Alexandria Real Estate(ARE) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for 2019 were $1.5 billion, up 15.4% compared to 2018 [32] - Cash NOI for the fourth quarter was $1 billion annualized, with FFO per share as adjusted at $1.77 for the fourth quarter and $6.96 for the full year [32] - Same property NOI growth was strong at 3.1% for 2019, with 7.1% on a cash basis [32] - Occupancy rate was 97.8% before considering vacancy from recently acquired properties, which reduced occupancy by 1% [33] Business Line Data and Key Metrics Changes - Alexandria achieved the highest annual leasing volume in its history at 5.1 million square feet, with rental rate increases of 17.6% cash and 32.2% GAAP [19][32] - The company reported a mark-to-market basis across all regions at approximately 17.1% on a GAAP basis [19] Market Data and Key Metrics Changes - Total life science venture investment was strong at about $26 billion for 2019, the second highest record over the past decade [9] - The company noted that 52% of its tenants received FDA new approvals in 2019, with a quarter of those approvals related to cancer and central nervous system diseases [9] Company Strategy and Development Direction - The company emphasized the ongoing creation and curation of unique mega campuses in the strongest innovation clusters across the country [14] - A significant joint venture with Boston Properties in South San Francisco was highlighted, aiming to develop a premier life science location [16][18] - The company is focused on maintaining a disciplined approach to acquisitions and capital management, with a goal of achieving a net debt to adjusted EBITDA of 5.2 times by the end of 2020 [38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued demand for life science real estate, citing strong tenant interest and limited supply in key markets [42][45] - The company is monitoring potential changes in drug pricing and property tax regulations but believes its lease structure mitigates risks associated with these changes [35] Other Important Information - The company recognized impairments aggregating $10 million related to privately held investments, but expects to recover a significant portion of its original investment [36] - Alexandria issued $550 million in green bonds, focusing on projects that meet environmental sustainability goals [31] Q&A Session Summary Question: Concerns about excess supply in South San Francisco and Boston Seaport - Management noted that supply in South San Francisco has been substantially absorbed, with limited available inventory [42] Question: Demand pipeline for the Seaport - Demand in the Cambridge market remains healthy, with ongoing discussions with large tenants interested in the Seaport [45] Question: Acquisitions and financing - Management indicated a disciplined approach to acquisitions, with a focus on maintaining optionality for future capital needs [49] Question: Impact of mega campuses on tenant relationships - Management emphasized the importance of balancing respect for long-term tenant relationships with market realities [54] Question: Redevelopment projects and their impact on earnings - Management indicated that upcoming redevelopment opportunities are modest and will not significantly impact earnings [61]