UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 29, 2016


ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)

Maryland
 
1-12993
 
95-4502084
(State or other jurisdiction of
incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)




385 East Colorado Boulevard, Suite 299
 
 
Pasadena, California
 
91101
(Address of principal executive offices)
 
(Zip Code)


Registrant’s telephone number, including area code: (626) 578-0777
 

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o               Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o               Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o               Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o               Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4 (c))







Item 1.01 Entry into a Material Definitive Agreement

We previously reported, in a Form 8-K filed on July 7, 2016, that on July 7, 2016 (i) Alexandria Real Estate Equities, Inc. (the “Company”) and its subsidiary, Alexandria Real Estate Equities, L.P., entered into an escrow agreement (the “Escrow Agreement”) with Bank of America, N.A., as administrative agent, certain lenders and Kaye Scholer LLP, as escrow agent (the “Escrow Agent”), pursuant to which the Company and the other parties to the Fifth Amended and Restated Credit Agreement (the “Amended Credit Agreement”) submitted their signature pages to the Amended Credit Agreement to be held by the Escrow Agent in escrow; (ii) the Company and its subsidiary, Alexandria Real Estate Equities, L.P., entered into the Escrow Agreement with Bank of America, N.A., as administrative agent, certain lenders and the Escrow Agent, pursuant to which the Company and the other parties to the First Amendment to the Amended and Restated Term Loan Agreement (the “2019 Unsecured Senior Bank Term Loan Amendment”) submitted their signature pages to the 2019 Unsecured Senior Bank Term Loan Amendment to be held by the Escrow Agent in escrow; and (iii) the Company and its subsidiary, Alexandria Real Estate Equities, L.P., entered into an escrow agreement with Citibank, N.A., as administrative agent, certain lenders and Shearman & Sterling LLP, as escrow agent (the “2021 Unsecured Senior Bank Term Loan Escrow Agent”), pursuant to which the Company and the other parties to the First Amendment to the Third Amended and Restated Term Loan Agreement (the “2021 Unsecured Senior Bank Term Loan Amendment”) submitted their signature pages to the 2021 Unsecured Senior Bank Term Loan Amendment to be held by the 2021 Unsecured Senior Bank Term Loan Escrow Agent in escrow.

The terms and conditions of each of the above-described Escrow Agreements were satisfied on July 29, 2016, and on that date each of the Amended Credit Agreement, the 2019 Unsecured Senior Bank Term Loan Amendment, and the 2021 Unsecured Senior Bank Term Loan Amendment was deemed executed and became effective. The terms of such agreements were unchanged from those anticipated in the Form 8-K filed on July 7, 2016, and are summarized below.

Fifth Amended and Restated Credit Agreement
The Amended Credit Agreement amends and restates the Company’s Fourth Amended and Restated Credit Agreement dated August 30, 2013. Bank of America, N.A. serves as administrative agent, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, JPMorgan Chase Bank, N.A., and Citigroup Global Markets Inc. serve as joint lead arrangers and joint bookrunners, under the Amended Credit Agreement. The Amended Credit Agreement provides for, among other things, a $1.65 billion unsecured senior revolving credit facility (the “Revolving Credit Facility”) and an accordion option to increase aggregate commitments under the Amended Credit Agreement by up to an additional $350 million. Borrowings under the Revolving Credit Facility will bear interest at a “Eurocurrency Rate” or a “Base Rate” specified in the Amended Credit Agreement, plus, in either case, a margin specified in the Amended Credit Agreement. The margin at closing applicable to loans based on the Eurocurrency Rate is anticipated to be 1.00%.
The Amended Credit Agreement extends the maturity date for the Revolving Credit Facility to October 29, 2021, provided that the Company exercises its rights to extend the maturity date twice by an additional six months for each exercise upon the satisfaction of certain conditions. The Amended Credit Agreement also modifies the applicable interest rate margins in respect of the loans under the Revolving Credit Facility, reduces the capitalization rate with respect to the asset value of certain types of real property, removes the negative covenant with respect to the creation or incurrence of liens, and removes the negative covenant with respect to investments.
Amendment to 2019 Unsecured Senior Bank Term Loan
The 2019 Unsecured Senior Bank Term Loan Amendment amends the Company’s Amended and Restated Term Loan Agreement dated as of August 30, 2013 with Bank of America, N.A., as administrative agent, J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Citigroup Global Markets Inc., as joint lead arrangers and joint bookrunners, and certain financial institutions party thereto as lenders (the “2019 Unsecured Senior Bank Term Loan Agreement”).
The 2019 Unsecured Senior Bank Term Loan Amendment, among other things, reduces the capitalization rate with respect to the asset value of certain types of real property, removes the negative covenant with respect to the creation or incurrence of liens, removes the negative covenant with respect to investments, and makes certain other changes to conform to those contained in the Amended Credit Agreement. The 2019 Unsecured Senior Bank Term Loan Amendment does not modify the maturity date, which is January 3, 2019, provided that the Company exercises its rights to extend the maturity date twice by an additional six months for each exercise upon the satisfaction of certain conditions.




Amendment to 2021 Unsecured Senior Bank Term Loan
The 2021 Unsecured Senior Bank Term Loan Amendment amends the Company’s Third Amended and Restated Term Loan Agreement dated as of June 30, 2015 with Citibank, N.A., as administrative agent, Citigroup Global Markets Inc., RBC Capital Markets and The Bank of Nova Scotia, as joint lead arrangers and joint book running managers, and certain financial institutions party thereto as lenders (the “2021 Unsecured Senior Bank Term Loan Agreement”).
The 2021 Unsecured Senior Bank Term Loan Amendment, among other things, reduces the capitalization rate with respect to the asset value of certain types of real property, removes the negative covenant with respect to the creation or incurrence of liens, removes the negative covenant with respect to investments, and makes certain other changes to conform to those contained in the Amended Credit Agreement. The 2021 Unsecured Senior Bank Term Loan Amendment does not modify the maturity date, which is January 15, 2021, provided that the Company exercises its rights to extend the maturity date three times upon the satisfaction of certain conditions for an additional term of six months for the first and second extensions and for an additional term ending on January 15, 2021, for the third extension.
Affiliates of lenders under the Amended Credit Agreement, the 2019 Unsecured Senior Bank Term Loan Amendment and the 2021 Unsecured Senior Bank Term Loan Amendment have, from time to time, performed, and may in the future perform, various financial advisory, investment banking and general financing services for the Company.
The foregoing summaries of the Amended Credit Agreement, the 2019 Unsecured Senior Bank Term Loan Amendment, and the 2021 Unsecured Senior Bank Term Loan Amendment do not purport to be complete and are qualified in their entirety by reference to the full text of the Amended Credit Agreement, the 2019 Unsecured Senior Bank Term Loan Amendment, and the 2021 Unsecured Senior Bank Term Loan Amendment, copies of which will be filed as exhibits to the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2016.
Item 2.02.  Results of Operations and Financial Condition.

On August 1, 2016, Alexandria Real Estate Equities, Inc. (the “Company”) issued a press release entitled “Alexandria Real Estate Equities, Inc. Reports Second Quarter Ended June 30, 2016 Financial and Operating Results.”  The press release referred to certain supplemental information that is available on the Company’s website at www.are.com.  A copy of the press release and supplemental information are attached hereto as Exhibit 99.1.

The information contained in this Item 2.02, including the exhibit referenced herein, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section.  Such information shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01.  Financial Statements and Exhibits.

(d)  Exhibits.

99.1                Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the Second Quarter Ended June 30, 2016.

Forward-looking Statements

This current report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These statements include words such as “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “believes,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” or “will,” or the negative of these words or similar words.  Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in each such statement.  A number of important factors could cause actual results to differ materially from those included within or contemplated by the forward-looking statements, including, but not limited to, the factors described in the Company’s filings with the Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.  The Company does not undertake any responsibility to update any of these factors or to announce publicly any revisions to any of the forward-looking statements contained in this or any other document, whether as a result of new information, future events, or otherwise.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
ALEXANDRIA REAL ESTATE EQUITIES, INC.
 
 
 
 
 
 
August 1, 2016
 
By:
/s/ Joel S. Marcus
 
 
 
 
Joel S. Marcus
 
 
 
 
Chairman/Chief Executive Officer
 
 
 
 
(Principal Executive Officer)
 
 
 
 
 
 
 
 
 
By:
/s/ Dean A. Shigenaga
 
 
 
 
Dean A. Shigenaga
 
 
 
 
Chief Financial Officer
 
 
 
 
(Principal Financial Officer)
 




EXHIBIT INDEX

Exhibit
Number        Exhibit Title    
99.1        Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the Second Quarter Ended June 30, 2016.


Exhibit




 
Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2016
i


(1)    As of June 30, 2016.
(2)    For the three months ended June 30, 2016.

 
ii

 
 
 
Table of Contents
June 30, 2016
 
 

 
Page
EARNINGS PRESS RELEASE
 
SUPPLEMENTAL INFORMATION
 
Operating Information
 
 
 
Page
SUPPLEMENTAL INFORMATION (continued)
 
Investments in Real Estate
 
Visible Growth Highly Leased Pipeline:
 


This document includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Please see page 11 of our Earnings Press Release for further information.
 
This document is not an offer to sell or a solicitation to buy securities of Alexandria Real Estate Equities, Inc. Any offers to sell or solicitations to buy our securities shall be made only by means of a prospectus approved for that purpose. Unless otherwise indicated, the “Company,” “Alexandria,” “ARE,” “we,” “us,” and “our” refer to Alexandria Real Estate Equities, Inc. and its consolidated subsidiaries.

 
Alexandria Real Estate Equities, Inc. All Rights Reserved. © 2016
iii

Alexandria Real Estate Equities, Inc.

Reports

Second Quarter Ended June 30, 2016 Financial and Operating Results

Solid 2Q16 Operating Results and Strong Internal and External Growth

PASADENA, Calif. – August 1, 2016 – Alexandria Real Estate Equities, Inc. (NYSE:ARE) announced financial and operating results for the second quarter ended June 30, 2016.

Key highlights:

Solid internal and external growth
•
Total revenue of $226.1 million, up 11%, for 2Q16, compared to $204.2 million for 2Q15;
•
Executed leases for 816,512 RSF during 2Q16, even with minimal contractual lease expirations in 2016 and our highly leased value-creation pipeline;
•
Rental rate increases of 27.1% and 9.3% (cash basis) during 2Q16 for lease renewals and re-leasing of space aggregating 647,268 RSF (included in the 816,512 RSF above);
•
Same property NOI growth of 4.9% and 6.4% (cash basis) for 2Q16, compared to 2Q15; and
•
2Q16 key development projects placed into service:
•
295,609 RSF to Illumina, Inc. at 5200 Illumina Way
•
51,040 RSF to Dana-Farber Cancer Institute, Inc. at 360 Longwood Avenue
•
62,595 RSF, including 34,017 RSF of vacancy, at 430 East 29th Street; improvement of initial cash yield to 7.0% from originally disclosed yield of 6.6%.
Results
 
2Q16
 
2Q15
 
Change
 
1H16
 
1H15
 
Change
Net (loss) income attributable to Alexandria’s common stockholders – diluted:
In Millions
$
(127.6
)
 
$
31.3

 
N/A

 
$
(131.5
)
 
$
49.1

 
N/A

Per Share
$
(1.72
)
 
$
0.44

 
N/A

 
$
(1.79
)
 
$
0.69

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
FFO attributable to Alexandria’s common stockholders – diluted, as adjusted:
In Millions
$
101.1

 
$
93.6

 
8.0
%
 
$
198.2

 
$
185.0

 
7.1
%
Per Share
$
1.36

 
$
1.31

 
3.8
%
 
$
2.70

 
$
2.59

 
4.2
%
Key items impacting net (loss) income and EPS attributable to Alexandria’s common stockholders
(amounts are shown after deducting any amounts attributable to noncontrolling interests):
(in millions, except per share amounts)
2Q16
 
2Q15
 
2Q16
 
2Q15
Amount
 
Per Share – Diluted
Impairment of real estate (1)
$
155.6

 
$
—

 
$
2.09

 
$
—

Preferred stock redemption charge
9.5

 
—

 
0.13

 
—

Total
$
165.1

 
$
—

 
$
2.22

 
$
—

Weighted avg. shares of common stock outstanding
74.3

 
71.4

 
 
 
 
 
 
 
 
 
 
 
 
(1)    Primarily relates to impairments of real estate located in Asia. Refer to page 56 of our Supplemental Information for additional information.
 
Balance sheet management and disciplined allocation of capital
•
Repurchased 1.0 million shares of Series D cumulative convertible preferred stock for $33.7 million, or $33.69 per share;
•
$348.4 million gross proceeds from issuance of common stock under our ATM program; we anticipate filing another ATM program in the future;
•
Executed two separate joint ventures for sales of partial interests in two San Diego properties:
•
Aggregate proceeds of $256.3 million will be received primarily in 2016
•
Cash capitalization rate of 5.7% (reflects Eli Lilly and Company lease expiration and relocation)
•
One joint venture closed in June 2016 and one will close in 2H16;
•
Completed issuance of $350 million, 3.95% 10-year unsecured senior note payable;
•
Closed a $304.3 million secured construction loan for 100 Binney Street;
•
In July, we amended our unsecured senior line of credit and increased aggregate commitments available for borrowing to $1.65 billion, extended the maturity date to October 2021, and reduced the interest rate by 10 bps to LIBOR+1.00%; and
•
Disciplined allocation of capital to value-creation pipeline of highly leased Class A buildings in urban innovation clusters, representing 35% NOI growth over 2015:
Delivery Date
 
RSF
 
Leased %
 
Incremental Annual NOI
1H16
 
413,535

 
92%
 
$14 million
2H16
 
1,056,733

 
90%
 
$51 million to $56 million
2017-2018
 
1,987,948

 
74%
 
$130 million to $140 million
 
 
3,458,216

 
81%
 
$195 million to $210 million

Timely, fully funded strategic acquisition
•
In June 2016, we entered into a definitive agreement to acquire One Kendall Square, a 644,771 rentable square feet (“RSF”), seven-building collaborative science and technology campus in our key East Cambridge urban innovation cluster submarket. The purchase price is $725 million, including the assumption of a $203.0 million secured note payable. We expect to obtain approval by the lender for the loan assumption in the coming months and complete the acquisition soon thereafter.
•
In July 2016, we executed an offering, subject to forward sale agreements, to sell 7.5 million shares of common stock at a public offering price of $101.00 per share. The forward sale agreements allowed us to lock in the price of the shares (subject to certain adjustments) to fund the pending acquisition of One Kendall Square. We expect to settle the forward sale agreements after obtaining approval by the lender to assume the One Kendall Square loan and completing the acquisition of One Kendall Square (see “Subsequent Events” below).

Accelerated timing of lower leverage goal
•
Accelerated timing of net debt to adjusted EBITDA goal with 0.3x improvement by 4Q16 with a portion of proceeds from the forward sale agreements. Revised 4Q16 annualized target range is from 6.2x to 6.6x and was improved from range from 6.5x to 6.9x; and
•
In July, we completed the partial principal repayment of $200 million, and reduced the balance under our 2019 Unsecured Senior Bank Term Loan to $400 million.


 
1
 
 
 
Second Quarter Ended June 30, 2016, Financial and Operating Results
June 30, 2016
 
 

Key highlights (continued):

Increased common stock dividend and earned second consecutive CARE award
•
Common stock dividend for 2Q16 of $0.80 per common share, up 3 cents, or 4%, over 2Q15; continuation of our strategy to share growth in cash flows from operating activities with our stockholders, while also retaining a portion for reinvestment; and
•
2016 recipient of the NAREIT Investor CARE (Communications and Reporting Excellence) Gold Award as a best-in-class REIT that delivers transparency, quality, and efficient communications and reporting to the investment community; our second consecutive (2016 and 2015) NAREIT Investor CARE Gold Award.

Core operating metrics

•
Percentage of annualized base rent (“ABR”) from investment-grade tenants as of 2Q16:
•
All tenants: 53%
•
Top 20 tenants: 82%
•Solid leasing activity, even with minimal contractual lease expiration in 2016 and our highly leased value-creation pipeline:
 
 
 
 
Renewals/Re-leasing
 
 
 
 
 
 
Rental Rate Growth
Period
 
Total RSF
 
RSF
 
GAAP
 
Cash
2Q16
 
816,512

 
647,268

 
27.1%
 
9.3%
YTD 2Q16
 
1,205,384

 
865,610

 
28.6%
 
11.0%

•
Same property NOI growth:
•
4.9% and 6.4% (cash basis) for 2Q16, compared to 2Q15
•
5.2% and 6.1% (cash basis) for YTD 2Q16, compared to YTD 2Q15
•
Occupancy for operating properties in North America of 97.0% as of 2Q16
•
Operating margin at 70% for 2Q16
•
Adjusted EBITDA margin at 66% for 2Q16

External growth

Visible, multiyear, highly leased value-creation pipeline
•
Disciplined allocation of capital to value-creation pipeline of highly leased Class A buildings in urban innovation clusters, representing 35% NOI growth over 2015:
Delivery Date
 
RSF
 
Leased %
 
Incremental Annual NOI
1H16
 
413,535

 
92%
 
$14 million
2H16
 
1,056,733

 
90%
 
$51 million to $56 million
2017-2018
 
1,987,948

 
74%
 
$130 million to $140 million
 
 
3,458,216

 
81%
 
$195 million to $210 million
 
External growth (continued)

•
2Q16 key development projects placed into service:
•
295,609 RSF to Illumina, Inc. at 5200 Illumina Way, in our University Town Center submarket in San Diego
•
51,040 RSF to Dana-Farber Cancer Institute, Inc. at 360 Longwood Avenue in our Longwood Medical Area submarket in Greater Boston
•
62,595 RSF, including 34,017 RSF of vacancy, at 430 East 29th Street in our Manhattan submarket in New York City; improvement of initial cash yield to 7.0% from originally disclosed yield of 6.6%
•
2Q16 commencement of development projects:
•
Additional building, 100% leased to Vertex Pharmaceuticals, Inc., located at 3215 Merryfield Row, aggregating 170,523 RSF at our ARE Spectrum project in our Torrey Pines submarket
•
Parking structure, 100% leased to Illumina, Inc., located at 5200 Illumina Way in our University Town Center submarket

One Kendall Square Acquisition
•
In June 2016, we entered into a definitive agreement to acquire One Kendall Square, a 644,771 RSF, seven-building collaborative science and technology campus in our key East Cambridge urban innovation cluster submarket located in Greater Boston. The purchase price is $725 million, including the assumption of a $203.0 million secured note payable. We expect to obtain approval by the lender for the loan assumption in the coming months and complete the acquisition soon thereafter. See pages 5 - 7 for additional information.

Balance sheet

Sales of partial interests in properties located in our University Town Center submarket of San Diego
•
In June 2016, we entered into a joint venture agreement with TIAA Global Asset Management (“TIAA”) to sell a 45% partial interest in 10290 Campus Point Drive, a 304,326 RSF redevelopment project in San Diego 100% leased to Eli Lilly and Company. Our partner is expected to fund substantially all of the remaining costs to complete the redevelopment. This sale of a partial interest closed in June 2016.
•
Additionally, in June 2016, we entered into a separate joint venture agreement with TIAA to sell a 45% partial interest in 10300 Campus Point Drive, consisting of 449,759 RSF, primarily leased to Celgene Corporation, Eli Lilly and Company, and The Regents of the University of California. This sale of a partial interest will close in 2H16.
•
Total gross estimated proceeds from these two sales of partial interests are $256.3 million, representing a 5.7% cash capitalization rate. The cash capitalization rate reflects the near-term contractual lease expiration by Eli Lilly and Company of 125,409 RSF as they expand into 304,326 RSF at 10290 Campus Point Drive. Proceeds from the joint venture that closed in June 2016 were $31.0 million. Estimated proceeds of $45 million, $165 million, and $15 million are expected to be received by us in 3Q16, 4Q16, and 1Q17, respectively.


 
2
 
 
 
Second Quarter Ended June 30, 2016, Financial and Operating Results
June 30, 2016
 
 

Balance sheet (continued)

Improvement in balance sheet leverage and liquidity
•
Net debt to adjusted EBITDA
•
2Q16 annualized: 6.8x
•
2Q16 trailing 12 months: 6.9x
•
4Q16 annualized target range: 6.2x to 6.6x
•
Goal: less than 6.0x;
•
3.5x fixed-charge coverage ratio for 2Q16 annualized and trailing 12 months;
•
$2.4 billion of liquidity;
•
Repurchased 1.0 million outstanding shares of our Series D cumulative convertible preferred stock at an aggregate price of $33.7 million, or $33.69 per share, and recognized a preferred stock redemption charge of $9.5 million in 2Q16;
•
Sold an aggregate of 3.7 million shares of common stock under our ATM program for gross proceeds of $348.4 million, or $95.31 per share, and net proceeds of $342.5 million in 2Q16;
•
In April 2016, we closed a secured construction loan for our development project at 100 Binney Street in our Cambridge submarket:
•
Commitments available for borrowing of $304.3 million
•
Outstanding borrowings bear interest at a rate of LIBOR+200 bps
•
Executed 2.00% LIBOR rate cap agreements for notional up to $150 million;
•
In June 2016, we executed the offering of $350.0 million of unsecured senior notes, due in 2027, at an interest rate of 3.95%. Net proceeds were used initially to reduce outstanding borrowings on our unsecured senior line of credit;
•
$12.4 billion total market capitalization as of 2Q16;
•
16% of gross investments in real estate in North America in value-creation pipeline as of 2Q16, with 4Q16 target range from 10% to 13%;
•
Limited debt maturities through 2018 and well-laddered maturity profile;
•
10% unhedged variable-rate debt as a percentage of total debt as of 2Q16; and
•
During 2Q16, we repaid two secured notes payable aggregating $173.8 million with a weighted average interest rate of 5.59%.

LEED certifications

•
57% of total ABR expected from LEED projects upon completion of in-process projects.

 
Subsequent events

•
In July 2016, we repurchased 1.1 million outstanding shares of our 7.0% Series D cumulative convertible preferred stock at an aggregate price of $39.3 million, or $36.31 per share.
•
In July 2016, we executed an offering, subject to forward sale agreements, to sell an aggregate of 7.5 million shares of common stock, including 975,000 shares sold pursuant to the exercise in full of the underwriters’ option to purchase additional shares of our common stock, at a public offering price of $101.00 per share. Net proceeds, after issuance costs and underwriters’ discount, of $724.0 million, will be further adjusted as provided in the forward sale agreements. The forward sale agreements allowed us to lock in the price of the shares (subject to certain adjustments) to fund the pending acquisition of One Kendall Square. We expect to settle the forward sale agreements by issuing the common stock after obtaining approval by the lender to assume the One Kendall Square loan and completing the acquisition of One Kendall Square.
•
In July 2016, we executed two interest rate swap agreements, with notional amounts aggregating $200 million at a fixed pay rate of 0.95%, effective on March 29, 2018.
•On July 29, 2016, we amended our unsecured senior line of credit and recognized a loss on early extinguishment of debt of $2.4 million related to the write-off of unamortized loan fees. Key changes are summarized below:
 
 
As of July 29, 2016
 
Prior Agreement
Commitments available for borrowing
 
$1.65 billion
 
$1.5 billion
Interest rate
 
LIBOR+1.00%
 
LIBOR+1.10%
Maturity date
 
October 29, 2021
 
January 3, 2019

•
On July 29, 2016, we completed a partial principal repayment of $200 million of our 2019 Unsecured Senior Bank Term Loan and reduced the total outstanding balance from $600 million to $400 million and recognized a loss on early extinguishment of debt of $869 thousand related to the write-off of unamortized loan fees.



 
3
 
 
 
Incremental Annual NOI from Development and Redevelopment Projects
June 30, 2016
 
 




(1)
Represents incremental annual NOI upon stabilization of our development and redevelopment projects, including only our share of real estate joint venture projects. RSF and percentage leased represents 100% of each property.
(2)
Incremental annual NOI for 2016 of $65 million to $70 million (including $14 million of incremental NOI for 1H16) decreased from a range of $75 million to $80 million previously disclosed primarily due to the sale in June 2016 of a 45% partial interest in 10290 Campus Point Drive.
(3)
Incremental annual NOI for 2017-2018 of $130 million to $140 million increased from range of a $120 million to $130 million previously disclosed due to adding the development of a new parking structure, 100% leased to Illumina, Inc., located at 5200 Illumina Way in our University Town Center submarket.



 
4


 
5


 
6


 
 
 
 
One Kendall Square Acquisition: Expanding
Our Presence and Our Urban Innovation Campus Strategy in Cambridge
 
 
 
 
 

 
7
 
 
 
Disciplined Allocation of Capital and Management of Value-Creation Pipeline
June 30, 2016
 
 


2016 Disciplined Allocation of Capital (1)
 
North America Value-Creation Pipeline
 
 
 
 
In-Process
Value-Creation (2)
Future
Value-Creation
 
3.5M
5.6M
 
RSF
RSF
 
 
 
 
Pre-Leased Percentage (3) of Ground-Up Developments since January 1, 2009
 
Ground-Up Developments Commenced & Delivered since January 1, 2009
 
 
 
 
 
Single-Tenant

100%
Pre-Leased

2.6M RSF
Multi-Tenant

38%
Pre-Leased

2.5M RSF
 
Average
Initial Stabilized Yield


8.0%
Average
Initial Stabilized Yield
(Cash Basis)

7.6%
(1)
Represents projected construction and acquisitions for the year ending December 31, 2016, including the acquisition of One Kendall Square, which we expect to close within the next several months. Refer to pages 5 - 7 of our Earnings Press Release for additional details.
(2)
Includes 0.4 million RSF of value-creation projects recently completed and placed into service in 1H16.
(3)
Represents average pre-leased percentage at the commencement of vertical above ground construction.

 
8
 
 
Dispositions
June 30, 2016
(Dollars in thousands)
 
 

 
 
 
 
 
 
 
 
 
 
 
 
Classification
 
Property/Market/Submarket
 
Date of Sale
 
RSF/Acres
 
NOI (1)
 
Cash
NOI (1)
 
Construction Funding
 
Asset
Sales (2)
 
16020 Industrial Drive/Maryland/Gaithersburg
 
4/21/16
 
71,000
 RSF
 
$
1,022

 
 
$
896

 
 
$
—

 
$
6,400

 
14 Firstfield Road/Maryland/Gaithersburg
 
6/2/16
 
4.6
 acres
 
N/A

 
 
N/A

 
 
—

 
 
3,500

 
Land parcel in Asia
 
5/2/16
 
5.0
 acres
 
N/A

 
 
N/A

 
 
—

 
 
7,484

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Two joint ventures – 45% partial interest sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10290 Campus Point Drive
 
6/29/16
 
304,326
 RSF
 
$
15,930

(3) 
 
$
14,733

(3) 
 
106,263

(4) 
 
—

 
10300 Campus Point Drive
 
2H16
 
449,759
 RSF
 
 
—

 
 
150,008

(4) 
 
 
 
 
 
 
 
 
 
 
 
 
106,263

 
 
167,392

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
306 Belmont Street and 350 Plantation Street/Greater Boston/Route 495/Worcester (5)
 
2H16
 
90,690
 RSF
 
$
1,558

 
 
$
1,348

 
 
—

 
 
17,550

 
Operating properties and land parcels/Asia
 
2H16
 
1,200,683
 RSF
 
N/A

 
 
N/A

 
 
—

 
 
105,300

(6) 
 
 
 
 
 
 
 
 
 
 
 
 
—

 
 
122,850

 
Completed and pending asset sales
 
 
 
 
 
 
 
 
 
 
 
$
106,263

 
$
290,242

 

(1)
NOI amounts represent the annualized amounts for the quarter ended prior to the date of sale, or 2Q16 annualized for the pending asset sales. For partial interest sales in process, NOI represents the partial interest portion expected to be sold. Cash NOI excludes straight-line rent and amortization of acquired below-market leases.
(2)
Represents gross sales proceeds.
(3)
Amount represents 45% partial interest share of the anticipated initial stabilized NOI and cash NOI upon completion of redevelopment of 10290 Campus Point Drive and NOI and cash NOI for 2Q16 annualized for 10300 Campus Point Drive.
(4)
Aggregate proceeds of $256.3 million, including gross proceeds of $31.0 million received in 2Q16, and additional future construction funding of $75 million to be received for 10290 Campus Point Drive.
(5)
Non-core properties located outside of our urban innovation clusters. These properties are Class B office buildings leased to non-credit tenants and represent our remaining investments in Worcester. The internal rate of return over our hold period, including the expected disposition of the asset, is expected to be 8.9%.
(6)
Represents 1.2 RSF million RSF of operating properties, plus land parcels aggregating 191.0 acres. Sales expected to be completed in multiple transactions over several quarters.

 
9
 
 
 
Guidance
 
June 30, 2016
 
(Dollars in thousands, except per share amounts)
 
 
 
 

The following updated guidance is based on our current view of existing market conditions and other assumptions for the year ending December 31, 2016. There can be no assurance that actual amounts will be materially higher or lower than these expectations. See our discussion of “forward-looking statements” on page 11.
Summary of Key Changes in Guidance
 
Prior (1)
 
As of 8/1/16
 
Summary of Key Changes in Guidance (Continued)
 
Prior (1)
 
As of 8/1/16
 
EPS, FFO per share, and FFO per share, as adjusted
 
See below
 
See below
 
Interest expense
 
$108 to $118 million
 
$100 to $110 million
(2) 
Rental rate increases up 5%
 
14.0% to 17.0%
 
19.0% to 22.0%
 
Same property NOI increase up 0.5%
 
2.0% to 4.0%
 
2.5% to 4.5%
 
Rental rate increases (cash basis) up 1%
 
6.0% to 9.0%
 
7.0% to 10.0%
 
Same property NOI increase (cash basis) up 0.5%
 
3.5% to 5.5%
 
4.0% to 6.0%
 
EPS and FFO per Share Attributable to Alexandria’s Common Stockholders – Diluted (3)
 
 
As of 7/6/16
 
As of 8/1/16
Earnings per share
 
$(1.08) to $(0.98)
 
$(1.19) to $(1.13)
Add: depreciation and amortization
 
4.00
 
4.00
Add: impairment of real estate – rental properties
 
1.14
 
1.15
Other
 
(0.02)
 
(0.02)
FFO per share
 
$4.04 to $4.14
 
$3.94 to $4.00
Less: investment income (4)
 
—
 
(0.06)
Add: impairment of real estate – land parcels
 
1.24
 
1.25
Add: loss on early extinguishment of debt
 
0.04
 
0.04
Add: preferred stock redemption charge
 
0.16
 
0.33
Other
 
(0.02)
 
(0.02)
FFO per share, as adjusted
 
$5.46 to $5.56
 
$5.48 to $5.54
 
 
2016 Guidance
Key Assumptions
 
Low
 
High
Occupancy percentage in North America as of December 31, 2016
 
96.5%

 
97.1%

 
 
 
 
 
Lease renewals and re-leasing of space:
 
 
 
 
Rental rate increases
 
19.0%

 
22.0%

Rental rate increases (cash basis)
 
7.0%

 
10.0%

Same property performance:
 
 
 
 
NOI increase
 
2.5%

 
4.5%

NOI increase (cash basis)
 
4.0%

 
6.0%

 
 
 
 
 
Straight-line rent revenue
 
$
51,000

 
$
56,000

General and administrative expenses
 
$
59,000

 
$
64,000

Capitalization of interest
 
$
45,000

 
$
55,000

Interest expense (2)
 
$
100,000

 
$
110,000

 
Key Credit Metrics
 
2016 Guidance
 
Net debt to Adjusted EBITDA – 4Q annualized
 
6.2x to 6.6x
 
Fixed charge coverage ratio – 4Q annualized
 
3.0x to 3.5x
 
Value-creation pipeline percentage of gross real estate as of 12/31/16
 
10% to 13%
 
 
 
2016 Guidance
 
As of 6/30/16 (unless stated otherwise)
 
Key Sources and Uses of Capital
 
Low
 
High
 
Mid-Point
 
 
Sources of capital:
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities after dividends
 
$
115,000

 
$
135,000

 
$
125,000

 
$
81,000

 
Incremental debt
 
339,000

 
269,000

 
304,000

 
(30,000
)
 
Asset sales
 
300,000

 
400,000

 
350,000

 
290,000

(5) 
Common equity/sales of available-for-sale equity securities
 
1,180,000

 
1,280,000

 
1,230,000

 
1,092,000

(3) 
Total sources of capital
 
$
1,934,000

 
$
2,084,000

 
$
2,009,000

 
$
1,433,000

 
Uses of capital:
 
 
 
 
 
 
 
 
 
Acquisitions
 
$
900,000

 
$
950,000

 
$
925,000

(6) 
$
779,000

(7) 
Improvement in leverage
 
175,000

 
175,000

 
175,000

(8) 
175,000

(8) 
Construction
 
760,000

 
860,000

 
810,000

 
380,000

 
Series D preferred stock repurchases
 
99,000

 
99,000

 
99,000

 
99,000

(9) 
Total uses of capital
 
$
1,934,000

 
$
2,084,000

 
$
2,009,000

 
$
1,433,000

 
Incremental debt (included above):
 
 
 
 
 
 
 
 
 
Issuance of unsecured senior notes payable
 
$
350,000

 
$
350,000

 
$
350,000

 
$
350,000

 
Assumption of secured note payable
 
203,000

 
203,000

 
203,000

 
203,000

(7) 
Borrowings – secured construction loans
 
250,000

 
300,000

 
275,000

 
149,000

 
Repayments of secured notes payable
 
(190,000
)
 
(290,000
)
 
(240,000
)
 
(233,000
)
 
Repayment of unsecured senior term loan
 
(200,000
)
 
(200,000
)
 
(200,000
)
 
(200,000
)
(10) 
Unsecured senior line of credit/other
 
(74,000
)
 
(94,000
)
 
(84,000
)
 
(299,000
)
 
Incremental debt
 
$
339,000

 
$
269,000

 
$
304,000

 
$
(30,000
)
 



(1)
Prior guidance for these items was provided on May 2, 2016, with the exception of EPS, FFO per share, and FFO per share, as adjusted, which were provided on July 6, 2016.
(2)
Our guidance range for interest expense for the year ending December 31, 2016 has been revised for the impact of the amount and/or timing of various transactions that we have completed and/or announced, including acquisitions, our forward sale of common stock, asset sales, and unsecured senior notes payable offering. In the prior quarter, our outlook assumed we would be in the bottom half of our interest expense range of $108 million to $118 million.
(3)
Includes net proceeds of $724.0 million from the forward sale agreements to sell an aggregate of 7.5 million shares of our common stock, and net proceeds of $367.8 million for sales of common stock under our ATM program for YTD 2016.
(4)
Represents investment gains of $4.4 million related to one investment in 2Q16.
(5)
Includes completed and pending asset sales discussed on page 9.
(6)
Includes acquisition price of $140 million for 88 Bluxome Street in our Mission Bay/SoMa submarket of San Francisco that may be deferred to 2017.
(7)
Includes the pending acquisition of One Kendall Square for $725 million; we expect to assume a non-recourse secured note payable of $203.0 million at closing.
(8)
We expect to use $175 million of the proceeds from the forward sale of common stock to reduce our projected net debt to adjusted EBITDA - 4Q16, annualized, from a range of 6.5x to 6.9x, to 6.2x to 6.6x.
(9)
Includes the repurchase of 1.1 million outstanding shares of our Series D cumulative convertible preferred stock in July 2016.
(10)
On July 29, 2016, we completed a partial principal repayment of $200 million of our 2019 Unsecured Senior Bank Term Loan.

 
10
 
 
 
Earnings Call Information and About the Company
June 30, 2016
 
 


We will host a conference call on Tuesday, August 2, 2016, at noon Eastern Time (“ET”)/9:00 a.m. Pacific Time (“PT”), which is open to the general public to discuss our financial and operating results for the second quarter ended June 30, 2016. To participate in this conference call, dial 877-548-7905 or 719-325-4929 and confirmation code 4797929 shortly before noon ET/9:00 a.m. PT. The audio webcast can be accessed at www.are.com, in the “For Investors” section. A replay of the call will be available for a limited time from 3:00 p.m. ET/noon PT on Tuesday, August 2, 2016. The replay number is 888-203-1112 or 719-457-0820, and the confirmation code is 4797929.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the second quarter ended June 30, 2016, is available in the “For Investors” section of our website at www.are.com or by following this link: http://www.are.com/fs/2016q2.pdf.

For any questions, please contact Joel S. Marcus, chairman, chief executive officer, and founder, at (626) 578-9693 or Dean A. Shigenaga, executive vice president and chief financial officer, at (626) 578-0777.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE:ARE) is a fully integrated, self-administered, and self-managed urban office real estate investment trust (“REIT”) uniquely focused on world-class collaborative science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $12.4 billion and an asset base in North America of 24.4 million square feet as of June 30, 2016. The asset base in North America includes 18.8 million RSF of operating properties and development and redevelopment projects (under construction or pre-construction) and 5.6 million square feet of future ground-up development projects. Alexandria pioneered this niche in 1994 and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park.

***********

This document includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2016 earnings per share attributable to Alexandria’s common stockholders – diluted, 2016 FFO per share attributable to Alexandria’s common stockholders – diluted, NOI, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “believes,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” or “will,” or the negative of those words or similar words. These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. There can be no assurance that actual results will not be materially higher or lower than these expectations. These statements are subject to risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully place into service and lease any properties undergoing development or redevelopment and our existing space held for future development or redevelopment (including new properties acquired for that purpose), our failure to successfully operate or lease acquired properties, decreased rental rates, increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, general and local economic conditions, a favorable capital market environment, leasing activity, lease renewals, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission (“SEC”). Accordingly, you are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are made as of the date of this earnings press release, and unless otherwise stated, we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.


 
11
 
 
Consolidated Statements of Income
June 30, 2016
(Dollars in thousands, except per share amounts)
 
 

 
 
Three Months Ended
 
Six Months Ended
 
 
6/30/16

3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
 
6/30/16
 
6/30/15
Revenues:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Rental
 
$
161,638

 
$
158,276

 
$
158,100

 
$
155,311

 
$
151,805

 
$
319,914

 
$
295,413

Tenant recoveries
 
54,107

 
52,597

 
54,956

 
56,119

 
49,594

 
106,704

 
97,988

Other income
 
10,331

 
5,216

 
10,899

 
7,180

 
2,757

 
15,547

 
7,508

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
226,076

 
216,089

(1) 
223,955

 
218,610

 
204,156

 
442,165


400,909

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental operations
 
67,325

 
65,837

 
68,913

 
68,846

 
62,250

 
133,162

 
123,473

General and administrative
 
15,384

 
15,188

 
15,102

 
15,143

 
14,989

 
30,572

 
29,376

Interest
 
25,025

 
24,855

 
28,230

 
27,679

 
26,668

 
49,880

 
49,904

Depreciation and amortization
 
70,169

 
70,866

 
72,245

 
67,953

 
62,171

 
141,035

 
121,091

Impairment of real estate
 
156,143

(2) 
28,980

(2) 
8,740

 
—

 
—

 
185,123

(2) 
14,510

Loss on early extinguishment of debt
 
—

 
—

 
—

 
—

 
189

 
—

 
189

Total expenses
 
334,046

 
205,726

 
193,230

 
179,621

 
166,267

 
539,772

 
338,543

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in (losses) earnings of unconsolidated real estate joint ventures
 
(146
)
 
(397
)
 
(174
)
 
710

 
541

 
(543
)
 
1,115

Gain on sales of real estate – rental properties
 
—

 
—

 
12,426

 
—

 
—

 
—

 
—

(Loss) income from continuing operations
 
(108,116
)
 
9,966

 
42,977

 
39,699

 
38,430

 
(98,150
)
 
63,481

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss from discontinued operations
 
—

 
—

 
—

 
—

 
—

 
—

 
(43
)
Net (loss) income
 
(108,116
)
 
9,966

 
42,977

 
39,699

 
38,430

 
(98,150
)
 
63,438

Net income attributable to noncontrolling interests
 
(3,500
)
 
(4,030
)
(3) 
(972
)
 
(170
)
 
(263
)
 
(7,530
)
 
(755
)
Net (loss) income attributable to Alexandria Real Estate Equities, Inc.
 
(111,616
)
 
5,936

 
42,005

 
39,529

 
38,167

 
(105,680
)
 
62,683

Dividends on preferred stock
 
(5,474
)
 
(5,907
)
 
(6,246
)
 
(6,247
)
 
(6,246
)
 
(11,381
)
 
(12,493
)
Preferred stock redemption charge
 
(9,473
)
 
(3,046
)
 
—

 
—

 
—

 
(12,519
)
 
—

Net income attributable to unvested restricted stock awards
 
(1,085
)
 
(801
)
 
(628
)
 
(623
)
 
(630
)
 
(1,886
)
 
(1,113
)
Net (loss) income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders
 
$
(127,648
)
(2) 
$
(3,818
)
(2) 
$
35,131

 
$
32,659

 
$
31,291

 
$
(131,466
)
(2) 
$
49,077

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic and diluted:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
(1.72
)
(2) 
$
(0.05
)
(2) 
$
0.49

 
$
0.46

 
$
0.44

 
$
(1.79
)
(2) 
$
0.69

Discontinued operations
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Earnings per share – basic and diluted
 
$
(1.72
)
 
$
(0.05
)
 
$
0.49

 
$
0.46

 
$
0.44

 
$
(1.79
)
 
$
0.69

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding for
calculating earnings per share attributable to Alexandria’s common stockholders – basic and diluted
 
74,319

 
72,584

 
71,833

 
71,500

 
71,412

 
73,452

 
71,389

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per share of common stock
 
$
0.80

 
$
0.80

 
$
0.77

 
$
0.77

 
$
0.77

 
$
1.60

 
$
1.51

 
(1)
Decrease in total revenues during 1Q16 is primarily related to a $2.4 million reduction in tenant recoveries due to lower operating expenses and a $3.6 million decrease in investment gains during 1Q16.
(2)
See page 56 of our Supplemental Information for additional information.
(3)
Increase in net income attributable to noncontrolling interest is due to the sales of partial interest in three Class A assets in December 2015 for $453.1 million.

 
12
 
 
Consolidated Balance Sheets
June 30, 2016
(In thousands)
 
 

 
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
Assets
 
 
 
 

 
 

 
 

 
 

Investments in real estate
 
$
7,774,608

 
$
7,741,466

 
$
7,629,922

 
$
7,527,738

 
$
7,321,820

Investments in unconsolidated real estate joint ventures
 
132,433

 
127,165

 
127,212

 
126,471

 
121,055

Cash and cash equivalents
 
256,000

 
146,197

 
125,098

 
76,383

 
68,617

Restricted cash
 
13,131

 
14,885

 
28,872

 
36,993

 
44,191

Tenant receivables
 
9,196

 
9,979

 
10,485

 
10,124

 
9,279

Deferred rent
 
303,379

 
293,144

 
280,570

 
267,954

 
257,427

Deferred leasing costs
 
191,619

 
192,418

 
192,081

 
184,798

 
169,466

Investments
 
360,050

 
316,163

 
353,465

 
330,570

 
360,614

Other assets
 
104,414

 
130,115

 
133,312

 
151,669

 
145,073

Total assets
 
$
9,144,830

 
$
8,971,532

 
$
8,881,017

 
$
8,712,700

 
$
8,497,542

 
 
 
 
 
 
 
 
 
 
 
Liabilities, Noncontrolling Interests, and Equity
 
 
 
 
 
 
 
 
 
 
Secured notes payable
 
$
722,794

 
$
816,578

 
$
809,818

 
$
767,874

 
$
763,844

Unsecured senior notes payable
 
2,376,713

 
2,031,284

 
2,030,631

 
1,734,857

 
1,734,310

Unsecured senior line of credit
 
72,000

 
299,000

 
151,000

 
843,000

 
624,000

Unsecured senior bank term loans
 
945,030

 
944,637

 
944,243

 
943,857

 
943,463

Accounts payable, accrued expenses, and tenant security deposits
 
593,628

 
628,467

 
589,356

 
586,594

 
531,612

Dividends payable
 
67,188

 
64,275

 
62,005

 
61,340

 
61,194

Total liabilities
 
4,777,353

 
4,784,241

 
4,587,053

 
4,937,522

 
4,658,423

 
 
 
 
 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
 
9,218

 
14,218

 
14,218

 
14,218

 
14,248

 
 
 
 
 
 
 
 
 
 
 
Alexandria Real Estate Equities, Inc.’s stockholders’ equity:
 
 
 
 
 
 
 
 
 
 
Series D cumulative convertible preferred stock
 
188,864

 
213,864

 
237,163

 
237,163

 
237,163

Series E cumulative redeemable preferred stock
 
130,000

 
130,000

 
130,000

 
130,000

 
130,000

Common stock
 
766

 
729

 
725

 
718

 
717

Additional paid-in capital
 
3,693,807

 
3,529,660

 
3,558,008

 
3,356,043

 
3,371,016

Accumulated other comprehensive income (loss)
 
8,272

 
(8,533
)
 
49,191

 
35,238

 
83,980

Alexandria’s stockholders’ equity
 
4,021,709

 
3,865,720

 
3,975,087

 
3,759,162

 
3,822,876

Noncontrolling interests
 
336,550

 
307,353

 
304,659

 
1,798

 
1,995

Total equity
 
4,358,259

 
4,173,073

 
4,279,746

 
3,760,960

 
3,824,871

Total liabilities, noncontrolling interests, and equity
 
$
9,144,830

 
$
8,971,532

 
$
8,881,017

 
$
8,712,700

 
$
8,497,542




 
13
 
 
Funds From Operations and Adjusted Funds From Operations
June 30, 2016
(In thousands)
 
 

The following table presents a reconciliation of net (loss) income attributable to Alexandria’s common stockholders – basic, the most directly comparable financial measure presented in accordance with generally accepted accounting principles (“GAAP”), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to FFO attributable to Alexandria’s common stockholders – basic and diluted, FFO attributable to Alexandria’s common stockholders – diluted, as adjusted, and adjusted funds from operations (“AFFO”) attributable to Alexandria’s common stockholders – diluted.
 
 
Three Months Ended
 
Six Months Ended
 
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
 
6/30/16
 
6/30/15
Net (loss) income attributable to Alexandria’s common stockholders
 
$
(127,648
)
 
$
(3,818
)
 
$
35,131

 
$
32,659

 
$
31,291

 
$
(131,466
)
 
$
49,077

Depreciation and amortization
 
68,594

 
69,308

 
72,528

 
68,398

 
62,523

 
137,902

 
121,725

Impairment of real estate – rental properties
 
88,395

 
—

 
8,740

 
—

 
—

 
88,395

 
14,510

Gain on sales of real estate – rental properties
 
—

 
—

 
(12,426
)
 
—

 
—

 
—

 
—

Allocation to unvested restricted stock awards
 
—

 
(80
)
 
(522
)
 
(698
)
 
(381
)
 
—

 
(547
)
FFO attributable to Alexandria’s common stockholders – basic and diluted (1)
 
29,341

 
65,410

 
103,451

 
100,359

 
93,433

 
94,831

 
184,765

Investment income
 
(4,361
)
(2) 
—

 
(7,731
)
 
(5,378
)
 
—

 
(4,361
)
 
—

Impairment of real estate – land parcels
 
67,162

 
28,980

 
—

 
—

 
—

 
96,142

 
—

Loss on early extinguishment of debt
 
—

 
—

 
—

 
—

 
189

 
—

 
189

Preferred stock redemption charge
 
9,473

 
3,046

 
—

 
—

 
—

 
12,519

 
—

Allocation to unvested restricted stock awards
 
(530
)
 
(358
)
 
85

 
67

 
(2
)
 
(969
)
 
(2
)
FFO attributable to Alexandria’s common stockholders – diluted, as adjusted
 
101,085

 
97,078

 
95,805

 
95,048

 
93,620

 
198,162

 
184,952

Non-revenue-enhancing capital expenditures:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
Building improvements
 
(2,833
)
 
(2,318
)
 
(2,025
)
 
(2,404
)
 
(2,743
)
 
(5,151
)
 
(5,021
)
Tenant improvements and leasing commissions
 
(9,041
)
 
(2,475
)
 
(4,436
)
 
(5,499
)
 
(6,429
)
 
(11,516
)
 
(12,204
)
Straight-line rent revenue
 
(2,688
)
(3) 
(12,492
)
 
(13,517
)
 
(12,006
)
 
(14,159
)
 
(15,180
)
 
(24,856
)
Straight-line rent expense on ground leases
 
777

 
592

 
862

 
(1,245
)
 
510

 
1,369

 
873

Amortization of acquired below-market leases
 
(966
)
 
(974
)
 
(997
)
 
(3,182
)
 
(1,006
)
 
(1,940
)
 
(1,939
)
Amortization of loan fees
 
2,986

 
2,792

 
2,689

 
2,657

 
2,921

 
5,778

 
5,756

Amortization of debt premiums
 
(26
)
 
(86
)
 
(90
)
 
(100
)
 
(100
)
 
(112
)
 
(182
)
Stock compensation expense
 
6,117

 
5,439

 
4,590

 
5,178

 
4,054

 
11,556

 
7,744

Allocation to unvested restricted stock awards
 
75

 
106

 
141

 
207

 
152

 
185

 
272

AFFO attributable to Alexandria’s common stockholders – diluted
 
$
95,486

 
$
87,662

 
$
83,022

 
$
78,654

 
$
76,820

 
$
183,151

 
$
155,395


(1)
Calculated in accordance with standards established by the Advisory Board of Governors of the National Association of Real Estate Investment Trusts (the “NAREIT Board of Governors”) in its April 2002 White Paper and related implementation guidance.
(2)
Represents investment gains of $4.4 million related to one investment recognized in 2Q16.
(3)
Decrease in 2Q16 due to the timing of a contractual lease payment of $9.6 million received from a tenant in our Route 128 submarket of Greater Boston. Straight-line rent revenue is expected to increase in 3Q16 to a quarterly run rate generally consistent with quarters prior to 2Q16.

 
14
 
 
Funds From Operations Per Share and Adjusted Funds From Operations Per Share
June 30, 2016
(In thousands, except per share amounts)
 
 

The following table presents a reconciliation of earnings per share attributable to Alexandria’s common stockholders – basic, the most directly comparable financial measure presented in accordance with GAAP, including our share of amounts from consolidated and unconsolidated real estate joint ventures, to FFO per share attributable to Alexandria’s common stockholders – diluted, FFO per share attributable to Alexandria’s common stockholders – diluted, as adjusted, and AFFO per share attributable to Alexandria’s common stockholders – diluted. Amounts allocable to unvested restricted stock awards are not material and are not presented separately within the table below. Per share amounts may not add due to rounding.
 
 
Three Months Ended
 
Six Months Ended
 
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
 
6/30/16
 
6/30/15
EPS attributable to Alexandria’s common stockholders – basic and diluted
 
$
(1.72
)
 
$
(0.05
)
 
$
0.49

 
$
0.46

 
$
0.44

 
$
(1.79
)
 
$
0.69

Depreciation and amortization 
 
0.92

 
0.95

 
1.00

 
0.95

 
0.87

 
1.88

 
1.70

Impairment of real estate – rental properties
 
1.19

 
—

 
0.12

 
—

 
—

 
1.20

 
0.20

Gain on sales of real estate – rental properties
 
—

 
—

 
(0.17
)
 
—

 
—

 
—

 
—

FFO per share attributable to Alexandria’s common stockholders – basic and diluted
 
0.39

 
0.90

 
1.44

 
1.40

 
1.31

 
1.29


2.59

Investment income
 
(0.06
)
 
—

 
(0.11
)
 
(0.08
)
 
—

 
(0.06
)
 
—

Impairment of real estate – land parcels
 
0.90

 
0.40

 
—

 
—

 
—

 
1.30

 
—

Preferred stock redemption charge
 
0.13

 
0.04

 
—

 
—

 
—

 
0.17

 
—

FFO per share attributable to Alexandria’s common stockholders – diluted, as adjusted
 
1.36

 
1.34

 
1.33

 
1.33

 
1.31

 
2.70

 
2.59

Non-revenue-enhancing capital expenditures:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Building improvements
 
(0.04
)
 
(0.03
)
 
(0.03
)
 
(0.03
)
 
(0.04
)
 
(0.07
)
 
(0.07
)
Tenant improvements and leasing commissions
 
(0.12
)
 
(0.04
)
 
(0.06
)
 
(0.08
)
 
(0.09
)
 
(0.16
)
 
(0.17
)
Straight-line rent revenue 
 
(0.04
)
 
(0.17
)
 
(0.19
)
 
(0.17
)
 
(0.20
)
 
(0.21
)
 
(0.35
)
Straight-line rent expense on ground leases
 
0.01

 
0.01

 
0.01

 
(0.02
)
 
0.01

 
0.02

 
0.01

Amortization of acquired below-market leases
 
(0.01
)
 
(0.01
)
 
(0.01
)
 
(0.04
)
 
(0.01
)
 
(0.03
)
 
(0.02
)
Amortization of loan fees 
 
0.04

 
0.04

 
0.04

 
0.04

 
0.04

 
0.08

 
0.08

Stock compensation expense
 
0.08

 
0.07

 
0.07

 
0.07

 
0.06

 
0.16

 
0.11

AFFO per share attributable to Alexandria’s common stockholders – diluted
 
$
1.28

 
$
1.21

 
$
1.16

 
$
1.10

 
$
1.08

 
$
2.49

 
$
2.18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares of common stock outstanding for calculating FFO, FFO, as adjusted, and AFFO per share attributable to Alexandria’s common stockholders – basic and diluted
 
74,319

 
72,584

 
71,833

 
71,500

 
71,412

 
73,452

 
71,389


See footnotes on prior page.

 
15








SUPPLEMENTAL
INFORMATION








 
 
 
Company Profile
June 30, 2016
 
 

Alexandria Real Estate Equities, Inc. (NYSE:ARE) is an urban office REIT uniquely focused on world-class collaborative science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $12.4 billion and an asset base in North America of 24.4 million square feet as of June 30, 2016. The asset base in North America includes 18.8 million RSF of operating properties and development and redevelopment projects (under construction or pre-construction) and 5.6 million square feet of future ground-up development projects. Alexandria pioneered this niche in 1994 and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park. Alexandria has a longstanding and proven track record of developing Class A assets clustered in urban science and technology campuses that provide its innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. We believe these advantages result in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.

Tenant base

Alexandria is known for its high-quality and diverse tenant base, with approximately 53% of total annualized base rent as of June 30, 2016, generated from investment-grade tenants – a REIT industry-leading percentage. Among our top 20 tenants, approximately 82% of total annualized base rent as of June 30, 2016, was generated from investment-grade tenants. The impressive quality, diversity, breadth, and depth of our significant relationships with our tenants provide Alexandria with high-quality and stable cash flows. Alexandria’s underwriting team and long-term industry relationships positively distinguish us from all other publicly traded REITs and real estate companies.

Executive/senior management team

Alexandria’s executive and senior management team has unique experience and expertise in creating highly dynamic and collaborative campuses in key urban science and technology cluster locations that inspire innovation. From the development of high-quality, sustainable real estate, to the ongoing cultivation of collaborative environments with unique amenities and events, the Alexandria team has a first-in-class reputation of excellence in its niche. Our sophisticated management team also includes regional market directors with leading reputations and longstanding relationships within the science and technology communities in their respective urban innovation clusters. We believe that our expertise, experience, reputation, and key relationships with the real estate, science, and technology industries provide Alexandria significant competitive advantages in attracting new business opportunities.
 
Alexandria’s executive/senior management team, consisting of 24 individuals, averages more than 25 years of real estate experience, including more than 12 years with Alexandria.


EXECUTIVE MANAGEMENT TEAM
Joel S. Marcus
Chairman,
Chief Executive Officer & Founder
Dean A. Shigenaga
Executive Vice President,
Chief Financial Officer & Treasurer
Thomas J. Andrews
Executive Vice President –
Regional Market Director – Greater Boston
Jennifer J. Banks
Executive Vice President –
General Counsel & Corporate Secretary
Vincent R. Ciruzzi
Chief Development Officer
Peter M. Moglia
Chief Investment Officer
Stephen A. Richardson
Chief Operating Officer &
Regional Market Director – San Francisco
Daniel J. Ryan
Executive Vice President –
Regional Market Director – San Diego & Strategic Operations


 
17
 
 
 
Investor Information
June 30, 2016
 
 

Corporate Headquarters
 
New York Stock Exchange Trading Symbols
 
Information Requests
385 East Colorado Boulevard, Suite 299
 
Common stock: ARE
 
Phone:
(626) 396-4828
Pasadena, California 91101
 
Series D preferred stock: ARE PRD
 
E-mail:
corporateinformation@are.com
 
 
Series E preferred stock: ARE PRE
 
Web:
www.are.com
 
 
 
 
 
 
Equity research coverage
Alexandria is currently covered by the following research analysts. This list may not be complete and is subject to change as firms initiate or discontinue coverage of our company. Please note that any opinions, estimates, or forecasts regarding our historical or predicted performance made by these analysts are theirs alone and do not represent opinions, estimates, or forecasts of Alexandria or its management. Alexandria does not by its reference or distribution of the information below imply its endorsement of or concurrence with any opinions, estimates, or forecasts of these analysts. Interested persons may obtain copies of analysts’ reports on their own as we do not distribute these reports. Several of these firms may from time-to-time own our stock and/or hold other long or short positions in our stock, and may provide compensated services to us.
Bank of America Merrill Lynch
 
Green Street Advisors, Inc.
 
Mitsubishi UFJ Securities (USA), Inc.
 
Robert W. Baird & Co., Incorporated
Jamie Feldman / Jeffrey Spector
 
Michael Knott / Kevin Tyler
 
Karin Ford
 
David Rodgers / Richard Schiller
(646) 855-5808 / (646) 855-1363
 
(949) 640-8780 / (949) 640-8780
 
(212) 405-7349
 
(216) 737-7341 / (312) 609-5485
 
 
 
 
 
 
 
Barclays Capital Inc.
 
JMP Securities – JMP Group, Inc.
 
Mizuho Securities USA Inc.
 
Standard & Poor’s
Ross Smotrich / Peter Siciliano
 
Peter Martin / Brian Riley
 
Richard Anderson / Jieren Huang
 
Kenneth Leon
(212) 526-2306 / (212) 526-3098
 
(415) 835-8904 / (415) 835-8908
 
(212) 205-8445 / (201) 626-1085
 
(212) 438-4638
 
 
 
 
 
 
 
Citigroup Global Markets Inc.
 
J.P. Morgan Securities LLC
 
RBC Capital Markets
 
UBS Securities LLC
Michael Bilerman / Emmanuel Korchman
 
Anthony Paolone / Gene Nusinzon
 
Michael Carroll / George Clark
 
Nick Yulico / Frank Lee
(212) 816-1383 / (212) 816-1382
 
(212) 622-6682 / (212) 622-1041
 
(440) 715-2649 / (440) 715-2653
 
(212) 713-3402 / (415) 352-5679
 
 
 
 
 
 
 
Evercore ISI
 
 
 
 
 
 
Sheila McGrath / Nathan Crossett
 
 
 
 
 
 
(212) 497-0882 / (212) 497-0870
 
 
 
 
 
 



Rating agencies
 
 
 
 
 
 
 
 
Moody’s Investors Service
 
Rating
 
S&P Global Ratings
 
Rating
 
 
Philip Kibel / Merrie Frankel
 
Baa2
 
Fernanda Hernandez / Anita Ogbara
 
BBB-
 
 
(212) 553-4569 / (212) 553-3652
 
Stable Outlook
 
(212) 438-1347 / (212) 438-5077
 
Positive Outlook
 
 

 
18
 
 
 
High-Quality, Diversified, and Innovative Tenants
June 30, 2016
 
 


Cash Flows from High-Quality, Diversified, and Innovative Tenants

Top 20 Tenants
 
All Tenants
Investment-Grade Tenants
 
Investment-Grade Tenants
82%
 
53%
of ABR
 
of ABR
 
 
 
Solid Lease Duration
 
High-Quality Tenant Base
8.4
 
Years
 
 
 


(1)
Office and tech office space compose 2.5% and 0.6% of total ABR, respectively.

 
19
 
 
 
Class A Assets in AAA Locations
June 30, 2016
 
 


High-Quality Cash Flows from Class A Assets in AAA Locations

 
 
Key Locations
 
 
Class A Assets in
AAA Locations
 
 
75%
 
of ARE’s Total ABR
 
 
 
 
 
 
 
 
 
% of ARE’s Total ABR


 
20
 
 
 
Occupancy
June 30, 2016
 
 



Solid Demand for Class A Assets in AAA Locations
Drives Solid Occupancy

 
 
Occupancy of Operating Properties
Across Key Locations as of June 30, 2016
 
 
Solid Historical Occupancy (1)
 
 
95%
 
Over 10 Years
 
 
 
 
(1)    Average occupancy of operating properties in North America as of December 31 for the last 10 years, and as of June 30, 2016.

 
21
 
 
Financial and Asset Base Highlights
June 30, 2016
(Dollars in thousands, except per share amounts)
 
 

 
 
Three Months Ended (Unless Stated Otherwise)
 
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
Selected financial data from consolidated financial statements and related information
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
226,076

 
$
216,089

(1) 
$
223,955

 
$
218,610

 
$
204,156

General and administrative expense as a percentage of total assets – trailing 12 months
 
0.7%

 
0.7%

 
0.7%

 
0.7%

 
0.7%

General and administrative expense as a percentage of total revenues – trailing 12 months
 
6.9%

 
7.0%

 
7.1%

 
7.2%

 
7.2%

Operating margins
 
70%

 
70%

 
69%

 
69%

 
70%

Capitalized interest
 
$
13,788

 
$
12,099

(2) 
$
8,696

 
$
8,436

 
$
8,437

Weighted-average interest rate for capitalization of interest during period
 
3.70%

 
3.60%

 
3.37%

 
3.34%

 
3.45%

 
 
 
 
 
 
 
 
 
 
 
Gross investments in real estate
 
$
9,200,568

 
$
9,118,058

 
$
8,945,261

 
$
8,787,478

 
$
8,526,845

Investments in unconsolidated real estate joint ventures
 
$
132,433

 
$
127,165

 
$
127,212

 
$
126,471

 
$
121,055

Total assets
 
$
9,144,830

 
$
8,971,532

 
$
8,881,017

 
$
8,712,700

 
$
8,497,542

Gross assets
 
$
10,570,790

 
$
10,348,124

 
$
10,196,356

 
$
9,972,440

 
$
9,702,567

Total unsecured debt
 
$
3,393,743

 
$
3,274,921

 
$
3,125,874

 
$
3,521,714

 
$
3,301,773

Total debt
 
$
4,116,537

 
$
4,091,499

 
$
3,935,692

 
$
4,289,588

 
$
4,065,617

Total liabilities
 
$
4,777,353

 
$
4,784,241

 
$
4,587,053

 
$
4,937,522

 
$
4,658,423

 
 
 
 
 
 
 
 
 
 
 
Closing stock price at end of period
 
$
103.52

 
$
90.89

 
$
90.36

 
$
84.67

 
$
87.46

Dividend per share – quarter/annualized
 
$0.80/$3.20

 
$0.80/$3.20

 
$0.77/$3.08

 
$0.77/$3.08

 
$0.77/$3.08

Dividend payout ratio for the quarter
 
61%

 
60%

 
58%

 
58%

 
59%

Dividend yield – annualized
 
3.1%

 
3.5%

 
3.4%

 
3.6%

 
3.5%

Total equity capitalization
 
$
8,326,096

 
$
7,008,376

 
$
6,949,924

 
$
6,446,634

 
$
6,640,810

Total market capitalization
 
$
12,442,633

 
$
11,099,875

 
$
10,885,616

 
$
10,736,222

 
$
10,706,427

Common shares outstanding (in thousands)
 
76,615

 
72,874

 
72,549

 
71,791

 
71,689

 
 
 
 
 
 
 
 
 
 
 
Net (loss) income attributable to Alexandria’s common stockholders
 
$
(127,648
)
(3) 
$
(3,818
)
(3) 
$
35,131

 
$
32,659

 
$
31,291

FFO attributable to Alexandria’s common stockholders – basic and diluted
 
$
29,341

(3) 
$
65,410

(3) 
$
103,451

 
$
100,359

 
$
93,433

FFO attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
101,085

 
$
97,078

 
$
95,805

 
$
95,048

 
$
93,620

AFFO attributable to Alexandria’s common stockholders – diluted
 
$
95,486

 
$
87,662

 
$
83,022

 
$
78,654

 
$
76,820

 
 
 
 
 
 
 
 
 
 
 
Earnings per share attributable to Alexandria’s common stockholders – basic and diluted
 
$
(1.72
)
(3) 
$
(0.05
)
(3) 
$
0.49

 
$
0.46

 
$
0.44

FFO per share attributable to Alexandria’s common stockholders – diluted
 
$
0.39

(3) 
$
0.90

(3) 
$
1.44

 
$
1.40

 
$
1.31

FFO per share attributable to Alexandria’s common stockholders – diluted, as adjusted
 
$
1.36

 
$
1.34

 
$
1.33

 
$
1.33

 
$
1.31

AFFO per share attributable to Alexandria’s common stockholders – diluted
 
$
1.28

 
$
1.21

 
$
1.16

 
$
1.10

 
$
1.08

(1)    The decrease in total revenues from 4Q15 is primarily related to a $2.4 million reduction in tenant recoveries due to lower operating expenses and a $3.6 million decrease in investment gains during 1Q16.
(2)    The increase in capitalized interest compared to 4Q15 is primarily driven by development activities on our 3.5 million RSF highly leased value-creation pipeline, as well as an increase in the weighted-average interest rate for capitalization.
(3)    See “Key items impacting net (loss) income and EPS attributable to Alexandria’s common stockholders” on page 1 and page 56 of our Supplemental Information.

 
22
 
 
Financial and Asset Base Highlights (continued)
June 30, 2016
(Dollars in thousands, except ABR per occupied RSF amounts)
 
 

 
 
Three Months Ended (Unless Stated Otherwise)
 
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
Operating statistics and related information (as of the end of period)
Number of properties
 
197

 
198

 
199

 
198

 
194

RSF (including development and redevelopment projects under construction) – North America
 
18,819,315

 
18,903,424

 
18,874,070

 
18,744,025

 
17,618,209

Total square feet – North America
 
24,400,303

 
24,509,859

 
24,419,610

 
23,851,586

 
23,452,253

Total operating RSF – Asia
 
1,200,683

 
1,200,683

 
1,199,714

 
1,199,714

 
1,199,714

ABR per occupied RSF – North America
 
$
42.06

 
$
41.67

 
$
41.17

 
$
41.03

 
$
40.20

Occupancy of operating properties – North America
 
97.0%

 
97.3%

 
97.2%

 
96.2%

 
95.9%

Occupancy of operating and redevelopment properties – North America
 
93.9%

 
93.8%

 
93.7%

 
93.0%

 
95.9%

 
 
 
 
 
 
 
 
 
 
 
Total leasing activity – RSF
 
816,512

 
388,872

 
1,012,238

 
1,021,756

 
1,915,379

Lease renewals and re-leasing of space – change in average new rental rates over expiring rates:
 
 
 
 
 
 
 
 
 
 
Rental rate increases
 
27.1%


33.6%

 
19.8%

 
17.5%

 
14.5%

Rental rate increases (cash basis)
 
9.3%

 
16.9%

 
7.3%

 
8.8%

 
7.0%

RSF (1)
 
647,268

 
218,342

 
480,963

 
456,602

 
783,042

 
 
 
 
 
 
 
 
 
 
 
Certain non-GAAP and credit metric information
 
 
 
 
 
 
 
 
 
 
Same property – percentage change over comparable quarter from prior year:
 
 
 
 
 
 
 
 
 
 
NOI increase
 
4.9%

 
5.3%

 
1.3%

 
1.1%

 
0.5%

NOI increase (cash basis)
 
6.4%

 
6.2%

 
2.0%

 
4.8%

 
4.7%

 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA margins
 
66%

 
65%

 
65%

 
65%

 
65%

Adjusted EBITDA – quarter annualized
 
$
581,176

 
$
545,196

(2) 
$
586,120

 
$
570,352

 
$
532,904

Adjusted EBITDA – trailing 12 months
 
$
570,711

 
$
558,643

 
$
549,116

 
$
525,944

 
$
501,827

Net debt (excluding unamortized deferred financing costs)
 
$
3,933,301

 
$
4,014,077

 
$
3,857,727

 
$
4,241,840

 
$
4,023,048

 
 
 
 
 
 
 
 
 
 
 
Net debt to Adjusted EBITDA – quarter annualized
 
6.8x

 
7.4x

 
6.6x

 
7.4x

 
7.5x

Net debt to Adjusted EBITDA – trailing 12 months
 
6.9x

 
7.2x

 
7.0x

 
8.1x

 
8.0x

Fixed-charge coverage ratio – quarter annualized
 
3.5x

 
3.3x

 
3.6x

 
3.5x

 
3.4x

Fixed-charge coverage ratio – trailing 12 months
 
3.5x

 
3.4x

 
3.4x

 
3.4x

 
3.3x

Unencumbered NOI as a percentage of total NOI
 
86%

 
81%

 
81%

 
79%

 
78%

 
 
 
 
 
 
 
 
 
 
 
(1)    Included in total leasing activity immediately above.
(2)    Decrease from 4Q15 was primarily driven by the sales of partial interest in three core Class A assets to TIAA in December 2015 for an aggregate sales price of $453.1 million and a cash capitalization rate of 4.6%.

 
23
 
 
 
Key Operating Metrics
June 30, 2016
 
 

Favorable Lease Structure
 
Same Property NOI Increase
 
 
 
 
 
Percentage of triple net leases
96%
 
 
 
 
Stable cash flows
 
 
 
 
Percentage of leases
containing annual rent escalations
95%
 
 
 
Increasing cash flows
 
 
 
 
Percentage of leases
providing for the recapture of capital expenditures
94%
 
 
 
Lower capex burden
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Margins (1)
 
Rental Rate Increases:
Renewed/Re-Leased Space
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
Operating
 
 
66%
 
70%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Represents the three months ended June 30, 2016.


 
24
 
 
 
Same Property Performance
June 30, 2016
 
 

Same Property Financial Data
 
2Q16
 
YTD 2Q16
 
Same Property Statistical Data
 
2Q16
 
YTD 2Q16
Percentage change over comparable period from prior year:
 
 
 
 
 
Number of same properties
 
163
 
161
NOI increase
 
4.9%
 
5.2%
 
Rentable square feet
 
14,255,425
 
13,641,651
NOI increase (cash basis)
 
6.4%
 
6.1%
 
Occupancy – current-period average
 
97.2%
 
96.9%
Operating margin
 
71%
 
70%
 
Occupancy – same-period prior-year average
 
96.3%
 
96.5%


The tables below provide two alternative calculations of same property performance in comparison to our historical same property performance. Our reported same property performance is based upon a pool of operating assets and development and redevelopment projects recently placed into service to the extent that those assets were operating for the entirety of the comparable same property periods presented. Development and redevelopment projects recently placed into service are included in same property data for each of the year-over-year comparison periods only if the property was operating during both entire same property periods. For example, projects completed during 2014 are included in 2016 versus 2015 same property performance (as a percentage change over 2015). The two alternative calculations presented below consist of (i) same property performance for the operating portfolio excluding assets that were recently developed or redeveloped, and (ii) same property performance for the operating portfolio including those redevelopment projects that were either under construction or recently placed into service. Same property performance including redevelopment properties generally would have been higher than our method of reporting same property performance. Same property performance including redevelopment properties will, from time to time, have significant growth in NOI as a result of the completion of the conversion of non-laboratory space (with lower NOI) to office/laboratory space (with higher NOI) through redevelopment. We believe our method of reporting same property performance is a more useful presentation because it excludes the potential significant increases in performance as a result of completion of significant redevelopment projects.

 
 
NOI Included in All Comparative Periods
 
 
Operating
Properties
 
Recently Placed into Service
 
Properties under Construction
Same Property
 
 
Developments
 
Redevelopments
 
Development
 
Redevelopment
As reported
 
Yes
 
Yes
 
Yes 
 
No
 
No
 
 
 
 
 
 
 
 
 
 
 
Operating portfolio
 
Yes
 
No
 
No
 
No
 
No
 
 
 
 
 
 
 
 
 
 
 
Including redevelopments
 
Yes
 
No
 
Yes
 
No
 
Yes

Percentage Change in Same Property NOI over Preceding Period
 
Same Property
 
2013
 
2014
 
2015
 
YTD 2Q16
 
As reported
 
1.8%
 
4.5%
 
1.3%
 
5.2%
 
 
 
 
 
 
 
 
 
 
 
Operating portfolio
 
1.7%
 
4.8%
 
1.1%
 
5.3%
 
 
 
 
 
 
 
 
 
 
 
Including redevelopments
 
8.4%
 
6.9%
 
3.1%
 
4.7%
 
Percentage Change in Same Property NOI over Preceding Period (Cash Basis)
 
Same Property
 
2013
 
2014
 
2015
 
YTD 2Q16
 
As reported
 
5.4%
 
5.5%
 
4.7%
 
6.1%
 
 
 
 
 
 
 
 
 
 
 
Operating portfolio
 
4.4%
 
3.3%
 
4.2%
 
5.7%
 
 
 
 
 
 
 
 
 
 
 
Including redevelopments
 
9.6%
 
8.1%
 
5.8%
 
10.3%
 

 
25
 
 
Same Property Performance (continued)
June 30, 2016
(Dollars in thousands)
 
 

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
2016
 
2015
 
$ Change
 
% Change
 
2016
 
2015
 
$ Change
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
$
140,949

 
$
135,915

 
$
5,034

 
3.7
%
 
$
252,931

 
$
244,084

 
$
8,847

 
3.6
%
 
Non-same properties
 
20,689

 
15,890

 
4,799

 
30.2

 
66,983

 
51,329

 
15,654

 
30.5

 
Total rental
 
161,638

 
151,805

 
9,833

 
6.5

 
319,914

 
295,413

 
24,501

 
8.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
46,696

 
43,927

 
2,769

 
6.3

 
86,116

 
82,305

 
3,811

 
4.6

 
Non-same properties
 
7,411

 
5,667

 
1,744

 
30.8

 
20,588

 
15,683

 
4,905

 
31.3

 
Total tenant recoveries
 
54,107

 
49,594

 
4,513

 
9.1

 
106,704

 
97,988

 
8,716

 
8.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
53

 
11

 
42

 
381.8

 
114

 
18

 
96

 
533.3

 
Non-same properties
 
10,278

 
2,746

 
7,532

 
274.3

 
15,433

 
7,490

 
7,943

 
106.0

 
Total other income
 
10,331

 
2,757

 
7,574

 
274.7

 
15,547

 
7,508

 
8,039

 
107.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
187,698

 
179,853

 
7,845

 
4.4

 
339,161

 
326,407

 
12,754

 
3.9

 
Non-same properties
 
38,378

 
24,303

 
14,075

 
57.9

 
103,004

 
74,502

 
28,502

 
38.3

 
Total revenues
 
226,076

 
204,156

 
21,920

 
10.7

 
442,165

 
400,909

 
41,256

 
10.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
54,319

 
52,670

 
1,649

 
3.1

 
100,288

 
99,333

 
955

 
1.0

 
Non-same properties
 
13,006

 
9,580

 
3,426

 
35.8

 
32,874

 
24,140

 
8,734

 
36.2

 
Total rental operations
 
67,325

 
62,250

 
5,075

 
8.2

 
133,162

 
123,473

 
9,689

 
7.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
133,379

 
127,183

 
6,196

 
4.9

 
238,873

 
227,074

 
11,799

 
5.2

 
Non-same properties
 
25,372

 
14,723

 
10,649

 
72.3

 
70,130

 
50,362

 
19,768

 
39.3

 
Consolidated net operating income
 
158,751

 
141,906

 
16,845

 
11.9

 
309,003

 
277,436

 
31,567

 
11.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
Non-same properties
 
(6,061
)
 
—

 
(6,061
)
 
100.0

 
(12,116
)
 
—

 
(12,116
)
 
100.0

 
Less: NOI of consolidated real estate JVs attributable to NCI
 
(6,061
)
 
—

 
(6,061
)
 
100.0

 
(12,116
)
 
—

 
(12,116
)
 
100.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
Non-same properties
 
1,214

 
931

 
283

 
30.4

 
2,282

 
1,791

 
491

 
27.4

 
Our share of NOI from unconsolidated real estate JVs
 
1,214

 
931

 
283

 
30.4

 
2,282

 
1,791

 
491

 
27.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same properties
 
133,379

 
127,183

 
6,196

 
4.9

 
238,873

 
227,074

 
11,799

 
5.2

 
Non-same properties
 
20,525

 
15,654

 
4,871

 
31.1

 
60,296

 
52,153

 
8,143

 
15.6

 
Our share of total net operating income
 
$
153,904

 
$
142,837

 
$
11,067

 
7.7
%
 
$
299,169

 
$
279,227

 
$
19,942

 
7.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our share of NOI – same properties
 
$
133,379

 
$
127,183

 
$
6,196

 
4.9
%
 
$
238,873

 
$
227,074

 
$
11,799

 
5.2
%
 
Our share of straight-line rent revenue and
amortization of acquired below-market leases
 
(10,341
)
 
(11,500
)
 
1,159

 
(10.1
)
 
(8,477
)
 
(9,839
)
 
1,362

 
(13.8
)
 
Our share of NOI – same properties (cash basis)
 
$
123,038

 
$
115,683

 
$
7,355

 
6.4
%
 
$
230,396

 
$
217,235

 
$
13,161

 
6.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




 
26
 
 
 
Leasing Activity
June 30, 2016
 
 

 
 
Three Months Ended
 
Six Months Ended
 
Year Ended
 
 
June 30, 2016
 
June 30, 2016
 
December 31, 2015
(Dollars are per RSF)
 
Including
Straight-Line Rent
 
Cash Basis
 
Including
Straight-Line Rent
 
Cash Basis
 
Including
Straight-Line Rent
 
Cash Basis
Leasing activity:
 
 
 
 
 
 
 
 
 
 
 
 
Renewed/re-leased space (1)
 
 
 
 
 
 

 
 

 
 
 
 
Rental rate changes
 
27.1%

 
9.3%

 
28.6%

 
11.0%

 
19.6%

 
9.9%

New rates
 
$
47.57

 
$
45.22

 
$
46.79

 
$
44.42

 
$
35.70

 
$
35.97

Expiring rates
 
$
37.43

 
$
41.37

 
$
36.38

 
$
40.01

 
$
29.84

 
$
32.73

Rentable square footage
 
647,268

 
 
 
865,610

 
 
 
2,209,893

 
 
Number of leases
 
33

 
 
 
57

 
 
 
146

 
 
Tenant improvements/leasing commissions
 
$
13.79

 
 
 
$
13.30

 
 
 
$
10.02

 
 
Average lease terms
 
5.0 years

 
 
 
4.7 years

 
 
 
4.7 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Developed/redeveloped/previously vacant space leased
 
 
 
 
 
 
 
 
 
 
 
 
New rates
 
$
47.69

 
$
45.04

 
$
47.99

 
$
45.37

 
$
55.24

 
$
50.65

Rentable square footage
 
169,244

 
 
 
339,774

 
 
 
2,762,149

 
 
Number of leases
 
14

 
 
 
30

 
 
 
72

 
 
Tenant improvements/leasing commissions
 
$
24.08

 
 
 
$
23.56

 
 
 
$
19.63

 
 
Average lease terms
 
10.0 years

 
 
 
8.8 years

 
 
 
11.9 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leasing activity summary (totals):
 
 
 
 
 
 
 
 
 
 
 
 
New rates
 
$
47.60

 
$
45.18

 
$
47.13

 
$
44.69

 
$
46.55

 
$
44.13

Rentable square footage
 
816,512

 
 
 
1,205,384

(2) 
 
 
4,972,042

 
 
Number of leases
 
47

 
 
 
87

 
 
 
218

 
 
Tenant improvements/leasing commissions
 
$
15.93

 
 
 
$
16.20

 
 
 
$
15.36

 
 
Average lease terms
 
6.0 years

 
 
 
5.9 years

 
 
 
8.7 years

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease expirations: (1)
 
 
 
 
 
 
 
 
 
 
 
 
Expiring rates
 
$
35.76

 
$
39.34

 
$
34.23

 
$
37.36

 
$
28.32

 
$
30.80

Rentable square footage
 
729,893

 
 
 
1,094,459

 
 
 
2,801,883

 
 
Number of leases
 
48

 
 
 
76

 
 
 
197

 
 

Leasing activity includes 100% of results for properties managed by us.

(1)
Excludes 18 month-to-month leases for 38,467 RSF and 16 month-to-month leases for 30,810 RSF as of June 30, 2016, and December 31, 2015, respectively.
(2)
During the six months ended June 30, 2016, we granted tenant concessions/free rent averaging 1.7 months with respect to the 1,205,384 RSF leased.

 
27
 
 
 
Contractual Lease Expirations
June 30, 2016
 
 

Year
 
Number of Leases
 
RSF
 
Percentage of
Occupied RSF
 
ABR (per RSF)
 
2016
 
 
40

(1) 
 
 
579,190

(1) 
 
 
3.6
%
 
 
 
$
38.19

 
 
2017
 
 
75

 
 
 
1,080,739

 
 
 
6.7
%
 
 
 
$
27.77

 
 
2018
 
 
95

 
 
 
2,000,107

 
 
 
12.4
%
 
 
 
$
40.66

 
 
2019
 
 
81

 
 
 
1,461,455

 
 
 
9.0
%
 
 
 
$
37.56

 
 
2020
 
 
68

 
 
 
1,567,688

 
 
 
9.7
%
 
 
 
$
36.79

 
 
2021
 
 
63

 
 
 
1,531,662

 
 
 
9.5
%
 
 
 
$
38.90

 
 
2022
 
 
39

 
 
 
1,181,248

 
 
 
7.3
%
 
 
 
$
36.37

 
 
2023
 
 
28

 
 
 
1,392,899

 
 
 
8.6
%
 
 
 
$
36.79

 
 
2024
 
 
19

 
 
 
1,008,861

 
 
 
6.2
%
 
 
 
$
46.20

 
 
2025
 
 
17

 
 
 
564,956

 
 
 
3.5
%
 
 
 
$
34.40

 
 
Thereafter
 
 
39

 
 
 
3,747,844

 
 
 
23.2
%
 
 
 
$
46.20

 
 

 
 
2016 Contractual Lease Expirations
 
ABR of
Expiring Leases
(per RSF)
 
2017 Contractual Lease Expirations

ABR of
Expiring Leases
(per RSF)
 
 
Leased
 
Negotiating/
Anticipating
 
Targeted for
Redevelopment
 
Remaining
Expiring Leases
 
Total (1)
 
 
Leased

Negotiating/
Anticipating

Targeted for
Redevelopment

Remaining
Expiring Leases

Total

Market
 
 
 
 
 
 
 





Greater Boston
 
40,648

 
5,042

 
—

 
17,990

 
63,680

 
$
46.35

 
—


14,327


—


272,946

(3) 
287,273


$
37.81

San Francisco
 
38,080

 
—

 
—

 
6,170

 
44,250

 
25.55

 
2,027


—


—


70,710


72,737


32.78

New York City
 
—

 
—

 
—

 
11,319

 
11,319

 
N/A

 
—


—


—


5,943


5,943


N/A

San Diego
 
48,591

 
—

 
—

 
204,850

(2) 
253,441

 
40.31

 
—


36,172


—

 
197,675

(4) 
233,847


30.25

Seattle
 
8,740

 
20,422

 
—

 
—

 
29,162

 
39.26

 
20,133


9,960


—


25,262


55,355


45.10

Maryland
 
16,005

 
53,554

 
—

 
33,055

 
102,614

 
28.38

 
—


—


—


95,555


95,555


19.11

Research Triangle Park
 
—

 
20,613

 
—

 
12,813

 
33,426

 
24.14

 
19,753


51,328


—


92,081


163,162


13.61

Non-cluster markets
 
—

 
—

 
—

 
—

 
—

 
—

 
—


35,155


—


7,890


43,045


20.33

Asia
 
—

 
35,335

 
—

 
5,963

 
41,298

 
14.00


39,676


56,800


—


27,346


123,822


14.82

Total
 
152,064

 
134,966

 
—

 
292,160

 
579,190

 
$
38.19

 
81,589


203,742


—


795,408


1,080,739


$
27.77

Percentage of expiring leases
 
26
%
 
23
%
 
—
%
 
51
%
 
100
%
 
 
 
8
%
 
19
%
 
—
%
 
73
%

100
%


 

Lease expirations include 100% of the RSF for properties managed by us.

(1)Excludes 18 month-to-month leases for 38,467 RSF.
(2)
Includes 125,409 RSF leased to Eli Lilly and Company at 10300 Campus Point Drive with a contractual expiration in 4Q16. This tenant will relocate and expand into 304,326 RSF at our recently acquired redevelopment project at 10290 Campus Point Drive.
(3)    Includes 209,874 RSF located in our Cambridge submarket. Additionally, the largest contractual lease expiration is approximately 47,000 RSF.
(4)    Includes lease for 109,780 RSF with ABR per RSF of $22.72. We are in early negotiations for a long-term renewal.

 
28
 
 
Top 20 Tenants
June 30, 2016
(Dollars in thousands)
 
 

Top 20 Tenants: 82% of ABR from Investment-Grade Tenants

 
 
 
 
Remaining Lease Term in Years (1)
 
Aggregate
RSF
 
 
 
Investment-Grade Ratings
 
 
 
Tenant
 
 
 
ABR
 
Percentage of Aggregate ABR
 
Fitch
 
Moody’s
 
S&P
 
1
 
Illumina, Inc.
 
 
14.0

 
 
891,495

 
$
31,301

 
4.8
%
 
—
 
—
 
 BBB
 
2
 
ARIAD Pharmaceuticals, Inc. / IBM Watson Health (2)
 
 
13.8

 
 
386,111

 
30,051

 
4.6

 
—
 
—
 
—
 
3
 
Novartis AG
 
 
1.6

(3) 
 
564,873

(3) 
29,308

(3) 
4.5

 
 AA
 
 Aa3
 
 AA-
 
4
 
New York University
 
 
14.0

 
 
209,224

 
20,354

 
3.1

 
—
 
 Aa3
 
 AA-
 
5
 
Eli Lilly and Company
 
 
6.8

 
 
287,924

 
19,445

 
3.0

 
 A
 
 A2
 
 AA-
 
6
 
Dana-Farber Cancer Institute, Inc.
 
 
14.0

 
 
254,130

 
19,191

 
3.0

 
—
 
 A1
 
—
 
7
 
Amgen Inc.
 
 
7.7

 
 
473,369

 
17,753

 
2.7

 
 BBB
 
 Baa1
 
 A
 
8
 
Roche
 
 
4.2

 
 
343,861

 
16,517

 
2.5

 
 AA
 
 A1
 
 AA
 
9
 
Celgene Corporation
 
 
6.8

 
 
350,797

 
15,076

 
2.3

 
—
 
 Baa2
 
 BBB+
 
10
 
United States Government
 
 
8.9

 
 
263,147

 
14,822

 
2.3

 
 AAA
 
 Aaa
 
 AA+
 
11
 
FibroGen, Inc.
 
 
7.4

 
 
234,249

 
14,198

 
2.2

 
—
 
—
 
—
 
12
 
Biogen Inc.
 
 
12.3

 
 
305,212

 
13,278

 
2.0

 
—
 
 Baa1
 
 A-
 
13
 
Massachusetts Institute of Technology
 
 
4.1

 
 
233,620

 
12,409

 
1.9

 
—
 
 Aaa
 
 AAA
 
14
 
GlaxoSmithKline plc
 
 
3.1

 
 
296,604

 
11,200

 
1.7

 
 A
 
 A2
 
 A+
 
15
 
Bristol-Myers Squibb Company
 
 
2.7

 
 
251,316

 
10,743

 
1.7

 
 A-
 
 A2
 
 A+
 
16
 
The Regents of the University of California
 
 
7.2

 
 
233,527

 
10,677

 
1.6

 
 AA
 
 Aa2
 
 AA
 
17
 
Sanofi
 
 
5.1

 
 
179,697

 
8,042

 
1.2

 
 AA-
 
 A1
 
 AA
 
18
 
Alnylam Pharmaceuticals, Inc.
 
 
5.3

 
 
129,424

 
7,314

 
1.1

 
—
 
—
 
—
 
19
 
Sumitomo Dainippon Pharma Co., Ltd.
 
 
6.8

 
 
106,232

 
6,533

 
1.0

 
—
 
—
 
—
 
20
 
Pfizer Inc.
 
 
3.4

 
 
128,348

 
6,415

 
1.0

 
A+
 
A1
 
AA
 
 
 
Total/weighted average
 
 
8.4

 
 
6,123,160

 
$
314,627

 
48.2
%
 
 
 
 
 
 
 

ABR and RSF amounts include 100% of the properties managed by us.

(1)
Based on percentage of aggregate ABR in effect as of June 30, 2016.
(2)
IBM Watson Health, a digital health venture of IBM, currently subleases 163,186 RSF at 75 Binney Street with an initial lease term of 10 years. IBM holds investment-grade ratings of A+ (Fitch), Aa3 (Moody’s), and AA- (S&P).
(3)
As of June 30, 2016, Novartis AG’s number of leases, RSF, and ABR consisted of the following:
    
 
Number of leases
 
RSF
 
ABR
Cambridge, MA
9

 
425,020

 
$
26,266

San Diego, CA
1

 
46,033

 
1,434

India
3

 
93,820

 
1,608

 
13

 
564,873

 
$
29,308


 
29
 
 
Summary of Properties and Occupancy
June 30, 2016
(Dollars in thousands, except per RSF amounts)
 
 

Summary of properties
 
 
RSF
 
Number of Properties
 
ABR
 
Market
 
Operating
 
Development
 
Redevelopment
 
Total
 
% Total
 
 
Total
 
% of Total
 
Per RSF
 
Greater Boston
 
4,513,580

 
1,062,352

 
59,783

 
5,635,715

 
28
%
 
42

 
$
232,939

 
36
%
 
$
52.70

 
San Francisco
 
2,786,476

 
872,980

 
—

 
3,659,456

 
18

 
29

 
126,199

 
19

 
45.29

 
New York City
 
727,674

 
—

 
—

 
727,674

 
4

 
2

 
59,217

 
9

 
85.99

 
San Diego
 
3,189,754

 
295,278

 
466,482

 
3,951,514

 
20

 
50

 
100,640

 
16

 
33.64

 
Seattle
 
746,260

 
287,806

 
—

 
1,034,066

 
5

 
11

 
33,530

 
5

 
45.33

 
Maryland
 
2,085,196

 
—

 
—

 
2,085,196

 
10

 
28

 
50,633

 
8

 
25.19

 
Research Triangle Park
 
1,043,348

 
—

 
—

 
1,043,348

 
5

 
15

 
23,367

 
4

 
22.79

 
Canada
 
322,967

 
—

 
—

 
322,967

 
2

 
4

 
7,386

 
1

 
23.02

 
Non-cluster markets
 
268,689

 
—

 
—

 
268,689

 
1

 
6

 
6,237

 
1

 
26.31

 
Properties held for sale
in North America
 
90,690

 
—

 
—

 
90,690

 
1

 
2

 
1,479

 
—

 
N/A

 
North America
 
15,774,634

 
2,518,416

 
526,265

 
18,819,315

 
94

 
189

 
641,627

 
99

 
42.06

 
Properties held for sale
in Asia
 
1,200,683

 
—

 
—

 
1,200,683

 
6

 
8

 
7,550

 
1

 
8.94

 
Total
 
16,975,317

 
2,518,416

 
526,265

 
20,019,998

 
100
%
 
197

 
$
649,177

 
100
%
 
$
40.18

 

RSF, number of properties, and ABR amounts include 100% of the properties managed by us.

Summary of occupancy
 
 
Operating Properties
 
Operating and Redevelopment Properties
Market
 
6/30/16
 
3/31/16
 
6/30/15
 
6/30/16
 
3/31/16
 
6/30/15
Greater Boston
 
97.9
%
 
97.6
%
 
96.5
%
 
96.6
%
 
96.3
%
 
96.5
%
San Francisco
 
100.0

 
100.0

 
100.0

 
100.0

 
100.0

 
100.0

New York City
 
94.6

(1) 
99.7

 
99.6

 
94.6

 
99.7

 
99.6

San Diego
 
93.8

 
94.5

 
94.5

 
81.8

 
80.1

 
94.5

Seattle
 
99.1

 
99.2

 
96.0

 
99.1

 
99.2

 
96.0

Maryland
 
96.4

 
95.9

 
93.6

 
96.4

 
95.9

 
93.6

Research Triangle Park
 
98.3

 
98.6

 
91.0

 
98.3

 
98.6

 
91.0

Subtotal
 
97.2

 
97.5

 
96.0

 
93.9

 
93.8

 
96.0

Canada
 
99.3

 
99.3

 
99.3

 
99.3

 
99.3

 
99.3

Non-cluster markets
 
88.2

 
88.1

 
68.0

 
88.2

 
88.1

 
68.0

North America
 
97.0
%
 
97.3
%
 
95.9
%
 
93.9
%
 
93.8
%
 
95.9
%

Occupancy includes 100% of properties managed by us.

(1)
The decrease in occupancy from 1Q16 is due to an additional 62,595 RSF at 430 East 29th Street placed into service during 2Q16, which included 34,017 RSF of vacant space.

 
30
 
 
Property Listing
June 30, 2016
(Dollars in thousands)
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Occupancy Percentage 
 
 
 
 
 
RSF 
 
Number of Properties
 
 
 
 
 
 
 
 
 
 
ABR
 
 
 
Operating and Redevelopment
 
Market / Submarket / Address
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
Operating
 
 
Greater Boston
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cambridge/Inner Suburbs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® at Kendall Square
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50/60, 75/125, and 100 Binney Street, 161 and 215 First Street,
150 Second Street, 300 Third Street, and 11 Hurley Street
 
1,056,522

 
961,960

 
59,783

 
2,078,265

 
9
 
$
63,050

 
99.8
%
 
94.5
%
 
 
 
225 Binney Street (consolidated joint venture – 30% ownership)
 
305,212

 
—

 
—

 
305,212

 
1
 
13,278

 
100.0

 
100.0

 
 
 
Alexandria Technology Square®
 
1,181,635

 
—

 
—

 
1,181,635

 
7
 
73,613

 
100.0

 
100.0

 
 
 
100, 200, 300, 400, 500, 600, and 700 Technology Square
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
480/500 Arsenal Street
 
234,260

 
—

 
—

 
234,260

 
2
 
9,214

 
100.0

 
100.0

 
 
 
640 Memorial Drive
 
225,504

 
—

 
—

 
225,504

 
1
 
13,687

 
100.0

 
100.0

 
 
 
780/790 Memorial Drive
 
99,658

 
—

 
—

 
99,658

 
2
 
6,721

 
100.0

 
100.0

 
 
 
167 Sidney Street/99 Erie Street
 
54,549

 
—

 
—

 
54,549

 
2
 
2,788

 
100.0

 
100.0

 
 
 
79/96 Thirteenth Street Charlestown Navy Yard
 
25,309

 
—

 
—

 
25,309

 
1
 
620

 
100.0

 
100.0

 
 
 
Cambridge/Inner Suburbs
 
3,182,649

 
961,960

 
59,783

 
4,204,392

 
25
 
182,971

 
99.9

 
98.1

 
 
Longwood Medical Area
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
360 Longwood Avenue (unconsolidated joint venture – 27.5% ownership)
 
313,407

 
100,392

 
—

 
413,799

 
1
 
23,403

 
100.0

 
100.0

 
 
Route 128
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Park at 128
 
343,882

 
—

 
—

 
343,882

 
8
 
9,167

 
93.3

 
93.3

 
 
 
3, 6, and 8 Preston Court, 29, 35, and 44 Hartwell Avenue,
35, 45, and 47 Wiggins Avenue, and 60 Westview Street
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19 Presidential Way
 
144,892

 
—

 
—

 
144,892

 
1
 
2,437

 
52.6

 
52.6

 
 
 
225 Second Avenue
 
112,500

 
—

 
—

 
112,500

 
1
 
6,121

 
100.0

 
100.0

 
 
 
100 Beaver Street
 
82,330

 
—

 
—

 
82,330

 
1
 
3,064

 
100.0

 
100.0

 
 
 
285 Bear Hill Road
 
26,270

 
—

 
—

 
26,270

 
1
 
926

 
100.0

 
100.0

 
 
 
Route 128
 
709,874

 
—

 
—

 
709,874

 
12
 
21,715

 
87.1

 
87.1

 
 
Route 495
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
111/130 Forbes Boulevard
 
155,846

 
—

 
—

 
155,846

 
2
 
1,415

 
100.0

 
100.0

 
 
 
20 Walkup Drive
 
91,045

 
—

 
—

 
91,045

 
1
 
670

 
100.0

 
100.0

 
 
 
30 Bearfoot Road
 
60,759

 
—

 
—

 
60,759

 
1
 
2,765

 
100.0

 
100.0

 
 
 
Route 495
 
307,650

 
—

 
—

 
307,650

 
4
 
4,850

 
100.0

 
100.0

 
 
 
Greater Boston
 
4,513,580

 
1,062,352

 
59,783

 
5,635,715

 
42
 
$
232,939

 
97.9
%
 
96.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSF, ABR, and occupancy include 100% of properties managed by us.



 

 
31
 
 
Property Listing (continued)
June 30, 2016
(Dollars in thousands)
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Occupancy Percentage 
 
 
 
 
 
RSF 
 
Number of Properties
 
 
 
 
 
 
 
 
 
 
ABR
 
 
 
Operating and Redevelopment
 
Market / Submarket / Address
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
Operating
 
 
San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mission Bay/SoMa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
409/499 Illinois Street (consolidated joint venture – 60% ownership)
 
455,069

 
—

 
—

 
455,069

 
2
 
$
28,227

 
100.0
%
 
100.0
%
 
 
 
1455/1515 Third Street (unconsolidated joint venture – 51% ownership)
 
—

 
422,980

 
—

 
422,980

 
2
 
—

 
—

 
—

 
 
 
510 Townsend Street
 
—

 
300,000

 
—

 
300,000

 
1
 
—

 
—

 
—

 
 
 
455 Mission Bay Boulevard South
 
210,398

 
—

 
—

 
210,398

 
1
 
10,378

 
100.0

 
100.0

 
 
 
1500 Owens Street (consolidated joint venture – 50.1% ownership)
 
158,267

 
—

 
—

 
158,267

 
1
 
7,752

 
100.0

 
100.0

 
 
 
1700 Owens Street
 
157,340

 
—

 
—

 
157,340

 
1
 
10,344

 
100.0

 
100.0

 
 
 
505 Brannan Street (consolidated joint venture – 99.4% ownership)
 
—

 
150,000

 
—

 
150,000

 
1
 
—

 
—

 
—

 
 
 
Mission Bay/SoMa
 
981,074

 
872,980

 
—

 
1,854,054

 
9
 
56,701

 
100.0

 
100.0

 
 
South San Francisco
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Gateway
 
448,175

 
—

 
—

 
448,175

 
6
 
17,851

 
100.0

 
100.0

 
 
 
600, 630, 650, 681, 901, and 951 Gateway Boulevard
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
249/259/269 East Grand Avenue
 
407,369

 
—

 
—

 
407,369

 
3
 
16,838

 
100.0

 
100.0

 
 
 
400/450 East Jamie Court
 
163,035

 
—

 
—

 
163,035

 
2
 
6,028

 
100.0

 
100.0

 
 
 
500 Forbes Boulevard
 
155,685

 
—

 
—

 
155,685

 
1
 
5,540

 
100.0

 
100.0

 
 
 
7000 Shoreline Court
 
136,395

 
—

 
—

 
136,395

 
1
 
4,582

 
100.0

 
100.0

 
 
 
341/343 Oyster Point Boulevard
 
107,960

 
—

 
—

 
107,960

 
2
 
4,006

 
100.0

 
100.0

 
 
 
849/863 Mitten Road and 866 Malcolm Road
 
103,857

 
—

 
—

 
103,857

 
1
 
3,005

 
100.0

 
100.0

 
 
 
South San Francisco
 
1,522,476

 
—

 
—

 
1,522,476

 
16
 
57,850

 
100.0

 
100.0

 
 
Palo Alto/Stanford Research Park
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
2425 Garcia Avenue and 2400/2450 Bayshore Parkway
 
99,208

 
—

 
—

 
99,208

 
1
 
4,257

 
100.0

 
100.0

 
 
 
3165 Porter Drive
 
91,644

 
—

 
—

 
91,644

 
1
 
3,885

 
100.0

 
100.0

 
 
 
3350 West Bayshore Road
 
60,000

 
—

 
—

 
60,000

 
1
 
1,919

 
100.0

 
100.0

 
 
 
2625/2627/2631 Hanover Street
 
32,074

 
—

 
—

 
32,074

 
1
 
1,587

 
100.0

 
100.0

 
 
 
Palo Alto/Stanford Research Park
 
282,926

 
—

 
—

 
282,926

 
4
 
11,648

 
100.0

 
100.0

 
 
 
San Francisco
 
2,786,476

 
872,980

 
—

 
3,659,456

 
29
 
$
126,199

 
100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New York City
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Manhattan
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Center® for Life Science
 
727,674

 
—

 
—

 
727,674

 
2
 
59,217

 
94.6

(1) 
94.6

 
 
 
430 and 450 East 29th Street
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New York City
 
727,674

 
—

 
—

 
727,674

 
2
 
$
59,217

 
94.6
%
 
94.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSF, ABR, and occupancy include 100% of properties managed by us.

(1)    Occupancy for 430 and 450 East 29th Street is 99.5% and 91.0%, respectively.
 

 
32
 
 
Property Listing (continued)
June 30, 2016
(Dollars in thousands)
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Occupancy Percentage 
 
 
 
 
 
RSF 
 
Number of Properties
 
 
 
 
 
 
 
 
 
 
ABR
 
 
 
Operating and Redevelopment
 
Market / Submarket / Address
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
Operating
 
 
San Diego
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Torrey Pines
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Spectrum
 
102,938

 
233,523

 
—

 
336,461

 
3
 
$
4,599

 
100.0
%
 
100.0
%
 
 
 
3215 Merryfield Row and 3013/3033 Science Park Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Nautilus
 
227,945

 
—

 
—

 
227,945

 
4
 
6,253

 
71.9

 
71.9

 
 
 
3530/3550 John Hopkins Court and 3535/3565 General Atomics Court
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Sunrise
 
231,526

 
—

 
—

 
231,526

 
3
 
8,845

 
100.0

 
100.0

 
 
 
10931, 10933, and 10975 North Torrey Pines Road,
3010 Science Park Road, and 10996 Torreyana Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3545 Cray Court
 
116,556

 
—

 
—

 
116,556

 
1
 
4,827

 
100.0

 
100.0

 
 
 
11119 North Torrey Pines Road
 
72,506

 
—

 
—

 
72,506

 
1
 
2,799

 
100.0

 
100.0

 
 
 
Torrey Pines
 
751,471

 
233,523

 
—

 
984,994

 
12
 
27,323

 
91.5

 
91.5

 
 
University Town Center
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5200 Illumina Way
 
792,687

 
—

 
—

 
792,687

 
6
 
25,371

 
100.0

 
100.0

 
 
 
Alexandria Center® for Life Science at Campus Pointe (consolidated joint venture) (1)
 
449,759

 
—

 
304,326

 
754,085

 
2
 
18,036

 
100.0

 
59.6

 
 
 
10290 and 10300 Campus Point Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Towne Centre
 
140,398

 
—

 
162,156

 
302,554

 
4
 
1,913

 
76.4

 
35.4

 
 
 
9363, 9373, 9393, and 9625 Towne Centre Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARE Esplanade
 
180,208

 
61,755

 
—

 
241,963

 
4
 
6,978

 
100.0

 
100.0

 
 
 
4755, 4757, and 4767 Nexus Center Drive, and 4796 Executive Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9880 Campus Point Drive
 
71,510

 
—

 
—

 
71,510

 
1
 
2,774

 
100.0

 
100.0

 
 
 
University Town Center
 
1,634,562

 
61,755

 
466,482

 
2,162,799

 
17
 
55,072

 
98.0

 
76.2

 
 
Sorrento Mesa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5810/5820 and 6138/6146/6150 Nancy Ridge Drive
 
160,910

 
—

 
—

 
160,910

 
3
 
4,027

 
100.0

 
100.0

 
 
 
ARE Portola
 
105,812

 
—

 
—

 
105,812

 
3
 
1,631

 
43.1

 
43.1

 
 
 
6175, 6225, and 6275 Nancy Ridge Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10121/10151 Barnes Canyon Road (2)
 
102,392

 
—

 
—

 
102,392

 
2
 
1,987

 
100.0

 
100.0

 
 
 
7330 Carroll Road
 
66,244

 
—

 
—

 
66,244

 
1
 
2,431

 
100.0

 
100.0

 
 
 
5871 Oberlin Drive
 
33,817

 
—

 
—

 
33,817

 
1
 
993

 
100.0

 
100.0

 
 
 
Sorrento Mesa
 
469,175

 
—

 
—

 
469,175

 
10
 
11,069

 
87.2

 
87.2

 
 
Sorrento Valley
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11025/11035/11045/11055/11065/11075 Roselle Street
 
121,655

 
—

 
—

 
121,655

 
6
 
2,798

 
88.5

 
88.5

 
 
 
3985/4025/4031/4045 Sorrento Valley Boulevard
 
103,111

 
—

 
—

 
103,111

 
4
 
1,883

 
74.6

 
74.6

 
 
 
Sorrento Valley
 
224,766

 
—

 
—

 
224,766

 
10
 
4,681

 
82.1

 
82.1

 
 
I-15 Corridor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13112 Evening Creek Drive
 
109,780

 
—

 
—

 
109,780

 
1
 
2,495

 
100.0

 
100.0

 
 
 
San Diego
 
3,189,754

 
295,278

 
466,482

 
3,951,514

 
50
 
$
100,640

 
93.8
%
 
81.8
%
 
RSF, ABR, and occupancy include 100% of properties managed by us.


(1)    See page 3 of our Supplemental Information for information related to our sale of a partial interest in 10290 Campus Point Drive in June 2016.
(2)    During 2Q16, we leased the property on an as-is basis to an existing tenant pursuant to a seven-year lease.
 

 
33
 
 
Property Listing (continued)
June 30, 2016
(Dollars in thousands)
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Occupancy Percentage 
 
 
 
 
 
RSF 
 
Number of Properties
 
 
 
 
 
 
 
 
 
 
ABR
 
 
 
Operating and Redevelopment
 
Market / Submarket / Address
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
Operating
 
 
Seattle
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lake Union
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
400 Dexter Avenue North
 
—

 
287,806

 
—

 
287,806

 
1
 
$
—

 
—
%
 
—
%
 
 
 
1201/1208 Eastlake Avenue East
 
203,369

 
—

 
—

 
203,369

 
2
 
8,748

 
100.0

 
100.0

 
 
 
1616 Eastlake Avenue East
 
168,708

 
—

 
—

 
168,708

 
1
 
8,191

 
96.7

 
96.7

 
 
 
1551 Eastlake Avenue East
 
117,482

 
—

 
—

 
117,482

 
1
 
4,506

 
99.1

 
99.1

 
 
 
199 East Blaine Street
 
115,084

 
—

 
—

 
115,084

 
1
 
6,183

 
100.0

 
100.0

 
 
 
219 Terry Avenue North
 
30,705

 
—

 
—

 
30,705

 
1
 
1,744

 
100.0

 
100.0

 
 
 
1600 Fairview Avenue East
 
27,991

 
—

 
—

 
27,991

 
1
 
1,133

 
100.0

 
100.0

 
 
 
Lake Union
 
663,339

 
287,806

 
—

 
951,145

 
8
 
30,505

 
99.0

 
99.0

 
 
Elliott Bay
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3000/3018 Western Avenue
 
47,746

 
—

 
—

 
47,746

 
1
 
1,839

 
100.0

 
100.0

 
 
 
410 West Harrison/410 Elliott Avenue West
 
35,175

 
—

 
—

 
35,175

 
2
 
1,186

 
100.0

 
100.0

 
 
 
Elliott Bay
 
82,921

 
—

 
—

 
82,921

 
3
 
3,025

 
100.0

 
100.0

 
 
 
Seattle
 
746,260

 
287,806

 
—

 
1,034,066

 
11
 
$
33,530

 
99.1
%
 
99.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rockville
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9800 Medical Center Drive
 
282,436

 
—

 
—

 
282,436

 
4
 
12,449

 
100.0

 
100.0

 
 
 
1330 Piccard Drive
 
131,511

 
—

 
—

 
131,511

 
1
 
3,162

 
100.0

 
100.0

 
 
 
1500/1550 East Gude Drive
 
90,489

 
—

 
—

 
90,489

 
2
 
1,681

 
100.0

 
100.0

 
 
 
14920/15010 Broschart Road
 
86,703

 
—

 
—

 
86,703

 
2
 
2,055

 
100.0

 
100.0

 
 
 
1405 Research Boulevard
 
71,669

 
—

 
—

 
71,669

 
1
 
2,104

 
100.0

 
100.0

 
 
 
5 Research Place
 
63,852

 
—

 
—

 
63,852

 
1
 
2,390

 
100.0

 
100.0

 
 
 
9920 Medical Center Drive
 
58,733

 
—

 
—

 
58,733

 
1
 
455

 
100.0

 
100.0

 
 
 
5 Research Court
 
54,906

 
—

 
—

 
54,906

 
1
 
—

 
—

 
—

 
 
 
12301 Parklawn Drive
 
49,185

 
—

 
—

 
49,185

 
1
 
1,169

 
100.0

 
100.0

 
 
 
Rockville
 
889,484

 
—

 
—

 
889,484

 
14
 
25,465

 
93.8

 
93.8

 
 
Gaithersburg
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Gaithersburg I
 
377,401

 
—

 
—

 
377,401

 
4
 
7,862

 
95.7

 
95.7

 
 
 
9 West Watkins Mill Road and 910, 930, and 940 Clopper Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Gaithersburg II
 
237,137

 
—

 
—

 
237,137

 
5
 
6,058

 
99.0

 
99.0

 
 
 
708 Quince Orchard Road, 1300 Quince Orchard Boulevard, and
19, 20, and 22 Firstfield Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
401 Professional Drive
 
63,154

 
—

 
—

 
63,154

 
1
 
1,374

 
97.6

 
97.6

 
 
 
950 Wind River Lane
 
50,000

 
—

 
—

 
50,000

 
1
 
1,082

 
100.0

 
100.0

 
 
 
620 Professional Drive
 
27,950

 
—

 
—

 
27,950

 
1
 
1,191

 
100.0

 
100.0

 
 
 
Gaithersburg
 
755,642

 
—

 
—

 
755,642

 
12
 
17,567

 
97.3

 
97.3

 
 
Beltsville
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8000/9000/10000 Virginia Manor Road
 
191,884

 
—

 
—

 
191,884

 
1
 
2,463

 
100.0

 
100.0

 
 
Northern Virginia
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14225 Newbrook Drive
 
248,186

 
—

 
—

 
248,186

 
1
 
5,138

 
100.0

 
100.0

 
 
 
Maryland
 
2,085,196

 
—

 
—

 
2,085,196

 
28
 
$
50,633

 
96.4
%
 
96.4
%
 
RSF, ABR, and occupancy include 100% of properties managed by us.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
34
 
 
Property Listing (continued)
June 30, 2016
(Dollars in thousands)
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Occupancy Percentage 
 
 
 
 
 
RSF 
 
Number of Properties
 
 
 
 
 
 
 
 
 
 
ABR
 
 
 
Operating and Redevelopment
 
Market / Submarket / Address
 
Operating
 
Development
 
Redevelopment
 
Total
 
 
 
Operating
 
 
Research Triangle Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research Triangle Park
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Alexandria Technology Center® – Alston
 
186,870

 
—

 
—

 
186,870

 
3
 
$
3,527

 
97.8
%
 
97.8
%
 
 
 
100, 800, and 801 Capitola Drive
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
108/110/112/114 TW Alexander Drive
 
158,417

 
—

 
—

 
158,417

 
1
 
4,607

 
100.0

 
100.0

 
 
 
Alexandria Innovation Center® – Research Triangle Park
 
135,677

 
—

 
—

 
135,677

 
3
 
3,270

 
98.3

 
98.3

 
 
 
7010, 7020, and 7030 Kit Creek Road
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6 Davis Drive
 
100,000

 
—

 
—

 
100,000

 
1
 
1,062

 
100.0

 
100.0

 
 
 
7 Triangle Drive
 
96,626

 
—

 
—

 
96,626

 
1
 
3,156

 
100.0

 
100.0

 
 
 
407 Davis Drive
 
81,956

 
—

 
—

 
81,956

 
1
 
1,644

 
100.0

 
100.0

 
 
 
2525 East NC Highway 54
 
82,618

 
—

 
—

 
82,618

 
1
 
1,488

 
86.2

 
86.2

 
 
 
601 Keystone Park Drive
 
77,395

 
—

 
—

 
77,395

 
1
 
1,199

 
100.0

 
100.0

 
 
 
6040 George Watts Hill Drive
 
61,547

 
—

 
—

 
61,547

 
1
 
2,051

 
100.0

 
100.0

 
 
 
5 Triangle Drive
 
32,120

 
—

 
—

 
32,120

 
1
 
824

 
100.0

 
100.0

 
 
 
6101 Quadrangle Drive
 
30,122

 
—

 
—

 
30,122

 
1
 
539

 
100.0

 
100.0

 
 
 
Research Triangle Park
 
1,043,348

 
—

 
—

 
1,043,348

 
15
 
$
23,367

 
98.3
%
 
98.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Canada
 
322,967

 
—

 
—

 
322,967

 
4
 
7,386

 
99.3

 
99.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-cluster markets
 
268,689

 
—

 
—

 
268,689

 
6
 
6,237

 
88.2

 
88.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15,683,944

 
2,518,416

 
526,265

 
18,728,625

 
187
 
640,148

 
97.0
%
 
93.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties held for sale in North America
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
306 Belmont Street and 350 Plantation Street
 
90,690

 
—

 
—

 
90,690

 
2
 
1,479

 
100.0

 
100.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
15,774,634

 
2,518,416

 
526,265

 
18,819,315

 
189
 
641,627

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asia - properties held for sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
China
 
634,328

 
—

 
—

 
634,328

 
2
 
1,979

 
73.9

 
73.9

 
 
 
India
 
566,355

 
—

 
—

 
566,355

 
6
 
5,571

 
66.3

 
66.3

 
 
 
Properties held for sale in Asia (1)
 
1,200,683

 
—

 
—

 
1,200,683

 
8
 
7,550

 
70.3
%
 
70.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
16,975,317

 
2,518,416

 
526,265

 
20,019,998

 
197
 
$
649,177

 
 
 
 
 
RSF, ABR, and occupancy include 100% of properties managed by us.

(1)    See page 56 for additional information.
 
 
 
 
 
 
 
 
 
 
 
 
 

 
35
 
 
 
Incremental Annual NOI from Development and Redevelopment Projects
June 30, 2016
 
 







    
(1)
Represents incremental annual NOI upon stabilization of our development and redevelopment projects, including only our share of real estate joint venture projects. RSF and percentage leased represents 100% of each property.
(2)
Incremental annual NOI for 2016 of $65 million to $70 million (including $14 million of incremental NOI for 1H16) decreased from a range of $75 million to $80 million previously disclosed primarily due to the sale in June 2016 of a 45% partial interest in 10290 Campus Point Drive.
(3)
Incremental annual NOI for 2017-2018 of $130 million to $140 million increased from a range of $120 million to $130 million previously disclosed due to adding the development of a new parking structure, 100% leased to Illumina, Inc., located at 5200 Illumina Way in our University Town Center submarket.

 
36
 
 
 
Disciplined Allocation of Capital and Management of Value-Creation Pipeline
June 30, 2016
 
 


2016 Disciplined Allocation of Capital (1)
 
North America Value-Creation Pipeline
 
 
 
 
In-Process
Value-Creation (2)
Future
Value-Creation
 
3.5M
5.6M
 
RSF
RSF
 
 
 
 
 
Pre-Leased Percentage (3) of Ground-Up Developments since January 1, 2009
 
Ground-Up Developments Commenced & Delivered since January 1, 2009
 
 
 
 
 
Single-Tenant

100%
Pre-Leased

2.6M RSF
Multi-Tenant

38%
Pre-Leased

2.5M RSF
 
Average
Initial Stabilized Yield


8.0%
Average
Initial Stabilized Yield
(Cash Basis)

7.6%
(1)
Represents projected construction and acquisitions for the year ending December 31, 2016, including the acquisition of One Kendall Square, which we expect to close within the next several months. Refer to pages 5 - 7 of our Earnings Press Release for additional details.
(2)
Includes 0.4 million RSF of value-creation projects recently completed and placed into service in 1H16.
(3)
Represents average pre-leased percentage at the commencement of vertical above ground construction.



 
37
 
 
 
Sustainability
June 30, 2016
 
 


(1)    Upon completion of 20 in-process LEED certification projects.

 
38
 
 
Investments in Real Estate
June 30, 2016
(Dollars in thousands, except per SF amounts)
 
 

 
 
Investments in Real Estate
 
Square Feet
 
 
 
 
Consolidated
 
Noncontrolling Share of Consolidated Real Estate Joint Ventures
 
ARE Share of Unconsolidated Real Estate Joint Ventures
 
Total ARE Share
 
 
 
Unconsolidated Real Estate
Joint Ventures
at 100%
 
 
 
 
 
Page
 
 
 
Amount
 
%
 
Consolidated
 
 
Total
 
Per SF (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental properties – North America
$
7,764,847

 
$
(322,377
)
 
$
83,712

 
$
7,526,182

 
84
%
 
15,461,227

 
313,407

 
15,774,634

 
$
509

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and redevelopment projects:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projects to be delivered by 4Q16
572,570

 
(48,577
)
 
23,360

 
547,353

 
6

 
956,341

 
100,392

 
1,056,733

 
617

Projects to be delivered in 2017 and 2018
552,894

 
(217
)
 
70,526

 
623,203

 
7

 
1,564,968

 
422,980

 
1,987,948

 
345

Development and redevelopment projects
 
1,125,464

 
(48,794
)
 
93,886

 
1,170,556

 
13

 
2,521,309

 
523,372

 
3,044,681

 
439

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental properties and development/redevelopment projects
 
8,890,311

 
(371,171
)
 
177,598

 
8,696,738

 
 
 
17,982,536

 
836,779

 
18,819,315

 
498

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future value-creation projects – North America
233,696

 
(9,322
)
 
—

 
224,374

 
3

 
5,580,988

 
—

 
5,580,988

 
42

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Value-creation pipeline – North America
 
1,359,160

 
(58,116
)
 
93,886

 
1,394,930

 
16

 
8,102,297

 
523,372

 
8,625,669

 
182

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross investments in real estate – North America
 
9,124,007

 
(380,493
)
 
177,598

 
8,921,112

 
100
%
 
23,563,524

 
836,779

 
24,400,303

 
$
394

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets held for sale in Asia:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental properties
 
73,855

 
(672
)
 
—

 
73,183

 

 
1,200,683

 
—

 
1,200,683

 
$
62

Land parcels
 
2,706

 
—

 
—

 
2,706

 

 
 
 
 
 
 
 
 
Gross investments in real estate – Asia
 
76,561

 
(672
)
 
—

 
75,889

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross investments in real estate
 
9,200,568

 
(381,165
)
 
177,598

 
$
8,997,001

 

 
 
 
 
 
 
 
 
Less: accumulated depreciation – North America
 
(1,407,819
)
 
25,033

 
(3,121
)
 
 
 
 
 
 
 
 
 
 
 
 
Less: accumulated depreciation – Asia
 
(18,141
)
 
127

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Investments in real estate
 
$
7,774,608

 
$
(356,005
)
 
$
174,477

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(1)
The per square foot amounts represent total investment in real estate, including our partners’ share of consolidated and unconsolidated real estate joint ventures, divided by 100% of the rentable or developable square feet of the respective properties.


 
39
 
 
Development Projects Placed into Service in 2016
June 30, 2016
(Dollars in thousands)
 
 

 
 
 
 
RSF in Service
 
% of Project in Service
 
 
 
Unlevered Yields
 
 
 
 
 
 
Placed into Service 2016
 
 
 
Total Project
 
Average Cash
 
Initial Stabilized Cash Basis
 
Initial Stabilized
Property/Market/Submarket
 
Date
 
Prior to 1/1/16
 
First Quarter
 
Second Quarter
 
Total
 
 
Leased/
Negotiating
 
Investment
 
 
 
Consolidated development projects
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
430 East 29th Street/
New York City/Manhattan
 
Various
 
354,261

 
1,783

 
62,595

(1) 
418,639

 
100%
 
96%
 
$
471,000

(2) 
 
7.6
%
(2) 
 
 
7.0
%
(2) 
 
 
7.1
%
(2) 
5200 Illumina Way, Building 6/
San Diego/University Town Center
 
6/20/16
 
—

 
—

 
295,609

 
295,609

 
100%
 
100%
 
$
68,000

(3) 
 
8.8
%
(3) 
 
 
7.2
%
(3) 
 
 
8.6
%
(3) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated real estate joint venture development project
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
360 Longwood Avenue/
Greater Boston/Longwood Medical Area
 
Various
 
259,859

 
2,508

 
51,040

 
313,407

 
76%
 
76%
 
$
108,965

 
 
8.2
%
(4) 
 
 
7.3
%
(4) 
 
 
7.8
%
(4) 
 
 
 
 
614,120

 
4,291

 
409,244

 
1,027,655

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

430 East 29th Street
 
5200 Illumina Way, Building 6
 
360 Longwood Avenue
New York City/Manhattan
 
San Diego/University Town Center
 
Greater Boston/Longwood Medical Area
418,639 RSF
 
295,609 RSF
 
313,407 RSF
Roche/New York University/Others
 
Illumina, Inc.
 
Dana-Farber Cancer Institute, Inc.
The Children’s Hospital Corporation
 
 

(1)
Includes 34,017 RSF delivered vacant.
(2)
Increased from our originally disclosed estimated yields of 7.1% for average cash yield, 6.6% initial stabilized yield (cash basis), and 6.5% for initial stabilized yield. Increased from our originally disclosed cost at completion of $463.2 million.
(3)
Increased from our originally disclosed estimated yields of 8.6% for average cash yield, 7.0% initial stabilized yield (cash basis), and 8.4% for initial stabilized yield. Decreased from our originally disclosed cost at completion of $69.9 million.
(4)
Consistent with previously disclosed estimated yields.


 
40
 
 
Visible Growth Highly Leased Pipeline: Projects Expected to Be Placed into Service by 4Q16
June 30, 2016
(Dollars in thousands)
 
 

 
 
Dev/ Redev
 
Project RSF
 
Percentage
 
Total Leased/Negotiating
 
Project Start
 
Occupancy
Property/Market/Submarket
 
 
In Service
 
CIP
 
Total
 
Leased
 
Negotiating
 
RSF
 
%
 
 
Initial
 
Stabilized
50/60 Binney Street/Greater Boston/Cambridge
 
Dev
 
—

 
530,477

 
530,477

 
98
%
 
—
%
 
520,385

 
98
%
 
1Q15
 
4Q16
 
4Q16
360 Longwood Avenue/Greater Boston/Longwood Medical Area
 
Dev
 
313,407

 
100,392

 
413,799

 
76
%
 
—
%
 
313,407

 
76
%
 
2Q12
 
3Q14
 
4Q16
4796 Executive Drive/San Diego/University Town Center
 
Dev
 
—

 
61,755

 
61,755

 
100
%
 
—
%
 
61,755

 
100
%
 
4Q15
 
4Q16
 
4Q16
10290 Campus Point Drive/San Diego/University Town Center
 
Redev
 
—

 
304,326

 
304,326

 
100
%
 
—
%
 
304,326

 
100
%
 
3Q15
 
4Q16
 
4Q16
11 Hurley Street/Greater Boston/Cambridge
 
Redev
 
—

 
59,783

 
59,783

 
100
%
 
—
%
 
59,783

 
100
%
 
3Q15
 
4Q16
 
4Q16
Total/weighted average
 
 
 
313,407

 
1,056,733

 
1,370,140

 
92
%
 
—
%

1,259,656


92
%
 
 
 
 
 
 
 
 
 
 
Our Share of Investment
 
 
Unlevered Yields
 
 
Property/Market/Submarket
 
Our Ownership Interest
 
 
 
Cost to Complete
 
 
 
 
Average Cash
 
Initial Stabilized Cash Basis
 
Initial Stabilized
 
 
 
In Service
 
CIP
 
Construction
Financing
 
Other
 
Total at Completion
 
 
 
 
50/60 Binney Street/Greater Boston/Cambridge
 
100%
 
$
—

 
$
355,039

 
$
144,961

(1) 
$
—

 
 
$
500,000

 
 
8.1%
 
 
 
7.3%
 
 
 
7.4%
 
 
360 Longwood Avenue/Greater Boston/Longwood Medical Area
 
27.5%
 
72,925

 
23,360

 
8,938

(2) 
3,742

 
 
108,965

(3) 
 
8.2%
(3) 
 
 
7.3%
(3) 
 
 
7.8%
(3) 
 
4796 Executive Drive/San Diego/University Town Center
 
100%
 
—

 
21,719

 
—

 
20,481

 
 
42,200

 
 
7.7%
 
 
 
6.8%
 
 
 
7.1%
 
 
10290 Campus Point Drive/San Diego/University Town Center
 
55%
 
—

 
121,732

 
—

 
268

 
 
122,000

(3) 
 
7.6%
(3) 
 
 
6.8%
(3) 
 
 
7.0%
(3) 
 
11 Hurley Street/Greater Boston/Cambridge
 
100%
 
—

 
25,503

 
—

 
15,497

 
 
41,000

 
 
8.8%
 
 
 
7.9%
 
 
 
8.6%
 
 
Total/weighted average
 
 
 
$
72,925

 
$
547,353

 
$
153,899

 
$
39,988

 
 
$
814,165

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
See page 61 for additional information related to our secured construction loans.
(2)
See page 55 for additional information related to our unconsolidated real estate joint venture secured construction loan.
(3)
Our projected cost at completion and unlevered yields are based upon our share of the investment in real estate, including costs incurred directly by us outside of the real estate joint venture. Development management fees earned from these projects have been excluded from our estimate of unlevered yields. The RSF related to the project in the table above represents 100% of the project RSF.

 
41
 
 
 
Visible Growth Highly Leased Pipeline: Projects Expected to Be Placed into Service by 4Q16 (continued)
June 30, 2016
 
 



50 Binney Street
 
60 Binney Street
 
360 Longwood Avenue
Greater Boston/Cambridge
 
Greater Boston/Cambridge
 
Greater Boston/Longwood Medical Area
274,734 RSF
 
255,743 RSF
 
100,392 RSF
Sanofi Genzyme
 
bluebird bio, Inc.
 
Dana-Farber Cancer Institute, Inc.
The Children’s Hospital Corporation
 
 
4796 Executive Drive
 
10290 Campus Point Drive
 
11 Hurley Street
San Diego/University Town Center
 
San Diego/University Town Center
 
Greater Boston/Cambridge
61,755 RSF
 
304,326 RSF
 
59,783 RSF
Otonomy, Inc.
 
Eli Lilly and Company
 
Editas Medicine, Inc.
 
 

 
42
 
 
Visible Growth Highly Leased Pipeline: Projects Expected to Be Placed into Service in 2017 and 2018
June 30, 2016
(Dollars in thousands)
 
 

 
 
Dev/ Redev
 
Project RSF
 
Percentage
 
Total Leased/Negotiating
 
Project Start
 
Occupancy
Property/Market/Submarket
 
 
In Service
 
CIP
 
Total
 
Leased
 
Negotiating
 
RSF
 
%
 
 
Initial
 
Stabilized
100 Binney Street/Greater Boston/Cambridge
 
Dev
 
—

 
431,483

 
431,483

 
48
%
 
26
%
 
320,683

 
74
%
 
3Q15
 
4Q17
 
2017
510 Townsend Street/San Francisco/Mission Bay/SoMa
 
Dev
 
—

 
300,000

 
300,000

 
100
%
 
—
%
 
300,000

 
100
%
 
3Q15
 
3Q17
 
2017
505 Brannan Street, Phase I/San Francisco/Mission Bay/SoMa
 
Dev
 
—

 
150,000

 
150,000

 
100
%
 
—
%
 
150,000

 
100
%
 
1Q16
 
2H17
 
2017
1455/1515 Third Street/San Francisco/Mission Bay/SoMa
 
Dev
 
—

 
422,980

 
422,980

 
100
%
 
—
%
 
422,980

 
100
%
 
3Q14
 
2Q/3Q18
 
2018
400 Dexter Avenue North/Seattle/Lake Union
 
Dev
 
—

 
287,806

 
287,806

 
62
%
 
28
%
 
259,594

 
90
%
(1) 
2Q15
 
1Q17
 
2018
ARE Spectrum/San Diego/Torrey Pines
 
Dev
 
102,938

 
233,523

 
336,461

 
91
%
 
—
%
 
305,525

 
91
%
 
2Q16
 
2H17
 
2017
9625 Towne Centre Drive/San Diego/University Town Center
 
Redev
 
—

 
162,156

 
162,156

 
—
%
 
100
%
 
162,156

 
100
%
 
3Q15
 
1Q17
 
2017
5200 Illumina Way, Parking Structure/San Diego/University Town Center (2)
 
Dev
 
N/A

 
N/A

 
N/A

 
100
%
 
—
%
 
N/A

 
100
%
 
2Q16
 
2H17
 
2017
Total/weighted average
 
 
 
102,938

 
1,987,948

 
2,090,886

 
75
%
 
17
%
 
1,920,938

 
92
%
 
 
 
 
 
 

 
 
 
 
Our Share of Investment
 
Unlevered Yields
Property/Market/Submarket
 
Our Ownership Interest
 
 
 
Cost to Complete
 
 
 
 
Average Cash
 
Initial Stabilized Cash Basis
 
Initial Stabilized
 
 
In Service
 
CIP
 
Construction Financing
 
Other
 
Total at Completion
 
 
 
100 Binney Street/Greater Boston/Cambridge
 
100%
 
$
—

 
$
200,484

 
$
264,192

 
$
70,324

 
$
535,000

 
7.9%
 
7.0%
 
7.7%
510 Townsend Street/San Francisco/Mission Bay/SoMa
 
100%
 
—

 
99,959

 
—

 
 
138,041

 
 
238,000

 
7.9%
 
7.0%
 
7.2%
505 Brannan Street, Phase I/San Francisco/Mission Bay/SoMa
 
99.4%
 
—

 
44,907

 
—

 
 
96,093

 
 
141,000

 
8.6%
 
7.0%
 
8.2%
1455/1515 Third Street/San Francisco/Mission Bay/SoMa
 
51.0%
 
10,787

(3) 
70,525

(3) 
—

 
 
—

 
 
TBD

 
(4) 
 
(4) 
 
(4) 
400 Dexter Avenue North/Seattle/Lake Union
 
100%
 
—

 
90,793

 
—

 
 
141,207

 
 
232,000

 
7.3%
 
6.9%
 
7.2%
ARE Spectrum/San Diego/Torrey Pines
 
100%
 
65,413

 
88,830

 
—

 
 
123,757

 
 
278,000

 
6.9%
 
6.1%
 
6.4%
9625 Towne Centre Drive/San Diego/University Town Center
 
100%
 
—

 
24,078

 
—

 
 
—

 
 
TBD

 
(4) 
 
(4) 
 
(4) 
5200 Illumina Way, Parking Structure/San Diego/University Town Center (2)
 
100%
 
—

 
3,627

 
—

 
 
66,373

 
 
70,000

 
7.0%
 
7.0%
 
7.0%
Total/weighted average
 
 
 
$
76,200

 
$
623,203

 
$
264,192

 
$
TBD

 
$
TBD

 
 
 
 
 
 
 
 
 

(1)
Remaining 10% of RSF includes 5% of retail space. Retail space is generally leased closer to completion of the building.
(2)
Represents a 1,280 space parking garage, a portion of which is subterranean, and 20,000 to 40,000 RSF of contiguous amenity space which is leased to Illumina, Inc. Since 2011, we have expanded the campus at 5200 Illumina Way from 346,581 RSF to 792,687 RSF by way of three separate build-to-suit developments for Illumina, Inc. As of 2Q16, pro forma for rents from the recently completed Building 6 and the parking garage under construction, ABR per RSF for the entire 5200 Illumina Way campus is approximately $38.19 per year.
(3)
The in-service and CIP costs are based on our share of the investment in real estate, including costs incurred directly by us outside of the joint venture. The RSF related to the project in the table above represents 100% of the project RSF.
(4)
The design and budget of these projects are in process, and the estimated project costs with related yields will be disclosed in the future.

 
43
 
 
 
 
Visible Growth Highly Leased Pipeline: Projects Expected to Be Placed into Service in 2017 and 2018 (continued)
 
 
June 30, 2016
 
 
 


100 Binney Street
 
510 Townsend Street
 
505 Brannan Street, Phase I
 
Greater Boston/Cambridge
 
San Francisco/Mission Bay/SoMa
 
San Francisco/Mission Bay/SoMa
 
431,483 RSF
 
300,000 RSF
 
150,000 RSF
 
Bristol-Myers Squibb Company
 
Stripe, Inc.
 
Pinterest, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1455/1515 Third Street
 
400 Dexter Avenue North
 
ARE Spectrum
 
9625 Towne Centre Drive
San Francisco/Mission Bay/SoMa
 
Seattle/Lake Union
 
San Diego/Torrey Pines
 
San Diego/University Town Center
422,980 RSF
 
287,806 RSF
 
233,523 RSF
 
162,156 RSF
Uber Technologies, Inc.
 
Juno Therapeutics, Inc.
 
Celgene Corporation
The Medicines Company
Vertex Pharmaceuticals Incorporated
 
Negotiating
 
 
 

 
44
 
 
Key Future Projects
June 30, 2016
(Dollars in thousands, except per SF amounts)
 
 


 
 
 
 
 
 
 
 
 
 
 
 
Property/Market/Submarket
 
Our Ownership Interest
 
 
ARE Share of Book Value
 
Square Feet
 
Per SF (1)
Alexandria Technology Square®/Greater Boston/Cambridge
 
 
100%
 
 
 
$
7,787

 
100,000

 
$
78

505 Brannan Street, Phase II/San Francisco/Mission Bay/SoMa
 
 
99.4%
 
 
 
12,994

 
165,000

 
79

Grand Avenue/San Francisco/South San Francisco
 
 
Various
(2) 
 
 
36,574

 
434,072

 
105

560 Eccles Avenue/San Francisco/South San Francisco (3)
 
 
100%
 
 
 
17,655

 
144,000

 
123

East 29th Street/New York City/Manhattan
 
 
100%
 
 
 
—

 
420,000

 
—

5200 Illumina Way/San Diego/University Town Center
 
 
100%
 
 
 
10,645

 
386,044

 
28

Campus Point Drive/San Diego/University Town Center
 
 
100%
 
 
 
8,522

 
315,000

 
27

1150/1165/1166 Eastlake Avenue East/Seattle/Lake Union
 
 
100%
 
 
 
34,971

 
366,000

 
96

1818 Fairview Avenue East/Seattle/Lake Union
 
 
100%
 
 
 
8,864

 
188,490

 
47

6 Davis Drive/Research Triangle Park/Research Triangle Park
 
 
100%
 
 
 
16,419

 
1,000,000

 
16

Other:
 
 
 
 
 
 
 
 
 
 
 
Greater Boston
 
 
100%
 
 
 
9,823

 
405,599

 
24

San Francisco
 
 
100%
 
 
 
—

 
95,620

 
—

San Diego
 
 
100%
 
 
 
25,691

 
193,895

 
132

Maryland
 
 
100%
 
 
 
17,732

 
668,721

 
27

Research Triangle Park
 
 
100%
 
 
 
4,149

 
76,262

 
54

Non-cluster markets
 
 
100%
 
 
 
12,548

 
622,285

 
20

 
 
 
 
 
 
 
 
 
 
 
 
Future value-creation projects
 
 
 
 
 
 
$
224,374

 
5,580,988

 
$
42

 
 
 
 
 
 
 
 
 
 
 
 

(1)
The per square foot amounts represent total investment in real estate, including our partners’ share of consolidated real estate joint ventures, divided by 100% of the rentable or developable square feet of the respective properties.
(2)
Includes a redeemable noncontrolling interest, aggregating 28% ownership in one of our consolidated real estate joint ventures, at our 213 East Grand Avenue property aggregating 306,096 RSF.
(3)
Represents an additional parcel located near our 341/343 Oyster Point Boulevard properties and within walking distance of Roche’s campus in South San Francisco.


 
45
 
 
 
Key Future Projects (continued)
June 30, 2016
 
 



 
46
 
 
 
Key Future Projects (continued)
June 30, 2016
 
 



 
47
 
 
Projected and Historical Construction Spending
June 30, 2016
(Dollars in thousands, except for per RSF amounts)
 
 



Projected Construction Spending
 
Year Ending
December 31, 2016
Development and redevelopment projects
 
$
376,000
 
Generic laboratory infrastructure/building improvement projects
 
 
44,000
 
Non-revenue-enhancing capital expenditures and tenant improvements
 
 
9,000
 
Total construction spending for the six months ending December 31, 2016
 
$
429,000
 
Actual construction spending for the six months ended June 30, 2016
 
 
380,401
 
Guidance range for the year ending December 31, 2016
 
$
760,000
–
860,000


Historical Construction Spending
 
Six Months Ended June 30, 2016
Our share of total construction costs(1)
 
$
380,401

Joint venture partner’s share of construction costs
 
48,477

Increase in accrued construction
 
(59,871
)
Total construction spending (cash basis)
 
$
369,007

 
 
 
Classification in Consolidated Statement of Cash Flows
 
 
Additions to real estate
 
$
363,061

Investments in unconsolidated real estate joint ventures
 
5,946

Total construction spending (cash basis)
 
$
369,007


(1)
Includes revenue-enhancing projects and non-revenue-enhancing capital expenditures shown in the table below.


Non-Revenue-Enhancing Capital Expenditures,
Tenant Improvements, and Leasing Costs (1)
 
Six Months Ended June 30, 2016
 
Recent Average
per RSF (2)
 
Amount
 
RSF
 
Per RSF
 
Non-revenue-enhancing capital expenditures
 
$
5,151

 
16,629,515

 
$
0.31

 
$
0.43

 
 
 
 
 
 
 
 
 
Tenant improvements and leasing costs:
 
 
 
 
 
 
 
 
Re-tenanted space
 
$
7,142

 
380,924

 
$
18.75

 
$
15.89

Renewal space
 
4,374

 
484,686

 
9.02

 
7.40

Total tenant improvements and leasing costs/weighted average
 
$
11,516

 
865,610

 
$
13.30

 
$
9.82

 
 
 
 
 
 
 
 
 

(1)
Excludes amounts that are recoverable from tenants, revenue enhancing, or related to properties that have undergone redevelopment.
(2)
Represents the average of 2012 through 2015 and six months ended June 30, 2016, annualized.

 
48
 
 
Pro Rata – Operating Information
June 30, 2016
(In thousands)
 
 


 
Three Months Ended June 30, 2016
 
Six Months Ended June 30, 2016
 
 
Consolidated
 
Noncontrolling Share of Consolidated JVs
 
Our Share of Unconsolidated JVs
 
Our Total Share
 
Consolidated
 
Noncontrolling Share of Consolidated JVs
 
Our Share of Unconsolidated JVs
 
Our Total Share
 
Total revenues
$
226,076

 
$
(8,383
)
 
$
1,989

 
$
219,682

 
$
442,165

 
$
(16,573
)
 
$
3,844

 
$
429,436

 
Rental operations
67,325

 
(2,322
)
 
775

 
65,778

 
133,162

 
(4,457
)
 
1,562

 
130,267

 
 
158,751

 
(6,061
)
 
1,214

 
153,904

 
309,003

 
(12,116
)
 
2,282

 
299,169

 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
General and administrative
15,384

 
(46
)
 
16

 
15,354

 
30,572

 
(68
)
 
52

 
30,556

 
Interest
25,025

 
—

 
693

 
25,718

 
49,880

 
—

 
1,379

 
51,259

 
Depreciation and amortization
70,169

 
(2,226
)
 
651

 
68,594

 
141,035

 
(4,527
)
 
1,394

 
137,902

 
Impairment of real estate
156,143

 
(586
)
 
—

 
155,557

 
185,123

 
(586
)
 
—

 
184,537

 
 
266,721

 
(2,858
)
 
1,360

 
265,223

 
406,610

 
(5,181
)
 
2,825

 
404,254

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in loss from unconsolidated real estate joint venture
(146
)
 
—

 
146

 
—

 
(543
)
 
—

 
543

 
—

 
Net loss
(108,116
)
 
(3,203
)
 
—

 
(111,319
)
 
(98,150
)
 
(6,935
)
 
—

 
(105,085
)
 
Net income attributable to noncontrolling interests
(3,500
)
 
3,203

 
—

 
(297
)
(1) 
(7,530
)
 
6,935

 
—

 
(595
)
(1) 
Net loss attributable to Alexandria Real Estate Equities, Inc.
(111,616
)
 
—

 
—

 
(111,616
)
 
(105,680
)
 
—

 
—

 
(105,680
)
 
Dividends on preferred stock
(5,474
)
 
—

 
—

 
(5,474
)
 
(11,381
)
 
—

 
—

 
(11,381
)
 
Preferred stock redemption charge
(9,473
)
 
—

 
—

 
(9,473
)
 
(12,519
)
 
—

 
—

 
(12,519
)
 
Net income attributable to unvested restricted stock awards
(1,085
)
 
—

 
—

 
(1,085
)
 
(1,886
)
 
—

 
—

 
(1,886
)
 
Net loss attributable to Alexandria's common stockholders
$
(127,648
)
 
$
—

 
$
—

 
$
(127,648
)
 
$
(131,466
)
 
$
—

 
$
—

 
$
(131,466
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Represents net income attributable to redeemable noncontrolling interests. These redeemable interests earn a fixed preferred return of 8.4% rather than a variable return based upon their ownership percentage of the joint venture and have been excluded from our calculation.

 
49
 
 
Pro Rata – Balance Sheet Information
June 30, 2016
(In thousands)
 
 



 
June 30, 2016
 
Consolidated
 
Noncontrolling Share of Consolidated JVs
 
Our Share of Unconsolidated JVs
 
Our Total Share
Investments in real estate
$
7,774,608

 
$
(356,005
)
 
$
174,477

 
$
7,593,080

Investments in unconsolidated real estate joint ventures
132,433

 
—

 
(132,433
)
 
—

Cash and cash equivalents
256,000

 
(7,904
)
 
6,002

 
254,098

Other assets
981,789

 
(18,272
)
 
8,759

 
972,276

Total assets
$
9,144,830

 
$
(382,181
)
 
$
56,805

 
$
8,819,454

 
 
 
 
 
 
 
 
Secured notes payable
$
722,794

 
$
—

 
$
49,592

 
$
772,386

Unsecured debt
3,393,743

 
—

 
—

 
3,393,743

Other liabilities
660,816

 
(36,413
)
 
7,213

 
631,616

Total liabilities
4,777,353

 
(36,413
)
 
56,805

 
4,797,745

 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
9,218

 
(9,218
)
 
—

 
—

 
 
 
 
 
 
 
 
Alexandria’s stockholders’ equity
4,021,709

 
—

 
—

 
4,021,709

Noncontrolling interests
336,550

 
(336,550
)
 
—

 
—

Total equity
4,358,259

 
(336,550
)
 
—

 
4,021,709

Total liabilities and equity
$
9,144,830

 
$
(382,181
)
 
$
56,805

 
$
8,819,454

 
 
 
 
 
 
 
 



 
50
 
 
Consolidated Joint Ventures – Pro Rata Operating Information
June 30, 2016
(Dollars in thousands)
 
 


 
 
Three Months Ended June 30, 2016
 
 
Consolidated Real Estate Joint Ventures at 100% 
 
 
225 Binney Street
 
1500 Owens Street
 
409/499 Illinois Street
 
Various
 
Total
Total revenues
 
$
3,941

 
$
3,220

 
$
9,957

 
$
473

 
$
17,591

Rental operations
 
624

 
1,089

 
3,276

 
599

 
5,588

 
 
3,317

 
2,131

 
6,681

 
(126
)

12,003

Expenses:
 
 
 
 
 
 
 
 
 
 
General and administrative
 
9

 
29

 
50

 
158

 
246

Interest
 
—

 
—

 
—

 
—

 
—

Depreciation and amortization
 
977

 
700

 
2,970

 
121

 
4,768

Impairment of real estate
 
—

 
—

 
—

 
18,841

 
18,841

Net income (loss)
 
$
2,331

 
$
1,402

 
$
3,661

 
$
(19,246
)
 
$
(11,852
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interests Share of Amounts Above
 
 
225 Binney Street
 
1500 Owens Street
 
409/499 Illinois Street
 
 
 
Total
 
 
70%
 
49.9%
 
40%
 
Various (1)
 
Total revenues
 
$
2,759

 
$
1,606

 
$
3,983

 
$
35

 
$
8,383

Rental operations
 
438

 
543

 
1,311

 
30

 
2,322

 
 
2,321

 
1,063

 
2,672

 
5

 
6,061

Expenses:
 
 
 
 
 
 
 
 
 
 
General and administrative
 
6

 
15

 
20

 
5

 
46

Interest
 
—

 
—

 
—

 
—

 
—

Depreciation and amortization
 
683

 
349

 
1,188

 
6

 
2,226

Impairment of real estate
 
—

 
—

 
—

 
586

 
586

Net income (loss)
 
$
1,632

 
$
699

 
$
1,464

 
$
(592
)
 
$
3,203

 
 
 
 
 
 


 
 
 
 
 
(1)
Excludes net income attributable to redeemable noncontrolling interests, aggregating $297 thousand. These redeemable interests earn a fixed preferred return of 8.4%, rather than a variable return based upon their ownership percentage of
the joint venture, and have been excluded from our calculation.

 
51
 
 
Consolidated Joint Ventures – Pro Rata Operating Information
June 30, 2016
(Dollars in thousands)
 
 


 
 
Six Months Ended June 30, 2016
 
 
Consolidated Real Estate Joint Ventures at 100% 
 
 
225 Binney Street
 
1500 Owens Street
 
409/499 Illinois Street
 
Various
 
Total
Total revenues
 
$
7,878

 
$
6,267

 
$
19,627

 
$
1,203

 
$
34,975

Rental operations
 
1,239

 
2,074

 
6,196

 
1,179

 
10,688

 
 
6,639

 
4,193

 
13,431

 
24

 
24,287

Expenses:
 
 
 
 
 
 
 
 
 
 
General and administrative
 
9

 
30

 
57

 
373

 
469

Interest
 
—

 
—

 
—

 
—

 
—

Depreciation and amortization
 
1,953

 
1,429

 
6,024

 
483

 
9,889

Impairment of real estate
 
—

 
—

 
—

 
18,841

 
18,841

Net income (loss)
 
$
4,677

 
$
2,734

 
$
7,350

 
$
(19,673
)
 
$
(4,912
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interest Share of Amounts Above
 
 
225 Binney Street
 
1500 Owens Street
 
409/499 Illinois Street
 
 
 
Total
 
 
70%
 
49.9%
 
40%
 
Various (1)
 
Total revenues
 
$
5,515

 
$
3,127

 
$
7,851

 
$
80

 
$
16,573

Rental operations
 
868

 
1,035

 
2,479

 
75

 
4,457

 
 
4,647

 
2,092

 
5,372

 
5

 
12,116

Expenses:
 
 
 
 
 
 
 
 
 
 
General and administrative
 
6

 
15

 
22

 
25

 
68

Interest
 
—

 
—

 
—

 
—

 
—

Depreciation and amortization
 
1,367

 
713

 
2,410

 
37

 
4,527

Impairment of real estate
 
—

 
—

 
—

 
586

 
586

Net income (loss)
 
$
3,274

 
$
1,364

 
$
2,940

 
$
(643
)
 
$
6,935

 
 
 
 
 
 
 
 
 
 
 

(1)
Excludes net income attributable to redeemable noncontrolling interests, aggregating $595 thousand. These redeemable interests earn a fixed preferred return of 8.4%, rather than a variable return based upon their ownership percentage of the joint venture, and have been excluded from our calculation.

 
52
 
 
Consolidated Joint Ventures – Pro Rata Balance Sheet Information
June 30, 2016
(Dollars in thousands)
 
 





 
 
June 30, 2016
 
 
Consolidated Real Estate Joint Ventures at 100% 
 
 
225 Binney Street
 
1500 Owens Street
 
409/499 Illinois Street
 
10290 Campus Point Drive
 
Various
 
Total
Investments in real estate
 
$
161,609

 
$
81,532

 
$
357,548

 
$
169,816

 
$
117,266

 
$
887,771

Cash and cash equivalents
 
3,719

 
2,615

 
9,485

 
—

 
7,157

 
22,976

Other assets
 
7,076

 
6,312

 
23,673

 
3,021

 
4,506

 
44,588

Total assets
 
$
172,404

 
$
90,459

 
$
390,706

 
$
172,837

 
$
128,929

 
$
955,335

 
 
 
 
 
 
 
 
 
 
 
 
 
Secured notes payable
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Other liabilities
 
3,272

 
10,081

 
27,238

 
18,141

 
12,356

 
71,088

Total liabilities
 
3,272

 
10,081

 
27,238

 
18,141

 
12,356

 
71,088

 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
 
—

 
—

 
—

 
—

 
9,218

(1) 
9,218

 
 
 
 
 
 
 
 
 
 
 
 
 
Total equity
 
169,132

 
80,378

 
363,468

 
154,696

 
107,355

 
875,029

Total liabilities and equity
 
$
172,404

 
$
90,459

 
$
390,706

 
$
172,837

 
$
128,929

 
$
955,335

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interest Share of Amounts Above
 
 
225 Binney Street
 
1500 Owens Street
 
409/499 Illinois Street
 
10290 Campus Point Drive
 
 
 
Total
 
 
70%
 
49.9%
 
40%
 
45% (2)
 
Various
 
Investments in real estate
 
$
113,126

 
$
40,685

 
$
143,020

 
$
48,477

 
$
10,697

 
$
356,005

Cash and cash equivalents
 
2,603

 
1,305

 
3,794

 
—

 
202

 
7,904

Other assets
 
4,954

 
3,149

 
9,468

 
603

 
98

 
18,272

Total assets
 
$
120,683

 
$
45,139

 
$
156,282

 
$
49,080

 
$
10,997

 
$
382,181

 
 
 
 
 
 
 
 
 
 
 
 
 
Secured notes payable
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Other liabilities
 
2,291

 
5,030

 
10,895

 
18,141

 
56

 
36,413

Total liabilities
 
2,291

 
5,030

 
10,895

 
18,141

 
56

 
36,413

 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
 
—

 
—

 
—

 
—

 
9,218

(1) 
9,218

 
 
 
 
 
 
 
 
 
 
 
 
 
Total equity
 
118,392

 
40,109

 
145,387

 
30,939

 
1,723

 
336,550

Total liabilities and equity
 
$
120,683

 
$
45,139

 
$
156,282

 
$
49,080

 
$
10,997

 
$
382,181

 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Represents redeemable noncontrolling interests aggregating approximately 28% ownership in one of our consolidated real estate joint ventures. Excluding this entity, the remaining real estate joint venture partners have approximately 2% ownership in the various consolidated real estate joint ventures.
(2)
The 10290 Campus Point Drive joint venture closed in June 2016. Our joint venture partner is expected to fund substantially all of the remaining redevelopment costs for this project. As of June 30, 2016, 10290 Campus Point Drive was under redevelopment and had no operating activities.

 
53
 
 
Unconsolidated Joint Ventures – Pro Rata Operating Information
June 30, 2016
(Dollars in thousands)
 
 



 
 
Three Months Ended June 30, 2016
 
Six Months Ended June 30, 2016
 
 
Unconsolidated Real Estate JVs at 100%
 
Unconsolidated Real Estate JVs at 100%
 
 
360 Longwood Avenue
 
1455/1515 Third Street
 
Total
 
360 Longwood Avenue
 
1455/1515 Third Street
 
Total
Total revenue
 
$
6,613

 
$
187

 
$
6,800

 
$
12,866

 
$
298

 
$
13,164

Rental operations
 
2,468

 
187

 
2,655

 
4,951

 
391

 
5,342

 
 
4,145

 
—

 
4,145

 
7,915

 
(93
)
 
7,822

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
General and administrative
 
16

 
22

 
38

 
143

 
22

 
165

Interest
 
2,516

 
—

 
2,516

 
5,011

 
—

 
5,011

Depreciation and amortization
 
1,676

 
132

 
1,808

 
3,344

 
264

 
3,608

Net loss
 
$
(63
)
 
$
(154
)
 
$
(217
)
 
$
(583
)
 
$
(379
)
 
$
(962
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our Share of Amounts Above
 
Our Share of Amounts Above
 
 
360 Longwood Avenue
 
1455/1515 Third Street
 
 
 
360 Longwood Avenue
 
1455/1515 Third Street
 
 
 
 
27.5%
 
51%
 
Total
 
27.5%
 
51%
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
$
1,893

(1)
$
96

 
$
1,989

 
$
3,692

(1)
$
152

 
$
3,844

Rental operations
 
679

 
96

 
775

 
1,362

 
200

 
1,562

 
 
1,214

 
—

 
1,214

 
2,330

 
(48
)
 
2,282

Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
General and administrative
 
5

 
11

 
16

 
41

 
11

 
52

Interest
 
693

 
—

 
693

 
1,379

 
—

 
1,379

Depreciation and amortization
 
583

 
68

 
651

 
1,259

 
135

 
1,394

Net loss
 
$
(67
)
 
$
(79
)
 
$
(146
)
 
$
(349
)
 
$
(194
)
 
$
(543
)

(1)
Includes property management fees earned by us.

 
54
 
 
Unconsolidated Joint Ventures – Pro Rata Balance Sheet Information
June 30, 2016
(Dollars in thousands)
 
 


 
 
June 30, 2016
 
 
Unconsolidated Real Estate Joint Ventures at 100%
 
 
360 Longwood Avenue

 
1455/1515 Third Street

 
Total
Investments in real estate
 
$
309,421

 
$
147,763

 
$
457,184

Cash and cash equivalents
 
7,165

 
7,869

 
15,034

Other assets
 
21,829

 
2,543

 
24,372

Total assets
 
$
338,415

 
$
158,175

 
$
496,590

 
 
 
 
 
 


Secured notes payable
 
$
180,341

(1)
$
—

 
$
180,341

Other liabilities
 
9,837

 
7,585

 
17,422

Total liabilities
 
190,178

 
7,585

 
197,763

 
 
 
 
 
 
 
Total equity
 
148,237

 
150,590

 
298,827

Total liabilities and equity
 
$
338,415

 
$
158,175

 
$
496,590

 
 
 
 
 
 
 
 
 
Our Share of Amounts Above (2)
 
 
360 Longwood Avenue
 
1455/1515 Third Street
 
 
 
 
27.5%
 
51%
 
Total
Investments in real estate
 
$
93,659

 
$
80,818

 
$
174,477

Cash and cash equivalents
 
1,989

 
4,013

 
6,002

Other assets
 
7,186

 
1,573

 
8,759

Total assets
 
$
102,834

 
$
86,404

 
$
189,238

 
 
 
 
 
 
 
Secured notes payable
 
$
49,592

(1)
$
—

 
$
49,592

Other liabilities
 
3,268

 
3,945

 
7,213

Total liabilities
 
52,860

 
3,945

 
56,805

 
 
 
 
 
 
 
Total equity
 
49,974

 
82,459

 
132,433

Total liabilities and equity
 
$
102,834

 
$
86,404

 
$
189,238


(1)
Represents a non-recourse, secured construction loan with aggregate commitments of $213.2 million, of which $175.2 million bears interest at a fixed rate of 5.25% and $38.0 million bears interest at a floating rate of LIBOR+3.75%, with a floor of 5.25%. Borrowings under the floating rate tranche are subject to an interest rate cap on LIBOR of 3.50%. The maturity date of the loan is April 1, 2017, with two, one-year options to extend the stated maturity date to April 1, 2019, subject to certain conditions. The amount of $180.3 million classified as a secured note payable as of June 30, 2016, consists of $180.7 million of outstanding principal of the secured note payable, net of $352 thousand of unamortized deferred financing costs.
(2)
Amounts include costs incurred directly by us outside of the real estate joint ventures.

 
55
 
 
Real Estate Investments in Asia
June 30, 2016
(Dollars in thousands)
 
 


In March 2016, we recognized an impairment charge of $29.0 million for two land parcels in India that met the criteria for classification as held for sale. On April 22, 2016, our Board of Directors approved the monetization of our remaining real estate investments in Asia in order to invest capital into our highly leased value-creation pipeline. As a result of this decision, we recognized an aggregate impairment charge of $154.1 million during 2Q16 to reduce our net book value to fair value less cost to sell for all of our remaining investments in Asia. During 2Q16, we sold one land parcel in Asia at a sales price of $7.5 million with no gain or loss. We believe our remaining real estate investments in Asia will be monetized in several separate transactions over the next several quarters.

The following is a summary of net assets of our real estate investments in Asia that were classified as held for sale as of June 30, 2016, including eight operating properties with 1.2 million RSF and land parcels aggregating 191 acres.
Balance Sheet Information
 
June 30, 2016
 
Total assets
 
$
72,575

 
Total liabilities
 
(19,712
)
 
Total accumulated other comprehensive loss
 
44,662

(1) 
Net assets as of June 30, 2016
 
$
97,525

 

The following is a summary of operating information of our real estate investments in Asia, including: (i) eight operating properties aggregating 1.2 million RSF and land parcels aggregating 191 acres that were classified as held for sale as of June 30, 2016, and (ii) one land parcel and one development project in India that were sold subsequent to January 1, 2015:
 
Three Months Ended
 
Six Months Ended
 
Operating Information
June 30, 2016
 
June 30, 2016
 
Total revenues
$
3,297

 
$
6,516

 
Operating expenses
(2,417
)
 
(4,724
)
 
 
880

 
1,792

 
General and administrative expense
(757
)
 
(1,722
)
 
 
123

 
70

 
Depreciation expense
(761
)
 
(3,009
)
 
Impairment of real estate
(154,117
)
 
(183,097
)
 
Net loss
$
(154,755
)
 
$
(186,036
)
 


(1)
Represents cumulative foreign currency translation losses related to our real estate investments located in Asia.


 
56
 
 
Non-Real Estate Investments
June 30, 2016
(Dollars in thousands)
 
 


Public/Private Investment Mix
(Cost)
 
Tenant/Non-Tenant Mix
(Cost)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment
Type
 
Cost
 
Net Unrealized Gains
 
Total
 
Number of Investments

199

Average Cost

$1.4M
Public
 
$
36,469

 
$
76,078

 
$
112,547

 
Private
 
247,503

 
—

 
247,503

 
Total
 
$
283,972

 
$
76,078

 
$
360,050

 

 
57
 
 
 
Key Credit Metrics
June 30, 2016
 
 


Net Debt to Adjusted EBITDA (1)
 
Liquidity
 
 
 
 
 
 
$2.4B
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in millions)

 
 
Availability under our unsecured senior line of credit (2)
$
1,578

 
 
Remaining construction loan commitments
483

 
 
Available-for-sale equity securities, at fair value
112

 
 
Cash and cash equivalents
256

 
 
 
$
2,429

 
 
 
 
 
 
Fixed-Charge Coverage Ratio (1)
 
Unencumbered NOI (3)
 
 
 
 
 
 
86%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Quarter annualized.
(2)
Amount includes our availability for borrowing under our unsecured senior line of credit, aggregating $1.4 billion as of June 30, 2016, and an additional $150 million that became available on July 29, 2016, upon amendment of our unsecured senior line of credit agreement. Aggregate commitments available under our unsecured senior line of credit were increased to $1.65 billion.
(3)
For the three months ended June 30, 2016.

 
58
 
 
 
Summary of Debt
June 30, 2016
 
 


Debt maturities chart
(Dollars in millions)
(1)
We have a one-year option to extend the stated maturity date of one secured note payable, aggregating $201.2 million, to August 23, 2018, subject to certain conditions.

Fixed-rate/hedged and unhedged variable-rate debt
 
Fixed-Rate/Hedged
Variable-Rate Debt
 
Unhedged
Variable-Rate Debt
 
Total
 
Weighted-Average
 
 
 
 
 
 
Remaining Term
(in years)
(Dollars in thousands)
 
 
Consolidated
 
Percentage
 
Interest Rate (1)
 
Secured notes payable
$
382,052

 
$
340,742

 
$
722,794

 
17.6
%
 
3.46
%
 
2.8
Unsecured senior notes payable
2,376,713

 
—

 
2,376,713

 
57.8

 
4.12

 
7.7
$1.5 billion unsecured senior line of credit (2)
—

 
72,000

 
72,000

 
1.7

 
1.57

 
2.5
2019 Unsecured Senior Bank Term Loan
597,304

 
—

 
597,304

 
14.5

 
2.20

 
2.5
2021 Unsecured Senior Bank Term Loan
347,726

 
—

 
347,726

 
8.4

 
2.22

 
4.5
Total/weighted average
$
3,703,795

 
$
412,742

 
$
4,116,537

 
100.0
%
 
3.52
%
 
5.8
Percentage of total debt
90%

 
10%

 
100%

 
 
 
 
 
 
 

(1)
See footnote 1 on page 60 for additional information on weighted-average interest rate.
(2)
On July 29, 2016, we amended our unsecured senior line of credit and increased commitments available for borrowing by $150 million to an aggregate of $1.65 billion, extended the maturity date to October 29, 2021, and reduced the interest rate from LIBOR+1.10% to LIBOR+1.00%.

 
59
 
 
Summary of Debt (continued)
June 30, 2016
(Dollars in thousands)
 
 


 
 
Stated 
Rate
 
Weighted Average Interest Rate
 
Maturity Date
 
Principal Payments Remaining for the Periods Ending December 31,
 
 
 
Unamortized (Deferred Financing Cost), (Discount)/Premium
 
 
Debt
 
 
(1) 
(2) 
2016
 
2017
 
2018
 
2019
 
2020
 
Thereafter
 
Principal
 
 
Total
Secured notes payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maryland
 
2.44
%
 
2.79
%
 
1/20/17
 
$
—

 
$
76,000

 
$
—

 
$
—

 
$
—

 
$
—

 
$
76,000

 
$
(146
)
 
$
75,854

Greater Boston
 
L+1.35

 
2.44

 
8/23/17
(3) 
—

 
201,241

 
—

 
—

 
—

 
—

 
201,241

 
(1,614
)
 
199,627

Greater Boston
 
L+1.50

 
1.88

 
1/28/19
(3) 
—

 
—

 
—

 
180,753

 
—

 
—

 
180,753

 
(3,081
)
 
177,672

Greater Boston
 
L+2.00

 
2.94

 
4/20/19
(3) 
—

 
—

 
—

 
40,089

 
—

 
—

 
40,089

 
(3,703
)
 
36,386

San Diego, Seattle, and Maryland
 
7.75

 
8.08

 
4/1/20
 
864

 
1,832

 
1,980

 
2,138

 
104,352

 
—

 
111,166

 
(1,253
)
 
109,913

San Diego
 
4.66

 
4.93

 
1/1/23
 
861

 
1,540

 
1,615

 
1,692

 
1,770

 
29,904

 
37,382

 
(428
)
 
36,954

Greater Boston
 
3.93

 
3.33

 
3/10/23
 
—

 
—

 
1,091

 
1,505

 
1,566

 
77,838

 
82,000

 
3,586

 
85,586

San Francisco
 
6.50

 
6.72

 
7/1/36
 
9

 
20

 
22

 
23

 
25

 
703

 
802

 
—

 
802

Secured debt weighted average interest rate/subtotal
 
3.42
%
 
3.46

 
 
 
1,734

 
280,633

 
4,708

 
226,200

 
107,713

 
108,445

 
729,433

 
(6,639
)
 
722,794

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$1.5 billion unsecured senior line of credit (4)
 
L+1.10
%
(4) 
1.57

 
1/3/19
 
—

 
—

 
—

 
72,000

 
—

 
—

 
72,000

 
—

 
72,000

2019 Unsecured Senior Bank Term Loan
 
L+1.20
%
 
2.20

 
1/3/19
 
—

 
—

 
—

 
600,000

 
—

 
—

 
600,000

 
(2,696
)
 
597,304

2021 Unsecured Senior Bank Term Loan
 
L+1.10
%
 
2.22

 
1/15/21
 
—

 
—

 
—

 
—

 
—

 
350,000

 
350,000

 
(2,274
)
 
347,726

Unsecured senior notes payable
 
2.75
%
 
2.95

 
1/15/20
 
—

 
—

 
—

 
—

 
400,000

 
—

 
400,000

 
(2,793
)
 
397,207

Unsecured senior notes payable
 
4.60
%
 
4.72

 
4/1/22
 
—

 
—

 
—

 
—

 
—

 
550,000

 
550,000

 
(3,726
)
 
546,274

Unsecured senior notes payable
 
3.90
%
 
4.02

 
6/15/23
 
—

 
—

 
—

 
—

 
—

 
500,000

 
500,000

 
(4,095
)
 
495,905

Unsecured senior notes payable
 
4.30
%
 
4.46

 
1/15/26
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(4,563
)
 
295,437

Unsecured senior notes payable
 
3.95
%
 
4.00

 
1/15/27
 
—

 
—

 
—

 
—

 
—

 
350,000

 
350,000

 
(5,225
)
 
344,775

Unsecured senior notes payable
 
4.50
%
 
4.58

 
7/30/29
 
—

 
—

 
—

 
—

 
—

 
300,000

 
300,000

 
(2,885
)
 
297,115

Unsecured debt weighted average/subtotal
 
 
 
3.54

 
 
 
—

 
—

 
—

 
672,000

 
400,000

 
2,350,000

 
3,422,000

 
(28,257
)
 
3,393,743

Weighted average interest rate/total
 
 
 
3.52
%
 
 
 
$
1,734

 
$
280,633

 
$
4,708

 
$
898,200

 
$
507,713

 
$
2,458,445

 
$
4,151,433

 
$
(34,896
)
 
$
4,116,537

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balloon payments
 
 
 
 
 
 
 
$
—

 
$
277,241

 
$
—

 
$
892,842

 
$
503,979

 
$
2,450,487

 
$
4,124,549

 
$
—

 
$
4,124,549

Principal amortization
 
 
 
 
 
 
 
1,734

 
3,392

 
4,708

 
5,358

 
3,734

 
7,958

 
26,884

 
(34,896
)
 
(8,012
)
Total debt
 
 
 
 
 
 
 
$
1,734

 
$
280,633

 
$
4,708

 
$
898,200

 
$
507,713

 
$
2,458,445

 
$
4,151,433

 
$
(34,896
)
 
$
4,116,537

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed-rate/hedged variable-rate debt
 
 
 
 
 
 
 
$
1,734

 
$
153,392

 
$
4,708

 
$
605,358

 
$
507,713

 
$
2,458,445

 
$
3,731,350

 
$
(27,555
)
 
$
3,703,795

Unhedged variable-rate debt
 
 
 
 
 
 
 
—

 
127,241

 
—

 
292,842

 
—

 
—

 
420,083

 
(7,341
)
 
412,742

Total debt
 
 
 
 
 
 
 
$
1,734

 
$
280,633

 
$
4,708

 
$
898,200

 
$
507,713

 
$
2,458,445

 
$
4,151,433

 
$
(34,896
)
 
$
4,116,537

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Represents the weighted average interest rate as of the end of the applicable period plus the impact of debt premiums/discounts, interest rate swap agreements, and deferred financing costs.
(2)
Reflects any extension options that we control.
(3)
See “Secured Construction Loans” on the next page regarding options to extend maturity date.
(4)
See footnote 2 on the prior page regarding our July 2016 amendment to our unsecured senior line of credit. Our unsecured senior line of credit contains a feature that allows lenders to competitively bid on the interest rate for borrowings under the facility. This may result in an interest rate that is below the stated rate. In addition to the cost of borrowing, the facility is subject to an annual facility fee of 0.20%, based on the aggregate commitments. Unamortized deferred financing costs related to our unsecured senior line of credit are classified in other assets and are excluded from the calculation of the weighted-average interest rate.


 
60
 
 
Summary of Debt (continued)
June 30, 2016
(Dollars in thousands)
 
 


Secured construction loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property/Market/Submarket
 
Stated Rate
 
Maturity Date
 
Outstanding
Balance
 
Remaining Commitments
 
Total Commitments
75/125 Binney Street/Greater Boston/Cambridge
 
 
L+1.35
%
 
 
 
8/23/17
(1)
 
$
201,241

 
$
49,159

 
$
250,400

50/60 Binney Street/Greater Boston/Cambridge
 
 
L+1.50
%
 
 
 
1/28/19
(2)
 
180,753

 
169,247

 
350,000

100 Binney Street/Greater Boston/Cambridge
 
 
L+2.00
%
(3)
 
 
4/20/19
(4)
 
40,089

 
264,192

 
304,281

 
 
 
 
 
 
 
 
 
 
$
422,083

 
$
482,598

 
$
904,681


(1)
We have a one-year option to extend the stated maturity date to August 23, 2018, subject to certain conditions.
(2)
We have two, one-year options to extend the stated maturity date to January 28, 2021, subject to certain conditions.
(3)
In June 2016, we executed two interest rate cap agreements to cap LIBOR at 2.00% for a notional amount based on scheduled increases over the term of the cap, up to $150 million of the total loan commitment, which will become effective in 3Q16.
(4)
We have two, one-year options to extend the stated maturity date to April 20, 2021, subject to certain conditions.
Debt covenants
 
Unsecured Senior Notes Payable
 
Unsecured Senior Line of Credit and
Unsecured Senior Bank Term Loans
Debt Covenant Ratios(1)
 
Requirement
 
Actual
 
Requirement
 
Actual(2)
Total Debt to Total Assets
 
≤ 60%
 
39%
 
≤ 60.0%
 
33.3%
Secured Debt to Total Assets
 
≤ 40%
 
7%
 
≤ 45.0%
 
6.1%
Consolidated EBITDA to Interest Expense
 
≥ 1.5x
 
6.0x
 
≥ 1.50x
 
3.28x
Unencumbered Total Asset Value to Unsecured Debt
 
≥ 150%
 
244%
 
N/A
 
N/A
Unsecured Leverage Ratio
 
N/A
 
N/A
 
≤ 60.0%
 
37.2%
Unsecured Interest Coverage Ratio
 
N/A
 
N/A
 
≥ 1.50x
 
6.24x

(1)
All covenant ratio titles utilize terms as defined in the respective debt agreements; therefore, EBITDA is not calculated under the definition set forth by the SEC in Exchange Act Release No. 47226.
(2)
Actual covenants are calculated pursuant to the specific terms of our unsecured senior line of credit and unsecured senior bank term loan agreements, including covenants update by the agreement dated July 21, 2016.
Interest rate hedge agreements
 
 
 
Number of Contracts
 
Weighted-Average Interest Pay Rate/
Cap Rate (1)
 
Fair Value as of 6/30/16
 
Notional Amount in Effect as of
Interest Rate Hedge Type
 
Effective Date
 
Maturity Date
 
 
 
 
6/30/16
 
12/31/16
 
12/31/17
 
12/31/18
Swap
 
September 1, 2015
 
March 31, 2017
 
2
 
0.57%
 
$
(72
)
 
$
100,000

 
$
100,000

 
$
—

 
$
—

Swap
 
March 31, 2016
 
March 31, 2017
 
11
 
1.15%
 
(5,058
)
 
1,000,000

 
1,000,000

 
—

 
—

Swap
 
March 31, 2017
 
March 31, 2018
 
15
 
1.31%
 
(6,484
)

—

 
—

 
900,000

 
—

Swap
 
March 29, 2018
 
March 31, 2019
 
4
 
1.06%
 
(718
)
 
—

 
—

 
—

 
250,000

Swap
 
March 29, 2018
 
March 31, 2019
 
2
 
0.95%
 
N/A

(2) 
—

 
—

 
—

 
200,000

Cap
 
July 29, 2016
 
April 20, 2019
 
2
 
2.00%
 
110

 
—

 
55,000

 
126,000

 
150,000

Total
 
 
 
 
 
 
 
 
 
$
(12,222
)
 
$
1,100,000

 
$
1,155,000

 
$
1,026,000

 
$
600,000


(1)
In addition to the interest pay rate for each swap agreement, interest is also payable at an applicable margin for borrowings outstanding as of June 30, 2016. Borrowings under our 2019 Unsecured Senior Bank Term Loan include an applicable margin of 1.20%, and borrowings outstanding under our 2021 Unsecured Senior Bank Term Loan and our unsecured senior line of credit include an applicable margin of 1.10%. The applicable margin for our unsecured senior line of credit was reduced from 1.10% to 1.00% as a result of the amendment executed on July 29, 2016 - refer to footnote 2 on page 59 for additional details.
(2)
These interest rate swap agreements were executed in July 2016.

 
61
 
 
 
Definitions and Reconciliations
June 30, 2016
 
 



This section contains additional information for sections throughout this supplemental information package as well as explanations of certain non-GAAP financial measures and the reasons why we use these supplemental measures of performance. Additional detail can be found in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, as well as other documents filed with or furnished to the SEC from time to time.

Adjusted EBITDA
 
The following table reconciles net (loss) income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA:
 
Three Months Ended
(Dollars in thousands)
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
Net (loss) income
$
(108,116
)
 
$
9,966

 
$
42,977

 
$
39,699

 
$
38,430

Net income attributable to noncontrolling interests
(3,500
)
 
(4,030
)
 
(972
)
 
—

 
—

Interest (1)
25,718

 
25,541

 
28,933

 
27,921

 
26,706

Income taxes
924

 
1,095

 
2,160

 
1,392

 
1,324

Depreciation and amortization:
 
 
 
 
 
 
 
 
 
Consolidated
70,169

 
70,866

 
72,245

 
67,953

 
62,171

NCI share of consolidated JVs
(2,226
)
 
(2,301
)
 
(372
)
 
—

 
—

Our share of unconsolidated JVs
651

 
743

 
655

 
445

 
352

Depreciation and amortization
68,594

 
69,308

 
72,528

 
68,398

 
62,523

Stock compensation expense
6,117

 
5,439

 
4,590

 
5,178

 
4,054

Loss on early extinguishment of debt
—

 
—

 
—

 
—

 
189

Gain on sales of real estate – rental properties
—

 
—

 
(12,426
)
 
—

 
—

Impairment of real estate:
 
 
 
 
 
 
 
 
 
Consolidated
156,143

 
28,980

 
8,740

 
—

 
—

NCI share of consolidated JVs
(586
)
 
—

 
—

 
—

 
—

Impairment of real estate
155,557

 
28,980

 
8,740

 
—

 
—

Adjusted EBITDA
$
145,294

 
$
136,299

 
$
146,530

 
$
142,588

 
$
133,226


(1)
See page 64 of our Supplemental Information for our calculation.

We use Adjusted EBITDA as a supplemental performance measure of our core operations, including our share of amounts from consolidated and unconsolidated real estate joint ventures, for financial and operational decision making, and as a supplemental or additional means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation, and amortization (“EBITDA”), excluding stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and impairments. We believe Adjusted EBITDA provides investors relevant and useful information because it allows investors to view income from our operations on an unleveraged basis before the effects of taxes, depreciation and amortization, stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and impairments.

 
By excluding interest expense and gains or losses on early extinguishment of debt, Adjusted EBITDA allows investors to measure our performance independent of our capital structure and indebtedness. We believe that excluding charges related to share-based compensation facilitates a comparison of our operations across periods without the variances caused by the volatility of the expense (which depends on market forces outside our control). We believe that adjusting for the effects of gains or losses on sales of real estate and impairments provides useful information by excluding certain items that are not representative of our core operating results. Adjusted EBITDA has limitations as measures of our performance. Adjusted EBITDA does not reflect our historical cash expenditures or future cash requirements for capital expenditures or contractual commitments. While Adjusted EBITDA is a relevant measure of performance, it does not represent net income or cash flows from operations as defined by GAAP, and it should not be considered as an alternative to those indicators in evaluating performance or liquidity.

Adjusted EBITDA margins

We calculate Adjusted EBITDA margins by dividing Adjusted EBITDA by total revenues. Because our total revenues exclude revenues from discontinued operations, for purposes of calculating the margin ratio, we exclude discontinued operations for each period presented. We believe excluding Adjusted EBITDA from our discontinued operations improves the consistency and comparability of the Adjusted EBITDA margins from period to period. Likewise, our Adjusted EBITDA is presented to include our share of Adjusted EBITDA from consolidated and unconsolidated real estate joint ventures. Therefore, revenues are presented with only our share of revenues from consolidated and unconsolidated real estate joint ventures to improve the consistency and comparability from period to period.
 
Three Months Ended
(Dollars in thousands)
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
Adjusted EBITDA
$
145,294

 
$
136,299

 
$
146,530

 
$
142,588

 
$
133,226

 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
Consolidated
$
226,076

 
$
216,089

 
$
223,955

 
$
218,610

 
$
204,156

NCI share of consolidated JVs
(8,383
)
 
(8,190
)
 
(1,403
)
 
—

 
—

Our share of unconsolidated JVs
1,989

 
1,855

 
2,012

 
1,875

 
1,324

Revenues
$
219,682

 
$
209,754

 
$
224,564

 
$
220,485

 
$
205,480

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA margins
66%


65%


65%


65%


65%




 
62
 
 
 
Definitions and Reconciliations (continued)
June 30, 2016
 
 


Adjusted funds from operations attributable to Alexandria’s common stockholders
 
AFFO is a non-GAAP financial measure that we use as a supplemental measure of our performance. We compute AFFO to include only our share of amounts from consolidated and unconsolidated real estate joint ventures. AFFO is calculated from FFO, as adjusted, and is further adjusted by adding or deducting our share of the following items: (i) non-revenue-enhancing building improvements (excluding amounts recoverable from our tenants), non-revenue-enhancing tenant improvements and leasing commissions (excluding revenue-enhancing and development and redevelopment expenditures); (ii) effects of straight-line rent revenue and straight-line rent expense on ground leases; (iii) capitalized income from development projects; (iv) amortization of acquired above- and below-market leases, loan fees, and debt premiums/discounts; (v) stock compensation expense; and (vi) allocation of AFFO attributable to unvested restricted stock awards.

We believe that AFFO is a useful supplemental performance measure because it further adjusts FFO to (i) deduct certain expenditures that, although capitalized and classified in depreciation expense, do not enhance the revenue or cash flows of our properties; (ii) eliminate the effect of straight-lining our rental income and capitalizing income from development projects; and (iii) eliminate the effect of items that are not indicative of our core operations. We believe that eliminating the effect of charges related to share-based compensation facilitates a comparison of our operations across periods without the variances caused by the volatility of the expense (which depends on market forces outside our control). We believe that AFFO provides useful information by excluding certain items that are not representative of our operating results because such items are dependent upon historical costs or are subject to judgmental valuation inputs and the timing of our decisions.

AFFO is not intended to represent cash flow for the period, and is intended only to provide an additional measure of performance. We believe that net income attributable to Alexandria’s common stockholders is the most directly comparable GAAP financial measure to AFFO. We believe that AFFO is a widely recognized measure of the operations of equity REITs, and presenting AFFO will enable investors to assess our performance in comparison to other equity REITs. AFFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.

Annualized base rent

Annualized base rent means the annualized fixed base rental amount in effect as of the end of the period, related to our operating rentable square feet (using rental revenue in accordance with GAAP). Annualized base rent and measures computed using annualized base rent are presented at 100% for all properties under our management, including properties held by our consolidated and unconsolidated real estate joint ventures.

Average cash yield

See definition of initial stabilized yield (unlevered).

 
Cash interest

Cash interest is equal to interest expense calculated in accordance with GAAP, plus capitalized interest, less amortization of loan fees and debt premiums/discounts. See definition of fixed-charge coverage ratio for a reconciliation of interest expense, the most directly comparable GAAP financial measure, to cash interest.

Construction in progress

A key component of our business model is our development and redevelopment projects under construction. These projects are focused on providing high-quality, generic, and reusable space to meet the real estate requirements of and are reusable by a wide range of tenants. We also have certain significant value-creation projects undergoing important and substantial predevelopment activities to bring these assets to their intended use. These critical activities add significant value and are required for the construction of buildings. Upon completion, each value-creation project is expected to generate significant revenues and cash flows. Our development and redevelopment projects are generally in locations that are highly desirable to high-quality entities, which we believe result in higher occupancy levels, longer lease terms, and higher rental income and returns. Development projects generally consist of the ground-up development of generic and reusable facilities. We generally will not commence new development projects for aboveground construction of Class A space without first securing pre-leasing for such space, except when there is significant market demand for high-quality Class A facilities. Redevelopment projects consist of the permanent change in use of office, warehouse, and shell space into office/laboratory or tech office space.

Class A assets and AAA locations

Class A assets are properties clustered in AAA locations that provide innovative tenants with high- quality, dynamic, and collaborative ecosystems that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Class A assets generally command higher ABR than other classes of similar properties.

AAA locations are in close proximity to concentrations of specialized skills, knowledge, institutions, and related businesses. Such locations are generally characterized by high barriers to entry for new landlords, high barriers to exit for tenants, and a limited supply of available space.

Dividend payout ratio

Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (shares of common stock outstanding on the respective record dates multiplied by the related dividend per share) to FFO attributable to Alexandria’s common stockholders on a diluted basis, as adjusted.

Dividend yield

Dividend yield for the quarter represents the annualized quarter dividend divided by the closing common stock price at the end of the quarter.


 
63
 
 
 
Definitions and Reconciliations (continued)
June 30, 2016
 
 


Fixed-charge coverage ratio

Fixed-charge coverage ratio is the ratio of Adjusted EBITDA to fixed charges. This ratio is useful to investors as a supplemental measure of our ability to satisfy fixed financing obligations and preferred stock dividends. We compute the fixed-charge coverage ratio to include only our share of amounts from consolidated and unconsolidated real estate joint ventures. Cash interest is equal to interest expense calculated in accordance with GAAP, plus capitalized interest, less amortization of loan fees and amortization of debt (premiums) discounts. The fixed-charge coverage ratio calculation below is not directly comparable to the computation of ratio of earnings to fixed charges as defined in Item 503(d) of Regulation S-K and to the computation of “Consolidated Ratio of Earnings to Fixed Charges and Consolidated Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends” included in Exhibit 12.1 to our annual report on Form 10-K for the year ended December 31, 2015.

The following table presents a reconciliation of interest expense, the most directly comparable GAAP financial measure to cash interest and fixed charges:
 
Three Months Ended
(Dollars in thousands)
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
Adjusted EBITDA
$
145,294

 
$
136,299

 
$
146,530

 
$
142,588

 
$
133,226

 
 
 
 
 
 
 
 
 
 
Interest:
 
 
 
 
 
 
 
 
 
Consolidated
$
25,025

 
$
24,855

 
$
28,230

 
$
27,679

 
$
26,668

NCI share of consolidated JVs
—

 
—

 
—

 
—

 
—

Our share of unconsolidated JVs
693

 
686

 
703

 
242

 
38

Interest
25,718

 
25,541

 
28,933

 
27,921

 
26,706

Capitalized interest:
 
 
 
 
 
 
 
 
 
Consolidated
13,788

 
12,099

 
8,696

 
8,436

 
8,437

NCI share of consolidated JVs
—

 
—

 
—

 
—

 
—

Our share of unconsolidated JVs
—

 
—

 
—

 
641

 
617

Capitalized interest
13,788

 
12,099

 
8,696

 
9,077

 
9,054

Amortization of loan fees:
 
 
 
 
 
 
 
 
 
Consolidated
(2,953
)
 
(2,759
)
 
(2,654
)
 
(2,625
)
 
(2,889
)
NCI share of consolidated JVs
—

 
—

 
—

 
—

 
—

Our share of unconsolidated JVs
(33
)
 
(33
)
 
(35
)
 
(32
)
 
(32
)
Amortization of loan fees
(2,986
)
 
(2,792
)
 
(2,689
)
 
(2,657
)
 
(2,921
)
Amortization of debt premiums
26

 
86

 
90

 
100

 
100

Cash interest
36,546

 
34,934

 
35,030

 
34,441

 
32,939

Dividends on preferred stock
5,474

 
5,907

 
6,246

 
6,247

 
6,246

Fixed charges
$
42,020

 
$
40,841

 
$
41,276

 
$
40,688

 
$
39,185

 
 
 
 
 
 
 
 
 
 
Fixed-charge coverage ratio:
 
 
 
 
 
 
 
 
 
– quarter annualized
3.5x

 
3.3x

 
3.6x

 
3.5x

 
3.4x

– trailing 12 months
3.5x

 
3.4x

 
3.4x

 
3.4x

 
3.3x

 
Funds from operations and funds from operations, as adjusted (attributable to Alexandria’s common stockholders)

GAAP-basis accounting for real estate assets utilizes historical cost accounting and assumes that real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the NAREIT Board of Governors established the measurement tool of FFO. Since its introduction, FFO has become a widely used non-GAAP financial measure among equity REITs. We believe that FFO is helpful to investors as an additional measure of the performance of an equity REIT. Moreover, we believe that FFO, as adjusted, allows investors to compare our performance to the performance of other real estate companies on a consistent basis, without having to account for differences caused by investment and disposition decisions, financing decisions, terms of securities, capital structures, and capital market transactions. We compute FFO in accordance with standards established by the NAREIT Board of Governors in its April 2002 White Paper and related implementation guidance (the “NAREIT White Paper”). The NAREIT White Paper defines FFO as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciable real estate and land parcels, and impairments of depreciable real estate (excluding land parcels) plus real estate-related depreciation and amortization, and after adjustments for our share of consolidated and unconsolidated partnerships and real estate joint ventures. Impairments of real estate relate to decreases in the fair value of real estate due to changes in general market conditions and do not necessarily reflect the operating performance of the properties during the corresponding period. Impairments of real estate represent the write-down of assets when fair value over the recoverability period is less than the carrying value.

We compute FFO, as adjusted, as FFO calculated in accordance with the NAREIT White Paper less/plus significant gains/losses on the sale of investments, plus losses on early extinguishment of debt, preferred stock redemption charges, impairments of non-depreciable real estate and land parcels, impairments of investments, deal costs, and the amount of such items that is allocable to our unvested restricted stock awards. Neither FFO nor FFO, as adjusted, should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as a measure of liquidity, nor are they indicative of the availability of funds for our cash needs, including our ability to make distributions.

Initial stabilized yield (unlevered)
Initial stabilized yield is calculated as the quotient of the estimated amounts of NOI at stabilization and our investment in the property. Our initial stabilized yield excludes the impact of leverage. Our cash rents related to our value-creation projects are expected to increase over time due to contractual annual rent escalations, and our average cash yields are expected, in general, to be greater than our initial stabilized yields (cash basis). Our estimates for initial stabilized yields, initial stabilized yields (cash basis), and total costs at completion represent our initial estimates at the commencement of the project. We expect to update this information upon completion of the project, or sooner, if there are significant changes to the expected project yields or costs.

•
Initial stabilized yield reflects rental income, including contractual rent escalations and any rent concessions over the term(s) of the lease(s), calculated on a straight-line basis.
•
Initial stabilized yield (cash basis) reflects cash rents at the stabilization date after initial rental concessions, if any, have elapsed and our total cash investment in the property.

Average cash yield reflects cash rents, including contractual rent escalations after initial rental concessions have elapsed, calculated on a straight-line basis.



 
64
 
 
 
Definitions and Reconciliations (continued)
June 30, 2016
 
 


Net cash provided by operating activities after dividends

Net cash provided by operating activities after dividends includes the deduction for distributions to noncontrolling interests. For purposes of this calculation, changes in operating assets and liabilities are excluded as they represent timing differences.

Net debt to Adjusted EBITDA

Net debt to Adjusted EBITDA is a non-GAAP financial measure that we believe is useful to investors as a supplemental measure in evaluating our balance sheet leverage. We compute the net debt to Adjusted EBITDA ratio to include only our share of amounts from consolidated and unconsolidated real estate joint ventures. Net debt is equal to the sum of total consolidated debt less cash, cash equivalents, and restricted cash. Refer to “Adjusted EBITDA” for further information on the calculation of Adjusted EBITDA. The following table reconciles debt to net debt and computes net debt to Adjusted EBITDA:
(Dollars in thousands)
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
Secured notes payable:
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
722,794

 
$
816,578

 
$
809,818

 
$
767,874

 
$
763,844

NCI share of consolidated JVs
 
—

 
—

 
—

 
—

 
—

Our share of unconsolidated JVs
 
49,592

 
49,485

 
48,561

 
48,017

 
46,665

Secured notes payable
 
772,386

 
866,063

 
858,379

 
815,891

 
810,509

Unsecured senior notes payable
 
2,376,713

 
2,031,284

 
2,030,631

 
1,734,857

 
1,734,310

Unsecured senior line of credit
 
72,000

 
299,000

 
151,000

 
843,000

 
624,000

Unsecured senior bank term loans
 
945,030

 
944,637

 
944,243

 
943,857

 
943,463

Unamortized deferred financing costs:
 
 
 
 
 
 
 
 
 
 
Consolidated
 
34,302

 
28,474

 
30,103

 
24,644

 
27,349

NCI share of consolidated JVs
 
—

 
—

 
—

 
—

 
—

Our share of unconsolidated JVs
 
99

 
131

 
165

 
198

 
231

Unamortized deferred financing costs
 
34,401

 
28,605

 
30,268

 
24,842

 
27,580

Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
Consolidated
 
(256,000
)
 
(146,197
)
 
(125,098
)
 
(76,383
)
 
(68,617
)
NCI share of consolidated JVs
 
7,904

 
8,888

 
1,385

 
—

 
—

Our share of unconsolidated JVs
 
(6,002
)
 
(3,318
)
 
(4,209
)
 
(7,231
)
 
(4,006
)
Cash and cash equivalents
 
(254,098
)
 
(140,627
)
 
(127,922
)
 
(83,614
)
 
(72,623
)
Less: restricted cash
 
(13,131
)
 
(14,885
)
 
(28,872
)
 
(36,993
)
 
(44,191
)
Net debt
 
$
3,933,301

 
$
4,014,077

 
$
3,857,727

 
$
4,241,840

 
$
4,023,048

Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
$
581,176

 
$
545,196

 
$
586,120

 
$
570,352

 
$
532,904

– trailing 12 months
 
$
570,711

 
$
558,643

 
$
549,116

 
$
525,944

 
$
501,827

Net debt to Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
 
– quarter annualized
 
6.8
x
 
7.4
x
 
6.6
x
 
7.4
x
 
7.5
x
– trailing 12 months
 
6.9
x
 
7.2
x
 
7.0
x
 
8.1
x
 
8.0
x


 
NOI

The following table reconciles (loss) income from continuing operations to total net operating income:
 
 
Three Months Ended
 
Six Months Ended
(Dollars in thousands)
 
6/30/16
 
6/30/15
 
6/30/16
 
6/30/15
(Loss) income from continuing operations
 
$
(108,116
)
 
$
38,430

 
$
(98,150
)
 
$
63,481


 
 
 
 
 
 
 
 
General and administrative:
 
 
 
 
 
 
 
 
Consolidated
 
15,384

 
14,989

 
30,572

 
29,376

NCI share of consolidated JVs
 
(46
)
 
—

 
(68
)
 
—

Our share of unconsolidated JVs
 
16

 
—

 
52

 
—

General and administrative
 
15,354

 
14,989

 
30,556

 
29,376

Interest (1)
 
25,718

 
26,706

 
51,259

 
49,946

Depreciation and amortization (1)
 
68,594

 
62,523

 
137,902

 
121,725

Impairment of real estate (2)
 
155,557

 
—

 
184,537

 
14,510

Net income attributable to nonredeemable noncontrolling interests
 
(3,203
)
 
—

 
(6,935
)
 
—

Loss on early extinguishment of debt
 
—

 
189

 
—

 
189

Total net operating income
 
$
153,904

 
$
142,837

 
$
299,169

 
$
279,227

 
 
 
 
 
 
 
 
 
(1)
See pages 62 and 64 for our Supplemental Information for our calculation.
(2)
Excludes amounts attributable to noncontrolling interests. See page 56 of our Supplemental Information for additional information.

NOI is a non-GAAP financial measure calculated as (loss) income from continuing operations, the most directly comparable GAAP financial measure, excluding general and administrative expense, interest, depreciation and amortization, impairment of real estate, net income attributable to nonredeemable noncontrolling interests, and gain/loss on early extinguishment of debt. These amounts are presented to include our share of amounts from consolidated and unconsolidated real estate joint ventures. We believe NOI provides useful information to investors regarding our financial condition and results of operations because it primarily reflects those income and expense items that are incurred at the property level. Therefore, we believe NOI is a useful measure for evaluating the operating performance of our real estate assets, including our share of amounts from consolidated and unconsolidated real estate joint ventures. NOI on a cash basis is NOI adjusted to exclude the effect of straight-line rent and amortization of above- and below-market lease revenue adjustments required by GAAP. We believe that NOI on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent and amortization of above- and below-market lease revenue adjustments to rental revenue.

Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates rental rates, and operating costs, which provides perspective not immediately apparent from income from continuing operations. NOI can be used to measure the initial stabilized yields of our properties by calculating the quotient of NOI generated by a property on a straight-line basis, and our investment in the property, excluding the impact of leverage. NOI excludes certain components from income from continuing operations in order to provide results that are more closely related to the results of operations of our properties. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level rather than at the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. Impairments of real estate have been excluded in deriving NOI because we do not consider impairments of real estate to be property-level operating expenses. Impairments of real estate relate to changes in the values of our assets and do not reflect the current operating performance with respect to related revenues or expenses. Our impairments of real estate represent the write-down in the value of the assets to the estimated fair value less cost to sell. These impairments result from investing decisions and the deterioration in market conditions that adversely impact underlying real estate values. Our


 
65
 
 
 
Definitions and Reconciliations (continued)
June 30, 2016
 
 


calculation of NOI also excludes charges incurred from changes in certain financing decisions, such as losses on early extinguishment of debt, as these charges often relate to the timing of corporate strategy. Property operating expenses that are included in determining NOI primarily consist of costs that are related to our operating properties, such as utilities, repairs, and maintenance; rental expense related to ground leases; contracted services, such as janitorial, engineering, and landscaping; property taxes and insurance; and property-level salaries. General and administrative expenses consist primarily of accounting and corporate compensation, corporate insurance, professional fees, office rent, and office supplies that are incurred as part of corporate office management.

We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with income from continuing operations as presented in our consolidated statements of income. NOI should not be considered as an alternative to income from continuing operations as an indication of our performance, or as an alternative to cash flows as a measure of liquidity, or our ability to make distributions.

Operating statistics

We present certain operating statistics related to our properties, including number of properties, ABR, ABR per occupied RSF, occupancy, RSF, leasing activity, rental rates, and contractual lease expirations. We believe these measures are useful to investors because they facilitate an understanding of certain trends for our properties. We compute operating statistics at 100% for all properties managed by us, including properties owned by our consolidated and unconsolidated real estate joint ventures.

Pro rata financial information
    
We present joint venture operating and balance sheet information on a pro rata basis, which is not in accordance with or intended to be a presentation in accordance with GAAP. The pro rata operating and balance sheet information presents our proportionate economic ownership of all entities that we do not wholly own. We calculate our proportionate share of each financial statement line as follows: (i) for each real estate joint venture that we consolidate in our financial statements, but of which we own less than 100%, we apply the noncontrolling interest economic ownership percentage to each financial statement line item to arrive at the amount of such noncontrolling interest share of the operating and balance sheet information for each joint venture; and (ii) for each real estate joint venture that we do not control, and do not consolidate, we apply our economic ownership percentage to these unconsolidated real estate joint ventures to arrive at our proportionate share of the operating and balance sheet information.

Our share of assets and liabilities, or the revenues and expenses, does not represent our legal claim to those items. The joint venture agreement for each entity that we do not wholly own generally determines what equity holders can receive upon capital events, such as sales or refinancing, or in the event of a liquidation. Equity holders are normally entitled to their respective legal ownership of any residual cash from a joint venture only after all liabilities, priority distributions, and claims have been repaid or satisfied.

We believe pro rata financial information can help investors estimate our economic interest and the impact of partially owned entities. Presenting pro rata financial information provides a perspective not immediately available from consolidated results and one that can supplement consolidated financial statements for the potential impact of joint ventures on assets and liabilities, or revenues and expenses and other metrics presented, including NOI, same property comparisons, and credit metrics.

Pro rata information is limited as an analytical tool as the overall economic ownership interest does not represent our legal claim to each of our joint ventures’ assets, liabilities, or results of operations. In addition, pro rata financial information may include financial information related to unconsolidated real estate joint ventures that we do not control. We believe that in order to facilitate a clear understanding of our operating results and our total assets and liabilities, pro rata financial information should be examined in conjunction with our consolidated statements of income and balance sheets. Pro rata financial information should not be considered an alternative to our consolidated financial statements, which are prepared in accordance with GAAP.
 
Stabilized occupancy date

The stabilized occupancy date represents the estimated date on which the project is expected to reach occupancy of 95% or greater.

Same property comparisons

As a result of changes within our total property portfolio during the comparative periods presented, including changes from assets acquired or sold, properties placed into development or redevelopment, and development and/or redevelopment properties recently placed into service, the consolidated total rental revenues, tenant recoveries, and rental operating expenses in our operating results can show significant changes from period to period. In order to supplement an evaluation of our results of operations over a given period, we analyze the operating performance for all properties, including only our share of amounts from consolidated and unconsolidated real estate joint ventures for comparable properties, referred to as same properties, that were fully operating for the entirety of the comparative periods presented. These properties are analyzed separately from properties acquired subsequent to the first day in the earliest comparable period presented, properties that underwent development or redevelopment at any time during the comparative periods, and corporate entities (legal entities performing general and administrative functions), which have been excluded from same property results. Additionally, rental revenues from lease termination fees, if any, are excluded from the results of same properties.



 
66
 
 
 
Definitions and Reconciliations (continued)
June 30, 2016
 
 


The following table reconciles the number of same properties to total properties for YTD 2Q16:
Development – under construction
 
Properties
 
50/60 Binney Street
 
2

 
100 Binney Street
 
1

 
510 Townsend Street
 
1

 
505 Brannan Street
 
1

 
ARE Spectrum
 
3

 
4796 Executive Drive
 
1

 
400 Dexter Avenue North
 
1

 
360 Longwood Avenue (unconsolidated joint venture)
 
1

 
1455/1515 Third Street (unconsolidated joint venture)
 
2

 
5200 Illumina Way, Parking Structure
 
N/A

 
 
 
13

 
 
 
 
 
Development – placed into service after January 1, 2015
 
Properties
 
75/125 Binney Street
 
1

 
430 East 29th Street
 
1

 
5200 Illumina Way, Building 6
 
1

 
6040 George Watts Hill Drive
 
1

 
 
 
4

 
 
 
 
 
Redevelopment – under construction
 
Properties
 
11 Hurley Street
 
1

 
10290 Campus Point Drive
 
1

 
9625 Towne Centre Drive
 
1

 
 
 
3

 
Redevelopment – placed into service after January 1, 2015
 
Properties
225 Second Avenue
 
1

11055/11065/11075 Roselle Street
 
3

10151 Barnes Canyon Road
 
1

 
 
5

 
 
 
Acquisitions after January 1, 2015
 
Properties
640 Memorial Drive
 
1

 
 
 
Properties held for sale
 
10

Total properties excluded from same properties
 
36

 
 
 
Same properties
 
161

 
 
 
Total properties as of June 30, 2016
 
197

 

Total equity market capitalization
    
Total equity market capitalization is equal to the sum of outstanding shares of Series D cumulative convertible preferred stock, Series E cumulative redeemable preferred stock, and common stock multiplied by the related closing price of each class of security at the end of each period presented.

 
Total market capitalization

Total market capitalization is equal to the sum of total equity market capitalization and total debt, as calculated in accordance with GAAP.

Unencumbered NOI as a percentage of total net operating income
    
Our share of unencumbered NOI as a percentage of our share of total net operating income is a non-GAAP financial measure that we believe is useful to investors as a performance measure of the results of operations of our unencumbered real estate assets, as it reflects primarily those income and expense items that are incurred at the unencumbered property level. We use our share of unencumbered NOI as a percentage of our share of total net operating income in order to assess our compliance with our financial covenants under our debt obligations because the measure serves as a proxy for a financial measure under such debt obligations.

Our share of unencumbered NOI is derived from assets classified in continuing operations, including our share of amounts from consolidated and unconsolidated real estate joint ventures, which are not subject to any mortgage, deed of trust, lien, or other security interest, as of the period for which income is presented.
 
Three Months Ended
 
(Dollars in thousands)
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
 
Our share of unencumbered NOI
$
132,221

 
$
117,698

 
$
124,982

 
$
118,889

 
$
110,820

 
Our share of encumbered NOI
21,683

 
27,567

 
30,196

 
32,272

 
32,017

 
Our share of total NOI
$
153,904

 
$
145,265

 
$
155,178

 
$
151,161

 
$
142,837

 
Unencumbered NOI as a percentage of total NOI
86%

 
81%

 
81%

 
79%

 
78%

 

Weighted-average interest rate for capitalization of interest

The weighted-average interest rate required for calculating capitalization of interest pursuant to GAAP represents a weighted-average rate based on the rates applicable to borrowings outstanding during the period and includes the impact of our interest rate swap agreements, amortization of debt discounts/premiums, amortization of loan fees, and other bank fees. A separate calculation is performed to determine our weighted-average interest rate for capitalization for each month. The rate will vary each month due to changes in variable interest rates, outstanding debt balances, the proportion of variable-rate debt to fixed-rate debt, the amount and terms of interest rate swap agreements, and the amount of loan fee amortization.

The following table presents the weighted-average interest rate for capitalization of interest:
 
Three Months Ended
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
6/30/15
Weighted-average interest rate for capitalization of interest
3.70%
 
3.60%
 
3.37%
 
3.34%
 
3.45%



 
67