Marc E. Binda
Chief Financial Officer and Treasurer at Alexandria Real Estate Equities
Okay. Apologies. Thank you, Peter. This is Marc Binda, CFO. Hello, and good afternoon, everyone. First, I'd like to pause a moment to recognize many of our Alexandria team members who have been personally impacted by the horrible fires that have plagued the Los Angeles area over the last few weeks. Second, a congratulations to the entire Alexandria team for the outstanding execution during the quarter, including the tremendous capital recycling of $1.1 billion completed during the quarter. We reported solid operating and financial results for the fourth quarter and the year. Total revenues and adjusted EBITDA were up 8% and 11.6%, respectively, over 2023, primarily driven by solid same property performance and continued execution of our development and development strategy. FFO per share as adjusted was $9.47, up 5.6% over 2023 and up 36% over the last 3 years, which represents the highest percentage growth amongst the 15 NAREIT equity Healthcare Index over that time. On internal growth, our solid operating results for the quarter continue to be driven by our disciplined execution of our mega-campus strategy, tremendous scale advantage, long-standing tenant relationships and operational excellence by our team. 77% of our annual rental revenue comes from our collaborative mega campuses, and we hope to increase this steadily over time. We have high-quality cash flows with 52% of our annual rental revenue from investment-grade and publicly traded large-cap tenants. Collections remained very high at 99.9%, and adjusted EBITDA margins were strong at 72% for the quarter and represent the second highest quarterly margin reported since 2019. On leasing, an important takeaway for the quarter is the continued solid leasing volume driving our business. Leasing volume for the quarter was 1.3 million square feet, which represents the fourth consecutive quarter over 1 million square feet and creates great momentum as we transition into the new year. The quarterly volume also included 273,000 square feet of previously vacant space, the largest amount in the last 5 quarters. Leasing volume for the full year '24 was 5.1 million square feet, up 17% over the prior year and up 19% compared to the 7-year historical period prior to 2020. We continue to benefit from our tremendous scale, high-quality tenant roster and brand loyalty with 84% of our leasing activity over the last 12 months coming from our existing deep well of approximately 800 tenant relationships. Rental rate growth for lease renewals and releasing space in '24 was solid at 16.9% and 7.2% on a cash basis. For the quarter, it was 18.1% and 3.3% on a cash basis. We continue to achieve very healthy lease terms on completed leases with 9.5 years on average for the quarter, which is above our historical 10-year average. TIs and leasing commissions on renewals and the leasing space for the quarter was elevated on a per square foot basis due to 2 large long-term leases signed in San Francisco and San Diego. But importantly, these costs were fairly modest for the year when considered as a percentage of the total rent over the lease term, which was 8.4% for the full year '24 and ranks as the second lowest percentage over the last 5 years. Our non-revenue-enhancing expenditures, including TIs and leasing commissions on second-generation space have averaged 15% of net operating income over the last 5 years, including the last 3 have all been below the 5-year average.
Looking forward to '25, we do expect this ratio to tick up a bit due to the repositioning activities at Technology Square and 409 Illinois. On same property, same-property NOI growth was solid at 1.2% and 4.6% on a cash basis and 0.6% and 6.3% on a cash basis for '24 in the fourth quarter of '24, respectively. Driven by solid rental rate, increase in pickup in same-property occupancy and some burn-off of free rent benefiting the cash numbers. Our outlook for full year '25 same-property growth is consistent with our prior outlook at down 2% and flat on a cash basis at midpoint. These projected results for 2025 include the impact of approximately 2.6% and 3.4% on a cash basis from the $768,000 of lease expirations expected to go vacant and 1Q '25 spread across 4 projects. As a reminder, the 2 largest components of those key 1Q '25 lease expirations relate to Alexandria Technology Square with a move-out and expansion to another Alexandria property by Moderna, and our single tenant building at 409 Illinois in Mission Bay. We've made great progress on these specific upcoming lease expirations with 136,000 square feet already leased under negotiation with most of the balance under our ongoing discussions with several prospective tests. We expect downtime on these spaces on average to be at least 12 months given time to complete construction work. We expect same-property results to be impacted starting in 1Q '25 with some offsets to the cash results for the burn-off of free rent across the rest of the same property pool over the first half of '25. Turning to occupancy. Occupancy for the quarter was solid at 94.6%, which is consistent with the steady results over the last 5 quarters. The midpoint of our guidance range for occupancy for year-end '25 is 92.4%, which includes approximately 2% vacancy coming from the 4 projects with 1Q '25 lease expirations expected to go vacant that I described earlier and are described on Page 24 of our supplemental package. During the quarter, we continued to execute on our development and redevelopment strategy by delivering 603,000 square feet from the pipeline, which will generate $55 million of incremental annual net operating income. We have 4.4 million rentable square feet of development and redevelopment projects that are projected to generate $395 million of incremental annual net operating income over the next 3.5 years, including $83 million in 2025 from projects that are leased or negotiating around 89%. We also expect to see significant growth in incremental annual net operating income on a cash basis of $70 million from executed leases as the initial free rent from recent delivery burns off over the next 3 months on a weighted average basis. Turning to buybacks. On December 9, we announced that our Board had authorized a common stock purchase program of up to $500 million. To date, we've repurchased $200 million under the program, including $50 million in December and $150 million in January at an average price of $98.16. Subject to changing market conditions, we will continue to monitor additional share repurchases under the plan and expect to fund any repurchases on a leverage-neutral basis through the end of '25. As a reminder here, our guidance range for acquisitions and other opportunistic uses of capital is 0 to $200 million. So with the share repurchases completed in the first quarter, we're already on the high end of our guidance range for the year.
Turning next to the balance sheet. We continue to have one of the strongest balance sheets amongst all publicly traded U.S. REITs. Our corporate credit ratings continue to rank in the top 10% of all publicly traded U.S. REITs. We ended the year with leverage of 5.2x for net debt to adjusted EBITDA, consistent with the average of our year-end leverage for the last 5 years. We have tremendous liquidity, and we have 1 of the longest debt maturity profiles amongst all S&P 500 REITs with only 14% of total debt maturing over the next 3 years. interesting next to funding, we continue to be focused on our disciplined funding strategy to recycle capital from dispositions and to minimize the issuance of common stock, which has been nominal over the last 2 years. Huge congratulations to the Alexandria team for their tremendous execution during '24 with $1.4 billion of dispositions completed, including $1.1 billion of dispositions completed during the fourth quarter across 12 different transactions with about half of that coming from stabilized dispositions with a weighted average cash capitalization rate of 6.9%. Important to note here that the stabilized dispositions completed in the fourth quarter were primarily located in suburban Boston, Northern Virginia and RT submarkets, which comprise a small fraction of our overall asset base. In the fourth quarter, we did recognize impairments aggregating $186 million, which was primarily comprised of the following: first, $40.9 million for properties at 1 Moderna Way and Group 128, which was sold to our long-standing tenant for $369.4 million during the quarter; and second, $102.8 million primarily related to multiple land parcels located in San Diego, some of which were sold in the fourth quarter and many of which will close next year. The team continues to be laser-focused on the execution of our capital plan. As Peter mentioned, we're off to a great start. We have pending 2025 dispositions subject to nonrefundable deposits or contract negotiations for $539.5 million of which about half of this represents anticipated sales of land and in total, represents about 1/3 of the midpoint of our guidance for next year. In addition to dispositions and sales of partial interest, we also expect to fund a meaningful amount of our equity needs next year with retained cash flows from operating activities after dividends of $475 million at the midpoint of our guidance for next year. Our high-quality cash flows continue to support the growth in our common stock dividends with an average annual increase in dividends per share of 5.4% since 2020, and we continue to have a conservative FFO payout ratio of 55% for the quarter. On venture investments quarterly realized gains from venture investments included FFO per share as adjusted since 2021, have averaged about $25 million a quarter. For 2024, realized gains, including FFO per share were just slightly above our historical rate at about $29 million a quarter on average or $117 million for the full year and $32 million in the fourth quarter. Our outlook for 2025 is consistent with the most recent run rate for the full year 2024. Turning to guidance. We reaffirmed our guidance for 2025 with a $150 million change to our '25 sources of capital to reflect the closing of certain dispositions that were originally expected to close in 2024 and are now expected to close in 2025. There were no changes to the midpoints of our guidance ranges for EPS of $2.67 and FFO per share diluted as adjusted of $9.33. As a reminder, we view our projected '25 FFO per share midpoint as flat relative to 2024 after considering the approximate 14% impact from the Alexandria Technology Square ground lease extension completed last year. In closing, as we reflect on the fourth quarter and the full year of 2024, we're pleased with the tremendous execution with solid FFO growth of 5.6% in a very tough macroeconomic environment. With our tremendous scale, high-quality cash flows, deep industry relationships and our highly experienced management team, we're well positioned to continue reinforcing our dominant platform and strategically position us for future growth. With that, I'll turn it back to Joel.
