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ALEXANDRIA REAL ESTATE EQUITIES, INC. - Quarter Report: 2021 March (Form 10-Q)


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

FORM 10-Q

(Mark One)
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 1-12993

ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 95-4502084
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer Identification Number)
 26 North Euclid Avenue, Pasadena, California 91101
(Address of principal executive offices) (Zip code)

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

N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per share
ARE
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxSmaller reporting company o
Accelerated filer oEmerging growth company o
Non-accelerated filero
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x

As of April 15, 2021, 147,503,288 shares of common stock, par value $0.01 per share, were outstanding.



TABLE OF CONTENTS
 
 
Page
 
 
 
 
Consolidated Balance Sheets as of March 31, 2021, and December 31, 2020
 
Consolidated Financial Statements for the Three Months Ended March 31, 2021 and 2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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GLOSSARY

The following abbreviations or acronyms that may be used in this document shall have the adjacent meanings set forth below:
ASUAccounting Standards Update
ATMAt the Market
CIPConstruction in Progress
EPSEarnings per Share
FASBFinancial Accounting Standards Board
FFOFunds From Operations
GAAPU.S. Generally Accepted Accounting Principles
JVJoint Venture
LEED®
Leadership in Energy and Environmental Design
LIBORLondon Interbank Offered Rate
NareitNational Association of Real Estate Investment Trusts
NAVNet Asset Value
REITReal Estate Investment Trust
RSFRentable Square Feet/Foot
SECSecurities and Exchange Commission
SFSquare Feet/Foot
SoDoSouth of Downtown submarket of Seattle
SOFRSecured Overnight Financing Rate
SoMaSouth of Market submarket of San Francisco Bay Area
U.S.United States
VIEVariable Interest Entity

ii


PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Alexandria Real Estate Equities, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)

March 31, 2021December 31, 2020
Assets
Investments in real estate
$20,253,418 $18,092,372 
Investments in unconsolidated real estate joint ventures
325,928 332,349 
Cash and cash equivalents
492,184 568,532 
Restricted cash
42,219 29,173 
Tenant receivables
7,556 7,333 
Deferred rent
751,967 722,751 
Deferred leasing costs
294,328 272,673 
Investments
1,641,811 1,611,114 
Other assets
1,424,935 1,191,581 
Total assets
$25,234,346 $22,827,878 
Liabilities, Noncontrolling Interests, and Equity
Secured notes payable
$229,406 $230,925 
Unsecured senior notes payable
8,311,512 7,232,370 
Unsecured senior line of credit and commercial paper
— 99,991 
Accounts payable, accrued expenses, and other liabilities
1,750,687 1,669,832 
Dividends payable
160,779 150,982 
Total liabilities
10,452,384 9,384,100 
Commitments and contingencies
Redeemable noncontrolling interests
11,454 11,342 
Alexandria Real Estate Equities, Inc.’s stockholders’ equity:
Common stock
1,457 1,367 
Additional paid-in capital12,994,748 11,730,970 
Accumulated other comprehensive loss(5,799)(6,625)
Alexandria Real Estate Equities, Inc.’s stockholders’ equity
12,990,406 11,725,712 
Noncontrolling interests
1,780,102 1,706,724 
Total equity
14,770,508 13,432,436 
Total liabilities, noncontrolling interests, and equity
$25,234,346 $22,827,878 

The accompanying notes are an integral part of these consolidated financial statements.
1


Alexandria Real Estate Equities, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended March 31,
20212020
Revenues:
Income from rentals
$478,695 $437,605 
Other income
1,154 2,314 
Total revenues
479,849 439,919 
Expenses:
Rental operations
137,888 129,103 
General and administrative
33,996 31,963 
Interest
36,467 45,739 
Depreciation and amortization
180,913 175,496 
Impairment of real estate
5,129 2,003 
Loss on early extinguishment of debt
67,253 — 
Total expenses
461,646 384,304 
Equity in earnings (losses) of unconsolidated real estate joint ventures3,537 (3,116)
Investment income (loss)1,014 (21,821)
Gain on sales of real estate2,779 — 
Net income25,533 30,678 
Net income attributable to noncontrolling interests(17,412)(11,913)
Net income attributable to Alexandria Real Estate Equities, Inc.’s stockholders8,121 18,765 
Net income attributable to unvested restricted stock awards
(2,014)(1,925)
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders$6,107 $16,840 
Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
Basic
$0.04 $0.14 
Diluted
$0.04 $0.14 

The accompanying notes are an integral part of these consolidated financial statements.
2


Alexandria Real Estate Equities, Inc.
Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)

Three Months Ended March 31,
20212020
Net income$25,533 $30,678 
Other comprehensive income (loss)
Unrealized gains (losses) on foreign currency translation:
Unrealized foreign currency translation gains (losses) arising during the period826 (5,857)
Unrealized gains (losses) on foreign currency translation, net826 (5,857)
Total other comprehensive income (loss)826 (5,857)
Comprehensive income26,359 24,821 
Less: comprehensive income attributable to noncontrolling interests(17,412)(11,913)
Comprehensive income attributable to Alexandria Real Estate Equities, Inc.’s stockholders$8,947 $12,908 

The accompanying notes are an integral part of these consolidated financial statements.

3




Alexandria Real Estate Equities, Inc.
Consolidated Statement of Changes in Stockholders’ Equity and Noncontrolling Interests
(Dollars in thousands)
(Unaudited)
Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity
Number of
Common
Shares
Common
Stock
Additional
Paid-In Capital
Retained
Earnings
Accumulated Other Comprehensive LossNoncontrolling
Interests
Total
Equity
Redeemable
Noncontrolling
Interests
Balance as of December 31, 2020136,690,329 $1,367 $11,730,970 $— $(6,625)$1,706,724 $13,432,436 $11,342 
Net income— — — 8,121 — 17,195 25,316 217 
Total other comprehensive income— — — — 826 — 826 — 
Contributions from and sales of noncontrolling interests— — 47 — — 81,863 81,910 94 
Distributions to and redemption of noncontrolling interests— — — — — (25,680)(25,680)(199)
Issuance of common stock8,834,703 88 1,397,561 — — — 1,397,649 — 
Issuance pursuant to stock plan180,072 26,935 — — — 26,937 — 
Taxes related to net settlement of equity awards(49,548)— (8,107)— — — (8,107)— 
Dividends declared on common stock ($1.09 per share)
— — — (160,779)— — (160,779)— 
Reclassification of distributions in excess of earnings— — (152,658)152,658 — — — — 
Balance as of March 31, 2021145,655,556 $1,457 $12,994,748 $— $(5,799)$1,780,102 $14,770,508 $11,454 

The accompanying notes are an integral part of these consolidated financial statements.
4




Alexandria Real Estate Equities, Inc.
Consolidated Statement of Changes in Stockholders’ Equity and Noncontrolling Interests
(Dollars in thousands)
(Unaudited)
Alexandria Real Estate Equities, Inc.’s Stockholders’ Equity
Number of
Common
Shares
Common
Stock
Additional
Paid-In Capital
Retained
Earnings
Accumulated Other Comprehensive LossNoncontrolling
Interests
Total
Equity
Redeemable
Noncontrolling
Interests
Balance as of December 31, 2019120,800,315 $1,208 $8,874,367 $— $(9,749)$1,288,352 $10,154,178 $12,300 
Net income— — — 18,765 — 11,695 30,460 218 
Total other comprehensive loss— — — — (5,857)— (5,857)— 
Contributions from and sales of noncontrolling interests— — 55,856 — — 296,100 351,956 — 
Redemptions of noncontrolling interests— — — — — — — (300)
Distributions to noncontrolling interests — — — — — (16,481)(16,481)(205)
Issuance of common stock3,392,622 34 504,304 — — — 504,338 — 
Issuance pursuant to stock plan181,928 22,986 — — — 22,988 — 
Taxes related to net settlement of equity awards(49,181)(1)(6,864)— — — (6,865)— 
Dividends declared on common stock ($1.03 per share)
— — — (129,981)— — (129,981)— 
Cumulative effect of adjustment upon adoption of new ASU on credit losses on January 1, 2020— — — (2,484)— — (2,484)— 
Reclassification of distributions in excess of earnings— — (113,700)113,700 — — — — 
Balance as of March 31, 2020124,325,684 $1,243 $9,336,949 $— $(15,606)$1,579,666 $10,902,252 $12,013 

The accompanying notes are an integral part of these consolidated financial statements.


5


    
Alexandria Real Estate Equities, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Three Months Ended March 31,
20212020
Operating Activities:
Net income$25,533 $30,678 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization180,913 175,496 
Impairment of real estate5,129 2,003 
Gain on sales of real estate(2,779)— 
Loss on early extinguishment of debt67,253 — 
Equity in (earnings) losses of unconsolidated real estate joint ventures(3,537)3,116 
Distributions of earnings from unconsolidated real estate joint ventures4,958 490 
Amortization of loan fees2,817 2,247 
Amortization of debt premiums(576)(888)
Amortization of acquired above- and below-market leases(12,112)(15,964)
Deferred rent(27,382)(20,597)
Stock compensation expense12,446 9,929 
Investment (income) loss(1,014)21,821 
Changes in operating assets and liabilities:
Tenant receivables(221)(4,874)
Deferred leasing costs(23,359)(9,085)
Other assets(25,775)(10,893)
Accounts payable, accrued expenses, and other liabilities9,759 7,788 
Net cash provided by operating activities212,053 191,267 
Investing Activities:
Proceeds from sale of real estate25,695 — 
Additions to real estate(465,411)(373,499)
Purchases of real estate (1,871,043)(482,409)
Change in escrow deposits(98,303)4,834 
Acquisition of interest in unconsolidated real estate joint venture(9,048)— 
Investments in unconsolidated real estate joint ventures— (2,592)
Return of capital from unconsolidated real estate joint ventures— 20,224 
Additions to non-real estate investments(77,339)(31,060)
Sales of non-real estate investments57,569 30,910 
Net cash used in investing activities$(2,437,880)$(833,592)
6


Alexandria Real Estate Equities, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

Three Months Ended March 31,
20212020
Financing Activities:
Repayments of borrowings from secured notes payable$(15,423)$(1,479)
Proceeds from issuance of unsecured senior notes payable1,743,716 699,531 
Repayments of unsecured senior notes payable(650,000)— 
Premium paid for early extinguishment of debt(66,829)— 
Borrowings from unsecured senior line of credit2,101,000 783,000 
Repayments of borrowings from unsecured senior line of credit(2,101,000)(946,000)
Proceeds from issuances under commercial paper program6,810,000 2,158,900 
Repayments of borrowings under commercial paper program(6,910,000)(2,158,900)
Payments of loan fees(16,599)(7,954)
Taxes paid related to net settlement of equity awards(1,678)(1,253)
Proceeds from issuance of common stock1,397,649 504,338 
Dividends on common stock(150,982)(126,278)
Contributions from and sales of noncontrolling interests 48,279 2,756 
Distributions to and purchases of noncontrolling interests(25,879)(16,986)
Net cash provided by financing activities2,162,254 889,675 
Effect of foreign exchange rate changes on cash and cash equivalents
271 (1,668)
Net (decrease) increase in cash, cash equivalents, and restricted cash(63,302)245,682 
Cash, cash equivalents, and restricted cash as of the beginning of period
597,705 242,689 
Cash, cash equivalents, and restricted cash as of the end of period
$534,403 $488,371 
Supplemental Disclosures and Non-Cash Investing and Financing Activities:
Cash paid during the period for interest, net of interest capitalized$55,052 $65,500 
Accrued construction for current-period additions to real estate$193,439 $134,414 
Right-of-use asset$— $32,700 
Lease liability$— $(32,700)
Consolidation of real estate assets in connection with our acquisition of partner’s interest in unconsolidated real estate joint venture $19,613 $— 
Assumption of secured note payable in connection with acquisition of partner’s interest in unconsolidated real estate joint venture$(14,558)$— 
Contribution of assets from real estate joint venture partner$33,000 $350,000 
Issuance of noncontrolling interest to joint venture partner$(33,000)$(292,930)

The accompanying notes are an integral part of these consolidated financial statements.

7


Alexandria Real Estate Equities, Inc.
Notes to Consolidated Financial Statements
(Unaudited)

1.    ORGANIZATION AND BASIS OF PRESENTATION

Alexandria Real Estate Equities, Inc. (NYSE:ARE), an S&P 500® urban office REIT, is the first, longest-tenured, and pioneering owner, operator, and developer uniquely focused on collaborative life science, agtech, and technology campuses in AAA innovation cluster locations. As used in this quarterly report on Form 10-Q, references to the “Company,” “Alexandria,” “ARE,” “we,” “us,” and “our” refer to Alexandria Real Estate Equities, Inc. and its consolidated subsidiaries. The accompanying unaudited consolidated financial statements include the accounts of Alexandria Real Estate Equities, Inc. and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated.

We have prepared the accompanying interim consolidated financial statements in accordance with GAAP and in conformity with the rules and regulations of the SEC. In our opinion, these interim consolidated financial statements presented herein reflect all adjustments, of a normal recurring nature, that are necessary to fairly present the interim consolidated financial statements. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our annual report on Form 10-K for the year ended December 31, 2020. Any references to our market capitalization, number or quality of buildings or tenants, quality of location, square footage, number of leases, or occupancy percentage, and any amounts derived from these values, in these notes to consolidated financial statements are outside the scope of our independent registered public accounting firm’s review.


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

On an ongoing basis, as circumstances indicate the need for reconsideration, we evaluate each legal entity that is not wholly owned by us in accordance with the consolidation guidance. Our evaluation considers all of our variable interests, including equity ownership, as well as fees paid to us for our involvement in the management of each partially owned entity. To fall within the scope of the consolidation guidance, an entity must meet both of the following criteria:

The entity has a legal structure that has been established to conduct business activities and to hold assets; such entity can be in the form of a partnership, limited liability company, or corporation, among others; and
We have a variable interest in the legal entity – i.e., variable interests that are contractual, such as equity ownership, or other financial interests that change with changes in the fair value of the entity’s net assets.

If an entity does not meet both criteria above, we apply other accounting literature, such as the cost or equity method of accounting. If an entity does meet both criteria above, we evaluate such entity for consolidation under either the variable interest model if the legal entity meets any of the following characteristics to qualify as a VIE, or under the voting model for all other legal entities that are not VIEs.

A legal entity is determined to be a VIE if it has any of the following three characteristics:

1)The entity does not have sufficient equity to finance its activities without additional subordinated financial support;
2)The entity is established with non-substantive voting rights (i.e., the entity deprives the majority economic interest holder(s) of voting rights); or
3)The equity holders, as a group, lack the characteristics of a controlling financial interest. Equity holders meet this criterion if they lack any of the following:
The power, through voting rights or similar rights, to direct the activities of the entity that most significantly influence the entity’s economic performance, as evidenced by:
Substantive participating rights in day-to-day management of the entity’s activities; or
Substantive kick-out rights over the party responsible for significant decisions;
The obligation to absorb the entity’s expected losses; or
The right to receive the entity’s expected residual returns.

8



2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Our real estate joint ventures consist of limited partnerships or limited liability companies. For an entity structured as a limited partnership or a limited liability company, our evaluation of whether the equity holders (equity partners other than the general partner or the managing member of a joint venture) lack the characteristics of a controlling financial interest includes the evaluation of whether the limited partners or non-managing members (the noncontrolling equity holders) lack both substantive participating rights and substantive kick-out rights, defined as follows:

Participating rights provide the noncontrolling equity holders the ability to direct significant financial and operating decisions made in the ordinary course of business that most significantly influence the entity’s economic performance.
Kick-out rights allow the noncontrolling equity holders to remove the general partner or managing member without cause.

If we conclude that any of the three characteristics of a VIE are met, including that the equity holders lack the characteristics of a controlling financial interest because they lack both substantive participating rights and substantive kick-out rights, we conclude that the entity is a VIE and evaluate it for consolidation under the variable interest model.

Variable interest model

If an entity is determined to be a VIE, we evaluate whether we are the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and benefits. We consolidate a VIE if we have both power and benefits — that is, (i) we have the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and (ii) we have the obligation to absorb losses of or the right to receive benefits from the VIE that could potentially be significant to the VIE (benefits). We consolidate VIEs whenever we determine that we are the primary beneficiary. Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements for information on specific joint ventures that qualify as VIEs. If we have a variable interest in a VIE but are not the primary beneficiary, we account for our investment using the equity method of accounting.

Voting model

If a legal entity fails to meet any of the three characteristics of a VIE (i.e., insufficiency of equity, existence of non-substantive voting rights, or lack of a controlling financial interest), we then evaluate such entity under the voting model. Under the voting model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the voting shares and that other equity holders do not have substantive participating rights. Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements for further information on our unconsolidated real estate joint ventures that qualify for evaluation under the voting model.

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, and equity; the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements; and the amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Investments in real estate

Evaluation of business combination or asset acquisition

We evaluate each acquisition of real estate or in-substance real estate (including equity interests in entities that predominantly hold real estate assets) to determine whether the integrated set of assets and activities acquired meets the definition of a business and needs to be accounted for as a business combination. An acquisition of an integrated set of assets and activities that does not meet the definition of a business is accounted for as an asset acquisition. If either of the following criteria is met, the integrated set of assets and activities acquired would not qualify as a business:

Substantially all of the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets; or
The integrated set of assets and activities is lacking, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs (i.e., revenue generated before and after the transaction).

An acquired process is considered substantive if:

The process includes an organized workforce (or includes an acquired contract that provides access to an organized workforce) that is skilled, knowledgeable, and experienced in performing the process;
The process cannot be replaced without significant cost, effort, or delay; or
The process is considered unique or scarce.

9



2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Generally, our acquisitions of real estate or in-substance real estate do not meet the definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e., land, buildings, and related intangible assets) or because the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort, or delay. When evaluating acquired service or management contracts, we consider the nature of the services performed, the terms of the contract relative to similar arm’s-length contracts, and the availability of comparable vendors in evaluating whether the acquired contract constitutes a substantive process.

Recognition of real estate acquired

We evaluate each acquisition of real estate or in-substance real estate (including equity interests in entities that predominantly hold real estate assets) to determine whether the integrated set of assets and activities acquired meets the definition of a business and needs to be accounted for as a business combination. An acquisition of an integrated set of assets and activities that does not meet the definition of a business is accounted for as an asset acquisition.

For acquisitions of real estate or in-substance real estate that are accounted for as business combinations, we allocate the acquisition consideration (excluding acquisition costs) to the assets acquired, liabilities assumed, noncontrolling interests, and previously existing ownership interests at fair value as of the acquisition date. Assets include intangible assets such as tenant relationships, acquired in-place leases, and favorable intangibles associated with in-place leases in which we are the lessor. Liabilities include unfavorable intangibles associated with in-place leases in which we are the lessor. In addition, for acquired in-place finance or operating leases in which we are the lessee, acquisition consideration is allocated to lease liabilities and related right-of-use assets, adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms. Any excess (deficit) of the consideration transferred relative to the fair value of the net assets acquired is accounted for as goodwill (bargain purchase gain). Acquisition costs related to business combinations are expensed as incurred.

Generally, we expect that acquisitions of real estate or in-substance real estate will not meet the definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e., land, buildings, and related intangible assets). The accounting model for asset acquisitions is similar to the accounting model for business combinations, except that the acquisition consideration (including acquisition costs) is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. Any excess (deficit) of the consideration transferred relative to the sum of the fair value of the assets acquired and liabilities assumed is allocated to the individual assets and liabilities based on their relative fair values. As a result, asset acquisitions do not result in the recognition of goodwill or a bargain purchase gain. Incremental and external direct acquisition costs (such as legal and other third-party services) are capitalized.

We exercise judgment to determine the key assumptions used to allocate the purchase price of real estate acquired among its components. The allocation of the consideration to the various components of properties acquired during the year can have an effect on our net income due to the useful depreciable and amortizable lives applicable to each component and the recognition of the related depreciation and amortization expense in our consolidated statements of operations. We apply judgment in utilizing available comparable market information to assess relative fair value. We assess the relative fair values of tangible and intangible assets and liabilities based on available comparable market information, including estimated replacement costs, rental rates, and recent market transactions. In addition, we may use estimated cash flow projections that utilize appropriate discount and capitalization rates. Estimates of future cash flows are based on a number of factors, including the historical operating results, known and anticipated trends, and market/economic conditions that may affect the property.

The value of tangible assets acquired is based upon our estimation of fair value on an “as if vacant” basis. The value of acquired in-place leases includes the estimated costs during the hypothetical lease-up period and other costs that would have been incurred in the execution of similar leases under the market conditions at the acquisition date of the acquired in-place lease. If there is a bargain fixed-rate renewal option for the period beyond the noncancelable lease term of an in-place lease, we evaluate intangible factors such as the business conditions in the industry in which the lessee operates, the economic conditions in the area in which the property is located, and the ability of the lessee to sublease the property during the renewal term, in order to determine the likelihood that the lessee will renew. When we determine there is reasonable assurance that such bargain purchase option will be exercised, we consider the option in determining the intangible value of such lease and its related amortization period. We also recognize the relative fair values of assets acquired, the liabilities assumed, and any noncontrolling interest in acquisitions of less than a 100% interest when the acquisition constitutes a change in control of the acquired entity.

10



2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The values allocated to buildings and building improvements, land improvements, tenant improvements, and equipment are depreciated on a straight-line basis using the shorter of the respective ground lease term, estimated useful life, or up to 40 years, for buildings and building improvements; estimated life, or up to 20 years, for land improvements; the respective lease term or estimated useful life for tenant improvements; and the shorter of the lease term or estimated useful life for equipment. The values of the right-of-use assets are amortized on a straight-line basis during the remaining lease term. The values of acquired in-place leases and associated favorable intangibles (i.e., acquired above-market leases) are classified in other assets in our consolidated balance sheets and are amortized over the remaining terms of the related leases as a reduction of income from rentals in our consolidated statements of operations. The values of unfavorable intangibles (i.e., acquired below-market leases) associated with acquired in-place leases are classified in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets and are amortized over the remaining terms of the related leases as an increase in income from rentals in our statements of operations.

Capitalized project costs

We capitalize project costs, including pre-construction costs, interest, property taxes, insurance, and other costs directly related and essential to the development, redevelopment, pre-construction, or construction of a project. Capitalization of development, redevelopment, pre-construction, and construction costs is required while activities are ongoing to prepare an asset for its intended use. Fluctuations in our development, redevelopment, pre-construction, and construction activities could result in significant changes to total expenses and net income. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Should development, redevelopment, pre-construction, or construction activity cease, interest, property taxes, insurance, and certain other costs would no longer be eligible for capitalization and would be expensed as incurred. Expenditures for repairs and maintenance are expensed as incurred.

Real estate sales

A property is classified as held for sale when all of the following criteria for a plan of sale have been met: (i) management, having the authority to approve the action, commits to a plan to sell the property; (ii) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary; (iii) an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; (iv) the sale of the property is probable and is expected to be completed within one year; (v) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Depreciation of assets ceases upon designation of a property as held for sale.

If the disposal of a property represents a strategic shift that has (or will have) a major effect on our operations or financial results, such as (i) a major line of business, (ii) a major geographic area, (iii) a major equity method investment, or (iv) other major parts of an entity, then the operations of the property, including any interest expense directly attributable to it, are classified as discontinued operations in our consolidated statements of operations, and amounts for all prior periods presented are reclassified from continuing operations to discontinued operations. The disposal of an individual property generally will not represent a strategic shift and therefore will typically not meet the criteria for classification as a discontinued operation.

We recognize gains/losses on real estate sales in accordance with the accounting standard on the derecognition of nonfinancial assets arising from contracts with noncustomers. Our ordinary output activities consist of the leasing of space to our tenants in our operating properties, not the sales of real estate. Therefore, sales of real estate (in which we are the seller) qualify as contracts with noncustomers. In our transactions with noncustomers, we apply certain recognition and measurement principles consistent with our method of recognizing revenue arising from contracts with customers. Derecognition of the asset is based on the transfer of control. If a real estate sales contract includes our ongoing involvement with the property, then we evaluate each promised good or service under the contract to determine whether it represents a separate performance obligation, constitutes a guarantee, or prevents the transfer of control. If a good or service is considered a separate performance obligation, an allocated portion of the transaction price is recognized as revenue as we transfer the related good or service to the buyer.

The recognition of gain or loss on the sale of a partial interest also depends on whether we retain a controlling or noncontrolling interest in the property. If we retain a controlling interest in the property upon completion of the sale, we continue to reflect the asset at its book value, record a noncontrolling interest for the book value of the partial interest sold, and recognize additional paid-in capital for the difference between the consideration received and the partial interest at book value. Conversely, if we retain a noncontrolling interest upon completion of the sale of a partial interest of real estate, we would recognize a gain or loss as if 100% of the real estate were sold.

11



2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of long-lived assets

Prior to and subsequent to the end of each quarter, we review current activities and changes in the business conditions of all of our long-lived assets to determine the existence of any triggering events or impairment indicators requiring an impairment analysis. If triggering events or impairment indicators are identified, we review an estimate of the future undiscounted cash flows, including, if necessary, a probability-weighted approach if multiple outcomes are under consideration.

Long-lived assets to be held and used, including our rental properties, CIP, land held for development, right-of-use assets related to operating leases in which we are the lessee, and intangibles, are individually evaluated for impairment when conditions exist that may indicate that the carrying amount of a long-lived asset may not be recoverable. The carrying amount of a long-lived asset to be held and used is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Triggering events or impairment indicators for long-lived assets to be held and used are assessed by project and include significant fluctuations in estimated net operating income, occupancy changes, significant near-term lease expirations, current and historical operating and/or cash flow losses, construction costs, estimated completion dates, rental rates, and other market factors. We assess the expected undiscounted cash flows based upon numerous factors, including, but not limited to, construction costs, available market information, current and historical operating results, known trends, current market/economic conditions that may affect the asset, and our assumptions about the use of the asset, including, if necessary, a probability-weighted approach if multiple outcomes are under consideration.

Upon determination that an impairment has occurred, a write-down is recognized to reduce the carrying amount to its estimated fair value. If an impairment charge is not required to be recognized, the recognition of depreciation or amortization is adjusted prospectively, as necessary, to reduce the carrying amount of the real estate to its estimated disposition value over the remaining period that the asset is expected to be held and used. We may adjust depreciation of properties that are expected to be disposed of or redeveloped prior to the end of their useful lives.

We use the held for sale impairment model for our properties classified as held for sale. The held for sale impairment model is different from the held and used impairment model. Under the held for sale impairment model, an impairment charge is recognized if the carrying amount of the long-lived asset classified as held for sale exceeds its fair value less cost to sell. Because of these two different models, it is possible for a long-lived asset previously classified as held and used to require the recognition of an impairment charge upon classification as held for sale.

International operations

In addition to operating properties in the U.S., we have three operating properties in Canada and one operating property in China. The functional currency for our subsidiaries operating in the U.S. is the U.S. dollar. The functional currencies for our foreign subsidiaries are the local currencies in each respective country. The assets and liabilities of our foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect as of the financial statement date. Revenue and expense accounts of our foreign subsidiaries are translated using the weighted-average exchange rate for the periods presented. Gains or losses resulting from the translation are classified in accumulated other comprehensive income as a separate component of total equity and are excluded from net income.

Whenever a foreign investment meets the criteria for classification as held for sale, we evaluate the recoverability of the investment under the held for sale impairment model. We may recognize an impairment charge if the carrying amount of the investment exceeds its fair value less cost to sell. In determining an investment’s carrying amount, we consider its net book value and any cumulative unrealized foreign currency translation adjustment related to the investment.

The appropriate amounts of foreign exchange rate gains or losses classified in accumulated other comprehensive income are reclassified to net income when realized upon the sale of our investment or upon the complete or substantially complete liquidation of our investment.

12



2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Investments

We hold investments in publicly traded companies and privately held entities primarily involved in the life science, agtech, and technology industries. As a REIT, we generally limit our ownership of each individual entity’s voting stock to less than 10%.

Our equity investments (except those accounted for under the equity method and those that result in consolidation of the investee) are measured as follows:

Investments in publicly traded companies are classified as investments with readily determinable fair values and are presented at fair value in our consolidated balance sheets, with changes in fair value recognized in net income. The fair values for our investments in publicly traded companies are determined based on sales prices or quotes available on securities exchanges.
Investments in privately held entities without readily determinable fair values fall into two categories:
Investments in privately held entities that report NAV per share, such as our privately held investments in limited partnerships, are presented at fair value using NAV as a practical expedient, with changes in fair value recognized in net income. We use NAV per share reported by limited partnerships generally without adjustment, unless we are aware of information indicating that the NAV reported by a limited partnership does not accurately reflect the fair value of the investment at our reporting date. We disclose the timing of liquidation of an investee’s assets and the date when redemption restrictions will lapse (or indicate if this timing is unknown) if the investee has communicated this information to us or has announced it publicly.
Investments in privately held entities that do not report NAV per share are accounted for using a measurement alternative under which these investments are measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income.

For investments in privately held entities that do not report NAV per share, an observable price arises from an orderly transaction for an identical or similar investment of the same issuer, which is observed by an investor without expending undue cost and effort. Observable price changes result from, among other things, equity transactions of the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. To determine whether these transactions are indicative of an observable price change, we evaluate, among other factors, whether these transactions have similar rights and obligations, including voting rights, distribution preferences, and conversion rights to the investments we hold.

We monitor investments in privately held entities that do not report NAV per share throughout the year for new developments, including operating results, prospects and results of clinical trials, new product initiatives, new collaborative agreements, capital-raising events, and merger and acquisition activities. These investments are evaluated on the basis of a qualitative assessment for indicators of impairment by monitoring the presence of the following triggering events or impairment indicators: (i) a significant deterioration in the earnings performance, asset quality, or business prospects of the investee; (ii) a significant adverse change in the regulatory, economic, or technological environment of the investee, (iii) a significant adverse change in the general market condition, including the research and development of technology and products that the investee is bringing or attempting to bring to the market, or (iv) significant concerns about the investee’s ability to continue as a going concern. If such indicators are present, we are required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value.

Investments in privately held entities are accounted for under the equity method, unless our interest in the entity is deemed to be so minor that we have virtually no influence over the entity’s operating and financial policies. Under the equity method of accounting, we initially recognize our investment at cost and adjust the carrying amount of the investment to recognize our share of the earnings or losses of the investee subsequent to the date of our investment. We had no non-real estate investments accounted for under the equity method as of March 31, 2021.

We recognize both realized and unrealized gains and losses in our consolidated statements of operations, classified within investment income. Unrealized gains and losses represent changes in fair value for investments in publicly traded companies, changes in NAV as a practical expedient to estimate fair value for investments in privately held entities that report NAV per share, and observable price changes on our investments in privately held entities that do not report NAV per share. Impairments are realized losses, which result in an adjusted cost, and represent charges to reduce the carrying values of investments in privately held entities that do not report NAV per share to their estimated fair value. Realized gains and losses represent the difference between proceeds received upon disposition of investments and their historical or adjusted cost.



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2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenues

The table below provides details of our consolidated total revenues for the three months ended March 31, 2021 and 2020 (in thousands):
Three Months Ended March 31,
20212020
Income from rentals:
Revenues subject to the lease accounting standard:
Operating leases$473,798 $428,742 
Direct financing lease625 613 
Revenues subject to the lease accounting standard474,423 429,355 
Revenues subject to the revenue recognition accounting standard
4,272 8,250 
Income from rentals478,695 437,605 
Other income1,154 2,314 
Total revenues$479,849 $439,919 

During the three months ended March 31, 2021, revenues that were subject to the lease accounting standard aggregated $474.4 million and represented 98.9% of our total revenues. During the three months ended March 31, 2021, our total revenues also included $5.4 million, or 1.1%, subject to other accounting guidance. Our other income consisted primarily of construction management fees and interest income earned during the three months ended March 31, 2021. For a detailed discussion related to our revenue streams, refer to the “Lease accounting” and “Recognition of revenue arising from contracts with customers” sections within this Note 2 to our unaudited consolidated financial statements.

Lease accounting

Definition and classification of a lease

When we enter into a contract or amend an existing contract, we evaluate whether the contract meets the definition of a lease. To meet the definition of a lease, the contract must meet all three criteria:

(i)One party (lessor) must hold an identified asset;
(ii)The counterparty (lessee) must have the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of the contract; and
(iii)The counterparty (lessee) must have the right to direct the use of the identified asset throughout the period of the contract.

The criteria to determine whether a lease should be accounted for as a finance lease for lessees or a sales-type lease for lessors include any of the following:

(i)Ownership is transferred from lessor to lessee by the end of the lease term;
(ii)An option to purchase is reasonably certain to be exercised;
(iii)The lease term is for the major part of the underlying asset’s remaining economic life;
(iv)The present value of lease payments equals or exceeds substantially all of the fair value of the underlying asset; or
(v)The underlying asset is specialized and is expected to have no alternative use at the end of the lease term.

If any of these criteria is met, a lease is classified as a finance lease by the lessee and as a sales-type lease by the lessor. If none of the criteria are met, a lease is classified as an operating lease by the lessee but may still qualify as a direct financing lease or an operating lease for the lessor. The existence of a residual value guarantee from an unrelated third party other than the lessee may qualify the lease as a direct financing lease by the lessor. Otherwise, the lease is classified as an operating lease by the lessor. Therefore, lessees apply a dual approach by classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, which corresponds to a similar evaluation performed by lessors.

14



2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Lessor accounting

Costs to execute leases

We capitalize initial direct costs, which represent only incremental costs of a lease that would not have been incurred if the lease had not been obtained. Costs that we incur to negotiate or arrange a lease, regardless of its outcome, such as for fixed employee compensation, tax, or legal advice to negotiate lease terms, and other costs, are expensed as incurred.

Operating leases

We account for the revenue from our lease contracts by utilizing the single component accounting policy. This policy requires us to account for, by class of underlying asset, the lease component and nonlease component(s) associated with each lease as a single component if two criteria are met:

(i)The timing and pattern of transfer of the lease component and the nonlease component(s) are the same; and
(ii)The lease component would be classified as an operating lease if it were accounted for separately.

Lease components consist primarily of fixed rental payments, which represent scheduled rental amounts due under our leases, and contingent rental payments. Nonlease components consist primarily of tenant recoveries representing reimbursements of rental operating expenses under our triple net lease structure, including recoveries for utilities, repairs and maintenance, and common area expenses.

If the lease component is the predominant component, we account for all revenues under such lease as a single component in accordance with the lease accounting standard. Conversely, if the nonlease component is the predominant component, all revenues under such lease are accounted for in accordance with the revenue recognition accounting standard. Our operating leases qualify for the single component accounting, and the lease component in each of our leases is predominant. Therefore, we account for all revenues from our operating leases under the lease accounting standard and classify these revenues as income from rentals in our consolidated statements of operations.

We commence recognition of income from rentals related to the operating leases at the date the property is ready for its intended use by the tenant and the tenant takes possession or controls the physical use of the leased asset. Income from rentals related to fixed rental payments under operating leases is recognized on a straight-line basis over the respective operating lease terms. We classify amounts expected to be received in later periods as deferred rent in our consolidated balance sheets. Amounts received currently but recognized as revenue in future periods are classified in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets.

Income from rentals related to variable payments includes tenant recoveries, and contingent rental payments. Tenant recoveries, including reimbursements of utilities, repairs and maintenance, common area expenses, real estate taxes and insurance, and other operating expenses, are recognized as revenue in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse us arises. Income from rentals related to other variable payments is recognized when associated contingencies are removed.

We assess collectibility from our tenants of future lease payments for each of our operating leases. If we determine that collectibility is probable, we recognize income from rentals based on the methodology described above. If we determine that collectibility is not probable, we recognize an adjustment to lower our income from rentals. Furthermore, we may recognize a general allowance at a portfolio level (not the individual level) if we do not expect to collect future lease payments in full. As of March 31, 2021, we had a general allowance of $3.8 million for a pool of deferred rent balances, which at the portfolio level (not the individual level) is not expected to be collected in full through the lease term.

Direct financing and sales-type leases

As of March 31, 2021, we had one direct financing lease with a net investment balance of $38.0 million and no sales-type leases. Income from rentals related to our direct financing lease is recognized over the lease term using the effective interest rate method. At lease commencement, we record an asset within other assets in our consolidated balance sheets, which represents our net investment in the direct financing lease. This initial net investment is determined by aggregating the total future lease payments attributable to the direct financing lease and the estimated residual value of the property less unearned income. Over the lease term, the investment in the direct financing lease is reduced and rental income is recognized as income from rentals in our consolidated statements of operations, producing a constant periodic rate of return on the net investment in the direct financing lease.

We evaluate our net investment in the direct financing lease for impairment under the current expected credit loss standard that we adopted on January 1, 2020. For more information, refer to the “Allowance for credit losses” section within this Note 2 to our unaudited consolidated financial statements.

15



2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Lessee accounting

We have operating lease agreements in which we are the lessee consisting of ground and office leases. At the lease commencement date (or at the acquisition date if the lease is acquired as part of a real estate acquisition), we are required to recognize a liability to account for our future obligations under these operating leases, and a corresponding right-of-use asset.

The lease liability is measured based on the present value of the future lease payments, including payments during the term under our extension options that we are reasonably certain to exercise. The present value of the future lease payments is calculated for each operating lease using each respective remaining lease term and a corresponding estimated incremental borrowing rate, which is the interest rate that we estimate we would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments. Subsequently, the lease liability is accreted by applying a discount rate established at the lease commencement date to the lease liability balance as of the beginning of the period and is reduced by the payments made during the period. We classify the operating lease liability in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets.

The right-of-use asset is measured based on the corresponding lease liability, adjusted for initial direct leasing costs and any other consideration exchanged with the landlord prior to the commencement of the lease, as well as adjustments to reflect favorable or unfavorable terms of an acquired lease when compared with market terms at the time of acquisition. Subsequently, the right-of-use asset is amortized on a straight-line basis during the lease term. We classify the right-of-use asset in other assets in our consolidated balance sheets.

Recognition of revenue arising from contracts with customers

We recognize revenues associated with transactions arising from contracts with customers, excluding revenues subject to the lease accounting standard discussed in the “Lease accounting” section above, in accordance with the revenue recognition accounting standard. A customer is distinguished from a noncustomer by the nature of the goods or services that are transferred. Customers are provided with goods or services that are generated by a company’s ordinary output activities, whereas noncustomers are provided with nonfinancial assets that are outside of a company’s ordinary output activities.
    
We generally recognize revenue representing the transfer of goods and services to customers in an amount that reflects the consideration to which we expect to be entitled in the exchange. In order to determine the recognition of revenue from customer contracts, we use a five-step model to (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy the performance obligation.

We identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. We consider whether we control the goods or services prior to the transfer to the customer in order to determine whether we should account for the arrangement as a principal or agent. If we determine that we control the goods or services provided to the customer, then we are the principal to the transaction, and we recognize the gross amount of consideration expected in the exchange. If we simply arrange but do not control the goods or services being transferred to the customer, then we are considered to be an agent to the transaction, and we recognize the net amount of consideration we are entitled to retain in the exchange.

Total revenues subject to the revenue recognition accounting standard and classified within income from rentals in our consolidated statements of operations for the three months ended March 31, 2021, included $4.3 million primarily related to short-term parking revenues associated with long-term lease agreements. During the three months ended March 31, 2020, revenues subject to the revenue recognition accounting standard and classified within income from rentals in our consolidated statements of operations were $8.3 million primarily related to short-term parking revenues associated with long-term lease agreements and revenues generated from our transient parking, retail tenants, and amenities. Short-term parking revenues do not qualify for the single component accounting policy, discussed in the “Lessor accounting” subsection of the “Lease accounting” section within this Note 2, due to the difference in the timing and pattern of transfer of our parking service obligations and associated lease components within the same lease agreement. We recognize short-term parking revenues in accordance with the revenue recognition accounting standard when the service is provided and the performance obligation is satisfied, which normally occurs at a point in time.

Monitoring of tenant credit quality

During the term of each lease, we monitor the credit quality and any related material changes of our tenants by (i) monitoring the credit rating of tenants that are rated by a nationally recognized credit rating agency, (ii) reviewing financial statements of the tenants that are publicly available or that are required to be delivered to us pursuant to the applicable lease, (iii) monitoring news reports regarding our tenants and their respective businesses, and (iv) monitoring the timeliness of lease payments.

16



2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Allowance for credit losses

On January 1, 2020, we adopted an accounting standard (further clarified in subsequently issued updates) that requires companies to estimate and recognize lifetime expected losses, rather than incurred losses, which results in the earlier recognition of credit losses even if the expected risk of credit loss is remote. The accounting standard applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases arising from sales-type and direct financing leases, and off-balance-sheet credit exposures (e.g., loan commitments). The standard does not apply to the receivables arising from operating leases. An assessment of the collectibility of operating lease payments and the recognition of an adjustment to lease income based on this assessment is governed by the lease accounting standard discussed in the “Lease accounting” section earlier within this Note 2 to our unaudited consolidated financial statements.

Upon adoption of the accounting standard, we had one lease subject to this standard classified as a direct financing lease with a net investment balance aggregating $39.9 million prior to the credit loss adjustment. In this direct financing lease, the payment obligation of the lessee is collateralized by real estate property. Historically, we have had no collection issues related to this direct financing lease; therefore, we assessed the probability of default on this lease based on the lessee’s financial condition, credit rating, business prospects, remaining lease term, and expected value of the underlying collateral upon its repossession. Based on the aforementioned considerations, we estimated a credit loss adjustment related to this direct financing lease aggregating $2.2 million, which was recognized as a cumulative adjustment to retained earnings and as a reduction of the investment in the direct financing lease balance from $39.9 million to $37.7 million in our consolidated balance sheets on January 1, 2020. Subsequent to the initial recognition, at each reporting date we recognize a credit loss adjustment, if necessary, for our current estimate of expected credit losses, which is classified within rental operations in our consolidated statements of operations. For further details, refer to Note 5 – “Leases” to our unaudited consolidated financial statements.

In addition to our direct financing lease, the accounting standard on credit losses applies to our receivables that result from revenue transactions within the scope of the revenue recognition accounting standard discussed in the “Recognition of revenue arising from contracts with customers” section earlier within this Note 2. Upon adoption of the standard on January 1, 2020, our receivables resulting from revenue transactions within the scope of revenue recognition accounting standard aggregated $16.1 million. Among other factors, we considered the short-term nature of these receivables, our positive assessment of the financial condition and business prospects of the payors, and minimal historical collectibility issues. Based on the aforementioned considerations, we estimated the credit loss related to our trade receivables to approximate $259 thousand, which was recognized as a cumulative adjustment to retained earnings and as a reduction of the trade receivables balance in our consolidated balance sheets on January 1, 2020.

Income taxes

We are organized and operate as a REIT pursuant to the Internal Revenue Code (the “Code”). Under the Code, a REIT that distributes at least 90% of its REIT taxable income to its stockholders annually (excluding net capital gains) and meets certain other conditions is not subject to federal income tax on its distributed taxable income, but could be subject to certain federal, foreign, state, and local taxes. We distribute 100% of our taxable income annually; therefore, a provision for federal income taxes is not required. In addition to our REIT returns, we file federal, foreign, state, and local tax returns for our subsidiaries. We file with jurisdictions located in the U.S., Canada, China, and other international locations. Our tax returns are subject to routine examination in various jurisdictions for the 2015 through 2020 calendar years.

Employee and non-employee share-based payments

We have implemented an entity-wide accounting policy to account for forfeitures of share-based awards granted to employees and non-employees when they occur. As a result of this policy, we recognize expense on share-based awards with time-based vesting conditions without reductions for an estimate of forfeitures. This accounting policy only applies to service condition awards. For performance condition awards, we continue to assess the probability that such conditions will be achieved. Expenses related to forfeited awards are reversed as forfeitures occur. In addition, all nonforfeitable dividends paid on share-based payment awards are initially classified in retained earnings and reclassified to compensation cost only if forfeitures of the underlying awards occur. Our employee and non-employee share-based awards are measured at their fair value on the grant date and recognized over the recipient’s required service period.
17



2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Forward equity sales agreements

We account for our forward equity sales agreements in accordance with the accounting guidance governing financial instruments and derivatives. As of March 31, 2021, none of our forward equity sales agreements were deemed to be liabilities as they did not embody obligations to repurchase our shares, nor did they embody obligations to issue a variable number of shares for which the monetary value was predominantly fixed, varied with something other than the fair value of our shares, or varied inversely in relation to our shares. We also evaluated whether the agreements met the derivatives and hedging guidance scope exception to be accounted for as equity instruments and concluded that the agreements can be classified as equity contracts based on the following assessment: (i) none of the agreements’ exercise contingencies were based on observable markets or indices besides those related to the market for our own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock.

Issuer and guarantor subsidiaries of guaranteed securities
    
In March 2020, the SEC issued an amendment to existing guidance to reduce and simplify financial disclosure requirements for issuers and guarantors of registered debt offerings. The guidance became effective for filings on or after January 4, 2021, with early adoption permitted. Upon evaluation of the guidance, we elected to early adopt the amendment during the three months ended March 31, 2020.

Generally, a parent entity must provide separate subsidiary issuer or guarantor financial statements, unless it qualifies for disclosure exceptions provided in the amendment. Under the previous guidance, a parent entity was required to fully own the subsidiary issuer or guarantor and guarantee its registered security fully and unconditionally to qualify for disclosure exceptions. Pursuant to the amendment, a parent entity may be eligible for disclosure exceptions if it meets the following criteria:

The subsidiary issuer or guarantor is a consolidated subsidiary of the parent company, and
The subsidiary issues a registered security that is:
Issued jointly and severally with the parent company, or
Fully and unconditionally guaranteed by the parent company.

A parent entity that meets the above criteria may instead present summarized financial information (“alternative disclosures”). We evaluated the criteria and determined that we are eligible for the disclosure exceptions, which allow us to provide alternative disclosures.

The amendment also allows for further simplification of disclosure requirements for entities that qualify for the alternative disclosures. A parent entity was previously required to provide disclosures within the footnotes to the consolidated financial statements. However, the amendment allows for such disclosures to be provided outside of the consolidated financial statements, including within the “Management’s discussion and analysis of financial condition and results of operations” section in Item 2. As such, since our adoption of the amendment during the three months ended March 31, 2020, our disclosures are no longer presented in our consolidated financial statements and have been relocated to the “Management’s discussion and analysis of financial condition and results of operations” section in Item 2.

Joint venture distributions

We use the “nature of the distribution” approach to determine the classification within our statement of cash flows of cash distributions received from equity method investments, including our unconsolidated joint ventures. Under this approach, distributions are classified based on the nature of the underlying activity that generated the cash distributions. If we lack the information necessary to apply this approach in the future, we will be required to apply the “cumulative earnings” approach as an accounting change on a retrospective basis. Under the cumulative earnings approach, distributions up to the amount of cumulative equity in earnings recognized are classified as cash inflows from operating activities, and those in excess of that amount are classified as cash inflows from investing activities.

Restricted cash

We present cash and cash equivalents separately from restricted cash within our consolidated balance sheets. We include restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the consolidated statements of cash flows. We provide a reconciliation between the balance sheets and statements of cash flows, as required when the balance includes more than one line item for cash, cash equivalents, and restricted cash. We also provide a disclosure of the nature of the restrictions related to material restricted cash balances.

18


3.    INVESTMENTS IN REAL ESTATE

Our consolidated investments in real estate, including real estate assets held for sale as described in Note 15 – “Assets classified as held for sale” to our unaudited consolidated financial statements, consisted of the following as of March 31, 2021, and December 31, 2020 (in thousands):
March 31, 2021December 31, 2020
Rental properties:
Land (related to rental properties)$3,173,698 $2,550,571 
Buildings and building improvements14,336,292 13,364,561 
Other improvements1,627,751 1,508,776 
Rental properties19,137,741 17,423,908 
Development and redevelopment of new Class A properties:
Development and redevelopment projects
3,645,866 3,075,453 
Future development projects753,057 738,994 
Gross investments in real estate23,536,664 21,238,355 
Less: accumulated depreciation
(3,315,190)(3,178,024)
Net investments in real estate – North America
20,221,474 18,060,331 
Net investments in real estate – Asia
31,944 32,041 
Investments in real estate$20,253,418 $18,092,372 

Acquisitions

Our real estate asset acquisitions during the three months ended March 31, 2021, consisted of the following (dollars in thousands):
Square Footage
MarketNumber of PropertiesFuture DevelopmentActive Development/RedevelopmentOperating With Future Development/RedevelopmentOperatingPurchase Price
Greater Boston3305,000 640,116 311,066 692,088 $1,541,326 
Other2269,426 209,295 120,000 741,191 332,424 
Three months ended March 31, 202125374,426 849,411 431,066 1,433,279 $1,873,750 
(1)

(1)Represents the aggregate contractual purchase price of our acquisitions, which differ from purchases of real estate in our consolidated statements of cash flows due to closing costs and other acquisition adjustments such as prorations of rents and expenses.

Based upon our evaluation of each acquisition, we determined that substantially all of the fair value related to each acquisition is concentrated in a single identifiable asset or a group of similar identifiable assets, or is associated with a land parcel with no operations. Accordingly, each transaction did not meet the definition of a business and therefore was accounted for as an asset acquisition. In each of these transactions, we allocated the total consideration for each acquisition to the individual assets and liabilities acquired on a relative fair value basis.

During the three months ended March 31, 2021, we acquired 25 properties for an aggregate purchase price of $1.9 billion. In connection with our acquisitions, we recorded in-place leases aggregating $118.7 million and below-market leases in which we are the lessor aggregating $57.2 million. As of March 31, 2021, the weighted-average amortization period remaining on our in-place and below-market leases acquired during the three months ended March 31, 2021, was 9.7 years and 11.3 years, respectively, and 10.2 years in total.

Purchase of partner’s interest in an unconsolidated real estate joint venture in March 2021

As of December 31, 2020, we had a 56.8% interest in an unconsolidated real estate joint venture that owned an operating property aggregating 80,032 RSF located at 704 Quince Orchard Road in our Gaithersburg submarket of Maryland. We accounted for this joint venture under the equity method of accounting. On March 25, 2021, we acquired the remaining 43.2% interest in this real estate joint venture for $9.4 million and fully repaid the outstanding secured loan with principal and accrued interest aggregating $14.6 million as of March 25, 2021.

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3.    INVESTMENTS IN REAL ESTATE (continued)
As a result of this acquisition, we now own 100% of this property and consolidate its results in our consolidated financial statements. The acquired property did not meet the definition of a business and the transaction was accounted for as an asset acquisition. Refer to Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements for more information about our evaluation of applicability of asset acquisition or business combination accounting guidance.

Real estate assets acquired in April 2021

In April 2021, we acquired One Investors Way, located in our Route 128 submarket of Greater Boston, aggregating 240,000 RSF, for a purchase price of $105.0 million. The property was simultaneously 100% leased to Moderna, Inc. for 12 years and immediately placed into redevelopment. The property also includes a future development opportunity aggregating 350,000 RSF.

Additionally, we completed the acquisitions of one property and two land parcels for an aggregate purchase price of $222.5 million, comprising 260,867 RSF of operating properties with future development and redevelopment opportunities and 2.1 million SF of future development opportunities strategically located across multiple markets.

Sales of real estate assets and impairment charges
    
Gain on sales of real estate

During the three months ended March 31, 2021, we recognized $2.8 million of gains related to the completion of two real
estate dispositions. These gains were classified in gain on sales of real estate within our consolidated statements of operations for the three months ended March 31, 2021.

Impairment charges

During the three months ended December 31, 2020, we recognized impairment charges aggregating $25.2 million upon classification as held for sale of the three of our office properties located in our San Francisco Bay Area and Seattle markets. During the three months ended March 31, 2021, we recognized additional impairment charges aggregating $5.1 million to further lower the carrying amounts of these properties to their respective estimated fair values based on the respective sales price negotiated for each property during February – March 2021, less costs to sell. We expect to complete these sales during the three months ending June 30, 2021.

Refer to “Impairment of long-lived assets” within Note 2 – “Summary of significant account policies” to our unaudited consolidated financial statements for additional information.

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4.    CONSOLIDATED AND UNCONSOLIDATED REAL ESTATE JOINT VENTURES

From time to time, we enter into joint venture agreements through which we own a partial interest in real estate entities that own, develop, and operate real estate properties. As of March 31, 2021, our real estate joint ventures held the following properties:
PropertyMarketSubmarket
Our Ownership Interest(1)
Consolidated joint ventures(2):
75/125 Binney StreetGreater BostonCambridge/Inner Suburbs40.0 %
225 Binney StreetGreater BostonCambridge/Inner Suburbs30.0 %
57 Coolidge AvenueGreater BostonCambridge/Inner Suburbs75.0 %
409 and 499 Illinois StreetSan Francisco Bay AreaMission Bay60.0 %
1500 Owens StreetSan Francisco Bay AreaMission Bay50.1 %
Alexandria Technology Center® – Gateway(3)
San Francisco Bay AreaSouth San Francisco45.9 %
500 Forbes BoulevardSan Francisco Bay AreaSouth San Francisco10.0 %
Alexandria Center® for Life Science – Millbrae Station
San Francisco Bay AreaSouth San Francisco35.5 %
Alexandria Point(4)
San DiegoUniversity Town Center55.0 %
5200 Illumina WaySan DiegoUniversity Town Center51.0 %
9625 Towne Centre DriveSan DiegoUniversity Town Center50.1 %
SD Tech by Alexandria(5)
San DiegoSorrento Mesa50.0 %
The Eastlake Life Science Campus by Alexandria(6)
SeattleLake Union30.0 %
Unconsolidated joint ventures(2):
1655 and 1725 Third StreetSan Francisco Bay AreaMission Bay10.0 %
Menlo GatewaySan Francisco Bay AreaGreater Stanford49.0 %
(1)Refer to the table on the next page that shows the categorization of our joint ventures under the consolidation framework.
(2)In addition to the real estate joint ventures listed, various partners hold insignificant noncontrolling interests in six other consolidated joint ventures in North America and we hold an interest in two other insignificant unconsolidated real estate joint ventures in North America.
(3)Excludes 600, 630, 650, 901, and 951 Gateway Boulevard in our South San Francisco submarket.
(4)Excludes 9880 Campus Point Drive in our University Town Center submarket.
(5)Excludes 5505 Morehouse Drive and 10121 and 10151 Barnes Canyon Road in our Sorrento Mesa submarket.
(6)Excludes 1165, 1551, and 1616 Eastlake Avenue East, 188 East Blaine Street, and 1600 Fairview Avenue East in our Lake Union submarket.

Our consolidation policy is fully described under the “Consolidation” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements. Consolidation accounting is highly technical, but its framework is primarily based on the controlling financial interests and benefits of the joint ventures.

We generally consolidate a joint venture that is a legal entity that we control (i.e., we have the power to direct the activities of the joint venture that most significantly affect its economic performance) through contractual rights, regardless of our ownership interest, and where we determine that we have benefits through the allocation of earnings or losses and fees paid to us that could be significant to the joint venture (the “VIE model”).

We also generally consolidate joint ventures when we have a controlling financial interest through voting rights and where our voting interest is greater than 50% (the “voting model”). Voting interest differs from ownership interest for some joint ventures.

We account for joint ventures that do not meet the consolidation criteria under the equity method of accounting by recognizing our share of income and losses.

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4.    CONSOLIDATED AND UNCONSOLIDATED REAL ESTATE JOINT VENTURES (continued)
The table below shows the categorization of our joint ventures under the consolidation framework:
Property(1)
Consolidation Model Voting InterestConsolidation AnalysisConclusion
75/125 Binney StreetVIE model
Not applicable under VIE modelWe have:Consolidated
225 Binney Street(i)The power to direct the activities of the joint venture that most significantly affect its economic performance; and
57 Coolidge Avenue
409 and 499 Illinois Street
1500 Owens Street
Alexandria Technology Center® – Gateway
500 Forbes Boulevard(ii)Benefits that can be significant to the joint venture.
Alexandria Center® for Life Science – Millbrae Station
Alexandria Point
5200 Illumina Way
Therefore, we are the primary beneficiary of each VIE
9625 Towne Centre Drive
SD Tech by Alexandria
The Eastlake Life Science Campus by Alexandria
Menlo Gateway
We do not control the joint venture and are therefore not the primary beneficiaryEquity method of accounting
1655 and 1725 Third StreetVoting modelDoes not exceed 50%Our voting interest is 50% or less

(1)In addition to the real estate joint ventures listed, various partners hold insignificant noncontrolling interests in six other consolidated joint ventures in North America and we hold an interest in two other insignificant unconsolidated real estate joint ventures in North America.

Consolidated VIEs’ balance sheet information

The table below aggregates the balance sheet information of our consolidated VIEs as of March 31, 2021, and December 31, 2020 (in thousands):
March 31, 2021December 31, 2020
Investments in real estate$3,618,870 $3,196,215 
Cash and cash equivalents99,476 95,565 
Other assets398,570 341,524 
Total assets$4,116,916 $3,633,304 
Secured notes payable$— $— 
Other liabilities200,630 183,237 
Total liabilities200,630 183,237 
Redeemable noncontrolling interests1,842 1,731 
Alexandria Real Estate Equities, Inc.’s share of equity2,134,680 1,742,039 
Noncontrolling interests’ share of equity1,779,764 1,706,297 
Total liabilities and equity$4,116,916 $3,633,304 

In determining whether to aggregate the balance sheet information of consolidated VIEs, we considered the similarity of each VIE, including the primary purpose of these entities to own, manage, operate, and lease real estate properties owned by the VIEs, and the similar nature of our involvement in each VIE as a managing member. Due to the similarity of the characteristics, we present the balance sheet information of these entities on an aggregated basis. None of our consolidated VIEs’ assets have restrictions that limit their use to settle specific obligations of the VIE. There are no creditors or other partners of our consolidated VIEs that have recourse to our general credit. Our maximum exposure to our consolidated VIEs is limited to our variable interests in each VIE.

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4.    CONSOLIDATED AND UNCONSOLIDATED REAL ESTATE JOINT VENTURES (continued)
Unconsolidated real estate joint ventures

Our maximum exposure to our unconsolidated VIEs is limited to our investment in each VIE. Our investments in unconsolidated real estate joint ventures, accounted for under the equity method of accounting presented in our consolidated balance sheets as of March 31, 2021, and December 31, 2020, consisted of the following (in thousands):

PropertyMarch 31, 2021December 31, 2020
Menlo Gateway
$299,215 $300,622 
704 Quince Orchard Road— 
(1)
4,961 
1655 and 1725 Third Street
14,974 14,939 
Other
11,739 11,827 
$325,928 $332,349 
(1)During the three months ended March 31, 2021, we acquired our partner’s ownership interest in this unconsolidated real estate joint venture. For additional information, refer to the “Purchase of partner’s interest in an unconsolidated real estate joint venture in March 2021” section in Note 3 – “Investments in real estate” to our unaudited consolidated financial statements.

The following table presents key terms related to our unconsolidated real estate joint ventures’ secured loans as of March 31, 2021 (dollars in thousands):
Unconsolidated Joint VentureOur ShareMaturity DateStated Rate
Interest Rate(1)
Debt Balance at 100%(2)
1655 and 1725 Third Street10.0%3/10/254.50%4.57%$598,338 
Menlo Gateway, Phase II49.0%5/1/354.53%4.59%155,965 
Menlo Gateway, Phase I49.0%8/10/354.15%4.18%138,905 
$893,208 
(1)Includes interest expense and amortization of loan fees.
(2)Represents outstanding principal, net of unamortized deferred financing costs, as of March 31, 2021.
23


5.    LEASES

We are subject to the lease accounting standard that sets principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors).

As a lessor, we are required to disclose, among other things, the following:

A description of the nature of leases, including terms for any variable payments, options to extend or terminate, and options to purchase the underlying asset;
Tabular presentation of undiscounted cash flows to be received over the next five years and thereafter separately for operating leases and direct financing leases;
The amount of lease income and its location on the statements of operations;
Income classified separately for operating leases and direct financing leases; and
Our risk management strategy to mitigate declines in residual value of the leased assets.

As a lessee, we are required to disclose, among other things, the following:

A description of the nature of leases, including terms for any variable payments, options to extend or terminate, and options to purchase the underlying asset;
The amounts of lease liabilities and corresponding right-of-use assets and their respective locations in the balance sheet;
The weighted-average remaining lease term and weighted-average discount rate of leases;
Tabular presentation of undiscounted cash flows of our remaining lease payment obligations over the next five years and thereafter; and
Total lease costs, including cash paid, amounts expensed, and amounts capitalized.

Refer to the “Lease accounting” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements for additional information.

Leases in which we are the lessor

As of March 31, 2021, we had 360 properties aggregating 33.9 million operating RSF located in key locations, including Greater Boston, San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. We focus on developing Class A properties in AAA innovation cluster locations, which we consider to be highly desirable for tenancy by life science, agtech, and technology entities. 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. As of March 31, 2021, all leases in which we are the lessor were classified as operating leases with the exception of one direct financing lease. Our operating leases and direct financing lease are described below.

Operating leases

As of March 31, 2021, our 360 properties were subject to operating lease agreements. Two of these properties, representing two land parcels, are subject to lease agreements that each contain an option for the lessee to purchase the underlying asset from us at fair market value during each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent commencement date of October 1, 2017. The remaining lease term related to each of the two land parcels is 71.7 years. Our leases generally contain options to extend lease terms at prevailing market rates at the time of expiration. Certain operating leases contain early termination options that require advance notification and payment of a penalty, which in most cases is substantial enough to be deemed economically disadvantageous by a tenant to exercise. Future lease payments to be received under the terms of our operating lease agreements, excluding expense reimbursements, in effect as of March 31, 2021, are outlined in the table below (in thousands):
YearAmount
2021$996,581 
20221,381,082 
20231,363,705 
20241,252,843 
20251,170,172 
Thereafter7,143,569 
Total$13,307,952 

Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements for additional information about our owned real estate assets, which are the underlying assets under our operating leases.

24



5.    LEASES (continued)
Direct financing lease

As of March 31, 2021, we had one direct financing lease agreement for a parking structure with a remaining lease term of 71.7 years. The lessee has an option to purchase the underlying asset at fair market value during each of the 30-day periods commencing on the dates that are 15 years, 30 years, and 74.5 years after the rent commencement date of October 1, 2017. The components of net investment in our direct financing lease as of March 31, 2021, and December 31, 2020, are summarized in the table below (in thousands):
March 31, 2021December 31, 2020
Gross investment in direct financing lease$258,317 $258,751 
Less: unearned income(217,448)(218,072)
Less: allowance for credit losses(2,839)(2,839)
Net investment in direct financing lease$38,030 $37,840 

On January 1, 2020, we adopted an accounting standard that requires companies to estimate and recognize expected losses, rather than incurred losses, which results in the earlier recognition of credit losses even if the expected risk of credit loss is remote. This accounting standard applies to our direct financing lease described above. Upon adoption of the standard on January 1, 2020, we recognized a credit loss adjustment related to this direct financing lease aggregating $2.2 million. During the year ended December 31, 2020, we updated our assessment of the current estimated credit loss related to this direct financing lease and estimated the loss to increase to $2.8 million. As a result, we recognized an additional credit loss adjustment of $614 thousand classified within rental operations in our consolidated statement of operations for the year ended December 31, 2020. No adjustment to the estimated credit loss balance was required during the three months ended March 31, 2021. For further details, refer to the “Allowance for credit losses” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.

Future lease payments to be received under the terms of our direct financing lease as of March 31, 2021, are outlined in the table below (in thousands):
YearTotal
2021$1,322 
20221,809 
20231,863 
20241,919 
20251,976 
Thereafter249,428 
Total$258,317 

Income from rentals

Our total income from rentals includes revenue related to agreements for the rental of our real estate, which primarily includes revenues subject to the lease accounting standard and the revenue recognition accounting standard as shown below (in thousands):
Three Months Ended March 31,
20212020
Income from rentals:
Revenues subject to the lease accounting standard:
Operating leases$473,798 $428,742 
Direct financing lease625 613 
Revenues subject to the lease accounting standard474,423 429,355 
Revenues subject to the revenue recognition accounting standard
4,272 8,250 
Income from rentals$478,695 $437,605 
    
Our revenues that are subject to the revenue recognition accounting standard and are classified in income from rentals consist primarily of short-term parking revenues that are not considered lease revenues under the lease accounting standard. Refer to the “Revenues” and “Recognition of revenue arising from contracts with customers” sections in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements for additional information.

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5.    LEASES (continued)
Residual value risk management strategy

Our leases do not have guarantees of residual value on the underlying assets. We manage risk associated with the residual value of our leased assets by (i) evaluating each potential acquisition of real estate to determine whether it meets our business objective to invest primarily in high-demand markets with limited supply of available space, (ii) directly managing our leased properties, conducting frequent property inspections, proactively addressing potential maintenance issues before they arise, and timely resolving any occurring issues, (iii) carefully selecting our tenants and monitoring their credit quality throughout their respective lease terms, and (iv) focusing on making continuous improvements to our sustainability efforts and achievement of our sustainability goals for ground-up development of new buildings, which are targeting Gold or Platinum LEED® certification. Our environmentally focused design decisions, careful selection of construction materials, and continuous monitoring of our properties throughout their lives are expected to promote the durability of building infrastructure and enhance residual value of our properties.

Leases in which we are the lessee

Operating lease agreements

We have operating lease agreements in which we are the lessee consisting of ground and office leases. Certain of these leases have options to extend or terminate the contract terms upon meeting certain criteria. There are no notable restrictions or covenants imposed by the leases, nor guarantees of residual value.

We recognize a right-of-use asset, which is classified within other assets in our consolidated balance sheets, and a related liability, which is classified within accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets, to account for our future obligations under ground and office lease arrangements in which we are the lessee. Refer to the “Lessee accounting” subsection of the “Lease accounting” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.

As of March 31, 2021, the present value of the remaining contractual payments aggregating $821.4 million under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $345.0 million. Our corresponding operating lease right-of-use assets, adjusted for initial direct leasing costs and other consideration exchanged with the landlord prior to the commencement of the lease, aggregated $371.1 million. As of March 31, 2021, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 43 years, and the weighted-average discount rate was 4.88%. The weighted-average discount rate is based on the incremental borrowing rate estimated for each lease, which is the interest rate that we estimate we would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments.

Ground lease obligations as of March 31, 2021, included leases for 37 of our properties, which accounted for approximately 10% of our total number of properties. Excluding one ground lease that expires in 2036 related to one operating property with a net book value of $6.9 million as of March 31, 2021, our ground lease obligations have remaining lease terms ranging from approximately 33 years to 94 years, including extension options which we are reasonably certain to exercise.

The reconciliation of future lease payments, under noncancelable operating ground and office leases in which we are the lessee, to the operating lease liability reflected in our unaudited consolidated balance sheet as of March 31, 2021, is presented in the table below (in thousands):
YearTotal
2021$14,497 
202219,915 
202320,088 
202420,334 
202520,364 
Thereafter726,197 
Total future payments under our operating leases in which we are the lessee821,395 
Effect of discounting(476,347)
Operating lease liability$345,048 
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5.    LEASES (continued)
Lessee operating costs

Operating lease costs relate to our ground and office leases in which we are the lessee. Ground leases generally require fixed annual rent payments and may also include escalation clauses and renewal options. Our operating lease obligations related to our office leases have remaining terms of up to 14 years, exclusive of extension options. For the three months ended March 31, 2021 and 2020, our costs for operating leases in which we are the lessee were as follows (in thousands):
Three Months Ended March 31,
20212020
Gross operating lease costs$6,550 $5,621 
Capitalized lease costs(684)(840)
Expenses for operating leases in which we are the lessee$5,866 $4,781 

For the three months ended March 31, 2021 and 2020, amounts paid and classified as operating activities in our unaudited consolidated statements of cash flows for leases in which we are the lessee were $5.6 million and $4.7 million, respectively.

6.     CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Cash, cash equivalents, and restricted cash consisted of the following as of March 31, 2021, and December 31, 2020 (in thousands):
 March 31, 2021December 31, 2020
Cash and cash equivalents$492,184 $568,532 
Restricted cash:
Funds held in trust under the terms of certain secured notes payable18,148 17,256 
Funds held in escrow related to construction projects and investing activities
16,863 4,580 
Other 7,208 7,337 
42,219 29,173 
Total$534,403 $597,705 
27


7.    INVESTMENTS

We hold investments in publicly traded companies and privately held entities primarily involved in the life science, agtech, and technology industries, as further described below.

Investments in publicly traded companies

Our investments in publicly traded companies are classified as investments with readily determinable fair values and are presented at fair value in our consolidated balance sheets, with changes in fair value classified in investment income in our consolidated statements of operations.

Investments in privately held companies

Our investments in privately held entities consist of (i) investments in entities that report NAV, and (ii) investments in privately held entities that do not report NAV. These investments are accounted for as follows:

Investments in privately held entities that report NAV

Investments in entities that report NAV, such as our privately held investments in limited partnerships, are presented at fair value using NAV as a practical expedient, with changes in fair value recognized in net income. We use NAV reported by limited partnerships generally without adjustment, unless we are aware of information indicating that the NAV reported by a limited partnership does not accurately reflect the fair value of the investment at our reporting date.

Investments in privately held entities that do not report NAV

Investments in privately held entities that do not report NAV are carried at cost, adjusted for observable price changes and impairments, with changes recognized in net income. These investments continue to be evaluated on the basis of a qualitative assessment for indicators of impairment by utilizing the same monitoring criteria described in the “Investments” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements, and by monitoring the presence of the following impairment indicators:

(i)a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee,
(ii)a significant adverse change in the regulatory, economic, or technological environment of the investee,
(iii)a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates, and/or
(iv)significant concerns about the investee’s ability to continue as a going concern.

If such indicators are present, we are required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value.

Investments in privately held entities are accounted for under the equity method, unless our interest in the entity is deemed to be so minor that we have virtually no influence over the entity’s operating and financial policies. Under the equity method of accounting, we initially recognize our investment at cost and adjust the carrying amount of the investment to recognize our share of the earnings or losses of the investee subsequent to the date of our investment. We had no non-real estate investments accounted for under the equity method as of March 31, 2021.

Investment income/loss recognition and classification

We classify unrealized and realized gains and losses on our investments within investment income in our consolidated statements of operations. Unrealized gains and losses represent:

(i)changes in fair value for investments in publicly traded companies,
(ii)changes in NAV as a practical expedient to estimate fair value for investments in privately held entities that report NAV, and/or
(iii)observable price changes of our investments in privately held entities that do not report NAV.

An observable price arises from an orderly transaction for an identical or similar investment of the same issuer. Observable price changes result from, among other things, equity transactions of the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. To determine whether these transactions are indicative of an observable price change, we evaluate, among other factors, whether these transactions have similar rights and obligations, including voting rights, distribution preferences, and conversion rights to the investments we hold.

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7.    INVESTMENTS (continued)
Realized gains and losses represent the difference between proceeds received upon disposition of investments and their historical or adjusted cost. Impairments are realized losses, which result in an adjusted cost, and represent charges to reduce the carrying values of investments in privately held entities that do not report NAV to their estimated fair value.

The following tables summarize our investments as of March 31, 2021, and December 31, 2020 (in thousands):
March 31, 2021
CostUnrealized
Gains (Losses)
Carrying Amount
Investments:
Publicly traded companies$234,146 $322,871 $557,017 
Entities that report NAV348,207 327,831 676,038 
Entities that do not report NAV:
Entities with observable price changes 51,816 78,723 130,539 
Entities without observable price changes278,217 — 278,217 
Total investments$912,386 $729,425 $1,641,811 

December 31, 2020
CostUnrealized
Gains (Losses)
Carrying Amount
Investments:
Publicly traded companies$208,754 $351,076 $559,830 
Entities that report NAV334,341 327,741 662,082 
Entities that do not report NAV:
Entities with observable price changes47,545 96,859 144,404 
Entities without observable price changes244,798 — 244,798 
Total investments$835,438 $775,676 $1,611,114 

Cumulative gains and losses (realized and unrealized) on investments in privately held entities that do not report NAV still held as of March 31, 2021, aggregated to a gain of $43.2 million, which consisted of upward adjustments of $79.5 million and downward adjustments and impairments of $36.2 million.

Our investment income for the three months ended March 31, 2021 and 2020, consisted of the following (in thousands):
Three Months Ended March 31,
20212020
Realized gains (losses)$47,265 $(4,677)
Unrealized losses(46,251)(17,144)
Investment income (loss)$1,014 $(21,821)

During the three months ended March 31, 2021, gains and losses on investments in privately held entities that do not report NAV still held at March 31, 2021, aggregated to a loss of $20.2 million, which consisted of upward adjustments of $8.5 million and downward adjustments and impairments of $28.7 million.

During the three months ended March 31, 2020, gains and losses on investments in privately held entities that do not report NAV still held at March 31, 2020, aggregated to a gain of $3.9 million, which consisted of downward adjustments and impairments of $1.7 million and upward adjustments of $5.6 million.

Unrealized gains and losses related to investments still held at March 31, 2021 and 2020, aggregated to losses of $45.2 million and losses of $4.8 million during the three months ended March 31, 2021 and 2020, respectively.

Refer to the “Investments” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements for additional information.

29



7.    INVESTMENTS (continued)
Investments in privately held entities that report NAV

We are committed to funding approximately $249.8 million for all investments in privately held entities related to our investments in limited partnerships. Our funding commitments expire at various dates over the next 12 years, with a weighted-average expiration of 8.5 years as of March 31, 2021. These investments are not redeemable by us, but we may receive distributions from these investments throughout their term. Our investments in privately held entities that report NAV generally have expected initial terms in excess of 10 years. The weighted-average remaining term during which these investments are expected to be liquidated was 5.1 years as of March 31, 2021.

8.     OTHER ASSETS

The following table summarizes the components of other assets (in thousands):
March 31, 2021December 31, 2020
Acquired in-place leases$550,408 $462,324 
Deferred compensation plan33,438 31,057 
Deferred financing costs – unsecured senior line of credit22,914 24,124 
Deposits112,168 13,861 
Furniture, fixtures, and equipment30,830 31,130 
Net investment in direct financing lease38,030 37,840 
Notes receivable4,164 3,424 
Operating lease right-of-use asset371,050 335,920 
Other assets41,493 30,620 
Prepaid expenses66,973 67,667 
Property, plant, and equipment153,467 153,614 
Total$1,424,935 $1,191,581 
9.    FAIR VALUE MEASUREMENTS

We provide fair value information about all financial instruments for which it is practicable to estimate fair value. We measure and disclose the estimated fair value of financial assets and liabilities by utilizing a fair value hierarchy that distinguishes between data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. This hierarchy consists of three broad levels, as follows: (i) quoted prices in active markets for identical assets or liabilities (Level 1), (ii) significant other observable inputs (Level 2), and (iii) significant unobservable inputs (Level 3). Significant other observable inputs can include quoted prices for similar assets or liabilities in active markets, as well as inputs that are observable for the asset or liability, such as interest rates, foreign exchange rates, and yield curves. Significant unobservable inputs are typically based on an entity’s own assumptions, since there is little, if any, related market activity. In instances in which the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level of input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Assets and liabilities measured at fair value on a recurring basis

The following table sets forth the assets that we measure at fair value on a recurring basis by level in the fair value hierarchy (in thousands). There were no liabilities measured at fair value on a recurring basis as of March 31, 2021, and December 31, 2020. In addition, there were no transfers of assets measured at fair value on a recurring basis to or from Level 3 in the fair value hierarchy during the three months ended March 31, 2021.
Fair Value Measurement Using
Description TotalQuoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant
Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Investments in publicly traded companies:
As of March 31, 2021$557,017 $557,017 $— $— 
As of December 31, 2020$559,830 $559,830 $— $— 

30



9.    FAIR VALUE MEASUREMENTS (continued)
Our investments in publicly traded companies represent investments with readily determinable fair values, and are carried at fair value, with changes in fair value classified in net income. We also hold investments in privately held entities, which consist of (i) investments that report NAV, and (ii) investments that do not report NAV, as further described below.

Our investments in privately held entities that report NAV, such as our privately held investments in limited partnerships, are carried at fair value using NAV as a practical expedient, with changes in fair value classified in net income. As of March 31, 2021, and December 31, 2020, the carrying values of investments in privately held entities that report NAV aggregated $676.0 million and $662.1 million, respectively. These investments are excluded from the fair value hierarchy above as required by the fair value accounting standards. We estimate the fair value of each of our investments in limited partnerships based on the most recent NAV reported by each limited partnership. As a result, the determination of fair values of our investments in privately held entities that report NAV generally does not involve significant estimates, assumptions, or judgments.

Assets and liabilities measured at fair value on a nonrecurring basis

The following table sets forth the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of March 31, 2021 (in thousands). These investments were measured at various times during the period from January 1, 2018, to March 31, 2021.
Fair Value Measurement Using
Description TotalQuoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant
Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Investments in privately held entities that do not report NAV
As of March 31, 2021$143,612 $— $130,539 
(1)
$13,073 
(2)
As of December 31, 2020$157,871 $— $144,404 $13,467 
(1)This balance represents the total carrying amount of our equity investments in privately held entities with observable price changes, included in our total investments balance of $1.6 billion in our consolidated balance sheets as of March 31, 2021. For more information, refer to Note 7 – “Investments” to our unaudited consolidated financial statements.
(2)This amount is included in the $278.2 million balance of investments in privately held entities without observable price changes disclosed in Note 7 – “Investments” to our unaudited consolidated financial statements and represents the carrying amount of investments in privately held entities that do not report NAV for which impairments have been recognized in accordance with the measurement alternative guidance described within the “Investments” section in Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements.

Our investments in privately held entities that do not report NAV are measured at cost, adjusted for observable price changes and impairments, with changes recognized in net income. These investments are evaluated on a nonrecurring basis based on the observable price changes in orderly transactions for the identical or similar investment of the same issuer. Further adjustments are not made until another observable transaction occurs. Therefore, the determination of fair values of our investments in privately held entities that do not report NAV does not involve significant estimates and assumptions or subjective and complex judgments.

We also subject our investments in privately held entities that do not report NAV to a qualitative assessment for indicators of impairment. If indicators of impairment are present, we are required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value.

The estimates of fair value typically incorporate valuation techniques that include an income approach reflecting a discounted cash flow analysis, and a market approach that includes a comparative analysis of acquisition multiples and pricing multiples generated by market participants. In certain instances, we may use multiple valuation techniques for a particular investment and estimate its fair value based on an average of multiple valuation results.

Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures,” Note 7 – “Investments,” and Note 15 – “Assets classified as held for sale” to our unaudited consolidated financial statements for further discussion on assets and liabilities measured at fair value on a nonrecurring basis.

The carrying values of cash and cash equivalents, restricted cash, tenant receivables, deposits, notes receivable, accounts payable, accrued expenses, and other short-term liabilities approximate their fair value.

The fair values of our secured notes payable, unsecured senior notes payable, and the amounts outstanding on our unsecured senior line of credit and commercial paper program were estimated using widely accepted valuation techniques, including discounted cash flow analyses using significant other observable inputs such as available market information on discount and borrowing rates with similar terms, maturities, and credit ratings. Because the valuations of our financial instruments are based on these types of estimates, the actual fair value of our financial instruments may differ materially if our estimates do not prove to be accurate. Additionally, the use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.
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9.    FAIR VALUE MEASUREMENTS (continued)

As of March 31, 2021, and December 31, 2020, the book and estimated fair values of our secured notes payable, unsecured senior notes payable, and amounts outstanding under our unsecured senior line of credit and commercial paper program, including the level within the fair value hierarchy for which the estimates were derived, were as follows (in thousands):
March 31, 2021
Book ValueFair Value HierarchyEstimated Fair Value
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant
Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Liabilities:
Secured notes payable$229,406 $— $245,235 $— $245,235 
Unsecured senior notes payable$8,311,512 $— $8,790,880 $— $8,790,880 
Unsecured senior line of credit
$— $— $— $— $— 
Commercial paper program$— $— $— $— $— 

December 31, 2020
Book ValueFair Value HierarchyEstimated Fair Value
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
Significant
Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Liabilities:
Secured notes payable$230,925 $— $249,782 $— $249,782 
Unsecured senior notes payable$7,232,370 $— $8,447,845 $— $8,447,845 
Unsecured senior line of credit
$— $— $— $— $— 
Commercial paper program$99,991 $— $99,998 $— $99,998 
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10.    SECURED AND UNSECURED SENIOR DEBT

The following table summarizes our outstanding indebtedness and respective principal payments as of March 31, 2021 (dollars in thousands):
Stated 
Rate
Interest Rate(1)
Maturity Date(2)
Principal Payments Remaining for the Periods Ending December 31,Unamortized (Deferred Financing Cost), (Discount) Premium
Debt20212022202320242025ThereafterPrincipalTotal
Secured notes payable
Greater Boston
4.82 %3.40 %2/6/24$2,529 $3,564 $3,742 $183,527 $— $— $193,362 $7,717 $201,079 
San Francisco Bay Area4.14 %4.42 7/1/26— — — — — 28,200 28,200 (577)27,623 
San Francisco Bay Area6.50 %6.50 7/1/3626 28 30 32 34 554 704 — 704 
Secured debt weighted-average interest rate/subtotal
4.74 %3.53 2,555 3,592 3,772 183,559 34 28,754 222,266 7,140 229,406 
Commercial paper program(3)
N/A
(3)
N/A
(3)
(3)
— — — — — — — — — 
Unsecured senior line of credit
L+0.815 %
(4)
N/A1/6/26— — — — — — — — — 
Unsecured senior notes payable
3.45 %3.62 4/30/25— — — — 600,000 — 600,000 (3,589)596,411 
Unsecured senior notes payable
4.30 %4.50 1/15/26— — — — — 300,000 300,000 (2,345)297,655 
Unsecured senior notes payable – green bond
3.80 %3.96 4/15/26— — — — — 350,000 350,000 (2,479)347,521 
Unsecured senior notes payable
3.95 %4.13 1/15/27— — — — — 350,000 350,000 (2,938)347,062 
Unsecured senior notes payable
3.95 %4.07 1/15/28— — — — — 425,000 425,000 (2,881)422,119 
Unsecured senior notes payable
4.50 %4.60 7/30/29— — — — — 300,000 300,000 (1,853)298,147 
Unsecured senior notes payable
2.75 %2.87 12/15/29— — — — — 400,000 400,000 (3,587)396,413 
Unsecured senior notes payable
4.70 %4.81 7/1/30— — — — — 450,000 450,000 (3,443)446,557 
Unsecured senior notes payable
4.90 %5.05 12/15/30— — — — — 700,000 700,000 (7,649)692,351 
Unsecured senior notes payable
3.375 %3.48 8/15/31— — — — — 750,000 750,000 (6,739)743,261 
Unsecured senior notes payable – green bond
2.00 %2.12 5/18/32— — — — — 900,000 900,000 (10,229)889,771 
Unsecured senior notes payable
1.875 %1.97 2/1/33— — — — — 1,000,000 1,000,000 (10,345)989,655 
Unsecured senior notes payable
4.85 %4.93 4/15/49— — — — — 300,000 300,000 (3,303)296,697 
Unsecured senior notes payable
4.00 %3.91 2/1/50— — — — — 700,000 700,000 10,385 710,385 
Unsecured senior notes payable
3.00 %3.08 5/18/51— — — — — 850,000 850,000 (12,493)837,507 
Unsecured debt weighted-average interest rate/subtotal3.54 — — — — 600,000 7,775,000 8,375,000 (63,488)8,311,512 
Weighted-average interest rate/total
3.54 %$2,555 $3,592 $3,772 $183,559 $600,034 $7,803,754 $8,597,266 $(56,348)$8,540,918 
(1)Represents the weighted-average interest rate as of the end of the applicable period, including amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.
(2)Reflects any extension options that we control.
(3)Refer to footnote 2 on the next page.
(4)During the three months ended March 31, 2021, we achieved certain sustainability measures, as described in our unsecured senior line of credit agreement, which reduced the borrowing rate by one basis point for one year.
33



10.    SECURED AND UNSECURED SENIOR DEBT (continued)
The following table summarizes our secured and unsecured senior debt as of March 31, 2021 (dollars in thousands):
Fixed-Rate DebtVariable-Rate DebtWeighted-Average
InterestRemaining Term
(in years)
TotalPercentage
Rate(1)
Secured notes payable
$229,406 $— $229,406 2.7 %3.53 %3.2
Unsecured senior notes payable
8,311,512 — 8,311,512 97.3 3.54 13.3
Unsecured senior line of credit— — — — N/A4.8
Commercial paper program— — — — N/A
(2)
Total/weighted average
$8,540,918 $— $8,540,918 100.0 %3.54 %13.0
Percentage of total debt
100 %— %100 %
(1)Represents the weighted-average interest rate as of the end of the applicable period, including expense/income related to the amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.
(2)The commercial paper notes bear interest at short-term fixed rates and can generally be issued with a maturity of 30 days or less and with a maximum maturity of 397 days from the date of issuance. Borrowings under the program are used to fund short-term capital needs and are backed by our unsecured senior line of credit. In the event we are unable to issue commercial paper notes or refinance outstanding borrowings under terms equal to or more favorable than those under our unsecured senior line of credit, we expect to borrow under the unsecured senior line of credit at L+0.815%. As such, we calculate the weighted-average remaining term of our commercial paper by using the maturity date of our unsecured senior line of credit. The commercial paper notes sold during the three months ended March 31, 2021, were issued at a weighted-average yield to maturity of 0.22% and had a weighted-average maturity term of 10 days.

Unsecured senior notes payable

In February 2021, we opportunistically issued $1.75 billion of unsecured senior notes payable with a weighted-average interest rate of 2.49% and a weighted-average maturity of 20.4 years. The unsecured senior notes consisted of $900.0 million of 2.00% unsecured senior notes due 2032 (“2.00% Unsecured Senior Notes”) and $850.0 million of 3.00% unsecured senior notes due 2051 (“3.00% Unsecured Senior Notes”). The proceeds from our 2.00% Unsecured Senior Notes are expected to be allocated to eligible green projects and were initially used to refinance $650.0 million of our 4.00% unsecured senior notes payable due in 2024 pursuant to a partial cash tender offer completed on February 10, 2021, and a subsequent call for redemption for the remaining outstanding amounts that settled on March 12, 2021. As a result of this refinancing, we recognized a loss on early extinguishment of debt of $67.2 million, including the write-off of unamortized loan fees and premiums.

$1.5 billion commercial paper program

Our commercial paper program, which received credit ratings of A-2 from S&P Global Ratings and Prime-2 from Moody’s Investors Service, provides us with the ability to issue up to $1.5 billion of commercial paper with a maturity of generally 30 days or less and with a maximum maturity of 397 days from the date of issuance. Our commercial paper program is backed by our unsecured senior line of credit, and at all times we expect to retain a minimum undrawn amount of borrowing capacity under our unsecured senior line of credit equal to any outstanding notes issued under our commercial paper program. We use the net proceeds from the issuances of the notes for general working capital and other general corporate purposes. General corporate purposes may include, but are not limited to, the repayment of other debt and selective development, redevelopment, or acquisition of properties. As of March 31, 2021, we had no outstanding notes under our commercial paper program.

Interest expense

The following table summarizes interest expense for the three months ended March 31, 2021 and 2020 (in thousands):
Three Months Ended March 31,
20212020
Gross interest$76,353 $70,419 
Capitalized interest(39,886)(24,680)
Interest expense$36,467 $45,739 
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11.     ACCOUNTS PAYABLE, ACCRUED EXPENSES, AND OTHER LIABILITIES

The following table summarizes the components of accounts payable, accrued expenses, and other liabilities as of March 31, 2021, and December 31, 2020 (in thousands):
March 31, 2021December 31, 2020
Accounts payable and accrued expenses$320,322 $285,021 
Accrued construction323,617 333,271 
Acquired below-market leases332,752 288,075 
Conditional asset retirement obligations51,100 47,070 
Deferred rent liabilities11,434 4,495 
Operating lease liability345,048 345,750 
Unearned rent and tenant security deposits297,807 276,751 
Other liabilities68,607 89,399 
Total$1,750,687 $1,669,832 

As of March 31, 2021, and December 31, 2020, our conditional asset retirement obligations liability primarily consisted of the soil and groundwater remediation liabilities associated with certain of our properties. Some of our properties may contain asbestos or may be subjected to other hazardous or toxic substances, which, under certain conditions, requires remediation. We engage independent environmental consultants to conduct Phase I or similar environmental assessments at our properties. This type of assessment generally includes a site inspection, interviews, and a public records review; asbestos, lead-based paint, and mold surveys; subsurface sampling; and other testing. We recognize a liability for the fair value of a conditional asset retirement obligation (including asbestos) when the fair value of the liability can be reasonably estimated. In addition, environmental laws and regulations subject our tenants, and potentially us, to liability that may result from our tenants’ routine handling of hazardous substances and wastes as part of their operations at our properties. These assessments and investigations of our properties have not to date revealed any additional environmental liability we believe would have a material adverse effect on our business and financial statements or that would require additional disclosures or recognition in our financial statements.
35


12.    EARNINGS PER SHARE

From time to time, we enter into forward equity sales agreements, which are discussed in Note 13 – “Stockholders’ equity” to our unaudited consolidated financial statements. We considered the potential dilution resulting from the forward equity sales agreements on the EPS calculations. At inception, the agreements do not have an effect on the computation of basic EPS as no shares are delivered until settlement. The common shares issued upon the settlement of the forward equity sales agreements, weighted for the period these common shares were outstanding, are included in the denominator of basic EPS. To determine the dilution resulting from the forward equity sales agreements during the period of time prior to settlement, we calculate the number of weighted-average shares outstanding – diluted using the treasury stock method.

We account for unvested restricted stock awards that contain nonforfeitable rights to dividends as participating securities and include these securities in the computation of EPS using the two-class method. Our forward equity sales agreements are not participating securities and are therefore not included in the computation of EPS using the two-class method. Under the two-class method, we allocate net income (after amounts attributable to noncontrolling interests) to common stockholders and unvested restricted stock awards by using the weighted-average shares of each class outstanding for quarter-to-date and year-to-date periods independently, based on their respective participation rights to dividends declared (or accumulated) and undistributed earnings.

The table below is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the three months ended March 31, 2021 and 2020 (in thousands, except per share amounts):
Three Months Ended March 31,
20212020
Net income$25,533 $30,678 
Net income attributable to noncontrolling interests
(17,412)(11,913)
Net income attributable to unvested restricted stock awards
(2,014)(1,925)
Numerator for basic and diluted EPS – net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders$6,107 $16,840 

Denominator for basic EPS – weighted-average shares of common stock outstanding
137,319 121,433 
Dilutive effect of forward equity sales agreements
369 352 
Denominator for diluted EPS – weighted-average shares of common stock outstanding
137,688 121,785 
Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders:
Basic$0.04 $0.14 
Diluted
$0.04 $0.14 
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13.    STOCKHOLDERS’ EQUITY

Common equity transactions

During the three months ended March 31, 2021, our common equity transactions included the following:

In January 2021, we entered into forward equity sales agreements to sell an aggregate of 6.9 million shares of our common stock (including the exercise of underwriters’ option) aggregating $1.1 billion at a public offering price of $164.00 per share, before underwriting discounts and commissions.
During the three months ended March 31, 2021, we settled a portion of our forward equity sales agreements by issuing 5.4 million shares and received proceeds of $850.5 million.
We expect to issue 1.5 million shares to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $232.6 million in 2021.
In February 2021, we entered into a new ATM common stock offering program, which allows us to sell up to an aggregate of $1.0 billion of our common stock.
During the three months ended March 31, 2021, we issued 3.1 million shares under our ATM program at a price of $163.26 per share (before underwriting discounts) and received net proceeds of $492.3 million.
As of March 31, 2021, and as of the date of this report, the remaining aggregate amount available under our ATM program for future sales of common stock aggregated $500.0 million.
In March 2021, we issued the remaining 362 thousand shares of common stock to settle our forward equity sales agreements that were outstanding as of December 31, 2020, and received net proceeds of $56.2 million.

Dividends

During the three months ended March 31, 2021, we declared cash dividends on our common stock aggregating $160.8 million, or $1.09 per share. In April 2021, we paid the cash dividends on our common stock declared for the three months ended March 31, 2021.

Accumulated other comprehensive loss

The following table presents the changes in accumulated other comprehensive loss attributable to Alexandria Real Estate Equities, Inc.’s stockholders during the three months ended March 31, 2021, which was entirely due to net unrealized gains on foreign currency translation related to our operations in Canada and China (in thousands):
 Total
Balance as of December 31, 2020$(6,625)

Other comprehensive income before reclassifications826 
Net other comprehensive income826 
Balance as of March 31, 2021$(5,799)

Common stock, preferred stock, and excess stock authorizations

Our charter authorizes the issuance of 200.0 million shares of common stock, of which 145.7 million shares were issued and outstanding as of March 31, 2021. Our charter also authorizes the issuance of up to 100.0 million shares of preferred stock, none of which were issued and outstanding as of March 31, 2021. In addition, 200.0 million shares of “excess stock” (as defined in our charter) are authorized, none of which were issued and outstanding as of March 31, 2021.

37


14.    NONCONTROLLING INTERESTS

Noncontrolling interests represent the third-party interests in certain entities in which we have a controlling interest. These entities owned 42 properties as of March 31, 2021, and are included in our consolidated financial statements. Noncontrolling interests are adjusted for additional contributions and distributions, the proportionate share of the net earnings or losses, and other comprehensive income or loss. Distributions, profits, and losses related to these entities are allocated in accordance with the respective operating agreements. During the three months ended March 31, 2021 and 2020, we distributed $25.9 million and $16.7 million, respectively, to our consolidated real estate joint venture partners.

Certain of our noncontrolling interests have the right to require us to redeem their ownership interests in the respective entities. We classify these ownership interests in the entities as redeemable noncontrolling interests outside of total equity in our consolidated balance sheets. Redeemable noncontrolling interests are adjusted for additional contributions and distributions, the proportionate share of the net earnings or losses, and other comprehensive income or loss. If the amount of a redeemable noncontrolling interest is less than the maximum redemption value at the balance sheet date, such amount is adjusted to the maximum redemption value. Subsequent declines in the redemption value are recognized only to the extent that previous increases have been recognized.

Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements for additional information.

15.    ASSETS CLASSIFIED AS HELD FOR SALE
    
As of March 31, 2021, five properties aggregating 559,993 RSF were classified as held for sale in our unaudited consolidated financial statements, none of which met the criteria for classification as discontinued operations. Accordingly, we ceased depreciation of these properties upon their classification as held for sale.

Refer to the “Sales of real estate assets and impairment charges” section within Note 3 – “Investments in real estate” to our unaudited consolidated financial statements for information about impairment charges aggregating $5.1 million recognized during the three months ended March 31, 2021, in connection with three of the properties classified as held for sale.

The following is a summary of net assets as of March 31, 2021, and December 31, 2020, for our real estate investments that were classified as held for sale as of each respective date (in thousands):

March 31, 2021December 31, 2020
Total assets$112,996 $117,879 
Total liabilities(32,987)(33,081)
Total accumulated other comprehensive loss(740)(841)
Net assets classified as held for sale$79,269 $83,957 

16.    SUBSEQUENT EVENTS

In April 2021, we acquired One Investors Way, located in our Route 128 submarket of Greater Boston, aggregating 240,000 RSF, for a purchase price of $105.0 million. The property was simultaneously 100% leased to Moderna, Inc. for 12 years and immediately placed into redevelopment. The property also includes a future development opportunity aggregating 350,000 RSF.

In April 2021, we also completed the acquisitions of one property and two land parcels for an aggregate purchase price of $222.5 million, comprising 260,867 RSF of operating properties with future development and redevelopment opportunities and 2.1 million SF of future development opportunities strategically located across multiple markets.

In April 2021, we sold a 70% interest in our 213 East Grand Avenue property located in our South San Francisco submarket for a sales price of $301.0 million, or $1,429 per RSF. We retained control over the newly formed real estate joint venture and therefore continued to consolidate this property. Accordingly, we accounted for the $103.7 million difference between the consideration received and the book value of the 70% interest sold as an equity transaction, with no gain or loss recognized in earnings.

38


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking statements

Certain information and statements included in this quarterly report on Form 10-Q, including, without limitation, statements containing the words “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “goals,” “believes,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” or “will,” or the negative of those words or similar words, constitute “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. Forward-looking statements involve inherent risks and uncertainties regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, results of operations, and financial position. 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 following:

Operating factors such as a failure to operate our business successfully in comparison to market expectations or in comparison to our competitors, our inability to obtain capital when desired or refinance debt maturities when desired, and/or a failure to maintain our status as a REIT for federal tax purposes.
Market and industry factors such as adverse developments concerning the life science, agtech, and technology industries and/or our tenants.
Government factors such as any unfavorable effects resulting from federal, state, local, and/or foreign government policies, laws, and/or funding levels.
Global factors such as negative economic, political, financial, credit market, and/or banking conditions.
Uncertain global, national, and local impacts of the ongoing COVID-19 pandemic.
Other factors such as climate change, cyber intrusions, and/or changes in laws, regulations, and financial accounting standards.

This list of risks and uncertainties is not exhaustive. Additional information regarding risk factors that may affect us is included under “Item 1A. Risk factors” and “Item 7. Management’s discussion and analysis of financial condition and results of operations” of our annual report on Form 10-K for the year ended December 31, 2020, and respective sections within this quarterly report on Form 10-Q. Readers of this quarterly report on Form 10-Q should also read our other documents filed publicly with the SEC for further discussion regarding such factors.

The COVID-19 pandemic

In December 2019, a novel coronavirus, which causes respiratory illness and spreads from person to person (COVID-19), was identified for the first time. The first case of COVID-19 in the U.S. was reported on January 20, 2020. On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic, and on March 13, 2020, the U.S. declared a national emergency with respect to COVID-19. As of April 23, 2021, according to the World Health Organization, over 144.3 million novel coronavirus cases have been reported worldwide. The U.S. has reported more than 31.5 million cases of COVID-19 and 564,091 deaths as of April 23, 2021.

COVID-19 disease, treatment, and measures to combat the pandemic

Most patients with COVID-19 have had mild to severe respiratory illness with symptoms of fever, chills, cough, shortness of breath, fatigue, and loss of taste. Many individuals with COVID-19 are asymptomatic and show limited to no symptoms, highlighting the ongoing challenge of containing the continued spread of COVID-19. Some patients develop pneumonia in both lungs and/or multi-organ failure, which in some cases leads to death. Since scientists shared the virus’s genetic makeup in January 2020, intense research has been underway around the world to develop treatments and vaccines for COVID-19. This has led to the U.S. Food and Drug Administration (“FDA”) issuing Emergency Use Authorizations (“EUAs”) for therapeutics to treat patients with COVID-19 and, most recently, issuing EUAs for three vaccines for use in the prevention of coronavirus disease caused by COVID-19.

The three vaccines issued EUAs were created by Pfizer Inc. (in partnership with BioNTech), Moderna, Inc. (in partnership with the National Institutes of Health (“NIH”)), and Johnson & Johnson, each a tenant of ours. The U.S. began a large-scale COVID-19 vaccination campaign in December 2020. As of April 23, 2021, according to the U.S. Centers for Disease Control and Prevention, over 91.1 million individuals in the U.S. have been fully vaccinated for COVID-19, and the U.S. will continue to roll out vaccines across the nation.

Although the FDA has authorized the emergency use of three vaccines and certain therapies for use as of the date of this report, it is still relatively early in the initial rollout and distribution of the vaccine. As such, questions around widespread adoption, the timing to achieve complete herd immunity, the overall efficacy of the vaccines once widely administered and especially as new strains of COVID-19 continue to emerge, and the level of resistance these new strains may have to the existing vaccines all remain unknown.

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In response to the supply and distribution issues surrounding the vaccine, in January 2021, President Biden outlined a plan to create additional vaccination sites, increase the supply and distribution of vaccines, and increase the number of vaccinations administered to Americans. The Biden administration is utilizing the Defense Production Act to maximize the manufacturing and distribution of vaccines in order to have adequate supply for the entire U.S. adult population by the end of May 2021.

In addition to the currently approved vaccines, as of April 23, 2021, there are over 85 other potential vaccines in clinical development that may contribute to increasing the supply of vaccines. The current vaccines in development use a myriad of different scientific approaches to attempt to provoke an immune response, including:

Genetic vaccines that use part of the coronavirus’s genetic code;
Viral vector vaccines that use a virus to deliver coronavirus genes into cells;
Protein-based vaccines that use a coronavirus protein or protein fragment to stimulate the immune system; and
Whole-virus vaccines that use a weakened or inactivated version of the coronavirus.

Of these over 85 potential vaccines currently in human clinical trials, nearly 30% are in later stages of clinical development. Phase I trials typically include a small number of participants to test safety and dosage as well as to confirm that the vaccine stimulates the immune system. Phase II trials involve hundreds of participants split into groups, such as children and the elderly, to determine whether the vaccine acts differently in each subpopulation. Phase III trials involve delivering the vaccine to tens of thousands of people, observing how many subsequently become infected, and determining the severity of symptoms when compared with volunteer subjects who received a placebo. Regulators in each country will review the trial results to make a determination as to whether the drug or vaccine should be approved. As of April 23, 2021, there were 26 potential vaccines in Phase III trials, including a number that require only a single dose, rather than two doses for some of the currently approved vaccines and that are potentially easier to distribute.

Shelter-in-place and stay-at-home orders

On March 19, 2020, California became the first state to set mandatory stay-at-home restrictions to help combat the spread of the coronavirus. The order included the shutdown of all nonessential services, such as dine-in restaurants, bars, gyms, conference or convention centers, and other businesses not deemed to support critical infrastructure. Exceptions for essential services, such as grocery stores, pharmacies, gas stations, food banks, convenience stores, and delivery restaurants, have allowed these services to remain open. Subsequently, almost all states issued similar orders, including New York, Massachusetts, Washington, Maryland, and North Carolina, where our remaining properties outside California are located. Countries around the world also implemented measures to slow the spread of the coronavirus, from national quarantines to school closures or similar types of stay-at-home orders or movement limitations.

Most state orders expired or were rescinded between May and early June 2020, and authorities began reopening businesses, including retail stores, restaurants, bars, salons, houses of worship, entertainment venues such as movie theaters and museums, and manufacturing facilities and offices. Waves of daily new COVID-19 cases surged in the U.S. in June and July 2020, and again in October 2020 through January 2021, leading to additional restrictions in many parts of the country. Additionally, in recent months, new COVID-19 variants were discovered in the United Kingdom, among other countries, which have spread globally, including the U.S. While these strains do not appear to cause more severe symptoms in individuals, they have shown to be more infectious than the original strain. As a result, more stringent lockdown restrictions have been implemented in locations experiencing spikes in COVID-19 cases globally and within the U.S. On April 23, 2021, according to the World Health Organization, 62,642 new cases and 867 deaths were reported in the U.S.

Impact to the global and U.S. economy

As a result of the unprecedented measures taken in the U.S. and around the world, the disruption and impact to the U.S. and global economies and financial markets by the COVID-19 pandemic have been significant. In April 2021, the International Monetary Foundation (“IMF”) estimated that the global and U.S. economies contracted by 3.3% and 3.5%, respectively, during 2020. However, multiple vaccine approvals have raised hopes for an eventual end to the pandemic, and the rollout of vaccines has contributed to the positive global and U.S. growth projections for 2021, as estimated by the IMF in April 2021, of 6.0% and 6.4%, respectively.

Based on the data provided by the U.S. Bureau of Labor Statistics on April 2, 2021, the unemployment rate in the U.S. is up by 2.5% since February 2020 to 6.0%. While still higher compared to pre-pandemic levels, there has been a slight decrease since December 2020. The April 2021 data reported an increase of approximately 916,000 jobs in March 2021, reflecting the gradual reopening of the economy as a result of vaccine distribution.

On March 27, 2020, the U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), a $2 trillion economic stimulus package. The CARES Act allocated over $140 billion to the U.S. health system to support COVID-19-related manufacturing, production, diagnostics, and treatments, and to accelerate the market entrance of necessary vaccines and cures. The CARES Act also designated $945.4 million specifically to the NIH, a tenant of ours in our Maryland market, to combat COVID-19, which includes, but is not limited to, providing support for research, construction, and acquisition of equipment for vaccine and infectious disease research facilities, including the acquisition of real property.
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In addition, on April 24, 2020, former President Trump signed the Paycheck Protection Program and Health Care Enhancement Act into law, which provided an additional $484 billion of relief primarily to assist distressed small businesses and prevent them from shutting their operations and laying off employees. This package also designated $75 billion to hospitals and $25 billion for a new COVID-19 testing program.

On August 8, 2020, former President Trump signed four executive actions to provide additional COVID-19 relief along with unemployment benefits of $400 weekly payments to those receiving more than $100 a week in state-funded unemployment benefits through December 6, 2020. On December 27, 2020, a second stimulus package was passed to provide relief aid to Americans experiencing financial hardship, aggregating $900 billion in provisions, which included an additional $600 payment to eligible American adults and $600 for qualifying child dependents, a reinstatement of unemployment benefits of $300 per week through March 14, 2021, an additional $285 billion towards loan programs for small businesses, $82 billion towards education, and additional aid for hard-hit industries, including the airline industry.

On March 11, 2021, President Biden signed a $1.9 trillion stimulus package, the “American Rescue Plan Act of 2021,” to further combat the pandemic and stimulate the economy. The bill provides additional provisions for unemployment benefits; rental and utility assistance; support for small businesses, state and local governments, educational institutions; and substantial funding toward accelerated distribution of vaccines and COVID-19 testing, as well as direct payments of $1,400 to all eligible Americans. It is too early to determine if the various relief packages were effective or sufficient to offset some of the most severe economic effects of the pandemic.

Potential ineffectiveness or delay of relief measures could lead to the deterioration of economic conditions, higher unemployment rates, and a recession, which in turn could materially affect our (or our tenants’ or venture investment portfolio companies’) performance, financial condition, results of operations, and cash flows.

See “Item 1A. Risk factors” in our most recent annual report on Form 10-K for additional discussion of the risks posed by the COVID-19 pandemic, and uncertainties we, our tenants, and the national and global economies face as a result.


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Overview

We are a Maryland corporation formed in October 1994 that has elected to be taxed as a REIT for federal income tax purposes. We are an S&P 500® urban office REIT and the first, longest-tenured, and pioneering owner, operator, and developer uniquely focused on collaborative life science, agtech, and technology campuses in AAA innovation cluster locations, with a total market capitalization of $32.5 billion and an asset base in North America of 52.6 million SF as of March 31, 2021. The asset base in North America includes 33.9 million RSF of operating properties and 4.0 million RSF of Class A properties undergoing construction, 7.3 million RSF of near-term and intermediate-term development and redevelopment projects, and 7.4 million SF of future development projects. Founded in 1994, we pioneered this niche and have since established a significant market presence in key locations, including Greater Boston, San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. We have a longstanding and proven track record of developing Class A properties clustered in urban life science, agtech, and technology campuses that provide our 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. Alexandria also provides strategic capital to transformative life science, agtech, and technology companies through our venture capital platform. We believe these advantages result in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.

As of March 31, 2021:

Investment-grade or publicly traded large cap tenants represented 55% of our total annual rental revenue;
Approximately 95% of our leases (on an RSF basis) contained effective annual rent escalations that were either fixed (generally ranging from approximately 3.0% to 3.5%) or indexed based on a consumer price index or other index;
Approximately 94% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent; and
Approximately 93% of our leases (on an RSF basis) provided for the recapture of capital expenditures (such as heating, ventilation, and air conditioning systems maintenance and/or replacement, roof replacement, and parking lot resurfacing) that we believe would typically be borne by the landlord in traditional office leases.

Our primary business objective is to maximize stockholder value by providing our stockholders with the greatest possible total return and long-term asset value based on a multifaceted platform of internal and external growth. A key element of our strategy is our unique focus on Class A properties clustered in urban campuses. These key urban campus locations are characterized by high barriers to entry for new landlords, high barriers to exit for tenants, and a limited supply of available space. They generally represent highly desirable locations for tenancy by life science, agtech, and technology entities because of their close proximity to concentrations of specialized skills, knowledge, institutions, and related businesses. Our strategy also includes drawing upon our deep and broad real estate, life science, agtech, and technology relationships in order to identify and attract new and leading tenants and to source additional value-creation real estate.

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Executive summary

Operating results
Three Months Ended March 31,
20212020
Net income attributable to Alexandria’s common stockholders – diluted:
In millions
$6.1 $16.8 
Per share
$0.04 $0.14 
Funds from operations attributable to Alexandria’s common stockholders – diluted, as adjusted:
In millions
$263.0 $221.4 
Per share
$1.91 $1.82 

The operating results shown above include certain items related to corporate-level investing and financing decisions. Refer to the tabular presentation of these items at the beginning of the “Results of operations” section within this Item 2 for additional information.

Alexandria and our tenants at the vanguard and heart of the life science ecosystem

Bringing together our unique and pioneering vertical platforms of essential Labspace® real estate, strategic venture investments, impactful thought leadership, and purposeful corporate responsibility, Alexandria is at the vanguard and heart of the vital life science ecosystem that is solving COVID-19 with unprecedented speed and efficiency while addressing other major challenges to human health. Owing to the efforts of numerous Alexandria tenants, including Pfizer Inc., Moderna, Inc., and Johnson & Johnson, in developing and delivering safe and effective vaccines and therapies to people around the world, the inherent value of and critical need for the life science industry have been globally recognized. As we entered this new year, the essential R&D engine of the biopharma industry continued to perform with exceptional productivity, progress, and resilience. By maintaining 24/7 operations across our campuses and facilities, Alexandria enables our tenants to pursue their mission-critical research, development, manufacturing, and commercialization efforts to solve these most pressing current and future healthcare challenges.

Strong and flexible balance sheet with significant liquidity

Investment-grade credit ratings ranked in the top 10% among all publicly traded REITs as of March 31, 2021.
Net debt and preferred stock to Adjusted EBITDA of 5.8x and fixed-charge coverage ratio of 4.7x for the three months ended March 31, 2021, annualized.
$4.3 billion of liquidity as of March 31, 2021.
No debt maturing prior to 2024.
13.0 years weighted-average remaining term of debt as of March 31, 2021.

Continued dividend strategy to share growth in cash flows with stockholders

Common stock dividend declared for the three months ended March 31, 2021, of $1.09 per common share, aggregating $4.30 per common share for the twelve months ended March 31, 2021, up 24 cents, or 6%, over the twelve months ended March 31, 2020. Our FFO payout ratio of 60% for the three months ended March 31, 2021, allows us to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

A REIT industry-leading, high-quality tenant roster

55% of annual rental revenue from investment-grade or publicly traded large cap tenants.
Weighted-average remaining lease term of 7.6 years.

Key development projects placed into service during the three months ended March 31, 2021

We placed into service three fully leased development projects aggregating 376,475 RSF located across three submarkets at a weighted-average yield of 6.6% and 6.3% (cash basis).

Key strategic transaction that generated capital for investment into our highly leased value-creation pipeline

In April 2021, we sold a 70% partial interest in our 213 East Grand Avenue property located in our South San Francisco submarket for a sales price of $301.0 million, or $1,429 per RSF, representing capitalization rates of 4.5% and 4.0% (cash basis), which generated capital for investment into our highly leased development and redevelopment projects and strategic acquisitions.

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Continued strong net operating income and internal growth

Total revenues of $479.8 million, up 9.1%, for the three months ended March 31, 2021, compared to $439.9 million for the three months ended March 31, 2020.
Net operating income (cash basis) of $1.2 billion for the three months ended March 31, 2021, annualized, increased by $112.8 million, or 10.3%, compared to the three months ended March 31, 2020, annualized.
95% of our leases contain contractual annual rent escalations approximating 3%.
4.4% and 6.1% (cash basis) same property net operating income growth for three months ended March 31, 2021, over three months ended March 31, 2020.
Continued strong leasing activity and rental rate growth during the three months ended March 31, 2021, over expiring rates on renewed and re-leased space:

Three Months Ended March 31, 2021
Total leasing activity – RSF1,677,659 
(1)
Leasing of development and redevelopment space – RSF788,973 
Lease renewals and re-leasing of space:
RSF (included in total leasing activity above)521,825 
Rental rate increases36.2%
Rental rate increases (cash basis)17.4%
(1)Represents the second highest quarterly leasing activity during the past five years.

High-quality revenues and cash flows, strong Adjusted EBITDA margin, and operational excellence

Percentage of annual rental revenue in effect from investment-grade or publicly traded large cap tenants55 %
Occupancy of operating properties in North America94.5 %
(1)
Operating margin71 %
Adjusted EBITDA margin69 %
Weighted-average remaining lease term:
All tenants7.6years
Top 20 tenants10.9years
(1)Includes 1.2 million RSF, or 3.5%, of vacancy at recently acquired properties in our North America markets (noted below), representing lease-up opportunities that will contribute to growth in cash flows. Approximately 26% of the vacant 1.2 million RSF is currently leased, with occupancy expected primarily over the next two quarters. Excluding these acquired vacancies, occupancy of operating properties in North America was 98.0% as of March 31, 2021. Refer to the “Summary of occupancy percentages in North America” section within this Item 2 for additional information regarding vacancy from recently acquired properties.

Sustained strength in tenant collections during the ongoing COVID-19 pandemic

Tenant collections remain consistently high, with 99.4% of April 2021 billings collected as of the date of this report.
As of March 31, 2021, our tenant receivables balance was $7.6 million.

Strategic acquisitions with significant value-creation opportunities in key submarkets

During the three months ended March 31, 2021, we completed the acquisition of 25 properties in key submarkets aggregating 3.1 million SF, including 1.8 million RSF from our acquisition of Alexandria Center® for Life Science – Fenway (described below), for an aggregate purchase price of $1.9 billion. All of these transactions included development and/or redevelopment opportunities. Additionally, some of the value-creation-related acquisitions also included one or more operating properties.

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Acquisition of 401 Park Drive and 201 Brookline Avenue

During the three months ended March 31, 2021, we acquired the Alexandria Center® for Life Science – Fenway, located in our Fenway submarket, for a purchase price of $1.48 billion. The future collaborative life science campus, aggregating 1.8 million SF, consists of the following as of March 31, 2021:
401 Park Drive (operating property with future redevelopment opportunity):
Highly amenitized Class A office/R&D building aggregating 973,145 RSF is 90% occupied with a weighted-average remaining lease term of 8.4 years;
56% of annual rental revenue is generated from investment-grade tenants;
In-place rents are 38% below market; 30% of the RSF has a weighted-average remaining lease term of 3.1 years with in-place rents approximately 41% below market;
Initial stabilized yields of 5.7% and 4.5% (cash basis); and
Future opportunity to convert up to 311,066 RSF of office space, or 32% of the building, to office/laboratory space through redevelopment.
201 Brookline Avenue (active development project):
Office/laboratory building undergoing ground-up development, aggregating 510,116 RSF, targeting initial occupancy in 2022;
84% is leased/negotiating to high-quality tenants; and
We have a 97.9% ownership interest in this project.
Future development opportunity for one office/laboratory building for which we are pursuing entitlement rights approximating 305,000 SF of office/laboratory along with retail and amenity spaces.

Highly leased value-creation pipeline

Current and pre-leased near-term projects aggregating 4.2 million RSF are currently in progress. These projects are highly leased/negotiating at 76%, including RSF already in service, and will generate significant revenues and cash flows.
During the three months ended March 31, 2021, we commenced development and redevelopment of five projects aggregating 1.0 million RSF, which are currently 73% leased/negotiating.
Fully leased development projects placed into service during the three months ended March 31, 2021:
176,832 RSF leased to REGENXBIO Inc. at 9804 Medical Center Drive in our Rockville submarket;
100,086 RSF leased to Adaptive Biotechnologies Corporation at 1165 Eastlake Avenue East in our Lake Union submarket; and
99,557 RSF leased to Atreca, Inc. at the Alexandria Center® for Life Science – San Carlos in our Greater Stanford submarket.
Annual net operating income (cash basis) is expected to increase by $26 million upon the burn-off of initial free rent from recently delivered projects.

Balance sheet management

Key metrics as of March 31, 2021

$32.5 billion of total market capitalization.
$23.9 billion of total equity capitalization.
$4.3 billion of liquidity.
March 31, 2021Goal for Fourth Quarter of 2021, Annualized
Quarter AnnualizedTrailing 12 Months
Net debt and preferred stock to Adjusted EBITDA5.8x6.1xLess than or equal to 5.2x
Fixed-charge coverage ratio4.7x4.4xGreater than or equal to 4.8x

Value-creation pipeline of new Class A development and redevelopment projects as a percentage of gross investments in real estate
March 31, 2021
Current and pre-leased near-term projects 76% leased/negotiating
9%
Income-producing/potential cash flows/covered land play(1)
6%
Land4%
(1)Includes projects that have existing buildings that are generating or can generate operating cash flows. Also includes development rights associated with existing operating campuses.

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Key capital events

During the three months ended March 31, 2021, our common equity transactions included the following:
In January 2021, we entered into forward equity sales agreements to sell an aggregate of 6.9 million shares of our common stock (including the exercise of underwriters’ option) aggregating $1.1 billion at a public offering price of $164.00 per share, before underwriting discounts and commissions.
During the three months ended March 31, 2021, we settled a portion of our forward equity sales agreements by issuing 5.4 million shares and received net proceeds of $850.5 million.
We expect to issue 1.5 million shares to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $232.6 million in 2021.
In February 2021, we entered into a new ATM common stock offering program, which allows us to sell up to an aggregate of $1.0 billion of our common stock.
During the three months ended March 31, 2021, we issued 3.1 million shares under our ATM program at a price of $163.26 per share (before underwriting discounts) and received net proceeds of $492.3 million.
As of March 31, 2021, and as of the date of this report, the remaining aggregate amount available under our ATM program for future sales of common stock aggregated $500.0 million.
In March 2021, we issued the remaining 362 thousand shares of common stock to settle our forward equity sales agreements that were outstanding as of December 31, 2020, and received net proceeds of $56.2 million.
In February 2021, we opportunistically issued $1.75 billion of unsecured senior notes payable with a weighted-average interest rate of 2.49% and a weighted-average maturity of 20.4 years. The unsecured senior notes include:
$850.0 million of 3.00% unsecured senior notes due 2051.
$900.0 million of 2.00% unsecured senior notes due 2032 expected to be allocated to eligible green projects.
These proceeds were initially used to refinance our $650.0 million unsecured senior notes payable due in 2024, bearing an interest rate of 4.00%.
As a result of this refinancing, we recognized a loss on early extinguishment of debt of $67.2 million, including the write-off of unamortized loan fees and premiums.

Investments

Our investments in publicly traded companies and privately held entities aggregated a carrying amount of $1.6 billion, including an adjusted cost basis of $912.4 million and unrealized gains of $729.4 million, as of March 31, 2021.
Investment income of $1.0 million for the three months ended March 31, 2021, consisted of $47.3 million of realized gains and $46.3 million of unrealized losses.


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are-20210331_g1.jpg
Represents an illustrative subset of approximately 100 tenants that have focused on COVID-19-related efforts, with some of these companies working on multiple efforts that span testing, treatment, and/or vaccine development.
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are-20210331_g2.jpg
(1)Source: U.S. Congressional Research Service, "Operation Warp Speed Contracts for COVID-19 Vaccines and Ancillary Vaccination Materials," Updated March 1, 2021.
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Alexandria and our innovative tenants are at the vanguard and heart of the life science ecosystem solving COVID-19 with unprecedented speed and efficiency

Safe and effective vaccines and therapies, in addition to widespread testing, continue to be critically needed to bring an end to the global COVID-19 pandemic. By maintaining essential continuous operations across our campuses, Alexandria has enabled several of our life science tenants to pursue mission-critical COVID-19-related research and development. This heroic work by our tenants and campus community members to help test for, treat, and prevent COVID-19, as well as to provide medical supplies to neighboring hospitals, is profound and inspiring. We are currently tracking approximately 100 tenants across our cluster markets that have contributed meaningful time and resources to advancing solutions for COVID-19.

Developing preventative vaccines
Since the novel coronavirus’s genetic makeup was revealed in January 2020, researchers around the world have been working with unprecedented speed to develop safe and effective vaccines. To expedite the development, manufacturing, and distribution of these vaccines, the U.S. government called for broad public-private collaboration and allocated several billions of dollars to these efforts.
This support, along with the internal vaccine development expertise and innovative technology platforms of our tenants Pfizer Inc. (in partnership with BioNTech) and Moderna, Inc. (in partnership with the National Institutes of Health), culminated in the Food and Drug Administration’s (“FDA”) issuance of Emergency Use Authorization (“EUA”) in December 2020 for their respective mRNA-based COVID-19 vaccines. In February 2021, the FDA granted an EUA to Johnson & Johnson for its one-shot vaccine. The U.S. has initiated a large-scale COVID-19 vaccination campaign and will continue to roll out vaccines across the nation, with the goal of having adequate supply for the entire U.S. adult population by the end of May 2021.
Additional tenants, including AstraZeneca plc, FUJIFILM Diosynth Biotechnologies, GlaxoSmithKline plc, Novavax, Inc., and Sanofi, have similarly received strong government support for their efforts in the development, manufacturing, and/or distribution of COVID-19 vaccines. Many of these companies will report critical trial data over the coming months, which, if positive, could help further bolster the widespread distribution of safe and effective COVID-19 vaccines around the world.

Advancing new and repurposed therapies
Safe and effective therapies are important for mitigating the impact of COVID-19, decreasing hospitalizations, and improving patient outcomes overall. On October 22, 2020, the FDA approved Veklury® (remdesivir), developed by our tenant Gilead Sciences, Inc., as the first antiviral treatment approved for COVID-19 patients requiring hospitalization. Subsequently, in November 2020, the FDA granted EUAs to tenant Eli Lilly and Company’s bamlanivimab for the treatment of newly infected high-risk patients with mild or moderate disease, as well as to Regeneron Pharmaceutical’s antibody cocktail for a similar indication. In February 2021, Eli Lilly and Company received an additional EUA for its bamlanivimab + etesevimab COVID-19 antibody cocktail. In April 2021, due to observations of diminishing responsiveness of bamlanivimab alone to COVID-19 variants, Eli Lilly and Company requested that the FDA revoke its single antibody EUA and instead encourage use of their combination (bamlanivimab + etesevimab) antibody cocktail for COVID-19 patients at high risk of severe disease progression.
In addition, over 300 experimental therapies to treat COVID-19 are being studied in over 1,000 clinical trials around the world, and over 200 therapeutic candidates are in preclinical development. A substantial number of these programs are sponsored by our tenants, including the following:
Vir Biotechnology, Inc. and GlaxoSmithKline plc announced on March 26, 2021, that they submitted an EUA request to the FDA for VIR-7831, their most advanced antibody therapy for the early treatment of adolescent and adult patients with mild to moderate COVID-19 risk for progression to hospitalization or death.
AbbVie Inc., Amgen Inc., AstraZeneca plc, Atreca Inc., Merck & Co., Inc., Novartis AG, and Pfizer Inc. are similarly endeavoring to develop novel therapies and repurpose existing and investigational drugs to provide near-term treatments for moderate and severe COVID-19 patients and those at highest risk.

Improving testing quality and capacity
Abbott Laboratories, Adaptive Biotechnologies Corporation, Color, Cue Health Inc., Laboratory Corporation of America Holdings, Quest Diagnostics, Quidel Corporation, Roche, Thermo Fisher Scientific Inc., Verily Life Sciences, and others are working to improve testing quality, capacity, and turnaround time to more effectively determine who has an active COVID-19 infection, who has been exposed to the virus, and who has developed immunity against it. Even as vaccine distribution increases, the availability of widespread COVID-19 testing will remain critical for rapidly identifying new outbreaks and ultimately bringing the pandemic to an end.
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Industry and corporate leadership: catalyzing and leading the way for positive change to benefit human health and society

Industry leadership

In February 2021, Alexandria was ranked as the third most sustainable REIT, as featured in Barron’s “The 10 Most Sustainable REITs, According to Calvert.”
In March 2021, Alexandria LaunchLabs® at the Alexandria Center® at One Kendall Square in our Cambridge submarket was awarded the Fitwel Impact Award for achieving the highest-scoring project of all time. This is the second year in a row that Alexandria has held this distinction, demonstrating our unwavering commitment to optimizing projects to advance health and wellness.
In January 2021, Alexandria Venture Investments, our strategic venture capital platform, was recognized for a fourth consecutive year as the most active biopharma corporate investor by new deal volume by Silicon Valley Bank in its “Healthcare Investments and Exits: Annual Report 2021.” In February 2021, Alexandria Venture Investments was also recognized as one of the five most active U.S. investors in agrifoodtech by deal volume in 2020 by AgFunder in its “2021 AgFunder AgriFoodTech Investment Report.”

Relentless drive to develop and implement disruptive and highly impactful solutions to society’s most urgent challenges

Against the backdrop of the ongoing COVID-19 pandemic, which has exacerbated persistent, preexisting societal challenges, and rooted in our mission to advance human health, Alexandria continues to work steadfastly to leverage our leadership, knowledge, expertise, and resources not only to combat the COVID-19 pandemic but also to create long-term scalable solutions to our most pressing societal challenges. This work includes national and regional efforts in the following areas, as further described below:
Accelerating groundbreaking medical research, development, and manufacturing to advance lifesaving treatments and cures
Harnessing the agrifood ecosystem to combat hunger, improve nutrition, and support human health at its most fundamental level
Bolstering the resilience of our military, our veterans, and their families
Conquering the opioid epidemic and revolutionizing addiction treatment
Educationally empowering underserved students to achieve long-term success and reach their potential as leaders in the community
Building a model for a comprehensive, sustainable solution to address homelessness

Accelerating groundbreaking medical research, development, and manufacturing to advance lifesaving treatments and cures

Alexandria is a critical driver of medical progress and provides transformative strategic funding to speed the most promising breakthrough biomedical discoveries from laboratories to patients in need.
Our ongoing partnership with the Parker Institute for Cancer Immunotherapy (“PICI”) is a key example of our significant efforts in this area. As a sustaining supporter of PICI, Alexandria supports mission-critical work to develop breakthrough immunotherapies that could turn cancers into curable diseases faster. Serving on PICI’s Board of Directors, our Executive Chairman and Founder, Joel S. Marcus, helped guide PICI toward achieving many accomplishments in 2020, including the development of a first-of-its-kind data analysis engine for scientific discovery.

Harnessing the agrifood ecosystem to combat hunger, improve nutrition, and support human health at its most fundamental level

Driven by the understanding that food is a fundamental building block of human health and well-being, Alexandria is dedicated to ensuring all Americans have the nutritious, healthy food they need to thrive. Through the support of partners like Alexandria for hunger-relief organizations, including Project Angel Food, Nourish Now, Los Angeles Regional Food Bank, and Feeding America, these non-profits have provided over 6 billion meals to hungry Americans during the pandemic.
In Cambridge, we are long-term supporters of Food For Free, a non-profit organization dedicated to providing the Greater Boston community with reliable access to fresh and nutritious food. In February 2021, Alexandria announced its contribution toward Food For Free’s new Just Eats Grocery Box program. The program, which aims to distribute 3,000 boxes of food per week through food pantries, Cambridge Housing Authority sites, other low-income housing sites, and schools, fills a critical gap for food-insecure families in Greater Boston.
Additionally, through our agtech real estate infrastructure and investments in innovative agtech companies, we continue to help combat hunger and improve nutrition for countless people facing food insecurity.

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Bolstering the resilience of our military, our veterans, and their families

With profound appreciation for the immense sacrifices of our nation’s heroes and the essential role they play in enabling us to pursue our noble mission, Alexandria is committed to providing resources to assist our military, our veterans, and their families to live healthy, successful, and rewarding lives. We have actively supported the Navy SEAL Foundation since 2010, including through our record-breaking fundraising efforts as the chair of the New York City Benefit in 2017 and as the recipient of its prestigious Patriot Award in 2020.
Motivated to continue to enhance our critical support of the U.S. military, Alexandria joined The Honor Foundation (“THF”) and its founding partner, the Navy SEAL Foundation, in 2017, to embark on a truly impactful partnership to create a mission-critical headquarters in San Diego for THF, a unique career transition program for the Special Operations Forces community that effectively translates elite military experience to the private sector and helps facilitate the next generation of corporate and community leaders. Alexandria conceived of, designed, fully built out, and donated the use of an 8,000 RSF state-of-the-art facility where our nation’s most elite service members can participate in a tuition-free three-month executive education program that provides tools and experiences to help them transition from the Special Operations Forces to their next mission in life.
In 2020, THF served over 1,350 service members at its world-class headquarters, up from 802 in 2019, and graduated 296 of our nation’s heroes from the program, up from 178 in 2019.

Conquering the opioid epidemic and revolutionizing addiction treatment: OneFifteen, a blueprint for the nation

Determined to reverse the trajectory of the U.S. opioid epidemic, which is one of the most pervasive public health challenges in our nation’s history, Alexandria has built a partnership with Verily Life Sciences to create OneFifteen, an innovative, non-profit healthcare ecosystem dedicated to the full and sustained recovery of people living with addiction. Together, we pioneered a fully integrated campus in Dayton, Ohio, that houses an evidence-based model encompassing a full continuum of care with dedicated facilities and services for crisis stabilization, medication-assisted treatment, residential housing, peer support, family reunification, workforce development, job placement, and community transition.
OneFifteen’s first-of-its-kind campus ecosystem was featured as the cover story in the January/February 2021 issue of REIT Magazine. The piece highlights our leadership role in this meaningful endeavor.
Since June 2019, we completed construction of the OneFifteen Outpatient Clinic; the Crisis Stabilization Unit; and most recently, OneFifteen Living, the residential housing component that was delivered in September 2020.
Overdose deaths continue to rise dramatically during the COVID-19 pandemic, demonstrating the tremendous need for the OneFifteen ecosystem. Since opening in the fall of 2019, OneFifteen has made a positive impact on the local community and the way addiction is treated, seeing approximately 2,700 patients, including over 1,300 people during the three months ended March 31, 2021. It is our hope that OneFifteen’s holistic approach to data-driven treatment will serve as a model of recovery for the rest of the country to replicate.

Educationally empowering underserved students to achieve long-term success and reach their potential as leaders in the community

Understanding that education is one of the most fundamental foundations for a safe and healthy life, Alexandria is deeply committed to driving educational opportunities and providing the support and resources needed to prepare students for academic success, the 21st century job market, and a productive, rewarding life.
In February 2021, we made a $2 million community benefit gift to the San Francisco Unified School District (“SFUSD”) to support the development of a new science-focused school in our Mission Bay submarket. In addition to this gift, which extends Alexandria’s impactful collaboration with SFUSD, we will provide our laboratory design, construction, and development expertise to the project; participate in shaping the academic program; and facilitate connections with the local life science community to enhance the school’s STEM education opportunities.

Building a model for a comprehensive, sustainable solution to address homelessness

Inspired by the OneFifteen platform, we are presently incubating a similar model to combat homelessness in Seattle with the goal of providing a complete continuum of services in a safe living environment, from treatment for addiction and mental health issues to job training and placement.

51


Operating summary

Same Property Net Operating
 Income Growth
Favorable Lease Structure(1)
are-20210331_g3.jpg
are-20210331_g4.jpg
Strategic Lease Structure by Owner and Operator of Collaborative Life Science, Agtech, and Technology Campuses
Increasing cash flows
Percentage of leases containing annual rent escalations
95%
Stable cash flows
Percentage of triple
net leases
94%
Lower capex burden
Percentage of leases providing for the recapture of capital expenditures
93%
Rental Rate Growth:
Renewed/Re-Leased Space
Margins(2)
are-20210331_g5.jpg

are-20210331_g6.jpg
OperatingAdjusted EBITDA
71%69%
(1)Percentages calculated based on RSF as of March 31, 2021.
(2)Represents percentages for the three months ended March 31, 2021.
52


Long-Duration Cash Flows From High-Quality, Diverse, and
Innovative Tenants
Investment-Grade or
Publicly Traded Large Cap Tenants
Long-Duration Lease Terms
55%7.6 Years
of ARE’sWeighted-Average
Annual Rental Revenue(1)
Remaining Term(2)
Tenant Mix
are-20210331_g7.jpg
Percentage of ARE’s Annual Rental Revenue(1)
(1)Represents annual rental revenue in effect as of March 31, 2021. Refer to the “Non-GAAP measures and definitions” section within this Item 2 for additional information.
(2)Based on aggregate annual rental revenue in effect as of March 31, 2021. Refer to definition of “Annual rental revenue” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information on our methodology on annual rental revenue for unconsolidated real estate joint ventures.
(3)Represents annual rental revenue currently generated from office space that is targeted for a future change in use. The weighted-average remaining term of these leases is 3.0 years.
(4)Represents annual rental revenue from publicly traded tech tenants with an average daily market capitalization greater than $200 billion for the twelve months ended March 31, 2021.
(5)Annual rental revenues from our other tenants, aggregating 5.0%, comprise 4.2% of annual rental revenue from technology, professional services, finance, telecommunications, and construction/real estate companies and only 0.8% from retail-related tenants.
53


High-Quality Cash Flows From High-Quality Tenants and
Class A Properties in AAA Locations
Industry-Leading
Tenant Roster
AAA Locations
are-20210331_g8.jpg
88%
of ARE’s Top 20
Annual Rental Revenue
(1)
From Investment-Grade or
Publicly Traded
Large Cap Tenants
Percentage of ARE’s Annual Rental Revenue(1)
Solid Historical
Occupancy(2)
Occupancy Across Key Locations(3)
are-20210331_g9.jpg
96%

Over 10 Years

(1)Represents annual rental revenue in effect as of March 31, 2021. Refer to the “Non-GAAP measures and definitions” section within this Item 2 for additional information.
(2)Represents average occupancy of operating properties in North America as of each December 31 for the last 10 years and as of March 31, 2021.
(3)As of March 31, 2021.
(4)Refer to the “Summary of occupancy percentages in North America” section within this Item 2 for additional information.
54


Leasing

The following table summarizes our leasing activity at our properties:
Three Months EndedYear Ended
March 31, 2021December 31, 2020
Including
Straight-Line Rent
Cash BasisIncluding
Straight-Line Rent
Cash Basis
(Dollars per RSF)
Leasing activity:
Renewed/re-leased space(1)
    
Rental rate changes
36.2%17.4%37.6%18.3%
New rates
$57.61 $54.85 $49.51 $46.53 
Expiring rates
$42.31 $46.74 $35.99 $39.32 
RSF
521,825 2,556,833 
Tenant improvements/leasing commissions
$30.73 $35.08 
Weighted-average lease term
6.9 years6.0 years
Developed/redeveloped previously vacant space leased
New rates
$49.14 $45.67 $56.67 $53.61 
RSF
1,155,834 1,802,013 
Tenant improvements/leasing commissions
$37.17 $28.17 
Weighted-average lease term
10.7 years9.0 years
Leasing activity summary (totals):
New rates
$51.78 $48.53 $52.47 $49.46 
RSF
1,677,659 
(2)
4,358,846 
Tenant improvements/leasing commissions
$35.17 $32.22 
Weighted-average lease term
9.5 years7.3 years
Lease expirations(1)
Expiring rates
$40.70 $43.84 $36.03 $39.01 
RSF
747,275 3,560,188 

Leasing activity includes 100% of results for each property in which we have an investment in North America.

(1)Excludes month-to-month leases aggregating 82,972 RSF and 96,383 RSF as of March 31, 2021, and December 31, 2020, respectively.
(2)During the three months ended March 31, 2021, we granted tenant concessions/free rent averaging 3.5 months with respect to the 1,677,659 RSF leased. Approximately 41% of the leases executed during the three months ended March 31, 2021, did not include concessions for free rent.

55


Summary of contractual lease expirations

The following table summarizes information with respect to the contractual lease expirations at our properties as of March 31, 2021:
YearRSFPercentage of
Occupied RSF
Annual Rental Revenue
(per RSF)(1)
Percentage of Total
Annual Rental Revenue
2021
(2)
1,244,636 3.9 %$43.05 3.4 %
20222,601,783 8.2 %$45.96 7.6 %
20233,587,104 11.3 %$41.05 9.4 %
20242,472,214 7.8 %$45.47 7.2 %
20252,581,288 8.1 %$47.25 7.8 %
20262,036,500 6.4 %$46.54 6.1 %
20272,207,171 6.9 %$50.50 7.1 %
20282,540,712 8.0 %$49.56 8.0 %
20292,006,321 6.3 %$54.14 6.9 %
20302,288,097 7.2 %$53.70 7.9 %
Thereafter8,310,754 25.9 %$53.73 28.6 %
(1)Represents amounts in effect as of March 31, 2021.
(2)Excludes month-to-month leases aggregating 82,972 RSF as of March 31, 2021.

The following tables present information by market with respect to our lease expirations in North America as of March 31, 2021, for the remainder of 2021, and all of 2022:
2021 Contractual Lease Expirations (in RSF)
Annual Rental Revenue
(per RSF)(4)
Market
LeasedNegotiating/
Anticipating
Targeted for
Development/
Redevelopment(1)
Remaining
Expiring Leases(2)
Total(3)
Greater Boston17,975 101,103 202,428 115,392 436,898 $45.21 
San Francisco Bay Area202,268 36,564 9,738 144,640 393,210 49.58 
New York City— — — 2,007 2,007 N/A
San Diego6,493 5,749 83,697 101,251 197,190 32.74 
Seattle— 15,184 — 58,058 73,242 29.66 
Maryland— — — 11,438 11,438 31.75 
Research Triangle16,942 — — 41,399 58,341 32.12 
Canada— — — 13,672 13,672 25.09 
Non-cluster/other markets— — — 58,638 58,638 44.70 
Total243,678 158,600 295,863 546,495 1,244,636 $43.05 
Percentage of expiring leases
20 %13 %24 %43 %100 %
2022 Contractual Lease Expirations (in RSF)
Annual Rental Revenue
(per RSF)(4)
Market
LeasedNegotiating/
Anticipating
Targeted for
Development/
Redevelopment(1)
Remaining
Expiring Leases(5)
Total
Greater Boston44,767 8,998 — 514,925 
(6)
568,690 $58.57 
San Francisco Bay Area— 7,180 490,127 302,531 799,838 53.01 
New York City30,408 14,891 — 2,979 48,278 N/A
San Diego114,656 24,523 231,585 157,604 528,368 37.83 
Seattle— 50,618 51,255 146,061 247,934 31.99 
Maryland— 29,283 — 49,439 78,722 26.95 
Research Triangle— — — 251,706 251,706 21.05 
Canada— — — 28,664 28,664 22.19 
Non-cluster/other markets— — — 49,583 49,583 55.84 
Total189,831 135,493 772,967 1,503,492 2,601,783 $45.96 
Percentage of expiring leases
%%30 %58 %100 %

(1)Represents RSF targeted for development or redevelopment upon expiration of existing in-place leases, primarily related to recently acquired properties. Refer to “Investments in real estate – value-creation square footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional details on value-creation square feet currently included in rental properties.
(2)The largest remaining contractual lease expiration is a 55,183 RSF lease in our Mission Bay submarket.
(3)Excludes month-to-month leases aggregating 82,972 RSF as of March 31, 2021.
(4)Represents amounts in effect as of March 31, 2021.
(5)The largest remaining contractual lease expiration includes a Class A office/laboratory building aggregating 113,555 RSF in our Cambridge/Inner Suburbs submarket and one lease for 62,490 RSF in our Research Triangle submarket.
(6)72% of the remaining expiring leases in Greater Boston are located in our Cambridge/Inner Suburbs submarket.

56


Top 20 tenants

88% of Top 20 Annual Rental Revenue From Investment-Grade
or Publicly Traded Large Cap Tenants(1)

Our properties are leased to a high-quality and diverse group of tenants, with no individual tenant accounting for more than 3.4% of our annual rental revenue in effect as of March 31, 2021. The following table sets forth information regarding leases with our 20 largest tenants in North America based upon annual rental revenue in effect as of March 31, 2021 (dollars in thousands, except average market cap):
Remaining Lease Term(1)
 (in Years)
Aggregate
RSF
Annual
Rental
Revenue(1)
Percentage of Aggregate Annual Rental Revenue (1)
Investment-Grade Credit Ratings
Average Market Cap(1)
(in billions)
TenantMoody’sS&P
Bristol-Myers Squibb Company7.4 916,234 $52,853 3.4 %A2A+$137.5 
Takeda Pharmaceutical Company Ltd.8.4 606,249 39,342 2.6 Baa2BBB+$56.5 
Facebook, Inc.10.8 903,786 38,899 2.5 $719.2 
Illumina, Inc.9.4 891,495 36,058 2.3 Baa3BBB$52.3 
Eli Lilly and Company8.0 555,335 35,807 2.3 A2A+$156.0 
Sanofi7.2 494,693 33,868 2.2 A1AA$124.2 
Moderna, Inc.11.2 615,458 32,147 2.1 $36.3 
Novartis AG7.4 423,914 30,128 2.0 A1AA-$216.6 
Uber Technologies, Inc.61.7 
(2)
1,009,188 27,379 1.8 $73.8 
10 Roche2.4 
(3)
612,242 25,768 1.7 Aa3AA$298.4 
11 bluebird bio, Inc.6.2 312,805 23,142 1.5 $3.3 
12 Maxar Technologies4.2 
(4)
478,000 21,577 1.4 $1.7 
13 Massachusetts Institute of Technology7.7 257,626 21,145 1.4 AaaAAA$— 
14 The Children's Hospital Corporation17.6 269,816 20,066 1.3 Aa2AA$— 
15 Jazz Pharmaceuticals, Inc.9.4 198,041 20,003 1.3 $7.6 
16 New York University10.5 204,691 19,531 1.3 Aa2AA-$— 
17 Merck & Co., Inc.13.2 311,015 19,392 1.3 A1AA-$201.4 
18 Pfizer Inc.3.9 416,979 17,762 1.2 A2A+$202.8 
19 United States Government6.6 296,765 16,933 1.1 AaaAA+$— 
20 Amgen Inc.3.0 407,369 16,838 1.1 Baa1A-$138.0 
Total/weighted-average
10.9 
(2)
10,181,701 $548,638 35.8 %

Annual rental revenue and RSF include 100% of each property managed by us in North America.

(1)Based on aggregate annual rental revenue in effect as of March 31, 2021. Refer to the definitions of “Annual rental revenue” and “Investment-grade or publicly traded large cap tenants” in the “Non-GAAP measures and definitions” section within this Item 2 for our methodologies on annual rental revenue from unconsolidated real estate joint ventures and average market capitalization.
(2)Includes (i) ground leases for land at 1455 and 1515 Third Street (two buildings aggregating 422,980 RSF) and (ii) leases at 1655 and 1725 Third Street (two buildings aggregating 586,208 RSF) owned by our unconsolidated real estate joint venture in which we have an ownership interest of 10%. Annual rental revenue is presented using 100% of the annual rental revenue of our consolidated properties and our share of annual rental revenue for our unconsolidated real estate joint ventures. Refer to footnote 1 for additional details. Excluding the ground lease, the weighted-average remaining lease term for our top 20 tenants was 8.2 years as of March 31, 2021.
(3)Includes 197,787 RSF expiring in 2022 at our recently acquired property at 651 Gateway Boulevard in our South San Francisco submarket. Upon expiration of the lease, 651 Gateway Boulevard will be redeveloped into a Class A office/laboratory building. Excluding this 197,787 RSF, the weighted-average remaining term of space occupied by Roche is 2.8 years.
(4)Represents remaining lease term at two properties with future redevelopment and development opportunities. The leases with this tenant were in place when we acquired the property during the three months ended December 31, 2019.
57


Locations of properties

The locations of our properties are diversified among a number of life science, agtech, and technology cluster markets. The following table sets forth the total RSF, number of properties, and annual rental revenue in effect as of March 31, 2021, in each of our markets in North America (dollars in thousands, except per RSF amounts):
RSFNumber of PropertiesAnnual Rental Revenue
Market
OperatingDevelopmentRedevelopmentTotal% of TotalTotal% of TotalPer RSF
Greater Boston
9,393,117 510,116 490,545 10,393,778 27 %75 $563,356 37 %$62.32 
San Francisco Bay Area7,582,096 645,158 92,147 8,319,401 22 60 374,050 24 59.25 
New York City
1,145,296 — 122,382 1,267,678 82,226 72.24 
San Diego
6,322,521 322,884 208,690 6,854,095 19 81 236,430 16 40.10 
Seattle
2,628,577 — 213,976 2,842,553 40 105,819 41.57 
Maryland
2,998,406 84,264 249,970 3,332,640 45 92,085 31.36 
Research Triangle
2,810,670 410,000 652,381 3,873,051 10 35 62,527 24.50 
Canada
256,967 — — 256,967 5,151 — 24.55 
Non-cluster/other markets550,870 — — 550,870 12 11,478 39.65 
Properties held for sale
225,849 — — 225,849 6,231 — N/A
North America
33,914,369 1,972,422 2,030,091 37,916,882 100 %360 $1,539,353 100 %$49.58 
4,002,513

Summary of occupancy percentages in North America

The following table sets forth the occupancy percentages for our operating properties and our operating and redevelopment properties in each of our North America markets, excluding properties held for sale, as of the following dates:

 Operating PropertiesOperating and Redevelopment Properties
Market3/31/2112/31/203/31/203/31/2112/31/203/31/20
Greater Boston96.2 %
(1)
98.1 %98.9 %91.5 %94.8 %97.0 %
San Francisco Bay Area95.4 
(1)
95.8 94.7 94.3 94.7 90.6 
New York City99.4 97.3 99.2 89.8 87.8 88.1 
San Diego93.3 
(1)
93.5 90.9 90.3 92.4 90.9 
Seattle96.8 96.0 97.8 89.6 85.5 97.8 
Maryland97.9 96.1 95.9 90.4 90.6 94.6 
Research Triangle90.8 
(1)
89.6 96.5 73.7 72.7 96.5 
Subtotal95.3 95.5 95.6 89.9 90.7 93.3 
Canada81.6 81.8 93.6 81.6 81.8 93.6 
Non-cluster/other markets52.6 52.7 65.2 52.6 52.7 65.2 
North America94.5 %
(1)
94.6 %95.1 %89.2 %90.0 %92.9 %

(1)Includes 1.2 million RSF, or 3.5%, of vacancy at recently acquired properties in our North America markets, representing lease-up opportunities that will contribute to growth in cash flows (noted below). Approximately 26% of the vacant 1.2 million RSF is currently leased, with occupancy expected primarily over the next two quarters. Excluding these acquired vacancies, occupancy of operating properties in North America was 98.0% as of March 31, 2021. The estimated cost basis associated with these spaces was approximately $451.3 million as of March 31, 2021. The following table provides vacancy detail for our recent acquisitions:
As of March 31, 2021
VacantOccupancy Impact
PropertyMarket/SubmarketRSFRegionConsolidated
Alexandria Center® for Life Science – Durham
Research Triangle/Research Triangle233,362 8.3 %0.7 %
601, 611, and 651 Gateway BoulevardSan Francisco Bay Area/South San Francisco254,582 3.4 %0.8 
SD Tech by AlexandriaSan Diego/Sorrento Mesa83,171 1.3 %0.2 
Other acquisitionsVarious518,830  N/A1.5 
1,089,945 3.2 
1Q21 acquisitions:
Alexandria Center® for Life Science – Fenway
Greater Boston/Fenway98,174 1.0 %0.3 
1,188,119 3.5 %

Refer to the “Non-GAAP measures and definitions” section within this Item 2 for additional information.
58


Investments in real estate

A key component of our business model is our disciplined allocation of capital to the development and redevelopment of new Class A properties located in collaborative life science, agtech, and technology campuses in AAA innovation clusters. These projects are focused on providing high-quality, generic, and reusable spaces that meet the real estate requirements of, and are reusable by, a wide range of tenants. Upon completion, each value-creation project is expected to generate a significant increase in rental income, net operating income, and cash flows. Our development and redevelopment projects are generally in locations that are highly desirable to high-quality entities, which we believe results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. Our pre-construction activities are undertaken in order to get the property ready for its intended use and include entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building improvements.

As of the date of this report, construction activities were in process at all of our active construction projects. Construction workers continue to observe social distancing and follow rules that restrict gatherings of large groups of people in close proximity, as
well as adhere to other appropriate measures that may slow the pace of construction.

Our investments in real estate consisted of the following as of March 31, 2021 (dollars in thousands):
Development and Redevelopment
OperatingUnder ConstructionNear
Term
Intermediate
Term
FutureSubtotalTotal
Investments in real estate
Book value as of March 31, 2021(1)
$19,137,741 $2,071,733 $977,609 $596,524 $753,057 $4,398,923 $23,536,664 
Square footage
Operating33,914,369 — — — — — 33,914,369 
New Class A development and redevelopment properties— 4,002,513 4,612,656 3,826,115 9,221,297 21,662,581 21,662,581 
Value-creation square feet currently included in rental properties(2)
— — (553,693)(622,000)(1,810,218)(2,985,911)(2,985,911)
Total square footage
33,914,369 4,002,513 4,058,963 3,204,115 7,411,079 18,676,670 52,591,039 
    
(1)Balances exclude our share of the cost basis associated with our properties held by our unconsolidated real estate joint ventures, which is classified as investments in unconsolidated real estate joint ventures in our consolidated balance sheets.
(2)Refer to the definition of “Investments in real estate – value-creation square footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional details on value-creation square feet currently included in rental properties.


59



Acquisitions

Our real estate asset acquisitions for the three months ended March 31, 2021, consisted of the following (dollars in thousands):
PropertySubmarket/MarketDate of PurchaseNumber of PropertiesOperating
Occupancy
Square FootagePurchase Price
Acquisitions with Development and Redevelopment Opportunities
Future DevelopmentActive RedevelopmentOperating With Future Development/ Redevelopment
Operating(1)
Operating
Three months ended March 31, 2021:
Alexandria Center® for Life Science – Fenway
Fenway/Greater Boston1/29/21290 %
(2)
305,000 510,116 311,066 662,079 — $1,483,200 
(2)
840 Winter StreetRoute 128/Greater Boston1/20/211100— 130,000 — 30,009 — 58,126 
(3)
OtherVariousVarious229769,426 209,295 120,000 661,159 80,032 
(4)
332,424 
2594 %374,426 849,411 431,066 1,353,247 80,032 $1,873,750 

(1)Represents the operating component of our value-creation acquisitions that is not expected to undergo development or redevelopment.
(2)The campus includes an operating property with future redevelopment opportunities at 401 Park Drive, a development project at 201 Brookline Avenue, and a future development opportunity. 401 Park Drive, aggregating 973,145 RSF, is 90% occupied, with an additional 3% of leased space that is under renovation, and has initial stabilized yields of 5.7% and 4.5% (cash basis). We expect to provide total estimated costs and related yields for the development projects at 201 Brookline Avenue and the future development/redevelopment opportunities in the future, subsequent to the commencement of construction. Refer to “New Class A development and redevelopment properties: current projects” within this Item 2 for additional information.
(3)We expect to provide total estimated costs and related yields for development and redevelopment projects in the future, subsequent to the commencement of construction. Refer to “New Class A development and redevelopment properties: current projects” within this Item 2 for additional information on active development and redevelopment projects.
(4)Represents the acquisition of our partner’s 43.2% ownership interest in our previously unconsolidated real estate joint venture at 704 Quince Orchard Road for $9.4 million. We completed the redevelopment of this stabilized property during the three months ended June 30, 2019.
60


Sustainability
are-20210331_g10.jpg
61


are-20210331_g11.jpg
(1)13 projects have been certified and another 36 projects are in process targeting WELL or Fitwel certification.
(2)Source: Barron’s, “The 10 Most Sustainable REITs, According to Calvert,” February 19, 2021.
(3)Relative to a 2015 baseline for buildings in operation that Alexandria directly manages.
(4)For buildings in operation that Alexandria directly and indirectly manages.
(5)Reflects sum of annual like-for-like progress from 2015 to 2020.
(6)Reflects progress for all buildings in operation in 2020 that Alexandria directly and indirectly manages.
62



New Class A development and redevelopment properties: recent deliveries
Alexandria Center® for Life Science –
San Carlos
9877 Waples Street1165 Eastlake Avenue East9804 Medical Center Drive
San Francisco Bay Area/Greater Stanford San Diego/Sorrento MesaSeattle/Lake UnionMaryland/Rockville
196,020 RSF63,774 RSF100,086 RSF176,832 RSF
are-20210331_g12.jpg
are-20210331_g13.jpg
are-20210331_g14.jpg
are-20210331_g15.jpg
    
The following table presents value-creation development and redevelopment of new Class A properties placed into service during the three months ended March 31, 2021 (dollars in thousands):
Property/Market/SubmarketDelivery DateOur Ownership InterestRSF Placed in Service
Occupancy Percentage(1)
Total ProjectUnlevered Yields
4Q201Q21TotalInitial StabilizedInitial Stabilized (Cash Basis)
RSFInvestment
Development projects
Alexandria Center® for Life Science – San Carlos/
   San Francisco Bay Area/Greater Stanford
Various100%96,463 99,557 196,020 100%526,178 $630,000 6.4 %6.1 %
1165 Eastlake Avenue East/Seattle/Lake UnionMarch 2021100%— 100,086 100,086 100%100,086 138,000 6.3 
(2)
6.4 
(2)
9804 Medical Center Drive/Maryland/RockvilleJanuary 2021100%— 176,832 176,832 100%176,832 89,300 
(3)
8.3 
(3)
8.0 
(3)
Redevelopment projects
Alexandria Center® for Life Science – Long Island City/New York City/New York City
December 2020100%17,716 — 17,716 100%176,759 184,300 5.5 5.6 
9877 Waples Street/San Diego/Sorrento MesaDecember 2020100%63,774 — 63,774 100%63,744 31,000 8.8 8.1 
Total177,953 376,475 554,428 $1,072,600 6.5 %6.3 %

(1)Relates to total operating RSF placed in service as of the most recent delivery.
(2)Unlevered yields represent aggregate returns for 1165 Eastlake Avenue East, an amenity-rich research headquarters for Adaptive Biotechnologies Corporation, and 1208 Eastlake Avenue East, an adjacent multi-tenant office/laboratory building.
(3)Improvements in initial stabilized yields of 60 bps and 80 bps (cash basis) were driven by overall cost savings relative to initial budget.




New Class A development and redevelopment properties: current projects

The Arsenal on the Charles201 Brookline Avenue840 Winter Street201 Haskins Way
Greater Boston/
Cambridge/Inner Suburbs
Greater Boston/FenwayGreater Boston/Route 128San Francisco Bay Area/South San Francisco
360,545 RSF510,116 RSF130,000 RSF315,000 RSF
are-20210331_g16.jpg
are-20210331_g17.jpg
are-20210331_g18.jpg
are-20210331_g19.jpg

Alexandria Center® for Life Science –
San Carlos
3160 Porter Drive
Alexandria Center® for Life Science –
Long Island City
3115 Merryfield Row
San Francisco Bay Area/Greater Stanford San Francisco Bay Area/Greater StanfordNew York City/New York CitySan Diego/Torrey Pines
330,158 RSF92,147 RSF122,382 RSF146,456 RSF
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are-20210331_g20.jpg
are-20210331_g21.jpg
are-20210331_g22.jpg
64



New Class A development and redevelopment properties: current projects (continued)

SD Tech by Alexandria(1)
5505 Morehouse Drive9950 Medical Center Drive700 Quince Orchard Road
San Diego/Sorrento MesaSan Diego/Sorrento MesaMaryland/RockvilleMaryland/Gaithersburg
176,428 RSF79,945 RSF84,264 RSF169,420 RSF
are-20210331_g23.jpg
are-20210331_g24.jpg
are-20210331_g25.jpg
are-20210331_g26.jpg
20400 Century Boulevard
Alexandria Center® for Life Science – Durham(2)
Alexandria Center® for AgTech
Alexandria Center® for
Advanced Technologies(3)
Maryland/GaithersburgResearch Triangle/Research TriangleResearch Triangle/Research TriangleResearch Triangle/Research Triangle
80,550 RSF652,381 RSF160,000 RSF250,000 RSF
are-20210331_g27.jpg
are-20210331_g28.jpg
are-20210331_g29.jpg
are-20210331_g30.jpg

(1)Represents 10055 Barnes Canyon Road in our SD Tech by Alexandria campus.
(2)Represents 2400 Ellis Road in our Alexandria Center® for Life Science – Durham campus.
(3)Represents 10 Davis Drive in our Alexandria Center® for Advanced Technologies campus.

65



New Class A development and redevelopment properties: current projects (continued)


The following tables set forth a summary of our new Class A development and redevelopment properties under construction and pre-leased near-term projects as of March 31, 2021 (dollars in thousands):
Property/Market/Submarket
Square FootagePercentage
Dev/RedevIn ServiceCIPTotalLeasedLeased/Negotiating
Initial
Occupancy(1)
Under construction
The Arsenal on the Charles/Greater Boston/Cambridge/Inner SuburbsRedev475,743 
(2)
360,545 836,288 79 %85 %2021
201 Haskins Way/San Francisco Bay Area/South San FranciscoDev— 315,000 315,000 100 100 2Q21
The Alexandria Center® for Life Science – San Carlos/San Francisco Bay Area/Greater Stanford
Dev196,020 330,158 526,178 100 100 4Q20
3160 Porter Drive/San Francisco Bay Area/Greater StanfordRedev— 92,147 92,147 20 26 1H21
Alexandria Center® for Life Science – Long Island City/New York City/New York City
Redev54,377 122,382 176,759 31 44 4Q20
3115 Merryfield Row/San Diego/Torrey PinesDev— 146,456 146,456 100 100 2022
5505 Morehouse Drive/San Diego/Sorrento MesaRedev— 79,945 79,945 35 35 2021
Other/SeattleRedev246,647 213,976 460,623 51 51 2022
9950 Medical Center Drive/Maryland/RockvilleDev— 84,264 84,264 100 100 1H22
(2)
700 Quince Orchard Road/Maryland/GaithersburgRedev— 169,420 169,420 100 100 2021
Alexandria Center® for Life Science – Durham/Research Triangle/
   Research Triangle(3)
Redev— 652,381 652,381 77 77 1H21/2022
Alexandria Center® for AgTech/Research Triangle/Research Triangle(4)
Redev/Dev180,400160,000 340,400 55 55 2021
Alexandria Center® for Advanced Technologies/Research Triangle/
   Research Triangle
Dev— 250,000 250,000 
(5)
58 
(5)
58 
(5)
2H21/2022
1,153,187 2,976,674 4,129,861 74 76 
Under construction – additions in 1Q21
201 Brookline Avenue/Greater Boston/FenwayDev— 510,116 510,116 17 84 2022
840 Winter Street/Greater Boston/Route 128Redev30,009 130,000 160,009 19 19 2022
SD Tech by Alexandria/San Diego/Sorrento MesaDev176,428 176,428 61 96 2022
Other/San DiegoRedev— 128,745 128,745 100 100 2021
20400 Century Boulevard/Maryland/GaithersburgRedev— 80,550 80,550 — 12 2022
30,009 1,025,839 1,055,848 34 73 
1,183,196 4,002,513 5,185,709 66 76 
Pre-leased near-term projects
Alexandria Point/San Diego/University Town Center(6)
Dev171,102 171,102 100 100 
1,183,196 4,173,615 5,356,811 67 %76 %
(1)Initial occupancy dates are subject to leasing and/or market conditions. Construction disruptions resulting from COVID-19 and observance of social distancing measures may impact construction and occupancy forecasts and will continue to be monitored closely. Multi-tenant projects may have occupancy by tenants over a period of time. Stabilized occupancy may vary depending on single tenancy versus multi-tenancy.
(2)Refer to footnote 1 on the following page for additional information.
(3)The recently acquired Alexandria Center® for Life Science – Durham redevelopment project includes three properties at 40 Moore Drive, 2400 Ellis Road, and 14 TW Alexander Drive. 2400 Ellis Road is 100% leased, with initial occupancy anticipated in the first half of 2021 and stabilized occupancy expected for the remaining buildings in 2022.
(4)The new strategic collaborative agtech campus consists of Phase I at 5 Laboratory Drive, including campus amenities, which was previously delivered, and Phase II at 9 Laboratory Drive.
(5)Represents 150,000 RSF that is 29% leased at 8 Davis Drive and 100,000 RSF that is 100% leased at 10 Davis Drive. Vertical construction at 8 Davis Drive has commenced, and 10 Davis Drive is expected to commence in the second quarter of 2021.
(6)Represents our 4150 Campus Point Court property, which is expected to commence vertical construction in the fourth quarter of 2021.
66



New Class A development and redevelopment properties: current projects (continued)

Our Ownership InterestUnlevered Yields
Property/Market/Submarket
In ServiceCIPCost to CompleteTotal at
Completion
Initial StabilizedInitial Stabilized (Cash Basis)
Under construction
The Arsenal on the Charles/Greater Boston/Cambridge/Inner Suburbs100 %$357,448 $248,243 $166,309 $772,000 6.2 %5.5 %
201 Haskins Way/San Francisco Bay Area/South San Francisco100 %— 291,082 $78,918 $370,000 6.4 %6.2 %
The Alexandria Center® for Life Science – San Carlos/San Francisco Bay Area/Greater Stanford
100 %182,558 340,378 $107,064 $630,000 6.4 %6.1 %
3160 Porter Drive/San Francisco Bay Area/Greater Stanford100 %— 74,864 TBD
Alexandria Center® for Life Science – Long Island City/New York City/New York City
100 %36,560 127,232 $20,508 $184,300 5.5 %5.6 %
3115 Merryfield Row/San Diego/Torrey Pines100 %— 72,464 $79,536 $152,000 6.2 %6.2 %
5505 Morehouse Drive/San Diego/Sorrento Mesa100 %— 21,950 TBD
Other/Seattle100 %54,152 65,329 
9950 Medical Center Drive/Maryland/Rockville100 %— 41,154 $18,446 $59,600 8.6 %
(1)
7.7 %
(1)
700 Quince Orchard Road/Maryland/Gaithersburg100 %— 49,561 $29,939 $79,500 8.6 %7.3 %
Alexandria Center® for Life Science – Durham/Research Triangle/Research Triangle
100 %— 143,036 $101,964 $245,000 7.5 %6.7 %
Alexandria Center® for AgTech/Research Triangle/Research Triangle
100 %90,677 69,548 TBD
Alexandria Center® for Advanced Technologies/Research Triangle/Research Triangle
100 %— 46,612 
721,395 1,591,453 
Under construction – additions in 1Q21
201 Brookline Avenue/Greater Boston/Fenway97.9 %— 370,409 TBD
840 Winter Street/Greater Boston/Route 128100 %12,517 47,979 
SD Tech by Alexandria/San Diego/Sorrento Mesa50.0 %— 25,117 
Other/San Diego100 %— 27,855 
20400 Century Boulevard/Maryland/Gaithersburg100 %— 8,920 
12,517 480,280 
733,912 2,071,733 
Pre-leased near-term projects
Alexandria Point/San Diego/University Town Center55.0 %— 26,342 
Total$733,912 $2,098,075 

(1)During the three months ended March 31, 2021, we leased the property to a public biotechnology company which resulted in higher rents and our initial stabilized yields increased by 130 bps and 90 bps (cash basis), and our date of initial occupancy has been revised to the first half of 2022.
67



New Class A development and redevelopment properties: summary of pipeline

The following table summarizes the key information for all our development and redevelopment projects in North America as of March 31, 2021 (dollars in thousands):

Property/SubmarketOur Ownership InterestBook ValueSquare Footage
Development and RedevelopmentTotal
Under ConstructionNear
Term
Intermediate
Term
Future
Greater Boston
The Arsenal on the Charles/Cambridge/Inner Suburbs100 %$273,891 360,545 200,000 
(1)
— 12,502 573,047 
Alexandria Center® for Life Science – Fenway/Fenway
(2)
493,272 510,116 — 305,000 — 815,116 
840 Winter Street/Route 128100 %47,979 130,000 — — — 130,000 
325 Binney Street/Cambridge100 %154,591 — 450,000 
(1)
— — 450,000 
57 Coolidge Avenue/Cambridge/Inner Suburbs75.0 %48,618 — 275,000 
(1)
— — 275,000 
15 Necco Street/Seaport Innovation District96.4 %188,131 — 350,000 
(1)
— — 350,000 
Reservoir Woods/Route 128100 %43,040 — 202,428 
(1)(3)
— 752,845 
(3)
955,273 
10 Necco Street/Seaport Innovation District100 %91,872 — — 175,000 — 175,000 
215 Presidential Way/Route 128100 %6,808 — — 112,000 — 112,000 
Alexandria Technology Square®/Cambridge
100 %7,881 — — — 100,000 100,000 
380 and 420 E Street/Seaport Innovation District100 %117,197 — — — 1,000,000 
(3)
1,000,000 
99 A Street/Seaport Innovation District95.3 %45,335 — — — 235,000 235,000 
One Upland Road and 100 Tech Drive/Route 128100 %8,696 — — — 750,000 750,000 
231 Second Avenue/Route 128100 %1,093 — — — 32,000 32,000 
Other value-creation projects100 %9,782 — — — 16,955 16,955 
1,538,186 1,000,661 1,477,428 592,000 2,899,302 5,969,391 
San Francisco Bay Area
201 Haskins Way/South San Francisco100 %291,082 315,000 — — — 315,000 
Alexandria Center® for Life Science – San Carlos/Greater Stanford
100 %597,906 330,158 — 700,000 
(3)
587,000 
(3)
1,617,158 
3160 Porter Drive/Greater Stanford100 %74,864 92,147 — — — 92,147 
Alexandria Technology Center® – Gateway/South San Francisco
45.9 %55,147 — 517,010 
(1)(3)
— 291,000 808,010 
901 California Avenue/Greater Stanford100 %713 — 56,924 — — 56,924 
88 Bluxome Street/SoMa100 %306,754 — 1,070,925 — — 1,070,925 
1450 Owens Street/Mission Bay100 %58,004 — — 191,000 — 191,000 
3825 and 3875 Fabian Way/Greater Stanford100 %— — — 250,000 
(3)
228,000 
(3)
478,000 
3450 and 3460 Hillview Avenue/Greater Stanford100 %— — — 76,951 
(3)
— 76,951 
East Grand Avenue/South San Francisco100 %6,120 — — — 90,000 90,000 
Other value-creation projects100 %— — — — 25,000 25,000 
$1,390,590 737,305 1,644,859 1,217,951 1,221,000 4,821,115 

 
(1)We expect to commence vertical construction or redevelopment of all or a portion of this project in 2021.
(2)We have a 97.9% ownership interest in 201 Brookline Avenue, which is currently under construction. We have a 100% ownership interest in the intermediate-term development project.
(3)Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operation at properties that also have inherent future development or redevelopment opportunities. Upon expiration of existing in-place leases, we have the intent to demolish or redevelop the existing property, and commence future construction. Refer to the definition of “Investments in real estate – value-creation square footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information.
68



New Class A development and redevelopment properties: summary of pipeline (continued)
Property/SubmarketOur Ownership InterestBook ValueSquare Footage
Development and RedevelopmentTotal
Under ConstructionNear
Term
Intermediate
Term
Future
New York City
Alexandria Center® for Life Science – Long Island City/New York City
100 %$127,232 122,382 — — — 122,382 
47-50 30th Street/New York City100 %29,771 — 135,938 — — 135,938 
Alexandria Center® for Life Science – New York City/New York City
100 %62,078 — — 550,000 
(1)
— 550,000 
219 East 42nd Street/New York City100 %— — — — 579,947 
(2)
579,947 
219,081 122,382 135,938 550,000 579,947 1,388,267 
San Diego
3115 Merryfield Row/Torrey Pines100 %72,464 146,456 — — — 146,456 
SD Tech by Alexandria/Sorrento Mesa50.0 %109,519 176,428 190,074 
(3)
160,000 333,845 860,347 
5505 Morehouse Drive/Sorrento Mesa100 %21,950 79,945 — — — 79,945 
Alexandria Point/University Town Center55.0 %105,773 — 351,102 
(3)
249,164 
(4)
320,281 
(4)
920,547 
10931 and 10933 Torrey Pines Road/Torrey Pines100 %— — — 242,000 
(4)
— 242,000 
University District/University Town Center100 %60,009 — — 600,000 
(4)(5)
— 600,000 
11255 and 11355 North Torrey Pines Road/Torrey Pines100 %108,183 — — — 240,000 
(4)
240,000 
5200 Illumina Way/University Town Center51.0 %12,444 — — — 451,832 451,832 
6450 Sequence Drive and Excess Land/Sorrento Mesa100 %36,312 — — — 911,915 
(4)
911,915 
4045 and 4075 Sorrento Valley Boulevard/Sorrento Valley100 %7,679 — — — 149,000 
(4)
149,000 
Other value-creation projects100 %27,855 128,745 — — 50,000 178,745 
562,188 531,574 541,176 1,251,164 2,456,873 4,780,787 
Seattle
1150 Eastlake Avenue East/Lake Union100 %56,101 — 310,000 
(3)
— — 310,000 
701 Dexter Avenue North/Lake Union100 %58,136 — 217,000 — — 217,000 
601 Dexter Avenue North/Lake Union100 %36,073 — — — 188,400 
(4)
188,400 
1010 4th Avenue South/SoDo100 %49,830 — — — 544,825 544,825 
830 4th Avenue South/SoDo100 %— — — — 52,488 
(4)
52,488 
Other value-creation projects100 %71,319 213,976 51,255 
(4)
— 35,000 300,231 
$271,459 213,976 578,255  820,713 1,612,944 
(1)We are currently negotiating a long-term ground lease with the City of New York for the future site of a new building approximating 550,000 RSF.
(2)Includes 349,947 RSF in operation with an opportunity either to convert the existing office space into office/laboratory space through future redevelopment or to expand the building by an additional 230,000 RSF through ground-up development. The building is currently occupied by Pfizer Inc. with a remaining lease term of approximately four years.
(3)We expect to commence vertical construction or redevelopment of all or a portion of this project during 2021.
(4)Represents total square footage upon completion of development or redevelopment of a new Class A property. Square footage presented includes RSF of buildings currently in operation at properties that also have inherent future development or redevelopment opportunities. Upon expiration of existing in-place leases, we have the intent to demolish or redevelop the existing property, and commence future construction. Refer to the definition of “Investments in real estate – value-creation square footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information.
(5)Includes our recently acquired project at 4555 Executive Drive and 9363, 9373, and 9393 Towne Centre Drive in our University Town Center submarket, which is currently under evaluation for development, subject to future market conditions.
69



New Class A development and redevelopment properties: summary of pipeline (continued)
Property/SubmarketOur Ownership InterestBook ValueSquare Footage
Development and RedevelopmentTotal
Under ConstructionNear
Term
Intermediate
Term
Future
Maryland
9950 Medical Center Drive/Rockville100 %$41,154 84,264 — — — 84,264 
700 Quince Orchard Road/Gaithersburg100 %49,561 169,420 — — — 169,420 
20400 Century Boulevard/Gaithersburg100 %8,920 80,550 — — — 80,550 
14200 Shady Grove Road/Rockville100 %29,621 — 145,000 145,000 145,000 435,000 
9808 Medical Center Drive/Rockville100 %2,896 — 90,000 
(1)
— — 90,000 
132,152 334,234 235,000 145,000 145,000 859,234 
Research Triangle
Alexandria Center® for Life Science – Durham/Research Triangle
100 %143,036 652,381 — — — 652,381 
Alexandria Center® for Advanced Technologies/Research Triangle
100 %63,602 250,000 — 70,000 700,000 1,020,000 
Alexandria Center® for AgTech, Phase II/Research Triangle
100 %69,548 160,000 — — — 160,000 
Other value-creation projects100 %4,185 — — — 76,262 76,262 
280,371 1,062,381  70,000 776,262 1,908,643 
Other value-creation projects100 %4,896 — — — 322,200 322,200 
Total pipeline as of March 31, 2021
$4,398,923 4,002,513 4,612,656 3,826,115 9,221,297 21,662,581 
(2)
Key pending acquisition
Mercer Mega Block/Lake Union— 800,000 — — 800,000 
4,002,513 5,412,656 3,826,115 9,221,297 22,462,581 

(1)We expect to commence vertical construction or redevelopment of all or a portion of this project during 2021.
(2)Total square footage includes 2,985,911 RSF of buildings currently in operation that will be redeveloped or replaced with new development RSF upon commencement of future construction. Refer to the definition of “Investments in real estate – value-creation square footage currently in rental properties” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information.

70


Summary of capital expenditures

Our construction spending for the three months ended March 31, 2021, consisted of the following (in thousands):

Construction SpendingThree Months Ended March 31, 2021
Additions to real estate – consolidated projects$465,411 
Contributions from noncontrolling interests(6,576)
Construction spending (cash basis)458,835 
Change in accrued construction(10,036)
Construction spending for the three months ended March 31, 2021
448,799 
 Projected construction spending for the nine months ending December 31, 20211,291,201 
Guidance midpoint$1,740,000 

The following table summarizes the total projected construction spending for the year ending December 31, 2021, which includes interest, property taxes, insurance, payroll, and other indirect project costs (in thousands):

Projected Construction SpendingYear Ending December 31, 2021
Development, redevelopment, and pre-construction projects$1,625,000 
Contributions from noncontrolling interests (consolidated real estate joint ventures)(100,000)
Revenue-enhancing and repositioning capital expenditures150,000 
Non-revenue-enhancing capital expenditures65,000 
Guidance midpoint$1,740,000 
71


Results of operations

We present a tabular comparison of items, whether gain or loss, that may facilitate a high-level understanding of our results and provide context for the disclosures included in our annual report on Form 10-K for the year ended December 31, 2020, and our subsequent quarterly reports on Form 10-Q. We believe such tabular presentation promotes a better understanding for investors of the corporate-level decisions made and activities performed that significantly affect comparison of our operating results from period to period. We also believe this tabular presentation will supplement for investors an understanding of our disclosures and real estate operating results. Gains or losses on sales of real estate and impairments of held for sale assets are related to corporate-level decisions to dispose of real estate. Gains or losses on early extinguishment of debt are related to corporate-level financing decisions focused on our capital structure strategy. Significant realized and unrealized gains or losses on non-real estate investments, impairments of real estate and non-real estate investments, and significant termination fees are not related to the operating performance of our real estate assets as they result from strategic, corporate-level decisions and external market conditions. Impairments of non-real estate investments are not related to the operating performance of our real estate as they represent the write-down of non-real estate investments when their fair values decline below their respective carrying values due to changes in general market or other conditions outside of our control. Significant items, whether a gain or loss, included in the tabular disclosure for current periods are described in further detail within this Item 2. Key items included in net income attributable to Alexandria’s common stockholders for the three months ended March 31, 2021 and 2020, were as follows (In millions, except per share amounts):

Three Months Ended March 31,
2021202020212020

AmountPer Share – Diluted
Unrealized losses on non-real estate investments$(46.3)$(17.1)$(0.34)$(0.14)
Realized gains on non-real estate investments22.9 
(1)
— 0.17 — 
Gain on sales of real estate2.8 
(1)
— 0.02 — 
Impairment of real estate(5.1)
(1)
(9.6)(0.04)(0.08)
Impairment of non-real estate investments— (19.8)— (0.16)
Loss on early extinguishment of debt(67.3)
(1)
— (0.49)— 
Total$(93.0)$(46.5)$(0.68)$(0.38)
(1)Refer to “Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’s common stockholders“ in the “Non-GAAP measures and definitions” section within this Item 2 for additional information.
72


Same properties

We supplement an evaluation of our results of operations with an evaluation of operating performance of certain of our properties, referred to as Same Properties. For additional information on the determination of our Same Properties portfolio, refer to the definition of “Same property comparisons” in the “Non-GAAP measures and definitions” section within this Item 2. The following table presents information regarding our Same Properties for the three months ended March 31, 2021:

Three Months Ended March 31, 2021
Percentage change in net operating income over comparable period from prior year
4.4%
Percentage change in net operating income (cash basis) over comparable period from prior year
6.1%
Operating margin
73%
Number of Same Properties
250 
RSF
23,716,975 
Occupancy – current-period average
96.3%
Occupancy – same-period prior-year average
96.4%

The following table reconciles the number of Same Properties to total properties for the three months ended March 31, 2021:

Development – under construction
Properties
9950 Medical Center Drive
1
The Alexandria Center® for Life Science – San Carlos
2
3115 Merryfield Row1
201 Haskins Way
1
Alexandria Center® for AgTech
2
Alexandria Center® for Advanced Technologies
201 Brookline Avenue
SD Tech by Alexandria
11 
Development – placed into service after
January 1, 2020
Properties
9804 Medical Center Drive
1165 Eastlake Avenue East
Redevelopment – under construction
Properties
5505 Morehouse Drive
Alexandria Center® for Life Science – Long Island City
3160 Porter Drive
The Arsenal on the Charles
11 
700 Quince Orchard Road
Alexandria Center® for Life Science – Durham
840 Winter Street
Other/San Diego
20400 Century Boulevard
21 
Redevelopment – placed into service after January 1, 2020Properties
9877 Waples Street

Acquisitions after January 1, 2020Properties
3181 Porter Drive
275 Grove Street
601, 611, and 651 Gateway Boulevard
3330, 3412, 3450, and 3460 Hillview Avenue
9605 Medical Center Drive
9808 and 9868 Scranton Road
1075 Commercial Street
4555 Executive Drive
Alexandria Center® for Life Science – Durham
13 
Reservoir Woods
One Upland Road
830 4th Avenue South
11255 and 11355 North Torrey Pines Road
6420 and 6450 Sequence Drive
380 and 420 E Street
Alexandria Center® for Life Science – Fenway
704 Quince Orchard Road
Other26 
66 
Unconsolidated real estate JVs
Properties held for sale
Total properties excluded from Same Properties
110 
Same Properties
250 
Total properties in North America as of
March 31, 2021
360 
73


Comparison of results for the three months ended March 31, 2021, to the three months ended March 31, 2020

The following table presents a comparison of the components of net operating income for our Same Properties and Non-Same Properties for the three months ended March 31, 2021, compared to the three months ended March 31, 2020. Refer to the “Non-GAAP measures and definitions” section within this Item 2 for definitions of “Tenant recoveries” and “Net operating income” and their reconciliations from the most directly comparable financial measures presented in accordance with GAAP, income from rentals and net income (loss), respectively.

For additional discussion related to the COVID-19 pandemic and its impact to us, refer to “The COVID-19 pandemic” section within this Item 2. In addition, refer to “Item 1A. Risk factors” in our annual report on Form 10-K for the year ended December 31, 2020, for a discussion about risks that COVID-19 directly or indirectly may pose to our business.
Three Months Ended March 31,
(Dollars in thousands)20212020$ Change% Change
Income from rentals:
Same Properties$302,036 $294,616 $7,420 2.5 %
Non-Same Properties68,197 43,326 24,871 57.4 
Rental revenues370,233 337,942 32,291 9.6 
Same Properties96,638 92,280 4,358 4.7 
Non-Same Properties11,824 7,383 4,441 60.2 
Tenant recoveries108,462 99,663 8,799 8.8 
Income from rentals478,695 437,605 41,090 9.4 
Same Properties101 100 1.0 
Non-Same Properties1,053 2,214 (1,161)(52.4)
Other income1,154 2,314 (1,160)(50.1)
Same Properties398,775 386,996 11,779 3.0 
Non-Same Properties81,074 52,923 28,151 53.2 
Total revenues479,849 439,919 39,930 9.1 
Same Properties108,395 108,947 (552)(0.5)
Non-Same Properties29,493 20,156 9,337 46.3 
Rental operations137,888 129,103 8,785 6.8 
Same Properties290,380 278,049 12,331 4.4 
Non-Same Properties51,581 32,767 18,814 57.4 
Net operating income$341,961 $310,816 $31,145 10.0 %
Net operating income – Same Properties$290,380 $278,049 $12,331 4.4 %
Straight-line rent revenue
(17,582)(19,417)1,835 (9.5)
Amortization of acquired below-market leases(3,466)(4,778)1,312 (27.5)
Net operating income – Same Properties (cash basis)$269,332 $253,854 $15,478 6.1 %

Income from rentals

Total income from rentals for the three months ended March 31, 2021, increased by $41.1 million, or 9.4%, to $478.7 million, compared to $437.6 million for the three months ended March 31, 2020, as a result of increases in rental revenues and tenant recoveries, as discussed below.
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Rental revenues

Total rental revenues for the three months ended March 31, 2021, increased by $32.3 million, or 9.6%, to $370.2 million, compared to $337.9 million for the three months ended March 31, 2020. The increase was primarily due to an increase in rental revenues from our Non-Same Properties aggregating $24.9 million primarily related to 457,965 RSF of development and redevelopment projects placed into service subsequent to January 1, 2020, and 66 operating properties aggregating 7.5 million RSF acquired subsequent to January 1, 2020.

Rental revenues from our Same Properties for the three months ended March 31, 2021, increased by $7.4 million, or 2.5%, to $302.0 million, compared to $294.6 million for the three months ended March 31, 2020. The increase was primarily due to an $8.6 million increase in rental revenues from rental rate increases on lease renewals and re-leasing of space since January 1, 2020. This increase was partially offset by a decrease in retail and retail-related and transient parking revenues, due to the continued impact of COVID-19 during the three months ended March 31, 2021.

Tenant recoveries

Tenant recoveries for the three months ended March 31, 2021, increased by $8.8 million, or 8.8%, to $108.5 million, compared to $99.7 million for the three months ended March 31, 2020. The increase was primarily from our Non-Same Properties related to our development and redevelopment projects placed into service and properties acquired subsequent to January 1, 2020, as discussed above under “Rental revenues.”

Same Properties’ tenant recoveries for the three months ended March 31, 2021, increased by $4.4 million, or 4.7%, primarily due to an increase in recoverable property tax expenses resulting from higher assessed values of our properties, higher property insurance, and higher contract services expenses during the three months ended March 31, 2021, as discussed under “Rental operations” below. As of March 31, 2021, 94% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent.

Other income

Other income for the three months ended March 31, 2021 and 2020, was $1.2 million and $2.3 million, respectively, primarily consisting of construction management fees and interest income earned during each respective period.

Rental operations

Total rental operating expenses for the three months ended March 31, 2021, increased by $8.8 million, or 6.8%, to $137.9 million, compared to $129.1 million for the three months ended March 31, 2020. The increase was primarily due to incremental expenses related to our Non-Same Properties, which consist of development and redevelopment projects placed into service and acquired properties, as discussed above under “Income from rentals.”

Same Properties’ rental operating expenses decreased by $0.6 million, or 0.5%, to $108.4 million during the three months ended March 31, 2021, compared to $108.9 million for the three months ended March 31, 2020. The decrease was primarily the result of a $5.0 million decrease in retail and retail-related and transient parking operating expenses, due to the continued impact of COVID-19 during the three months ended March 31, 2021. The decrease was partially offset by a $4.4 million increase in recoverable property tax expenses resulting from higher assessed values of our properties, higher property insurance, and higher contract services expenses.

General and administrative expenses

General and administrative expenses for the three months ended March 31, 2021, increased by $2.0 million, or 6.4%, to $34.0 million, compared to $32.0 million for the three months ended March 31, 2020. The increase was primarily due to the costs related to our corporate responsibility efforts, as well as the continued growth in the depth and breadth of our operations in multiple markets. As a percentage of net operating income, our general and administrative expenses for the trailing twelve months ended March 31, 2021 and 2020, were 9.8% and 10.2%, respectively.

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Interest expense

Interest expense for the three months ended March 31, 2021 and 2020, consisted of the following (dollars in thousands):

Three Months Ended March 31,
Component20212020Change
Gross interest$76,353 $70,419 $5,934 
Capitalized interest(39,886)(24,680)(15,206)
Interest expense$36,467 $45,739 $(9,272)
Average debt balance outstanding(1)
$8,683,228 $7,241,621 $1,441,607 
Weighted-average annual interest rate(2)
3.5 %3.9 %(0.4)%
(1)Represents the average debt balance outstanding during the respective periods.
(2)Represents annualized total interest incurred divided by the average debt balance outstanding in the respective periods.

The net change in interest expense during the three months ended March 31, 2021, compared to the three months ended March 31, 2020, resulted from the following (dollars in thousands):

Component
Interest Rate(1)
Effective DateChange
Increases in interest incurred due to:
Issuances of debt:
$1.0 billion unsecured senior notes payable due 20331.97 %August 2020$4,723 
$700 million unsecured senior notes payable due 20305.05 %March 20208,108 
$900 million unsecured senior notes payable due 2032 – green bond2.12 %February 20212,177 
$850 million unsecured senior notes payable due 20513.08 %February 20213,055 
Other increase in interest
636 
Total increases18,699 
Decreases in interest incurred due to:
Repayments of debt:
Secured notes payableVariousDecember 2020(988)
$500 million unsecured senior notes payable due 20234.04 %September 2020(4,915)
$650 million unsecured senior notes payable due 2024 – green bond4.03 %March 2021(3,348)
Fluctuations in interest rate and average balance:
Unsecured senior line of credit(1,213)
$1.5 billion commercial paper program(2,301)
Total decreases(12,765)
Change in gross interest5,934 
Increase in capitalized interest(15,206)
Total change in interest expense$(9,272)
(1)Represents the weighted-average interest rate as of the end of the applicable period, including amortization of loan fees, amortization of debt premiums (discounts), and other bank fees.

Depreciation and amortization

Depreciation and amortization expense for the three months ended March 31, 2021, increased by $5.4 million, or 3.1%, to $180.9 million, compared to $175.5 million for the three months ended March 31, 2020. The increase was primarily due to additional depreciation from 457,965 RSF of development and redevelopment projects placed into service subsequent to January 1, 2020, and 66 operating properties aggregating 7.5 million RSF acquired subsequent to January 1, 2020.

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Impairment of real estate

During the three months ended December 31, 2020, we recognized impairment charges aggregating $25.2 million upon classification as held for sale of the three of our real estate properties located in our San Francisco Bay Area and Seattle markets. During the three months ended March 31, 2021, we recognized additional impairment charges aggregating $5.1 million to further lower the carrying amounts of these properties to their respective estimated fair values based on the respective sales price negotiated for each property during February–March 2021, less costs to sell. We expect to complete these sales during the three months ending June 30, 2021.

During the three months ended March 31, 2020, we recognized impairment charges of $2.0 million in connection with the write-off of real estate deal costs primarily related to four potential acquisitions of real estate properties that we ultimately decided not to acquire.

Loss on early extinguishment of debt

During the three months ended March 31, 2021, we recognized a loss on early extinguishment of debt of $67.3 million, including the write-off of unamortized loan fees, primarily related to the refinancing of our 4.00% unsecured senior notes payable aggregating $650.0 million due in 2024 pursuant to a partial cash tender offer completed on February 10, 2021, and a subsequent call for redemption for the remaining outstanding amounts completed on March 12, 2021.

Equity in earnings of unconsolidated real estate joint ventures

During the three months ended March 31, 2021, we recognized equity in earnings of unconsolidated real estate joint ventures aggregating $3.5 million.    

During the three months ended March 31, 2020, we recognized equity in losses from our unconsolidated real estate joint ventures aggregating $3.1 million, which included a $7.6 million impairment charge discussed below partially offset by the earnings from our unconsolidated real estate joint ventures of $4.5 million.

In March 2020, the impact of COVID-19 pandemic and the resulting State of Maryland’s “shelter in place” order led to the closure of a retail center owned by one of our unconsolidated joint ventures. We evaluated the recoverability of our investment in this joint venture and during the three months ended March 31, 2020 we recognized a $7.6 million impairment charge to lower the carrying amount of our investment balance, which primarily consisted of real estate, to its estimated fair value less costs to sell.

Investment income

During the three months ended March 31, 2021, we recognized investment income aggregating $1.0 million, which consisted of $47.3 million of realized gains and $46.3 million of unrealized losses. Realized gains included a $22.9 million realized gain related to the acquisition of one of our privately held non-real estate investments in a biopharmaceutical company by a pharmaceutical company, as well as gains realized from distributions received from our investments in limited partnerships during the three months ended March 31, 2021. Unrealized losses of $46.3 million primarily consisted of decreases in fair values of our investments in publicly traded companies during the three months ended March 31, 2021.

During the three months ended March 31, 2020, we recognized investment losses aggregating $21.8 million, which consisted of $17.1 million of unrealized losses and $4.7 million of realized losses.

For more information about our investments, refer to Note 7 – “Investments” to our unaudited consolidated financial statements under Item 1 of this report. For our impairments accounting policy, refer to the “Investments” section of Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements under Item 1 of this report.

Gain on sales of real estate

During the three months ended March 31, 2021, we recognized $2.8 million of gains related to the completion of two real estate dispositions. These gains were classified in gain on sales of real estate within our consolidated statements of operations for the three months ended March 31, 2021.
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Projected results

We present updated guidance for EPS attributable to Alexandria’s common stockholders – diluted, and funds from operations per share attributable to Alexandria’s common stockholders – diluted, as adjusted, based on our current view of existing market conditions and other assumptions for the year ending December 31, 2021, as set forth, in the tables below. The tables below also provide a reconciliation of EPS attributable to Alexandria’s common stockholders – diluted, the most directly comparable GAAP measure, to funds from operations per share and funds from operations per share, as adjusted, non-GAAP measures, and other key assumptions included in our updated guidance for the year ending December 31, 2021. There can be no assurance that actual amounts will not be materially higher or lower than these expectations. Refer to our discussion of “Forward-looking statements” within this Item 2.

Projected 2021 Earnings per Share and Funds From Operations per Share Attributable to Alexandria’s Common Stockholders – DilutedAs of 4/26/21As of 2/1/21
Earnings per share(1)
$1.58 to $1.68$2.14 to $2.34
Depreciation and amortization of real estate assets
5.505.50
Gain on sales of real estate(2)
(0.02)
Impairment of real estate – rental properties(2)
0.04
Allocation of unvested restricted stock awards
(0.03)(0.04)
Funds from operations per share(2)
$7.07 to $7.17$7.60 to $7.80
Unrealized losses on non-real estate investments0.34
Realized gains on non-real estate investments(2)
(0.17)
Loss on early extinguishment of debt(2)
0.49
Allocation to unvested restricted stock awards
(0.01)
Other(0.04)
Funds from operations per share, as adjusted(2)
$7.68 to $7.78$7.60 to $7.80
Midpoint
$7.73$7.70
(1)Excludes unrealized gains or losses after March 31, 2021, that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted.
(2)Refer to the definition of “Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’s common stockholders” in the “Non-GAAP measures and definitions” section within this Item 2 for additional information.


Key Assumptions(1)
(Dollars in millions)
As of 4/26/21As of 2/1/21
LowHighLowHigh
Occupancy percentage for operating properties in North America as of December 31, 2021(2)
95.3%95.9%95.6%96.2%
Lease renewals and re-leasing of space:
Rental rate increases
30.0%33.0%29.0%32.0%
Rental rate increases (cash basis)
17.0%20.0%16.0%19.0%
Same property performance:
Net operating income increase
1.5%3.5%1.0%3.0%
Net operating income increase (cash basis)
4.3%6.3%4.0%6.0%
Straight-line rent revenue
$114 $124 $114 $124 
General and administrative expenses$146 $151 $146 $151 
Capitalization of interest
$172 $182 $167 $177 
Interest expense
$128 $138 $133 $143 
(1)Our assumptions presented in the table above are subject to a number of variables and uncertainties, including those discussed as “Forward-looking statements” under Part I; “Item 1A. Risk factors” and “Item 7. Management’s discussion and analysis of financial condition and results of operations” of our annual report on Form 10-K for the year ended December 31, 2020, as well as in “Item 1A. Risk factors” within “Part II – Other information” of this quarterly report on Form 10-Q.
(2)Updated guidance for occupancy percentage in North America as of December 31, 2021, reflects vacancy at the recently acquired property at the Alexandria Center® for Life Science – Fenway, representing lease-up opportunities that will contribute to growth in cash flows. Refer to “Summary of occupancy percentages in North America” within this Item 2 Information for additional details.

Key Credit Metrics
As of 4/26/21As of 2/1/21
Net debt and preferred stock to Adjusted EBITDA – fourth quarter of 2021, annualizedLess than or equal to 5.2xLess than or equal to 5.2x
Fixed-charge coverage ratio – fourth quarter of 2021, annualizedGreater than or equal to 4.8xGreater than or equal to 4.5x
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Consolidated and unconsolidated real estate joint ventures

We present components of balance sheet and operating results information for the noncontrolling interest share of our consolidated real estate joint ventures and for our share of investments in unconsolidated real estate joint ventures to help investors estimate balance sheet and operating results information related to our partially owned entities. These amounts are estimated by computing, for each joint venture that we consolidate in our financial statements, the noncontrolling interest percentage of each financial item to arrive at the cumulative noncontrolling interest share of each component presented. In addition, for our real estate joint ventures that we do not control and do not consolidate, we apply our economic ownership percentage to the unconsolidated real estate joint ventures to arrive at our proportionate share of each component presented. Refer to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements under Item 1 of this report for further discussion.
Consolidated Real Estate Joint Ventures
Property/Market/Submarket
Noncontrolling(1)
Interest Share
Operating RSF
at 100%
75/125 Binney Street/Greater Boston/Cambridge/Inner Suburbs60.0 %388,270 
225 Binney Street/Greater Boston/Cambridge/Inner Suburbs70.0 %305,212 
57 Coolidge Avenue/Greater Boston/Cambridge/Inner Suburbs25.0 %— 
(2)
409 and 499 Illinois Street/San Francisco Bay Area/Mission Bay40.0 %455,069 
1500 Owens Street/San Francisco Bay Area/Mission Bay49.9 %158,267 
Alexandria Technology Center® – Gateway/San Francisco Bay Area/South San Francisco(3)
54.1 %1,089,852 
500 Forbes Boulevard/San Francisco Bay Area/South San Francisco90.0 %155,685 
Alexandria Center® for Life Science – Millbrae Station/San Francisco Bay Area/South San Francisco
64.5 %— 
Alexandria Point/San Diego/University Town Center(4)
45.0 %1,337,916 
5200 Illumina Way/San Diego/University Town Center
49.0 %792,687 
9625 Towne Centre Drive/San Diego/University Town Center
49.9 %163,648 
SD Tech by Alexandria/San Diego/Sorrento Mesa(5)
50.0 %677,597 
The Eastlake Life Science Campus by Alexandria/Seattle/Lake Union(6)
70.0 %321,218 
Unconsolidated Real Estate Joint Ventures
Property/Market/Submarket
Our Ownership Share(7)
Operating RSF
at 100%
1655 and 1725 Third Street/San Francisco Bay Area/Mission Bay10.0 %586,208
Menlo Gateway/San Francisco Bay Area/Greater Stanford49.0 %772,983

(1)In addition to the consolidated real estate joint ventures listed, various partners hold insignificant noncontrolling interests in six other real estate joint ventures in North America.
(2)We expect to commence vertical construction of 275,000 RSF during 2021.
(3)Excludes 600, 630, 650, 901, and 951 Gateway Boulevard in our South San Francisco submarket. Noncontrolling interest share is anticipated to be 49% as we make further contributions into the joint venture over time.
(4)Excludes 9880 Campus Point Drive in our University Town Center submarket.
(5)Excludes 5505 Morehouse Drive and 10121 and 10151 Barnes Canyon Road in our Sorrento Mesa submarket.
(6)Excludes 1165, 1551, and 1616 Eastlake Avenue East, 188 East Blaine Street, and 1600 Fairview Avenue East in our Lake Union submarket.
(7)In addition to the unconsolidated real estate joint ventures listed, we hold an interest in two other insignificant unconsolidated real estate joint ventures in North America.

The following table presents key terms related to our unconsolidated real estate joint ventures’ secured loans as of March 31, 2021 (dollars in thousands):
Maturity DateStated Rate
Interest Rate(1)
Debt Balance
at 100%(2)
Unconsolidated Joint VentureOur Share
1655 and 1725 Third Street10.0%3/10/254.50%4.57%$598,338 
Menlo Gateway, Phase II49.0%5/1/354.53%4.59%155,965 
Menlo Gateway, Phase I49.0%8/10/354.15%4.18%138,905 
$893,208 
(1)Includes interest expense and amortization of loan fees.
(2)Represents outstanding principal, net of unamortized deferred financing costs, as of March 31, 2021.
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The following tables present information related to the operating results and financial positions of our consolidated and unconsolidated real estate joint ventures for the three months ended March 31, 2021 (in thousands):
Three Months Ended March 31, 2021
Noncontrolling Interest
Share of Consolidated
Real Estate Joint Ventures
Our Share of Unconsolidated
Real Estate Joint Ventures
Total revenues$44,762 $10,512 
Rental operations(12,015)(1,546)
32,747 8,966 
General and administrative(109)(30)
Interest— (2,323)
Depreciation and amortization(15,443)(3,076)
Fixed returns allocated to redeemable noncontrolling interests(1)
217 — 
$17,412 $3,537 
Straight-line rent and below-market lease revenue
$855 $998 
Funds from operations(2)
$32,855 $6,613 

(1)Represents an allocation of joint venture earnings to redeemable noncontrolling interests primarily in one property in our South San Francisco submarket. These redeemable noncontrolling interests earn a fixed return on their investment rather than participate in the operating results of the property.
(2)Refer to the definition of “Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’s common stockholders” in the “Non-GAAP measures and definitions” section within this Item 2 for the definition and the reconciliation from the most directly comparable GAAP measure.
As of March 31, 2021
Noncontrolling Interest Share of Consolidated
Real Estate Joint Ventures
Our Share of Unconsolidated
Real Estate Joint Ventures
Investments in real estate$1,605,686 $466,268 
Cash, cash equivalents, and restricted cash53,386 9,390 
Other assets215,438 58,946 
Secured notes payable — (202,710)
Other liabilities(82,954)(5,966)
Redeemable noncontrolling interests
(11,454)— 
$1,780,102 $325,928 

During the three months ended March 31, 2021 and 2020, our consolidated real estate joint ventures distributed an aggregate of $25.9 million and $16.7 million, respectively, to our joint venture partners. Refer to our consolidated statements of cash flows and Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements under Item 1 of this report for additional information.
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Investments

We present our equity investments at fair value whenever fair value or NAV is readily available. Adjustments for our limited partnership investments represent changes in reported NAV as a practical expedient to estimate fair value. For investments without readily available fair values, we adjust the carrying amount whenever such investments have an observable price change, and further adjustments are not made until another price change, if any, is observed. Refer to Note 7 – “Investments” to our unaudited consolidated financial statements under Item 1 of this report for additional information.

(In thousands)Three Months Ended March 31, 2021Year Ended December 31, 2020
Realized gains$47,265 
(1)
$47,288 
(2)
Unrealized (losses) gains(46,251)374,033 
Investment income$1,014 $421,321 

Investments
(In thousands)
CostUnrealized
Gains
Carrying Amount
Fair value:
Publicly traded companies
$234,146 $322,871 
(3)
$557,017 
Entities that report NAV
348,207 327,831 676,038 
Entities that do not report NAV:
Entities with observable price changes
51,816 78,723 130,539 
Entities without observable price changes
278,217 — 278,217 
March 31, 2021$912,386 
(4)
$729,425 $1,641,811 
December 31, 2020$835,438 $775,676 $1,611,114 

(1)Includes $22.9 million of realized gain related to the acquisition of one of our privately held non-real estate investments in a biopharmaceutical company by a pharmaceutical company.
(2)Includes impairments of $24.5 million related to investments in privately held entities that do not report NAV.
(3)Includes gross unrealized gains and losses of $346.3 million and $23.4 million, respectively, as of March 31, 2021.
(4)Represents 3.2% of total gross assets as of March 31, 2021.

Public/Private
Mix (Cost)
are-20210331_g31.jpg
Tenant/Non-Tenant
Mix (Cost)
are-20210331_g32.jpg
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Liquidity
LiquidityMinimal Outstanding Borrowings and Significant Availability on Unsecured Senior Line of Credit
$4.3B(in millions)
are-20210331_g33.jpg
(In millions)
Availability under our unsecured senior line of credit, net of amounts outstanding under our commercial paper program
$3,000 
Outstanding forward equity sales agreements(1)
233 
Cash, cash equivalents, and restricted cash534 
Investments in publicly traded companies557 
Liquidity as of March 31, 2021
$4,324 
Net Debt and Preferred Stock to Adjusted EBITDA(2)
Fixed-Charge Coverage Ratio(2)
are-20210331_g34.jpg
are-20210331_g35.jpg
(1)Represents expected net proceeds from the future settlement of the remaining 1.5 million shares outstanding under our forward equity sales agreements as of March 31, 2021.
(2)Quarter annualized. Refer to the definitions of “Fixed-charge coverage ratio” and “Net debt and preferred stock to Adjusted EBITDA” in the “Non-GAAP measures and definitions” section within this Item 2 for additional details.

We expect to meet certain long-term liquidity requirements, such as requirements for development, redevelopment, other construction projects, capital improvements, tenant improvements, property acquisitions, leasing costs, non-revenue-enhancing capital expenditures, scheduled debt maturities, distributions to noncontrolling interests, and payment of dividends through net cash provided by operating activities, periodic asset sales, strategic real estate joint venture capital, and long-term secured and unsecured indebtedness, including borrowings under our unsecured senior line of credit, issuances under our commercial paper program, and issuances of additional debt and/or equity securities.

We expect to continue meeting our short-term liquidity and capital requirements, as further detailed in this section, generally through our working capital and net cash provided by operating activities. We believe that the net cash provided by operating activities will continue to be sufficient to enable us to make the distributions necessary to continue qualifying as a REIT.

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Over the next several years, our balance sheet, capital structure, and liquidity objectives are as follows:

Retain positive cash flows from operating activities after payment of dividends and distributions to noncontrolling interests for investment in development and redevelopment projects and/or acquisitions;
Improve credit profile and relative long-term cost of capital;
Maintain diverse sources of capital, including sources from net cash provided by operating activities, unsecured debt, secured debt, selective real estate asset sales, partial interest sales, non-real estate investment sales, preferred stock, and common stock;
Maintain commitment to long-term capital to fund growth;
Maintain prudent laddering of debt maturities;
Maintain solid credit metrics;
Maintain significant balance sheet liquidity;
Mitigate variable-rate debt exposure through the reduction of short-term and medium-term variable-rate bank debt;
Maintain a large unencumbered asset pool to provide financial flexibility;
Fund common stock dividends and distributions to noncontrolling interests from net cash provided by operating activities;
Manage a disciplined level of value-creation projects as a percentage of our gross investments in real estate; and
Maintain high levels of pre-leasing and percentage leased in value-creation projects.

In addition, refer to “Item 1A. Risk factors” within “Part II – Other information” of this quarterly report on Form 10-Q for a discussion about risks that COVID-19 directly or indirectly may pose to our business.

The following table presents the availability under our unsecured senior line of credit, net of amounts outstanding under our commercial paper program; outstanding forward equity sales agreements; cash, cash equivalents, and restricted cash; and investments in publicly traded companies as of March 31, 2021 (dollars in thousands):

DescriptionStated RateAggregate
Commitments
Outstanding
Balance
Remaining Commitments/Liquidity
Availability under our unsecured senior line of creditL+0.815 %$3,000,000 $— $3,000,000 
Outstanding forward equity sales agreements
232,600 
Cash, cash equivalents, and restricted cash
534,403 
Investments in publicly traded companies
557,017 
Total liquidity as of March 31, 2021
$4,324,020 

Cash, cash equivalents, and restricted cash

As of March 31, 2021, and December 31, 2020, we had $534.4 million and $597.7 million, respectively, of cash, cash equivalents, and restricted cash. We expect existing cash, cash equivalents, and restricted cash, net cash from operating activities, proceeds from real estate asset sales and partial interest sales, non-real estate investment sales, borrowings under our unsecured senior line of credit, issuances under our commercial paper program, issuances of unsecured notes payable, and issuances of common stock to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, such as regular quarterly dividends, distributions to noncontrolling interests, scheduled debt repayments, acquisitions, and certain capital expenditures, including expenditures related to construction activities.

Cash flows

We report and analyze our cash flows based on operating activities, investing activities, and financing activities. The following table summarizes changes in our cash flows for the three months ended March 31, 2021 and 2020 (in thousands):
Three Months Ended March 31,
20212020Change
Net cash provided by operating activities$212,053 $191,267 $20,786 
Net cash used in investing activities$(2,437,880)$(833,592)$(1,604,288)
Net cash provided by financing activities$2,162,254 $889,675 $1,272,579 
83


Operating activities

Cash flows provided by operating activities are primarily dependent upon the occupancy level of our asset base, the rental rates of our leases, the collectibility of rent and recovery of operating expenses from our tenants, the timing of completion of development and redevelopment projects, and the timing of acquisitions and dispositions of operating properties. Net cash provided by operating activities for the three months ended March 31, 2021, increased to $212.1 million, compared to $191.3 million for the three months ended March 31, 2020. This increase was primarily attributable to (i) cash flows generated from our highly leased development and redevelopment projects recently placed into service, (ii) income-producing acquisitions since January 1, 2020, and (iii) increases in rental rates on lease renewals and re-leasing of space since January 1, 2020.

Investing activities

Cash used in investing activities for the three months ended March 31, 2021 and 2020, consisted of the following (in thousands):
 Three Months Ended March 31,Increase (Decrease)
 20212020
Sources of cash from investing activities:
Sales of non-real estate investments
$57,569 $30,910 $26,659 
Proceeds from sales of real estate25,695 — 25,695 
Return of capital from unconsolidated real estate joint ventures
— 20,224 (20,224)
Change in escrow deposits— 4,834 (4,834)
83,264 55,968 27,296 
Uses of cash for investing activities:
Purchases of real estate
1,871,043 482,409 1,388,634 
Additions to real estate
465,411 373,499 91,912 
Acquisition of interest in unconsolidated real estate joint ventures9,048 — 9,048 
Investments in unconsolidated real estate joint ventures
— 2,592 (2,592)
Change in escrow deposits98,303 — 98,303 
Additions to non-real estate investments
77,339 31,060 46,279 
2,521,144 889,560 1,631,584 
Net cash used in investing activities$2,437,880 $833,592 $1,604,288 

The increase in net cash used in investing activities for the three months ended March 31, 2021, was primarily due to an increased use of cash for property acquisitions and additions to real estate, partially offset by increased proceeds from sales of non-real estate investments and sales of real estate. Refer to Note 3 – “Investments in real estate” to our unaudited consolidated financial statements under Item 1 of this report for additional information.
84


Financing activities

Cash flows provided by financing activities for the three months ended March 31, 2021 and 2020, consisted of the following (in thousands):
Three Months Ended March 31,
20212020Change
Repayments of borrowings from secured notes payable
$(15,423)$(1,479)$(13,944)
Proceeds from issuance of unsecured senior notes payable
1,743,716 699,531 1,044,185 
Repayments of unsecured senior notes payable
(650,000)— (650,000)
Premium paid for early extinguishment of debt
(66,829)— (66,829)
Borrowings from unsecured senior line of credit
2,101,000 783,000 1,318,000 
Repayments of borrowings from unsecured senior line of credit
(2,101,000)(946,000)(1,155,000)
Proceeds from issuance under commercial paper program6,810,000 2,158,900 4,651,100 
Repayments of borrowings from commercial paper program
(6,910,000)(2,158,900)(4,751,100)
Payments of loan fees
(16,599)(7,954)(8,645)
Changes related to debt
894,865 527,098 367,767 
Contributions from and sales of noncontrolling interests
48,279 2,756 45,523 
Distributions to and purchases of noncontrolling interests(25,879)(16,986)(8,893)
Proceeds from the issuance of common stock1,397,649 504,338 893,311 
Dividend payments
(150,982)(126,278)(24,704)
Taxes paid related to net settlement of equity awards
(1,678)(1,253)(425)
Net cash provided by financing activities$2,162,254 $889,675 $1,272,579 
85


Capital resources

We expect that our principal liquidity needs for the year ending December 31, 2021, will be satisfied by the following multiple sources of capital, as shown in the table below. There can be no assurance that our sources and uses of capital will not be materially higher or lower than these expectations.
Key Sources and Uses of Capital
(In millions)
As of 4/26/21
RangeMidpointCertain
Completed Items
As of 2/1/21 Midpoint
Sources of capital:
Net cash provided by operating activities after dividends$210 $250 $230 $230 
Incremental debt930 1,040 985 see below735 
2020 debt capital proceeds held in cash at the beginning of 2021150 250 200 200 
Real estate dispositions and partial interest sales 1,250 1,500 1,375 $324 1,375 
Common equity2,000 2,400 2,200 $1,634 
(1)
1,900 
Total sources of capital$4,540 $5,440 $4,990 $4,440 
Uses of capital:
Construction (refer to the “Investments in real estate” section within Item 2 for additional information)
$1,590 $1,890 $1,740 $1,740 
Acquisitions (refer to the “ Acquisitions” section within Item 2 for additional information)2,800 3,300 3,050 $2,201 2,700 
2021 debt capital proceeds held in cash150 250 200 — 
Total uses of capital$4,540 $5,440 $4,990 $4,440 
Incremental debt (included above):
Issuance of unsecured senior notes payable$1,750 $1,750 $1,750 $1,750 
(2)
$900 
Principal repayments of unsecured senior notes payable(650)(650)(650)$(650)
(2)
— 
Unsecured senior line of credit, commercial paper, and other
(170)(60)(115)(165)
Incremental debt$930 $1,040 $985 $735 

(1)Refer to Note 13 – “Stockholders’ equity” to our unaudited consolidated financial statements under Item 1 of this report for additional details on our January 2021 forward equity offering and shares issued under our ATM program. As of March 31, 2021, we issued 8.8 million shares of common stock and received net proceeds of $1.4 billion in 2021. We expect to issue 1.5 million shares to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $232.6 million in 2021.
(2)Refer to Note 10 – “Secured and unsecured senior debt” to our unaudited consolidated financial statements under Item 1 of this report for additional details on the issuance of our $1.75 billion unsecured senior notes payable and the refinancing of our $650.0 million unsecured senior notes payable.

The key assumptions behind the sources and uses of capital in the table above include a favorable capital market environment, performance of our core operating properties, lease-up and delivery of current and future development and redevelopment projects, and leasing activity. Our expected sources and uses of capital are subject to a number of variables and uncertainties, including those discussed as “Forward-looking statements” under Part I; “Item 1A. Risk factors” and “Item 7. Management’s discussion and analysis of financial condition and results of operations” of our annual report on Form 10-K for the year ended December 31, 2020; and “Item 1A. Risk factors” within “Part II – Other information” of this quarterly report on Form 10-Q. We expect to update our forecast of sources and uses of capital on a quarterly basis.
86


Sources of capital

Net cash provided by operating activities after dividends

We expect to retain $210.0 million to $250.0 million of net cash flows from operating activities after payment of common stock dividends, and distributions to noncontrolling interests for the year ending December 31, 2021. For purposes of this calculation, changes in operating assets and liabilities are excluded as they represent timing differences. We also exclude significant contract termination fees that represent an ancillary source of cash that is not associated with any ongoing activity at any of our operating properties. For the year ending December 31, 2021, we expect our recently delivered projects, our highly pre-leased value-creation projects expected to be completed and along with contributions from Same Properties and recently acquired properties, to contribute significant increases in income from rentals, net operating income, and cash flows. We anticipate significant contractual near-term growth in annual cash rents of $26 million related to the commencement of contractual rents on the projects recently placed into service that are near the end of their initial free rent period. Refer to the “Cash flows” subsection of the “Liquidity” section within this Item 2 for a discussion of cash flows provided by operating activities for the three months ended March 31, 2021.

Debt

We expect to fund a portion of our capital needs for the remainder of 2021 from the settlement of our outstanding forward equity sales agreements, sales of our common stock under our ATM program, issuances under our commercial paper program discussed below, borrowings under our unsecured senior line of credit, and real estate dispositions and partial interest sales.

As of March 31, 2021, we have no outstanding balance on our unsecured senior line of credit. Our unsecured senior line of credit bears an interest rate of LIBOR plus 0.825% with a 0% LIBOR floor and is subject to certain annual sustainability measures entitling us to a temporary reduction in the interest rate margin of one basis point, but not below zero percent per year. During the three months ended March 31, 2021, we achieved certain sustainability measures, as described in our unsecured senior line of credit agreement, which reduced our borrowing rate to LIBOR plus 0.815% for a one-year period. In addition to the cost of borrowing, the unsecured senior line of credit is subject to an annual facility fee of 0.15% based on the aggregate commitments outstanding.

We use our unsecured senior line of credit to fund working capital, construction activities, and, from time to time, acquisition of properties. Borrowings under the unsecured senior line of credit bear interest at a “Eurocurrency Rate,” a “LIBOR Floating Rate,” or a “Base Rate” specified in the unsecured senior line of credit agreement plus, in any case, the Applicable Margin. The Eurocurrency Rate specified in the unsecured senior line of credit agreement is, as applicable, the rate per annum equal to either (i) the LIBOR or a successor rate thereto as agreed to by the administrative agent and the Company for loans denominated in a LIBOR quoted currency (i.e., U.S. dollars, euro, sterling, or yen), (ii) the average annual yield rates applicable to Canadian dollar bankers’ acceptances for loans denominated in Canadian dollars, (iii) the Bank Bill Swap Reference Bid rate for loans denominated in Australian dollars, or (iv) the rate designated with respect to the applicable alternative currency for loans denominated in a non-LIBOR quoted currency (other than Canadian or Australian dollars). The LIBOR Floating Rate means, for any day, one-month LIBOR, or a successor rate thereto as agreed to by the administrative agent and the Company for loans denominated in U.S. dollars. The Base Rate means, for any day, a fluctuating rate per annum equal to the highest of (i) the federal funds rate plus 1/2 of 1.00%, (ii) the rate of interest in effect for such day as publicly announced from time to time by the Administrative Agent as its “prime rate,” and (iii) the Eurocurrency Rate plus 1.00%. 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.

We established a commercial paper program that provides us with the ability to issue up to $1.5 billion of commercial paper notes with a maturity of generally 30 days or less and with a maximum maturity of 397 days from the date of issuance. Our commercial paper program is backed by our unsecured senior line of credit, and at all times we expect to retain a minimum undrawn amount of borrowing capacity under our unsecured senior line of credit equal to any outstanding balance on our commercial paper program. We use borrowings under the program to fund short-term capital needs. The notes issued under our commercial paper program are sold under customary terms in the commercial paper market. They are typically issued at a discount to par, representing a yield to maturity dictated by market conditions at the time of issuance. In the event we are unable to issue commercial paper notes or refinance outstanding commercial paper notes under terms equal to or more favorable than those under the unsecured senior line of credit, we expect to borrow under the unsecured senior line of credit at LIBOR plus 0.815%. The commercial paper notes sold during the three months ended March 31, 2021, were issued at a weighted-average yield to maturity of 0.22%. As of March 31, 2021, we had no outstanding notes under our commercial paper program.

In February 2021, we opportunistically issued $1.75 billion of unsecured senior notes payable with a weighted-average interest rate of 2.49% and a weighted-average maturity of 20.4 years. The unsecured senior notes consisted of $900.0 million of 2.00% unsecured senior notes due 2032 (“2.00% Unsecured Senior Notes”) and $850.0 million of 3.00% unsecured senior notes due 2051. The proceeds from our 2.00% Unsecured Senior Notes are expected to be allocated to eligible green projects and were initially used to refinance $650.0 million of our 4.00% unsecured senior notes payable due in 2024, pursuant to a partial cash tender offer completed on February 10, 2021, and a subsequent call for redemption for the remaining outstanding amounts that settled on March 12, 2021.
87


Proactive management of transition away from LIBOR

LIBOR has been used extensively in the U.S. and globally as a reference rate for various commercial and financial contracts, including variable-rate debt and interest rate swap contracts. However, based on an announcement made by the Financial Conduct Authority (“FCA”) on March 5, 2021, all LIBOR settings will effectively cease after June 30, 2023, and it is expected that LIBOR will no longer be used after this date. To address the impending discontinuation of LIBOR, in the U.S. the Alternative Reference Rates Committee (“ARRC”) was established to help ensure the successful transition from LIBOR. In June 2017, the ARRC selected SOFR, a new index calculated by reference to short-term repurchase agreements backed by U.S. Treasury securities, as its preferred replacement for U.S. dollar LIBOR. We have been closely monitoring developments related to the transition away from LIBOR and have implemented numerous proactive measures to minimize the potential impact of the transition to the Company, specifically:

We have proactively eliminated outstanding LIBOR-based borrowings under our unsecured senior bank term loans and secured construction loans through repayments. From January 2017 through March 2021, we retired approximately $1.5 billion of all such debt.
During 2020, we increased the aggregate amount of our commercial paper program to $1.5 billion from $750.0 million. This program provides us with ability to issue commercial paper notes bearing interest at short-term fixed rates, with a maturity of generally 30 days or less and with a maximum maturity of 397 days from the date of issuance. Our commercial paper program is not subject to LIBOR and is used for funding short-term working capital needs. As of March 31, 2021, we had no outstanding notes under our commercial paper program.
We continue to prudently manage outstanding borrowings under our unsecured senior line of credit, our only LIBOR-based debt. As of March 31, 2021, we had no borrowings outstanding under our unsecured senior line of credit.
As a result of the announcements made on March 5, 2021, our unsecured senior line of credit will automatically convert to SOFR after June 30, 2023, unless we complete an earlier amendment to transition to SOFR.
Our unsecured senior line of credit contains fallback language generally consistent with the ARRC’s Amendment Approach, which provides a streamlined amendment approach for negotiating a benchmark replacement and introduces clarity with respect to the fallback trigger events and an adjustment to be applied to the successor rate.
We continue to monitor developments by the FCA, ARRC and other governing bodies involved in LIBOR transition.

Refer to Note 10 – “Secured and unsecured senior debt” to our unaudited consolidated financial statements under Item 1 of this quarterly report on Form 10-Q and “Item 1A. Risk factors” of our annual report on Form 10-K for the year ended December 31, 2020, for additional information about our management of risks related to the transition away from LIBOR.

Real estate dispositions and partial interest sales

We expect to continue the disciplined execution of select sales of operating assets. Future sales will provide an important source of capital to fund a portion of pending and recently completed opportunistic acquisitions and our highly leased value-creation development and redevelopment projects, and also provide significant capital for growth over the next two to three quarters. We may also consider additional sales of partial interest in core Class A properties and/or development projects. For 2021, we expect real estate dispositions and partial interest sales ranging from $1.3 billion to $1.5 billion. The amount of asset sales necessary to meet our forecasted sources of capital will vary depending upon the amount of EBITDA associated with the assets sold.

As a REIT, we are generally subject to a 100% tax on the net income from real estate asset sales that the IRS characterizes as “prohibited transactions.” We do not expect our sales will be categorized as prohibited transactions. However, unless we meet certain “safe harbor” requirements, whether a real estate asset sale is a prohibited transaction will be based on the facts and circumstances of the sale. Our real estate asset sales may not always meet such “safe harbor” requirements. Refer to “Item 1A. Risk factors” of our annual report on Form 10-K for the year ended December 31, 2020, for additional information about the “prohibited transaction” tax.
88


Common equity transactions

During the three months ended March 31, 2021, our common equity transaction included the following:

In January 2021, we entered into forward equity sales agreements to sell an aggregate of 6.9 million shares of our common stock (including the exercise of underwriters’ option) aggregating $1.1 billion at a public offering price of $164.00 per share, before underwriting discounts and commissions.
During the three months ended March 31, 2021, we settled a portion of our forward equity sales agreements by issuing 5.4 million shares and received proceeds of $850.5 million.
We expect to issue 1.5 million shares to settle our remaining outstanding forward equity sales agreements and receive net proceeds of approximately $232.6 million in 2021.
In February 2021, we entered into a new ATM common stock offering program, which allows us to sell up to an aggregate of $1.0 billion of our common stock.
During the three months ended March 31, 2021, we issued 3.1 million shares under our ATM program at a price of $163.26 per share (before underwriting discounts) and received net proceeds of $492.3 million.
As of March 31, 2021, and as of the date of this report, the remaining aggregate amount available under our ATM program for future sales of common stock aggregated $500.0 million.
In March 2021, we issued the remaining 362 thousand shares of common stock to settle our forward equity sales agreements that were outstanding as of December 31, 2020, and received net proceeds of $56.2 million.

Other sources

Under our current shelf registration statement filed with the SEC, we may offer common stock, preferred stock, debt, and other securities. These securities may be issued, from time to time, at our discretion based on our needs and market conditions, including, as necessary, to balance our use of incremental debt capital.

Additionally, we hold interests, together with joint venture partners, in real estate joint ventures that we consolidate in our financial statements. These joint venture partners may contribute equity into these entities primarily related to their share of funds for construction and financing-related activities. During the three months ended March 31, 2021, we received $48.3 million of contributions from and sales of noncontrolling interests.
89


Uses of capital

Summary of capital expenditures

One of our primary uses of capital relates to the development, redevelopment, pre-construction, and construction of properties. We currently have projects in our growth pipeline aggregating 4.0 million RSF of Class A office/laboratory and tech office space undergoing construction, 7.3 million RSF of near-term and intermediate-term development and redevelopment projects, and 7.4 million SF of future development projects in North America. We incur capitalized construction costs related to development, redevelopment, pre-construction, and other construction activities. We also incur additional capitalized project costs, including interest, property taxes, insurance, and other costs directly related and essential to the development, redevelopment, pre-construction, or construction of a project, during periods when activities necessary to prepare an asset for its intended use are in progress. Refer to the “New Class A development and redevelopment properties: current projects” and “Summary of capital expenditures” subsections of the “Investments in real estate” section within this Item 2 for more information on our capital expenditures.

We capitalize interest cost as a cost of the project only during the period for which activities necessary to prepare an asset for its intended use are ongoing, provided that expenditures for the asset have been made and interest cost has been incurred. Capitalized interest for the three months ended March 31, 2021 and 2020, of $39.9 million and $24.7 million, respectively, was classified in investments in real estate. Indirect project costs, including construction administration, legal fees, and office costs that clearly relate to projects under development or construction, are capitalized as incurred during the period an asset is undergoing activities to prepare it for its intended use. We capitalized payroll and other indirect project costs related to development, redevelopment, pre-construction, and construction projects, which aggregated $16.8 million and $14.7 million for the three months ended March 31, 2021 and 2020, respectively. The increase in capitalized payroll and other indirect project costs for the three months ended March 31, 2021, compared to the same period in 2020 was primarily due to an increase in our value-creation pipeline projects undergoing construction and pre-construction activities aggregating 10 projects with 7.2 million RSF in 2021 over 2020. Pre-construction activities include entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building improvements. The advancement of pre-construction efforts is focused on reducing the time required to deliver projects to prospective tenants. These critical activities add significant value for future ground-up development and are required for the vertical construction of buildings. Should we cease activities necessary to prepare an asset for its intended use, the interest, taxes, insurance, and certain other direct project costs related to this asset would be expensed as incurred. Expenditures for repairs and maintenance are expensed as incurred.

Fluctuations in our development, redevelopment, and construction activities could result in significant changes to total expenses and net income. For example, had we experienced a 10% reduction in development, redevelopment, and construction activities without a corresponding decrease in indirect project costs, including interest and payroll, total expenses would have increased by approximately $5.7 million for the three months ended March 31, 2021.

We use third-party brokers to assist in our leasing activity, who are paid on a contingent basis upon successful leasing. We are required to capitalize initial direct costs related to successful leasing transactions that result directly from and are essential to the lease transaction and would not have been incurred had that lease transaction not been successfully executed. During the three months ended March 31, 2021, we capitalized total initial direct leasing costs of $33.8 million. Costs that we incur to negotiate or arrange a lease regardless of its outcome, such as fixed employee compensation, tax, or legal advice to negotiate lease terms, and other costs, are expensed as incurred.

Acquisitions

Refer to the “Acquisitions” section of Note 3 – “Investments in real estate” and to Note 4 – “Consolidated and unconsolidated real estate joint ventures” to our unaudited consolidated financial statements under Item 1 of this report, and the “Acquisitions” subsection of the “Investments in real estate” section within this Item 2 for information on our acquisitions.

Dividends

During the three months ended March 31, 2021 and 2020, we paid common stock dividends of $151.0 million and $126.3 million, respectively. The increase of $24.7 million in dividends paid on our common stock during the three months ended March 31, 2021, compared to the three months ended March 31, 2020, was primarily due to an increase in number of common shares outstanding subsequent to January 1, 2020, as a result of issuances of common stock under our ATM program and settlement of forward equity sales agreements, and partially due to the increase in the related dividends to $1.09 per common share paid during the three months ended March 31, 2021, from $1.03 per common share paid during the three months ended March 31, 2020.


90


Contractual obligations and commitments

Contractual obligations as of March 31, 2021, consisted of the following (in thousands):
Payments by Period
Total20212022–20232024–2025Thereafter
Secured and unsecured debt(1)(2)
$8,597,266 $2,555 $7,364 $783,593 $7,803,754 
Estimated interest payments on fixed-rate debt(3)
3,883,437 208,761 593,689 566,553 2,514,434 
Ground lease obligations – operating leases
794,376 12,916 34,750 35,115 711,595 
Operating office leases27,019 1,581 5,253 5,583 14,602 
Other obligations
35,765 312 836 844 33,773 
Total
$13,337,863 $226,125 $641,892 $1,391,688 $11,078,158 

(1)Amounts represent principal amounts due and exclude unamortized premiums (discounts) and deferred financing costs reflected in the consolidated balance sheets under Item 1 of this report.
(2)Payment dates reflect any extension options that we control.
(3)Amounts are based upon contractual interest rates, including interest payment dates and scheduled maturity dates.

Secured notes payable

Secured notes payable as of March 31, 2021, consisted of four notes secured by nine properties. Our secured notes payable typically require monthly payments of principal and interest and had a weighted-average interest rate of approximately 3.53%. As of March 31, 2021, the total book value of our investments in real estate securing debt was approximately $881.9 million. Additionally, as of March 31, 2021, our entire secured notes payable balance of $229.4 million, including unamortized discounts and deferred financing costs, was fixed-rate debt.

Unsecured senior notes payable and unsecured senior line of credit

The requirements of, and our actual performance with respect to, the key financial covenants under our unsecured senior notes payable as of March 31, 2021, were as follows:

Covenant Ratios(1)
RequirementMarch 31, 2021
Total Debt to Total AssetsLess than or equal to 60%31%
Secured Debt to Total AssetsLess than or equal to 40%1%
Consolidated EBITDA(2) to Interest Expense
Greater than or equal to 1.5x9.8x
Unencumbered Total Asset Value to Unsecured DebtGreater than or equal to 150%298%

(1)All covenant ratio titles utilize terms as defined in the respective debt agreements.
(2)The calculation of consolidated EBITDA is based on the definitions contained in our loan agreements and is not directly comparable to the computation of EBITDA as described in Exchange Act Release No. 47226.

In addition, the terms of the indentures, among other things, limit the ability of the Company, Alexandria Real Estate Equities, L.P., and the Company’s subsidiaries to (i) consummate a merger, or consolidate or sell all or substantially all of the Company’s assets, and (ii) incur certain secured or unsecured indebtedness.

The requirements of, and our actual performance with respect to, the key financial covenants under our unsecured senior line of credit as of March 31, 2021, were as follows:
Covenant Ratios(1)
RequirementMarch 31, 2021
Leverage RatioLess than or equal to 60.0%29.1%
Secured Debt RatioLess than or equal to 45.0%0.8%
Fixed-Charge Coverage RatioGreater than or equal to 1.50x4.01x
Unsecured Interest Coverage RatioGreater than or equal to 1.75x7.36x
(1)All covenant ratio titles utilize terms as defined in each respective credit agreement.

91


Estimated interest payments

Estimated interest payments on our fixed-rate debt were calculated based upon contractual interest rates, including interest payment dates and scheduled maturity dates. As of March 31, 2021, 100% of our debt was fixed-rate debt. For additional information regarding our debt, refer to Note 10 – “Secured and unsecured senior debt” to our unaudited consolidated financial statements under Item 1 of this report.

Ground lease obligations

Operating lease agreements

Ground lease obligations as of March 31, 2021, included leases for 37 of our properties, which accounted for approximately 10% of our total number of properties. Excluding one ground lease that expires in 2036 related to one operating property with a net book value of $6.9 million as of March 31, 2021, our ground lease obligations have remaining lease terms ranging from approximately 33 to 94 years, including available extension options that we are reasonably certain to exercise.

As of March 31, 2021, the remaining contractual payments under ground and office lease agreements in which we are the lessee aggregated $794.4 million and $27.0 million, respectively. We are required to recognize a right-of-use asset and a related liability to account for our future obligations under operating lease arrangements in which we are the lessee. The operating lease liability is measured based on the present value of the remaining lease payments, including payments during the term under our extension options that we are reasonably certain to exercise. The right-of-use asset is equal to the corresponding operating lease liability, adjusted for the initial direct leasing cost and any other consideration exchanged with the landlord prior to the commencement of the lease, as well as adjustments to reflect favorable or unfavorable terms of an acquired lease when compared with market terms at the time of acquisition. As of March 31, 2021, the present value of the remaining contractual payments, aggregating $821.4 million, under our operating lease agreements, including our extension options that we are reasonably certain to exercise, was $345.0 million, which was classified in accounts payable, accrued expenses, and other liabilities in our consolidated balance sheets. As of March 31, 2021, the weighted-average remaining lease term of operating leases in which we are the lessee was approximately 43 years, and the weighted-average discount rate was 4.88%. Our corresponding operating lease right-of-use assets, adjusted for initial direct leasing costs and other consideration exchanged with the landlord prior to the commencement of the lease, aggregated $371.1 million. We classify the right-of-use asset in other assets in our consolidated balance sheets. Refer to the “Lease accounting” section of Note 2 – “Summary of significant accounting policies” to our unaudited consolidated financial statements under Item 1 of this report for additional information.

Commitments

As of March 31, 2021, remaining aggregate costs under contract for the construction of properties undergoing development, redevelopment, and improvements under the terms of leases approximated $1.5 billion. We expect payments for these obligations to occur over one to three years, subject to capital planning adjustments from time to time. We may have the ability to cease the construction of certain properties, which would result in the reduction of our commitments. In addition, we have letters of credit and performance obligations aggregating $11.1 million primarily related to construction projects.

We are committed to funding approximately $249.8 million for non-real estate investments in privately held entities that report NAV. Our funding commitments expire at various dates over the next 12 years, with a weighted-average expiration of 8.5 years as of March 31, 2021.

Exposure to environmental liabilities

In connection with the acquisition of all of our properties, we have obtained Phase I environmental assessments to ascertain the existence of any environmental liabilities or other issues. The Phase I environmental assessments of our properties have not revealed any environmental liabilities that we believe would have a material adverse effect on our financial condition or results of operations taken as a whole, nor are we aware of any material environmental liabilities that have occurred since the Phase I environmental assessments were completed. In addition, we carry a policy of pollution legal liability insurance covering exposure to certain environmental losses at substantially all of our properties.

92


Foreign currency translation gains and losses

The following table presents the change in accumulated other comprehensive loss attributable to Alexandria Real Estate Equities, Inc.’s stockholders during the three months ended March 31, 2021, due to the changes in the foreign exchange rates for our real estate investments in Canada and Asia. We reclassify unrealized foreign currency translation gains and losses into net income (loss) as we dispose of these holdings.
(In thousands)Total
Balance as of December 31, 2020$(6,625)
Other comprehensive income before reclassifications826 
Net other comprehensive income826 
Balance as of March 31, 2021$(5,799)
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Issuer and guarantor subsidiary summarized financial information

Alexandria Real Estate Equities, Inc. (the “Issuer”) has sold certain debt securities registered under the Securities Act of 1933, as amended, that are fully and unconditionally guaranteed by Alexandria Real Estate Equities, L.P. (the “LP” or the “Guarantor Subsidiary”), an indirectly 100% owned subsidiary of the Issuer. The Issuer’s other subsidiaries, including, but not limited to, the subsidiaries that own substantially all of its real estate (collectively, the “Combined Non-Guarantor Subsidiaries”), will not provide a guarantee of such securities, including the subsidiaries that are partially or 100% owned by the LP. The following summarized financial information presents on a combined basis for the Issuer and the Guarantor Subsidiary balance sheet financial information as of March 31, 2021, and December 31, 2020, and results of operations and comprehensive income for the three months ended March 31, 2021, and year ended December 31, 2020. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. In presenting the summarized financial statements, the equity method of accounting has been applied to (i) the Issuer’s interests in the Guarantor Subsidiary, (ii) the Guarantor Subsidiary’s interests in the Combined Non-Guarantor Subsidiaries, and (iii) the Combined Non-Guarantor Subsidiaries’ interests in the Guarantor Subsidiary, where applicable, even though all such subsidiaries meet the requirements to be consolidated under GAAP. All assets and liabilities have been allocated to the Issuer and the Guarantor Subsidiary generally based on legal entity ownership.

The following tables present combined summarized financial information as of March 31, 2021, and December 31, 2020, and for the three months ended March 31, 2021, and the year ended December 31, 2020, for the Issuer and Guarantor Subsidiary. Amounts provided do not represent our total consolidated amounts (in thousands):
March 31, 2021December 31, 2020
Assets:
Cash, cash equivalents, and restricted cash$343,869 $404,802 
Other assets103,143 100,689 
Total assets$447,012 $505,491 
Liabilities:
Unsecured senior notes payable$8,311,512 $7,232,370 
Unsecured senior line of credit and commercial paper— 99,991 
Other liabilities329,268 341,621 
Total liabilities$8,640,780 $7,673,982 

Three Months Ended March 31, 2021Year Ended December 31, 2020
Total revenues$5,968 $22,946 
Total expenses(137,322)(355,370)
Net loss(131,354)(332,424)
Net income attributable to unvested restricted stock awards(2,014)(10,168)
Net loss attributable to Alexandria Real Estate Equities, Inc.’s common stockholders$(133,368)$(342,592)

Critical accounting policies

Refer to our annual report on Form 10-K for the year ended December 31, 2020, for a discussion of our critical accounting policies related to REIT compliance, investments in real estate, impairment of long-lived assets, equity investments, liability and right-of-use assets related to operating leases in which we are the lessee, monitoring of tenant credit quality, and allowance for credit losses.


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Non-GAAP measures and definitions

This section contains additional information of certain non-GAAP financial measures and the reasons why we use these supplemental measures of performance and believe they provide useful information to investors, as well as the definitions of other terms used in this report.

Funds from operations and funds from operations, as adjusted, attributable to Alexandria Real Estate Equities, Inc.’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 funds from operations as an improved measurement tool. Since its introduction, funds from operations has become a widely used non-GAAP financial measure among equity REITs. We believe that funds from operations is helpful to investors as an additional measure of the performance of an equity REIT. Moreover, we believe that funds from operations, 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 recognized because of real estate acquisition and disposition decisions, financing decisions, capital structure, capital market transactions, variances resulting from the volatility of market conditions outside of our control, or other corporate activities that may not be representative of the operating performance of our properties.

The 2018 White Paper published by the Nareit Board of Governors (the “Nareit White Paper”) defines funds from operations as net income (computed in accordance with GAAP), excluding gains or losses on sales of real estate, and impairments of real estate, plus depreciation and amortization of operating real estate assets, and after adjustments for our share of consolidated and unconsolidated partnerships and real estate joint ventures. Impairments represent the write-down of assets when fair value over the recoverability period is less than the carrying value due to changes in general market conditions and do not necessarily reflect the operating performance of the properties during the corresponding period.

We compute funds from operations, as adjusted, as funds from operations calculated in accordance with the Nareit White Paper, excluding significant gains, losses, and impairments realized on non-real estate investments, unrealized gains or losses on non-real estate investments, gains or losses on early extinguishment of debt, significant termination fees, acceleration of stock compensation expense due to the resignation of an executive officer, deal costs, the income tax effect related to such items, and the amount of such items that is allocable to our unvested restricted stock awards. Neither funds from operations nor funds from operations, as adjusted, should be considered as alternatives to net income (determined in accordance with GAAP) as indications of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as measures of liquidity, nor are they indicative of the availability of funds for our cash needs, including our ability to make distributions.

The following table reconciles net income to funds from operations for the share of consolidated real estate joint ventures attributable to noncontrolling interests and our share of unconsolidated real estate joint ventures for the three months ended March 31, 2021 (in thousands):

Three Months Ended March 31, 2021
Noncontrolling Interest Share of Consolidated Real Estate Joint VenturesOur Share of Unconsolidated
Real Estate Joint Ventures
Net income$17,412 $3,537 
Depreciation and amortization
15,443 3,076 
Funds from operations$32,855 $6,613 


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The following tables present a reconciliation of net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders, 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 funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, and funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted, and the related per share amounts for the three months ended March 31, 2021 and 2020. Per share amounts may not add due to rounding.

Three Months Ended March 31,
(In thousands)
20212020
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic and diluted$6,107 $16,840 
Depreciation and amortization of real estate assets177,720 172,628 
Noncontrolling share of depreciation and amortization from consolidated real estate JVs
(15,443)(15,870)
Our share of depreciation and amortization from unconsolidated real estate JVs
3,076 2,643 
Gain on sales of real estate(2,779)
(1)
— 
Impairment of real estate – rental properties
5,129 
(2)
7,644 
Allocation to unvested restricted stock awards
(201)(847)
Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted(3)
173,609 183,038 
Unrealized losses on non-real estate investments46,251 17,144 
Realized gains on non-real estate investments(22,919)
(4)
— 
Impairment of real estate
— 2,003 
Impairment of non-real estate investments— 19,780 
Loss on early extinguishment of debt67,253 
(5)
— 
Allocation to unvested restricted stock awards
(1,208)(591)
Funds from operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted$262,986 $221,374 

(1)Related to two real estate dispositions.
(2)Represents impairment charges recognized during the three months ended March 31, 2021, to further lower the carrying amounts of three of our office properties located in our San Francisco Bay Area and Seattle markets and classified as held for sale in December 2020 to their respective estimated fair values based on the sales price negotiated for each property less costs to sell. We expect to complete these sales during the three months ending June 30, 2021.
(3)Calculated in accordance with standards established by the Nareit Board of Governors.
(4)Represents the realized gain related to the acquisition of one of our privately held non-real estate investments in a biopharmaceutical company by a pharmaceutical company.
(5)Primarily related to the refinancing of our $650.0 million unsecured senior notes payable. Refer to Note 10 – “Secured and unsecured senior debt” to our unaudited consolidated financial statement under Item 1 of this report for additional details.
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Three Months Ended March 31,
(Per share)
20212020
Net income per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted$0.04 $0.14 
Depreciation and amortization of real estate assets1.20 1.31 
Gain on sales of real estate(0.02)(1)— 
Impairment of real estate – rental properties
0.04 (1)0.06 
Allocation to unvested restricted stock awards
— (0.01)
Funds from operations per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted1.26 1.50 
Unrealized losses on non-real estate investments0.34 0.14 
Realized gains on non-real estate investments(0.17)(1)— 
Impairment of real estate
— 0.02 
Impairment of non-real estate investments— 0.16 
Loss on early extinguishment of debt0.49 (1)— 
Allocation to unvested restricted stock awards
(0.01)— 
Funds from operations per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted, as adjusted
$1.91 $1.82 
Weighted-average shares of common stock outstanding(2) – diluted
137,688 121,785 

(1)Refer to the footnotes on the prior page for additional information.
(2)Refer to the definition of “Weighted-average shares of common stock outstanding – diluted” within this section of this Item 2 for additional information.

Adjusted EBITDA and Adjusted EBITDA margin

We use Adjusted EBITDA as a supplemental performance measure of our operations, for financial and operational decision-making, and as a supplemental 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, impairments of real estate, and significant termination fees. Adjusted EBITDA also excludes unrealized gains or losses and significant realized gains and impairments that result from our non-real estate investments. These non-real estate investment amounts are classified in our consolidated statements of operations outside of total revenues.

We believe Adjusted EBITDA provides investors with relevant and useful information as it allows investors to evaluate the operating performance of our business activities without having to account for differences recognized because of investing and financing decisions related to our real estate and non-real estate investments, our capital structure, capital market transactions, and variances resulting from the volatility of market conditions outside of our control. For example, we exclude gains or losses on the early extinguishment of debt to allow investors to measure our performance independent of our indebtedness and capital structure. We believe that adjusting for the effects of impairments and gains or losses on sales of real estate, significant impairments and gains on the sale of non-real estate investments, and significant termination fees allows investors to evaluate performance from period to period on a consistent basis without having to account for differences recognized because of investing and financing decisions related to our real estate and non-real estate investments or other corporate activities that may not be representative of the operating performance of our properties.

In addition, we believe that excluding charges related to stock compensation and unrealized gains or losses facilitates for investors a comparison of our business activities across periods without the volatility resulting from market forces outside of our control. Adjusted EBITDA has limitations as a measure of our performance. Adjusted EBITDA does not reflect our historical expenditures or future requirements for capital expenditures or contractual commitments. While Adjusted EBITDA is a relevant measure of performance, it does not represent net income (loss) or cash flows from operations calculated and presented in accordance with GAAP, and it should not be considered as an alternative to those indicators in evaluating performance or liquidity.

In order to calculate Adjusted EBITDA margin, we also make comparable adjustments to our revenues. We adjust our total revenues by realized gains, losses, and impairments related to our non-real estate investments and significant termination fees to arrive at revenues, as adjusted. Our calculation of Adjusted EBITDA margin divides Adjusted EBITDA by our revenues, as adjusted. We believe that consistent application of these comparable adjustments to both components of Adjusted EBITDA margin provides a more useful calculation for the comparison across periods.        
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The following table reconciles net income (loss) and revenues, the most directly comparable financial measures calculated and presented in accordance with GAAP, to Adjusted EBITDA and revenues, as adjusted, respectively, for the three months ended March 31, 2021 and 2020 (dollars in thousands):

Three Months Ended March 31,
20212020
Net income$25,533 $30,678 
Interest expense36,467 45,739 
Income taxes
1,426 1,341 
Depreciation and amortization
180,913 175,496 
Stock compensation expense12,446 9,929 
Loss on early extinguishment of debt
67,253 — 
Gain on sales of real estate(2,779)— 
Realized gains on non-real estate investments(22,919)— 
Unrealized losses on non-real estate investments46,251 17,144 
Impairment of real estate
5,129 9,647 
Impairment of non-real estate investments
— 19,780 
Adjusted EBITDA
$349,720 $309,754 
Revenues
$479,849 $439,919 
Non-real estate investments – realized gains (losses)47,265 (4,677)
Realized gains on non-real estate investments(22,919)— 
Impairment of non-real estate investments
— 19,780 
Revenues, as adjusted$504,195 $455,022 
Adjusted EBITDA margin
69%68%

Annual rental revenue
 
Annual rental revenue represents the annualized fixed base rental obligations, calculated in accordance with GAAP, for leases in effect as of the end of the period, related to our operating RSF. Annual rental revenue is presented using 100% of the annual rental revenue of our consolidated properties and our share of annual rental revenue for our unconsolidated real estate joint ventures. Annual rental revenue per RSF is computed by dividing annual rental revenue by the sum of 100% of the RSF of our consolidated properties and our share of the RSF of properties held in unconsolidated real estate joint ventures. As of March 31, 2021, approximately 94% of our leases (on an RSF basis) were triple net leases, which require tenants to pay substantially all real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses (including increases thereto) in addition to base rent. Annual rental revenue excludes these operating expenses recovered from our tenants. Amounts recovered from our tenants related to these operating expenses, along with base rent, are classified in income from rentals in our consolidated statements of operations.

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). Refer to the definition of “Fixed-charge coverage ratio” within this section of this Item 2 for a reconciliation of interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest.

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Class A properties and AAA locations

Class A properties are properties clustered in AAA locations that provide 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. Class A properties generally command higher annual rental rates 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.

Development, redevelopment, and pre-construction

A key component of our business model is our disciplined allocation of capital to the development and redevelopment of new Class A properties, and property enhancements identified during the underwriting of certain acquired properties, located in collaborative life science, agtech, and technology campuses in AAA innovation clusters. These projects are generally focused on providing high-quality, generic, and reusable spaces that meet the real estate requirements of, and are reusable by, a wide range of tenants. Upon completion, each value-creation project is expected to generate a significant increase in rental income, net operating income, and cash flows. Our development and redevelopment projects are generally in locations that are highly desirable to high-quality entities, which we believe results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.

Development projects generally consist of the ground-up development of generic and reusable facilities. Redevelopment projects consist of the permanent change in use of office, warehouse, and shell space into office/laboratory, agtech, or tech office space. We generally will not commence new development projects for aboveground construction of new Class A office/laboratory, agtech, and tech office space without first securing significant pre-leasing for such space, except when there is solid market demand for high-quality Class A properties.

Pre-construction activities include entitlements, permitting, design, site work, and other activities preceding commencement of construction of aboveground building improvements. The advancement of pre-construction efforts is focused on reducing the time required to deliver projects to prospective tenants. These critical activities add significant value for future ground-up development and are required for the vertical construction of buildings. Ultimately, these projects will provide high-quality facilities and are expected to generate significant revenue and cash flows.

Development, redevelopment, and pre-construction spending also includes the following costs: (i) certain tenant improvements and renovations that will be reimbursed, (ii) amounts to bring certain acquired properties up to market standard and/or other costs identified during the acquisition process (generally within two years of acquisition), and (iii) permanent conversion of space for highly flexible, move-in-ready office/laboratory space to foster the growth of promising early- and growth-stage life science companies.

Revenue-enhancing and repositioning capital expenditures represent spending to reposition or significantly change the use of a property, including through improvement in the asset quality from Class B to Class A.

Non-revenue-enhancing capital expenditures represent costs required to maintain the current revenues of a stabilized property, including the associated costs for renewed and re-leased space.

Fixed-charge coverage ratio

Fixed-charge coverage ratio is a non-GAAP financial measure representing the ratio of Adjusted EBITDA to fixed charges. We believe this ratio is useful to investors as a supplemental measure of our ability to satisfy fixed financing obligations and preferred stock dividends. Cash interest is equal to interest expense calculated in accordance with GAAP plus capitalized interest, less amortization of loan fees and debt premiums (discounts).
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The following table reconciles interest expense, the most directly comparable financial measure calculated and presented in accordance with GAAP, to cash interest and fixed charges for the three months ended March 31, 2021 and 2020 (dollars in thousands):
Three Months Ended March 31,
20212020
Adjusted EBITDA$349,720 $309,754 
Interest expense$36,467 $45,739 
Capitalized interest39,886 24,680 
Amortization of loan fees(2,817)(2,247)
Amortization of debt premiums576 888 
Cash interest and fixed charges$74,112 $69,060 
Fixed-charge coverage ratio:
– period annualized4.7x4.5x
– trailing 12 months4.4x4.2x

Initial stabilized yield (unlevered)

Initial stabilized yield is calculated as the estimated amounts of net operating income at stabilization divided by our investment in the property. Our initial stabilized yield excludes the benefit of leverage. Our cash rents related to our value-creation projects are generally expected to increase over time due to contractual annual rent escalations. 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.

Investment-grade or publicly traded large cap tenants

Investment-grade or publicly traded large cap tenants represent tenants that are investment-grade rated or publicly traded companies with an average daily market capitalization greater than $10 billion for the twelve months ended March 31, 2021, as reported by Bloomberg Professional Services. In addition, we monitor the credit quality and related material changes of our tenants. Material changes that cause a tenant’s market capitalization to decline below $10 billion, which are not immediately reflected in the twelve-month average, may result in their exclusion from this measure.

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Investments in real estate – value-creation square footage currently in rental properties

The square footage presented in the table below includes RSF of buildings in operation as of March 31, 2021, primarily representing lease expirations at recently acquired properties that also have inherent future development or redevelopment opportunities, for which we have the intent to demolish or redevelop the existing property upon expiration of the existing in-place leases and commencement of future construction:
Dev/RedevRSF of Lease Expirations Targeted for
Development and Redevelopment
Property/Submarket20212022ThereafterTotal
Near-term projects:
50 and 60 Sylvan Road/Route 128Redev202,428 — — 202,428 
651 Gateway Boulevard/South San FranciscoRedev— 198,089 101,921 
(1)
300,010 
Other/SeattleRedev— 51,255 — 51,255 
202,428 249,344 101,921 553,693 
Intermediate-term projects:
3825 Fabian Way/Greater StanfordRedev— 250,000 — 250,000 
3450 and 3460 Hillview Avenue/Greater StanfordRedev— 42,340 34,611 76,951 
1075 Commercial Street/Greater StanfordDev9,738 — — 9,738 
10931 and 10933 North Torrey Pines Road/Torrey PinesDev— 92,450 — 92,450 
10260 Campus Point Drive/University Town CenterDev— — 109,164 109,164 
9393 Towne Centre Drive/University Town CenterDev42,222 — — 42,222 
4555 Executive Drive/University Town CenterDev41,475 — — 41,475 
93,435 384,790 143,775 622,000 
Future projects:
380 and 420 E Street/Seaport Innovation DistrictDev— — 195,506 195,506 
40 Sylvan Road/Route 128Redev— — 312,845 312,845 
3875 Fabian Way/Greater StanfordRedev— — 228,000 228,000 
960 Industrial Road/Greater StanfordDev— — 110,000 110,000 
219 East 42nd Street/New York CityDev— — 349,947 349,947 
11255 and 11355 North Torrey Pines Road/Torrey PinesDev— 139,135 — 139,135 
4161 Campus Point Court/University Town CenterDev— — 159,884 159,884 
6450 Sequence Drive/Sorrento MesaRedev— — 202,915 202,915 
4045 and 4075 Sorrento Valley Boulevard/Sorrento ValleyDev— — 50,926 50,926 
601 Dexter Avenue North/Lake UnionDev— — 18,680 18,680 
830 4th Avenue South/SoDoDev— — 42,380 42,380 
— 139,135 1,671,083 1,810,218 
295,863 773,269 1,916,779 2,985,911 

(1)Represents vacant square footage as of March 31, 2021.

Joint venture financial information

We present components of balance sheet and operating results information related to our real estate joint ventures, which are not presented, or intended to be presented, in accordance with GAAP. We present the proportionate share of certain financial line items as follows: (i) for each real estate joint venture that we consolidate in our financial statements, which are controlled by us through contractual rights or majority voting rights, but of which we own less than 100%, we apply the noncontrolling interest economic ownership percentage to each financial item to arrive at the amount of such cumulative noncontrolling interest share of each component presented; and (ii) for each real estate joint venture that we do not control and do not consolidate, and are instead controlled jointly or by our joint venture partners through contractual rights or majority voting rights, we apply our economic ownership percentage to each financial item to arrive at our proportionate share of each component presented.

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The components of balance sheet and operating results information related to our real estate joint ventures do not represent our legal claim to those items. For each entity that we do not wholly own, the joint venture agreement 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 this information can help investors estimate the balance sheet and operating results information related to our partially owned entities. Presenting this information provides a perspective not immediately available from consolidated financial statements and one that can supplement an understanding of the joint venture assets, liabilities, revenues, and expenses included in our consolidated results.

The components of balance sheet and operating results information related to our real estate joint ventures are 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, joint venture financial information may include financial information related to the unconsolidated real estate joint ventures that we do not control. We believe that in order to facilitate for investors a clear understanding of our operating results and our total assets and liabilities, joint venture financial information should be examined in conjunction with our consolidated statements of operations and balance sheets. Joint venture financial information should not be considered an alternative to our consolidated financial statements, which are presented and prepared in accordance with GAAP.

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 and preferred stock to Adjusted EBITDA

Net debt and preferred stock 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. Net debt and preferred stock is equal to the sum of total consolidated debt less cash, cash equivalents, and restricted cash, plus preferred stock outstanding as of the end of the period. Refer to the definition of “Adjusted EBITDA and Adjusted EBITDA margin” within this section of this Item 2 for further information on the calculation of Adjusted EBITDA.

The following table reconciles debt to net debt and preferred stock and computes the ratio to Adjusted EBITDA as of March 31, 2021, and December 31, 2020 (dollars in thousands):
March 31, 2021December 31, 2020
Secured notes payable$229,406 $230,925 
Unsecured senior notes payable 8,311,512 7,232,370 
Unsecured senior line of credit and commercial paper— 99,991 
Unamortized deferred financing costs68,293 56,312 
Cash and cash equivalents(492,184)(568,532)
Restricted cash(42,219)(29,173)
Preferred stock— — 
Net debt and preferred stock$8,074,808 $7,021,893 
Adjusted EBITDA:
– quarter annualized
$1,398,880 $1,331,608 
– trailing 12 months$1,314,153 $1,274,187 
Net debt and preferred stock to Adjusted EBITDA:
– quarter annualized5.8 x5.3 x
– trailing 12 months6.1 x5.5 x

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Net operating income, net operating income (cash basis), and operating margin

The following table reconciles net income to net operating income and to net operating income (cash basis) for the three months ended March 31, 2021 and 2020 (dollars in thousands):

Three Months Ended March 31,
20212020
Net income$25,533 $30,678 
Equity in (earnings) losses of unconsolidated real estate joint ventures(3,537)3,116 
General and administrative expenses33,996 31,963 
Interest expense36,467 45,739 
Depreciation and amortization
180,913 175,496 
Impairment of real estate
5,129 2,003 
Loss on early extinguishment of debt67,253 — 
Gain on sales of real estate(2,779)— 
Investment (income) loss(1,014)21,821 
Net operating income341,961 310,816 
Straight-line rent revenue
(27,382)(20,597)
Amortization of acquired below-market leases(12,112)(15,964)
Net operating income (cash basis)$302,467 $274,255 
Net operating income (cash basis) – annualized$1,209,868 $1,097,020 
Net operating income (from above)$341,961 $310,816 
Total revenues$479,849 $439,919 
Operating margin71%71%


Net operating income is a non-GAAP financial measure calculated as net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding equity in the earnings of our unconsolidated real estate joint ventures, general and administrative expenses, interest expense, depreciation and amortization, impairments of real estate, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, and investment income or loss. We believe net operating income 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 net operating income is a useful measure for investors to evaluate the operating performance of our consolidated real estate assets. Net operating income on a cash basis is net operating income adjusted to exclude the effect of straight-line rent and amortization of acquired above- and below-market lease revenue adjustments required by GAAP. We believe that net operating income on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent revenue and the amortization of acquired above- and below-market leases.

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Furthermore, we believe net operating income is useful to investors as a performance measure for our consolidated properties because, when compared across periods, net operating income reflects trends in occupancy rates, rental rates, and operating costs, which provide a perspective not immediately apparent from net income or loss. Net operating income can be used to measure the initial stabilized yields of our properties by calculating net operating income generated by a property divided by our investment in the property. Net operating income excludes certain components from net income 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 comparability of operating performance at the property level. Impairments of real estate have been excluded in deriving net operating income 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 or a deterioration in market conditions. We also exclude realized and unrealized investment income or loss, which results from investment decisions that occur at the corporate level related to non-real estate investments in publicly traded companies and certain privately held entities. Therefore, we do not consider these activities to be an indication of operating performance of our real estate assets at the property level. Our calculation of net operating income also excludes charges incurred from changes in certain financing decisions, such as losses on early extinguishment of debt, as these charges often relate to corporate strategy. Property operating expenses included in determining net operating income 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 calculate operating margin as net operating income divided by total revenues.

We believe that in order to facilitate for investors a clear understanding of our operating results, net operating income should be examined in conjunction with net income or loss as presented in our consolidated statements of operations. Net operating income should not be considered as an alternative to net income or loss as an indication of our performance, nor as an alternative to cash flows as a measure of our liquidity or our ability to make distributions.

Operating statistics

We present certain operating statistics related to our properties, including number of properties, RSF, occupancy percentage, leasing activity, and contractual lease expirations as of the end of the period. We believe these measures are useful to investors because they facilitate an understanding of certain trends for our properties. We compute the number of properties, RSF, occupancy percentage, leasing activity, and contractual lease expirations at 100% for all properties in which we have an investment, including properties owned by our consolidated and unconsolidated real estate joint ventures. For operating metrics based on annual rental revenue, refer to the definition of “Annual rental revenue” within this section of this Item 2.

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 or redevelopment properties recently placed into service, the consolidated total income from rentals, as well as 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 quarterly or annual period, we analyze the operating performance for all consolidated properties that were fully operating for the entirety of the comparative periods presented, referred to as same properties. We separately present quarterly and year-to-date same property results to align with the interim financial information required by the SEC in our management’s discussion and analysis of our financial condition and results of operations. These same properties are analyzed separately from properties acquired subsequent to the first day in the earliest comparable quarterly or year-to-date period presented, properties that underwent development or redevelopment at any time during the comparative periods, unconsolidated real estate joint ventures, properties classified as held for sale, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results. Additionally, termination fees, if any, are excluded from the results of same properties. Refer to the “Same properties” subsection in the “Results of operations” section within this Item 2 for additional information.

Stabilized occupancy date

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

Tenant recoveries

Tenant recoveries represent revenues comprising reimbursement of real estate taxes, insurance, utilities, repairs and maintenance, common area expenses, and other operating expenses and earned in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse us arises.
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We classify rental revenues and tenant recoveries generated through the leasing of real estate assets within revenue in income from rentals in our consolidated statements of operations. We provide investors with a separate presentation of rental revenues and tenant recoveries in the “Comparison of results for the three months ended March 31, 2021, to the three months ended March 31, 2020” subsection of the “Results of operations” section within this Item 2 because we believe it promotes investors’ understanding of our operating results. We believe that the presentation of tenant recoveries is useful to investors as a supplemental measure of our ability to recover operating expenses under our triple net leases, including recoveries of utilities, repairs and maintenance, insurance, property taxes, common area expenses, and other operating expenses, and of our ability to mitigate the effect to net income for any significant variability to components of our operating expenses.

The following table reconciles income from rentals to tenant recoveries for the three months ended March 31, 2021 and 2020 (in thousands):
Three Months Ended March 31,
20212020
Income from rentals$478,695 $437,605 
Rental revenues(370,233)(337,942)
Tenant recoveries$108,462 $99,663 

Total market capitalization

Total market capitalization is equal to the outstanding shares of common stock at the end of the period multiplied by the closing price on the last trading day of the period (i.e., total equity capitalization), plus total debt outstanding at period-end.

Unencumbered net operating income as a percentage of total net operating income
 
Unencumbered net operating income as a percentage 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 those income and expense items that are incurred at the unencumbered property level. Unencumbered net operating income is derived from assets classified in continuing operations, which are not subject to any mortgage, deed of trust, lien, or other security interest, as of the period for which income is presented.

The following table summarizes unencumbered net operating income as a percentage of total net operating income for the three months ended March 31, 2021 and 2020 (dollars in thousands):
Three Months Ended March 31,
20212020
Unencumbered net operating income$330,160 $295,001 
Encumbered net operating income
11,801 15,815 
Total net operating income$341,961 $310,816 
Unencumbered net operating income as a percentage of total net operating income
97%95%

Weighted-average shares of common stock outstanding – diluted

From time to time, we enter into capital market transactions, including forward equity sales agreements (“Forward Agreements”), to fund acquisitions, to fund construction of our highly leased development and redevelopment projects, and for general working capital purposes. We are required to consider the potential dilutive effect of our forward equity sales agreements under the treasury stock method while the forward equity sales agreements are outstanding. As of March 31, 2021, we had Forward Agreements outstanding to sell an aggregate of 1.5 million shares of common stock. Refer to Note 13 – “Stockholders’ equity” to our unaudited consolidated financial statements under Item 1 of this report for additional information.

The weighted-average shares of common stock outstanding used in calculating EPS – diluted, funds from operations per share – diluted, and funds from operations per share – diluted, as adjusted, for the three months ended March 31, 2021 and 2020, are calculated as follows (in thousands):
Three Months Ended March 31,
20212020
Weighted-average shares of common stock outstanding – basic137,319 121,433 
Outstanding forward equity sales agreements369 352 
Weighted-average shares of common stock outstanding – diluted137,688 121,785 
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk

The primary market risk to which we believe we may be exposed is interest rate risk, which may result from many factors, including government monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control.

In order to modify and manage the interest rate characteristics of our outstanding debt and to limit the effects of interest rate risks on our operations, we may utilize a variety of financial instruments, including interest rate hedge agreements, caps, floors, and other interest rate exchange contracts. The use of these types of instruments to hedge a portion of our exposure to changes in interest rates may carry additional risks, such as counterparty credit risk and the legal enforceability of hedge agreements. As of March 31, 2021, we did not have any outstanding interest rate hedge agreements.

Our future earnings and fair values relating to our outstanding debt are primarily dependent upon prevalent market rates of interest. The following tables illustrate the effect of a 1% change in interest rates, assuming an interest rate floor of 0%, on our fixed- and variable-rate debt as of March 31, 2021 (in thousands):
Annualized effect on future earnings due to variable-rate debt:
Rate increase of 1%$— 
Rate decrease of 1%$— 
Effect on fair value of total consolidated debt:
Rate increase of 1%$(815,909)
Rate decrease of 1%$944,837 
These amounts are determined by considering the effect of the hypothetical interest rates on our borrowings as of March 31, 2021. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Furthermore, in the event of a change of such magnitude, we would consider taking actions to further mitigate our exposure to the change. Because of the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analyses assume no changes in our capital structure.

Equity price risk

We have exposure to equity price market risk because of our equity investments in publicly traded companies and privately held entities. All of our investments in actively traded public companies are reflected in the consolidated balance sheets at fair value. Our investments in privately held entities that report NAV per share are measured at fair value using NAV as a practical expedient to fair value. Our equity investments in privately held entities that do not report NAV per share are measured at cost less impairments, adjusted for observable price changes during the period. Changes in fair value of public investments, changes in NAV per share reported by privately held entities, and observable price changes of privately held entities that do not report NAV per share are classified as investment income in our consolidated statements of operations. There is no assurance that future declines in value will not have a material adverse effect on our future results of operations. The following table illustrates the effect that a 10% change in the value of our equity investments would have on earnings as of March 31, 2021 (in thousands):
Equity price risk:
Fair value increase of 10%$164,181 
Fair value decrease of 10%$(164,181)
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Foreign currency exchange rate risk

We have exposure to foreign currency exchange rate risk related to our subsidiaries operating in Canada and Asia. The functional currencies of our foreign subsidiaries are the local currencies in each respective country. Gains or losses resulting from the translation of our foreign subsidiaries’ balance sheets and statements of operations are classified in accumulated other comprehensive income (loss) as a separate component of total equity and are excluded from net income (loss). Gains or losses will be reflected in our consolidated statements of operations when there is a sale or partial sale of our investment in these operations or upon a complete or substantially complete liquidation of the investment. The following tables illustrate the effect that a 10% change in foreign currency rates relative to the U.S. dollar would have on our potential future earnings and on the fair value of our net investment in foreign subsidiaries based on our current operating assets outside the U.S. as of March 31, 2021 (in thousands):
Effect on potential future earnings due to foreign currency exchange rate:
Rate increase of 10%$62 
Rate decrease of 10%$(62)
Effect on the fair value of net investment in foreign subsidiaries due to foreign currency exchange rate:
Rate increase of 10%$9,723 
Rate decrease of 10%$(9,723)
This sensitivity analysis assumes a parallel shift of all foreign currency exchange rates with respect to the U.S. dollar; however, foreign currency exchange rates do not typically move in such a manner, and actual results may differ materially.

Our exposure to market risk elements for the three months ended March 31, 2021, was consistent with the risk elements presented above, including the effects of changes in interest rates, equity prices, and foreign currency exchange rates.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As of March 31, 2021, we had performed an evaluation, under the supervision of our principal executive officers and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. These controls and procedures have been designed to ensure that information required for disclosure is recorded, processed, summarized, and reported within the requisite time periods. Based on our evaluation, the principal executive officers and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2021.

Changes in internal control over financial reporting

There has not been any change in our internal control over financial reporting during the three months ended March 31, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION

ITEM 1A. RISK FACTORS

In addition to the information set forth in this quarterly report on Form 10-Q, one should also carefully review and consider the information contained in our other reports and periodic filings that we make with the SEC, including, without limitation, the information contained under the caption “Item 1A. Risk factors” in our annual report on Form 10-K for the year ended December 31, 2020. Those risk factors could materially affect our business, financial condition, and results of operations. The risks that we describe in our public filings are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we presently deem to be immaterial, also may materially adversely affect our business, financial condition, and results of operations.


ITEM 6. EXHIBITS
Exhibit
Number
Exhibit TitleIncorporated by Reference to:Date Filed
3.1*Form 10-QAugust 14, 1997
3.2*Form 10-QAugust 14, 1997
3.3*Form 8-KMay 12, 2017
3.4*Form 10-QAugust 13, 1999
3.5*Form 8-KFebruary 10, 2000
3.6*Form 8-KFebruary 10, 2000
3.7*Form 8-AJanuary 18, 2002
3.8*Form 8-AJune 28, 2004
3.9*Form 8-KMarch 25, 2008
3.10*Form 8-KMarch 14, 2012
3.11*Form 8-KMay 12, 2017
3.12*Form 8-KAugust 2, 2018
4.1*Form 8-KMarch 3, 2017
4.2*Form 8-KFebruary 18, 2021
4.3*Form 8-KFebruary 18, 2021
4.4*Form 8-KFebruary 18, 2021
4.5*Form 8-KFebruary 18, 2021
22.0N/AFiled herewith
31.1N/AFiled herewith
31.2N/AFiled herewith
31.3N/AFiled herewith
31.4N/AFiled herewith
32.0N/AFiled herewith
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Exhibit
Number
Exhibit TitleIncorporated by Reference to:Date Filed
101.1The following materials from the Company’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of March 31, 2021, and December 31, 2020 (unaudited), (ii) Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (unaudited), (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020 (unaudited), (iv) Consolidated Statements of Changes in Stockholders’ Equity and Noncontrolling Interests for the three months ended March 31, 2021 and 2020 (unaudited), (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited), and (vi) Notes to Consolidated Financial Statements (unaudited)N/AFiled herewith
104Cover Page Interactive Data File – the cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, is formatted in Inline XBRL and contained in Exhibit 101.1N/AFiled herewith
(*) Incorporated by reference.
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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, thereunto duly authorized, on April 26, 2021.
 ALEXANDRIA REAL ESTATE EQUITIES, INC.
/s/ Joel S. Marcus
Joel S. Marcus
Executive Chairman
(Principal Executive Officer)
/s/ Stephen A. Richardson
Stephen A. Richardson
Co-Chief Executive Officer
(Principal Executive Officer)
/s/ Peter M. Moglia
Peter M. Moglia
Co-Chief Executive Officer and Co-Chief Investment Officer
(Principal Executive Officer)
/s/ Dean A. Shigenaga
Dean A. Shigenaga
President and Chief Financial Officer
(Principal Financial Officer)

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