ALEXANDRIA REAL ESTATE EQUITIES INC
For the period ended Sep 30, 2024. Filed Oct 21, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 21, 2024
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-22.
0001035443-24-000225
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-21.
0001035443-24-000298
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 1273 previous paragraphs and 1364 current paragraphs.
724 unchanged; 356 reworded; 257 added; 171 removed; 22 previous and 27 current paragraphs rearranged.
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A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (257)
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Continued operational excellence and solid results amid challenging macroeconomics environment
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•Significant liquidity of $5.4 billion.
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•Since 2020, an average of 97.7% of our debt has been fixed rate.
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previous four-quarter average of 1.0 million RSF.
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•Rental rate changes on lease renewals and re-leasing of space were 5.1% and 1.5% (cash basis) for thethree months ended
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September 30, 2024 and 16.4% and 8.9% (cash basis) for thenine months ended September 30, 2024.
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(1)Includes a five-year lease extension to an investment-grade rated technology tenant aggregating 357,136 RSF of recently acquired tech R&D space in our
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Texas market that was renewed with rental rate changes of(33.6)% and(4.8)% (cash basis). These spaces were originally targeted for a future change in
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use at acquisition, but we instead renewed them with a lower capital investment while we continue to evaluate options to convert these spaces in the future,
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subject to market conditions. Excluding this lease, rental rate changes for renewed/re-leased space for the three months ended September 30, 2024 were
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13.0% and 2.3% (cash basis).
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•$791.6 million, up 10.9%, for thethree months ended September 30, 2024, comparedto$713.8 million for thethree
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•$2.3 billion, up 9.3%, for thenine months ended September 30, 2024, compared to$2.1 billion for thenine months ended
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•1.5% and 6.5% (cash basis) for thethree months ended September 30, 2024, compared to thethree months ended
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•1.6% and 4.6% (cash basis) for thenine months ended September 30, 2024, compared to thenine months ended
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Attractive dividend strategy to share net cash flows from operating activities with stockholders while retaining a significant portion for
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reinvestment
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annualized.
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December 31, 2024 with dispositions primarily focused on sales of properties and land parcels not integral to our mega campus
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strategy. Refer to “Dispositions” in Item 2 for additional details.
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•In September 2024, we completed the following transactions with our longstanding tenant, Fred Hutchinson Cancer Center
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(“Fred Hutch”), in the Lake Union submarket:
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•Sale of 1165 Eastlake Avenue East, a fully leased 100,086 RSF single-tenant Class A+ life science facility that was
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developed in 2021. We sold the property for$150.0 million, or$1,499 per RSF, at strong capitalization rates of 4.7% and
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4.9% (cash basis). Upon completion of the sale, we recognized a gain on sale of real estate aggregating $21.5 million.
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•Fred Hutch executed early renewals aggregating 117,479 RSF at our 1201 and 1208 Eastlake Avenue East properties,
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including a 15-year lease extension at 1201 Eastlake Avenue East.
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•Our prior joint venture partner sold its ownership interest in each of 1201 and 1208 Eastlake Avenue East to Fred Hutch.
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Our ownership interest in both properties remains unchanged at 30.0%. This sale, lease extensions, and new joint venture
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affirm Fred Hutch’s commitment to South Lake Union.
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losses aggregating$284.4 million and$118.2 million, respectively.
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•In September 2024, we amended and restated our unsecured senior line of credit to, among other changes, extend the
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•During the three months ended September 30, 2024, we had no activity under our ATM program. As of the date of this report,
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$510 million primarily by thefirst quarter of 2028
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Service, and
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Device
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Other Investment-Grade
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or Large Cap Tech
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information.
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asset value.
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•Approximately 94% of our leases (on an annual rental revenue basis) were triple net leases, which require tenants to pay
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An operationally excellent, industry-leading REIT with a high-quality, diverse client base to support growing revenues, stable cash flows,
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and strong margins
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•Solid rental rate increases of 7.4% and 3.7% (cash basis) for thethree months ended June 30, 2024 and 26.2% and 15.0%
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(cash basis) for thesix months ended June 30, 2024.
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•$766.7 million, up 7.4%, for thethree months ended June 30, 2024, compared to$713.9 million for thethree months
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•$1.5 billion, up 8.6%, for thesix months ended June 30, 2024, compared to$1.4 billion for thesix months ended June 30,
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•1.5% and 3.9% (cash basis) for thethree months ended June 30, 2024, compared to thethree months ended June 30,
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•1.1% and 3.7% (cash basis) for thesix months ended June 30, 2024, compared to thesix months ended June 30, 2023.
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•Significant liquidity of$5.6 billion.
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•97.3% of our debt has a fixed rate.
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Consistent dividend strategy with a focus on retaining significant net cash flows from operating activities after dividends for reinvestment
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December 31, 2024 with dispositions and sales of partial interests and are actively pursuing several dispositions and partial interest
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sale opportunities.
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(1)Refer to “Dispositions and sales of partial interests” in Item 2 for additional details.
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losses aggregating$284.2 million and$124.4 million, respectively.
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million of unrealized losses.
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•In July 2024, we executed an agreement with the lender group to amend and restate our unsecured senior line of credit to,
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among other changes, extend the maturity date from January 22, 2028 to January 22, 2030, including extension options that
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we control. We expect that the amendment and restatement will become effective in September 2024 upon the satisfaction of
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certain conditions.
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underwriting discounts). We expect to settle these forward equity sales agreements in 2024. As of June 30, 2024 and as of the
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Alexandria’s highly leased value-creation pipeline delivered incremental annual net operating income of$16 million, commencing during
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thefirst quarter of 2028
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•195,435 and 25,655 RSF at 9810 Darnestown Road and 9808 Medical Center Drive, respectively, located on the
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to stabilize in 2026 and beyond. In addition to the projects represented, we are evaluating one priority anticipated development project that could commence active
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Service,
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and Device
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Investment-Grade or
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Large Cap Tech
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Future Change
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in Use(1)
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(1)Represents annual rental revenue currently generated from space that is targeted for a future change in use to laboratory space, including 1.0% of annual rental revenue
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that is generated from covered land play projects for future development opportunities. The weighted-average remaining term of these leases is 2.9 years.
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9.4 Years
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7.4 Years
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Leasing
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(2)Includes one renewal aggregating 34,611 RSF in our Greater Stanford submarket. Excluding this renewal, rental rate changes for the three months ended June 30, 2024
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(2)Excludes month-to-month leases aggregating 129,549 RSF as of June 30, 2024.
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Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative life science mega campuses in AAA
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Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative mega campuses in AAA life science
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and New York City. As of June 30, 2024, Alexandria has a total market capitalization of $32.5 billion and an asset base in North America
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and New York City. As of September 30, 2024, Alexandria has a total market capitalization of $33.1 billion and an asset base in North
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that includes 42.1 million RSF of operating properties and 5.3 million RSF of Class A/A+ properties undergoing construction andone
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America that includes 41.8 million RSF of operating properties, 5.3 million RSF of Class A/A+ properties undergoing construction, and
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committed near-term project expected to commence construction in the nexttwo years. Alexandria has a longstanding and proven track
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one committed near-term project expected to commence construction in the nexttwo years. Alexandria has a longstanding and proven
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record of developing Class A/A+ properties clustered in life science mega campuses that provide our innovative tenants with highly
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track record of developing Class A/A+ properties clustered in mega campuses that provide our innovative tenants with highly dynamic
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dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire
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and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity,
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productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science companies
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efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science companies through our
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through our venture capital platform. We believe our unique business model and diligent underwriting ensure a high-quality and diverse
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venture capital platform. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base
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tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term
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that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.
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approximating 3.0% that were either fixed or indexed based on a consumer price index or other index;
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approximating 3% that were either fixed or indexed based on a consumer price index or other index;
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operating expenses (including increases thereto) in addition to base rent; and
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operating expenses (including increases thereto) in addition to base rent;
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•Approximately 93% of our leases (on anannual rental revenue basis)provided for the recapture of capital expenditures
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•Approximately 92% of our leases (on anannual rental revenue basis)provided for the recapture of capital expenditures
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typically be borne by the landlord in traditional office leases.
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typically be borne by the landlord in traditional office leases; and
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•79% of our leasing activity during the last twelve months was generated from our existing tenant base.
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•80% of our leasing activity during the last twelve months was generated from our existing tenant base.
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of internal and external growth. A key element of our strategy is our unique focus on Class A/A+ properties located in collaborative life
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of internal and external growth. A key element of our strategy is our unique focus on Class A/A+ properties located in collaborative
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science mega campuses in AAA innovation clusters. Our mega campuses are designed for scalability, offering our tenants a clear path
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mega campuses in AAA life science innovation clusters. Our mega campuses are designed for scalability, offering our tenants a clear
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for growth, including through our future developments and redevelopments. Strategically located near top academic medical institutions
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path for growth, including through our future developments and redevelopments. Strategically located near top academic medical
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and equipped with curated amenities, services, and transit access, our mega campuses are designed to support our tenants in
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institutions and equipped with curated amenities, services, and transit access, our mega campuses are designed to support our tenants
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attracting and retaining top talent, which we believe is a key driver of tenant demand for our properties. Our strategy also includes
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in attracting and retaining top talent, which we believe is a key driver of tenant demand for our properties. Our strategy also includes
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•As of June 30, 2024, our credit ratings from S&P Global Ratings and Moody’s Investors Service were BBB+ and Baa1,
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•As of September 30, 2024, our credit ratings from Moody’s Ratings and S&P Global Ratings were Baa1 and BBB+,
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respectively, which rank in the top 10% among all publicly traded U.S. REITs.
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respectively, which rank in thetop 10% among all publicly traded U.S. REITs.
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•Net debt and preferred stock to Adjusted EBITDA of 5.4x and fixed-charge coverage ratio of 4.5x for thethree months ended
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•Net debt and preferred stock to Adjusted EBITDA of 5.5x and fixed-charge coverage ratio of 4.4x for thethree months ended
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•32% of our total debt matures in 2049 and beyond.
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•31% of our total debt matures in 2049 and beyond.
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•13.0 years weighted-average remaining term of debt.
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•12.6 years weighted-average remaining term of debt.
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•$1.1 billion of expected capital contribution commitments from existing consolidated real estate joint venture partners to fund
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•$1.0 billion of capital contribution commitments from existing consolidated real estate joint venture partners to fund
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Strong leasing volume and solid rental rate increases
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Strong leasing volume and solid rental rates
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•Strong leasing volume aggregating 1.1 million RSF for thethree months ended June 30, 2024.
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•Strong leasing volume aggregating 1.5 million RSF for thethree months ended September 30, 2024, up 48% compared to our
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•Net operating income (cash basis) of$1.9 billion for thethree months ended June 30, 2024 annualized, increased by
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•Net operating income (cash basis) of$2.0 billion for thethree months ended September 30, 2024 annualized, increased by
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$122.7 million, or 6.9%, compared to thethree months ended June 30, 2023 annualized. Refer to “Net operating income, net
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$274.2 million, or 15.5%, compared to thethree months ended September 30, 2023 annualized. Refer to “Net operating
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operating income (cash basis), and operating margin” under “Definitions and reconciliations” in Item 2 for a reconciliation of our
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income, net operating income (cash basis), and operating margin” under “Definitions and reconciliations” in Item 2 for a
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net income to net operating income (cash basis).
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reconciliation of our net income to net operating income (cash basis).
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•Common stock dividend declared for thethree months ended June 30, 2024 of $1.30 per common share aggregating$5.08
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•Common stock dividend declared for thethree months ended September 30, 2024 of $1.30 per common share aggregating
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per common share for thetwelve months ended June 30, 2024, up 24 cents, or 5%, over thetwelve months ended June 30,
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$5.14 per common share for thetwelve months ended September 30, 2024, up 24 cents, or 5%, over thetwelve months
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•Average annual dividend per-share growth of 5% from 2020 through thethree months ended June 30, 2024 annualized.
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•Average annual dividend per-share growth of 5.4% from 2020 through thethree months ended September 30, 2024
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Ongoing execution of Alexandria’s 2024 capital strategy
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Ongoing successful execution of Alexandria’s 2024 capital strategy
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•$32.5 billion in total market capitalization.
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•$33.1 billion in total market capitalization.
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•$20.1 billion in total equity capitalization, which ranks in thetop 10% among all publicly traded U.S. REITs.
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•$20.5 billion in total equity capitalization, which ranks in thetop 10% among all publicly traded U.S. REITs.
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•Unrealized gains presented in our consolidated balance sheet were$159.8 million, comprising gross unrealized gains and
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•Unrealized gains presented in our consolidated balance sheet were$166.2 million, comprising gross unrealized gains and
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•Investment loss of$43.7 million for thethree months ended June 30, 2024 presented in our consolidated statement of
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•Investment income of$15.2 million for thethree months ended September 30, 2024 presented in our consolidated statement
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operations consisted of $33.4 million of realized gains, offset by $12.8 million of impairment charges and$64.2 million of
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of operations consisted of $23.0 million of realized gains and$2.6 million of unrealized gains, offset by $10.3 million of
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•Approximately 93% of our leases (on an annual rental revenue basis) were triple net leases, which require tenants to pay
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•80% of our leasing activity during the last twelve months was generated from our existing tenant base.
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by$37.8 million of impairment charges.
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New Class A/A+ development and redevelopment properties: recent deliveries (continued)
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revenues and tenant recoveries, as discussed below.
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our leases (on an annual rental revenue basis) were triple net leases, which require tenants to pay substantially all real estate taxes,
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insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in
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related to our development and redevelopment projects placed into service and properties acquired subsequent to January 1, 2023, as
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our leases (on an annual rental revenue basis) were triple net leases, which require tenants to pay substantially all real estate taxes,
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insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in
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incremental expenses related to our Same Properties’ rental operating expenses as discussed below.
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(1)Represents contractual capital commitments from existing consolidated real estate joint venture partners to fund construction.
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funds from operations per share, as adjusted.
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to our unaudited consolidated financial statements in Item 1 for additional details.
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(3)Refer to “Definitions and reconciliations” in Item 2 for additional information.
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properties” in Item 2 for additional details.
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statements in Item 1 for additional information.
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(2)In July 2024, we executed an amendment to our existing ground lease agreement at the Alexandria Technology Square® mega campus in our Cambridge submarket,
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and the first quarter of 2025.
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“Summary of significant accounting policies” to our unaudited consolidated financial statements in Item 1 for additional information.
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an amendment to our existing ground lease agreement at the Alexandria Technology Square®mega campus aggregating 1.2 million
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financial statements in Item 1 for additional information.
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rental revenue basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs
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and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Annual
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occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.
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September 30, 2024 and December 31, 2023 (dollars in thousands):
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statements in Item 1 for additional information.
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$27.8 million to sell 230 thousand shares of common stock under our ATM program at anaverage price of$122.32 (before
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(on an annual rental revenue basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance,
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utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to
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During thethree months ended June 30, 2023, we recognized$214.8 million of gains related to the completion ofsix real
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increases on lease renewals and re-leasing of space since January 1, 2023.
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development and redevelopment projects placed into service and properties acquired subsequent to January 1, 2023, as discussed
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annual rental revenue basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities,
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repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent.
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million, primarily due to higher insurance premiums.
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for these projects. As a result, we recognized impairment charges aggregating$30.8 million, primarily consisting of the pre-acquisition
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For more information, refer to “Sales of real estate assets and impairment charges” in Note 3 – “Investments in real estate” to
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unaudited consolidated financial statements in Item 1.
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Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements in Item 1 for
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(2)Refer to Note 16 – “Subsequent events” to our unaudited consolidated financial statements in Item 1 for additional information.
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During thethree months ended June 30, 2024, we entered into new forward equity sales agreements aggregating
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acquisitions to range from$250 million to$750 million.
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lease right-of-use assets, adjusted for initial direct leasing costs and other consideration exchanged with the landlord prior to the
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sheets. Refer to “Lease accounting” in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial
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letters of intent or purchase and sale agreements, aggregated $47.6 million. In addition, we have letters of credit and performance
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taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases
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longer lease terms, higher rental income, higher returns, and greater long-term asset value.
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excluding properties held for sale, as a percentage of gross assets as of June 30, 2024: