Stanford and Mission Bay/SoMa submarkets.
Key items included in operating results
Core operating metrics as of or for the quarter ended March 31, 2019
High-quality revenues and cash flows and operational excellence
Refer to the previous page for information on our total revenues, net operating income, same property net operating income growth, leasing activity, and rental rate growth.
Balance sheet management
Key metrics as of March 31, 2019
- $15.9 billion of total equity capitalization
- $21.8 billion of total market capitalization
- $2.7 billion of liquidity
- No unhedged variable-rate debt
- 95% of unencumbered net operating income as a percentage of total net operating income
Key capital events
- During 1Q19, we successfully increased our weighted-average remaining term of debt outstanding to over seven years, as a result of the following:
- In March 2019, we completed an offering of $850.0 million of unsecured senior notes for net proceeds of $846.1 million. The unsecured senior notes consisted of:
- $300.0 million of 4.85% unsecured senior notes due 2049.
- $350.0 million of 3.80% unsecured senior notes due 2026. The net proceeds were used to repay a secured note payable related to 50/60 Binney Street, a recently completed Class A property, which was awarded LEED® Gold certification, and the remaining proceeds will be allocated to fund recently completed and future eligible green projects.
- $200.0 million of our 4.00% unsecured senior notes payable due 2024 issued at a yield to maturity of 3.453%, and are part of the same series that was originally issued in 2018. The net proceeds will also be used to fund recently completed and future eligible green projects
- In March 2019, we repaid the remaining $193.1 million balance of our secured construction loan related to 50/60 Binney Street and recognized a loss on early extinguishment of debt of $269 thousand.
- In January 2019, we repaid early one secured note payable aggregating $106.7 million, which was due in 2020 and bore interest at 7.75%, and recognized a loss on early extinguishment of debt of $7.1 million, including the write-off of unamortized loan fees.
- During 1Q19, we repurchased, in privately negotiated transactions, 275,000 shares of our 7.00% Series D cumulative convertible preferred stock for $9.2 million, or $33.60 per share, and recognized a preferred stock redemption charge of $2.6 million. As of 1Q19, 2.3 million shares of our 7.00% Series D cumulative convertible preferred stock were outstanding at a book value aggregating $57.5 million.
- During the first quarter of 2019 and through April 29, 2019, there was no sale activity under our "at the market" common stock offering programs. As of April 29, 2019, the remaining aggregate amount available under our current programs for future sales of common stock is $658.7 million.
We carry our investments in publicly traded companies and certain privately held entities at fair value. As of March 31, 2019, cumulative unrealized gains related to changes in fair value aggregated $312.4 million and our adjusted cost basis aggregated $688.5 million. Investment income recognized in 1Q19 included the following:
- Unrealized gains of $72.2 million; and
- Realized gains of $11.4 million.
Corporate responsibility and industry leadership
- In February 2019, it was announced that we are working with Verily Life Sciences, LLC, Alphabet's life science division, to build a tech-focused rehabilitation campus in Dayton, Ohio, for the full and sustained recovery of people living with opioid addiction. The campus will provide a comprehensive model of care that will include a behavioral health treatment center, rehabilitation housing, and wrap-around services, and will act as a state of the art model for opioid addiction treatment nationwide.
- In February 2019, we were recognized by the Center for Active Design, which operates Fitwel®, as the inaugural Industry Leading Company in Fitwel's 2018 Best in Building Health. We were selected based on our 3-Star Fitwel certification (the highest rating possible); our leadership in promoting and educating the real estate industry on the opportunities for and benefits of building design, construction, and operational practices that support high levels of occupant health and wellness; and our #1 global ranking in the 2018 GRESB Health & Well-Being Module.
- In March 2019, Alexandria LaunchLabs® – Cambridge, located at the Alexandria Center® at One Kendall Square in Greater Boston, achieved LEED gold certification and a Fitwel 3-Star certification.
- In April 2019, we entered into an agreement to extend the maturity date of our unsecured senior bank term loan to January 2, 2025. We expect that the extension will become effective in June 2019, upon the satisfaction of certain conditions.
- In April 2019, we announced the launch of a new strategic agricultural technology (agtech) business initiative with the opening of the Alexandria Center® for AgTech – Research Triangle, the first state of the art, fully integrated, multi-tenant, amenity-rich agtech R&D and greenhouse campus. The campus opens with a 97% leased first phase, a 175,000 RSF redevelopment, at 5 Laboratory Drive, in the heart of Research Triangle, the most important, dense, and diverse agtech cluster in the United States.
Earnings Call Information and About the Company
March 31, 2019
We will host a conference call on Tuesday, April 30, 2019, at 3:00 p.m. Eastern Time ("ET")/noon Pacific Time ("PT"), which is open to the general public to discuss our financial and operating results for the first quarter ended March 31, 2019. To participate in this conference call, dial (833) 366-1125 or (412) 902-6738 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the call for Alexandria Real Estate Equities, Inc. The audio webcast can be accessed at www.are.com in the "For Investors" section. A replay of the call will be available for a limited time from 5:00 p.m. ET/2:00 p.m. PT on Tuesday, April 30, 2019. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 10128833.
Additionally, a copy of this Earnings Press Release and Supplemental Information for the first quarter ended March 31, 2019, is available in the "For Investors" section of our website at www.are.com or by following this link: http://www.are.com/fs/2019q1.pdf .
For any questions, please contact Joel S. Marcus, executive chairman and founder; Stephen A. Richardson, co-chief executive officer; Peter M. Moglia, co-chief executive officer and co-chief investment officer; Dean A. Shigenaga, co-president and chief financial officer; or Sara M. Kabakoff, assistant vice president – corporate communications, at (626) 578-0777.
About the Company
Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® company, is an urban office real estate investment trust ("REIT") uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $21.8 billion and an asset base in North America of 33.7 million square feet ("SF") as of March 31, 2019. The asset base in North America includes 23.2 million RSF of operating properties and 4.4 million RSF of new Class A properties currently undergoing construction or pre-construction, consisting of 2.1 million RSF of development and redevelopment projects under construction, and 2.3 million RSF undergoing pre-construction activities. Additionally, the asset base in North America includes 6.1 million SF of intermediate-term and future development projects. Founded in 1994, Alexandria pioneered this niche and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science and technology campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science and technology companies through our venture capital arm. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com .
This document includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2019 earnings per share attributable to Alexandria's common stockholders – diluted, 2019 funds from operations per share attributable to Alexandria's common stockholders – diluted, net operating income, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as "forecast," "guidance," "goals," "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.
Alexandria®, Lighthouse Design® logo, Building the Future of Life-Changing Innovation™, LaunchLabs®, Alexandria Center®, Alexandria Technology Square®, Alexandria Summit®, Alexandria Technology Center®, Alexandria Innovation Center®, and GradLabs™ are trademarks of Alexandria Real Estate Equities, Inc. All other company names, trademarks, and logos referenced herein are the property of their respective owners.
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