Alexandria Real Estate Equities, Inc. (NYSE: ARE) — 2022 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2022; figures below are annual, not standalone fourth-quarter results, unless noted. Alexandria is a REIT focused on life science, agtech, and technology real estate in major North American innovation markets. At year-end it reported 41.8 million operating RSF, 94.8% occupancy, approximately 1,000 tenants, and a 74.6 million-SF total asset base including development and future projects.
Key financial results
| Metric | 2022 | 2021 / change |
|---|---|---|
| Total revenue | $2.589 billion | $2.114 billion; up 22.5% |
| Net income attributable to common stockholders | $513.3 million; diluted EPS $3.18 | $563.4 million; diluted EPS $3.82 |
| Adjusted FFO attributable to common stockholders | $1.362 billion; $8.42 per diluted share | $1.145 billion; $7.76 per diluted share |
| Net operating income (NOI) | $1.806 billion | $1.491 billion; up 21.1% |
| Cash-basis NOI | $1.613 billion | $1.321 billion; up 22.2% |
| Net cash from operating activities | $1.294 billion | $1.010 billion |
| Adjusted EBITDA / margin | $1.798 billion / 69% | $1.518 billion / 72% |
| Cash, cash equivalents, and restricted cash | $858.0 million | $415.2 million |
| Total debt, including deferred financing costs | $10.160 billion | Net debt and preferred stock to adjusted EBITDA: 5.1x, quarter annualized |
Annual common dividends were $4.72 per share, up 5% from 2021. The fourth-quarter dividend was $1.21 per share; the reported fourth-quarter payout ratio was 58%. Approximately 99.4% of debt was fixed-rate, with a 13.2-year weighted-average remaining term. The company reported $5.3 billion of liquidity and no scheduled debt maturities before 2025.
Material changes and operating performance
- Revenue growth reflected acquisitions and development/redevelopment projects placed in service, alongside higher rents and occupancy in the same-property portfolio. Same-property NOI grew 6.6% (9.6% cash basis); average occupancy rose to 95.7% from 94.7%.
- Alexandria executed 8.4 million RSF of leases, its second-highest annual volume. On 4.5 million RSF of renewed or re-leased space, rents increased 31.0% on a straight-line basis and 22.1% on a cash basis.
- Depreciation and amortization rose to $1.002 billion from $821.1 million, mainly due to acquired and newly delivered properties. Rental operating expenses rose 25.6%; higher utilities, property taxes, and contract-service costs contributed.
- Net income and diluted EPS declined despite revenue and adjusted FFO growth. Results included $412.2 million of unrealized losses on non-real-estate investments, partly offset by $537.9 million of gains on real-estate sales. Adjusted FFO excludes specified investment, disposition, impairment, and financing items and is a non-GAAP measure.
- The company acquired 42 properties for an aggregate purchase price of $2.8 billion. Real-estate dispositions and partial-interest sales generated $2.2 billion in aggregate sales price; dispositions produced $537.9 million of reported gains, while retained-control partial-interest transactions were recorded as equity transactions.
Outlook, risks, and unusual items
2023 guidance: diluted EPS of $3.41–$3.61 and adjusted FFO per diluted share of $8.86–$9.06. Management expects year-end operating-property occupancy of 94.8%–95.8%, cash-basis same-property NOI growth of 4%–6%, and rental-rate increases of 11%–16% on a cash basis for renewals and re-leasing. The guidance is subject to assumptions and uncertainty.
Management cited a value-creation pipeline of current and near-term projects expected to generate more than $655 million of incremental NOI, primarily from 2023 through 2025. The pipeline was reported as 72% leased, including projects expected to commence construction. 2023 projected construction spending was approximately $2.975 billion at the midpoint; remaining contracted construction costs at year-end were about $3.5 billion.
- Impairments: 2022 real-estate impairment charges were $65.0 million, including a $38.3 million write-off after abandoning a California development project of more than 600,000 RSF amid a deteriorated macroeconomic outlook, and $20.9 million for assets classified as held for sale. The company expected to sell those assets in 2023.
- Investment volatility: non-real-estate investment income was a loss of $331.8 million, versus income of $259.5 million in 2021, primarily reflecting lower fair values. Year-end investments totaled $1.615 billion.
- Capital and interest-rate exposure: risks include higher borrowing and refinancing costs, market access, real-estate valuation pressure, and construction-cost inflation. The company amended its $4.0 billion credit facility to SOFR plus 0.875% and reported no outstanding balance on the facility or commercial-paper program at year-end.
- Business and portfolio risks: tenant funding and credit conditions in life science, agtech, and technology; leasing demand and concentration in key markets; development execution, supply-chain and labor costs; climate and natural hazards; and regulatory or REIT-qualification changes could affect results. Approximately 93% of leases were triple-net, and 96% included annual rent escalations approximating 3%.
- The filing reports no material pending legal proceedings beyond routine matters. The auditor gave an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective.
Important facts for investors to verify
- Review the reconciliation of GAAP net income and EPS to adjusted FFO, including the large unrealized investment losses and real-estate sale gains.
- Track delivery, lease-up, project costs, and realized yields for the development pipeline, as well as the timing and achievement of the projected incremental NOI.
- Assess 2023 guidance against actual occupancy, renewal rents, same-property NOI, construction spending, and asset-sale proceeds.
- Confirm liquidity, debt maturities, variable-rate exposure, covenant headroom, and funding available from joint-venture partners and equity issuance.
- Monitor tenant financial health and funding access, leasing conditions in major markets, and whether operating-cost and construction inflation can be recovered or contained.