Good afternoon, and welcome to the Alexandria Real Estate Equities fourth quarter 2021 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Paula Schwartz of Investor Relations. Please go ahead.
Thank you and good afternoon, everyone. This conference call contains forward-looking statements within the meaning of the federal securities laws. The company's actual results might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's periodic reports filed with the Securities and Exchange Commission. Now I'd like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead, Joel.
Thank you, Paula, and welcome everybody to our fourth quarter and 2021 year-end call. With me today are Peter Moglia, Steve Richardson, and Dean Shigenaga. With that welcome, I wanted to thank you for joining and wish everybody a happy Chinese New Year, starting today, the year of the tiger. We at Alexandria are very, very honored and pleased to report on a truly historic and remarkable fourth quarter and 2021 year-end results, really demonstrating operational and strategic excellence by really each and every metric. What I think is truly unique and audacious is that Alexandria has operated during this past two years, the 2021, 2020, and 2021 will be known as the COVID era, really at the highest operational tempo ever, and at a sophistication and scale that few REITs could ever accomplish.
In the words of Jim Collins, Alexandria has truly achieved three outputs that define a great company, superior results, distinctive impact, and lasting endurance. I wanna thank profoundly each and every one of the extraordinary Alexandria family team members on a sensational performance during 2021. Napoleon once said, "Strength and growth come only through continuous effort and struggle." Over the last 25 years, we came public in May 1997, so we'll have our 25th anniversary in May. We took this small company public three years after we started it with $19 million Series A. As of the end of the year, December 31, 2021, we had reached a phenomenal total market cap of $44 billion.
For the period of COVID, the 2020 and 2021, Alexandria's TSR approximated 45%+, exceeding by a wide margin the office index with a total return of -0.5%. Since our IPO 25 years ago in May 1997, we've been proud and fortunate that our total shareholder return has exceeded 2,500%, significantly outperforming the S&P 500 and office REIT indices at 939% and 552%, respectively. We're always playing the long game. Speaking about fourth quarter and year-end, very robust results. Our life science markets, as evidenced by our fourth quarter and full-year results, truly were a blowout in many respects, and most of which in, as clearly highlighted, has been leasing. That really sets us up nicely for a very strong 2022 and beyond.
The continued robust demand from really one of the most innovative and transformative industries in the United States, the life science industry, one which is not really cyclical, but which is event-driven, I think does set us up and enables us, our brand and our talented and special, operational lab space affords us a very strong pricing power in each of our cluster markets. Really, in many ways, sets us up to have a very strong earnings growth year here in 2022 and into 2023 and 2024. We continue to create highly accretive value creation opportunities to meet the current demand of over 850 innovative tenants, and importantly, provide a path for future growth.
Although we've reiterated 2022 guidance, and Dean will speak more about that in a moment, the 8.26-8.46 FFO per share, we will clearly revisit and update that in the first quarter earnings release. We have very strong momentum at our backs. As most of you know, and we often comment, with 10,000 known diseases to humankind, less than 10% really have addressable therapies today, and we are truly in the early days of the golden age of biotechnology and biology. Advances in innovation are happening at unprecedented speed and driving human health and quality of life in a positive direction. Steve Jobs commented many years ago when he predicted he thought that the biggest innovations of the 21st century would be the integration of biology and technology.
We've achieved historic milestones in many respects, and hopefully you enjoyed the press release and supplement where we tried to highlight those in both graphical and word form. Truly, others will speak about this in a moment. The highest leasing volume in the company's history, 9.5 million sq ft. Just an awesome achievement. Doubled annual revenues. At our 2017 investor day, we gave a framework that we would hope to double annual rental revenues in five years, and we exceeded that about a year and a half ahead of time. We also concluded the largest acquisition in the company's history during 2021, our entry into the Fenway sub-market. Over 1 million sq ft was leased to our longtime tenant, and very close relationship, Moderna.
I would say probably most importantly, I think Dean, Peter, and Steve will probably all comment on this, our historically high and strong leasing value creation pipeline really foreshadows outsized growth coming into the upcoming years, including 2022. Nearly 8 million rentable sq ft under construction are expected to commence over the next 6 quarters to generate over $610 million of incremental annual revenue. We think really sets us up in an extraordinary fashion. With that, let me turn it over to Steve for some important commentary.
Thank you, Joel, and good afternoon, everyone. Steve Richardson here. 2021 was indeed a year of historic demand, as Joel's just outlined, in the life science industry. For leasing milestones from the Alexandria team, the 9.5 million sq ft of total leasing was a record-shattering figure, and the 4.1 million sq ft during Q4 alone doubled the previous highest quarterly leasing run rate. The highlight, however, may have been the 3.8 million sq ft of leasing in the value creation, development, and redevelopment pipeline, with the emphasis on quality. We had two large-scale, ground-up Class A plus facilities featuring long-term leases to credit tenants.
The 462,000 rentable sq ft facility at 325 Binney leased to Moderna for their lab headquarters, and the 231,000 rentable sq ft facility at 751 Gateway for Genentech, Roche's lab facility, were ably led by our teams on the ground in Greater Boston and the San Francisco Bay Area. Important to note, both Moderna and Genentech, Roche are longtime lab tenants of Alexandria. A hearty shout-out as well to our teams for a superb year during 2021. Now, we also look to the metric we don't normally analyze, but consider the following. The 9.5 million sq ft of total leasing provides in excess of $6 billion of contractual triple net base rents.
$6 billion of contractual base rents are a significant financial metric, but maybe more important is the market reality of this leasing success, the meaningful expansion of the formidable moat the Alexandria team has carefully and strategically created since the company's inception 28 years ago. Also, consider that this 9.5 million sq ft of total leasing comprised 318 lease transactions with 280 different life science tenants in our core clusters. This dynamic activity could not be a starker contrast with other entities and random groups who may be leasing 25,000-50,000 sq ft, and occasionally 100,000 sq ft here or there to a handful of life science tenants, oftentimes outside of our core clusters. As an investor, the value proposition offered by Alexandria is very clear. We are laser focused on the life science industry.
This is not a sidecar or a new initiative for the company. As we continue to execute on creative and long-standing relationships to drive growth in our core markets, the dominant presence of our brand and mega campuses provides a singularly compelling story in the life science real estate market, with our stellar reputation for delivery of high quality, on time, and on budget infrastructure and incomparable complex lab operations. Now let me elaborate on a few additional highlights for a milestone late in 2021. The core continues to outperform with impressive renewal and re-leasing spreads of 22.6% cash and 37.9% GAAP during 2021. We have significant embedded upside with mark to market now at 31%+ . This is nearly double the mark to market of 17% at the end of Q4 2020.
AR for 2021 was 99.9%. Huge kudos to our best in class operations teams for their continued close relationships with our tenants throughout COVID these past two years. Early renewals during 2021 were 82% compared with our historical 71% rate. The exceptional health of Alexandria's value creation pipeline at scale, 7.4 million sq ft is one of the largest and highest quality pipelines amongst all REITs. We've increased the lease negotiating percentage to 83%, and Peter will comment on the details later, has significantly de-risked the delivering of the incremental revenues of $610 million noted on page 34 of the sup. Let me turn to supply and demand for a moment.
On demand, as we've highlighted throughout the recent Investor Day presentation, and these fresh statistics clearly indicate, Alexandria's compelling value proposition for our tenant base at our unique mega campuses has enabled us to capture not only a very large market share, but also the highest quality tenants in our core clusters. As we analyze supply, again, we do not foresee any major supply disruptions during 2022 and 2023. The delivery of large scale supply actually materializing is highly uncertain during 2024 and beyond for other potential new entrants. They face entitlement risk, operational risk for tenants considering unproven landlords, capital market risk with the recent increased volatility related to construction starts, supply chain risk as they consider plunging into a new technical and complicated product type, and the very significant underwriting risk posed by the nature of the biotechnology industry.
We are monitoring supply closely, but consider these risks to be very strong headwinds for others. In conclusion, as we start 2022 with enthusiasm for the highly disruptive therapies for huge unmet medical needs on the horizon by our more than 850 innovative tenants, we look forward to updating you on our progress in the coming months. With that, I'll hand it off to Peter.
Thanks, Steve. I'm gonna update you all on the value creation pipeline. I'm gonna discuss what we're seeing with construction costs and supply chain issues, and summarize our fourth quarter asset sales, which should bring to light the great opportunity investors have right now to benefit from the disconnect between our stock price and NAV due to overlooking the strength of our fundamentals and the reality on the ground in favor of macro themes. Just look at our quarterly and annual performance. Even in volatile times, we've been able to post exceptional results. Less than a handful of REITs can operate at this scale of operational excellence, and even fewer have a dominant share of each of their major markets, a high quality tenant base, and own the vast majority of a scarce asset class. Investors seem to be missing this.
Projects that are either under construction or expected to commence construction in the next six quarters are projected to deliver greater than $610 million in incremental rental revenues, primarily from the first quarter of this year through 2024. What Joel and others termed as the golden age of biotech today and during Investor Day, due to the accelerating discovery and development of effective new modalities such as cell, gene, and RNA and DNA therapies, continue to accelerate demand for life science real estate throughout the year, and especially in the fourth quarter, resulting in Alexandria shattering a number of leasing records, including the total annual and quarterly leasing volumes of our development and redevelopment pipeline.
In addition to this outstanding leasing, our best in class development teams have done a tremendous job continuing to deliver high quality purpose-built laboratory space to our tenants on time and on budget, even in challenging environments, which I'll touch on in a moment. During the year, we delivered a little over 2 million sq ft in 14 projects, with at least one project located in each of our core markets, illustrative of the depth and breadth of demand we see in all of our markets. During the quarter, we delivered 600,000 sq ft spanning 10 of those markets, which when fully delivered, will add approximately $34 million in NOI to our bottom line.
Stabilized yields for these projects averaged 6.2% on a cash basis, which is a very healthy spread to the cap rates we are seeing in our partial interest sales, which I will also discuss later. Our current projects under construction are largely pre-committed, with 75% of the space leased and 82% leased or under negotiation. Near term projects expected to commence construction in the next six quarters total 10.2 million sq ft and are already 67% leased and 83% leased or under negotiation. These projects include ground up development at Arsenal on the Charles, a development in the Seaport submarket of Boston at 15 Necco, which is fully committed. Two ground up projects at Torrey Pines that will aggregate properties on North Torrey Pines Road and adjacent streets into our new One Alexandria Square mega campus.
Two fully committed ground up developments at Alexandria Point mega campus in the UTC. Three ground up developments at our Alexandria Center for Life Science Shady Grove mega campus that are 89% committed in aggregate. Truly a remarkable pipeline to fuel earnings growth for years to come. We continue to monitor construction costs and supply chain disruptions with a laser focus. As reported in past calls, 2021 was a very challenging environment, with overall cost indexes indicating a full year inflation of 13%+, driven largely by materials costs and a lack of available labor. Conversations with general contractors and examination of industry reports are consistent in concluding that things are improving, and it's expected that as factories, ports, and logistics issues settle down, materials pricing will become favorable.
Expectations are things will remain elevated in 2022, but we will see a return to normal in 2023. For example, according to IHS Global Insight, steel increased by approximately 27% in 2021, but is expected to increase by approximately 14% this year before decreasing by 13% in 2023, and again by 9% in 2024. Almost every material line item tracked by IHS is expected to start decreasing in price by 2023, with the remaining items increasing at historic inflation rates. The bigger risk we face is delay caused by supply chain problems.
A poll of our project managers indicated that although we have some problems with items we typically include in our core and shell developments, such as generators being delayed by six to eight months, we are by and large able to mitigate delays by making early commitments on design and equipment specifications. A luxury we have because of our years of experience in developing life science buildings, enabling us to make quick decisions based on proven standards we have developed over two decades. A status few others have, and the result has been no material delays in the core and shell delivery of our project. Experience matters. However, it's a different story with FF&E, which puts most of the burden on our tenants. Things like benches and other fixtures, such as glass washing equipment, are tough to get right now.
Fortunately, we're able to leverage our scale and relationships for our tenants and ensure the advantages we have inure to their benefit, so they can get up and running with little inconvenience. In the fourth quarter, we completed the previously disclosed recapitalization of 1500 Owens at 409/499 Illinois in Mission Bay, and completed partial interest sales at 50-60 Binney in Cambridge, 455 Mission Bay Boulevard, and 1700 Owens in Mission Bay. With the Binney assets raising nearly $800 million in proceeds at a sub-4% cap rate, realizing a profit of approximately $450 million over cash invested, and the Mission Bay assets raising nearly $400 million of capital while achieving a 3.8% cap rate.
We also sold our 49% interest in our Menlo Gateway tech office project, generating almost $400 million in proceeds and achieving a profit of a little over $100 million in just under a five-year hold period. Overall, these sales generated $1.97 million in proceeds at an average cap rate of 4.3% and a per square foot value of $1,497. When you put that into the context of yesterday's $194.84 closing price of our stock, which implies a per square foot value of our operating assets of only $906, it supports my earlier statement about a disconnect between the stock price and the reality on the ground. High-quality life science assets with high-quality tenants are scarce, and we have hundreds of them.
We are a bargain right now. With that, I'll pass it over to Dean.
Hey, thanks, Peter. Dean here. Good afternoon, everyone. 2021 was a historic and record year of financial and operating performance for Alexandria. We're very well positioned for another exceptional year. We are the go-to brand. Our team delivers a very high level of operational excellence. We benefit from our important and strategic life science industry relationships, plus over 850 tenant relationships. We generate strong core growth through same property NOI growth. We have tremendous visibility into future growth with $610 million of incremental annual rental revenue from our value creation pipeline. Our team has delivered consistent execution of bottom-line FFO per share growth year to year, and we have one of the strongest balance sheets in the REIT industry.
We reported total revenues of $2.1 billion, up 12.1% over 2020, and FFO per share as adjusted per diluted share of $7.76 for the full year, outperforming our initial outlook for 2021 by $0.06 per share. 2021 generated many financial metrics that reflect outperformance relative to our initial guidance for the year, which I'll cover throughout my commentary. Core growth and key financial statistics were exceptional. Growth in cash NOI of $280 million- $1.4 billion for the fourth quarter annualized was supported by one of the highest quality tenant rosters in the REIT industry, with 51% of our annual rental revenue from investment grade rated or large cap public companies. We had an industry-leading EBITDA margin of 71%, highlighting efficient execution by our team.
We had 100 basis points growth in occupancy for the full year of 2021, excluding the impact of vacancy from recently acquired properties. Now importantly, 48% of the 1.8 million rentable sq ft of vacancy from recently acquired properties is expected to commence occupancy and rental revenue over the next two quarters. That's pretty amazing execution by our team. Now turning to 2022, the midpoint of our occupancy guidance is 95.5%, which is 150 basis points higher than occupancy of 94% as of 12/31/2021. Now demand for space from our life science industry relationships and tenant relationships drove record leasing volume with over 9.5 million rentable sq ft executed, double the rentable sq ft of leases executed annually in recent years.
We achieved record rental rate growth of 37.6% and 22.6% on a cash basis. Rental rate growth outperformed our initial outlook for 2021 by 740 basis points and 510 basis points above the midpoint of the range of our guidance. Again, pretty spectacular results. Importantly, for 2022, we expect continued strong rental rate growth on lease renewals and release in the space at roughly 32.5% and 20% on a cash basis at the midpoint of our guidance. Now same-property NOI growth was very strong for 2021 at 4.2% and 7.1% on a cash basis. GAAP rental rate growth was about double and cash results were up about 40% above the midpoint of our initial outlook for 2021.
Our outlook for 2022 same-property NOI growth at the midpoint of our guidance is also very strong at 6.5% and 7.5% on a cash basis above our strong performance in 2021 and reflects 170 basis point growth in same-property occupancy for 2022. Now leasing activity in the fourth quarter continued to reflect a very favorable environment for Alexandria. Occasionally, though, there is a lease or two that skews this particular statistic in the quarter. The fourth quarter included lease extensions with two tenants with higher tenant improvement allowances and leasing commissions. The key takeaway is that net effective rent, which is GAAP rent less the impact of tenant improvement allowances and leasing commissions, is up 50% on average for these leases.
Now TIs and leasing commissions for lease renewals and releasing in a space excluding these leases was about $34 per sq ft and consistent with historical amounts. Now we are in an outstanding position today with tremendous visibility for future growth and annual rental revenue of over $610 million from 7.4 million rentable sq ft of development and redevelopment projects that are 80% leased or under executed LOI or advanced lease negotiations. Now, what truly stands out as exceptional is that 94% of the 7.4 million rentable sq ft that is leased or negotiating is from existing relationships, highlighting the strength of our brand, operational excellence, our mega-campus offerings, and many other features.
Now during 2021, we completed a record level of leasing with 3.9 million rentable sq ft of development and redevelopment space leased, including a whopping 1.8 million rentable sq ft in the fourth quarter. We delivered about 2 million sq ft of development and redevelopment projects in the year with about $1.6 billion in basis that was on average completed in July of 2021. Now looking forward, NOI from development and redevelopment projects is expected to increase significantly in 2022 in comparison to 2021, and we expect significant year-over-year increases in NOI from development and redevelopment projects to continue into 2023. Turning to venture investments. The venture investments performed really well in 2021 and generated $216 million in realized gains, including $106 million that was included in FFO per share.
Now unrealized gains as of December 31 was almost $800 million, up about $44 million from the beginning of the year. Looking forward into 2022, venture investment gains that we expect to include in FFO per share should be relatively consistent with 2021 at roughly flat to up 10%. Turning to our balance sheet. Looking back, actually, it was about 10 years ago that our team completed our debut investment grade bond offering of 10-year notes at 4.66%. Now, 10 years later, our team is very pleased with Alexandria's corporate rating that ranks in the top 10% of the REIT industry. Congratulations, team. Now, thinking about where rates are today, we could issue 10-year bonds at all-in, at an all-in rate just under 3% today, highlighting very attractive long-term fixed rate debt for our company.
In October, S&P upgraded our credit rating outlook to positive, highlighting our unique and differentiated business model, strong brand and execution, high quality cash flows, and strong credit profile, among many other items. Now we met or exceeded our strong balance sheet goals with net debt to adjusted EBITDA at 5.2x and our fixed charge coverage ratio at 5.3x . We ended 2021 with over $3.8 billion in liquidity. Now turning to guidance. There were no changes in the detailed disclosures for 2021 guidance. We reaffirmed our strong outlook for 2022. Oops. 2022 included EPS diluted ranging from $2.65-$2.85, and FFO per share is adjusted diluted ranging from $8.26-$8.46.
Now as a reminder, please refer to page eight of our supplemental information for detailed underlying assumptions included in our guidance for 2022. With that, I'll turn it back to Joel.
Thank you very much. Let's open it up for questions, please.
We'll now begin the Q&A session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Sheila McGrath of Evercore ISI. Please go ahead.
Hi. Yes, good afternoon. I was wondering if you could go into a little bit more detail on some of the recent acquisitions and your vision or the opportunity you see, specifically the land purchases in Research Triangle, and maybe comment on the demand drivers in RTP, the acquisition of the strip center in San Diego, and finally Texas, what drove this new market decision?
Yeah. Hi, Sheila. Let me start with your couple of questions. In North Carolina, we have substantially increased our holdings there in a number of ways. Recent land parcels are aimed at creating and expanding—actually expanding the mega campus, which was the former Glaxo campus there that we bought and have turned into kind of a mega campus, if you will. That will be well over 1 million sq ft. Leasing has been very, very strong there, and we're adding some adjacent land to expand that campus and the capabilities there. You asked about what's driving the demand in North Carolina, particularly in the Triangle. I think you could argue it goes back to our thesis when we started the company that clusters are really driven by four factors.
One, you got to have a there's there, here's here, so to speak. The triangle is the there's there, here's here, anchored by North Carolina, UNC, Duke, and North Carolina State. The talent base is a second critical factor. One, as you know, there's kind of a war for talent across America and corporate America, even in just average individual-owned companies, small businesses, as you would call them, with so many people leaving the workforce. North Carolina has an amazing blend of great talent and highly trained, skilled people, especially for the life science, agricultural tech, and certainly technology industries. The third factor is risk capital. There's good abundance of capital in that market that are fueling companies.
Finally, there's a real plethora of scientific and technical, you might say technology, where translational work is coming out of the labs and moving into companies. Those are the four things that are really driving. Next gen manufacturing is found North Carolina to be an important place. I think Lilly announced today they're building a $1 billion campus, I think, just outside Charlotte. I'm a little surprised it wasn't closer to the Triangle, but they also have operations there. That's what's driving North Carolina. In San Diego, I think you asked about San Diego, was the second location.
Yeah, that's, I think you acquired a strip center there to redevelop or something.
Yeah, Dan has been working on that for quite a while. That is a really great location in the heart of University Towne Centre, which has been a hallmark of our presence down there since probably 1998, and an attempt to create a mini campus there in a really great location, driven heavily by great transport. Obviously, you know, the history of the San Diego market. San Diego's really emerged as one of the top markets with a great talent base and really strong capital base, strong scientific prowess, and obviously the land there has been very cherished. I think the final market you asked about was Texas.
For a variety of legal reasons, I can't say anything until the first quarter, and we'll talk about that. Much like New York, when we started in New York, we really spent before we opened the Alexandria Center for Life Science in 2010, we had started an effort in New York back in 2001 as part of Sandy Weill's effort to bring commercial life science to New York City, where none literally existed. I would say the same is true of Texas. Literally no real presence of commercial life science down there today. Our intent is to create a market and really bring early-stage commercial life science to Texas, much like we did in New York. With that, hopefully long-winded answer.
No, that's great. Thank you.
The next question comes from Jamie Feldman of Bank of America. Please go ahead.
Thank you for taking my question. Alexandria recently put out a press release saying that you're the number one most active corporate investor in biopharma in terms of new deal volume, and I believe it was for the last five years. I just wanna get your thoughts on your appetite for investment now. You know, our economists are calling for seven rate hikes this year. You know, Fed funds rate hikes this year and more next year. I wanna get your thoughts on both how ARE thinks about putting capital to work in a rising rate environment and just what your sense is of, you know, deal flow and capital raising we'll see in biotech and biopharma in this environment.
Yeah, Jamie, thanks for your question. It's a really good question. Remember, and I said in my earnings commentary just a few minutes ago, the industry is not a cyclical industry. The mature companies have, you know, large amounts of revenue and operate at scale and aren't really influenced by the cyclicality in any way, quite like, you know, the very interest rate sensitive industries are. That's number one. Number two, you have to remember that this industry, hopefully the compression time for bringing new therapies to market to address so many really terrible things that we don't currently have therapies for, you know, takes a number of years. It's not like tech, where you can create a software program and bring it out instantaneously.
When we met and began our work with Moderna was 2011, that was a pretty tough year as I recall. We were just getting our investment grade rating. As I remember, Steve always said, we didn't have a single tour at Mission Bay for maybe 18 months, and the capital markets were pretty bleak. We think long term. Investing now for the future, this is a good time to do it, especially as Peter said, the new modalities will change the face of, I think, healthcare of the future. We're very bullish on that. Yeah, I'm not sure what more I can say, but interest rates and the economy really are. You have to obviously pay attention. We're very mindful.
We've certainly lived through a number of ups and downs, the 1999, 2000 tech bust and then the 2008, 2009 financial meltdown. We're pretty judicious about what we do and how we do it. We're, you know, we're out there looking for the next Moderna.
Okay, thank you. Have you sensed a change in the market, you know, competitive investment market, given the pullback we've seen in the stocks? I know it hasn't been very long, but any-
Oh, for sure. I mean, yeah, it certainly is well recognized that the public markets have had major adjustments in valuations over the last, say, three quarters. I think that's starting to leak into the private market because a number of companies who have clinical programs are selling at cash, which is a bargain today. So investors are looking at those, you know, with big appetites. So I think you'll see some of that froth go out of the private markets. My guess is you're seeing the same thing on the tech side as well. Public markets are resetting valuations in the private markets. But truly great companies are gonna get funded.
There's a huge amount of venture that's been raised over the past couple of years, gigantic amounts, historic amounts, and those are investable dollars for the coming, handful of years that those aren't running out anytime soon.
In terms of demand for your portfolio, do you think it'll be a noticeable change or no?
I don't know if we'll be able to repeat the high water mark of 9.5 million sq ft for 2021, you know, over 4 million sq ft for 4Q. You know, as I think Peter and Steve have said, we have a huge wind at our back. We've got, you know, over 850 innovative tenants, most of whom, you know, we service for their current demand and future growth. We're pretty comfortable about where we are and certainly our value creation pipeline, super highly leased. I don't think we're at risk. We're mindful. I mean, if Russia invades the Ukraine, then, you know, things are gonna change pretty rapidly for everybody, right?
Okay. Thanks for your thoughts, Joel.
Of course.
The next question comes from Rich Anderson of SMBC Nikko. Please go ahead.
Good afternoon, everyone. Early on in the call, I think, Joel, you mentioned, you know, you've had this incredible quarter and year of leasing and that you'll take another look at guidance, not making any commitments, of course, in the following quarter. Is it not true that you, when you issued your guidance on December 1st, you had already seen what was happening at that point? Or was part of what you're reporting today a surprise to you even from, you know, the beginning of December, hence, you know, you could have like an earn-in type of event for 2022 as the success in the late part of fourth quarter rolls into the coming year?
Well, I think I'll let Dean answer that, but I think the commentary is we try to be conservative with how we project the future until we start to see things roll out. December was a record-breaking leasing year. We have a lot, you know, a good amount of leasing on the precipice of happening, and I think we feel pretty good. We gave a range and, you know, I think you'll see us go forward in the first quarter and give you a fulsome update. But Dean, do you wanna make any comments on that?
Yeah. Maybe just to somewhat reiterate what you said, Joel. Rich, the way to think about it, we had good tailwinds behind us last year, this time last year as we started 2021, and we were able to outperform a lot of our underlying guidance assumptions, including overall bottom line FFO per share. We're off to a great start at the very beginning of 2022 with good tailwinds behind us. So we're pretty optimistic, but stay tuned, I guess.
Okay. I guess the answer is, you know, record December, which didn't happen till after the earnings investor day. Next question, maybe to Peter. You mentioned the $906 per sq ft valuation on the stock. Can you kind of bookend that for me? Because there are a few ways to skin that analysis, depending on what you have in the denominator.
Yes
Is there a high and low end range, depending on some of the assumptions you put into that math?
Look, it's the same back of the napkin formula we used a while back when I was commenting on this, you know, kind of once the stock per implied per foot doesn't match up with our asset sales. You just take our total market cap, you know, at the close, or I'm sorry, at the end of the year of about $39.5 billion, and then you take out our CIP from our developments, our venture assets, and our cash and restricted cash, and that gives you the estimated value of our properties divided by our operating square footage. That's, you know, plus or minus, I'm sure it's not completely specific, but it's in the ballpark.
Okay.
Even if it was way off, there's still a huge disconnect.
Yeah, I got you. Yeah. And then, you know, following on the investment side for you, a lot of times when you guys make acquisitions, there is a component of operating assets and very often a future development or redevelopment opportunity, to your credit. When you allocate total cost to those types of transactions that have kind of multiple layers of opportunity in them, how do you do that? I mean, is there a rule of thumb of how much the operating assets get versus the development assets in a given transaction? I'm just curious how we should think about that.
Yeah. Dean, maybe.
Yeah, Rich, I wish there was a simple answer to help for your modeling. As you can imagine, every transaction is very unique and specific. The component of operating relative to value creation is also very unique. There's nothing general that I could guide you towards. We did include, though, for modeling in our acquisition disclosures, in the footnote there is a breakdown of how much NOI was brought on board for the current quarter acquisitions and the exact date on a weighted average basis that was added for the fourth quarter. At least you have the NOI to model, but the basis is much harder to get to, Rich.
Okay. Thanks very much.
Thank you, Rich.
Next question comes from Manny Korchman of Citi. Please go ahead.
Hey, it's Michael Bilerman here with Manny. Peter, I wanted to come back on this valuation question, and I recognize this is a drum that you've beat for a little while as the stock has traded below where you've been able to sell assets and certainly where private market values are. How do you think about, you know, the last two years you've issued, I think it's about 30% of your share base, clearly at pretty significant discounts to what you perceive market to be. You're obviously investing that capital accretively into a highly pre-leased development and redevelopment as well as acquisitions.
At some point, if your view is that the stock should be worth, you know, significantly more than it's trading today, you're issuing that equity at a massive discount, hence you need the things you're investing in to offset the dilution that you're putting on the company from issuing at such a low value below what you think your NAV is. Can you just sort of step back from it? Because if, you know, if you had issued 5% of your share base, it's one thing, but you've issued 30% over the last two years. How do you sort of put all that together as you're thinking about capital allocation and raising?
Yeah. Maybe, Dean, do you wanna comment on that first and maybe let Peter give color?
Sure, Joel. Michael, I think what you described at a super high level generally has been a challenge that a growing company like Alexandria has faced. As you know, as we grow cash flows pretty consistently quarter to quarter, take the macro environment away, our stock price should be higher the next quarter. If we wait too long to issue stock, then we have an equity overhang. I think what we've tried to do, Michael, is to be balanced here. I think Peter's commentary from time to time is just to highlight the opportunity on the stock price performance.
Hopefully, it catches the attention of investors while we do our job to execute the business and do it as best we can to grow cash flows in a prudent way and fund it in a reasonable way with both debt equity as well as proceeds from dispositions. Yeah, I think on average, we've done a pretty good job, being mindful of that overall challenge and opportunity in front of us. You know, we are making money, as we invest our capital at the price points that we have raised, both debt equity as well as recycling capital from dispositions. There's a balance we need to navigate that I think you're pointing out here.
Yeah. Dean, could you maybe just highlight the historical equity level compared to, say, a lot of companies?
Oh, yeah, that's important too. Michael, you might remember this from Investor Day. We had touched on just looking back at how much common equity do we use to fund our growth. We all know that at our leverage profile at a stabilized basis, an asset might require 65%+ of equity, the remainder being debt-funded. If you compare that to what we've done historically, we're actually only using about 40%-42% of common equity to fund growth.
What that's highlighting is tremendous cash flows being reinvested in the business, which for 2022 is north of $300 million. We're also taking advantage of recycling capital from high value, low cap rate, partial interest transactions. EBITDA growth gives us some incremental benefit as well. I think that also just highlights that we're being very disciplined in our approach on trying to minimize the amount of common equity we issue while being mindful. We wanna keep our balance sheet in a super strong position.
Yeah. I get all those things. Certainly tapping the asset sales and joint ventures over the last number of years has been another source of capital. You've also enlarged your acquisition opportunities, both development as well as straight transactions. It just strikes me that, you know, sometimes, Peter, when you get on and you say we're a bargain and throwing out $1,500 a foot, I think people start to really try to get into your head of, well, what do you perceive NAV to be?
You know, we recognize the most recent sales are indicative of where the market is for life sciences, but I don't think that's what you're trying to guide people towards, that your entirety of your portfolio is worth $1,500 a foot, and every $100 per foot is, you know, call it almost $20 a share of NAV. Trading at $900, you know, what is the value that you have in your mind? You must have a sense of when you're issuing, you know, a couple weeks ago, right? You issued $1.7 billion at $186. You must have had a view whether that equity, in your view, is worth $250. Is it $275? Are you saying it should be $600?
I think, Michael, the point of that is we were at an all-time high, and we felt very comfortable in taking the market risk of issuing equity, especially before a pretty, what's likely to shape up as a pretty volatile year. NAV is a little bit like beauty. It's in the minds of the beholder. I think that we felt at that point we're very comfortable issuing equity at that level. Let's just put that, you know, point to rest.
Yeah. I was just trying to get to understand how the company thinks about its cost of equity and when it puts into what you're using it for, just how you're thinking about the accretion dilution from that.
Yep.
Especially if you're telling investors that the stock is cheap. I'm just trying to get a sense of how you're thinking about it. We can-
Yeah, I didn't say that.
See you in Florida.
That's Peter giving a view on an asset-by-asset basis. At an all-time high, issuing the equity we did, we felt very good about what we're doing and the accretive uses we could put that equity to.
Okay, great. See you in Florida.
The next question comes from Michael Carroll of RBC Capital Markets. Please go ahead.
Yep, great. Thanks. I wanted to dive into the leasing stats a little bit. I know volumes were pretty high in the fourth quarter, both in the operating and the development portfolios. In the operating portfolio, I'm trying to connect the dots with the strong volume, but occupancy dipped, albeit very slightly. Is this in part due to leases being signed but not yet commenced, or is it explained by the lease extensions that Dean mentioned in his prepared remarks?
I think it's primarily acquisitions, but Dean, you could comment.
The acquisitions have been driving almost every quarter face rate declines in reported occupancy. If you restrict that out, Michael, pretty consistently every quarter or two, we're driving growth in overall occupancy. As an example, we highlighted in 2021, we had a 100 basis point increase in occupancy if you exclude vacancy from recently acquired properties. I think I highlighted in my commentary that we do expect if you put any future acquisitions to the side that we can't model because we're not aware of them, we're expecting a 150 basis point growth in occupancy in 2022. I would suspect that, you know, given the tailwinds for our business and our portfolio here, that could continue looking out beyond 2022 as well.
Okay. No, great. That makes a lot of sense. Also I like the new disclosure, at least the highlight disclosure, that about 63% of your operating properties are in mega campuses. I mean, is there a way to quantify the importance of having these larger campuses? Do those buildings in these campuses drive stronger revenue growth than buildings outside of those campuses?
Yeah. I think if you remember back to Investor Day, Dan gave a specific example in San Diego, where our mega campus leasing effort was substantially above on a lease rate above a nearby building which was owned by another REIT and demonstrated, you know, that is just kind of a sheer apples to apples. One of the reasons it makes a big difference is because it provides not only the highly amenitized and tailored services and facilities for tenants, but it gives them a space for growth right now, but a path for future growth. In our industry today, that's kind of mission-critical.
Great. Within the development pipeline, I guess, do you have the percentage of the buildings that further build out your existing campuses or create new campuses?
We do. I don't think we have that in any specific disclosure place, but if we go campus by campus, clearly we do.
Okay, great. Thank you.
Yep, thank you.
The next question comes from Tom Catherwood of BTIG, please go ahead.
Thanks, everyone. Steve, appreciate your commentary on the new supply in your markets, and demand is obviously strong given record leasing volumes this quarter and year. With that said, though, can you provide some additional color on the demand in your markets and maybe how that demand is split between your core and emerging clusters, if you have that information?
Yeah. Hey, Tom, it's Steve here. Yeah, certainly on the demand side, and we've said this now probably for a couple of years, that it is broad-based in each of our core clusters. It's not, you know, just one or two clusters with a out of proportion contribution. You know, Joel touched on what's happening down in Research Triangle. That's very encouraging. Very healthy demand in Maryland and Seattle as well. Certainly San Diego, San Francisco and Greater Boston, you know, very healthy there. On the demand side, you know, absolutely broad-based, and, you know, we continue to see that going forward in the future as well.
Makes sense. You know, given that you've added some of these emerging or new cluster locations, is it a case of, you know, if you build it, they will come, where you've seen demand move as you have moved? Or has it the demand kind of remained consistent from before and now after you're in those markets as well?
Yeah, I'm not sure I would characterize it as new markets, Tom. I think what we've done is either one, doubled down, you know, literally in our core markets. I mean, look at, you know, 325 Binney as an example there in Cambridge. Certainly what's happened, you know, Peter referenced the projects down in San Diego in Torrey Pines. Then the second aspect of it is really expanding through, you know, adjacent expansions. You know, no real kind of new greenfield core markets, as we talked about this broad-based demand.
That makes sense. Last one from me. In the supplement, you laid out your next, I think, 11 developments and redevelopments that are slated to start over the next 6 quarters, and they're 89% leased or in negotiation. Outside of those, are there others that could commence in the same timeframe if pre-leasing gets done, or are you kind of limited by entitlements or design or local approvals?
Tom, it's Dean here. There are projects beyond that 2.6 million sq ft that is currently disclosed at 89% leased or negotiating. Those are the projects that could start over the next six quarters. In addition, real clear here, we expect the potential for other starts. We just wanted to highlight in these disclosures here that we've got a very active pipeline under either leased or advanced negotiations. It just highlights how much we're working closely with our relationships to meet their current and future space needs.
Got it. Thanks, guys.
Thank you, Tom.
The next question comes from Vikram Malhotra of Mizuho. Please go ahead.
Thanks for taking the question. Just maybe two questions. First, just on, you know, just pricing power across your markets. You've referenced really good rent spread, seems like they're sustainable, given your guidance. I'm wondering if you can just talk about, how we think about the sustainability of these spreads, you know, maybe from two different perspectives. One, just in your view, what's sort of the mark-to-market of the portfolio today, in your various clusters? Also just maybe top-down, can you talk about just, you know, what life science tenants are paying in rent as a percent of their own revenue? Is it they're just an elongated runway given where that is today?
Yeah. The answer to your first question, I think Steve addressed. Generally on a mark-to-market basis, the portfolio would be about 31% up. That gives you a good sense of how that would play out. Then when you look at life science companies, pharma, biopharma, you know, small, medium rent is generally a smaller part of, I think Steve or Peter, you guys may have the stats, but a fairly small part of the overall G&A, whereas if you go to service companies, you know, law firms, securities firms, it's a much larger part. I don't know, Steve or Peter, do you have that percentage in mind? It's sub 5%, I believe.
Well, for our large cap bio and pharma companies, it's actually 1%-2%. Then, kind of, the mid-caps is in the 5%-6% range.
Okay. That's helpful. Then just to clarify on some of your newer developments, or in general, one of your office peers, I should say, referencing kind of a lot of demand, even for life science assets from other categories, tech especially, given you know, the need for newer buildings and amenities. Are you seeing you know, just unsolicited interest from just other groups given sort of where your buildings are?
Yeah. We've seen that for a decade or more. I mean, Steve, maybe just a tutorial on Mission Bay for a moment, which is kind of where a lot of this started.
Sure. Yeah, in Mission Bay, as you might know, you know, we had a significant influx of technology with Uber establishing a four-building 1 million sq ft campus there. You know, the combination of not only UCSF, you know, as a center of learning there, a waterfront location, now the Chase Center, really did make that very desirable for technology companies. A lot of those other elements are true when you look at all of the attributes of our mega-campuses, you know, San Diego, Seattle, certainly Cambridge and Greater Boston as well. Then you have, and Joel mentioned this too, you've got the integration of science and technology really spawning new companies and new growth, and those are all happening in, you know, in each of our clusters. Okay, great. Thank you.
Thank you.
Our last question comes from Dave Rodgers of Baird. Please go ahead.
Yeah, good afternoon. Thanks. Joel, I just wanted to ask about New York. Most of my other questions were answered. With the New York cluster, I know over time you've talked about it in kind of the long-term development track for some of these clusters. I think historically demand was one side, but also crowding out of investment capital and things in New York City was an impact on that particular cluster. With a weaker New York City office market, are you seeing either more tenants interested or are you seeing more capital, or is ARE more interested in kind of moving more aggressively in New York to take advantage of the weak office market like you see maybe in San Diego? Or is that just not really afoot?
Yeah, I don't think that's happening. I think we won the RFP for the first commercial life science campus in 2005 under Mayor Bloomberg's direction. We delivered our first building in 2010, and at that point, there was only a single commercial one incubator up in the northwest side of Manhattan that had commercial life science tenants, and that was it. Everything else was clinical, academic, but not commercial. Over the past decade, we've built New York. We have our campus today over 800,000 sq ft, and we have the prospect of going significantly more. We've got some 60+ companies there, only one of which really existed before we started the campus in the city.
The New York City market is still a small company market. It's a small market. We felt that it was a good one to enter because of our you know, our cluster model and the the drivers. If you look at last year, there were only about 250,000 sq ft of new leases. You know, in Boston, that's probably a day's work. You have to look at it you know, with respect to all of the clusters. It still is a 25-year gestation period, as I've said, to build a cluster and you know, we're just now entering the second decade. New York's got a long way to go.
You know, over the past couple of years, you know, New York's been a tough slog with crime and, you know, civil disturbances and things like that. That's been a challenge. Big companies aren't gonna go to New York, New York State because of high taxes. It remains a small company market. We're committed. You know, you build it from the ground up.
All right. Thank you.
Yep, thank you.
This concludes our Q&A session. I would like to turn the conference back over to Joel Marcus for any closing remarks.
Well, thank you, everybody. We look forward to updating you on our first quarter call. Be safe. Take care.
The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.