Alexandria Real Estate Equities, Inc. — 2020 Form 10-K
Business context and reporting period. Fiscal year ended December 31, 2020. Alexandria is a REIT focused on owning, operating, and developing life science, technology, and agtech properties in major North American innovation markets. At year-end, it reported 31.9 million operating RSF, 3.3 million RSF under construction, and 94.6% occupancy of operating properties. Excluding vacancy at recently acquired properties, occupancy was 97.7%. Investment-grade or publicly traded large-cap tenants generated 55% of annual rental revenue.
Financial and operating performance
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $1.886 billion | $1.531 billion |
| Net income attributable to common stockholders | $760.8 million; diluted EPS $6.01 | $351.0 million; diluted EPS $3.12 |
| Adjusted FFO attributable to common stockholders | $923.8 million; $7.30 per diluted share | $783.0 million; $6.96 per diluted share |
| Net cash from operating activities | $882.5 million | $683.9 million |
| Net cash used in investing activities | $3.278 billion | $3.641 billion |
| Net cash from financing activities | $2.750 billion | $2.927 billion |
| Total debt at year-end | $7.563 billion | $6.777 billion |
- Income from rentals rose 23.8% to $1.878 billion; rental revenue increased 26.3%, mainly from acquisitions and projects placed in service. Rental revenue per RSF decreased to $49.08 from $51.04, reflecting the mix of acquisitions; excluding specified recent acquisitions, it would have been $51.26.
- Net operating income (NOI), a non-GAAP measure, increased 24.8% to $1.355 billion; cash-basis NOI rose 26.2% to $1.201 billion. Same-property NOI increased 2.6%, or 5.1% on a cash basis. Same-property occupancy averaged 96.6%.
- Full-year operating margin was 72%, versus 71% in 2019; adjusted EBITDA margin was 68%, versus 69%. In the fourth quarter, those margins were 71% and 69%, respectively.
- Leasing activity totaled 4.36 million RSF. Renewals and re-leasing produced rent increases of 37.6% on a straight-line basis and 18.3% on a cash basis. Weighted-average remaining lease term was 7.6 years.
- Cash, cash equivalents, and restricted cash were $597.7 million. Reported liquidity was $4.1 billion, including $2.9 billion available under the credit facility net of commercial paper, expected proceeds from outstanding forward equity, and publicly traded investments.
- Net debt and preferred stock to adjusted EBITDA was 5.3x on a quarter-annualized basis; fixed-charge coverage was 4.6x on the same basis. Approximately 99% of debt was fixed-rate, with a 3.76% weighted-average interest rate and 10.6-year weighted-average remaining term. No debt matured before 2024.
- Common dividends declared were $4.24 per share, up 6% from $4.00 in 2019. The fourth-quarter dividend was $1.09 per share.
Material changes and unusual items
- Net income included $374.0 million of unrealized gains on non-real-estate investments, compared with $161.5 million in 2019. Investment income totaled $421.3 million, and the investment portfolio carrying value reached $1.611 billion. These fair-value changes are volatile and are excluded from adjusted FFO.
- Results included an $86.2 million net termination fee after Pinterest terminated a planned lease at 88 Bluxome Street; a $154.1 million gain on real estate sales; $55.7 million of real estate impairments; and $60.7 million of losses on early debt extinguishments.
- COVID-19-related restrictions reduced activity at some retail, parking, and amenity operations. Alexandria recorded a $5.4 million reduction to rental revenue for specific write-offs and a general allowance on deferred rent. It reported collecting 99.8% of rent and tenant recoveries from April through December 2020 and 99.2% for January 2021 as of January 29; year-end tenant receivables were $7.3 million.
- Alexandria acquired 55 properties for $2.6 billion and sold real estate interests generating approximately $1.1 billion in proceeds. It issued common shares and settled forward equity sales for approximately $2.4 billion of net proceeds, increasing shares outstanding.
- Debt actions included issuing $1.0 billion of 1.875% notes due 2033 and refinancing $500 million of 3.90% notes due 2023, while recognizing the related extinguishment loss. Year-end commercial paper outstanding was $100 million; the $3.0 billion credit facility had no borrowings.
Outlook, commentary, and risks
- For 2021, management guided to diluted EPS of $2.14–$2.34 and diluted FFO per share of $7.60–$7.80. Assumptions include year-end operating-property occupancy of 95.6%–96.2%, renewal/re-leasing rent increases of 29%–32% (16%–19% cash basis), and same-property NOI growth of 1%–3% (4%–6% cash basis).
- Management projected 2021 construction, redevelopment, and related spending of approximately $1.74 billion at the midpoint, and capital sources and uses of $4.04–$4.84 billion. The midpoint includes $1.375 billion of real estate dispositions/partial-interest sales and $1.9 billion of common equity as capital sources, alongside $2.7 billion of acquisitions. These are plans and assumptions, not assured outcomes.
- Management expects recently delivered projects to contribute about $28 million in annual cash NOI as initial free-rent periods burn off. The current and pre-leased near-term pipeline was 78% leased or in negotiation. Construction timing, leasing, and occupancy forecasts may be affected by COVID-19 and other disruptions.
- Principal risks include tenant funding or credit deterioration, concentration in life science and a limited number of urban markets, competition and leasing costs, development delays or overruns, capital-market access and refinancing, variable-rate exposure and LIBOR transition, venture-investment valuation volatility, environmental liabilities, natural disasters and insurance limitations, and cybersecurity. Approximately 94% of leases are triple-net and about 94% include contractual annual rent escalations, which provide some operating-cost protection.
- The filing reported no material pending legal proceedings beyond routine matters. The auditor issued an unqualified opinion on the financial statements and internal controls.
Investor verification priorities
- Separate recurring property performance from the $374.0 million of unrealized investment gains, the $86.2 million termination fee, sale gains, impairments, and debt-extinguishment losses.
- Track occupancy and lease-up at acquired properties, same-property performance, rent collections, and execution of the 4.8 million RSF near-term pipeline.
- Assess whether forecast 2021 acquisitions and construction spending can be funded as planned through equity issuance, asset sales, operating cash flow, and debt without undue dilution or leverage.
- Review debt maturities, covenant headroom, liquidity, and the transition of remaining LIBOR-linked exposures, including joint-venture debt.
- Confirm subsequent-event execution: the filing says five properties totaling $1.6 billion were acquired in January 2021, including the $1.48 billion Greater Boston campus transaction.
Non-GAAP measures such as FFO, adjusted FFO, NOI, and adjusted EBITDA are supplemental and should be considered alongside GAAP results and cash flows.