2022 was an extraordinary year for Alexandria. We celebrated our 25th anniversary as an NYSE listed company — a significant milestone that is a testament to the enduring strength of our one-of-a-kind, once-in-a-generation company. Against the backdrop of a deleterious macroeconomic environment, we achieved another outstanding year of operating and financial performance. These results were made possible thanks to our differentiated business model; sustained operational excellence; fortress balance sheet; world-class brand at the vanguard and heart of the life science ecosystem, the national treasure that has saved millions of lives during the COVID-19 pandemic; and our long-tenured and highly experienced team with unique life science expertise.
It has been remarkable for me to reflect on the incredible transformation Alexandria has undergone from our modest beginnings to our position today as a highly respected investment-grade S&P 500® REIT. We founded Alexandria in 1994 as a garage startup with $19 million in Series A capital and a bold vision to create a new kind of real estate company uniquely focused on building the complex infrastructure needed to catalyze medical innovation to improve human health. Three years after our inception, we took the company public on the NYSE on May 27, 1997, with just 15 properties totaling 1.5 million square feet. Today, we have a multifaceted business model, unmatched scale with a total asset base of nearly 75 million square feet in the nation’s top innovation clusters, and a REIT industry-leading client base of approximately 1,000 tenants that has been diligently cultivated and is not replicable. We are enormously proud of these accomplishments, which attest to the strength of our brand and our standing as the undisputed leading owner, operator, and developer of collaborative campuses for transformative life science companies.
As renowned author and business strategist Jim Collins said, “Alexandria has achieved the three outputs that define a great company: Superior Results, Distinctive Impact, and Lasting Endurance.”
ACHIEVING SUPERIOR RESULTS THROUGH OUR DIFFERENTIATED & MULTIFACETED BUSINESS MODEL
At Alexandria, our mission to advance human health by curing disease and improving nutrition drives us each and every day. It has shaped our pioneering and impactful business, which we have built on the foundation of our four strategic and integrated verticals — real estate, venture investments, thought leadership, and corporate responsibility — to holistically create collaborative campuses and support vibrant ecosystems that enable the world’s most innovative companies to develop scientific discoveries and technological advancements to benefit humankind.
Our unique business model continues to contribute to the company’s superior results and exceptional long-term total stockholder return (TSR). Since our IPO in May 1997, we have maintained the highest standards of excellence to generate long-term value for our stockholders. Alexandria’s outstanding TSR of 1,673% (assuming reinvestment of dividends) from our IPO through December 31, 2022 significantly outperformed major indices over the same period, including Nasdaq’s TSR of 838%, the MSCI U.S. REIT’s TSR of 684%, and the S&P 500’s TSR of 628%.
This year, Alexandria delivered approximately 8.5% earnings growth in funds from operations per share – diluted, as adjusted, and continued to strengthen our fortress balance sheet — the strongest in our history and one of the strongest in the REIT industry — a remarkable accomplishment in any year but especially noteworthy in a turbulent macroeconomic market. As of December 31, 2022, our investment-grade credit ratings, which ranked in the top 10% among all publicly traded U.S. REITs, and our significant liquidity of $5.3 billion afford us flexibility to manage our strategic business initiatives. Also as of December 31, 2022, Alexandria’s unrivaled client base continues to generate stable, long-duration cash flows that support increasing dividends with a yield of 3.3%.
Our high-quality and diverse tenants in our Class A properties in AAA locations continue to drive strong results, with 90% of Alexandria’s top 20 tenants annual rental revenue as of December 31, 2022 generated from investment-grade or publicly traded large cap tenants. Highlighting our high-credit tenancy and the essential nature of our Labspace® platform, we collected an average of more than 99% of rents and tenant recoveries in 2022.
Alexandria also continued to capitalize on the strong valuations in the private market by sourcing significant equity-type capital for reinvestment in 2022. This year, our real estate dispositions and partial interest sales unlocked tremendous value, and we successfully completed $2.2 billion of value harvesting for reinvestment in a highly strategic and disciplined manner.
Additionally, we are extremely proud to have earned our fifth consecutive and seventh overall Nareit Investor CARE Award in the Large Cap Equity REIT category for excellence in communications and reporting, demonstrating our consistently best-in-class transparency, quality, and efficiency in communications and reporting to the investment community.
WORLD-CLASS BRAND DELIVERING DISTINCTIVE IMPACT
While we continue to deliver strong returns and prudently manage our business, Alexandria’s stellar and well-earned reputation in the life science industry has established us as the go-to brand for delivering complex laboratory infrastructure and excellence in operations to the industry’s most innovative companies. We continue to cultivate trusted relationships with them to help accelerate the translation of their cutting-edge scientific discoveries into novel medicines to improve and save lives.
Our ability to strategically partner and form enduring partnerships with our tenants is distinctive in the real estate industry and is a testament to Alexandria’s operational excellence. Our decades of expert leadership in providing amenity-rich campuses with inspirational design and people-centered placemaking, along with our ability to adapt, innovate, and be a valued and trusted partner, has resulted in an incredibly loyal client base with an average retention rate of more than 80% over the past five years.
The life science industry is large, diverse, and complex. Our client base reflects this diversity with approximately 1,000 tenants that span multinational pharmaceutical companies; public and private biotechnology companies; life science products, such as research tools and manufacturers of complex medicines; and top-tier investment-grade companies and institutions.
Exemplifying the importance of our tenants’ work to society and underscoring Alexandria’s impressive reach across the life science industry, 50% of all FDA-approved therapies have come from our tenants since 2013. As for the broader industry, we have seen a growing cadence of success in its unrelenting pursuit of innovation on behalf of patients. In the last five years, the FDA has approved nearly 250 novel medicines, compared to just over 180 in the five years prior.
VISIONARY STRATEGY DRIVING LASTING ENDURANCE
Our extraordinary growth was accelerated by our visionary cluster development and ecosystem-building strategy, as informed by Harvard Business Professor Michael E. Porter’s cluster theory. Utilizing this theory as the basis of our proven cluster model, for which we identified four critical components for innovative companies to thrive — location, innovation, talent, and capital — we shifted our focus during 2004–2006 from single assets to high-potential urban innovation cluster campuses as the first mover in Mission Bay, Cambridge, and New York City. We then deliberately evolved from amenity-rich collaborative cluster campuses to today’s differentiated mega campuses of 1 million RSF or more.
Demonstrating the demand for our unrivaled mega campuses, design prowess, and operational excellence, Alexandria achieved our second-highest annual leasing volume in company history with over 8 million RSF this year, of which 74% was generated from existing tenants. Notably, we executed a long-term 427,000 RSF lease with Bristol Myers Squibb (BMS) in 2022 for the development of the global pharmaceutical company’s newest cutting-edge R&D facility located on our Campus Point by Alexandria mega campus in San Diego. The purpose-built development is designed to accelerate collaboration and will support the company’s innovative research in cancer as well as immune-mediated and neurodegenerative diseases. This historic milestone lease marks the second-largest life science lease in Alexandria’s history and furthers our more than 25-year relationship with BMS.
Another exceptional example of our cultivation of strategic long-term relationships is Eli Lilly’s selection of 15 Necco Street in the Seaport Innovation District of Greater Boston for its new Lilly Institute for Genetic Medicine and its signing of a 334,000 RSF long-term lease. This iconic facility will support Lilly’s efforts to leverage promising RNA- and DNA-based technologies to develop novel therapies to treat or cure diseases such as diabetes, Parkinson’s, and cancer. For more than a decade, Alexandria has provided Lilly with long-term real estate solutions, including 15 Necco, that aggregate 1 million RSF on campuses across our Greater Boston, San Francisco Bay Area, New York City, and San Diego cluster locations.
With sincere gratitude,
Joel S. Marcus
Executive Chairman & Founder
With over 10,000 diseases known to humankind and less than 10% currently addressable with therapies, the incredible innovation taking place within our facilities is and will remain a national imperative. Nearly 40% of adult men and women will be diagnosed with cancer during their lifetimes. One in five adults in the nation’s population suffers from a mental health disorder, and there were more than 100,000 deaths due to overdose in the last year alone.
Catalyzed by innovative technologies, massive unmet medical needs, and strong fundamentals, the life science industry remains uniquely positioned to tackle and solve our most persistent and major healthcare challenges. The emergence of a new golden age of biology at this time only enhances the industry’s structural integrity and its ability to weather macroeconomic volatility. It reaffirms the fundamental truth Alexandria recognized nearly three decades ago: laboratory infrastructure is essential for advancing innovation that improves human health.
This golden age is also driving the life science industry’s war for talent and increasing demand for our mega campuses, which have been purposefully designed to support our tenants’ mission-critical efforts to recruit and retain the best people, and we expect it will continue to generate significant demand for Alexandria’s Labspace real estate platform and fuel the company’s truly exceptional growth.
LOOKING FORWARD
As we look to 2023, we want to thank our 1,000 clients for putting their trust in the Alexandria brand and for their continued perseverance in seeking and advancing groundbreaking medical innovation to benefit humankind. We also thank our one-of-a-kind team for their extraordinary dedication to Alexandria and our solemn mission, and for their passion, dedication, and unmatched operational excellence, which continue to enable our tremendous success and outstanding accomplishments. We are grateful to our stockholders for your continued support and belief in our differentiated and mission-driven business.
I am humbled and proud to lead the one-of-a-kind, once-in-a-generation company I founded and to work alongside our Alexandria family team to fulfill our critical mission to advance human health. Our unwavering commitment to enable our tenants’ life-changing work encapsulates Alexandria’s world-class brand, and it unites and drives us as we continue to work every day to help them in that pursuit.
Joel S. Marcus
Executive Chairman & Founder
Read the original letter here.
