Alexandria Real Estate(ARE) - 2025 Q1 - Quarterly Results

Company Highlights Mission and Cluster Model Alexandria focuses on its mission to advance human health by creating and connecting life science ecosystems, employing a cluster model to concentrate assets in top innovation hubs for collaboration and growth - The company's mission is to create, develop, and operate dynamic ecosystems that advance and accelerate life-changing innovation for human health[9] Alexandria's Megacampus™ Platform The Megacampus™ platform is central to Alexandria's strategy, accounting for a significant majority of its revenue and operating square footage, demonstrating superior operating performance with higher average occupancy - The Megacampus™ platform is a core driver of superior operating results, generating 75% of the company's annual rental revenue and comprising 71% of its operating rentable square feet (RSF)[14] - Megacampus properties have shown a 4% occupancy outperformance compared to non-megacampus properties, with an average occupancy of 95% since 2021[15] Sector-Leading Client Base Alexandria boasts a high-quality, diverse client base of approximately 750 tenants, providing stable and long-duration cash flows, with a significant portion of revenue from investment-grade or large-cap tenants - 51% of the company's annual rental revenue is derived from investment-grade or publicly traded large-cap tenants[27] - 87% of the top 20 tenants' annual rental revenue is from investment-grade or publicly traded large-cap tenants[19][27] - The company has a long-duration weighted-average remaining lease term of 7.6 years for all tenants and 9.6 years for its top 20 tenants[27] - Lease structures are favorable, with 98% containing annual rent escalations and 91% being triple net leases[28][29] Operational Excellence and Value Creation Alexandria demonstrates strong long-term value creation, significantly outperforming major REIT and market indices since its 1997 IPO, achieving sector-leading FFO per share growth and exceptional operational metrics - Since its IPO in May 1997, Alexandria has delivered a total shareholder return of 1,427%, outperforming indices like the S&P 500 (1,001%) and MSCI US REIT Index (881%)[23][24] - The company projects leading five-year FFO per share growth (2020-2025) compared to other FTSE NAREIT Equity Health Care REITs[25][26] - Tenant rent collections have been consistently strong, averaging 99.8% from Q1 2021 to Q1 2025[31] Balance Sheet and Dividends Alexandria maintains a strong and flexible fortress balance sheet, characterized by significant liquidity, a high percentage of fixed-rate debt, and one of the longest weighted-average remaining debt terms among S&P 500 REITs, with a consistent history of strong and increasing dividends Key Balance Sheet Metrics as of March 31, 2025 | Metric | Value | | :--- | :--- | | Liquidity | $5.3 billion | | Target Net Debt/Adj. EBITDA (4Q25) | ≤5.2x | | Fixed-Rate Debt (Avg. since 2021) | 97.9% | | Debt Maturing in Next 3 Years | 13% | | Weighted-Average Remaining Debt Term | 12.2 years | | Weighted-Average Debt Interest Rate | 3.95% | - Alexandria has the longest weighted-average remaining debt term (12.2 years) among S&P 500 REITs, which is double the S&P 500 REIT average of 6.1 years[35][36] Dividend Highlights (1Q25) | Metric | Value | | :--- | :--- | | Dividend Yield | 5.7% | | Average Annual Dividend Per-Share Growth | 4.5% | | Payout Ratio | 57% | | Net Cash from Ops After Dividends (2021-2025E) | $2.3 billion | Earnings Press Release First Quarter Ended March 31, 2025 Financial and Operating Results For the first quarter of 2025, Alexandria reported a net loss per share of $0.07 and Funds From Operations (FFO) per share, as adjusted, of $2.30, marked by solid leasing volume, strong rental rate increases, capital recycling progress, and new development project deliveries Q1 2025 Financial Results vs. Q1 2024 | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues (in millions) | $758.2 | $769.1 | | Net Loss per Share - Diluted | $(0.07) | $0.97 (income) | | FFO per Share - Diluted, as Adjusted | $2.30 | $2.35 | Q1 2025 Leasing Activity | Metric | Value | | :--- | :--- | | Total Leasing Activity | 1,030,553 RSF | | Lease Renewals/Re-leasing | 884,408 RSF | | Rental Rate Increase | 18.5% | | Rental Rate Increase (Cash Basis) | 7.5% | - The company maintains a strong balance sheet with $5.3 billion in liquidity and a Net Debt and Preferred Stock to Adjusted EBITDA ratio of 5.9x for Q1 2025 annualized[42][43] - Development and redevelopment projects placed into service in Q1 2025 are expected to generate an incremental $37 million in annual net operating income[48][49] - Occupancy declined from 94.6% at year-end 2024 to 91.7% at the end of Q1 2025, primarily due to 2.9% of RSF becoming vacant from lease expirations. Of this vacancy, 1.3% is already re-leased for future delivery or is under negotiation[50] Guidance Alexandria updated its full-year 2025 guidance, reducing the midpoint for FFO per share, as adjusted, by $0.07 to $9.26, primarily due to slower leasing impacting occupancy and NOI forecasts, and increased interest expense, partially offset by reduced G&A expenses 2025 FFO Per Share Guidance Change | Metric | As of 4/28/25 | As of 1/27/25 | Change | | :--- | :--- | :--- | :--- | | FFO per share, as adjusted | $9.16 to $9.36 | $9.23 to $9.43 | - | | Midpoint | $9.26 | $9.33 | Reduction of $0.07 | Key Changes to 2025 Guidance Midpoints | Assumption | Change | | :--- | :--- | | Occupancy Percentage (Year-End) | 70 bps reduction | | Same Property NOI | 70 bps reduction | | Same Property NOI (Cash Basis) | 20 bps reduction | | Straight-Line Rent Revenue | $15 million reduction | | General & Administrative Expenses | $17 million reduction | | Interest Expense | $20 million increase | - The guidance for dispositions and sales of partial interests was increased by $250 million at the midpoint, primarily to fund a $150 million increase in the midpoint for acquisitions and other opportunistic capital uses[71] Dispositions and Sales of Partial Interests As of April 28, 2025, Alexandria has made significant progress towards its capital recycling goals, completing $176 million in dispositions and having an additional $433 million in pending transactions, totaling $609 million, representing 31% of its updated 2025 guidance midpoint 2025 Dispositions and Sales of Partial Interests (in millions) | Status | Our Share | | :--- | :--- | | Completed in 1Q25 | $176.4 | | Pending Transactions | $432.5 | | Total Completed and Pending | $608.9 | | 2025 Guidance Range | $1,450 - $2,450 | - A notable completed transaction in Q1 2025 was the sale of Costa Verde land for $124 million, for which Alexandria provided $91 million in seller financing[72][73] Consolidated Statements of Operations The Consolidated Statement of Operations for Q1 2025 shows total revenues of $758.2 million, a slight decrease from Q1 2024, and a net loss attributable to common stockholders of $11.6 million, a significant shift from prior-year net income, primarily due to unrealized losses on investments and impairment charges Consolidated Statements of Operations Highlights (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $758,158 | $769,108 | | Total Expenses | $682,162 | $593,763 | | Impairment of Real Estate | $32,154 | $0 | | Investment (Loss) Income | $(49,992) | $43,284 | | Net (Loss) Income Attributable to Common Stockholders | $(11,599) | $166,886 | Consolidated Balance Sheets As of March 31, 2025, Alexandria's consolidated balance sheet shows total assets of $37.60 billion, a slight increase from year-end 2024, while total liabilities increased and total equity decreased, reflecting share repurchases and the net loss for the quarter Consolidated Balance Sheet Highlights (in thousands) | Line Item | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Investments in Real Estate | $32,121,712 | $32,110,039 | | Total Assets | $37,600,428 | $37,527,449 | | Total Liabilities | $15,600,870 | $15,128,988 | | Total Equity | $21,989,946 | $22,378,489 | Funds From Operations and Funds From Operations per Share For Q1 2025, Funds From Operations (FFO) attributable to common stockholders, as adjusted, was $392.0 million, or $2.30 per diluted share, with reconciliation from net loss including significant add-backs for depreciation, unrealized investment losses, and real estate impairment FFO Reconciliation Highlights - Q1 2025 (in thousands) | Line Item | Amount | | :--- | :--- | | Net Loss Attributable to Common Stockholders | $(11,599) | | Depreciation and Amortization of Real Estate | $339,381 | | Unrealized Losses on Non-Real Estate Investments | $68,145 | | Impairment of Real Estate | $32,154 | | FFO Attributable to Common Stockholders - Diluted, As Adjusted | $392,009 | FFO Per Share - Diluted, As Adjusted (Quarterly Trend) | Quarter | FFO/Share (Adj.) | | :--- | :--- | | Q1 2025 | $2.30 | | Q4 2024 | $2.39 | | Q3 2024 | $2.37 | | Q2 2024 | $2.36 | | Q1 2024 | $2.35 | Supplemental Information Company Profile This section provides a corporate overview of Alexandria Real Estate Equities, Inc., highlighting its position as a leading life science REIT focused on collaborative Megacampus™ ecosystems in AAA innovation clusters, supported by a high-quality tenant base and experienced management - As of March 31, 2025, Alexandria has a total market capitalization of $28.8 billion and an asset base of 39.6 million RSF of operating properties and 4.0 million RSF of properties under construction[89] - The executive and senior management team consists of 62 individuals with an average of 24 years of real estate experience, including 13 years with Alexandria[91][92] Financial and Asset Base Highlights This section presents a five-quarter summary of key financial data and operating statistics, including a 70% operating margin, a Net Debt and Preferred Stock to Adjusted EBITDA ratio of 5.9x, 91.7% operating property occupancy, and 18.5% rental rate increase on renewed/re-leased space for Q1 2025 Selected Financial and Operating Metrics (Q1 2025) | Metric | Value | | :--- | :--- | | Operating Margin | 70% | | Adjusted EBITDA Margin | 71% | | Net Debt & Pref. Stock to Adj. EBITDA (Qtr Ann.) | 5.9x | | Total Debt & Pref. Stock to Gross Assets | 30% | | Fixed-Charge Coverage Ratio (Qtr Ann.) | 4.3x | | Occupancy of Operating Properties | 91.7% | | Rental Rate Change (Renewals/Re-leasing) | 18.5% | High-Quality and Diverse Client Base Alexandria's stability is underpinned by its diverse base of approximately 750 tenants, with 51% of annual rental revenue from investment-grade or publicly traded large-cap companies, highlighting strong tenant relationships, long-duration leases, and exceptional rent collection rates - The tenant base is diversified across multinational pharma, public and private biotech, institutions, and other high-credit entities[110][111] - Tenant collections remained robust, with 99.9% of Q1 2025 rents and 99.8% of April 2025 rents collected as of April 28, 2025[111] - The weighted-average remaining lease term is 9.6 years for the top 20 tenants and 7.6 years for the entire portfolio[111] Internal Growth This section details the drivers of Alexandria's internal growth, including same-property performance, leasing activity, and lease structure, noting a decline in same-property NOI in Q1 2025 due to specific large expirations, offset by strong rental rate growth and long-term leases with embedded annual rent escalations Same Property Performance For Q1 2025, same-property net operating income (NOI) decreased by 3.1% on a GAAP basis but increased by 5.1% on a cash basis compared to Q1 2024, with the GAAP decline significantly impacted by 768,080 RSF of lease expirations Q1 2025 Same Property Performance vs. Q1 2024 | Metric | % Change | | :--- | :--- | | Net Operating Income (GAAP) | (3.1)% | | Net Operating Income (Cash Basis) | 5.1% | - Excluding the impact of six specific properties with large lease expirations, the same property NOI change would have been 0.1% (GAAP) and 9.0% (cash basis)[116] Leasing Activity In Q1 2025, Alexandria executed leases for a total of 1,030,553 RSF, achieving a significant rental rate increase of 18.5% on a straight-line basis and 7.5% on a cash basis for renewed or re-leased space, with a weighted-average lease term of 10.1 years Q1 2025 Leasing Activity on Renewed/Re-leased Space | Metric | Value | | :--- | :--- | | RSF | 884,408 | | Rental Rate Change (Straight-Line) | 18.5% | | Rental Rate Change (Cash Basis) | 7.5% | | Weighted-Average Lease Term | 10.1 years | Contractual Lease Expirations The company has a well-staggered lease expiration schedule, with 5.6% of occupied RSF scheduled to expire for the remainder of 2025, and proactive management of expirations evident as 34% of 2025 expiring RSF is already re-leased Contractual Lease Expirations by Year (% of Occupied RSF) | Year | % of Occupied RSF | | :--- | :--- | | 2025 | 5.6% | | 2026 | 8.5% | | 2027 | 8.7% | | 2028 | 11.3% | | 2029 | 6.8% | - Of the leases expiring in 2025, 34% of the RSF has been leased and 6% is under negotiation, indicating proactive management of expirations[125] Top 20 Tenants Alexandria's top 20 tenants account for 36.2% of its annual rental revenue and are of very high credit quality, with 87% of this revenue coming from investment-grade or publicly traded large-cap tenants, led by Eli Lilly, Moderna, and Bristol-Myers Squibb - 87% of the annual rental revenue from the top 20 tenants is from investment-grade or publicly traded large-cap companies[130] Top 5 Tenants by Annual Rental Revenue | Rank | Tenant | % of Annual Rental Revenue | | :--- | :--- | :--- | | 1 | Eli Lilly and Company | 4.3% | | 2 | Moderna, Inc. | 4.3% | | 3 | Bristol-Myers Squibb Company | 3.7% | | 4 | Takeda Pharmaceutical Company Limited | 2.3% | | 5 | Eikon Therapeutics, Inc. | 1.8% | Summary of Properties and Occupancy As of March 31, 2025, Alexandria's North American portfolio comprised 39.6 million operating RSF with an occupancy rate of 91.7%, a decline primarily due to previously disclosed lease expirations across four submarkets, with Greater Boston, San Francisco Bay Area, and San Diego remaining key revenue contributors Occupancy by Market (Operating Properties) | Market | Occupancy 3/31/25 | Occupancy 12/31/24 | | :--- | :--- | :--- | | Greater Boston | 91.8% | 94.8% | | San Francisco Bay Area | 90.3% | 93.3% | | San Diego | 94.3% | 96.3% | | North America Total | 91.7% | 94.6% | - The decline in occupancy was primarily driven by 768,080 RSF of previously disclosed Q1 2025 lease expirations in the Cambridge, Mission Bay, Research Triangle, and Austin submarkets[135] - Of the total vacancy, 0.7% of RSF is already leased for future delivery (average end of 2025) and another 0.6% is subject to ongoing negotiations[137] External Growth / Investments in Real Estate This section outlines Alexandria's external growth strategy, centered on its development and redevelopment pipeline, with projects delivered in Q1 2025 expected to generate $37 million in incremental annual NOI, and a robust pipeline poised to deliver significant future growth, heavily concentrated in Megacampus ecosystems Investments in Real Estate Alexandria's development and redevelopment pipeline is a key driver of future growth, with projects placed into service in Q1 2025 set to add $37 million in annual NOI, and further significant incremental annual net operating income anticipated from deliveries through 2028 Incremental Annual NOI from Development/Redevelopment Pipeline | Delivery Period | Incremental Annual NOI | RSF | Leased/Negotiating % | | :--- | :--- | :--- | :--- | | 1Q25 (Placed in Service) | $37M | 309,494 | 100% | | 2Q25 – 4Q26 (Near-Term) | $171M | 1.6M | 75% | | 2027 – 2Q28 (Intermediate-Term) | $179M | 2.4M | 16% | New Class A/A+ Development and Redevelopment Properties The company details its active construction pipeline of 4.0 million RSF, with projects stabilizing in 2025-2026 being 75% leased or under negotiation, and the total pipeline, including future projects, heavily concentrated in Megacampus locations Active Development/Redevelopment Pipeline Summary | Stabilization Year | RSF Under Construction | % Leased/Negotiating | | :--- | :--- | :--- | | 2025 and 2026 | 1,597,920 | 75% | | 2027 and beyond | 2,449,862 | 16% | | Total | 4,047,782 | 43% | - The total development and redevelopment pipeline (including future projects) amounts to 28.9 million RSF, with 71% of this square footage located within the company's Megacampus ecosystems[161][270] Construction Spending and Capitalization of Interest Alexandria projects total construction spending for 2025 to be $1.75 billion at the midpoint of its guidance, including active construction and pre-construction activities, partially funded by contributions from noncontrolling interests and tenant-funded improvements Projected 2025 Construction Spending (Midpoint) | Category | Amount (in thousands) | | :--- | :--- | | Active Construction Projects | $1,220,000 | | Future Pipeline Pre-construction | $500,000 | | Capital Expenditures | $415,000 | | Less: NCI & Tenant Contributions | ($385,000) | | Total Construction Spending | $1,750,000 | - The company has $414.9 million in contractual capital commitments from existing real estate joint venture partners to fund construction from 2Q25 through 2027 and beyond[174] Joint Venture Financial Information This section provides financial details for Alexandria's consolidated and unconsolidated real estate joint ventures, highlighting key consolidated JVs in Greater Boston and San Diego, and the primary unconsolidated JV in Mission Bay, San Francisco - As of March 31, 2025, the noncontrolling interest share of consolidated real estate JVs totaled $4.53 billion in net assets[194] - Alexandria's share of unconsolidated real estate JVs totaled $50.1 million in net assets[194] Balance Sheet Management This section details Alexandria's balance sheet management, covering its non-real estate investments, key credit metrics, and debt structure, maintaining a $1.5 billion investment portfolio, significant liquidity of $5.3 billion, and a well-structured debt profile with a long weighted-average maturity and minimal near-term maturities Investments As of March 31, 2025, Alexandria held $1.5 billion in non-real estate investments, primarily in private life science companies, with the portfolio composed of 87% private and 13% public company investments by cost, and a total investment loss of $50.0 million recognized in Q1 2025 Non-Real Estate Investments as of March 31, 2025 | Metric | Value (in thousands) | | :--- | :--- | | Cost Basis | $1,223,221 | | Carrying Amount | $1,479,688 | | Gross Unrealized Gains | $204,917 | | Gross Unrealized Losses | $(173,054) | - The investment portfolio is composed of 87% private and 13% public companies, based on cost[198][199] Key Credit Metrics Alexandria highlights its strong credit profile with significant liquidity of $5.3 billion as of March 31, 2025, and prudent leverage targets, maintaining a target for Net Debt and Preferred Stock to Adjusted EBITDA of less than or equal to 5.2x for year-end 2025 Liquidity as of March 31, 2025 (in millions) | Source | Amount | | :--- | :--- | | Unsecured Senior Line of Credit | $4,700 | | Cash and Restricted Cash | $484 | | Secured Construction Loan Availability | $45 | | Investments in Public Companies | $85 | | Total Liquidity | $5,314 | - The company's Net Debt and Preferred Stock to Adjusted EBITDA was 5.9x (quarter annualized) for Q1 2025, with a target of ≤5.2x for 4Q25[204] Summary of Debt As of March 31, 2025, Alexandria's total debt was $13.1 billion, with a weighted-average remaining term of 12.2 years and a weighted-average interest rate of 3.95%, with the debt being 96.6% fixed-rate and a well-laddered maturity profile ensuring compliance with all debt covenants - The total debt of $13.1 billion has a weighted-average remaining term of 12.2 years[212][213] Debt Maturity Schedule (Principal Payments) | Year | Amount (in thousands) | | :--- | :--- | | 2025 | $600,034 | | 2026 | $800,454 | | 2027 | $350,038 | | 2028 | $425,041 | | 2029 | $700,044 | - The company is in compliance with all its debt covenants, with significant headroom on key ratios such as Total Debt to Total Assets (31% vs. ≤60% requirement)[218] Definitions and Reconciliations This section provides definitions for key terms and non-GAAP financial measures used throughout the report, such as Adjusted EBITDA, Funds From Operations (FFO), Net Operating Income (NOI), and various leverage ratios, including detailed reconciliations to their most directly comparable GAAP counterparts