Jacobs invested in the company with $5 million. Most REITs trade on major stock exchanges, and they offer a number of benefits to investors. Weve done a really good job on our construction/development side in making the most of the demand, he adds. Alexandria Reports Higher Revenues But Pauses Some Projects The life sciences REIT raised rents 48 percent the highest quarterly rate growth in company history. Great. WebJoel S. Marcus, JD, CPA, is the Executive Chairman and Founder of Alexandria Real Estate Equities, Inc. (NYSE: ARE), the urban office REIT that pioneered life science real Alexandria Real Estate Equities, Inc. is a real estate investment trust based in Pasadena, California that invests in office buildings and laboratories leased to tenants in the life science and technology industries. Joel S. Marcus Executive Chairman and Founder at Alexandria Real Estate Equities Well, and also, historically, if you go back to my comments, I said we have tried I guess what I'm trying to just make sure if I'm putting a cap rate on ARE's NOI and getting a value, what from that slide do I need to add to that to kind of capture the totality? Staying on the topic of innovation, a few final data points to orient the growth of the life science industry beyond the next few quarters but to the decades to come. 90% of our top 20 tenants are investment-grade rated or large-cap publicly traded companies and we highlighted continued strength of timely payments of rent from client tenants at 99.9% of rent that was due in the first quarter really reflects the strength of our high-quality client tenants, important tenant relationships and the high-quality underwriting from our research team. So that group of tenants, you're always looking now even much more so for much nearer-term value inflection milestones and really good data and importantly, large unmet medical needs. All Rights Reserved. But directly on transportation, we felt was a huge competitive advantage in landed a world-class tenant to 100% occupy that development. This month, the Company's personalized mRNA cancer vaccine in combination with an immunotherapy drug from tenant Merck, demonstrated promising clinical trial results in aggressive forms of skin cancer. He says he came up with the Alexandria name and logo as an undergraduate student at the University of Pennsylvanias Wharton School and that they belong to him. Dan, any other comment you would throw out? All rights reserved. For our preclinical and clinical stage public biotechs comprising 10% of our ARR, compelling clinical data remains king. So obviously, '23, a lot of stuff has already been delivered. Yes. If you look at Hallie indicated, if you look at the tenant collections by segment, they're 99% to 100%. Now turning to outstanding financial and operating results, we had really strong growth of $342.9 million or up 13.9% in total revenues for the first quarter annualized in comparison to the first quarter of 2022. Marcus also serves on the boards of Applied Therapeutics Inc., Boragen Inc., Frequency Therapeutics, Intra-Cellular Therapies, Inc., MeiraGTx Holdings plc, and Yumanity Therapeutics; the Foundation for the National Institutes of Health (FNIH), MassBio, and Scripps Research; and the Emily Krzyzewski Center, the National September 11 Memorial & Museum, the Navy SEAL Foundation, the Partnership for New York City, and Robin Hood. But a judge dismissed the complaint last month. However, Alexandria has an immense advantage with its long-term relationships with large, industry-leading companies, many of which are revolutionizing the biotech sector. Its first quarter revenue rose 28.2%, from the year earlier, to $615.1 million. Please go ahead. Or have you seen kind of any institutional interest that you hadn't seen before? [4], In 1997, it became a public company via an initial public offering, raising $155 million. During that time, he acquired an expertise in the biopharmaceutical industry and was one of the principal architects of the Kirin-Amgen EPO joint venture in 1984. In 2022, biopharma deployed an estimated $267 billion into R&D. No, I think not Peter said it perfectly. In addition, we've built an irreplaceable world-class asset base of robust and highly differentiated properties and campuses that attract a diversified best-in-class tenant base who values our expertise and operational excellence by providing 75% to 85% of our leasing quarter-to-quarter. And some of those aspects of what would otherwise be a high barrier to entry market don't exist there. We continued with very strong adjusted EBITDA margin of 69%. RUNLABS plans to provide offices and shared laboratory space to life science firms and is starting in Europe with a 150,000-square-foot building that Steven Marcus hopes to open in Paris next year. Ismail agrees: Theres some concern with biotech stocks, but overall, thats more of a potential change in the rate of growth rather than something that appears likely to upset or end the party.. American Consumer News, LLC dba MarketBeat 2010-2023. So, we've been able to absorb that. They're either completed or subject to executed LOIs or purchase and sales agreements, including the new JV partner for our build-to-suit project for UI Lilly. It's in operations, the book value would be sitting in the operating component if a larger campus had two operating buildings and a pad to support two buildings, the pad to support the future buildings would be in the future pipeline, the book basis, but the cost base is related to the operating buildings would be in operations, not in the pipeline. And so, I think, we're going to look hard, as I mentioned earlier, over the next couple of quarters. The next question comes from Dylan Burzinski with Green Street. This is very similar to last quarter, but in response to the uncertainty and volatility in the markets, we have made a strategic decision to reduce 2023 construction spend by $250 million by pausing or delaying projects that had been classified as under construction, so we can focus our capital on the most strategic projects that have the most attractive terms, enabling our highly bedded and vast tenant base. Theyre incredibly active on the venture capital side of the business, he explains. And we just completed a lot of product over the last two or three years. Alexandria has 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. You're right. Copyright Nareit 2023. So that's maybe a way to frame it, but I think you'll be pretty impressed. Alexandria began as a garage startup in 1994 when biotech was still an emerging industry. Continued innovation in medicine is an absolute national priority and the transformative work of our tenants in the industry is critical to addressing the massive unmet medical need. I would now like to turn the conference over to Paula Swartz with Investor Relations. Cost of materials and supply chain volatility were the initial drivers of construction inflation, but now the primary driver is labor with a triple whammy of wage increases, shortage of workers and the inefficiency of the remaining labor force due to the retirement of older, more skilled labor. Steven Marcus, 41, the eldest of Joel Marcuss three children, started two companies, London-based RUNLABS UK and Dublin-based RUNLABS Ireland, that plan to house life science firms in Europe. Prior to co-founding Alexandria, he had an extensive legal career specializing in corporate finance and capital markets, venture capital, and mergers and acquisitions. What happens on these campuses is intertwined with our other three verticals. So, on the $7.6 million square foot pipeline, how much -- what does that imply in terms of development spend in 2024? When you look at the focus on agtech, was this a natural progression for Alexandria? Thanks Peter. And do we want in the portfolio or not. Same platform but with new and improved features. With me today are Peter, Dean, Hallie and Dan. We were the first group that identified life science real estate as a niche, which could both garner and deploy capital to an important industry, which really had no major infrastructure capital going into it in the early 1990s, Marcus says. So -- what you're really focused on though in your question is a spend outside of that, which goes to quite a bit of activity, site work, advancing site work as well as entitlements. Now leasing volume for the first quarter was strong at 1.2 million rentable square feet, slightly ahead of the strong quarterly average of leasing volume prior to the exceptional record-level leasing volume in both 2021 and 2022. from New York University and M.A., M.Phil., and Ph.D. from Columbia University-Union Theological Seminary. Launching the niche was the first step. Could you please provide more color on the internal leasing pipeline that comes from your existing tenants? I think it will get better once there's more certainty in where the terminal rate is going to land and where cost of capital is so people get comfortable in spending their allocations for '23. And then Peter, sticking with you, appreciated your comments on availability rates when including 2023 and 2024 deliveries. I think we're still seeing decent activity maybe RTP or RT, I should say, has slowed maybe a bit more than we would have guessed, but part of that's due to my guess is the mix of tenants down there in the -- not so much our tenants per se, but the mix of life science, the components of life science tenants in that market. contact@marketbeat.com About 80% of our projects are under fixed-rate contracts, and were in the process of finalizing fixed-rate contracts for the remaining 20%, so were insulated as best you can, he continues. The company also continues to leverage its leadership, knowledge, expertise and resources to develop and implement long-term, scalable solutions to the most pressing societal issues. Washington, We've got a very low and conservative FFO payout ratio, 55% for the first quarter annualized with 5.3% increases in common stock dividends over the last 12 months. We will provide values and cap rates quarter-to-quarter as we close transactions since we're unable to do so sooner while transactions are in process. But Peter, you want to comment and Dan, you could comment as well. And today, for example, one of our greater Boston tenants, Morphic Therapeutic which has an oral drug addressing moderate to severe ulcerative colitis. Please go ahead, Joel. We're also in a position where we know where we are here at the end of April with a lot of good activity on the pipeline. To access all the content for free, please sign up by entering your email. When families or their loved ones are facing illness or injury and can benefit from some guidance, we have a mechanism here for them to reach out and be connected with an expert who can, hopefully, offer them a second opinion or help them get in to see a doctor they might not otherwise have been able to see. ", "I am deeply honored and incredibly moved to receive this honor from the 9/11 Memorial & Museum, especially as we commemorate the 20th anniversary of the 9/11 attacks," said Mr. Marcus. They own a billion-dollar venture capital portfolio and have invested in startups and established technology companies., This is relatively unique to Alexandria within the public REIT world, he says. On the supply side, we track high quality projects, we believe, are competitive to ours in the high barrier-to-entry submarkets. [4] The company has several properties in Kendall Square in Cambridge, Massachusetts, where it has invested over $2.3 billion since its first investment in the neighborhood in 2002. Okay. The company's revenues are derived in the following markets: Properties are generally located near universities to attract tenants. Yeah. Thanks. That is almost -- that's hard to do generally, and it's so submarket and building specific, Tony. Even worse is the availability of large transformers provided by the utility companies, which can take as long as three years now to get. They're one-off. For example, for Prometheus Bio was originally spun out of Cedars-Sinai, which is set to receive nearly $800 million from the recently announced M&A. For additional information on Alexandria, please visit www.are.com. Alexandria is definitely not a health care service facilities company, nor a generic office company. of societys most pressing issues including harnessing the agri-food ecosystem to combat hunger, addressing the mental health crisis, and accelerating groundbreaking medical research. Prometheus Biosciences, while not a tenant exemplify how data drives the lifeblood of the industry. Nareitis the worldwide representative voice for REITs and publicly traded real estate companies with an interest in U.S. real estate and capital markets. Hi, everyone. You asked about the nature of underwriting. Alexandrias already-strong performance was amplified by the pandemic when demand surged from new and existing tenants across its portfolio, as billions of dollars flooded into the research and development of a COVID-19 vaccine and other therapies to combat the virus. The company, led by founder and Executive Chairman Joel Marcus, focuses exclusively on highly specialized lab space used for research and development in the booming life science industry. Now rental rate growth on lease renewals, re-lease in this space was increased 1% for both GAAP and cash to a range of 28% to 33% for GAAP and 12% to 17% on cash and occupancy was adjusted 20 basis points to reflect vacancy from 170,000 rentable square foot building located in Texas that is on hold while we lease up the adjacent building under redevelopment that is currently 36% leased. And we've tried to minimize limit our exposure there and transaction that we build to suit was really a bit -- it's in the South San Francisco submarket, but it's a little bit out of there. This is a really scalable effort and it is being run by Fred Wilson of Union Square Ventures and is a really effective program. WebMarcus founded Alexandria Real Estate Equities, Inc., or Alexandria Real Estate, a publicly traded real estate investment trust, and currently serves as Executive Chairman after previously serving as its Chairman since May 2007, Chief Executive Officer since March 1997 and a director since its founding in 1994. But at what point does it become too much? WebJoel Marcus Senior Partner at Marcus & Pollack LLP - the real estate tax law firm New York, NY. So, hopefully, that gives you just some color on how we're thinking more broadly about it. In 1993, the partners at Jacobs Engineering Group asked Marcus, a certified public accountant and biotech industry attorney, to create a business plan to launch a private REIT that would exclusively own and invest in life science real estate, essentially, creating a brand-new asset class. In the first quarter, Alexandria inked a 427,000-square-foot lease with Bristol Myers Squibb, its largest tenant, (by annual rental revenue) for the development of that companys newest, cutting-edge research hub focused on cancer as well as immune-mediated and neurodegenerative diseases at the Alexandria Point mega campus inSan Diego. When the world is in a tumultuous situation of global conflict, economic stress, and rising interest rates, those are a series of things that investors worry about, Rodgers says. Thanks for taking the question. If you go back to my comments in the fourth quarter, I believe I gave similar comments of pre-leasing on space that had just rolled as well. And we're very pleased that we just received new -- one of Newsweek's most trusted company awards. The next question comes from Joshua Dennerlein with Bank of America. Now key updates on the underlying detailed assumptions included the following; a significant reduction of $325 million in both sources and uses of capital, including a $75 million reduction in the midpoint of acquisitions to $225 million and a $250 million reduction in construction spend at $2.725 billion. And if you've ever had it, it is a tough condition, a major GI indication announced that it hit its Phase 2a clinical trial endpoint and their stock has been up 75% this year. But maybe the thing to say is companies that are active are pharma -- and I think Peter alluded to this, bigger biotech product and service companies that aren't so much focused on the manufacturing side or the supply side. Yeah. I guess maybe a different way to ask it is if you think about the next couple of years, you see where the growth is within your portfolio and you also know space that's coming due in your development pipeline. This conference call contains forward-looking statements within the meaning of the federal securities laws. Chief Executive Officer and Co-Chief Investment Officer, Co-Chief Investment Officer and Regional Market Director - San Diego, Managing Director at Alexandria Real Estate Equities, Executive Chairman and Founder at Alexandria Real Estate Equities, Vice President, Science and Technology at Alexandria Real Estate Equities, Chief Executive Officer and Co-Chief Investment Officer at Alexandria Real Estate Equities, President and Chief Financial Officer at Alexandria Real Estate Equities, Co-Chief Investment Officer and Regional Market Director - San Diego at Alexandria Real Estate Equities, How to Invest in the Top Grocery Stocks for This Year, Best Bank Stocks to Invest in Ahead of Rising Interest Rates, Lucid Group, Inc. (NASDAQ:LCID) Position Increased by Zurcher Kantonalbank Zurich Cantonalbank, 10 E-commerce Stocks to Consider for Long-Term Buys, United Parcel Service Delivers A Warning To The Market, Get 30 Days of MarketBeat All Access Free, By creating a free account, you agree to our, First Republic up in air as regulators juggle bank's fate, Stock market today: Tokyo gains, most Asian markets closed, 'Super Mario Bros. Movie' hits $1B, is No. Great. [7], Its first purchase was of 4 buildings in San Diego which had been negotiated and structured by Kendell R. Joel Marcus - Executive Chairman and Founder Peter Moglia - Chief Executive Officer & Co-Chief Investment Officer Dean Shigenaga - President & Chief Yes. Joel S. Marcus. However, from Alexandrias standpoint, they should be able to continue to fund their growth. Now JV contributions to construction spend, including forecasted joint ventures were added to our detailed disclosures on page 48 of our supplemental package. As we have noted previously, demand has normalized from the record year of 2021. "Joel and Alexandria's tremendous support has made a lasting impact on the 9/11 Memorial & Museum and enabled us to commemorate and honor the nearly 3,000 victims of these attacks and all those who risked their lives to save others," said Alice M. Greenwald, president and CEO of the National September11 Memorial & Museum. We also absorbed $71,000 of vacancy from a building located in Texas. Some that don't have pre-leasing today are multi-tenant projects anywhere from a building to multiple buildings. Nigerias SEC Plans to Allow Asset-Backed Tokens But Not Crypto, Goldman, Bank of America Slightly Push Back Call for BOJ Move, Australias Rapid Fiscal Revival Brings Budget Surplus in View, Kings Coronation Holiday Provides Latest Drag for UK Economy, How Much ECB Hikes This Week Hinges on One Data-Packed Morning, Americanas Minority Shareholders Add Board Member Amid Crisis, Softbanks Arm Says It Registered Confidentially for US IPO, AI Chatbots Have BeenUsed to Create Dozens of News Content Farms, Jack Ma Joins University of Tokyo as Visiting Professor, Pitched Fight for Stock Market Supremacy Was Masked by VIXs April Plunge, Singapore Voices Grave Concern Over South China Sea Tensions, Peter Thiel Tells Black-Tie NYC Audience That Diversity Is a Distraction, What You Need to Know About the Biden Administrations New Mortgage Fees, Russias Most Famous Fashion Designer, Who Dressed First Ladies, Dies at 85, Pope voices willingness to return Indigenous loot, artifacts, The Slow Dance Between Markets and Central Banks, The Oil Industrys Unhappy Marriage Is Starting To Face Facts, Dont Make It Too Hard for Americans to Investin China, The Boring Old Box Truck Gets the Tesla Treatment, For Banks Under Stress, Theres a Federal Backstop That Provides Help Without Stigma, What the US Can Learn From Europes ESG Mistakes, Singapore Deputy PM Allays Property Price Fears in May Day Rally, Japan Coalition Party Says More Handouts for Kids Top Priority, What to Know About Red-Flag Warnings, an Ominous WildfireForecast, Occidental Hopes to Sell the Carbon It Capturesat the Worlds Biggest Plant, Germany Sets the New Standard for Cheap, National Mass Transit, Chinas Now Spurning Ugliest Buildings That Symbolized Its Meteoric Rise, Broke Chinese Gen Zs Turn Factory Town into Top Tourist Spot, Bitcoin Sags After its Longest Streak of Monthly Gains Since 2021, Bitcoin on Course for Longest Streak of Monthly Gains Since 2021, Chairman/Co-Founder, Alexandria Real Est Equities. Despite these challenges, the demand for high-quality life science assets which is vastly different from office assets continued in the quarter. The culmination is continued FDA approvals and 2023 has started at a fast clip. Since its inception in 1996, it has strategically invested in disruptive life science, agrifoodtech, climate innovation, and technology companies advancing transformative new modalities and platforms to meaningfully improve human health. Marcus teaches New Testament with an emphasis on the Gospels and the context of early Christianity within Judaism. So we decided to pass on that. These real estate companies have to meet a number of requirements to qualify as REITs. Briefly on venture investments, realized gains from the venture investments included in FFO averaged about $25.8 million per quarter for the last eight quarters through the end of 2022 in comparison to $20.7 million for the first quarter of 2023. Good afternoon, everyone. The book value would only have it to the extent it's not related to the operating component, Tony? So, you're referring to the page 34 for others on the call, which is in the bottom right-hand corner. Thank you. The government loves quotas, but thats not a way to operate a business. We've maintained strong guidance while lowering uses and sources of capital. Alexandria is designing it to be the most sustainable commercial lab building in Cambridge. 2023 Mass General Brigham Incorporated. And I guess just on that line of thought, like our markets like in the non-cluster markets, like RTP, suburban Maryland, are those sort of seeing similar kind of normalization demand trends as San Francisco versus maybe like your core mark submarkets like Cambridge, BTC, Torrey Pines in San Diego. However, Marcus says existing assets will become more valuable as a result. This is an increase of 3.4% in total availability over last quarter, largely driven by spec building in South San Francisco. It is just uncanny that people are still trying to put new products into the queue in a market that has a lot of vacancy. However, the elements of the cluster model, such as having access to top talent, are attractive to the industry and they do want to be on our campuses. And I think people would be impressed when we do our second quarter call. Importantly, occupancy is expected to recover in the second half of 2023. In addition to exploring potential new geographic markets, Alexandria is also staying on top of innovations in the life science industry through Alexandria Venture Investments, a venture capital platform Marcus created in 1996 that invests directly in the companies it serves. As you can imagine, the cost of this equipment is reflective of these shortages and paired with high labor cost is making new laboratory office projects more expensive to build than ever before. Life science, meanwhile, has moved from being a niche segment to mainstream real estate. We have a very strong balance sheet. The U.S. Department of Agriculture and the related departments spend less than $1 billion on ag research. Well, it's all reflected in our guidance. Thank you for your continued support. WebThe Alexandria juggernaut, now with a $44B market capitalization, outperformed its expectations for last year, standing out in a year of superlative performances across the industry. If you look back over time, I think we've enjoyed the opportunity to move rental rate growth and same-property performance northward as we make our way through the year. Depending on who you ask, demand is at slightly below or slightly above pre-COVID levels. Now we do expect realized gains each quarter from our venture investments for the remainder of '23 to be more consistent to slightly up from the historical quarterly average of $25.8 million that I just highlighted. We started this whole life science real estate niche with the purpose of helping to solve human diseases. It invests in disruptive life science, agri-food tech, climate innovation, and technology companies. And that's just how we do things. I'm curious as to what you've committed to in terms of development spending. We reported excellent operating and financial results that exceeded consensus with strong core results, and our team is off to a strong start towards a solid growth for 2023. "Their contributions continue to fund the Memorial & Museum's vital exhibitions and programming, such as Revealed: The Hunt for Bin Laden. These are the characteristics of real estate investment. Even now, many office buildings in the country are 30% to 40% occupied. Joel Marcus fortunes have risen with those of the life sciences industry. Joel S. Marcus, the real estate tycoon credited with helping to turn Cambridge into one of the worlds biggest biotech hubs, has lost a key battle in a legal war against his son. Please go ahead. For Alexandria to own big concentrations of campuses where they can provide the amenity base, as well as the opportunity to expand and move into different facilities and have them run incredibly professionally by one of the most experienced teams in the industry, is a real competitive advantage for Alexandrias tenants.. [9] The company stopped construction during the financial crisis of 2007-08, and in 2014, it sold its interest to the Government of Ontario for $65 million. 6.7 million square feet under construction or including 1.2 million to start in the near-term here. Now the key takeaway is that the scale of our high-quality tenant roster combined with operational excellence from our team, puts us in an excellent position to benefit from the unique pool of demand from our client tenants even in this unusual macro environment.