be

‘Stand-off’: Why the NZX may be next in line for double-digit correction

Post By: Olivia October 8, 2023 0 Comment(s) 2007, around, be, bond, cent, correction, could, doubledigit, exchange, fall, for, highs, in, Line, longdated, may, next, nzx, seen, since, standoff, stock, the, why, Yields, zealand

The New Zealand stock exchange could fall by around 10 per cent as long-dated bond yields hit highs not seen since 2007.

Fresh research from fund management firm Forsyth Barr suggests our equity market, when compared to the moves in the fixed income market, may be overvalued by as much as 30 per cent – although they say a decline of that degree is obviously unlikely.

“I don’t want to be called Doctor Doom here,” senior equity research analyst Aaron Ibbotson told Markets with Madison.

“[But,] it doesn’t make you feel extremely comfortable.

“We do not expect that degree of sell-off by any stretch of the imagination, but we have pretty much no meaningful outperform ratings [for yield-sensitive NZX-listed stocks].”

A 10 per cent drop over the next 12 months was more realistic, he said, although he wasn’t forecasting that per se.

For a deeper correction to occur, he said the market would need to re-establish its historical relationship with long-dated bond yields.

“Today, that relationship has pretty much totally broken down.”

The US 10-year yield hit a 16-year high of around 4.8 per cent this month, although that has come off slightly, and the NZ 10-year was sitting above 5 per cent, a 12-year high. Typically, that puts downward pressure on equities.

The NZX was one of the most interest rate-sensitive markets in the developed world, he said, because many of the companies listed on it were tied to real assets, such as commercial property, ports, telecommunications and power generators.

“It does look strange to us how little the equity market has reacted to to what’s happening in in in the bond market.

“In our view it is a little bit of a stand-off at the moment.”

Watch Aaron Ibbotson explain his bearish research exclusively on today’s episode of Markets with Madison.

Get investment insights from the experts on Markets with Madison every Monday and Friday on the NZ Herald.

Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.

Stake is the proud sponsor of Markets with Madison. Stake your claim today at HelloStake.com.

Madison Reidy is the host of New Zealand’s only financial markets show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.

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‘Not changing can be terminal’: Commercial fishing still hurting after Cyclone Gabrielle

Post By: Olivia September 14, 2023 0 Comment(s) after, be, Can, changing, Commercial, cyclone, fishing, gabrielle, hurting, not, still, terminal

Commercial fishermen Karl Warr (left) and Matt Douglas are still feeling the impacts of Cyclone Gabrielle on the waters seven months after the event. Photo / James Pocock

Commercial fishers say their catches are down and there’s still debris and sediment heaped on the ocean floor of Hawke’s Bay, as the impacts of Cyclone Gabrielle linger seven months on.

Occasionally, debris surfaces –

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ALEXANDRIA REAL ESTATE EQUITIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

Post By: Olivia January 30, 2023 0 Comment(s) Alexandria Real Estate Equities, and, annual, be, conjunction, discussion, exhibits, following, in, INC. stock exchange, information, item, News, notes, our, press release, read, report | ARE | US0152711091, schedules, should, statements, the, thereto, this, under, With

The following discussion should be read in conjunction with our consolidated
financial statements and notes thereto under "Item 15. Exhibits and financial
statement schedules" in this annual report on Form 10-K. Forward-looking
statements involve inherent risks and uncertainties regarding events,
conditions, and financial trends that may affect our future plans of operations,
business strategy, results of operations, and financial position. A number of
important factors could cause actual results to differ materially from those
included within or contemplated by such forward-looking statements, including,
but not limited to, those described within this "Item 7. Management's discussion
and analysis of financial condition and results of operations" in this annual
report on Form 10-K. We do not undertake any responsibility to update any of
these factors or to announce publicly any revisions to any of the
forward-looking statements contained in this or any other document, whether as a
result of new information, future events, or otherwise.

As used in this annual report on Form 10-K, references to the “Company,”
“Alexandria,” “ARE,” “we,” “us,” and “our” refer to Alexandria Real Estate
Equities, Inc. and its consolidated subsidiaries.

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                    [[Image Removed: are-20221231_g41.jpg]]
Sources: Bloomberg and S&P Global Market Intelligence. Assumes reinvestment of
dividends.
(1)Alexandria's IPO priced at $20.00 per share on May 27, 1997.
(2)Represents the FTSE Nareit Equity Office Index.
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                    [[Image Removed: are-20221231_g42.jpg]]
As of December 31, 2022.
(1)Quarter annualized. Refer to "Net debt and preferred stock to Adjusted
EBITDA" in the "Non-GAAP measures and definitions" section within this Item 7
for additional details.
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                    [[Image Removed: are-20221231_g43.jpg]]
As of December 31, 2022.
(1)Represents the percentage of our annual rental revenue generated by our top
20 tenants that are also investment-grade or publicly traded large cap tenants.
Refer to "Annual rental revenue" and "Investment-grade or publicly traded large
cap tenants" in the "Non-GAAP measures and definitions" section within this Item
7 for additional details.
(2)Represents annual rental revenue currently generated from space that is
targeted for a future change in use, including 1.1% of total annual rental
revenue that is generated from covered land play projects. The weighted-average
remaining term of these leases is 5.2 years.
(3)Our other tenants, which aggregate 2.0% of our annual rental revenue,
comprise technology, professional services, finance, telecommunications, and
construction/real estate companies and less than 1.0% of retail-related tenants
by annual rental revenue.
(4)Represents annual rental revenue in effect as of December 31, 2022. Refer to
"Annual rental revenue" in the "Non-GAAP measures and definitions" section
within this Item 7 for additional details.
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                    [[Image Removed: are-20221231_g48.jpg]]
(1)Based on the closing price of common stock as of December 31, 2022 of $145.67
and the common stock dividend declared for the three months ended December 31,
2022 of $1.21 annualized.
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(1)Includes initial proceeds from our joint venture partners' contribution
toward construction projects.
(2)Represents the aggregate gain and consideration in excess of book value
recognized on dispositions and partial interest sales, respectively.
(3)Represents the weighted-average capitalization rates for stabilized operating
assets.
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                    [[Image Removed: are-20221231_g50.jpg]]
Refer to "Net operating income" in the "Non-GAAP measures and definitions"
section within this Item 7 for additional details and its reconciliation from
the most directly comparable financial measures presented in accordance with
GAAP.
(1)As of December 31, 2022. Represents projects under construction aggregating
5.6 million RSF and seven near-term projects aggregating 2.0 million RSF
expected to commence construction during the next four quarters.
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(1)A credit rating is not a recommendation to buy, sell, or hold securities and
may be subject to revision or withdrawal at any time. Top 10% ranking represents
credit rating levels from Moody's Investors Service and S&P Global Ratings for
publicly traded U.S. REITs, from Bloomberg Professional Services as of December
31, 2022.
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                    [[Image Removed: are-20221231_g52.jpg]]
As of December 31, 2022.
(1)Quarter annualized. Refer to "Net debt and preferred stock to Adjusted
EBITDA" in the "Non-GAAP measures and definitions" section within this Item 7
for additional details.
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Executive summary

Operating results
                                                                         Year Ended December 31,
                                                                        2022                    2021
Net income attributable to Alexandria's common
stockholders - diluted:
In millions                                                     $       513.3              $     563.4
Per share                                                       $        3.18              $      3.82
Funds from operations attributable to Alexandria's common stockholders - diluted, as
adjusted:
In millions                                                     $     1,361.7              $   1,144.9
Per share                                                       $        8.42              $      7.76



The operating results shown above include certain items related to
corporate-level investing and financing decisions. For additional information,
refer to "Funds from operations and funds from operations, as adjusted,
attributable to Alexandria Real Estate Equities, Inc.'s common stockholders" in
the "Non-GAAP measures and definitions" section and to the tabular presentation
of these items in the "Results of operations" section within this Item 7 in this
annual report on Form 10-K.

An operationally excellent, industry-leading REIT with a high-quality client
base of approximately 1,000 tenants supporting high-quality revenues, cash
flows, and strong margins

Percentage of total annual rental revenue in effect from investment-grade
or publicly traded large cap tenants

                                                          48  %

Sustained strength in tenant collections:
Tenant receivables as of December 31, 2022                                             $        7.6 million

January 2023 tenant rent and receivables collected as of the date of this
report

                                                                                      99.4  %

Occupancy of operating properties in North America                                          94.8  %
Operating margin                                                                              70  % (1)
Adjusted EBITDA margin                                                                        69  % (1)
Weighted-average remaining lease term:
All tenants                                                                                     7.1 years
Top 20 tenants                                                                                  9.4 years

(1)For the three months ended December 31, 2022.

Second-highest annual leasing volume and rental rate increases (cash basis)


•Annual leasing volume of 8.4 million RSF in 2022 represents the second highest
in Company history, with 74% generated from our client base of approximately
1,000 tenants.
•Rental rate increase (cash basis) of 22.1% on lease renewals and re-leasing of
space represents the second highest rental rate growth (cash basis) in Company
history.
                                                                2022
Total leasing activity - RSF                                 8,405,587

Leasing of development and redevelopment space – RSF 2,828,539
Lease renewals and re-leasing of space:
RSF (included in total leasing activity above)

               4,540,325
Rental rate increases                                              31.0%
Rental rate increases (cash basis)                                 22.1%




                                      102
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Continued strong net operating income and internal growth, including highest
annual same property growth in Company history


•Total revenues of $2.6 billion, up 22.5%, for the year ended December 31, 2022,
compared to $2.1 billion for the year ended December 31, 2021.
•Net operating income (cash basis) of $1.6 billion for the year ended
December 31, 2022, increased by $292.8 million, or 22.2%, compared to the year
ended December 31, 2021.
•96% of our leases contain contractual annual rent escalations approximating 3%.
•Same property net operating income growth of 6.6% and 9.6% (cash basis) for the
year ended December 31, 2022, compared to the year ended December 31, 2021, with
both increases representing the highest growth in Company history.
•Our 2022 same property growth outperformed our 10-year averages of 3.6% and
6.7% (cash basis) as a result of an increase in same property occupancy of 100
bps and early lease renewals that commenced in late 2021/early 2022.

Continued strong, consistent, and increasing dividends with a focus on retaining
significant net cash flows from operating activities after dividends for
reinvestment


•Common stock dividend declared for the three months ended December 31, 2022 was
$1.21 per common share, aggregating $4.72 per common share for the year ended
December 31, 2022, up 24 cents, or 5%, over the year ended December 31, 2021.
•Dividend yield of 3.3% as of December 31, 2022.
•Dividend payout ratio of 58% for the three months ended December 31, 2022.
•Average annual dividend per-share growth of 6.5% over the last five years.

Alexandria’s value-creation pipeline drives visibility for future growth
aggregating over $655 million of incremental net operating income


•Highly leased value-creation pipeline of current and seven near-term projects
expected to generate greater than $655 million of incremental net operating
income, primarily commencing from the first quarter of 2023 through the fourth
quarter of 2025.
•7.6 million RSF of value-creation projects, which are 72% leased.
•77% of the leased RSF of our value-creation projects was generated from our
client base of approximately 1,000 tenants.

External growth and investments in real estate

Delivery and commencement of value-creation projects


•During the three months ended December 31, 2022, we placed into service
development and redevelopment projects aggregating 497,755 RSF across multiple
submarkets, resulting in $28 million of incremental annual net operating income.
•Annual net operating income (cash basis) is expected to increase by $57 million
upon the burn-off of initial free rent from recently delivered projects.
•Commenced two development projects aggregating 467,567 RSF during the three
months ended December 31, 2022, including 212,796 RSF at 1450 Owens Street in
our Mission Bay submarket, which will be 100% funded by our joint venture
partner, and 254,771 RSF at 10075 Barnes Canyon Road in our Sorrento Mesa
submarket, which will be 50% funded by our joint venture partner.

Value-creation pipeline of new Class A development and redevelopment
projects as a percentage of gross assets

                                                  December 31, 2022
Under construction projects 68% leased/negotiating                                               10%

Near-term projects expected to commence construction in the next four

                       2%
quarters 88% leased
Income-producing/potential cash flows/covered land play(1)                                        7%
Land                                                                                              3%


(1)Includes projects that have existing buildings that are generating or can
generate operating cash flows. Also includes development rights associated with
existing operating campuses. These projects aggregate 1.1% of total annual
rental revenue as of December 31, 2022 and are included in targeted for a future
change in use in our industry mix chart. Refer to "High-quality and diverse
client base in AAA locations" under Item 2 in this annual report on Form 10-K.

•81% of construction costs related to active development and redevelopment
projects aggregating 5.6 million RSF are under a guaranteed maximum price
("GMP") contract or other fixed contracts. Our budgets also include construction
cost contingencies in GMP contracts plus additional landlord contingencies that
generally range from 3% to 5%.

Alexandria is at the vanguard of innovation for a high-quality client base of
approximately 1,000 tenants, focused on accommodating their current needs and
providing them with a path for future growth

•During the year ended December 31, 2022, we completed acquisitions in our key
life science cluster submarkets aggregating 10.2 million SF, which comprise
9.5 million RSF of value-creation opportunities and 0.7 million RSF of operating
space, for an aggregate purchase price of $2.8 billion.
                                      103
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Execution of capital strategy

2022 capital strategy

During 2022, we continued to execute on many of the long-term components of our
capital strategy, as described below.

Maintained access to diverse sources of capital strategically important to our
long-term capital structure

•Generated significant net cash flows from operating activities
•In 2022, we funded approximately $460 million of our equity capital needs with
net cash flows from operating activities after dividends.


•Continued strategic value harvesting through real estate dispositions and
partial interest sales
•In 2022, these sales generated $2.2 billion of capital for investment into our
highly leased development and redevelopment projects and strategic acquisitions.
In connection with these transactions, we recorded gains or consideration in
excess of book value aggregating $1.2 billion.

•Achieved significant growth in annualized Adjusted EBITDA of $215.7 million, or
13%, for the year ended December 31, 2022 compared to the year ended December
31, 2021, which allowed us to:
•Improve our net debt and preferred stock to Adjusted EBITDA ratio to 5.1x,
representing the lowest ratio in Company history, for the three months ended
December 31, 2022 annualized, and fund $1.2 billion of growth on a
leverage-neutral basis; and
•Take advantage of favorable capital market environment and opportunistically
issue, on a leverage-neutral basis, unsecured senior notes payable aggregating
$1.8 billion with a weighted-average interest rate of 3.28% and an initial
weighted-average term of 22.0 years.

•Continued disciplined management of common equity issuances to support growth
in FFO per share, as adjusted, and NAV per share
•In 2022, the aforementioned internally generated capital enabled us to meet our
capital requirements while prudently limiting the amount of equity issuances to
12.9 million shares of common stock sold under our forward equity sales
agreements and ATM common stock offering program for net proceeds of $2.5
billion.

Maintained a strong and flexible balance sheet with lowest leverage in Company
history as of December 31, 2022


•Investment-grade credit ratings ranked in the top 10% among all publicly traded
U.S. REITs.
•Net debt and preferred stock to Adjusted EBITDA of 5.1x, the lowest ratio in
Company history, and fixed-charge coverage ratio of 5.0x for the three months
ended December 31, 2022 annualized.
•Total debt and preferred stock to gross assets of 25%.
•99.4% of our debt has a fixed rate.
•13.2 years weighted-average remaining term of debt.
•No debt maturities prior to 2025.
•No remaining LIBOR-based debt ahead of June 2023 phase-out.
•$5.3 billion of liquidity.
•$24.9 billion in total equity capitalization, which ranks in the top 10% among
all publicly traded U.S. REITs.
•$1.4 billion of contractual construction funding commitments from existing real
estate joint venture partners expected over the next four years.

Completion of unsecured senior line of credit amendment to upsize and extend
term

•In 2022, we amended our unsecured senior line of credit with the following key
changes:

                                                 New Agreement

Change

Commitments available for borrowing                 $4.0 billion             Up $1.0 billion
Maturity date                                       January 2028           Extended by 2 years
Interest rate                                       SOFR+0.875%             Converted to SOFR
                                                                               from LIBOR


                                      104

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2023 capital strategy


During 2023, we intend to continue to execute our capital strategy to achieve
further improvements to our credit profile, which will allow us to further
improve our cost of capital and continue our disciplined approach to capital
allocation. Consistent with 2022, our capital strategy for 2023 includes the
following elements:

•Allocate capital to Class A properties located in life science, agtech, and
tech campuses in AAA urban innovation clusters.
•Maintain prudent access to diverse sources of capital, which include net cash
flows from operating activities after dividends, incremental leverage-neutral
debt supported by growth in Adjusted EBITDA, strategic value harvesting and
asset recycling through real estate disposition and partial interest sales,
non-real estate investment sales, sales of equity, and other capital.
•Continue to improve our credit profile.
•Maintain commitment to long-term capital to fund growth.
•Prudently ladder debt maturities and manage short-term variable-rate debt.
•Prudently manage equity investments to support corporate-level investment
strategies.
•Maintain a stable and flexible balance sheet with significant liquidity.

The anticipated delivery of significant incremental EBITDA from our development
and redevelopment of new Class A properties is expected to enable us to continue
to debt fund a significant portion of our development and redevelopment projects
on a leverage-neutral basis. We expect to continue to maintain access to diverse
sources of capital, including unsecured senior notes payable and secured
construction loans for our development and redevelopment projects from time to
time. We expect to continue to maintain a significant proportion of our net
operating income on an unencumbered basis to allow for future flexibility for
accessing both unsecured and secured debt markets, although we expect
traditional secured mortgage notes payable will remain a small component of our
capital structure. We intend to supplement our remaining capital needs with net
cash flows from operating activities after dividends and proceeds from real
estate asset sales, non-real estate investment sales, partial interest sales,
and equity capital. For further information, refer to "Projected results,
Sources of capital," and "Uses of capital" within this Item 7. Our ability to
meet our 2023 capital strategy objectives and expectations will depend in part
on capital market conditions, real estate market conditions, and other factors
beyond our control. Accordingly, there can be no assurance that we will be able
to achieve these objectives and expectations. Refer to our discussion of
"Forward-looking statements" under Part I and "Item 1A. Risk factors" in this
annual report on Form 10-K.
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Operating summary

                                            Historical Same Property
                                         Net Operating Income Growth(1)                                                                                              Favorable Lease Structure(3)
                                                                                                                            Strategic Lease Structure by Owner and Operator of Collaborative Life Science, Agtech, and Technology Campuses
                                                                                                                         Increasing cash flows
                                                                                                                         Percentage of leases containing annual rent escalations                                                           96%
         [[Image Removed: are-20221231_g54.jpg]]                                                                         Stable cash flows
                                                                  [[Image Removed: are-20221231_g55.jpg]]                Percentage of triple                                                                                              93%
                                                                                                                         net leases
                                                                                                                         Lower capex burden
                                                                                                                         Percentage of leases providing for the recapture of capital expenditures                                          93%


                                         Historical Rental Rate Growth:
                                            Renewed/Re-Leased Space                                                                                                           Margins(4)

                                                                                                                                         Operating                                                                   Adjusted EBITDA
         [[Image Removed: are-20221231_g56.jpg]]                  [[Image Removed: are-20221231_g57.jpg]]                                   70%                                                                            69%




                                          Net Debt and Preferred Stock
                                             to Adjusted EBITDA(5)                                                                                                      Fixed-Charge Coverage Ratio(5)


                                    [[Image Removed: are-20221231_g58.jpg]]                                                                                        [[Image Removed: are-20221231_g59.jpg]]




(1)Refer to "Same properties" and "Non-GAAP measures and definitions" within
this Item 7 for additional details. "Non-GAAP measures and definitions" contains
the definition of "Net operating income" and its reconciliation from the most
directly comparable financial measures presented in accordance with GAAP.
(2)Our 2022 same property growth outperformed our 10-year averages of 3.6% and
6.7% (cash basis) as a result of an increase in same property occupancy of 100
bps and early lease renewals that commenced in late 2021/early 2022.
(3)Percentages calculated based on annual rental revenue in effect as of
December 31, 2022.
(4)Represents percentages for the three months ended December 31, 2022.
(5)Quarter annualized. Refer to the definitions of "Net debt and preferred stock
to Adjusted EBITDA" and "Fixed-charge coverage ratio" in the "Non-GAAP measures
and definitions" section within this Item 7 for additional details.
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Industry and ESG leadership: catalyzing and leading the way for positive change
to benefit human health and society


•In January 2022, Alexandria Venture Investments, our strategic venture capital
platform, was recognized by Silicon Valley Bank in its "Healthcare Investments
and Exits: Annual Report 2021" as the #1 most active corporate investor in
biopharma by new deal volume (2020-2021) for the fifth consecutive year. In
March 2022, Alexandria Venture Investments was also recognized by AgFunder in
its "2022 AgriFoodTech Investment Report" as one of the five most active U.S.
Investors in agrifoodtech by number of companies in which it invested (2021) for
the second consecutive year.
•Several of Alexandria's facilities and campuses across our regions received
awards in honor of excellence in operations, development, and design:
•200 Technology Square on our Alexandria Technology Square® mega campus in our
Cambridge/Inner Suburbs submarket earned a 2022 BOMA Mid-Atlantic TOBY (The
Outstanding Building of the Year) award in the Corporate Category. The TOBY
Awards honor and recognize quality in building operations and award excellence
in building management.
•Our Alexandria Center® for AgTech campus in our Research Triangle submarket was
named Top Flex/Warehouse Development in the Triangle Business Journal's 2022
SPACE Awards. The annual SPACE Awards recognize the Research Triangle's top real
estate developments and transactions.
•685 Gateway Boulevard, an amenities building on our Alexandria Technology
Center® - Gateway mega campus in our South San Francisco submarket, which is on
track to achieve Zero Energy Certification, was awarded one of 10 national
awards issued by WoodWorks - Wood Products Council in the 2022 Wood Design
Awards, an annual awards program that celebrates excellence in wood building
design.
•In February 2022, Alexandria earned the first-ever Fitwel Life Science
certification for 300 Technology Square, located on our Alexandria Technology
Square® mega campus in our Cambridge/Inner Suburbs submarket. The new rigorous,
evidence-based Fitwel Life Science Scorecard - developed in partnership with the
Center for Active Design exclusively for Alexandria - is the first healthy
building framework dedicated to laboratory facilities, marking another
pioneering effort by the Company to prioritize tenant health and wellness and
further differentiate our world-class laboratory buildings.
•In February 2022, Alexandria was ranked the #5 most sustainable REIT, as
featured in the Barron's article, "10 Real Estate Companies That Are Both
Greener and More Profitable."
•In March 2022, Alexandria's executive chairman and founder, Joel S. Marcus, was
honored by the National Medal of Honor Museum Foundation in Arlington, Texas
during a groundbreaking ceremony in celebration of the historic mission-critical
milestone in the development of the national museum. Mr. Marcus, who serves on
the foundation's board of directors, attended alongside fellow foundation board
members, major museum donors, government officials, and 15 Medal of Honor
recipients to commemorate the foundation's remarkable progress toward its goal
to build a permanent home where the inspiring stories of our country's Medal of
Honor recipients will be brought to life.
•In April 2022, 9880 Campus Point Drive, a 98,000 RSF development on the Campus
Point by Alexandria mega campus in our University Town Center submarket, earned
LEED Platinum certification, the highest level of certification under the U.S.
Green Building Council's Core & Shell rating system. Home to Alexandria
GradLabs®, a dynamic proprietary platform purpose-built to accelerate the growth
of promising post-seed-stage life science companies, the cutting-edge facility
demonstrates high levels of sustainability, including decreased water
consumption, significantly reduced energy use, and increased use of recycled
resources and materials.
•In June 2022, we released our 2021 ESG Report, which highlights our
longstanding ESG leadership. The report details our efforts to advance our ESG
impact, including by driving high-performance building design and operations to
reduce carbon emissions, mitigating climate-related risk in our real estate
portfolio, and investing in and providing essential infrastructure for
sustainable agrifoodtech companies. It also showcases Alexandria's comprehensive
efforts to catalyze the health, wellness, safety, and productivity of our
employees, tenants, local communities, and the world through the built
environment and beyond, including through our visionary social responsibility
endeavors. Notable initiatives presented in the report that highlight our
innovative approach include:
•Furthering the development of our approach to physical and transitional
climate-related risk by initiating a process to assess and understand potential
physical risk and pathways to mitigate and adapt to climate change, as well as
preparing for the transition to a low-carbon economy and continuing to develop
science-based targets;
•Implementing innovative solutions to minimize fossil fuel use in our
state-of-the-art laboratory development projects, such as at 325 Binney Street,
which will harness geothermal energy to target a LEED Zero Energy certification
and a 92% reduction in fossil fuel use as a key component of its design to be
the most sustainable laboratory building in Cambridge; at 751 Gateway Boulevard,
which is pursuing electrification and is tracking to be the first all-electric
laboratory building in South San Francisco; and at our Alexandria Center® for
Life Science - South Lake Union mega campus in Seattle, where the Company is
incorporating an innovative wastewater heat recovery system; and
•Increasing our investment in renewable electricity to mitigate carbon emissions
in our existing asset base, including through a large-scale solar power purchase
agreement that will significantly increase the supply of renewable electricity
to our Greater Boston market starting in 2024.
•In July 2022, Alexandria Venture Investments was recognized as the #1 most
active corporate investor in biopharma by new deal volume (2021-1H22) for the
fifth consecutive year by Silicon Valley Bank in its "Healthcare Investments and
Exits: Mid-Year 2022 Report." Alexandria's venture activity provides us with,
among other things, mission-critical data and insights into industry innovations
and trends.
                                      107
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•In September 2022, coinciding with National Suicide Prevention Month, we
announced our deepened partnership with KITA, a non-profit providing
tuition-free summer camp for children who have lost a loved one to suicide, and
the advancement of our eighth social responsibility pillar addressing the mental
health crisis. Through Alexandria's significant support, KITA will have free,
long-term access to 28 acres in Acton, Maine that will serve as the non-profit's
new home and enable it to grow its program and increase the number of children
it serves.
•In October 2022, Alexandria continued to enhance its first social
responsibility pillar focused on advancing human health by empowering NEXT for
AUTISM's development of important support services for autistic individuals and
their families. Alexandria has been forging strategically supportive
partnerships with highly impactful organizations that aim to accelerate
groundbreaking medical innovation to advance vitally needed therapies for
individuals with autism.
•In October 2022, Alexandria's position as a groundbreaking leader in ESG was
reinforced in the 2022 GRESB Real Estate Assessment, with several achievements,
including (i) Regional and Global Sector Leader for buildings in development in
the Science & Technology sector, (ii) #2 ranking for buildings in operation in
the Diversified Listed sector, and (iii) "A" disclosure score for the fifth
consecutive year. Alexandria has earned "Green Star" recognitions in the
operating asset benchmark for the sixth consecutive year and in the development
benchmark for the third consecutive year since its 2020 launch.
•In October 2022, Alexandria was recognized as a Climate Leader by the Sponsors
of Mass Save®, a collaborative of the energy utilities and energy efficiency
service providers in Massachusetts. Utilizing these programs in our Greater
Boston market, we have implemented over 65 energy conservation projects across
more than 40 buildings over the last 10 years, resulting in estimated recurring
annual energy savings of over 5 million kWh. Alexandria was the only real estate
company to be selected in the inaugural cohort of honorees.
•In October 2022, Mr. Marcus, as a newly appointed member of the Prix Galien
USA's esteemed Awards jury, honored groundbreaking medical innovations in life
science. He served on the Prix Galien committee, alongside other influential
science leaders, that recognized the Best Startup, Best Digital Health Solution
and the inaugural Best Incubators, Accelerators and Equity.
•In October 2022, 9880 Campus Point Drive on the Campus Point by Alexandria mega
campus in our University Town Center submarket received an Orchid award for
Architecture from the San Diego Architectural Foundation, and a People's Choice
Orchid. The facility is home to Alexandria GradLabs®, a dynamic platform that is
accelerating the growth of promising early-stage life science companies.
•Alexandria is addressing some of today's most urgent societal challenges
through our eight social responsibility pillars, including the mental health
crisis and opioid addiction. In October 2022:
•Alexandria presented a timely conversation on the state of mental health in
America with former congressman Patrick J. Kennedy, one of the world's leading
voices and policymakers on mental health, at the Galien Forum USA 2022, which
was held at the Alexandria Center® for Life Science - New York City.
•OneFifteen, a novel, data-driven comprehensive care model we developed in
partnership with Verily, celebrated its third anniversary of the campus's
opening in Dayton, Ohio. OneFifteen has treated over 5,800 patients since
opening its doors in October 2019.
•In November 2022, our executive chairman and founder, Joel S. Marcus, presented
at the much-anticipated Annual Baron Investment Conference for a rare second
time. Mr. Marcus opened the program with a presentation on what renowned author
and business strategist Jim Collins describes as our "Superior Results,
Distinctive Impact, and Lasting Endurance."
•In November 2022, Alexandria earned several 2022 TOBY (The Outstanding Building
of the Year) Awards from BOMA (Building Owners and Managers Association) in
Boston, Seattle, and Raleigh-Durham. The TOBY Awards recognize quality in
commercial buildings and reward excellence in building management.
•In our Cambridge/Inner Suburbs submarket: Four recognitions across three of our
premier mega campuses - Alexandria Center® at Kendall Square, Alexandria Center®
at One Kendall Square, and Alexandria Technology Square® - for Corporate
Facility, Laboratory Building, Renovated Building, and Building Under 100,000 SF
categories.
•In our Lake Union submarket: A recognition for 1165 Eastlake Avenue East on The
Eastlake Life Science Campus by Alexandria mega campus in the Corporate Facility
category.
•In our Research Triangle submarket: A recognition for 9 Laboratory Drive on our
Alexandria Center® for AgTech campus in the Life Science category.
•In January 2023, Alexandria Venture Investments was recognized by Silicon
Valley Bank in its "Healthcare Investments and Exits: Annual Report 2022" as the
#1 most active corporate investor in biopharma by new deal volume (2021-2022)
for the sixth consecutive year. Alexandria's venture activity provides us with,
among other things, mission-critical data on and insights into key macro life
science industry and innovation trends.
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                    [[Image Removed: are-20221231_g60.jpg]]
(1)Reflects current score for Alexandria and latest scores available for the
FTSE Nareit All REITs Index companies from Bloomberg Professional Services as of
December 31, 2022.
(2)Top 10% ranking among companies included in the Sustainalytics Global
Universe, based on information available from Bloomberg Professional Services as
of December 31, 2022.
(3)Reflects current scores for Alexandria and latest scores available for the
FTSE Nareit All REITs Index companies on ISS's website as of December 31, 2022.
(4)Top 10% ranking among FTSE Nareit All REITs Index companies, based on
information available from Bloomberg Professional Services as of December 31,
2022.
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                    [[Image Removed: are-20221231_g61.jpg]]

Environmental progress data for 2021 reflected in the chart above received
independent limited assurance from DNV Business Assurance USA, Inc.


(1)2025 environmental goal for Alexandria's cumulative progress relative to a
2015 baseline on a like-for-like basis for buildings in operation that the
Company directly manages.
(2)2025 environmental goal for buildings in operation that Alexandria indirectly
and directly manages. In alignment with industry best practice, the Company
reports waste diversion annually; the 2025 goal is to
achieve a waste diversion rate of at least 45% by 2025.
(3)Progress toward 2025 goals.
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                    [[Image Removed: are-20221231_g62.jpg]]
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Climate change and sustainability


We cannot predict the rate at which climate change will progress. However, the
physical effects of climate change could have a material adverse effect on our
properties, operations, and business. For example, most of our properties are
located along the east and west coasts of the U.S. and some of our properties
are located in close proximity to shorelines. To the extent that climate change
impacts weather patterns, our markets could experience severe weather, including
hurricanes, severe winter storms, wild fires, droughts, and coastal flooding due
to increases in storm intensity and rising sea levels. Over time, these
conditions could result in declining demand for space at our properties, delays
in construction and resulting increased construction costs, or in our inability
to operate the buildings at all. Climate change and severe weather may also have
indirect effects on our business by increasing the cost of, or decreasing the
availability of, property insurance on terms we find acceptable, and by
increasing the costs of energy, maintenance, repair of water and/or wind damage,
and snow removal at our properties. We continue to evaluate our asset base for
potential exposure to the following climate-related risks: sea level rise and
increases in heavy rain, flood, drought, extreme heat, and wildfire. As a part
of Alexandria's risk management program, we purchase property insurance to
mitigate the risk of extreme weather events and natural disasters. However, our
insurance may not adequately cover all of our potential losses. As a result,
there can be no assurance that climate change and severe weather will not have a
material adverse effect on our properties, operations, or business.

Board of directors and leadership oversight


The Audit Committee of Alexandria's Board of Directors oversees the management
of the Company's financial and other systemic risks, including those related to
climate. At a management level, Alexandria's Sustainability Committee, which
comprises members of the executive management team and senior decision makers
spanning the Company's Real Estate Development, Asset Management, Risk, and
Sustainability teams, leads the development and execution of our approach to
climate-related risk.

Proactively managing and mitigating climate risk


The resilience of our properties under a changing climate is paramount both for
our business and our tenants' mission-critical research, development,
manufacturing, and commercialization efforts. We consider the potential impacts
associated with climate change and extreme weather conditions in the
acquisition, design, development, and operation of our buildings and campuses.
Our approach to climate readiness focuses on physical and transition risks and
is aligned to guidelines issued by the Task Force on Climate-related Financial
Disclosures ("TCFD"), which we endorsed in 2018. To this end, we have initiated
a process to assess potential physical risks as well as the pathways to mitigate
and adapt to climate change. We are also preparing for the transition to a
low-carbon economy and continue to advance our approach to sustainable design
and operations to align with our tenants' strategic sustainability goals and
anticipate evolving regulations.

As further detailed in the "Monitoring and preparing for transition" section
below, over the past few years, regulatory bodies in most of our regions have
either passed or proposed legislation to limit the carbon footprint of
buildings, require procurement of clean power, or eliminate natural gas from new
construction projects. Additionally, certain U.S. jurisdictions incorporated
guidelines into their building codes to address the up-front impacts of building
materials such as concrete. Moreover, our tenant preferences for green,
efficient, and healthy buildings continue to rise. As of December 31, 2022, 90%
of Alexandria's top 20 tenants (by annual rental revenue) have set net-zero
carbon and/or carbon neutrality goals. As a result of our own sustainability
mission compelling us to reduce carbon emissions and mitigate climate risk, as
well as the changing regulatory environment and our tenants' expectations, we
have implemented a comprehensive approach to assessing and mitigating physical
risk to our properties as well as to preparing for the transition, as described
below.

Assessing and mitigating physical risk to our properties


We consider two climate change scenarios for the years 2030 and 2050 when
evaluating physical risk to our properties: (1) a business-as-usual scenario in
which greenhouse gas ("GHG") emissions continue to increase with time
(Representative Concentration Pathways ("RCP") 8.5); and (2) a mitigation
scenario in which GHG emissions level off by the year 2050 and decline
thereafter (RCP 4.5). To ensure a conservative evaluation of potential risk at
the asset level, we use the RCP 8.5 scenario, which has greater climate hazard
impacts than RCP 4.5. These climate change assessments covering both acute and
chronic risks enable us to assess preparedness for climate-related risks across
the real estate life cycle.

For our property acquisitions, our risk management and sustainability teams will
conduct climate change evaluations and advise the transactions and asset
management teams of any need for potential property upgrades, which are
evaluated in our financial modeling and transactional decisions.


For our developments and redevelopments of new Class A properties, we will
evaluate the potential impact of sea level rise, storm surges in coastal or
tidal locations, and changing temperatures out to the year 2050. As feasible, we
will consider designs that accommodate potential expansion of cooling
infrastructure to meet future building needs while providing flexibility and
optimization of infrastructure funds for more immediate needs. In water-scarce
areas, we will consider planting drought-resistant vegetation and equipping
buildings to connect to a municipal recycled-water infrastructure where
available and feasible. In areas prone to wildfire, we will work toward
incorporating brush management practices into landscape design and including
enhanced air filtration systems to
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support safe and healthy indoor air. For example, we have designed our
development project at 15 Necco street to account for a high-emissions climate
scenario and incorporate a number of innovative measures, including the
strategic placement of critical infrastructure and building systems to provide
multiple layers of protection, elevate the first floor above predicted 2070
flood evaluation (as published by the City of Boston), and install landscape and
hardscape features to decrease surface water runoff and serve as barriers to
potential flooding.

For our properties located in the areas prone to wildfires or flooding, we are
evaluating the extent to which we have mitigations in place and which
operational and physical improvements may be made. For example, resilience
measures that may be implemented at some of our properties will include the
following:


•In areas prone to fire, we will work toward incorporating brush management
practices into landscape design; we will select less flammable vegetation
species and position them in a reasonable distance from a property; we will
construct building envelopes with fire-resistant materials; and will install
HVAC systems that are able to filter smoke particulates in the air in the event
of fire.
•In areas prone to flooding, critical building mechanical equipment will be
positioned on the roofs or significantly above the projected potential flood
elevations; temporary flood barriers will be stored on-site to be deployed at
building entrances prior to a flood event; property entrances or the first floor
will be elevated above projected present-day and future flood elevations;
backflow preventors on storm/sewer utilities that discharge from the building
will be installed; and the building envelope will be waterproofed up to the
projected flood elevation.

As a part of Alexandria's risk management program, we maintain all-risk property
insurance at the portfolio level to mitigate the risk of extreme weather events
and natural disasters (including floods, wildfires, earthquakes, and wind
events). However, our insurance may not adequately cover all of our potential
losses. As a result, there can be no assurance that climate change and severe
weather will not have a material adverse effect on our properties, operations,
or business.

We also maintain all-risk property insurance at the portfolio level to mitigate
certain risks associated with natural catastrophes (floods, wildfires,
earthquakes, and wind events); our insurance policies, however, may not
completely cover all our potential losses.

Monitoring and preparing for transition


Globally, public concern regarding climate change has continued to escalate. On
November 20, 2022, the United Nations ("UN") held its annual climate summit,
COP27, and as a result of the summit announced an agreement that reaffirmed the
goal to limit the global temperature rise to the crucial temperature threshold
of 1.5 degrees Celsius above pre-industrial levels. The agreement also provided
a loss and damage fund for countries most vulnerable to climate disasters. As of
the date of this report, no decisions have been made on who should pay into the
fund, where the funds will come from, and which countries will benefit, and it
is unknown how or if the terms of the agreement will be carried out effectively
or whether these funds will be sufficient to mitigate the effects of damages
related to climate change over time.

In August 2021, the United Nations' Intergovernmental Panel on Climate Change
issued a detailed report titled "Climate Change 2021: The Physical Science
Basis," which provides comprehensive evidence of the catastrophic impact of GHG
emissions on climate change, including increases in severe and dangerous weather
conditions. In the U.S., in June 2019, President Biden identified climate change
as one of his administration's top priorities and pledged to seek measures that
would pave the path for the U.S. to eliminate net GHG pollution by the year
2050. In April 2021, President Biden announced his plan to reduce the U.S. GHG
emissions by at least 50% by the year 2030. These environmental goals earned a
prominent place in President Biden's $1.2 trillion infrastructure bill, which
was signed into law on November 15, 2021. Also, in August 2022, U.S. Congress
signed into law the Inflation Reduction Act of 2022 ("IRA"), which directs
nearly $400 billion for federal spending to be used toward reducing carbon
emissions and funding clean energy over the next 10 years and is designed to
encourage private investment in clean energy, transport, and manufacturing. It
is yet unknown what impact, if any, the IRA may have on us.

Numerous states and municipalities have adopted state and local laws and
policies on climate change and emission reduction targets, including, but not
limited to, the following:

California


•In September 2018, Senate Bill 100 was signed into law in California,
accelerating the state's renewable portfolio standard target dates and setting a
policy of meeting 100% of retail electricity sales from eligible renewables and
zero-carbon resources by December 31, 2045.

•In September 2020, Governor Newsom signed an executive order requiring all new
passenger cars and trucks sold in the state to be emission free by 2035.

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•In November 2020, the San Francisco Board of Supervisors adopted an
All-Electric New Construction Ordinance that will require all new buildings
(residential and non-residential) with initial building permit applications made
on or after June 1, 2021 to have all-electric indoor and outdoor
space-conditioning, water heating, cooking, and clothes drying systems.

•In September 2021, Governor Newsom signed legislation aimed at achieving
net-zero GHG emissions associated with cement used within the state no later
than 2045.


•In September 2022, Governor Gavin Newsom enacted a package of legislation that,
among other measures, will allow the state to achieve carbon neutrality no later
than 2045; establish an 85% emissions reduction target by 2045; achieve 90% and
95% clean energy by 2035 and 2040, respectively; and establish a regulatory
framework for removing carbon pollution.

Massachusetts

•In March 2021, Senate Bill 9 was signed into law, updating the state’s climate
policy to ensure net-zero GHG emissions by 2050 and establishing interim
emission reduction targets for several sectors, including commercial and
industrial buildings.


•In September 2021, the Boston City Council approved an amendment to the
Building Emissions Reduction and Disclosure Ordinance ("BERDO 2.0"), which
imposes enforceable emission limits on buildings over 20,000 square feet
starting in 2025-2030, targeting zero emissions by 2050. Furthermore, BERDO 2.0
adds a requirement that water and energy use data reported to the City of Boston
be verified by a third-party. (An annual reporting requirement starting in 2022
for year 2021 was imposed by BERDO 1.0.)

•In August 2022, Governor Charlie Baker enacted a bill to enable the state to
meet its climate targets, with key provisions, including mandating all new
vehicles sold to be emission free by 2035; providing certain municipalities the
ability to ban fossil fuel hookups in new construction or major renovation
projects; requiring the Massachusetts Bay Transportation Authority to electrify
its entire fleet of public transportation vehicles by 2040 and purchase only
zero-emission buses starting in 2030; and phasing out incentives for fossil
fuel-powered heating and cooling systems.

New York

•In July 2019, the Climate Leadership and Community Protection Act (“CLCPA”) was
signed into law, establishing a statewide framework to reduce net GHG emissions.


•In December 2022, New York approved the Scoping Plan, which details actions
required to advance directives stated in the CLCPA and to enable New York to
achieve:
•70% renewable energy by 2030;
•Zero emissions electricity by 2040;
•40% GHG emissions reduction below 1990 levels by 2030;
•85% GHG emissions reduction below 1990 levels by 2050; and
•Net-zero GHG emissions statewide by 2050.

•In May 2019, New York City enacted Local Law 97 as a part of the Climate
Mobilization Act aimed at reducing GHG emissions by 80% from commercial and
residential buildings by 2050. Starting in 2024, this law will place carbon caps
on most buildings larger than 25,000 square feet.


•In December 2021, New York City passed Local Law 154, which will phase out
fossil fuel usage in newly constructed residential and commercial buildings
starting in 2024 for lower-rise buildings and in 2027 for taller buildings. With
few exceptions, all buildings constructed in New York City must be fully
electric by 2027.

Washington


•In May 2019, the Clean Buildings Act was signed into law in the state of
Washington. The law imposed a cap on the energy used in commercial buildings
larger than 50,000 square feet and established a phase-in compliance requirement
starting in 2026. In March 2022, the law was expanded to apply to commercial
buildings exceeding 20,000 square feet.

•In 2020, the State of Washington set GHG emission limits, which will require
the state to reduce emissions levels by 45% below 1990 levels by 2030 and by 70%
below 1990 levels by 2040, and to achieve net-zero emissions by 2050.

Maryland

•In April 2022, the Climate Solutions Now Act of 2022 became law in Maryland.
The law requires new and existing buildings over 35,000 RSF:

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•To report energy use data annually beginning in 2025;
•To reduce direct GHG emissions by 20% from 2025 levels by 2030; and
•To have net-zero direct emissions by 2040.

The law also requires the state to reduce its GHG emissions by 60% below 2006
levels by 2031 and to achieve net-zero GHG emissions by 2045.

North Carolina


•In January 2022, Governor Roy Cooper signed an executive order that updates the
state's GHG emission goals to require a reduction of 50% below 2005 levels by
2030 and achievement of net-zero GHG emissions by 2050.

Alexandria has implemented a comprehensive approach to responding to transition
risk through the following strategies:

Decarbonizing construction

Alexandria targets LEED Gold or Platinum certification for new ground-up
developments. Through our sustainability goals for new developments, we deliver
energy- and resource-efficient buildings that meet or exceed tenant, city,
state, and federal requirements for energy and water efficiency, material
sourcing, biodiversity, and alternative transportation.

We are also revolutionizing the design of our buildings through innovative
low-carbon solutions and are pursuing more advanced certifications in Zero
Energy from LEED and the International Living Future Institute (“ILFI”) for two
projects:


•At 325 Binney Street, on our Alexandria Center at One Kendall Square mega
campus in our Cambridge submarket, the building design harnesses geothermal
energy and is expected to yield a 92% reduction in fossil fuel consumption. The
project is targeting LEED Platinum Core & Shell and LEED Zero Energy
certifications.

•At 685 Gateway Boulevard, an amenities building on our Alexandria Technology
Center® - Gateway mega campus in our South San Francisco submarket, we are
targeting Zero Energy Certification through ILFI by leveraging design strategies
such as building envelope optimization, high-performance features, and on-site
energy generation.

With several jurisdictions shifting (or with plans to shift soon) from fossil
fuels for heating and requiring all electric buildings as a strategy to reduce
carbon emissions associated with building operations, we have proactively
incorporated electrification into new building designs, with one project
completed and three currently in progress. We also continue to explore further
opportunities to heat and cool our buildings with alternative energy, such as
geothermal and wastewater heat recovery.

Embodied carbon from the building sector accounts for 11% of annual global GHG
emissions, and Alexandria is playing a leadership role in the industry's effort
to measure and ultimately reduce carbon associated with the construction
process. In 2019, Alexandria became a sponsor and the first REIT to use the
Carbon Leadership Forum's Embodied Carbon in Construction Calculator (EC3) tool.
For new construction projects, we seek to procure products with Environmental
Product Declarations ("EPDs"), which document and verify information on product
composition and environmental impact. Using such EPDs, Alexandria targets a 10%
reduction in embodied carbon for new ground-up development projects.

Investing in renewable energy


Alexandria anticipates a significant increase in the percentage of renewable
electricity used by our properties beginning in 2024 as a result of a new
large-scale solar power purchase agreement ("PPA") that we executed in our
Greater Boston market. Starting in 2024, the PPA is expected to supply the
Greater Boston market with new renewable electricity with power produced by a
solar farm that will be connected to the New England grid. With this contract in
place, 53% of Alexandria's total electricity consumption is expected to be
renewable based on electric usage during 2021.

Reducing the environmental footprint of buildings in operation


Our sustainability mission compels us toward industry-leading sustainability
practices and performance that can help reduce operating expenses and result in
higher occupancy levels, longer lease terms, higher rental income, higher
returns, and greater long-term asset value, and thus enable us to capture
climate-related opportunities. Our ongoing efforts to reduce consumption are
driven by our commitment to operational excellence in sustainability, building
efficiency, and service to our tenants. Alexandria's 2025 sustainability goals
for buildings in operation and new ground-up construction projects provide the
framework, metrics, and targets that guide the Company's focus on continuous,
long-term improvement. For buildings in operation, we set goals to reduce carbon
emissions, energy consumption, and potable water consumption and increase waste
diversion by the year 2025.


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                    [[Image Removed: are-20221231_g63.jpg]]
(1)2025 environmental goal for Alexandria's cumulative progress relative to a
2015 baseline on a like-for-like basis for buildings in operation that the
Company directly manages.
(2)2025 environmental goal for buildings in operation that Alexandria indirectly
and directly manages. In alignment with industry best practice, the Company
reports waste diversion annually; the 2025 goal is to achieve a waste diversion
rate of at least 45% by 2025.
(3)Progress toward 2025 goal.

As we look to the future, we are creating our long-term strategy and plan for
the net zero-carbon transition. We are developing an approach to set
industry-leading science-based targets that will provide a pathway to reduce GHG
emissions and continue our leadership in sustainability.

Refer to “Item 1A. Risk factors” in this annual report on Form 10-K for
discussion of the risks we face from climate change.

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Results of operations


We present a tabular comparison of items, whether gain or loss, that may
facilitate a high-level understanding of our results and provide context for the
disclosures included in this annual report on Form 10-K. We believe that such
tabular presentation promotes a better understanding for investors of the
corporate-level decisions made and activities performed that significantly
affect comparison of our operating results from period to period. We also
believe that this tabular presentation will supplement for investors an
understanding of our disclosures and real estate operating results. Gains or
losses on sales of real estate and impairments of assets classified as held for
sale are related to corporate-level decisions to dispose of real estate. Gains
or losses on early extinguishment of debt are related to corporate-level
financing decisions focused on our capital structure strategy. Significant
realized and unrealized gains or losses on non-real estate investments,
impairments of real estate and non-real estate investments, and acceleration of
stock compensation expense due to the resignation of an executive officer are
not related to the operating performance of our real estate assets as they
result from strategic, corporate-level non-real estate investment decisions and
external market conditions. Impairments of non-real estate investments are not
related to the operating performance of our real estate as they represent the
write-down of non-real estate investments when their fair values decrease below
their respective carrying values due to changes in general market or other
conditions outside of our control. Significant items included in the tabular
disclosure for current periods are described in further detail under this Item 7
in this annual report on Form 10-K. Key items included in net income
attributable to Alexandria's common stockholders for the years ended
December 31, 2022 and 2021 and the related per share amounts were as follows:
                                                                            Year Ended December 31,
                                                        2022             2021                 2022                 2021
(In millions, except per share amounts)                        Amount                          Per Share - Diluted
Impairment of real estate                            $ (65.0)         $ (52.7)         $     (0.40)             $ (0.35)
Loss on early extinguishment of debt                    (3.3)           (67.3)               (0.02)               (0.46)
Gain on sales of real estate(1)                        537.9            126.6                 3.33                 0.86
Acceleration of stock compensation expense due to
executive officer resignation                           (7.2)               -                (0.04)                   -
Unrealized (losses) gains on non-real estate
investments                                           (412.2)            43.6                (2.55)                0.30
Impairment of non-real estate investments              (20.5)               -                (0.13)                   -
Significant realized gains on non-real estate
investments                                                -            110.1                    -                 0.75
Total                                                $  29.7          $ 160.3          $      0.19              $  1.10

(1)Refer to “Funds from operations and funds from operations, as adjusted,
attributable to Alexandria Real Estate Equities, Inc.’s common stockholders” in
the “Non-GAAP measures and definitions” section within this Item 7 for
additional information.

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Same properties


We supplement an evaluation of our results of operations with an evaluation of
operating performance of certain of our properties, referred to as "Same
Properties." For additional information on the determination of our Same
Properties portfolio, refer to the definition of "Same property comparisons" in
the "Non-GAAP measures and definitions" section within this Item 7 in this
annual report on Form 10-K. The following table presents information regarding
our Same Properties as of December 31, 2022 and 2021:

                                                                                        December 31,
                                                                               2022                       2021

Percentage change in net operating income over comparable
period from prior year

                                                                  6.6%                    4.2  %

Percentage change in net operating income (cash basis) over
comparable period from prior year

            9.6%                    7.1  %
Operating margin                                                                         70%                       72%
Number of Same Properties                                                             253                          247
RSF                                                                               26,121,796                23,490,412
Occupancy - current-period average                                                     95.7%                   96.6  %
Occupancy - same-period prior-year average                                             94.7%                   96.3  %




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The following table reconciles the number of Same Properties to total properties
for the year ended December 31, 2022:


Development - under construction                                          Properties
4 Davis Drive                                                                        1
201 Brookline Avenue                                                                 1
15 Necco Street                                                                      1
751 Gateway Boulevard                                                          1
325 Binney Street                                                              1
1150 Eastlake Avenue East                                                      1
9810 Darnestown Road                                                           1
99 Coolidge Avenue                                                             1
500 North Beacon Street and 4 Kingsbury Avenue

9808 Medical Center Drive

6040 George Watts Hill Drive                                                   1
1450 Owens Street                                                              1
10075 Barnes Canyon Road                                                       1
                                                                              14
Development - placed into service after January 1, 2021                   Properties
1165 Eastlake Avenue East                                                      1
201 Haskins Way                                                                1
825 and 835 Industrial Road                                                    2
9950 Medical Center Drive                                                      1
3115 Merryfield Row                                                            1
8 and 10 Davis Drive                                                           2
5 and 9 Laboratory Drive                                                             2
10055 Barnes Canyon Road                                                             1
10102 Hoyt Park Drive                                                          1
                                                                              12
Redevelopment - under construction

Properties

2400 Ellis Road, 40 and 41 Moore Drive, and 14 TW Alexander Drive

   4
840 Winter Street                                                              1
20400 Century Boulevard                                                        1
9601 and 9603 Medical Center Drive                                             2
One Rogers Street                                                              1
40, 50, and 60 Sylvan Road                                                     3

Alexandria Center® for Advanced Technologies – Monte Villa Parkway

    6
651 Gateway Boulevard                                                          1
8800 Technology Forest Place                                                   1
Canada                                                                         2
Other                                                                          2
                                                                              24


Redevelopment - placed into service after
January 1, 2021                                                        Properties
700 Quince Orchard Road                                                     1
3160 Porter Drive                                                           1
5505 Morehouse Drive                                                        1
The Arsenal on the Charles                                                 11
30-02 48th Avenue                                                           1
Other                                                                       1
                                                                           16
Acquisitions after January 1, 2021

Properties

3301, 3303, 3305, 3307, 3420, and 3440 Hillview Avenue                      6
Sequence District by Alexandria                                             5
Alexandria Center® for Life Science - Fenway                                1
550 Arsenal Street                                                          1
1501-1599 Industrial Road                                                   6
One Investors Way                                                           2
2475 Hanover Street                                                         1
10975 and 10995 Torreyana Road                                              2
Pacific Technology Park                                                     5
1122 and 1150 El Camino Real                                                2
12 Davis Drive                                                              1
8505 Costa Verde Boulevard and 4260 Nobel Drive                             2
225 and 235 Presidential Way                                                2
104 TW Alexander Drive                                                      4
One Hampshire Street                                                        1
Intersection Campus                                                        12
100 Edwin H. Land Boulevard                                                 1
10010 and 10140 Campus Point Drive and 4275 Campus Point Court              3
446 and 458 Arsenal Street                                                  2
35 Gatehouse Drive                                                          1
1001 Trinity Street and 1020 Red River Street                               2
Other                                                                      37
                                                                           99
Unconsolidated real estate joint ventures                                   4
Properties held for sale

Total properties excluded from Same Properties

179

Same Properties

253

Total properties in North America as of December 31, 2022

432

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Comparison of results for the year ended December 31, 2022 to the year ended
December 31, 2021


The following table presents a comparison of the components of net operating
income for our Same Properties and Non-Same Properties for the year ended
December 31, 2022, compared to the year ended December 31, 2021. We provide a
comparison of the results for the year ended December 31, 2021 to the year ended
December 31, 2020, including a comparison of the components of net operating
income for our Same Properties and Non-Same Properties for the year ended
December 31, 2021, compared to the year ended December 31, 2020, in the "Results
of operations" section within this Item 7 of our annual report on Form 10-K for
the year ended December 31, 2021. Refer to the "Non-GAAP measures and
definitions" section within this Item 7 in this annual report on Form 10-K for
definitions of "Tenant recoveries" and "Net operating income" and their
reconciliations from the most directly comparable financial measures presented
in accordance with GAAP, income from rentals and net income, respectively.


                                                                            Year Ended December 31,
(Dollars in thousands)                                2022                 2021              $ Change             % Change
Income from rentals:
Same Properties                                  $ 1,385,380          $ 1,289,246          $  96,134                     7.5  %
Non-Same Properties                                  564,718              329,346            235,372                    71.5
Rental revenues                                    1,950,098            1,618,592            331,506                    20.5

Same Properties                                      478,333              407,450             70,883                    17.4
Non-Same Properties                                  147,609               82,207             65,402                    79.6
Tenant recoveries                                    625,942              489,657            136,285                    27.8

Income from rentals                                2,576,040            2,108,249            467,791                    22.2

Same Properties                                          620                  479                141                    29.4
Non-Same Properties                                   12,302                5,422              6,880                   126.9
Other income                                          12,922                5,901              7,021                   119.0

Same Properties                                    1,864,333            1,697,175            167,158                     9.8
Non-Same Properties                                  724,629              416,975            307,654                    73.8
Total revenues                                     2,588,962            2,114,150            474,812                    22.5

Same Properties                                      561,301              475,209             86,092                    18.1
Non-Same Properties                                  221,852              148,346             73,506                    49.6
Rental operations                                    783,153              623,555            159,598                    25.6

Same Properties                                    1,303,032            1,221,966             81,066                     6.6
Non-Same Properties                                  502,777              268,629            234,148                    87.2
Net operating income                             $ 1,805,809          $ 1,490,595          $ 315,214                    21.1  %

Net operating income - Same Properties           $ 1,303,032          $ 1,221,966          $  81,066                     6.6  %
Straight-line rent revenue                           (54,991)             (79,602)            24,611                   (30.9)
Amortization of acquired below-market
leases                                               (26,224)             (27,252)             1,028                    (3.8)
Net operating income - Same Properties
(cash basis)                                     $ 1,221,817          $ 1,115,112          $ 106,705                     9.6  %



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Income from rentals


Total income from rentals for the year ended December 31, 2022 increased by
$467.8 million, or 22.2%, to $2.6 billion, compared to $2.1 billion for the year
ended December 31, 2021, as a result of increase in rental revenues and tenant
recoveries, as discussed below.

Rental revenues


Total rental revenues for the year ended December 31, 2022 increased by $331.5
million, or 20.5%, to $2.0 billion, compared to $1.6 billion for the year ended
December 31, 2021. The increase was primarily due to an increase in rental
revenues from our Non-Same Properties related to 3.9 million RSF of development
and redevelopment projects placed into service subsequent to January 1, 2021 and
99 operating properties aggregating 9.6 million RSF acquired subsequent to
January 1, 2021.

Rental revenues from our Same Properties for the year ended December 31, 2022
increased by $96.1 million, or 7.5%, to $1.4 billion, compared to $1.3 billion
for the year ended December 31, 2021. The increase was primarily due to rental
rate increases on lease renewals and re-leasing of space since January 1, 2021
and an increase in occupancy from our Same Properties to 95.7% for the year
ended December 31, 2022 from 94.7% for the year ended December 31, 2021.

Tenant recoveries


Tenant recoveries for the year ended December 31, 2022 increased by $136.3
million, or 27.8%, to $625.9 million, compared to $489.7 million for the year
ended December 31, 2021. This increase was partially from our Non-Same
Properties related to our development and redevelopment projects placed into
service and properties acquired subsequent to January 1, 2021, as discussed
above under "Rental revenues."

Same Properties tenant recoveries for the year ended December 31, 2022 increased
by $70.9 million, or 17.4%, primarily due to higher operating expenses during
the year ended December 31, 2022, as discussed under "Rental operations" below.
As of December 31, 2022, approximately 93% of our leases (on an annual rental
revenue basis) were triple net leases, which require tenants to pay
substantially all real estate taxes, insurance, utilities, repairs and
maintenance, common area expenses, and other operating expenses (including
increases thereto) in addition to base rent.

Other income


Other income for the year ended December 31, 2022 increased by $7.0 million, or
119.0%, to $12.9 million, compared to $5.9 million for the year ended December
31, 2021. The increase in other income was primarily due to an increase in fees
for construction management services provided to tenants and an increase in
interest income resulting from larger average deposits in, and higher interest
rates earned by, our money market accounts during the year ended
December 31, 2022, compared to the year ended December 31, 2021.

Rental operations


Total rental operating expenses for the year ended December 31, 2022 increased
by $159.6 million, or 25.6%, to $783.2 million, compared to $623.6 million for
the year ended December 31, 2021. The increase was partially due to incremental
expenses related to our Non-Same Properties, which consist of development and
redevelopment projects placed into service and acquired properties, as discussed
above under "Rental revenues."

Same Properties rental operating expenses increased by $86.1 million, or 18.1%,
to $561.3 million during the year ended December 31, 2022, compared to $475.2
million for the year ended December 31, 2021. The increase was primarily the
result of increases in (i) utilities expenses aggregating $21.4 million,
primarily due to increased electricity usage and rates; (ii) property tax
expenses aggregating $16.4 million, primarily related to changes in the
ownership of four of our consolidated real estate joint ventures located in our
Mission Bay submarket during the three months ended December 31, 2021 and
resulting tax reassessment of values of the properties held by these joint
ventures; and (iii) higher contract services costs aggregating $12.7 million,
primarily due to increases in security services and trash and janitorial service
consumption and rates.

General and administrative expenses


General and administrative expenses for the year ended December 31, 2022
increased by $25.8 million, or 17.0%, to $177.3 million, compared to
$151.5 million for the year ended December 31, 2021. For the year ended
December 31, 2022, approximately $7.2 million of the increase was the result of
the acceleration of stock compensation expense recognized in connection with the
resignation of Stephen A. Richardson, our former co-chief executive officer,
which became effective on July 31, 2022. The remaining increase was primarily
due to the costs related to corporate related costs, additional headcount, and
corporate responsibility efforts, as well as the continued growth in the depth
and breadth of our operations in multiple markets, including development and
redevelopment projects placed into service and properties acquired, as discussed
above under "Rental revenues." As a percentage of net operating income, our
general and administrative expenses for the years ended December 31, 2022 and
2021 were 9.8% and 10.2%, respectively.
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Interest expense

Interest expense for the years ended December 31, 2022 and 2021 consisted of the
following (dollars in thousands):

                                                    Year Ended December 31,
 Component                                          2022               2021             Change
 Gross interest                                $    372,848       $   312,806       $    60,042
 Capitalized interest                              (278,645)         (170,641)         (108,004)
 Interest expense                              $     94,203       $   142,165       $   (47,962)

 Average debt balance outstanding(1)           $ 10,374,497       $

9,071,513 $ 1,302,984

 Weighted-average annual interest rate(2)               3.6  %            3.4  %            0.2  %

(1)Represents the average debt balance outstanding during the respective
periods.
(2)Represents total interest incurred divided by the average debt balance
outstanding during the respective periods.

The net change in interest expense during the year ended December 31, 2022,
compared to the year ended December 31, 2021, resulted from the following
(dollars in thousands):


Component                                                  Interest Rate(1)                 Effective Date              Change
Increases in interest incurred due to:
Issuances of debt:
$850 million unsecured senior notes payable                          3.08  %                 February 2021           $   3,342
$900 million unsecured senior notes payable -                        2.12  %                 February 2021               2,384
green bond
$1.0 billion unsecured senior notes payable                          3.63  %                 February 2022              31,138
$800 million unsecured senior notes payable -                        3.07  %                 February 2022              20,804
green bond
Fluctuation in interest rate and average
balance:
$2.0 billion commercial paper program                                                                                    7,167
Other increase in interest                                                                                               3,032
Total increases                                                                                                         67,867
Decreases in interest incurred due to:
Repayments of debt:
$650 million unsecured senior notes payable -                        4.03  %                  March 2021                (2,945)
green bond
Secured notes payable                                                3.40  %                  April 2022                (4,880)
Total decreases                                                                                                         (7,825)
Change in gross interest                                                                                                60,042
Increase in capitalized interest                                                                                      (108,004)
Total change in interest expense                                                                                     $ (47,962)

(1)Represents the weighted-average interest rate as of the end of the applicable
period, including amortization of loan fees, amortization of debt premiums
(discounts), and other bank fees.

Depreciation and amortization


Depreciation and amortization expense for the year ended December 31, 2022
increased by $181.1 million, or 22.1%, to $1.0 billion, compared to $821.1
million for the year ended December 31, 2021. The increase was primarily due to
additional depreciation from development and redevelopment projects placed into
service and properties acquired, as discussed above under "Rental revenues."

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Impairment of real estate

During the year ended December 31, 2022, we recognized real estate impairment
charges aggregating $65.0 million, as detailed below:


•Impairment charges aggregating $44.1 million, which consisted of write-offs of
pre-acquisition costs, including the $38.3 million write-off of our entire
investment in a future development project aggregating over 600,000 RSF in one
of our existing submarkets in California. This impairment was recognized upon
our decision to no longer proceed with this project as a result of a
deteriorated macroeconomic environment that negatively impacted the financial
outlook for this project.

•Impairment charges aggregating $20.9 million recognized during the three months
ended December 31, 2022 to reduce the carrying amount of 10 properties and a
land parcel located in multiple submarkets to their respective estimated fair
value, less costs to sell, upon classification as held for sale. We expect to
sell these real estate assets in 2023.

During the year ended December 31, 2021, we recognized impairment charges
aggregating $52.7 million, primarily related to impairment charges for a land
parcel in our SoMa submarket for the development of an office property and a
property located in our non-core submarket, to its estimated fair value less
costs to sell.

For more information, refer to the "Sales of real estate assets and impairment
charges" section in Note 3 - "Investments in real estate" to our consolidated
financial statements under Item 15 in this annual report on Form 10-K.

Loss on early extinguishment of debt

During the year ended December 31, 2022, we recognized a loss on early
extinguishment of debt of $3.3 million, including a prepayment penalty and the
write-off of unamortized loan fees, related to the repayment of two secured
notes payable.


During the year ended December 31, 2021, we recognized a loss on early
extinguishment of debt of $67.3 million, including the write-off of unamortized
loan fees primarily related to the refinancing of our 4.00% unsecured senior
notes payable aggregating $650.0 million due in 2024 pursuant to a partial cash
tender offer.

Equity in earnings of unconsolidated real estate joint ventures

During the years ended December 31, 2022 and 2021, we recognized equity in
earnings of unconsolidated real estate joint ventures of $645 thousand and $12.3
million, respectively. The decrease is primarily related to the sale of our
investment in an unconsolidated real estate joint venture in our Greater
Stanford submarket in December 2021.


Refer to Note 4 - "Consolidated and unconsolidated real estate joint ventures"
to our consolidated financial statements under Item 15 in this annual report on
Form 10-K for additional information.

Investment income


During the year ended December 31, 2022, we recognized investment losses
aggregating $331.8 million, which consisted of $80.4 million of realized gains
and $412.2 million of unrealized losses. Realized gains of $80.4 million
primarily consisted of sales of investments and distributions received,
partially offset by impairment charges of $20.5 million primarily related to
investments in privately held entities that do not report NAV. Unrealized losses
of $412.2 million during the year ended December 31, 2022 primarily consisted of
decreases in fair values of our investments in publicly traded companies and
investments in privately held entities that report NAV.

During the year ended December 31, 2021, we recognized investment income
aggregating $259.5 million, which consisted of $215.8 million of realized gains
and $43.6 million of unrealized gains.


For more information about our investments, refer to Note 7 - "Investments" to
our consolidated financial statements under Item 15 in this annual report on
Form 10-K. For our impairments accounting policy, refer to the "Investments"
section in Note 2 - "Summary of significant accounting policies" to our
consolidated financial statements under Item 15 in this annual report on Form
10-K.

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Gain on sales of real estate


During the year ended December 31, 2022, we recognized $537.9 million of gains
related to the completion of nine real estate dispositions across various
markets. The gains were classified in gain on sales of real estate within our
consolidated statements of operations for the year ended December 31, 2022.

During the year ended December 31, 2021, we recognized $126.6 million of gains,
which included a $101.1 million gain recognized in connection with the sale of
our entire 49.0% interest in the unconsolidated real estate joint venture at
Menlo Gateway and a $23.2 million gain related to the sale of a property located
in our Seattle market. The gains were classified in gain on sales of real estate
within our consolidated statements of operations for the year ended December 31,
2021.

For more information about our sales of real estate, refer to the "Sales of real
estate assets and impairment charges" section in Note 3 - "Investment in real
estate" to our consolidated financial statements under Item 15 in this annual
report on Form 10-K.

Other comprehensive income

Total other comprehensive income for the year ended December 31, 2022 decreased
by $12.8 million to aggregate net unrealized losses of $13.5 million, compared
to net unrealized losses of $0.7 million for the year ended December 31, 2021,
primarily due to unrealized losses on foreign currency translation related to
our operations in Canada and China.
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Summary of capital expenditures

Our construction spending for the year ended December 31, 2022 consisted of the
following (in thousands):


                                                                      Year

Ended

  Construction Spending                                           December

31, 2022

  Additions to real estate - consolidated projects               $

3,307,313

  Investments in unconsolidated real estate joint ventures

1,442

  Contributions from noncontrolling interests

(320,057)

  Construction spending (cash basis)

2,988,698

  Change in accrued construction                                            102,801
  Construction spending                                          $        3,091,499

The following table summarizes the total projected construction spending for the
year ending December 31, 2023, which includes interest, property taxes,
insurance, payroll, and other indirect project costs (in thousands):


                                                                                    Year Ending
Projected Construction Spending                                                  December 31, 2023
Development, redevelopment, and pre-construction projects

$ 3,549,000
Contributions from noncontrolling interests (consolidated real estate
joint ventures)

                                                                          (794,000)   (1)
Revenue-enhancing and repositioning capital expenditures                                  160,000
Non-revenue-enhancing capital expenditures                                                 60,000
Guidance midpoint                                                              $        2,975,000



(1)Approximately 55% of this amount represents contractual funding commitments
from our existing consolidated real estate joint ventures, and the remaining
amount is from projected new real estate joint ventures.

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Projected results


Based on our current view of existing market conditions and certain current
assumptions, we present guidance for EPS attributable to Alexandria's common
stockholders - diluted and funds from operations per share attributable to
Alexandria's common stockholders - diluted for the year ending December 31,
2023, as set forth in the table below. The tables below also provide a
reconciliation of EPS attributable to Alexandria's common stockholders -
diluted, the most directly comparable financial measure presented in accordance
with GAAP, to funds from operations per share, a non-GAAP measure, and other key
assumptions included in our updated guidance for the year ending December 31,
2023. There can be no assurance that actual amounts will not be materially
higher or lower than these expectations. Refer to our discussion of
"Forward-looking statements" included in the beginning of Part I in this annual
report on Form 10-K.

Projected 2023 Earnings per Share and Funds From Operations per Share Attributable to Alexandria's Common
Stockholders - Diluted
Earnings per share(1)                                                                 $3.41 to $3.61
Depreciation and amortization of real estate assets                                        5.50

Allocation of unvested restricted stock awards                                            (0.05)
Funds from operations per share(2)                                                    $8.86 to $9.06

Midpoint                                                                                   $8.96


(1)Excludes unrealized gains or losses after December 31, 2022 that are required
to be recognized in earnings and are excluded from funds from operations per
share, as adjusted.
(2)Refer to the definition of "Funds from operations and funds from operations,
as adjusted, attributable to Alexandria Real Estate Equities, Inc.'s common
stockholders" in the "Non-GAAP measures and definitions" section within this
Item 7 in this annual report on Form 10-K for additional information.

Key Assumptions(1)                                                                 2023 Guidance
(Dollars in millions)                                                        Low                 High

Occupancy percentage for operating properties in North America as
of December 31, 2023

                                                            94.8%           95.8%
Lease renewals and re-leasing of space:
Rental rate increases                                                           27.0%           32.0%
Rental rate increases (cash basis)                                              11.0%           16.0%
Same property performance:
Net operating income increase                                                    2.0%            4.0%
Net operating income increase (cash basis)                                       4.0%            6.0%
Straight-line rent revenue                                              $      130          $  145
General and administrative expenses                                     $      183          $  193
Capitalization of interest                                              $      342          $  362
Interest expense                                                        $       74          $   94


(1)Our assumptions presented in the table above are subject to a number of
variables and uncertainties, including those discussed as "Forward-looking
statements" under Part I; "Item 1A. Risk factors"; and Item 7. Management's
discussion and analysis of financial condition and results of operations in this
annual report on Form 10-K. To the extent our full-year earnings guidance is
updated during the year, we will provide additional disclosure supporting
reasons for any significant changes to such guidance.

Key Credit Metrics                                                          2023 Guidance
Net debt and preferred stock to Adjusted EBITDA - fourth quarter        Less than or equal to
of 2023 annualized

5.1x

Fixed-charge coverage ratio - fourth quarter of 2023 annualized

4.5x to 5.0x

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Consolidated and unconsolidated real estate joint ventures


We present components of balance sheet and operating results information for the
noncontrolling interest share of our consolidated real estate joint ventures and
for our share of investments in unconsolidated real estate joint ventures to
help investors estimate balance sheet and operating results information related
to our partially owned entities. These amounts are estimated by computing, for
each joint venture that we consolidate in our financial statements, the
noncontrolling interest percentage of each financial item to arrive at the
cumulative noncontrolling interest share of each component presented. In
addition, for our real estate joint ventures that we do not control and do not
consolidate, we apply our economic ownership percentage to the unconsolidated
real estate joint ventures to arrive at our proportionate share of each
component presented. Refer to Note 4 - "Consolidated and unconsolidated real
estate joint ventures" to our consolidated financial statements under Item 15 in
this annual report on Form 10-K for further discussion.

Consolidated Real Estate Joint Ventures

                                                                                                Noncontrolling(1)                             Operating RSF
                          Property/Market/Submarket                                              Interest Share                                  at 100%
50 and 60 Binney Street/Greater Boston/Cambridge/Inner Suburbs                                               66.0  %

532,395

75/125 Binney Street/Greater Boston/Cambridge/Inner Suburbs                                                  60.0  %

388,270

100 and 225 Binney Street and 300 Third Street/Greater Boston/Cambridge/Inner
Suburbs

                                                                                                      70.0  % (2)

870,106

99 Coolidge Avenue/Greater Boston/Cambridge/Inner Suburbs                                                    25.0  %

– (3)
Alexandria Center® for Science and Technology – Mission Bay/San Francisco Bay

                                75.0  %

1,005,989

Area/Mission Bay(4)
1450 Owens Street/San Francisco Bay Area/Mission Bay                                                         40.3  % (2)(5)                            -       (3)
601, 611, 651, 681, 685, and 701 Gateway Boulevard/San Francisco Bay                                         50.0  %

789,567

Area/South San Francisco
751 Gateway Boulevard/San Francisco Bay Area/South San Francisco                                             49.0  %                                   -       (3)
211 and 213 East Grand Avenue/San Francisco Bay Area/South San Francisco                                     70.0  %

300,930

500 Forbes Boulevard/San Francisco Bay Area/South San Francisco                                              90.0  %

155,685

Alexandria Center® for Life Science – Millbrae/San Francisco Bay Area/South

                                  54.7  %

–

San Francisco
3215 Merryfield Row/San Diego/Torrey Pines                                                                   70.0  % (2)

170,523

Campus Point by Alexandria/San Diego/University Town Center(6)                                               45.0  %

1,337,916

5200 Illumina Way/San Diego/University Town Center                                                           49.0  %

792,687

9625 Towne Centre Drive/San Diego/University Town Center                                                     49.9  %

163,648

SD Tech by Alexandria/San Diego/Sorrento Mesa(7)                                                             50.0  %

876,869

Pacific Technology Park/San Diego/Sorrento Mesa                                                              50.0  %

544,352

Summers Ridge Science Park/San Diego/Sorrento Mesa(8)                                                        70.0  % (2)

316,531

1201 and 1208 Eastlake Avenue East and 199 East Blaine Street /Seattle/Lake
Union

                                                                                                        70.0  %

321,218

400 Dexter Avenue North/Seattle/Lake Union                                                                   70.0  %

290,754

800 Mercer Street/Seattle/Lake Union                                                                         40.0  % (2)                               -

Unconsolidated Real Estate Joint Ventures

                                                                                                                                              Operating RSF
                          Property/Market/Submarket                                          Our Ownership Share(9)                              at 100%
1655 and 1725 Third Street/San Francisco Bay Area/Mission Bay                                                10.0  %

586,208

1401/1413 Research Boulevard/Maryland/Rockville                                                              65.0  % (10)

(11)

1450 Research Boulevard/Maryland/Rockville                                                                   73.2  % (12)

42,679

101 West Dickman Street/Maryland/Beltsville                                                                  57.9  % (12)

135,423

(1)In addition to the consolidated real estate joint ventures listed, various
partners hold insignificant noncontrolling interests in three other real estate
joint ventures in North America.
(2)Refer to the "Formation of consolidated real estate joint ventures and sales
of partial interests" section in Note 4 - "Consolidated and unconsolidated real
estate joint ventures" to our consolidated financial statements under Item 15 in
this annual report on Form 10-K for additional information.
(3)Represents a property currently under construction. Refer to "New Class A
development and redevelopment properties: current projects" under Item 2 in this
annual report on Form 10-K for additional details.
(4)Includes 409 and 499 Illinois Street, 1500 and 1700 Owens Street, and 455
Mission Bay Boulevard South.
(5)The noncontrolling interest share of our joint venture partner is anticipated
to increase to 75% as our partner contributes 100% of the remaining cost to
complete the project over time.
(6)Includes 10210, 10260, 10290, and 10300 Campus Point Drive and 4110, 4150,
4161, 4224, and 4242 Campus Point Court.
(7)Includes 9605, 9645, 9675, 9685, 9725, 9735, 9808, 9855, and 9868 Scranton
Road and 10055, 10065, and 10075 Barnes Canyon Road.
(8)Includes 9965, 9975, 9985, and 9995 Summers Ridge Road.
(9)In addition to the unconsolidated real estate joint ventures listed, we hold
an interest in one other insignificant unconsolidated real estate joint venture
in North America.
(10)Represents our ownership interest; our voting interest is limited to 50%.
(11)Represents a joint venture with a distinguished retail real estate developer
for a retail shopping center aggregating 84,837 RSF.
(12)Represents a joint venture with a local real estate operator in which our
partner manages the day-to-day activities that significantly affect the economic
performance of the joint venture.

127
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The following table presents key terms related to our unconsolidated real estate
joint ventures' secured loans as of December 31, 2022 (dollars in thousands):

At 100%
Interest Aggregate Debt

     Unconsolidated Joint Venture                     Maturity Date

         Stated Rate             Rate(1)             Commitment          Balance(2)          Our Share
1401/1413 Research Boulevard                             12/23/24                       2.70%                    3.33  %       $    28,500          $   28,146             65.0%
1655 and 1725 Third Street                                3/10/25                       4.50%                    4.57  %           600,000             599,081             10.0%
101 West Dickman Street                                  11/10/26                    SOFR+1.95%     (3)          6.38  %            26,750              11,575             57.9%
1450 Research Boulevard                                  12/10/26                    SOFR+1.95%     (3)          6.44  %            13,000               3,802             73.2%
                                                                                                                               $   668,250          $  642,604

(1)Includes interest expense and amortization of loan fees.
(2)Represents outstanding principal, net of unamortized deferred financing
costs, as of December 31, 2022.
(3)This loan is subject to a fixed SOFR floor rate of 0.75%.


The following tables present information related to the operating results and
financial positions of our consolidated and unconsolidated real estate joint
ventures (in thousands):

                                        Noncontrolling Interest Share of                  Our Share of Unconsolidated
                                     Consolidated Real Estate Joint Ventures              Real Estate Joint Ventures
                                                December 31, 2022                              December 31, 2022
                                                                                      Three Months
                                    Three Months Ended          Year Ended               Ended                Year Ended
Total revenues                      $       102,013          $     366,794          $       2,689          $      11,130
Rental operations                           (31,176)              (109,358)                  (753)                (3,197)
                                             70,837                257,436                  1,936                  7,933
General and administrative                     (372)                (1,594)                   (10)                  (106)
Interest                                        (15)                   (15)                  (772)                (3,516)
Depreciation and amortization of            (29,702)              (107,591)                  (982)                (3,666)
real estate assets
Fixed returns allocated to
redeemable noncontrolling
interests(1)                                    201                    805                      -                      -
                                    $        40,949          $     149,041          $         172          $         645
Straight-line rent and below-market
lease revenue                       $         3,858          $      15,776          $         274          $       1,136
Funds from operations(2)            $        70,651          $     256,632          $       1,154          $       4,311


(1)Represents an allocation of joint venture earnings to redeemable
noncontrolling interests primarily in one property in our South San Francisco
submarket. These redeemable noncontrolling interests earn a fixed return on
their investment rather than participate in the operating results of the
property.
(2)Refer to the definition of "Funds from operations and funds from operations,
as adjusted, attributable to Alexandria Real Estate Equities, Inc.'s common
stockholders" in the "Non-GAAP measures and definitions" section within this
Item 7 in this annual report on Form 10-K for the definition and its
reconciliation from the most directly comparable financial measure presented in
accordance with GAAP.

                                                                As of December 31, 2022
                                                       Noncontrolling
                                                     Interest Share of             Our Share of
                                                     Consolidated Real            Unconsolidated
                                                        Estate Joint             Real Estate Joint
                                                          Ventures                   Ventures
Investments in real estate                          $       3,392,839          $          114,664
Cash, cash equivalents, and restricted cash                   129,186                       4,729
Other assets                                                  386,667                      11,346
Secured notes payable                                         (14,599)                    (87,694)
Other liabilities                                            (183,233)                     (4,610)
Redeemable noncontrolling interests                            (9,612)                          -
                                                    $       3,701,248          $           38,435



During the years ended December 31, 2022 and 2021, our consolidated real estate
joint ventures distributed an aggregate of $192.2 million and $112.4 million,
respectively, to our joint venture partners. Refer to our consolidated
statements of cash flows and Note 4 - "Consolidated and unconsolidated real
estate joint ventures" to our consolidated financial statements under Item 15 in
this annual report on Form 10-K for additional information.
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Investments

We hold strategic investments in publicly traded companies and privately held
entities primarily involved in the life science, agtech, and technology
industries. The tables below summarize components of our non-real estate
investments and investment income. Refer to Note 7 - "Investments" to our
consolidated financial statements under Item 15 in this annual report on Form
10-K for additional information.

                                                                 December 31, 2022
                                                                                                            Year Ended December 31,
(In thousands)                                     Three Months Ended              Year Ended                        2021
Realized gains                                   $      4,464    (1)          $    80,435    (1)          $         215,845    (2)
Unrealized (losses) gains                             (24,117)                   (412,193)                           43,632
Investment (loss) income                         $    (19,653)                $  (331,758)                $         259,477



Investments                                                                                 Unrealized
(In thousands)                                 Cost              Unrealized Gains             Losses                    Carrying Amount
Publicly traded companies                 $   210,986          $          96,271          $   (100,118)               $        207,139
Entities that report NAV                      452,391                    315,071                (7,710)                        759,752
Entities that do not report NAV:
Entities with observable price
changes                                       100,296                     95,062                (1,574)                        193,784
Entities without observable price
changes                                       388,940                          -                     -                         388,940
Investments accounted for under the
equity method of accounting                          N/A                        N/A                   N/A                       65,459
December 31, 2022                         $ 1,152,613    (3)   $         506,404          $   (109,402)               $      1,615,074

December 31, 2021                         $ 1,007,303          $         830,863          $    (33,190)               $      1,876,564



(1)For the three months and year ended December 31, 2022, includes impairments
aggregating $20.5 million primarily related to three non-real estate investments
in privately held entities that do not report NAV.
(2)Includes six separate significant realized gains aggregating $110.1 million
related to the following transactions: (i) the sales of investments in three
publicly traded biotechnology companies, (ii) a distribution received from a
limited partnership investment, and (iii) the acquisition of two of our
privately held non-real estate investments in a biopharmaceutical company and a
biotechnology company.
(3)Represents 2.9% of gross assets as of December 31, 2022.



                Public/Private
                  Mix (Cost)
    [[Image Removed: are-20221231_g64.jpg]]

               Tenant/Non-Tenant
                  Mix (Cost)
    [[Image Removed: are-20221231_g65.jpg]]


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Liquidity


                                                                                 Minimal Outstanding Borrowings and Significant Availability on Unsecured Senior
                       Liquidity                                                                                  Line of Credit
                                                               (in millions)


                         $5.3B



(In millions)
Availability under our unsecured senior line
of credit, net of amounts outstanding under                                                          [[Image Removed: are-20221231_g66.jpg]]
our commercial paper program                  $ 4,000
Outstanding forward equity sales
agreements(1)                                     102

Cash, cash equivalents, and restricted cash 858
Remaining construction loan commitments

Investments in publicly traded companies 207
Liquidity as of December 31, 2022

             $ 5,303

(1)Represents expected net proceeds from the future settlement of 0.7 million
shares under forward equity sales agreements after underwriter discounts.



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

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

For additional information on our liquidity requirements related to our
contractual obligations and commitments, refer to Note 5 - "Leases" and Note 10
- "Secured and unsecured senior debt" to our consolidated financial statements
under Item 15 in this annual report on Form 10-K.

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


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

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The following table presents the availability under our unsecured senior line of
credit, net of amounts outstanding under our commercial paper program;
outstanding forward equity sales agreements; cash, cash equivalents, and
restricted cash; availability under our secured construction loan; and
investments in publicly traded companies as of December 31, 2022 (dollars in
thousands):

                                                         Stated               Aggregate            Outstanding                 Remaining
                Description                               Rate               Commitments           Balance(1)            Commitments/Liquidity
Availability under our unsecured senior line
of credit, net of amounts outstanding under
our commercial paper program                          SOFR+0.875%           $ 4,000,000          $          -          $             4,000,000
Outstanding forward equity sales
agreements(2)                                                                                                                          102,427
Cash, cash equivalents, and restricted cash                                                                                            857,975
Remaining construction loan commitments                SOFR+2.70%           $   195,300          $     58,396                          135,583
Investments in publicly traded companies                                                                                               207,139
Liquidity as of December 31, 2022                                                                                      $             5,303,124



(1)Represents outstanding principal, net of unamortized deferred financing
costs, as of December 31, 2022.
(2)Represents expected net proceeds from the future settlement of 0.7 million
shares under forward equity sales agreements after underwriter discounts.

Cash, cash equivalents, and restricted cash


As of December 31, 2022 and 2021, we had $858.0 million and $415.2 million,
respectively, of cash, cash equivalents, and restricted cash. We expect existing
cash, cash equivalents, and restricted cash, net cash provided by operating
activities, proceeds from real estate asset sales, partial interest sales,
strategic real estate joint ventures, non-real estate investment sales,
borrowings under our unsecured senior line of credit, issuances under our
commercial paper program, issuances of unsecured senior notes payable,
borrowings under our secured construction loans, and issuances of common stock
to continue to be sufficient to fund our operating activities and cash
commitments for investing and financing activities, such as regular quarterly
dividends, distributions to noncontrolling interests, scheduled debt repayments,
acquisitions, and certain capital expenditures, including expenditures related
to construction activities.

Cash flows

We report and analyze our cash flows based on operating activities, investing
activities, and financing activities. The following table summarizes changes in
our cash flows for the years ended December 31, 2022 and 2021 (in thousands):

                                                 Year Ended December 31,
                                                  2022              2021             Change

Net cash provided by operating activities $ 1,294,321 $ 1,010,197

      $    284,124
Net cash used in investing activities        $ (5,080,458)     $ (7,107,324)     $  2,026,866
Net cash provided by financing activities    $  4,229,772      $  5,916,361      $ (1,686,589)



Operating activities

Cash flows provided by operating activities are primarily dependent upon the
occupancy level of our asset base, the rental rates of our leases, the
collectibility of rent and recovery of operating expenses from our tenants, the
timing of completion of development and redevelopment projects, and the timing
of acquisitions and dispositions of operating properties. Net cash provided by
operating activities for the year ended December 31, 2022 increased by $284.1
million to $1.3 billion, compared to $1.0 billion for the year ended December
31, 2021. The increase was primarily attributable to the following since
January 1, 2021: (i) cash flows generated from our highly leased development and
redevelopment projects recently placed into service, (ii) income-producing
acquisitions, and (iii) increases in rental rates on lease renewals and
re-leasing of space.

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Investing activities

Cash used in investing activities for the years ended December 31, 2022 and 2021
consisted of the following (in thousands):

                                                              Year Ended December 31,
                                                                                                       Increase
                                                             2022                  2021               (Decrease)
Sources of cash from investing activities:
Proceeds from sales of real estate                      $    994,331          $   190,576          $     803,755
Change in escrow deposits                                    155,968                    -                155,968

Return of capital from unconsolidated real estate joint
ventures

                                                         471                    -                    471

Sale of interests in unconsolidated real estate joint
ventures

                                                           -              394,952               (394,952)
Sales of and distributions from non-real estate
investments                                                  198,320              424,623               (226,303)
                                                           1,349,090            1,010,151                338,939
Uses of cash for investing activities:
Purchases of real estate                                   2,877,861            5,434,652             (2,556,791)
Additions to real estate                                   3,307,313            2,089,849              1,217,464
Change in escrow deposits                                          -              161,696               (161,696)

Acquisition of interest in unconsolidated real estate
joint venture

                                                      -                9,048                 (9,048)
Investments in unconsolidated real estate joint
ventures                                                       1,442               13,666                (12,224)
Additions to non-real estate investments                     242,932              408,564               (165,632)
                                                           6,429,548            8,117,475             (1,687,927)

Net cash used in investing activities                   $  5,080,458

$ 7,107,324 $ (2,026,866)




The decrease in net cash used in investing activities for the year ended
December 31, 2022 when compared to the year ended December 31, 2021 was
primarily due to a decreased use of cash for purchases of real estate and
increase in proceeds from dispositions of real estate, partially offset by
increased cash used for additions to real estate. Refer to Note 3 - "Investments
in real estate" to our consolidated financial statements under Item 15 in this
annual report on Form 10-K for further information.


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Financing activities

Cash flows provided by financing activities for the years ended December 31,
2022 and 2021 consisted of the following (in thousands):

                                                             Year Ended

December 31,

                                                           2022                  2021                 Change
Borrowings from secured notes payable                 $     49,715          $     10,005          $     39,710
Repayments of borrowings from secured notes payable           (934)              (17,979)               17,045

Payment for the defeasance of secured notes payable (198,304)

            -              (198,304)
Proceeds from issuance of unsecured senior notes
payable                                                  1,793,318             1,743,716                49,602
Repayments of unsecured senior notes payable                     -              (650,000)              650,000
Premium paid for early extinguishment of debt                    -               (66,829)               66,829

Borrowings from unsecured senior line of credit 1,181,000

    3,521,000            (2,340,000)

Repayments of borrowings from unsecured senior line
of credit

                                               (1,181,000)           (3,521,000)            2,340,000
Proceeds from issuances under commercial paper
program                                                 14,641,500            30,951,300           (16,309,800)
Repayments of borrowings from commercial paper
program                                                (14,911,500)          (30,781,300)           15,869,800
Payments of loan fees                                      (35,612)              (18,938)              (16,674)
Changes related to debt                                  1,338,183             1,169,975               168,208

Contributions from and sales of noncontrolling
interests                                                1,542,347             2,026,486              (484,139)
Distributions to and purchases of noncontrolling
interests                                                 (192,171)             (118,891)              (73,280)
Proceeds from the issuance of common stock               2,346,444             3,529,097            (1,182,653)
Dividend payments                                         (757,742)             (655,968)             (101,774)

Taxes paid related to net settlement of equity awards (47,289)

      (34,338)              (12,951)
Net cash provided by financing activities             $  4,229,772          $  5,916,361          $ (1,686,589)



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Capital resources


We expect that our principal liquidity needs for the year ending December 31,
2023 will be satisfied by the following multiple sources of capital, as shown in
the table below. There can be no assurance that our sources and uses of capital
will not be materially higher or lower than these expectations.

Key Sources and Uses of Capital                                                 2023 Guidance
(In millions)                                                              Range                   Midpoint
Sources of capital:
Incremental debt                                                $   550

$ 850 $ 700
Excess 2022 bond capital held as cash at December 31,
2022

                                                                300              300               300
Net cash provided by operating activities after dividends           350              400               375

Real estate dispositions, sales of partial interests, and
issuances of common equity

                                        1,400            2,400             1,900    (1)

Total sources of capital                                        $ 2,600          $ 3,950          $  3,275

Uses of capital:
Construction                                                    $ 2,400          $ 3,550          $  2,975
Acquisitions                                                        200              400               300

Total uses of capital                                           $ 2,600

$ 3,950 $ 3,275


Incremental debt (included above):
Issuance of unsecured senior notes payable                      $   500          $ 1,000          $    750
Unsecured senior line of credit, commercial paper
program, and other                                                   50             (150)              (50)
Incremental debt                                                $   550          $   850          $    700



(1)Refer to Note 15 - "Stockholders' equity" to our consolidated financial
statements under Item 15 in this annual report on Form 10-K for additional
details. During the three months ended December 31, 2022, we entered into new
forward equity sales agreements aggregating $104.7 million to sell 699,274
shares under our ATM program at an average price of $149.68 per share (before
underwriter discounts). We expect to settle these forward equity sales
agreements in 2023 and establish a new ATM program during the first quarter of
2023.


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

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Sources of capital

Net cash provided by operating activities after dividends


We expect to retain $350.0 million to $400.0 million of net cash flows from
operating activities after payment of common stock dividends and distributions
to noncontrolling interests for the year ending December 31, 2023. For purposes
of this calculation, changes in operating assets and liabilities are excluded as
they represent timing differences. For the year ending December 31, 2023, we
expect our recently delivered projects, our highly pre-leased value-creation
projects expected to be delivered, and contributions from Same Properties and
recently acquired properties to contribute significant increases in income from
rentals, net operating income, and cash flows. We anticipate significant
contractual near-term growth in annual cash rents of $57 million related to the
commencement of contractual rents on the projects recently placed into service
that are near the end of their initial free rent period. Refer to "Cash flows"
within this Item 7 in this annual report on Form 10-K for a discussion of cash
flows provided by operating activities for the year ended December 31, 2022.

Debt


We expect to fund a portion of our capital needs in 2023 from real estate
dispositions, sales of partial interests, strategic real estate joint ventures,
settlement of our outstanding forward equity sales agreements, cash on hand,
issuances under our commercial paper program, borrowings under our unsecured
senior line of credit, and borrowings under our secured construction loans.

In September 2022, we amended our unsecured senior line of credit to extend the
maturity date to January 22, 2028 from January 6, 2026, increase the commitments
to $4.0 billion from $3.0 billion, and convert the interest rate to SOFR plus
0.875% from LIBOR plus 0.815%. As of December 31, 2022, we had no outstanding
balance on our unsecured senior line of credit. In addition to the cost of
borrowing, the unsecured senior line of credit is subject to an annual facility
fee of 0.15% based on the aggregate commitments outstanding. Based upon our
ability to achieve certain annual sustainability targets, the interest rate and
facility fee rate are also subject to upward or downward adjustments of up to
four basis points with respect to the interest rate and up to one basis point
with respect to the facility fee.

In September 2022, we increased the aggregate amount we may issue from time to
time under our commercial paper program to $2.0 billion from $1.5 billion.
Commercial notes under our commercial paper program can have a maximum maturity
of 397 days from the date of issuance and are generally issued with a maturity
of 30 days or less. Our commercial paper program is backed by our unsecured
senior line of credit, and at all times we expect to retain a minimum undrawn
amount of borrowing capacity under our unsecured senior line of credit equal to
any outstanding balance under our commercial paper program. We use borrowings
under the program to fund short-term capital needs. The notes issued under our
commercial paper program are sold under customary terms in the commercial paper
market. They are typically issued at a discount to par, representing a yield to
maturity dictated by market conditions at the time of issuance. In the event we
are unable to issue commercial paper notes or refinance outstanding commercial
paper notes under terms equal to or more favorable than those under the
unsecured senior line of credit, we expect to borrow under the unsecured senior
line of credit at SOFR plus 0.875%. The commercial paper notes sold during the
year ended December 31, 2022 were issued at a weighted-average yield to maturity
of 1.91%. As of December 31, 2022, we had no outstanding balance under our
commercial paper program.

In February 2022, we issued $1.8 billion of unsecured senior notes payable with
a weighted-average interest rate of 3.28% and a weighted-average maturity of
22.0 years. The unsecured senior notes consisted of $800.0 million of 2.95%
green unsecured senior notes due 2034 and $1.0 billion of 3.55% unsecured senior
notes due 2052.

In April 2022, we repaid two secured notes payable aggregating $195.0 million
due in 2024 with an effective interest rate of 3.40% and recognized a loss on
early extinguishment of debt of $3.3 million, including a prepayment penalty and
the write-off of unamortized loan fees.


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The following table provides our average debt outstanding and weighted-average
interest rate during the year ended December 31, 2022:

Year Ended December 31, 2022

                                                                  Average

Debt

                                                                  Outstanding           Weighted-Average Interest Rate
Long-term fixed-rate debt                                      $     9,999,145                                 3.50  %

Short-term variable-rate unsecured senior line of credit
and commercial paper program debt

                                      564,649                                 1.72
Blended average interest rate                                  $    10,563,794                                 3.40

Loan fee amortization and annual facility fee related to
unsecured senior line of credit

  N/A                              0.11
Total/weighted average                                         $    10,563,794                                 3.51  %

Proactive management of transition from LIBOR


LIBOR has been used extensively in the U.S. and globally as a reference rate for
various commercial and financial contracts, including variable-rate debt and
interest rate swap contracts. However, based on an announcement made by the
Financial Conduct Authority on March 5, 2021, one-week and two-month LIBOR rates
ceased to be published after December 31, 2021; all other LIBOR settings will
effectively cease after June 30, 2023, and it is expected that LIBOR will no
longer be used after this date. In connection with this change, in the U.S. the
Alternative Reference Rates Committee ("ARRC") was established to help ensure
the successful transition from LIBOR. In June 2017, the ARRC selected SOFR, a
new index calculated by reference to short-term repurchase agreements backed by
U.S. Treasury securities, as its preferred replacement for U.S. dollar LIBOR. We
have been closely monitoring developments related to the transition from LIBOR
and have implemented numerous proactive measures to eliminate the potential
transition-related impacts to the Company, specifically:

•Since January 2017, we have proactively eliminated outstanding LIBOR-based
borrowings, and as of December 31, 2022, we had no LIBOR-based debt or financial
contracts, including through our consolidated and unconsolidated real estate
joint ventures.
•From 2020 through December 31, 2022, we increased the aggregate amount
available under our commercial paper program to $2.0 billion from $750.0
million. Our commercial paper program is not subject to LIBOR and is used for
funding short-term working capital needs. This program provides us with the
ability to issue commercial paper notes bearing interest at short-term fixed
rates with a maturity of generally 30 days or less and a maximum maturity of 397
days from the date of issuance. As of December 31, 2022, we had no commercial
paper notes outstanding.
•In September 2022, we amended our unsecured senior line of credit to convert
its interest rate to SOFR, among other changes. As of December 31, 2022, we had
no borrowings outstanding under our unsecured senior line of credit.

Refer to Note 10 - "Secured and unsecured senior debt" to our consolidated
financial statements under Item 15 and "Item 1A. Risk factors" in this annual
report on Form 10-K for additional information about our management of risks
related to the transition from LIBOR.

Real estate dispositions, sales of partial interests, and issuances of common
equity


We expect to continue the disciplined execution of select sales of operating
assets. Future sales will provide an important source of capital to fund a
portion of pending and recently completed opportunistic acquisitions and our
highly leased value-creation development and redevelopment projects, and also
provide significant capital for growth. We may also consider additional sales of
partial interests in core Class A properties and/or development projects. For
2023, we expect real estate dispositions, sales of partial interests, and
issuances of common equity ranging from $1.4 billion to $2.4 billion. The amount
of asset sales necessary to meet our forecasted sources of capital will vary
depending upon the amount of Adjusted EBITDA associated with the assets sold.

Refer to Note 3 - "Investment in real estate", Note 4 - "Consolidated and
unconsolidated real estate joint ventures", and Note 15 - "Stockholders' equity"
to our consolidated financial statements under Item 15 and "Dispositions and
sales of partial interests" under Item 2 in this annual report on Form 10-K for
additional information on our dispositions, sales of partial interests, and
issuances of common equity.

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

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Common equity transactions

During the year ended December 31, 2022, our common equity transactions included
the following:


•In January 2022, we entered into new forward equity sales agreements
aggregating $1.7 billion to sell 8.1 million shares of our common stock
(including the exercise of an underwriters' option) at a public offering price
of $210.00 per share, before underwriting discounts and commissions.
•During the year ended December 31, 2022, we settled all of our outstanding
forward equity sales agreements by issuing 8.1 million shares and received net
proceeds of $1.6 billion.

•In December 2021, we entered into a new ATM common stock offering program,
which allows us to sell up to an aggregate of $1.0 billion of our common stock.
•During the year ended December 31, 2022, we entered into new forward equity
sales agreements aggregating $858.1 million to sell 4.9 million shares under our
ATM program at an average price of $175.12 per share (before underwriting
discounts).
•During the three months ended December 31, 2022, we settled a portion of our
outstanding forward equity agreements by issuing 4.2 million shares and received
net proceeds of $737.4 million.
•We expect to settle the remaining outstanding forward equity agreements by
issuing 699,274 shares and receive net proceeds of approximately $102.4 million
in 2023.
•As of December 31, 2022, the remaining aggregate amount available under our ATM
program for future sales of common stock was $141.9 million. We expect to
establish a new ATM program during the first quarter of 2023.

Other sources


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

Additionally, we, together with joint venture partners, hold interests in real
estate joint ventures that we consolidate in our financial statements. These
existing joint ventures provide significant equity capital to fund a portion of
our future construction spend, and our joint venture partners may also
contribute equity into these entities for financing-related activities. Over the
next four years, we expect to receive $1.4 billion from our existing real estate
joint venture partners to fund construction projects. For 2023, we expect
contributions from noncontrolling interests to aggregate $794.0 million,
approximately 55% of which represents funding commitments from our existing real
estate joint ventures and the remaining amount of which represents funding
expected from our future real estate joint ventures. During the year ended
December 31, 2022, we received $1.5 billion of contributions from and sales of
noncontrolling interests.
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Uses of capital

Summary of capital expenditures


One of our primary uses of capital relates to the development, redevelopment,
pre-construction, and construction of properties. We currently have projects in
our value-creation pipeline aggregating 5.6 million RSF of Class A properties
undergoing construction, 9.9 million RSF of near-term and intermediate-term
development and redevelopment projects, and 17.3 million SF of future
development projects in North America. We incur capitalized construction costs
related to development, redevelopment, pre-construction, and other construction
activities. We also incur additional capitalized project costs, including
interest, property taxes, insurance, and other costs directly related and
essential to the development, redevelopment, pre-construction, or construction
of a project, during periods when activities necessary to prepare an asset for
its intended use are in progress. Refer to "New Class A development and
redevelopment properties: current projects" under Item 2 in this annual report
on Form 10-K for more information on our capital expenditures.

We capitalize interest cost as a cost of the project only during the period in
which activities necessary to prepare an asset for its intended use are ongoing,
provided that expenditures for the asset have been made and interest cost has
been incurred. Capitalized interest for the years ended December 31, 2022 and
2021 of $278.6 million and $170.6 million, respectively, was classified in
investments in real estate in our consolidated balance sheets.

Property taxes, insurance on real estate, and indirect project costs, such as
construction administration, legal fees, and office costs that clearly relate to
projects under development or construction, are capitalized as incurred during
the period an asset is undergoing activities to prepare it for its intended use.
We capitalized payroll and other indirect costs related to development,
redevelopment, pre-construction, and construction projects, aggregating $83.8
million and $69.8 million, and property taxes, insurance on real estate and
indirect project costs aggregating $97.3 million and $73.8 million during the
years ended December 31, 2022 and 2021, respectively.

The increase in capitalized costs for the year ended December 31, 2022, compared
to the year ended December 31, 2021, was primarily due to an increase in our
value-creation pipeline projects undergoing construction and pre-construction
activities in 2022 over 2021. Pre-construction activities include entitlements,
permitting, design, site work, and other activities preceding commencement of
construction of aboveground building improvements. The advancement of
pre-construction efforts is focused on reducing the time required to deliver
projects to prospective tenants. These critical activities add significant value
for future ground-up development and are required for the vertical construction
of buildings. Should we cease activities necessary to prepare an asset for its
intended use, the interest, taxes, insurance, and certain other direct and
indirect project costs related to the asset would be expensed as incurred.
Expenditures for repairs and maintenance are expensed as incurred.

Fluctuations in our development, redevelopment, and construction activities
could result in significant changes to total expenses and net income. For
example, had we experienced a 10% reduction in development, redevelopment, and
construction activities without a corresponding decrease in indirect project
costs, including interest and payroll, total expenses would have increased by
approximately $36.2 million for the year ended December 31, 2022.

We use third-party brokers to assist in our leasing activity, who are paid on a
contingent basis upon successful leasing. We are required to capitalize initial
direct costs related to successful leasing transactions that result directly
from and are essential to the lease transaction and would not have been incurred
had that lease transaction not been successfully executed. During the year ended
December 31, 2022, we capitalized total initial direct leasing costs of $186.7
million. Costs that we incur to negotiate or arrange a lease regardless of its
outcome, such as fixed employee compensation, tax, or legal advice to negotiate
lease terms, and other costs, are expensed as incurred.

Acquisitions


Refer to the "Acquisitions" section in Note 3 - "Investments in real estate" and
to Note 4 - "Consolidated and unconsolidated real estate joint ventures" to our
consolidated financial statements under Item 15 in this annual report on Form
10-K, and the "Acquisitions" section in "Item 2. Properties" in this annual
report on Form 10-K for information on our acquisitions.

Dividends


During the years ended December 31, 2022 and 2021, we paid common stock
dividends of $757.7 million and $656.0 million, respectively. The increase of
$101.8 million in dividends paid on our common stock during the year ended
December 31, 2022, compared to the year ended December 31, 2021, was primarily
due to an increase in the number of common shares outstanding subsequent to
January 1, 2021 as a result of issuances of common stock under our ATM program
and settlement of forward equity sales agreements, and partially due to the
increase in the related dividends to $4.66 per common share paid during the year
ended December 31, 2022 from $4.42 per common share paid during the year ended
December 31, 2021.

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Secured notes payable


Secured notes payable as of December 31, 2022 consisted of three notes secured
by two properties. Our secured notes payable typically require monthly payments
of principal and interest and had a weighted-average interest rate of
approximately 6.75%. As of December 31, 2022, the total book value of our
investments in real estate securing debt was approximately $216.8 million. As of
December 31, 2022, our secured notes payable, including unamortized discounts
and deferred financing costs, comprised approximately $649 thousand and $58.4
million of fixed-rate debt and unhedged variable-rate debt, respectively.
Unsecured senior notes payable and unsecured senior line of credit

The requirements of, and our actual performance with respect to, the key
financial covenants under our unsecured senior notes payable as of December 31,
2022 were as follows:


            Covenant Ratios(1)                              Requirement                           December 31, 2022
Total Debt to Total Assets                       Less than or equal to 60%                               27%
Secured Debt to Total Assets                     Less than or equal to 40%                              0.2%

Consolidated EBITDA(2) to Interest Expense Greater than or equal to 1.5x

                          18.2x
Unencumbered Total Asset Value to
Unsecured Debt                                   Greater than or equal to 150%                          363%


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

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

The requirements of, and our actual performance with respect to, the key
financial covenants under our unsecured senior line of credit as of December 31,
2022 were as follows:


           Covenant Ratios (1)                          Requirement                          December 31, 2022
Leverage Ratio                                  Less than or equal to 60.0%                  26.6%
Secured Debt Ratio                              Less than or equal to 45.0%                   0.1%
                                                Greater than or equal to
Fixed-Charge Coverage Ratio                     1.50x                                        4.34x
                                                Greater than or equal to
Unsecured Interest Coverage Ratio               1.75x                                        18.87x

(1)All covenant ratio titles utilize terms as defined in the credit agreement.

Estimated interest payments


Estimated interest payments on our fixed-rate debt are calculated based upon
contractual interest rates, including interest payment dates and scheduled
maturity dates. As of December 31, 2022, 99.4% of our debt was fixed-rate debt.
For additional information regarding our debt, refer to Note 10 - "Secured and
unsecured senior debt" to our consolidated financial statements under Item 15 in
this annual report on Form 10-K.

Ground lease obligations

Operating lease agreements


Ground lease obligations as of December 31, 2022, included leases for 40 of our
properties, which accounted for approximately 9% of our total number of
properties. Excluding one ground lease that expires in 2036 related to one
operating property with a net book value of $6.3 million as of December 31,
2022, our ground lease obligations have remaining lease terms ranging from
approximately 31 to 99 years, including available extension options that we are
reasonably certain to exercise.

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As of December 31, 2022, the remaining contractual payments under ground and
office lease agreements in which we are the lessee aggregated $870.1 million and
$34.1 million, respectively. We are required to recognize a right-of-use asset
and a related liability to account for our future obligations under operating
lease arrangements in which we are the lessee. The operating lease liability is
measured based on the present value of the remaining lease payments, including
payments during the term under our extension options that we are reasonably
certain to exercise. The right-of-use asset is equal to the corresponding
operating lease liability, adjusted for the initial direct leasing cost and any
other consideration exchanged with the landlord prior to the commencement of the
lease, as well as adjustments to reflect favorable or unfavorable terms of an
acquired lease when compared with market terms at the time of acquisition. As of
December 31, 2022, the present value of the remaining contractual payments,
aggregating $904.2 million, under our operating lease agreements, including our
extension options that we are reasonably certain to exercise, was $406.7
million, which was classified in accounts payable, accrued expenses, and other
liabilities in our consolidated balance sheets. As of December 31, 2022, the
weighted-average remaining lease term of operating leases in which we are the
lessee was approximately 42 years, and the weighted-average discount rate was
4.6%. Our corresponding operating lease right-of-use assets, adjusted for
initial direct leasing costs and other consideration exchanged with the landlord
prior to the commencement of the lease, aggregated $558.3 million. We classify
the right-of-use asset in other assets in our consolidated balance sheets. Refer
to the "Lease accounting" section in Note 2 - "Summary of significant accounting
policies" to our consolidated financial statements under Item 15 in this annual
report on Form 10-K for additional information.

Commitments


As of December 31, 2022, remaining aggregate costs under contract for the
construction of properties undergoing development, redevelopment, and
improvements under the terms of leases approximated $3.5 billion. In addition,
we may be required to incur construction costs associated with our future
development projects aggregating 643,331 RSF in our Greater Boston market
pursuant to an agreement whereby our counterparty may elect to execute future
lease agreements on mutually agreeable terms.

We expect payments for these obligations to occur over one to three years,
subject to capital planning adjustments from time to time. We may have the
ability to cease the construction of certain projects, which would result in the
reduction of our commitments. In addition, we have letters of credit and
performance obligations aggregating $22.4 million primarily related to
construction projects and an anticipated acquisition.


We are committed to funding approximately $415.4 million related to our non-real
estate investments. These funding commitments are primarily associated with our
investments in privately held entities that report NAV and expire at various
dates over the next 12 years, with a weighted-average expiration of 8.6 years as
of December 31, 2022.

Exposure to environmental liabilities


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

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Foreign currency translation gains and losses


The following table presents the change in accumulated other comprehensive loss
attributable to Alexandria Real Estate Equities, Inc.'s stockholders during the
year ended December 31, 2022 due to the changes in the foreign exchange rates
for our real estate investments in Canada and Asia. We reclassify unrealized
foreign currency translation gains and losses into net income as we dispose of
these holdings.

(In thousands)                                              Total
Balance as of December 31, 2021                          $  (7,294)

Other comprehensive loss before reclassifications (13,518)
Net other comprehensive loss

                               (13,518)

Balance as of December 31, 2022                          $ (20,812)



Inflation


As of December 31, 2022, approximately 93% of our leases (on an annual rental
revenue basis) were triple net leases, which require tenants to pay
substantially all real estate taxes, insurance, utilities, repairs and
maintenance, common area expenses, and other operating expenses (including
increases thereto) in addition to base rent. Approximately 96% of our leases (on
an annual rental revenue basis) contained effective annual rent escalations that
were either fixed (generally ranging from 3.0% to 3.5%) or indexed based on a
consumer price index or other indices. Accordingly, we do not believe that our
cash flows or earnings from real estate operations are subject to significant
risks from inflation. A period of inflation, however, could cause an increase in
the cost of our variable-rate borrowings, including borrowings under our
unsecured senior line of credit and commercial paper program, issuances of
unsecured senior notes payable, and borrowings under our secured construction
loans, and secured loans held by our unconsolidated real estate joint ventures.

In addition, refer to "Item 1A. Risk factors" in this annual report on Form 10-K
for a discussion about risks that inflation directly or indirectly may pose to
our business.

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Issuer and guarantor subsidiary summarized financial information


Alexandria Real Estate Equities, Inc. (the "Issuer") has sold certain debt
securities registered under the Securities Act of 1933, as amended, that are
fully and unconditionally guaranteed by Alexandria Real Estate Equities, L.P.
(the "LP" or the "Guarantor Subsidiary"), an indirectly 100% owned subsidiary of
the Issuer. The Issuer's other subsidiaries, including, but not limited to, the
subsidiaries that own substantially all of its real estate (collectively, the
"Combined Non-Guarantor Subsidiaries"), will not provide a guarantee of such
securities, including the subsidiaries that are partially or 100% owned by the
LP. The following summarized financial information presents on a combined basis,
balance sheet information as of December 31, 2022 and 2021, and results of
operations and comprehensive income for the years ended December 31, 2022 and
2021 for the Issuer and the Guarantor Subsidiary. The information presented
below excludes eliminations necessary to arrive at the information on a
consolidated basis. In presenting the summarized financial statements, the
equity method of accounting has been applied to (i) the Issuer's interests in
the Guarantor Subsidiary, (ii) the Guarantor Subsidiary's interests in the
Combined Non-Guarantor Subsidiaries, and (iii) the Combined Non-Guarantor
Subsidiaries' interests in the Guarantor Subsidiary, where applicable, even
though all such subsidiaries meet the requirements to be consolidated under
GAAP. All assets and liabilities have been allocated to the Issuer and the
Guarantor Subsidiary generally based on legal entity ownership.

The following tables present combined summarized financial information as of
December 31, 2022 and 2021, and for the years ended December 31, 2022 and 2021,
for the Issuer and Guarantor Subsidiary. Amounts provided do not represent our
total consolidated amounts:

                                                                      December 31,
 (in thousands)                                                   2022             2021
 Assets:
 Cash, cash equivalents, and restricted cash                 $    465,707      $    78,856
 Other assets                                                     107,287          101,956
 Total assets                                                $    572,994      $   180,812

 Liabilities:
 Unsecured senior notes payable                              $ 10,100,717

$ 8,316,678

 Unsecured senior line of credit and commercial paper                   -          269,990
 Other liabilities                                                466,369          401,721
 Total liabilities                                           $ 10,567,086      $ 8,988,389



                                                                       Year Ended December 31,
(in thousands)                                                        2022                  2021
Total revenues                                                  $      33,052          $    26,798
Total expenses                                                       (277,647)            (363,525)
Net loss                                                             (244,595)            (336,727)

Net income attributable to unvested restricted stock
awards

                                                                 (8,392)              (7,848)

Net loss attributable to Alexandria Real Estate Equities,
Inc.’s common stockholders

(252,987) $ (344,575)




As of December 31, 2022, 420 of our 432 properties were held indirectly by the
REIT's wholly owned consolidated subsidiary, Alexandria Real Estate Equities,
L.P.
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Critical accounting estimates


Our consolidated financial statements have been prepared in accordance with
GAAP. The preparation of these financial statements in conformity with GAAP
requires us to make estimates, judgments, and assumptions that affect the
reported amounts of assets, liabilities, revenues, and expenses. We base these
estimates, judgments, and assumptions on historical experience, current trends,
and various other factors that we believe to be reasonable under the
circumstances.

We continually evaluate the estimates, judgments, and assumptions we use to
prepare our consolidated financial statements. Changes in estimates, judgments,
or assumptions could affect our financial position and our results of
operations, which are used by our stockholders, potential investors, industry
analysts, and lenders in their evaluation of our performance.

Our critical accounting estimates are defined as accounting estimates or
assumptions made in accordance with GAAP, which involve a significant level of
estimation uncertainty or subjectivity and have had or are reasonably likely to
have a material impact on our financial condition or results of operations. Our
significant accounting policies, which utilize these critical accounting
estimates, are described in Note 2 - "Summary of significant accounting
policies" to our consolidated financial statements under Item 15 in this annual
report on Form 10-K. Our critical accounting estimates are described below.

Recognition of real estate acquired


Generally, our acquisitions of real estate or in-substance real estate are
accounted for as asset acquisitions and not business combinations because
substantially all of the fair value is concentrated in a single identifiable
asset or group of similar identifiable assets (i.e., land, buildings, and
related intangible assets). The accounting model for asset acquisitions requires
that the acquisition consideration (including acquisition costs) be allocated to
the individual assets acquired and liabilities assumed on a relative fair value
basis. Any excess (deficit) of the consideration transferred relative to the sum
of the fair value of the assets acquired and liabilities assumed is allocated to
the individual assets and liabilities based on their relative fair values.

We assess the relative fair values of tangible and intangible assets and
liabilities based on:


(i)Available comparable market information;
(ii)Estimated replacement costs; or
(iii)Discounted cash flow analysis/estimated net operating income and
capitalization rates.

In certain instances, we may use multiple valuation techniques and estimate fair
values based on an average of multiple valuation results. We exercise judgement
to determine key assumptions used in each valuation technique. For example, to
estimate future cash flows in the discounted cash flow analysis, we are required
to use judgment and make a number of assumptions, including those related to
projected growth in rental rates and operating expenses, and anticipated trends
and market/economic conditions. The use of different assumptions in the
discounted cash flow analysis can affect the amount of consideration allocated
to the acquired depreciable/amortizable asset, which in turn can impact our net
income due to the recognition of the related depreciation/amortization expense
in our consolidated statements of operations.

We completed acquisitions of 42 properties for a total purchase price of $2.8
billion during the year ended December 31, 2022. These transactions were
accounted for as asset acquisitions, and the purchase price of each was
allocated based on the relative fair values of the assets acquired and
liabilities assumed. Refer to the "Investments in real estate" section in Note 2
- "Summary of significant accounting policies" to our consolidated financial
statements under Item 15 in this annual report on Form 10-K for additional
information.

Impairment of long-lived assets

Impairment of real estate assets classified as held for sale


A property is classified as held for sale when all of the accounting criteria
for a plan of sale have been met. These criteria are described in the
"Investments in real estate" section in Note 2 - "Summary of significant
accounting policies" to our consolidated financial statements under Item 15 in
this annual report on Form 10-K. Upon classification as held for sale, we
recognize an impairment charge, if necessary, to lower the carrying amount of
the real estate asset to its estimated fair value less cost to sell. The
determination of fair value can involve significant judgments and assumptions.
We develop key assumptions based on the following available factors: (i)
contractual sales price, (ii) preliminary non-binding letters of intent, or
(iii) other available comparable market information. If this information is not
available, we use estimated replacement costs or estimated cash flow projections
that utilize estimated discount and capitalization rates. These estimates are
subject to uncertainty and therefore require significant judgment by us. We
review all assets held for sale each reporting period to determine whether the
existing carrying amounts are fully recoverable in comparison to their estimated
fair values less costs to sell. Subsequently, as a result of our quarterly
assessment, we may recognize an incremental impairment charge for any decrease
in the asset's fair value less cost to sell. Conversely, we may recognize a gain
for a subsequent increase in fair value less cost to sell, limited to the
cumulative net loss previously recognized.

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Impairment of other long-lived assets


For each reporting period, we review current activities and changes in the
business conditions of all of our long-lived assets, including our rental
properties, CIP, land held for development, right-of-use assets related to
operating leases in which we are the lessee, and intangibles, to determine the
existence of any triggering events or impairment indicators requiring an
impairment analysis. If triggering events or impairment indicators are
identified, we review an estimate of the future undiscounted cash flows,
including, if necessary, a probability-weighted approach if multiple outcomes
are under consideration.

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

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

The evaluation for impairment and calculation of the carrying amount of a
long-lived asset to be held and used involves consideration of factors and
calculations that are different than the estimate of fair value of assets
classified as held for sale. Because of these two different models, it is
possible for a long-lived asset previously classified as held and used to
require the recognition of an impairment charge upon classification as held for
sale.

Impairment of real estate joint ventures accounted for under the equity method
of accounting


We generally account for our investments in real estate joint ventures that do
not meet the consolidation criteria under the equity method. Under the equity
method of accounting, we initially recognize our investment at cost and
subsequently adjust the carrying amount of the investment for our share of the
investee's earnings or losses, distributions received, and other-than-temporary
impairments.

Our unconsolidated real estate joint ventures are individually evaluated for
impairment when conditions exist that may indicate that the decrease in the
carrying amount of our investment has occurred and is other than temporary.
Triggering events or impairment indicators for an unconsolidated joint venture
include its recurring operating losses, and other events such as occupancy
changes, significant near-term lease expirations, significant changes in
construction costs, estimated completion dates, rental rates, and other factors
related to the properties owned by the real estate joint venture, or a decision
by investors to cease providing support or reduce their financial commitment to
the joint venture.

Upon determination that an other-than-temporary impairment has occurred, a
write-down is recognized to reduce the carrying amount of our investment to its
estimated fair value. As of December 31, 2022, the carrying amounts of our
investments in unconsolidated real estate joint ventures aggregated
$38.4 million, or approximately 0.1% of our total assets. During the year ended
December 31, 2022, no other-than-temporary impairments related to our
unconsolidated real estate joint ventures were identified. Refer to the
"Unconsolidated real estate joint ventures" section in Note 4 - "Consolidated
and unconsolidated real estate joint ventures" to our consolidated financial
statements under Item 15 in this annual report on Form 10-K for additional
information.

Impairment of non-real estate investments


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

Our investments in privately held entities that do not report NAV per share
require our evaluation for impairment when changes in these entities' conditions
may indicate that an impairment exists. We closely monitor these investments
throughout the year for new developments, including operating results, prospects
and results of clinical trials, new product initiatives, new collaborative
agreements, capital-raising events, and merger and acquisition activities. We
evaluate these investees on the basis of a qualitative assessment for indicators
of impairment by monitoring the presence of the following triggering events or
impairment indicators: (i) a significant deterioration in the earnings
performance, credit rating, asset quality, or business prospects of the
investee; (ii) a significant adverse
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change in the regulatory, economic, or technological environment of the
investee, (iii) a significant adverse change in the general market condition,
including the research and development of technology and products that the
investee is bringing or attempting to bring to the market, (iv) significant
concerns about the investee's ability to continue as a going concern, or (v) a
decision by investors to cease providing support to reduce their financial
commitment to the investee. If such indicators are present, we are required to
estimate the investment's fair value and immediately recognize an impairment
loss in an amount equal to the investment's carrying value in excess of its
estimated fair value. As of each December 31, 2022, 2021, and 2020, the carrying
amounts of our investments in privately held entities that do not report NAV per
share accounted for approximately 2% of our total assets and aggregated
$582.7 million, $491.3 million, and $389.2 million, respectively. During the
years ended December 31, 2022, 2021, and 2020, we recognized impairment charges
aggregating 4%, 0%, and 6% of the carrying amounts of our investments in
privately held entities that do not report NAV, respectively.

Monitoring of tenant credit quality


We monitor, on an ongoing basis, the credit quality and any related material
changes of our tenants by (i) monitoring the credit rating of tenants that are
rated by a nationally recognized credit rating agency, (ii) reviewing financial
statements of the tenants that are publicly available or that are required to be
delivered to us pursuant to the applicable lease, (iii) monitoring news reports
regarding our tenants and their respective businesses and industries in which
they conduct business, and (iv) monitoring the timeliness of lease payments.

We have a team of employees who, among them, have an extensive educational
background or experience in biology, chemistry, industrial biotechnology,
agtech, and the life science industry, as well as knowledge in finance. This
team is responsible for timely assessment, monitoring, and communication of our
tenants' credit quality and any material changes therein. During the fiscal
years ended 2022, 2021, and 2020, specific write-offs and a general allowance
related to deferred rent balances of tenants recognized in our consolidated
statements of operations have not exceeded 0.8% of our income from rentals for
each respective year. For additional information, refer to the "Monitoring of
tenant credit quality" section in Note 2 - "Summary of significant accounting
policies" to our consolidated financial statements under Item 15 in this annual
report on Form 10-K for additional information.

Allowance for credit losses


For the financial assets in scope of the accounting standard on credit losses,
we are required to estimate and recognize lifetime expected losses, rather than
incurred losses, which results in the earlier recognition of credit losses even
if the expected risk of credit loss is remote.

As of December 31, 2022, all of our 432 properties were subject to the operating
lease agreements, which are excluded from the scope of the standard on credit
losses. As of December 31, 2022, we had one direct financing lease agreement for
a parking structure with an aggregate net investment balance of $39.4 million,
which represented approximately 0.1% of our total assets. At each reporting
date, we estimate the current credit loss related to these assets by assessing
the probability of default on these leases based on the lessees' financial
condition, credit rating, business prospects, remaining lease term, and, in the
case of the direct financing lease, the expected value of the underlying
collateral upon its repossession, and, if necessary, we recognize a credit loss
adjustment. Since our adoption of this standard on January 1, 2020, and as of
each December 31, 2022 and 2021, our allowance for credit losses has not
exceeded $2.8 million, or 0.01% of our total assets. For further details, refer
to the "Allowance for credit losses" section in Note 2 - "Summary of significant
accounting policies" and to Note 5 - "Leases" to our consolidated financial
statements under Item 15 in this annual report on Form 10-K for additional
information.

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Non-GAAP measures and definitions

This section contains additional information of certain non-GAAP financial
measures and the reasons why we use these supplemental measures of performance
and believe they provide useful information to investors, as well as the
definitions of other terms used in this annual report on Form 10-K.

Funds from operations and funds from operations, as adjusted, attributable to
Alexandria Real Estate Equities, Inc.’s common stockholders


GAAP-basis accounting for real estate assets utilizes historical cost accounting
and assumes that real estate values diminish over time. In an effort to overcome
the difference between real estate values and historical cost accounting for
real estate assets, the Nareit Board of Governors established funds from
operations as an improved measurement tool. Since its introduction, funds from
operations has become a widely used non-GAAP financial measure among equity
REITs. We believe that funds from operations is helpful to investors as an
additional measure of the performance of an equity REIT. Moreover, we believe
that funds from operations, as adjusted, allows investors to compare our
performance to the performance of other real estate companies on a consistent
basis, without having to account for differences recognized because of real
estate acquisition and disposition decisions, financing decisions, capital
structure, capital market transactions, variances resulting from the volatility
of market conditions outside of our control, or other corporate activities that
may not be representative of the operating performance of our properties.

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

We compute funds from operations, as adjusted, as funds from operations
calculated in accordance with the Nareit White Paper, excluding significant
gains, losses, and impairments realized on non-real estate investments,
unrealized gains or losses on non-real estate investments, gains or losses on
early extinguishment of debt, significant termination fees, acceleration of
stock compensation expense due to the resignation of an executive officer, deal
costs, the income tax effect related to such items, and the amount of such items
that is allocable to our unvested restricted stock awards. We compute the amount
that is allocable to our unvested restricted stock awards using the two-class
method. Under the two-class method, we allocate net income (after amounts
attributable to noncontrolling interests) to common stockholders and to unvested
restricted stock awards by applying the respective weighted-average shares
outstanding during each quarter-to-date and year-to-date period. This may result
in a difference of the summation of the quarter-to-date and year-to-date
amounts. Neither funds from operations nor funds from operations, as adjusted,
should be considered as alternatives to net income (determined in accordance
with GAAP) as indications of financial performance, or to cash flows from
operating activities (determined in accordance with GAAP) as measures of
liquidity, nor are they indicative of the availability of funds for our cash
needs, including our ability to make distributions.

The following table reconciles net income to funds from operations for the share
of consolidated real estate joint ventures attributable to noncontrolling
interests and our share of unconsolidated real estate joint ventures for the
three and twelve months ended December 31, 2022 (in thousands):

                                  Noncontrolling Interest Share of                    Our Share of Unconsolidated
                              Consolidated Real Estate Joint Ventures                 Real Estate Joint Ventures
                                         December 31, 2022                                 December 31, 2022
                                                                                 Three Months
                             Three Months Ended           Year Ended                 Ended                Year Ended
Net income                  $          40,949          $      149,041          $          172          $          645
Depreciation and                       29,702                 107,591                     982                   3,666
amortization of real estate
assets
Funds from operations       $          70,651          $      256,632          $        1,154          $        4,311







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The following tables present a reconciliation of net income (loss) attributable
to Alexandria Real Estate Equities, Inc.'s common stockholders, the most
directly comparable financial measure presented in accordance with GAAP,
including our share of amounts from consolidated and unconsolidated real estate
joint ventures, to funds from operations attributable to Alexandria Real Estate
Equities, Inc.'s common stockholders - diluted, and funds from operations
attributable to Alexandria Real Estate Equities, Inc.'s common stockholders -
diluted, as adjusted, and the related per share amounts for the years ended
December 31, 2022, 2021, and 2020. Per share amounts may not add due to
rounding.

                                                                        Year Ended December 31,
(In thousands)                                               2022                 2021                2020
Net income attributable to Alexandria Real Estate
Equities, Inc.'s common stockholders - basic and
diluted                                                 $   513,268          $   563,399          $  760,791
Depreciation and amortization of real estate assets         988,363              804,633             684,682

Noncontrolling share of depreciation and amortization
from consolidated real estate JVs

                          (107,591)             (70,880)            (61,933)
Our share of depreciation and amortization from
unconsolidated real estate JVs                                3,666               13,734              11,413
Gain on sales of real estate                               (537,918)            (126,570)           (154,089)
Impairment of real estate - rental properties                20,899    (1)        25,485              40,501
Allocation to unvested restricted stock awards               (1,118)              (6,315)             (7,018)

Funds from operations attributable to Alexandria Real
Estate Equities, Inc.’s common stockholders –
diluted(2)

                                                  879,569            1,203,486           1,274,347
Unrealized losses (gains) on non-real estate
investments                                                 412,193              (43,632)           (374,033)
Significant realized gains on non-real estate
investments                                                       -             (110,119)                  -
Impairment of non-real estate investments                    20,512    (3)             -              24,482
Impairment of real estate                                    44,070    (4)        27,190              15,221
Loss on early extinguishment of debt                          3,317               67,253              60,668
Termination fee                                                   -                    -             (86,179)
Acceleration of stock compensation expense due to
executive officer resignation                                 7,185    (5)             -               4,499
Allocation to unvested restricted stock awards               (5,137)                 710               4,790

Funds from operations attributable to Alexandria Real
Estate Equities, Inc.’s common stockholders – diluted,
as adjusted

                                             $ 1,361,709          $ 1,144,888          $  923,795



(1)Primarily consists of an impairment of one real estate asset recognized to
reduce the carrying amount of the asset to its estimated fair value, less cost
to sell, upon its classification as held for sale in December 2022. We expect to
complete the sale of this asset during 2023.
(2)Calculated in accordance with standards established by the Nareit Board of
Governors.
(3)Primarily relates to three investments in privately held entities that do not
report NAV.
(4)Includes (i) the write-off of pre-acquisition deposits primarily related to
one previously pending acquisition, which was recognized upon our decision not
to proceed with the acquisition, and (ii) a $38.3 million impairment charge
related to one future development, which we recognized upon our decision not to
proceed with the project.
(5)Relates to the resignation of Stephen A. Richardson, our former co-chief
executive officer, in July 2022.



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                                                                              Year Ended December 31,
(Per share)                                                          2022                 2021               2020

Net income per share attributable to Alexandria Real
Estate Equities, Inc.’s common stockholders – diluted $ 3.18

              $    3.82          $    6.01
Depreciation and amortization of real estate assets                 5.47                   5.07               5.01
Gain on sales of real estate                                       (3.33)                 (0.86)             (1.22)
Impairment of real estate - rental properties                       0.13        (1)        0.17               0.32
Allocation to unvested restricted stock awards                     (0.01)                 (0.04)             (0.05)
Funds from operations per share attributable to
Alexandria Real Estate Equities, Inc.'s common
stockholders - diluted                                              5.44                   8.16              10.07
Unrealized losses (gains) on non-real estate investments            2.55                  (0.30)             (2.96)
Significant realized gains on non-real estate
investments                                                            -                  (0.75)                 -
Impairment of non-real estate investments                           0.13        (1)           -               0.19
Impairment of real estate                                           0.27        (1)        0.18               0.12
Loss on early extinguishment of debt                                0.02                   0.46               0.48
Termination fee                                                        -                      -              (0.68)
Acceleration of stock compensation expense due to
executive officer resignation                                       0.04        (1)           -               0.04
Allocation to unvested restricted stock awards                     (0.03)                  0.01               0.04
Funds from operations per share attributable to
Alexandria Real Estate Equities, Inc.'s common
stockholders - diluted, as adjusted                            $    8.42

$ 7.76 $ 7.30

Weighted-average shares of common stock outstanding for
calculations of:
EPS – diluted

                                                    161,659                147,460            126,490
Funds from operations - diluted, per share                       161,659                147,460            126,490

Funds from operations – diluted, as adjusted, per share 161,659

            147,460            126,490



(1)  Refer to footnotes on the previous page for additional details.
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Adjusted EBITDA and Adjusted EBITDA margin


We use Adjusted EBITDA as a supplemental performance measure of our operations,
for financial and operational decision-making, and as a supplemental means of
evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA
is calculated as earnings before interest, taxes, depreciation, and amortization
("EBITDA"), excluding stock compensation expense, gains or losses on early
extinguishment of debt, gains or losses on sales of real estate, impairments of
real estate, and significant termination fees. Adjusted EBITDA also excludes
unrealized gains or losses and significant realized gains or losses and
impairments that result from our non-real estate investments. These non-real
estate investment amounts are classified in our consolidated statements of
operations outside of total revenues.

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

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

In order to calculate the Adjusted EBITDA margin, we divide Adjusted EBITDA by
total revenues as presented in our consolidated statements of operations. We
believe that this supplemental performance measure provides investors with
additional useful information regarding the profitability of our operating
activities.


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The following table reconciles net income (loss), the most directly comparable
financial measure calculated and presented in accordance with GAAP, to Adjusted
EBITDA and calculates the Adjusted EBITDA margin for the three months and years
ended December 31, 2022 and 2021 (dollars in thousands):

                                                Three Months Ended December 31,                 Year Ended December 31,
                                                   2022                   2021                 2022                  2021
Net income                                  $         95,268          $   99,796          $    670,701          $   654,282
Interest expense                                      17,522              34,862                94,203              142,165
Income taxes                                           2,063               4,156                 9,673               12,054
Depreciation and amortization                        264,480             239,254             1,002,146              821,061
Stock compensation expense                            11,586              14,253                57,740               48,669
Loss on early extinguishment of debt                       -                   -                 3,317               67,253
Gain on sales of real estate                               -            (124,226)             (537,918)            (126,570)
Significant realized gains on
non-real estate investments                                -                   -                     -             (110,119)
Unrealized losses (gains) on non-real
estate investments                                    24,117             139,716               412,193              (43,632)
Impairment of real estate                             26,186                   -                64,969               52,675
Impairment of non-real estate
investments                                           20,512                   -                20,512                    -
Adjusted EBITDA                             $        461,734          $  407,811          $  1,797,536          $ 1,517,838

Total revenues                              $        670,281          $  576,923          $  2,588,962          $ 2,114,150

Adjusted EBITDA margin                                      69%                 71%                   69%                  72%



Annual rental revenue

Annual rental revenue represents the annualized fixed base rental obligations,
calculated in accordance with GAAP, for leases in effect as of the end of the
period, related to our operating RSF. Annual rental revenue is presented using
100% of the annual rental revenue from our consolidated properties and our share
of annual rental revenue for our unconsolidated real estate joint ventures.
Annual rental revenue per RSF is computed by dividing annual rental revenue by
the sum of 100% of the RSF of our consolidated properties and our share of the
RSF of properties held in unconsolidated real estate joint ventures. As of
December 31, 2022, approximately 93% of our leases (on an annual rental revenue
basis) were triple net leases, which require tenants to pay substantially all
real estate taxes, insurance, utilities, repairs and maintenance, common area
expenses, and other operating expenses (including increases thereto) in addition
to base rent. Annual rental revenue excludes these operating expenses recovered
from our tenants. Amounts recovered from our tenants related to these operating
expenses, along with base rent, are classified in income from rentals in our
consolidated statements of operations.

Capitalization rates

Capitalization rates are calculated based on net operating income and net
operating income (cash basis) annualized for the quarter preceding the date on
which the property is sold, or near-term prospective net operating income.

Cash interest


Cash interest is equal to interest expense calculated in accordance with GAAP
plus capitalized interest, less amortization of loan fees and debt premiums
(discounts). Refer to the definition of "Fixed-charge coverage ratio" in this
section within this Item 7 in this annual report on 10-K for a reconciliation of
interest expense, the most directly comparable financial measure calculated and
presented in accordance with GAAP, to cash interest.

Class A properties and AAA locations


Class A properties are properties clustered in AAA locations that provide
innovative tenants with highly dynamic and collaborative environments that
enhance their ability to successfully recruit and retain world-class talent and
inspire productivity, efficiency, creativity, and success. Class A properties
generally command higher annual rental rates than other classes of similar
properties.

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AAA locations are in close proximity to concentrations of specialized skills,
knowledge, institutions, and related businesses. Such locations are generally
characterized by high barriers to entry for new landlords, high barriers to exit
for tenants, and a limited supply of available space.

Construction costs related to active development and redevelopment projects
under contract


Includes (i) costs incurred to date, (ii) remaining costs to complete under a
general contractor's guaranteed maximum price ("GMP") construction contract or
other fixed contracts, and (iii) our maximum committed tenant improvement
allowances under our executed leases. The general contractor's GMP contract or
other fixed contracts reduce our exposure to costs of construction materials,
labor, and services from third-party contractors and suppliers, unless the
overruns result from, among other things, a force majeure event or a change in
the scope of work covered by the contract.

Development, redevelopment, and pre-construction


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

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

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

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

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


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

Dividend payout ratio (common stock)


Dividend payout ratio (common stock) is the ratio of the absolute dollar amount
of dividends on our common stock (shares of common stock outstanding on the
respective record dates multiplied by the related dividend per share) to funds
from operations attributable to Alexandria's common stockholders - diluted, as
adjusted.

Dividend yield

Dividend yield for the quarter represents the annualized quarter dividend
divided by the closing common stock price at the end of the quarter.

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Fixed-charge coverage ratio


Fixed-charge coverage ratio is a non-GAAP financial measure representing the
ratio of Adjusted EBITDA to fixed charges. We believe that this ratio is useful
to investors as a supplemental measure of our ability to satisfy fixed financing
obligations and preferred stock dividends. Cash interest is equal to interest
expense calculated in accordance with GAAP plus capitalized interest, less
amortization of loan fees and debt premiums (discounts).

The following table reconciles interest expense, the most directly comparable
financial measure calculated and presented in accordance with GAAP, to cash
interest and fixed charges and computes the fixed-charge coverage ratio for the
three months and years ended December 31, 2022 and 2021 (dollars in thousands):
                                               Three Months Ended December 31,                 Year Ended December 31,
                                                  2022                   2021                 2022                  2021
Adjusted EBITDA                            $        461,734          $  407,811          $  1,797,536          $ 1,517,838

Interest expense                           $         17,522          $   34,862          $     94,203          $   142,165
Capitalized interest                                 79,491              44,078               278,645              170,641
Amortization of loan fees                            (3,975)             (2,911)              (13,549)             (11,441)
Amortization of debt (discounts)
premiums                                               (272)                502                  (384)               2,041
Cash interest and fixed charges            $         92,766          $   76,531          $    358,915          $   303,406

Fixed-charge coverage ratio:
- period annualized                                       5.0x                5.3x                  5.0x                 5.0x
- trailing 12 months                                      5.0x                5.0x                  5.0x                 5.0x



Gross assets

Gross assets are calculated as total assets plus accumulated depreciation as of
December 31, 2022 and 2021 (in thousands):

                                     December 31,
                                2022              2021
Total assets               $ 35,523,399      $ 30,219,373

Accumulated depreciation 4,354,063 3,771,241
Gross assets

               $ 39,877,462      $ 33,990,614

Initial stabilized yield (unlevered)


Initial stabilized yield is calculated as the estimated amounts of net operating
income at stabilization divided by our investment in the property. Our initial
stabilized yield excludes the benefit of leverage. Our cash rents related to our
value-creation projects are generally expected to increase over time due to
contractual annual rent escalations. Our estimates for initial stabilized
yields, initial stabilized yields (cash basis), and total costs at completion
represent our initial estimates at the commencement of the project. We expect to
update this information upon completion of the project, or sooner if there are
significant changes to the expected project yields or costs.
•Initial stabilized yield reflects rental income, including contractual rent
escalations and any rent concessions over the term(s) of the lease(s),
calculated on a straight-line basis.
•Initial stabilized yield (cash basis) reflects cash rents at the stabilization
date after initial rental concessions, if any, have elapsed and our total cash
investment in the property.

Investment-grade or publicly traded large cap tenants


Investment-grade or publicly traded large cap tenants represent tenants that are
investment-grade rated or publicly traded companies with an average daily market
capitalization greater than $10 billion for the twelve months ended December 31,
2022, as reported by Bloomberg Professional Services. Credit ratings from
Moody's Investors Service and S&P Global Ratings reflect credit ratings of the
tenant's parent entity, and there can be no assurance that a tenant's parent
entity will satisfy the tenant's lease obligation upon such tenant's default. We
monitor the credit quality and related material changes of our tenants. Material
changes that cause a tenant's market capitalization to decrease below $10
billion, which are not immediately reflected in the twelve-month average, may
result in their exclusion from this measure.

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


The square footage presented in the table below includes RSF of buildings in
operation as of December 31, 2022, primarily representing lease expirations or
vacant space at recently acquired properties that also have inherent future
development or redevelopment opportunities and for which we have the intent to
demolish or redevelop the existing property upon expiration of the existing
in-place leases and commencement of future construction:
                                                                                                                       RSF of Lease Expirations Targeted for
                                                                                                                           Development and Redevelopment
Property/Submarket                                              Dev/Redev                2023                      2024                        Thereafter(1)                        Total
Near-term projects:
100 Edwin H. Land Boulevard/Cambridge/Inner Suburbs               Redev                       -                    104,500                                 -                          104,500
40 Sylvan Road/Route 128                                          Redev                 312,845                          -                                 -                          312,845
275 Grove Street/Route 128                                        Redev                       -                          -                           160,251                          160,251
840 Winter Street/Route 128                                       Redev                  10,265                     17,965                                 -                           28,230
3301 Monte Villa Parkway/Bothell                                  Redev                       -                     50,552                                 -                           50,552
                                                                                        323,110                    173,017                           160,251                          656,378
Intermediate-term projects:
219 East 42nd Street/New York City                                 Dev                        -                    349,947                                 -                          349,947
10975 and 10995 Torreyana Road/Torrey Pines                        Dev                        -                     84,829                                 -                           84,829
                                                                                              -                    434,776                                 -                          434,776
Future projects:
311 Arsenal Street/Cambridge/Inner Suburbs                        Redev                       -                          -                           308,446                          308,446
550 Arsenal Street/Cambridge/Inner Suburbs                         Dev                        -                          -                           260,867                          260,867
446 and 458 Arsenal Street/Cambridge/Inner Suburbs                 Dev                        -                          -                            38,200                           38,200
380 and 420 E Street/Seaport Innovation District                   Dev                        -                          -                           195,506                          195,506
Other/Greater Boston                                              Redev                       -                          -                           167,549                          167,549
1122 and 1150 El Camino Real/South San Francisco                   Dev                        -                          -                           655,172                          655,172
3875 Fabian Way/Greater Stanford                                   Dev                        -                          -                           228,000                          228,000
960 Industrial Road/Greater Stanford                               Dev                        -                          -                           110,000                          110,000
Campus Point by Alexandria/University Town Center                  Dev                        -                    495,192                                 -                          495,192
Sequence District by Alexandria/Sorrento Mesa                   Dev/Redev                     -                          -                           688,034                          688,034
4025 and 4045 Sorrento Valley Boulevard/Sorrento Valley            Dev                        -                          -                            22,886                           22,886
601 Dexter Avenue North/Lake Union                                 Dev                   18,680                          -                                 -                           18,680
830 4th Avenue South/SoDo                                          Dev                        -                          -                            42,380                           42,380
Other/Seattle                                                      Dev                        -                          -                           102,437                          102,437
1020 Red River Street/Austin                                      Redev                       -                    126,034                                 -                          126,034
                                                                                         18,680                    621,226                         2,819,477                        3,459,383
                                                                                        341,790                  1,229,019                         2,979,728                        4,550,537

(1)Includes vacant square footage as of December 31, 2022.

Joint venture financial information


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

The components of balance sheet and operating results information related to our
real estate joint ventures do not represent our legal claim to those items. For
each entity that we do not wholly own, the joint venture agreement generally
determines what equity holders can receive upon capital events, such as sales or
refinancing, or in the event of a liquidation. Equity holders are normally
entitled to their respective legal ownership of any residual cash from a joint
venture only after all liabilities, priority distributions, and claims have been
repaid or satisfied.

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We believe that this information can help investors estimate the balance sheet
and operating results information related to our partially owned entities.
Presenting this information provides a perspective not immediately available
from consolidated financial statements and one that can supplement an
understanding of the joint venture assets, liabilities, revenues, and expenses
included in our consolidated results.

The components of balance sheet and operating results information related to our
real estate joint ventures are limited as an analytical tool as the overall
economic ownership interest does not represent our legal claim to each of our
joint ventures' assets, liabilities, or results of operations. In addition,
joint venture financial information may include financial information related to
the unconsolidated real estate joint ventures that we do not control. We believe
that in order to facilitate for investors a clear understanding of our operating
results and our total assets and liabilities, joint venture financial
information should be examined in conjunction with our consolidated statements
of operations and balance sheets. Joint venture financial information should not
be considered an alternative to our consolidated financial statements, which are
presented and prepared in accordance with GAAP.

Mega campus


Mega campuses are cluster campuses that consist of approximately 1 million RSF
or more, including operating, active development/redevelopment, and land RSF
less operating RSF expected to be demolished. The following table reconciles our
operating RSF as of December 31, 2022:

                                                                      Operating RSF
Mega campus                                                            28,554,356
Non-mega campus                                                        13,219,366
Total                                                                  41,773,722

Mega campus RSF as a percentage of total operating property RSF

68 %

Net cash provided by operating activities after dividends


Net cash provided by operating activities after dividends includes the deduction
for distributions to noncontrolling interests. For purposes of this calculation,
changes in operating assets and liabilities are excluded as they represent
timing differences.

Net debt and preferred stock to Adjusted EBITDA


Net debt and preferred stock to Adjusted EBITDA is a non-GAAP financial measure
that we believe is useful to investors as a supplemental measure of evaluating
our balance sheet leverage. Net debt and preferred stock is equal to the sum of
total consolidated debt less cash, cash equivalents, and restricted cash, plus
preferred stock outstanding as of the end of the period. Refer to the definition
of "Adjusted EBITDA and Adjusted EBITDA margin" within this Item 7 in this
annual report on Form 10-K for further information on the calculation of
Adjusted EBITDA.

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The following table reconciles debt to net debt and preferred stock and computes
the ratio to Adjusted EBITDA as of December 31, 2022 and 2021 (dollars in
thousands):
                                                                   December 31,
                                                              2022              2021
Secured notes payable                                    $    59,045       $   205,198
Unsecured senior notes payable                            10,100,717

8,316,678

Unsecured senior line of credit and commercial paper               -

269,990

Unamortized deferred financing costs                          74,918            65,476
Cash and cash equivalents                                   (825,193)         (361,348)
Restricted cash                                              (32,782)          (53,879)
Preferred stock                                                    -                 -
Net debt and preferred stock                             $ 9,376,705       $ 8,442,115

Adjusted EBITDA:
- quarter annualized                                     $ 1,846,936       $ 1,631,244
- trailing 12 months                                     $ 1,797,536       $ 1,517,838

Net debt and preferred stock to Adjusted EBITDA:
- quarter annualized                                             5.1  x            5.2  x
- trailing 12 months                                             5.2  x            5.6  x

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


The following table reconciles net income (loss) to net operating income and net
operating income (cash basis) and computes operating margin for the years ended
December 31, 2022, 2021, and 2020 (dollars in thousands):

                                                                       Year Ended December 31,
                                                            2022                 2021                 2020
Net income                                             $   670,701          $   654,282          $   827,171

Equity in earnings of unconsolidated real estate
joint ventures                                                (645)             (12,255)              (8,148)
General and administrative expenses                        177,278              151,461              133,341
Interest expense                                            94,203              142,165              171,609
Depreciation and amortization                            1,002,146              821,061              698,104
Impairment of real estate                                   64,969               52,675               48,078
Loss on early extinguishment of debt                         3,317               67,253               60,668
Gain on sales of real estate                              (537,918)            (126,570)            (154,089)
Investment loss (income)                                   331,758             (259,477)            (421,321)
Net operating income                                     1,805,809            1,490,595            1,355,413
Straight-line rent revenue                                (118,003)            (115,145)             (96,676)
Amortization of acquired below-market leases               (74,346)             (54,780)             (57,244)
Net operating income (cash basis)                      $ 1,613,460

$ 1,320,670 $ 1,201,493


Net operating income (from above)                      $ 1,805,809          $ 1,490,595          $ 1,355,413
Total revenues                                         $ 2,588,962          $ 2,114,150          $ 1,885,637
Operating margin                                                  70%                  71%                  72%




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

Furthermore, we believe net operating income is useful to investors as a
performance measure of our consolidated properties because, when compared across
periods, net operating income reflects trends in occupancy rates, rental rates,
and operating costs, which provide a perspective not immediately apparent from
net income or loss. Net operating income can be used to measure the initial
stabilized yields of our properties by calculating net operating income
generated by a property divided by our investment in the property. Net operating
income excludes certain components from net income in order to provide results
that are more closely related to the results of operations of our properties.
For example, interest expense is not necessarily linked to the operating
performance of a real estate asset and is often incurred at the corporate level
rather than at the property level. In addition, depreciation and amortization,
because of historical cost accounting and useful life estimates, may distort
comparability of operating performance at the property level. Impairments of
real estate have been excluded in deriving net operating income because we do
not consider impairments of real estate to be property-level operating expenses.
Impairments of real estate relate to changes in the values of our assets and do
not reflect the current operating performance with respect to related revenues
or expenses. Our impairments of real estate represent the write-down in the
value of the assets to the estimated fair value less cost to sell. These
impairments result from investing decisions or a deterioration in market
conditions. We also exclude realized and unrealized investment gain or loss,
which results from investment decisions that occur at the corporate level
related to non-real estate investments in publicly traded companies and certain
privately held entities. Therefore, we do not consider these activities to be an
indication of operating performance of our real estate assets at the property
level. Our calculation of net operating income also excludes charges incurred
from changes in certain financing decisions, such as losses on early
extinguishment of debt, as these charges often relate to corporate strategy.
Property operating expenses included in determining net operating income
primarily consist of costs that are related to our operating properties, such as
utilities, repairs, and maintenance; rental expense related to ground leases;
contracted services, such as janitorial, engineering, and landscaping; property
taxes and insurance; and property-level salaries. General and administrative
expenses consist primarily of accounting and corporate compensation, corporate
insurance, professional fees, office rent, and office supplies that are incurred
as part of corporate office management. We calculate operating margin as net
operating income divided by total revenues.

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

Operating statistics


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

                                      156
--------------------------------------------------------------------------------

Same property comparisons


As a result of changes within our total property portfolio during the
comparative periods presented, including changes from assets acquired or sold,
properties placed into development or redevelopment, and development or
redevelopment properties recently placed into service, the consolidated total
income from rentals, as well as rental operating expenses in our operating
results, can show significant changes from period to period. In order to
supplement an evaluation of our results of operations over a given quarterly or
annual period, we analyze the operating performance for all consolidated
properties that were fully operating for the entirety of the comparative periods
presented, referred to as same properties. We separately present quarterly and
year-to-date same property results to align with the interim financial
information required by the SEC in our management's discussion and analysis of
our financial condition and results of operations. These same properties are
analyzed separately from properties acquired subsequent to the first day in the
earliest comparable quarterly or year-to-date period presented, properties that
underwent development or redevelopment at any time during the comparative
periods, unconsolidated real estate joint ventures, properties classified as
held for sale, and corporate entities (legal entities performing general and
administrative functions), which are excluded from same property results.
Additionally, termination fees, if any, are excluded from the results of same
properties. Refer to "Same properties" section within this Item 7 in this annual
report on Form 10-K for additional information.

Stabilized occupancy date

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

Tenant recoveries


Tenant recoveries represent revenues comprising reimbursement of real estate
taxes, insurance, utilities, repairs and maintenance, common area expenses, and
other operating expenses and earned in the period during which the applicable
expenses are incurred and the tenant's obligation to reimburse us arises.

We classify rental revenues and tenant recoveries generated through the leasing
of real estate assets within revenues in income from rentals in our consolidated
statements of operations. We provide investors with a separate presentation of
rental revenues and tenant recoveries in "Comparison of results for the year
ended December 31, 2022 to the year ended December 31, 2021" in the "Results of
operations" section within this Item 7 because we believe it promotes investors'
understanding of our operating results. We believe that the presentation of
tenant recoveries is useful to investors as a supplemental measure of our
ability to recover operating expenses under our triple net leases, including
recoveries of utilities, repairs and maintenance, insurance, property taxes,
common area expenses, and other operating expenses, and of our ability to
mitigate the effect to net income for any significant variability to components
of our operating expenses.

The following table reconciles income from rentals to tenant recoveries for the
years ended December 31, 2022, 2021, and 2020 (in thousands):

                                                    Year Ended December 31,
                                            2022             2021             2020
             Income from rentals        $ 2,576,040      $ 2,108,249      $ 1,878,208
             Rental revenues             (1,950,098)      (1,618,592)

(1,471,840)

             Tenant recoveries          $   625,942      $   489,657      $   406,368


Total equity capitalization

Total equity capitalization is equal to the outstanding shares of common stock
multiplied by the closing price on the last trading day at the end of each
period presented.

Total market capitalization

Total market capitalization is equal to the sum of total equity capitalization
and total debt.



                                      157
--------------------------------------------------------------------------------

Unencumbered net operating income as a percentage of total net operating income


Unencumbered net operating income as a percentage of total net operating income
is a non-GAAP financial measure that we believe is useful to investors as a
performance measure of the results of operations of our unencumbered real estate
assets as it reflects those income and expense items that are incurred at the
unencumbered property level. Unencumbered net operating income is derived from
assets classified in continuing operations, which are not subject to any
mortgage, deed of trust, lien, or other security interest, as of the period for
which income is presented.

The following table summarizes unencumbered net operating income as a percentage
of total net operating income for the years ended December 31, 2022, 2021, and
2020 (dollars in thousands):

                                                               Year Ended

December 31,

                                                  2022                  2021                  2020
Unencumbered net operating income            $  1,790,033          $  1,444,307          $  1,295,520
Encumbered net operating income                    15,776                46,288                59,893
Total net operating income                   $  1,805,809          $  1,490,595          $  1,355,413
Unencumbered net operating income as a
percentage of total net operating income                 99%                   97%                   96%

Weighted-average shares of common stock outstanding – diluted


From time to time, we enter into capital market transactions, including forward
equity sales agreements ("Forward Agreements"), to fund acquisitions, to fund
construction of our highly leased development and redevelopment projects, and
for general working capital purposes. We are required to consider the potential
dilutive effect of our Forward Agreements under the treasury stock method while
the Forward Agreements are outstanding. As of December 31, 2022, we had Forward
Agreements outstanding to sell an aggregate of 0.7 million shares of common
stock. Refer to Note 15 - "Stockholders' equity" to our consolidated financial
statements under Item 15 in this annual report on Form 10-K for additional
information.

The weighted-average shares of common stock outstanding used in calculating EPS
- diluted, funds from operations per share - diluted, and funds from operations
per share - diluted, as adjusted, for the years ended December 31, 2022, 2021,
and 2020 are calculated as follows. Also shown are the weighted-average unvested
shares associated with restricted stock awards used in calculating the amounts
allocable to unvested stock award holders for each of the respective periods
presented below (in thousands):

Year Ended December 31,

                                                   2022                            2021                          2020
Basic shares for earnings per share                  161,659                         146,921                       126,106
Forward Agreements                                         -                             539                           384
Diluted shares for earnings per share                161,659                         147,460                       126,490

Basic shares for funds from operations
per share and funds from operations per
share, as adjusted                                   161,659                         146,921                       126,106
Forward Agreements                                         -                             539                           384
Diluted shares for funds from operations
per share and funds from operations per
share, as adjusted                                   161,659                         147,460                       126,490

Unvested restricted shares used in the
allocation of net income, funds from
operations, and funds from operations, as
adjusted                                               1,723                           1,782                         1,728


                                      158

——————————————————————————–

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Horizon Bancorp : Bank Welcomes Kim Modigell as Vice President, Senior Commercial Loan Officer

Post By: Olivia January 17, 2023 0 Comment(s) announce, as, at | HBNC | US4404071049, be, Commercial, HORIZON BANCORP, INC. stock exchange, indiana, information, is, John, kim, lake, Loan, Located, market, Michigan, modigell, News, of, pleased, president, press release, senior, she, to, vice, will

Michigan City, Indiana – John Freyek, Market President of Lake County, is pleased to announce Kim Modigell as Vice President, Senior Commercial Loan Officer. She will be located at the Merrillville, Indiana office.

Modigell has over twenty-two years of experience in the banking industry. Most recently, she held the position of Vice President, Business Banker. In her previous position, she was named Regional Development Company Lender of the Year in 2018. In Modigell’s new role, she will be responsible for growing Horizon’s commercial loan portfolio in Northwest Indiana.

Modigell attended Lake Michigan College and Western Michigan University, where she majored in Business Administration. She was previously on the Board of Directors for the Munster Chamber of Commerce, and the past President of Friends of Hospice.

About Horizon Bancorp, Inc.

Celebrating 150 years, Horizon Bancorp, Inc. is an independent, commercial bank holding company serving Indiana and Michigan through its commercial banking subsidiary, Horizon Bank. Horizon Bancorp, Inc. may be reached online at www.horizonbank.com. Its common stock is traded on the NASDAQ Global Select Market under the symbol HBNC

# # #

Contact: Amy Phares
Public Relations Manager
Phone: (219) 874-9208

Disclaimer

Horizon Bancorp published this content on 17 January 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 January 2023 15:19:02 UTC.

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Hang Lung Properties : Parc 66 to be 100% Powered by Renewable Energy – the First Commercial Development in Jinan and Shandong Province

Post By: Olivia December 15, 2022 0 Comment(s) announce, be, by, Commercial, development, Energy, from, hang, HANG LUNG PROPERTIES LIMITED stock exchange, in, information, is, its, january, lung, making | 101 | HK0101000591, News, parc, pleased, powered, press release, properties, renewable, that, to, will

(Hong Kong, December 15, 2022) Hang Lung Properties (the “Company” or “Hang Lung”, SEHK stock code: 00101) is pleased to announce that its world-class commercial development in Jinan, Parc 66, will be 100% powered by renewable energy from January 1, 2023, making it the first commercial property in Jinan and Shandong Province to achieve net-zero carbon emissions in terms of annual electricity consumption for both landlord and tenant operations. The move also accelerates the Company’s progress towards its 2025 renewable energy target for its mainland China portfolio, with almost 25% of electricity demand to be met by renewable energy sources.

Located in Jinan’s commercial center, Parc 66 is the second Hang Lung property to be fully powered by renewable energy, following the Company’s procurement of 100% renewable energy at its Spring City 66 commercial complex in Kunming, Yunnan Province in 2021. The purchased electricity for Parc 66 will provide 37,000 MWh of renewable electricity per year from wind power, and is expected to reduce the property’s carbon emissions by over 35,000 tonnes per year.

“Tenants and investors are looking for real estate owners and operators who can take sustainability and operational excellence to the next level. Procuring 100% renewable energy for Parc 66 is a significant milestone towards our 2025 renewable energy target for our Mainland portfolio, and reaffirms our commitment to reaching net-zero value chain greenhouse gas emissions by 2050. We will continue to look for opportunities to replicate our successes in Kunming and Jinan in our other developments across mainland China,” said Mr. Adriel Chan, Hang Lung Properties Vice Chair and Chair of Sustainability Steering Committee.

Disclaimer

Hang Lung Properties Ltd. published this content on 15 December 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 December 2022 11:45:07 UTC.

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Invincible Investment : MOU to Amend the Fixed-term Building Lease and Property Management Agreement pertaining to the rent conditions for Oct to Dec, 2022 with Major Tenant

Post By: Olivia December 9, 2022 0 Comment(s) as, be, december | 8963 | JP3046190009, information, INVINCIBLE INVESTMENT CORPORATION stock exchange, japanese, language, News, press, press release, purpose, referred, release, should, the, to

[For Information Purpose Only.

The Japanese language press release should be referred to as the original.]

December 9, 2022

To All Concerned Parties

Name of REIT Issuer:

Invincible Investment Corporation

Naoki Fukuda, Executive Director

(Securities code: 8963)

Asset manager:

Consonant Investment Management Co., Ltd. Naoki Fukuda, President & CEO

Contact: Jun Komo

General Manager of Planning Department (Tel. +81-3-5411-2731)

Notice concerning Conclusion of Memorandum of Understanding to Amend the Fixed-term Building Lease and Property Management Agreement pertaining to the rent conditions for the period from October to December 2022 with Major Tenant

Invincible Investment Corporation (“INV”) announced the decision to enter into a Memorandum of Understanding (the “MOU”) to amend each fixed-term building lease and property management agreement (“MLPM Agreements”) pertaining to the rent conditions for the period from October 1, 2022 to December 31, 2022 for domestic hotels owned by INV with INV’s main tenant, MyStays Hotel Management Co., Ltd. (“MHM”) and its affiliates (the “MHM Group”), who operate the hotels, as decided today by Consonant Investment Management Co., Ltd. (“CIM”), the asset manager of INV.

The MHM Group has received investments through funds managed by affiliates of the Sponsor, Fortress Investment Group LLC (“FIG”). Therefore, CIM has treated the MHM Group as equivalent to Sponsor-related Persons. As such, CIM and INV have sincerely deliberated, discussed, and resolved to enter into the MOU in accordance with the internal rules of CIM to handle the related party transactions.

1. Outline of the MOU

Since the spread of the new coronavirus (COVID-19) began to have a tremendous impact on the hotel sector, INV entered into an MOU with the MHM Group to amend each MLPM Agreement eight times in total starting from May 11, 2020 (collectively referred to as the “Executed MOU”). For details of the previously Executed MOU, please refer to each press release described in “5. Reference Press Release List” below.

These Executed MOU were agreed as a tentative measure with respect to the 73 domestic hotels leased through the trustees to the MHM Group (the “Subject Properties”) for the period from March 1, 2020 to September 30, 2022. Thus, unless otherwise agreed, from October 2022 onward, the terms and conditions

This English language notice is a translation of the Japanese-language notice released on December 9, 2022 and was prepared solely for the convenience of, and reference by, non-Japanese investors. It is not intended as an inducement or solicitation for investment. We caution readers to undertake investment decisions based on their own investigation and responsibility. This translation of the original Japanese-language notice is provided for informational purposes only, and no warranties or assurances are given regarding the accuracy or completeness of this English translation. Readers are advised to read the original Japanese-language notice. In the event of any discrepancy between this translation and the Japanese original, the latter shall prevail in all respects.

under the MLPM Agreements prior to the amendment by each MOU (hereinafter referred to as the “Original Leasing Terms and Conditions”) will be applied. Demand for domestic hotels owned by INV is generally on a recovery trend, and the total GOP of all Subject Properties (73 properties) during the period from October 1, 2022 to December 31, 2022 (the “Fourth Quarter of 2022”) is trending at a level that exceeds the total fixed rent stipulated in the Original Leasing Terms and Conditions by about 40%. However, on an individual hotel basis, GOP of some hotels is still below the fixed rent stipulated in the Original Leasing Terms and Conditions, in which the rent payment is calculated for each hotel. Therefore,

for hotels where the GOP exceeds the fixed rent, MHM will pay out all the surpluses as variable rent, while (ii) for hotels where the GOP is lower than the fixed rent, MHM group needs to compensate for the difference between the fixed rent and the GOP, making it difficult for MHM Group, which has limited book equity given it’s a hotel management company, to pay the rent based on the Original Leasing Terms and Conditions. Therefore, to make it possible for the MHM Group to continue the hotel operation of the Subject Properties, certain changes in Original Leasing Terms and Conditions is inevitable even after October 2022.

Under such circumstances, INV has concluded that INV must accept to amend a part of the MLPM Agreement as an additional tentative measure in order to continue the operations of the Subject Properties, upon giving due consideration to INV’s interests to the fullest extent as well as its financial conditions.

Consequently, as a result of discussions and negotiations with the MHM Group, INV and CIM determined to enter into the MOU with the MHM Group and change the Original Leasing Terms and Conditions as described below as a tentative measure for the Fourth Quarter of 2022 with respect to the Subject Properties. The period to be covered by the temporary reduction measures will be three months, the same as the MOU to amend MLPM Contract concluded on December 8, 2021 (hereinafter referred to as the “December 2021 MOU”). In calculating the variable rent, in summary, if the total GOP of all Subject Properties (73 properties) is positive after deducting the management services fees and the total fixed rent on a three-month basis, INV will receive the positive amount as variable rent.

Items subject to

Original Leasing Terms

Tentative Measures

(For Reference)

Tentative Measures

Change

and Conditions

(Fourth Quarter of 2022)

(Fourth Quarter of 2021)

Fixed rent

Approx. JPY 2,685 million

JPY 950 million (Approx.

(Total rent for

(Same as the total fixed

35% of the amount under

three months for

rent

amount

under

the

the Original Leasing Terms

73 properties)

Original

Leasing

Terms

and Conditions)

Variable rent

Calculated on a 3-month

Calculated

summing

Same as in the column to

basis for each hotel.

up the rent of all 73

the left.

properties

for

three

The amount obtained by

months

described

deducting

(i)

the

total

below.

amount

expenses,

management

services

The amount obtained by

fees, and fixed rents of the

deducting

(i)

the

above

hotel property from (ii) the

total

fixed

rent

(the

total

total monthly sales of the

rent for three months for

hotel property

(if

the

73 properties) from (ii) the

calculation

results

are

aggregate of the amount

negative, the amount shall

for three

months

for 73

be JPY 0).

properties, which amount

is obtained

deducting

the management services

fees for the hotel for each

month from the monthly

GOP

(operating

gross

profit) for each hotel for

the same month (if the

calculation

results

are

negative,

the

amount

shall be JPY 0).

Payment

Paid on a hotel-by- hotel

Paid on a total basis of 73

Same as in the column to

method of rent

basis.

hotel properties.

the left.

Payment date	The due date is the 11th	On February 10, 2023,	On February 10, 2022,
	of the month which is two	the sum of the total fixed	the sum of the total fixed
	months from the month in	rent and the total variable	rent and the total variable
	which the last day of the	rent shall be paid.	rent shall be paid.
	calculation period	falls
	(for the fixed rent, every
	month, and for	the
	variable rent, every three
	months).

The total fixed rent (for 73 properties for three months in aggregate) set forth in the MOU is the same as the total fixed rent amount stipulated in the Original Leasing Terms and Conditions, and is about 2.8 times as much as the total fixed rent (for 73 properties for three months in aggregate) of JPY 950 million in the Fourth Quarter of 2021, reflecting the recovery of the hotel market. If the GOP for the Subject Properties (after deducting the management services fees) for the Fourth Quarter of 2022 performs well, and thereby the actual result exceeds the total amount of the fixed rent (for 73 properties for three months in aggregate), INV will receive the amount of such excess amount as variable rent.

Contrary to the MOU to amend the MLPM Contract concluded on May 11, 2020, INV will not bear the property management costs nor increase the amount of the management services fees payable to the MHM Group under the provisional measure by the MOU.

For the list of the Subject Properties, please refer to the Appendix. For an overview of the current lease agreements, including the terms and conditions of rent for each Subject Property, please refer to “Part I Fund Information / 1 Status of Fund / 5 Management Status / (2) Investment Assets” of the Securities Report for the 38th fiscal period (from January 1, 2022 to June 30, 2022) filed by INV on September 26, 2022 (available in Japanese only).

INV plans to make this change a provisional measure for the period up to the end of December 2022, and, if necessary, to discuss the details of the changes in the leasing terms and conditions after such period based on the future situation.

2. Outline of MHM

(i)	Name	MyStays Hotel Management Co., Ltd.

(ii)	Location	Roppongi Hills North Tower 14th Floor, 6-2-31, Roppongi, Minato-ku,
	Tokyo, Japan

(iii)	Title and name of	President and CEO, Ryoichi Shirota
	representative officer


(iv)	Business	Hotel and Ryokan (Japanese inn) operation and management
(v)	Capital	JPY 100 million (as of the end of November 2022)
(vi)	Date of establishment	July 8, 1999
(vii)	Relationship between INV/Asset Manager and the Tenant/Operator

	While there are no capital relationships that should be noted between
	INV/CIM and MHM, the parent company of MHM is owned by a fund
Capital relationships	operated by affiliates of FIG. FIG is a subsidiary of SoftBank Group
	Corp., which directly and indirectly holds 100% of CIM’s outstanding
	shares.

	As of today, among the directors of INV and the officers and
	employees of CIM, Naoki Fukuda, who is Executive Director of INV
Personnel relationships	and CEO of CIM, Naoto Ichiki, who is Chairman and Director of CIM,
and Christopher Reed, who is a part-time director of CIM, are

	seconded from Fortress Investment Group Japan Godo Kaisha, a
	subsidiary of FIG.

Transactional relationships	As of today, INV has entered into lease agreements (Note 1) with MHM
with respect to 73 hotel properties.


Whether the	MHM is not a related party of INV/CIM. Further, related persons and
affiliates of MHM are not related parties of INV/CIM. Furthermore,
Tenant/Operator is a
MHM is not an interested party, etc. of CIM as provided in the Act on
related party
Investment Trusts and Investment Corporations.

(Note 1) Agreements with MHM subsidiaries and management contracts between MHM and tenants are included.

3. Transactions with Interested Persons etc.

The MHM Group, tenants and operators of the Subject Properties, are not Sponsor-related Persons (Note) under the voluntary rules established by CIM as countermeasures against conflicts of interests in the management of INV’s investments. However, MHM or its Affiliates have received investments through funds managed by affiliates of the Sponsor, FIG. Therefore, CIM has treated MHM or its Affiliates as equivalent to Sponsor-related Persons.

In accordance with Sponsor-Related Person Transaction Rules and Sponsor-Related Person Transaction Management Manual, which are internal rules of CIM, and following the deliberation and resolution of the compliance committee meeting and the investment committee meeting both held on December 9, 2022, the board of directors of CIM and INV held on the same date each approved the conclusion of the MOU.

(Note) A Sponsor-related Person is (i) any person who falls under the “Interested Persons, etc.” set forth in the Investment Trust Act and the Orders for Enforcement of the Act on Investment Trust and Investment Corporations, (ii) all shareholders of CIM and (iii) special purpose companies (tokubetsu mokuteki kaisha) (a) which delegate their management to persons who fall under (ii) above, or (b) which are invested by or invested through anonymous partnership (tokumei kumiai) by persons who fall under (ii) above. Hereinafter the same.

4. Future Outlook

The impact of the conclusion the MOU is already incorporated in INV’s forecasts for financial results and distribution for the fiscal period ending December 2022 (from July 1, 2022 to December 31, 2022) as announced in “Notice concerning Revision of Forecast of Financial Results and Distribution for the 39th

Fiscal Period Ending December 2022″.

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Invincible Investment Corporation published this content on 09 December 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 December 2022 06:12:03 UTC.

Publicnow 2022

All news about INVINCIBLE INVESTMENT CORPORATION

Analyst Recommendations on INVINCIBLE INVESTMENT CORPORATION

Sales 2023	22 052 M 161 M 161 M
Net income 2023	10 422 M 76,3 M 76,3 M
Net Debt 2023	208 B 1 520 M 1 520 M
P/E ratio 2023	29,4x
Yield 2023	3,44%

Capitalization	307 B 2 245 M 2 245 M
EV / Sales 2023	23,3x
EV / Sales 2024	19,1x
Nbr of Employees	–
Free-Float	94,9%

Chart INVINCIBLE INVESTMENT CORPORATION

Duration :

Period :

Technical analysis trends INVINCIBLE INVESTMENT CORPORATION

	Short Term	Mid-Term	Long Term
Trends	Bullish	Bullish	Bullish

Income Statement Evolution

Mean consensus	–
Number of Analysts	0
Last Close Price	50 300,00
Average target price
Spread / Average Target	–

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TAKUNG ART CO., LTD Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

Post By: Olivia November 21, 2022 0 Comment(s) analysis, and, be, conjunction, discussion, following, in, information, LTD. stock exchange, News, notes, press release, read, regarding | TKAT | US87407Q2075, Related, should, statement, statements, TAKUNG ART CO., the, With

The following discussion and analysis should be read in conjunction with our
financial statements and related notes thereto.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains or may contain forward-looking
statements and information that are based upon beliefs of, and information
currently available to, our management as well as estimates and assumptions made
by our management. When used in the report the words "anticipate", "believe",
"estimate", "expect", "future", "intend", "plan" or the negative of these terms
and similar expressions as they relate to us or our management identify
forward-looking statements. Such statements reflect the current view of our
management with respect to future events and are subject to risks,
uncertainties, assumptions and other factors as they relate to our industry, our
operations and results of operations, and any businesses that we may acquire.
Should one or more of the events described in these risk factors materialize, or
should our underlying assumptions prove incorrect, actual results may differ
significantly from those anticipated, believed, estimated, expected, intended or
planned.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the U.S. federal securities laws, we do not intend to update any of
the forward-looking statements to conform them to actual results unless required
by applicable securities regulations or rules. The following discussion should
be read in conjunction with our financial statements and the related notes

filed
herein.



Overview



We, through our wholly owned subsidiary, NFT Exchange, operate an electronic
online platform located at https://www.nftoeo.com/ for artists, art dealers and
art investors to offer and trade valuable artwork. We offer online listing and
trading services that allow artists, art dealers and owners to access a much
bigger art trading market where they can engage with a wide range of investors
that they might not encounter without our platform.

In July 2021, Takung appointed Mr. Kwok Leung Li as the CEO to lead the new
direction with three initiatives to develop our blockchain and NFT related
businesses.

In May 2022, we launched our blockchain NFT online platform at www.nftoeo.com.




NFT Market Insights



Digital artwork based on NFT technology is becoming a hot asset. The earliest
NFT projects can be traced back to the 2017 bull market CryptoKitties (the
encrypted cats), which had the properties of scarcity and value anchoring of
ownership. At its peak, a virtual cat could sell for more than $100,000. In
terms of NFT artwork, in March 2021, artist Beeple's NFT work "Every Day: The
First 5,000 Days" sold for $69.346 million, making it the third-highest price
for a living artist. According to a report by Invezz, the NFT market was worth
$338 million in 2020, and it has grown to reach $490 million in 2021. With the
help of the bull market wave, NFT has grown rapidly., As of the first quarter of
2021, the total transaction volume of the NFT market has exceeded 1.5 billion US
dollars, an increase of more than 2627% from the previous quarter. In April
2021, the total market value of NFTs exceeded $30 billion for the first time,
setting a new all-time high. Currently, NFTs can be used in the fields including
games, artworks, domain names, insurance, collectibles, virtual assets, real
assets, identities, etc. With the vigorous development of the digital world,
many businesses will appear in the form of digital original ecology, and the
huge application space and technological imagination of NFT are expected to
become more and more attractive in the new digital economy world.



New Business Model



TKAT's business model revolves around the theme of "free circulation of value
and creation of a unique digital work exchange platform," allowing each user to
create, buy and sell various irreplaceable digital works to realize the value of
works.



                                       20





New Business Services



A.     Providing consulting services such as artwork valuation/appreciation
       potential




TKAT taps into the needs of users to provide comprehensive consulting services
such as labor cost, artist influence, artistic value of works, and channels for
obtaining works, which not only serves customers but also creates value for

the
company.



B. NFT trading service

TKAT has built a fully functional NFT trading platform, which was launched in
May 2022. The platform carries the categories of digital works including
artwork, music videos, collectibles, game props, sports, metaverse, virtual
world, social tokens, and meet the needs of various users as much as possible.
Users are able to complete the whole business process including user
registration, certification, work uploading, work casting, and work trading
through the platform. The platform was launched and placed in service in May
2022. In the transaction process, it not only meets the needs of customers for
uploading and purchasing digital works, but the company also extracts a portion
of the handling fee (including token minting, first sale, and second sale)

to
create value.



C. Advertising service




Once the TKAT platform has accumulated a larger user base, it can provide
advertising and publicity services for users or the company itself. The business
model is not limited to categories and industries, such as investment promotion,
work promotion, and industry promotion.



New Strategic Direction



TKAT is committed to creating a digital original ecological platform that
integrates games, artworks, domain names, insurance, collectibles, virtual
assets, real assets, identity and other fields, and changes the market status of
traditional industries through its own efforts. Strategic goals include basic
platform building, targeted population entry, providing services (consulting
services, transaction services, advertising services), optimizing the platform
and expanding the scope of services.



Competitor Analysis

Opensea is an NFT market exchange. It has more than 20,000 users. Compared with
projects in the popular decentralized finance ("DeFi") field, it is second only
to Uniswap, kyber and Compound, and higher than maker, 0x, etc. As a trading
platform with a relatively high status in the NFT field, OpenSea has a complete
range of collections, equivalent to Taobao in the NFT world. At present, the
trading market of OpenSea has nearly 40,000 users, and the monthly transaction
volume exceeds 5 million US dollars. Coinbase's new NFT platform hits 1.4
million signups. The Coinbase platform has an active population of 50,000 users.
The service rates for each service are as follows: 1. Rarible's minting fees are
borne by the creators themselves, and the royalties are also set by the creators
themselves, with default amounts of 10%, 20% and 30%. 2. VIV3's NFT minting
costs and profits come from the 12.5% service fee it collects on the first and
second sales. 3. OpenSea does not need gas fee to mint NFT. 4. Rarible charges a
2.5% service fee on the first sale. On the SuperRare platform, a 15% commission
is charged on the first sale and a 3% fee (paid by the buyer) is charged on

the
second sale.



                                       21





Competitive Advantages

The advantages of Takung in the NFT transaction and blockchain market are as
follows:




A. Innate industry advantages



In recent years, digital artworks of NFT technology based on blockchain
technology are becoming popular assets. The NFT online platform the Company
built can effectively solve the current situation such as unclear ownership of
property, difficulty in distinguishing authenticity and low efficiency of
artwork circulation. Converting the business development from offline to online
operation, so that the value of digital works can be freely circulated online.

B. Advantages of the core management team

The core team members of Takung have experience in blockchain technology
development and NFT trading platform operation, which can ensure a smoother
development and business operation in the later stage.

C. Takung’s platform advantages




The currently developed and launched NFT online trading platform supports
multi-category product uploads, including Digital art, Digital oil painting,
Produced by Gallery, Personal products, Artist signature, Oil on canvas, Print,
Paper ink, Device, Comprehensive media, Derivative, and it will be continuously
enriched and improved according to customer interests. The NFT trading platform
has stable performance, high security and is easy to maintain. At the front end
of the system, the Company will continuously improve the operability and user
experience of the system focusing on improving the user experience.



D. Technical advantages

Takung's digital works exchange platform that has been launched is built by a
professional technical team. Each technician has rich industry experience, can
work under a short development cycle or high pressure, and has a number of
relevant industry benchmarking projects experience. The capability of the
technical team ensures the strong technical support in later system optimization
and iterative updates.



E. Marketing advantages



The Company has a professional marketing team. After the platform goes online,
it can be promoted online and offline simultaneously, so as to quickly increase
the popularity of the platform, and use professional marketing solutions to
attract more creators and purchasers to join in the platform.

We expect that we will generate revenue from the offering and trading of NFT on
the Company’s system, primarily consisting of membership fee, trading
commissions, and advertising fees.

THREE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2021

The following tables set forth our interim condensed consolidated statements of
income data with a percentage:



                                                  Three Months Ended September 30,
                                                                 % of                            % of
                                               2022            Revenue           2021          Revenue
                                            (Unaudited)                      (Unaudited)

Revenue-Continuing operations              $   1,634,960             100     $          -              -
Revenue-Discontinued operations                        -               -        2,608,677            100
Cost of revenue-Continuing operations           (216,930 )           (13 )              -              -
Cost of revenue-Discontinued operations                -               -         (719,826 )          (28 )
Selling expenses-Continuing operations                 -               -                -              -
Selling expenses-Discontinued operations               -               -          (48,511 )           (2 )
General and administrative
expenses-Continuing operations                  (330,535 )           (20 )       (910,817 )            -
General and administrative
expenses-Discontinued operations                 (60,729 )             -       (2,906,818 )         (111 )
Total costs and expenses-Continuing
operations                                      (547,465 )           (33 )       (910,817 )            -
Total costs and expenses-Discontinuing
operations                                       (60,729 )             -       (3,675,155 )         (141 )
Loss from continuing operations                1,087,495              67         (910,817 )            -
Other(expenses)income - Continuing
operations                                          (175 )             0           57,635              -
Other(expenses)income - Discontinuing
operations                                         8,552               -           10,872              1
Loss before income taxes -Continuing
operations                                     1,087,320              67         (853,182 )            -
Income tax expense                               190,762              12                0              -
Net loss from Continuing operation         $     896,558              55     $   (853,182 )            -
Loss before income tax-Discontinued
operations                                       (52,177 )             -       (1,055,606 )          (40 )
Income tax expenses-Discontinued
operations                                             -               -           83,892              3
Net loss from Discontinued operations            (52,177 )             -

   (1,139,498 )          (44 )
Net loss                                         844,381              52       (1,992,680 )          (74 )




Revenue

For the three months ended September 30, 2022 and 2021, our operations generated
revenues in an amount of $1,634,960 and $2,608,677, respectively.




The following table sets forth our interim condensed consolidated revenue by
revenue source:



                                               Three Months Ended
                                                  September 30,
                                              2022             2021
                                          (Unaudited)      (Unaudited)

Listing fee-Continuing operations $ – $ –
Listing fee-Discontinued operations

                  -          320,173
Commission-Continuing operations             1,634,960                -
Commission-Discontinued operations                   -        1,083,976
Management fee-Continuing operations                 -                -
Management fee-Discontinued operations               -        1,124,528
Consultancy fee-Continuing operations
Consultancy fee-Discontinued operations              -           80,000

Total Revenue-Continuing operations $ 1,634,960 $ –
Total Revenue-Discontinued operations

                -        2,608,677




                                       23





(i) Listing fee revenue

Listing fee revenue is calculated based on a percentage of the listing value and
transaction value of artworks.

Listing value is the total offering price of an artwork when the ownership units
are initially listed on our trading platform. We utilize an appraised value as a
basis to determine the appropriate listing value for each artwork, or portfolio
of artworks. For the three months ended September 30, 2021 and 2022, listing fee
was $320,173 and $nil from discontinued and continued operations respectively.



  (ii) Commission fee revenue




For non-VIP Traders, the commission revenue was calculated based on a percentage
of transaction value of artworks, which we charge trading commissions for the
purchase and sale of the ownership shares of the artworks. The commission is
typically 5% of the total amount of each transaction. The commission is
accounted for as revenue and immediately deducted from the proceeds from the
sales of artwork units when a transaction is completed.

Commission revenue for the three months ended September 30, 2021 and 2022 was
$1,083,976 and $1,634,960 from discontinued and continued operations
respectively.



  (iii) Management fee revenue




Our legacy online trading platform from discontinued operations charges Traders
a management fee to cover the costs of insurance, storage, and transportation
for an artwork and trading management of artwork units. The management fee is
recognized when the artwork is sold and is deducted from proceeds from the sale
of artwork ownership shares when there is a purchase and sale transaction.



Our operations did not generate management fee revenue from our legacy trading
platform for the three months ended September 30, 2022 and had $1,124,528 for
the three months ended September,30, 2021.



Revenue by customer type

The following table presents our revenue by customer type:



                         Three months ended
                            September 30,
                        2022             2021
                    (Unaudited)      (Unaudited)
Artwork owners      $          -     $    320,173
Non - VIP Traders      1,634,960        1,153,367
VIP Traders                             1,055,137
Corporate advisee              -           80,000
Total               $  1,634,960     $  2,608,677




                                       24





Cost of Revenue



                                           Three months ended
                                              September 30,
                                         2022              2021
                                      (Unaudited)       (Unaudited)
Commissions paid to service agents   $           -           609,752
Depreciation                                     -     $      35,854
Internet service charge                    216,930            43,661
Artwork insurance                                -            12,710
Artwork storage                                  -            17,849
Total                                $     216,930     $     719,826

Cost of revenue of our continued and discontinued operations for the three
months ended September 30, 2022 and 2021 were $216,930 and $719,826,
respectively. The cost of revenue for the three months ended September 30, 2022
was incurred related to the revenue generated by our NFT online trading system.




Gross Profit

Gross profit for our operations was $1,418,030 and $1,888,851 for three months
ended September 30, 2022 and 2021, respectively.



Operating Expenses



General and administrative expenses for the three months ended September 30,
2022 were $391,264 compared to $3,817,635 for the three months ended September
30, 2021.



The following table sets forth the main components of the Company's general and
administrative expenses for the three months ended September 30, 2022 and
September 30, 2021.



                                                           Three months ended September 30,
                                               2022           % of Total

2021 % of Total

                                            (Unaudited)

(Unaudited)

Salary and welfare                         $     141,113             36.1     $    288,820              7.6
Office, insurance and rental expenses                  0                0          205,203              5.4
Legal and professional fees                       89,586             22.9          622,912             16.3
Non-deductible input VAT expense                       -                -           62,525              1.6
Travel and accommodation fees                          3                0

        24,865              0.7
Consultancy fee                                  108,081             27.6          159,304              4.2
Depreciation                                      52,481             13.4           21,893              0.6

Share based compensation expense                       -                -        1,897,600             49.6
Others                                                 -                -          534,513             14.0
Total general and administrative expense   $     391,264            100.0     $  3,817,635            100.0
Deduct: General and administrative
expense-Discontinued operations                   60,729             15.5       (2,906,818 )           76.1
General and administrative
expense-Continuing operations                    330,535             84.5

       910,817             23.9




                                       25





Other (expenses) income

Other expenses for the operations for the three months ended September 30, 2022
and 2021 were $8377 and $68,507, respectively.



Loss before income taxes

Our continuing operations incurred profit or loss before income taxes
$1,087,320and $(853,182) for the three months ended September 30, 2022 and 2021,
respectively.

Our discontinued operations incurred loss before income taxes, $52,177 and
$1,055,606 for the three months ended September 30, 2022 and 2021, respectively.




Income tax expense

For the three months ended September 30, 2022 and 2021, our continuing
operations incurred income tax expense as $190,762 and $nil, respectively.

The income tax expense from the discontinued operations for the three months
ended September 30, 2022 and 2021 were $nil and $83,892.



Net Loss



As a result of our operations aforementioned, our net profits or losses after
income taxes for continuing operations for the three months ended September 30,
2022 and 2021 were $896,558  and $(853,182), respectively. Our discontinued
operations generated net loss after income tax $52,177 and $1,139,498  for the
three months ended September 30, 2022 and 2021, respectively.

Foreign currency translation gain (loss)

We had a foreign currency translation loss for the three months ended September
30, 2022 and 2021 of $221,165 and $34,280, respectively.



Comprehensive loss

As a result of the above, we posted a comprehensive profit or loss of $623,216
and $(2,026,960) for the three months ended September 30, 2022 and 2021,
respectively.

NINE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2021




The following tables set forth our condensed consolidated statements of income
data:


                                                         Nine Months Ended September 30,
                                                               % of                            % of
                                               2022          Revenue           2021          Revenue
                                           (Unaudited)                     (Unaudited)

Revenue-Continuing operations                 2,329,135            100                -              -
Revenue-Discontinued operations                       -              -        4,531,280            100
Cost of revenue-Continuing operations          (367,860 )          (16 )              -              -
Cost of revenue-Discontinued operations                                      (1,424,528 )          (31 )
Selling expenses-Continuing operations                -              -                -              -
Selling expenses-Discontinued operations              -              -         (284,980 )           (6 )
General and administrative
expenses-Continuing operations               (8,142,254 )         (349 )     (8,453,469 )            -
General and administrative
expenses-Discontinued operations               (691,927 )            -       (4,329,638 )          (96 )
Total costs and expenses-Continuing
operations                                   (8,510,114 )         (365 )     (8,453,469 )            -
Total costs and expenses-Discontinued
operations                                     (691,927 )            -       (6,039,146 )         (133 )
Loss from continuing operations              (6,180,979 )         (265 )     (8,453,469 )            -

Other(expenses)income-Continuing

operations                                         (451 )            -          219,345              -

Other(expenses)income-Discontinued

operations                                        8,387              -           41,376              1
Loss before income taxes-Continuing
operations                                   (6,181,430 )         (265 )     (8,234,124 )            -
Income tax expenses-Continuing
operations                                      239,758             10                -              -

Net loss from Continuing operations $ (6,421,188 ) (276 ) $ (8,234,124 )

            -
Loss before income tax-Discontinued
operations                                     (683,540 )            -       (1,466,490 )          (32 )
Income tax expenses-Discontinued
operations                                            -              -           90,485              2
Net loss from Discontinued operations          (683,540 )            -

 (1,556,975 )          (34 )
Net loss                                     (7,104,728 )         (305 )     (9,791,099 )         (216 )




Revenue



The following table sets forth our condensed consolidated revenue by revenue
source:



                                                  Nine months ended
                                                    September 30,
                                                2022             2021
                                            (Unaudited)      (Unaudited)
Listing fee-Continuing operations           $          -     $          -
Listing fee-Discontinued operations                    -          877,267
Commission-Continuing operations               2,329,135                -
Commission-Discontinued operations                     -        2,090,372
Management fee-Continuing operations                   -                -
Management fee-Discontinued operations                 -        1,483,641
 Consultancy fee-Continuing operations                 -                -
  Consultancy fee-Discontinued operations              -           80,000
Revenue-Continuing operations               $  2,329,135     $          -
Revenue-Discontinued operations                        -        4,531,280




  (i) Listing fee revenue

Listing fee revenue is calculated based on a percentage of the listing value and
transaction value of artworks.

Listing value is the total offering price of an artwork when the ownership units
are initially listed on our trading platform. We utilize an appraised value as a
basis to determine the appropriate listing value for each artwork, or portfolio
of artworks. For the nine months ended September 30, 2021 and 2022, listing fee
was $877,267 and $nil from discontinued and continued operations respectively.



                                       27





  (ii) Commission fee revenue




For non-VIP Traders, the commission revenue was calculated based on a percentage
of transaction value of artworks, which we charge trading commissions for the
purchase and sale of the ownership shares of the artworks. The commission is
typically 5% of the total amount of each transaction. The commission is
accounted for as revenue and immediately deducted from the proceeds from the
sales of artwork units when a transaction is completed.

Commission revenue for the nine months ended September 30, 2021 and 2022 was
$2,090,372 and $2,329,135 from discontinued and continued operations
respectively.




(iii) Management fee revenue



Our legacy online trading platform charges Traders a management fee to cover the
costs of insurance, storage, and transportation for an artwork and trading
management of artwork units. The management fee is recognized when the artwork
is sold and is deducted from proceeds from the sale of artwork ownership shares
when there is a purchase and sale transaction.



Our operations did not generate management fee revenue from our legacy trading
platform for the nine months ended September 30, 2022, but generate $1,483,641
management fee revenue for the nine months ended September 30, 2021.



Revenue by customer type

The following table presents our revenue by customer type:



                          Nine months ended
                            September 30,
                        2022             2021
                    (Unaudited)      (Unaudited)
Artwork owners      $          -     $    877,267
Non - VIP traders      2,329,135        2,111,960
VIP traders                    -        1,462,053
Corporate advisee              -           80,000
Total               $  2,329,135     $  4,531,280




Cost of Revenue



                                           Nine months ended
                                             September 30,
                                         2022              2021
                                      (Unaudited)      (Unaudited)
Commissions paid to service agents   $           -     $  1,096,278
Depreciation                                     -          150,398
Internet service charge                    367,860           89,638
Artwork insurance                                -           38,185
Artwork storage                                  -           50,029
Total                                $     367,860     $  1,424,528

Cost of revenue for the nine months ended September 30, 2022 and September 30,
2021 was $367,860 and $1,424,528, respectively. The decline in cost of revenue
for the nine months ended September 30, 2022 compared to September 30, 2021 was
mainly due to the continuing operations from the new NFT business is on the
start stage and legacy business is treated as discontinued operations.



Gross Profit



Gross profit was $1,961,275 or 84.2% of the total revenue for the nine months
ended September 30, 2022, compared to $3,106,752 or 68.6% of the total revenue
for the nine months ended September 30, 2021.  Gross profit amount was reduced
by $1,145,477 while the gross profit margin was increased by 15.6%.



                                       28

Overall total revenue for the nine months ended September 30, 2022 dropped by
$2,202,145 or 48.6% compared to the same period in 2021, due to new NFT business
is in the initial stage.



Operating Expenses

General and administrative expenses for the nine months ended September 30, 2022
were $8,834,181, compared to $12,783,107, for the nine months ended September
30, 2021.



The following table sets forth the main components of the Company's general and
administrative expenses for the nine months ended September 30, 2022 and
September 30, 2021.


                                                           Nine months ended September 30,
                                               2022          % of Total

2021 % of Total

                                           (Unaudited)

(Unaudited)

Salary and welfare                         $    998,379             11.3     $    749,133              5.9
Legal and professional fees                     734,455              8.3        1,123,575              8.8
Office, insurance and rental expenses           123,888              1.4          504,447              3.9
Consultancy fee                                 405,807              4.6          709,449              5.5
Non-deductible input VAT expense                      -                -          147,406              1.2
Depreciation                                     52,946              0.6           74,991              0.6
Traveling and accommodation fees                      3              0.0           58,071              0.5
Share Based Compensation Expense                      -                -

    8,765,467             68.6
Impairment loss                               6,265,686             70.9                -                -
Others                                          253,017              2.9          650,568              5.0

Total general and administrative expense   $  8,834,181            100.0     $ 12,783,107            100.0
Deduct: General and administrative
expense-Discontinued operations                (691,927 )            7.8       (4,329,638 )           33.9
General and administrative
expense-Continuing operations                 8,142,254             92.2

    8,453,469             66.1




Other income (expenses)

During the nine months ended September 30, 2022, the Company incurred other
income in an amount of $7,936 whilst it incurred other income in an amount of
$260,721 for the nine months ended September 30, 2021.



                                       29





Income tax expense



The Company's effective tax rate varies due to the multiple jurisdictions in
which it books its pretax income or losses. The Company was subject to a U.S.
income tax rate of 21%, Hong Kong profits tax rate of 8.25% for the first HK$ 2
million (approximately $257,676) assessable profits and at 16.5% for assessable
profits above HK$ 2 million (approximately $257,676) and PRC enterprise income
tax rate of 25%.

The effective tax rates for the nine months ended September 30, 2022 and 2021
were 10.3% and 2.0 %, respectively.

The income tax expense were $239,758 and $90,485 for the nine months ended
September 30, 2022 and 2021, respectively.



Net loss

We recorded a net loss for the nine months ended September 30, 2022 of
$7,104,728 compared to net loss of $9,791,099 for the nine months ended
September 30, 2021.

The decrease in the net loss by $2,686,371 during this current period compared
to the same period ended September 30, 2021 as discussed above.

Liquidity and Capital Resources

The following tables set forth our consolidated statements of cash flow:


                                                                     Nine months ended
                                                                       September 30,
                                                                   2022             2021
                                                               (Unaudited)      (Unaudited)
Net cash provided by operating activities-continuing
operations                                                     $  4,216,434     $  1,148,367
Net cash provided by operating activities- discontinued
operations                                                          814,295       42,322,860
                                                                  5,030,729       43,471,227

Net cash provided by investing activities- continuing
operations                                                                -

(500,000 )
Net cash provided by investing activities- discontinued
operations

                                                           85,236

388,229

                                                                     85,236         (111,771 )
Proceeds from a short-term borrowing from a third party             300,000                -
Net cash provided by financing activities-continuing
operations                                                       60,000,007                -
Net cash provided by financing activities-discontinued
operations                                                                -        5,180,485
                                                                 60,300,007        5,180,485

Effect of exchange rate change on cash and cash equivalents,
and restricted cash from continuing operations

                      (15,888 )              -

Effect of exchange rate change on cash and cash equivalents,
and restricted cash from discontinued operations

                     (3,579

) (281,110 )

                                                                    (19,467

) (281,110 )


Net increase in cash and cash equivalents - continuing
operations                                                       64,500,553

648,367

Net increase in cash and cash equivalents and restricted
cash- discontinued operations

                                       895,952

47,610,464

                                                                 65,396,505

48,258,831

Cash, cash equivalents and restricted cash, beginning
balance- continuing operations

                                    1,503,153

31,188

Cash and cash equivalents and restricted cash, beginning
balance- discontinued operations

                                    338,542

13,811,557

                                                                  1,841,695

13,842,745

Cash and cash equivalents and restricted cash, ending
balance- continuing operations

                                 $ 66,003,706

$ 679,555
Cash and cash equivalents and restricted cash, ending
balance- discontinued operations

                                  1,234,494       61,422,021
                                                                 67,238,201       62,101,576




                                       30





Sources of Liquidity

The cash and cash equivalent and the restricted cash balances from the
continuing operations as of September 30, 2022 and 2021 were $66,003,707 and
$679,555 respectively.

The cash and cash equivalent balance from the discontinued operations as of
September 30, 2022 and 2021 were $1,234,494 and $ 61,422,021 respectively.




For the nine months ended September 30, 2022, net cash provided by operating
activities from continuing operation was $4,216,434. While there was nil cash
outflow from investing activities from our continuing operations during the nine
months ended September 30, 2022, our continuing operations incur net cash
provided by financing activities, $60,000,007 , as TKAT obtained two PIPE
financing from investors.



For the nine months ended September 30, 2022, net cash provided by in operating
activities by our discontinued operations was $814,295, which was a result of
net loss from discontinued operations. Net cash provided in investing activities
by our discontinued operations was $85,236. Our discontinued operations did not
incur cash inflow or outflow from financing activities.

As of September 30, 2022, the total current liabilities from the continuing
operations were $5,911,644. Total current liabilities from our discontinued
operations amount to $8,904,974.




As of September 30, 2022, the continuing operations of the Company had cash,
restricted cash and cash equivalents of $66,003,707, a working capital in an
amount of $60,097,620 and the total assets of $69,040,332. The Company's
discontinued operations has total assets of $1,428,781.

As of September 30, 2022, the Company’s continuing operation had cash and cash
equivalents of $62,764,182. The Company’s discontinued operations, which
primarily related to Hong Kong Takung, had cash and cash equivalents of
$1,234,494.




In order to continue to maintain the liquidity requirements, the Company
introduced NFT business in the fourth quarter of 2021 to developed service fee
on NFT projects and has generated commission revenue of $2,329,135 by the end of
September 30, 2022. The Company also seeks to negotiate and extend financing
arrangements with the related party and the third party.



The Company is aware of events or uncertainties which may affect its future
liquidity because of capital controls in the PRC. The RMB is only currently
convertible under the "current account," which includes dividends, trade and
service-related foreign exchange transactions, but not under the "capital
account," which includes foreign direct investment and loans, including loans we
may secure from our onshore subsidiaries or variable interest entities.
Currently, our PRC subsidiaries, which are wholly-foreign owned enterprises, may
purchase foreign currency for settlement of "current account transactions,"
including payment of dividends to us, without the approval of the State
Administration of Foreign Exchange ("SAFE") by complying with certain procedural
requirements. However, the relevant PRC governmental authorities may limit or
eliminate our ability to purchase foreign currencies in the future for current
account transactions. The existing and future restrictions on currency exchange
may limit our ability to utilize revenue generated in Renminbi to fund our
business activities outside of the PRC or pay dividends in foreign currencies to
our shareholders, including holders of our shares of common stock. Foreign
exchange transactions under the capital account remain subject to limitations
and require approvals from, or registration with, SAFE and other relevant PRC
governmental authorities. This could affect our ability to obtain foreign
currency through debt or equity financing for our PRC subsidiaries.



Applicable PRC law permits payment of dividends to us by our operating
subsidiaries in China only out of their net income, if any, determined in
accordance with PRC accounting standards and regulations. Our operating
subsidiaries in China are also required to set aside a portion of their net
income, if any, each year to fund general reserves for appropriations until such
reserves have reached 50% of the subsidiary's registered capital. These reserves
are not distributable as cash dividends. In addition, registered share capital
and capital reserve accounts are also restricted from withdrawal in the PRC, up
to the amount of net assets held in each operating subsidiary. In contrast,
there is no foreign exchange control or restrictions on capital flows into and
out of Hong Kong. Hence, our Hong Kong operating subsidiary is able to transfer
cash without any limitation to the U.S. under normal circumstances.



                                       31





If our operating subsidiaries were to incur additional debt on their own behalf
in the future, the instruments governing the debt may restrict the ability of
our operating subsidiaries to transfer cash to our U.S. investors.

Off-Balance Sheet Arrangements




We have no off-balance sheet arrangements, including arrangements that would
affect our liquidity, capital resources, market risk support, and credit risk
support or other benefits.



Future Financings



We may sell our common stock in order to fund our business growth. Issuances of
additional shares will result in dilution to existing shareholders. There is no
assurance that we will achieve sales of the equity securities or arrange for
debt or other financing to fund our growth in case it is necessary, or if we are
able to do so, there is no guarantee that existing shareholders will not be

substantially diluted.



Critical Accounting Policies

We regularly evaluate the accounting policies and estimates that we use to make
budgetary and financial statement assumptions. A complete summary of these
policies is included in the notes to our financial statements. In general,
management's estimates are based on historical experience, on information from
third party professionals, and on various other assumptions that are believed to
be reasonable under the facts and circumstances. Actual results could differ
from those estimates made by management. The discussion of our critical
accounting policies contained in Note 2 to our consolidated financial
statements, "Summary of Significant Accounting Policies", is incorporated herein
by reference.

Recent Accounting Pronouncements

The discussion of the recent accounting pronouncements contained in Note 2 to
our consolidated financial statements, “Summary of Significant Accounting
Policies”, is incorporated herein by reference.

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COMPASS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

Post By: Olivia November 14, 2022 0 Comment(s) analysis, and, be, Compass, condition, conjunction, discussion, financial, following, in, INC. stock exchange, information, News, of, our, press release, read, Results, should, statements, the, the | COMP | US20464U1007, unaudited, With

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and the related notes and other financial
information included elsewhere in this Quarterly Report and our audited
consolidated financial statements and the related notes and the discussion under
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for the year ended December 31, 2021
included in the 2021 Form 10-K. In addition to historical consolidated financial
information, the following discussion contains forward-looking statements that
reflect our plans, estimates, and beliefs. Our actual results could differ
materially from those expressed or implied by such forward-looking statements.
Important factors that could cause or contribute to these differences include,
but are not limited to, those discussed in the section entitled "Special Note
Regarding Forward-Looking Statements". You should review the disclosure under
the section entitled "Risk Factors" in Part I, Item 1A, "Risk Factors" in our
2021 Form 10-K for a discussion of important factors that could cause our actual
results to differ materially from those anticipated in these forward-looking
statements.

                                    OVERVIEW

Management's discussion and analysis of financial condition and results of
operations, or MD&A, is provided as a supplement to the condensed consolidated
financial statements and notes thereto included elsewhere in this Quarterly
Report and is intended to provide an understanding of our results of operations,
financial condition and changes in our results of operations and financial
condition. Our MD&A is organized as follows:

•Introduction. This section provides a general description of our company and
its business, recent developments affecting our company and discussions of how
seasonal factors, the COVID-19 pandemic and macroeconomic conditions may impact
our results.

•Results of Operations. This section provides our analysis and outlook for the
significant line items on our statements of operations, as well as other
information that we deem meaningful to understand our results of operations on a
consolidated basis.

•Key Business Metrics and Non-GAAP Financial Measures. This section provides a
discussion of key business metrics and non-GAAP financial measures we use to
evaluate our business and measure our performance, in addition to the measures
presented in our condensed consolidated financial statements.

•Liquidity and Capital Resources. This section provides an analysis of our
liquidity and cash flows, as well as a discussion of our commitments that
existed as of September 30, 2022.

•Critical Accounting Estimates and Policies. This section discusses those
accounting policies that are considered important to the evaluation and
reporting of our financial condition and results of operations, and whose
application requires us to exercise subjective and often complex judgments in
making estimates and assumptions.


•Recent Accounting Pronouncements. This section provides a summary of the most
recent authoritative accounting standards and guidance that have either been
recently adopted by our company or may be adopted in the future.

                                  INTRODUCTION

Our Company


Compass, Inc. (the "Company") was incorporated in Delaware on October 4, 2012
under the name Urban Compass, Inc. On January 8, 2021, the board of directors of
the Company approved a change to the Company's name from Urban Compass, Inc. to
Compass, Inc.

Our Business and Business Model


We are a technology-enabled brokerage that provides an end-to-end platform of
software, services and support to empower our residential real estate agents to
deliver exceptional service to seller and buyer clients. Real estate agents are
themselves business owners, and Compass agents utilize the platform to grow
their respective businesses, save time and manage their business more
effectively. Our platform includes an integrated suite of cloud-based software
for customer relationship management, marketing, client service, brokerage
services and other critical functionality, all custom-built for the real estate
industry and enabling our core brokerage services. The platform also uses
proprietary data, analytics, artificial intelligence and machine learning to
deliver high value recommendations and outcomes for Compass agents and their
clients.
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Our business model is directly aligned with the success of our agents. We
attract agents to our brokerage and partner with them as independent contractors
who affiliate their real estate licenses with us, operating their businesses on
our platform and under our brand. We currently generate substantially all of our
revenue from commissions paid by clients at the time that a home is transacted,
which agents use to assist home sellers and buyers in listing, marketing,
selling and finding homes as well as through the provision of services adjacent
to the transaction, such as title, escrow and mortgage. While adjacent services
comprise a small portion of our revenue to date, we are well-positioned to
capture meaningful revenue from adjacent services as we continue to expand and
diversify our offerings within the real estate ecosystem.

Update Related to the Restructuring Activities


During the three months ended June 30, 2022, we enacted certain workforce
reductions previously disclosed and began winding down Modus and during the
three months ended September 30, 2022, we took additional smaller non-material
workforce reduction actions and committed to and communicated an additional
separate workforce reduction (collectively, the "Workforce Reductions"). The
Workforce Reductions are part of a broader plan to take meaningful actions to
improve the alignment between our organizational structure and our long-term
business strategy, drive cost efficiencies enabled by our technology and other
competitive advantages and continue to drive toward profitability and positive
free cash flow. In addition to the aforementioned Workforce Reductions,
restructuring actions have included and are expected to include, but not be
limited to, a reduction in U.S. hiring and backfills resulting from attrition; a
reduction in spend through third party vendors; eliminating the use of
incentives when recruiting new agents and reducing incentives for existing
agents; a planned pause in M&A activity and new market expansion; and a review
of occupancy costs with a view to consolidating offices and reducing related
costs.

As a result of restructuring actions taken during the three and nine months
ended September 30, 2022, we incurred restructuring costs of $29.0 million and
$47.9 million, respectively, resulting from severance and other termination
benefits for employees whose roles are being eliminated, lease terminations
costs as a result of the accelerated amortization of various right-of-use assets
and other restructuring costs, including those costs related to the wind-down of
Modus. These costs have been presented within the Restructuring costs line in
the condensed consolidated statements of operations. We incurred additional
non-cash charges of approximately $0.9 million and $7.1 million, respectively,
for the three and nine months ended September 30, 2022 associated with the
discontinued use of certain intangible assets associated with Modus and charges
pertaining to the write-down of fixed assets for certain real estate leases that
have been exited, or partially exited. These costs have been included within the
Depreciation and amortization line in the condensed consolidated statements of
operations.

Initial Public Offering

On April 6, 2021, we completed our IPO and our Class A common stock began
trading on the New York Stock Exchange on April 1, 2021 under the symbol "COMP".
In connection with the IPO, we issued and sold 26.3 million shares of our Class
A common stock at a public offering price of $18.00 per share. We received
aggregate proceeds of $438.7 million from the IPO, net of the underwriting
discount and offering costs of approximately $11.0 million.

On March 31, 2021, in connection with the effectiveness of the IPO Registration
Statement, we recognized $148.5 million in stock-based compensation expense for
(i) certain restricted stock units ("RSUs") that contained both service-based
and liquidity event-based vesting conditions as the liquidity event-based
vesting condition was satisfied upon effectiveness of the IPO Registration
Statement and (ii) certain stock options and RSU awards with service,
performance and market-based vesting conditions that include stock price targets
to be met after the listing of our stock on a public exchange.

Operational Highlights for the three months ended September 30, 2022


We continue to attract and retain the most talented agents to our platform,
which is critical to our long-term success. We grow our revenue by attracting
high-performing agents looking to grow their business and increasing the
productivity of our agents. While we are not investing in technology at the same
rate as in the past, we continue to invest in our proprietary, integrated
platform designed for real estate agents, to enable them to grow their business
and save them time and money. This value proposition allows us to recruit more
agents, help them grow their business and retain them on our platform at
industry leading retention rates.

We had over 29,000 agents on our platform as of September 30, 2022. A subset of
our agents are considered principal agents, which we define as either agents who
are leaders of their respective agent teams or individual agents operating
independently on our platform.
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For the three months ended September 30, 2022, the Average Number of Principal
Agents1 was 13,314, an increase of 1,698, or 14.6%, from the three months ended
September 30, 2021. The principal agent additions came in both new and existing
markets.

During the three months ended September 30, 2022, our agents closed 54,606 Total
Transactions1, a decrease of 12.4% when compared to the three months ended
September 30, 2021. The decline was primarily driven by the macroeconomic
conditions that contributed to the slowdown in the U.S. residential real estate
market. See the section entitled "Impact of the Macroeconomic Conditions on the
U.S. Residential Real Estate Market and Our Business - Management's Discussion
and Analysis of Financial Condition and Results of Operations" for more details
surrounding these macroeconomic conditions.

Our Gross Transaction Value1 for the three months ended September 30, 2022 was
$57.3 billion, a decrease of 17.1% when compared to the three months ended
September 30, 2021. Gross Transaction Value is primarily driven by home values
in the markets we serve and by changes in the number of our agents in those
markets, as well as seasonality and the aforementioned macroeconomic factors.

For the three months ended September 30, 2022, our Gross Transaction Value
represented 4.2%2 of residential real estate transacted in the U.S., compared to
4.3% for the three months ended September 30, 2021. We calculate our national
market share by dividing our Gross Transaction Value, or the total dollar value
of transactions closed by agents on our platform, by two times (to account for
the sell-side and buy-side of each transaction) the aggregate dollar value of
U.S. existing home sales as reported by the National Association of Realtors
("NAR"). Should we elect to resume expansion into new markets in the future,
faster data integration and ingestion, more efficient agent onboarding, and the
ability to customize our solutions to local market requirements will allow us to
enter new markets more quickly and effectively over time. We have a dedicated
expansion team responsible for launching new markets that partners closely with
our enterprise sales team to rapidly identify talented agents in each new
market. The priority with which we enter new markets will be based on the
addressable size of each market, agent feedback and local market dynamics, and
improvement of macroeconomic conditions. Expansion within existing markets is
particularly cost efficient as we are able to leverage existing infrastructure,
personnel and our agent network.

Seasonality and Cyclicality



The residential real estate market is seasonal, which directly impacts our
agents' businesses. While individual markets may vary, transaction volume is
typically highest in spring and summer, and then declines gradually in late fall
and winter. We experience the most significant financial effect from this
seasonality in the first and fourth quarters of each year, when our revenue is
typically lower relative to the second and third quarters. The effect of this
seasonality on our revenue has a larger effect on our results of operations as
many of our operating expenses (excluding commissions) are somewhat fixed in
nature and do not vary directly in line with our revenue. We believe that this
seasonality has affected and will continue to affect our quarterly results;
however, to date its effect may have been masked by our rapid growth.

The broader residential real estate industry is cyclical, and individual markets
can have their own dynamics that diverge from broad market conditions. The real
estate industry can be impacted by the strength or weakness of the economy,
changes in interest rates or mortgage lending standards, or extreme economic or
political conditions. Our revenue growth rate tends to increase as the real
estate industry performs well and to decrease when the real estate industry
performs poorly.

1For the definitions of Average Number of Principal Agents, Total Transactions
and Gross Transaction Value please refer to the section entitled "Key Business
Metrics" included elsewhere in this Quarterly Report.
2 On July 21, 2022, NAR restated monthly average (mean) sales prices ("ASP") of
existing homes from January 2020 through June 2022 to reflect their change in
methodology to better account for outliers of high priced homes noting that the
monthly average (mean) sales prices are NAR's best estimates and given the
outliers, they are less reliable. This resulted in higher monthly ASP of
existing homes than what was reported prior and increases in total market Gross
Transaction Value than what was reported prior. As a result of the changes in
the NAR methodology, our previously reported national market share for the three
months ended September 30, 2021 changed from 5.4% to 4.3%. Our national market
share for the three months ended September 30, 2022 and 2021 reported in this
Form 10-Q was calculated using ASP data based on the updated NAR methodology.
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Impact of the COVID-19 Pandemic on Our Business


The ongoing COVID-19 pandemic has had, and continues to have, an impact around
the world, including in the U.S. and has had an adverse impact on the
residential real estate market during its early days. While we did not see
adverse impacts of the COVID-19 pandemic on our business and financial results
in the three and nine months ended September 30, 2022, the extent of the future
impact of the ongoing COVID-19 pandemic on our business and financial results
will depend largely on future developments, which are highly uncertain and
difficult to predict. See the section entitled "Risk Factors-Risks Related to
Our Business and Operations-The extent of the future impact of the ongoing
COVID-19 pandemic on our business and financial results will depend largely on
future developments, which are highly uncertain and difficult to predict"
included in the 2021 Form 10-K.

Impact of the Macroeconomic Conditions on the U.S. Residential Real Estate
Market and Our Business


Throughout 2022, a number of macroeconomic conditions contributed to the
slowdown in the U.S. residential real estate market, impacting our business and
financial results during the three and nine months ended September 30, 2022, as
described in more detail in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations". These conditions
include, but are not limited to, the conflict in Ukraine, volatility in the U.S.
equity markets, rising inflation, rapidly rising mortgage interest rates, and
the Federal Reserve Board increasing the federal funds rate by an aggregate of
3.75% through November 2022 with possible further increases by the end of the
year. These conditions have contributed towards slowed consumer demand and
declining home affordability and began to have an impact on price appreciation.
Any further slowdown or additional challenging conditions in the U.S.
residential real estate market could have a significant impact on our business
and financial results in the fourth quarter of 2022 and beyond. While we
continue to assess the effects of the current slowdown on our business and
financial results, the ultimate impact will depend on future developments, which
are highly uncertain and difficult to predict, as well as the actions that we
have taken, or will take, to minimize any current and future impact.

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RESULTS OF OPERATIONS


The following table sets forth our consolidated statements of operations data
for the periods indicated:

                                                          Three Months Ended September 30,                                               Nine Months Ended September 30,
                                                     2022                                    2021                                   2022                                    2021
                                                                                                 (in millions, except percentages)
Revenue                               $      1,493.7            100.0  %        $ 1,743.6            100.0  %        $      4,910.8            100.0  %        $ 4,808.9            100.0  %
Operating expenses:
Commissions and other related expense
(1)                                          1,218.0             81.5             1,430.6             82.0                  4,017.3             81.8             3,963.2             82.4
Sales and marketing (1)                        144.4              9.7               130.6              7.5                    444.3              9.0               366.2              7.6
Operations and support (1)                      95.1              6.4                97.0              5.6                    308.9              6.3               263.7              5.5
Research and development (1)                    81.5              5.5                89.7              5.1                    296.9              6.0               259.8              5.4
General and administrative (1)                  56.5              3.8                79.5              4.6                    167.0              3.4               231.8              4.8
Restructuring costs                             29.0              1.9                   -                -                     47.9              1.0                   -                -
Depreciation and amortization                   21.0              1.4                16.7              1.0                     65.1              1.3                45.1              0.9
Total operating expenses                     1,645.5            110.2             1,844.1            105.8                  5,347.4            108.9             5,129.8            106.7
Loss from operations                          (151.8)           (10.2)             (100.5)            (5.8)                  (436.6)            (8.9)             (320.9)            (6.7)
Investment income, net                           1.1              0.1                 0.1                -                      1.5                -                 0.1                -
Interest expense                                (0.9)            (0.1)               (0.7)               -                     (2.3)               -                (1.8)               -
Loss before income taxes and equity
in loss of unconsolidated entity              (151.6)           (10.1)             (101.1)            (5.8)                  (437.4)            (8.9)             (322.6)            (6.7)
Benefit from income taxes                          -                -                 1.3              0.1                      1.4                -                 3.3              0.1
Equity in loss of unconsolidated
entity                                          (2.5)            (0.2)                  -                -                     (7.5)            (0.2)                  -                -
Net loss                                      (154.1)           (10.3)              (99.8)            (5.7)                  (443.5)            (9.0)             (319.3)            (6.6)
Net (income) loss attributable to
non-controlling interests                       (0.1)               -                   -                -                      0.1                -                   -                -
Net loss attributable to Compass,
Inc.                                  $       (154.2)           (10.3  %)       $   (99.8)            (5.7  %)       $       (443.4)            (9.0  %)       $  (319.3)            (6.6  %)

(1)Includes stock-based compensation expense as follows:


                                           Three Months Ended September 30,

Nine Months Ended September 30,

                                                2022                2021                2022                2021

Commissions and other related expense $ 12.7 $ 26.3

       $      36.1          $    82.6
Sales and marketing                               10.8               10.3                 32.7               27.9
Operations and support                             3.9                4.5                 12.3               12.3
Research and development                           9.4               13.2                 45.2               76.2
General and administrative                        13.3               16.8                 46.8               93.9

Total stock-based compensation expense $ 50.1 $ 71.1

$ 173.1 $ 292.9

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Stock-based compensation for the nine months ended September 30, 2021 includes
the following amounts related to a one-time acceleration of stock-based
compensation expense in connection with the IPO:


                                           IPO Related
                                             Expense

Commissions and other related expense $ 41.7
Sales and marketing

                                1.8
Operations and support                             3.1
Research and development                          46.9
General and administrative                        55.0

Total stock-based compensation expense $ 148.5

Comparison of the Three and Nine Months Ended September 30, 2022 and 2021

Revenue

                                             Three Months Ended September 30,                                                     Nine Months Ended September 30,
                              2022                  2021            $ Change            % Change                  2022                   2021            $ Change            % Change
                                                                                       (in millions, except percentages)
Revenue                $    1,493.7             $ 1,743.6          $ (249.9)               (14.3  %)       $    4,910.8              $ 4,808.9          $  101.9                   2.1  %


Revenue was $1,493.7 million and $4,910.8 million during the three and nine
months ended September 30, 2022, a decrease of $249.9 million, or 14.3%, and an
increase of $101.9 million, or 2.1%, compared to the prior year periods,
respectively. The decrease for the three months ended September 30, 2022 was
primarily driven by the macroeconomic conditions that contributed to the current
slowdown in the U.S. residential real estate market. The increase for the nine
months ended September 30, 2022 was primarily driven by an increase in the
number of agents that joined our platform during 2021 and 2022, a higher volume
of transactions from both new and existing agents, partially offset by the
aforementioned macroeconomic conditions. The Average Number of Principal Agents
for the three and nine months ended September 30, 2022 grew to 13,314 and
12,956, increases of 14.6% and 21.2% from the year ago periods, respectively.

Operating Expenses

Commissions and other related expense

                                              Three Months Ended September 30,                                                   Nine Months Ended September 30,
                              2022                  2021            $ Change            % Change                 2022                 2021             $ Change            % Change
                                                                                       (in millions, except percentages)
Commissions and other
related expense         $         1,218.0       $ 1,430.6          $ (212.6)               (14.9  %)       $    4,017.3           $ 3,963.2          $    54.1                   1.4  %
Percentage of revenue           81.5  %              82.0  %                                                       81.8  %             82.4  %


Commissions and other related expense was $1,218.0 million and $4,017.3 million
during the three and nine months ended September 30, 2022, a decrease of $212.6
million, or 14.9%, and an increase of $54.1 million, or 1.4%, compared to the
prior year periods, respectively. Included in Commissions and other related
expense were non-cash expenses related to stock-based compensation of $12.7
million and $36.1 million for the three and nine months ended September 30, 2022
and $26.3 million and $82.6 million for the three and nine months ended
September 30, 2021, respectively. The decline in stock-based compensation
expense for the three months ended September 30, 2022 when compared to the prior
year period was primarily due to lower agent participation in the Agent Equity
Program. The decline in stock-based compensation expense for the nine months
ended September 30, 2022 when compared to the nine months ended September 30,
2021 was primarily related to a one-time acceleration of stock-based
compensation expense of $41.7 million incurred on March 31, 2021 in connection
with our IPO and a decline in year over year agent participation in the Agent
Equity Program. Commissions and other related expense excluding such non-cash
stock-based compensation expense, was $1,205.3 million and $3,981.2 million, or
80.7% and 81.1% of revenue, for the three and nine months ended September 30,
2022 and $1,404.3 million and $3,880.6 million, or 80.5% and 80.7% of revenue,
for the three and nine months ended September 30, 2021, respectively. The
decrease in absolute dollars of Commission and other related expense, excluding
non-cash stock-based compensation, for the three months ended
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September 30, 2022 when compared to the prior year period was primarily driven
by the macroeconomic conditions that contributed to the slowdown in the U.S.
residential real estate market. The increase in absolute dollars of Commissions
and other related expense, excluding non-cash stock-based compensation, for the
nine months ended September 30, 2022 was primarily driven by our higher revenue
and Total Transactions partially offset by the macroeconomic conditions that
contributed to the slowdown in the U.S. residential real estate market. The
unfavorable increase in Commissions and other related expense, excluding
non-cash stock-based compensation expense, expressed as a percentage of revenue
in the three and nine months ended September 30, 2022 as compared to the three
and nine months ended September 30, 2021, respectively, was primarily due to
lower Agent Equity Program contributions in the current year periods compared to
the year ago periods.

Sales and marketing

                                                   Three Months Ended September 30,                                                 Nine Months Ended September 30,
                                    2022                2021            $ Change            % Change                2022                2021            $ Change            % Change
                                                                                           (in millions, except percentages)
Sales and marketing            $     144.4           $ 130.6          $    13.8                  10.6  %       $     444.3           $ 366.2          $    78.1                  21.3  %
Percentage of revenue                  9.7  %            7.5  %                                                        9.0  %            7.6  %


Sales and marketing expense was $144.4 million and $444.3 million during the
three and nine months ended September 30, 2022, an increase of $13.8 million, or
10.6%, and $78.1 million, or 21.3%, compared to the prior year periods,
respectively. Included in Sales and marketing expense were non-cash expenses
related to stock-based compensation of $10.8 million and $32.7 million for the
three and nine months ended September 30, 2022 and $10.3 million and $27.9
million for the three and nine months ended September 30, 2021, respectively.
While stock-based compensation expense for the three month periods ended
September 30, 2022 and 2021 remained relatively flat, the increase in
stock-based compensation expense during the nine months ended September 30, 2022
as compared to the nine months ended September 30, 2021 was due to expense for
awards related to increased headcount partially offset by a one-time
acceleration of stock-based compensation expense of $1.8 million incurred on
March 31, 2021 in connection with our IPO. Sales and marketing expense,
excluding non-cash stock-based compensation expense, was $133.6 million and
$411.6 million, or 8.9% and 8.4% of revenue, for the three and nine months ended
September 30, 2022 and $120.3 million and $338.3 million, or 6.9% and 7.0% of
revenue, for the three and nine months ended September 30, 2021, respectively.
The increase in absolute dollars and as a percentage of revenue, excluding
non-cash stock-based compensation expense, during the three and nine months
ended September 30, 2022 as compared to the three and nine months ended
September 30, 2021 was partially due to an increase in occupancy costs,
compensation and other personnel-related costs due to increased headcount and
increased agent marketing and advertising.
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Operations and support

                                                    Three Months Ended September 30,                                                Nine Months Ended September 30,
                                      2022              2021            $ Change            % Change                2022                2021            $ Change            % Change
                                                                                            (in millions, except percentages)
Operations and support           $     95.1           $ 97.0          $    (1.9)                (2.0  %)       $     308.9           $ 263.7          $    45.2                  17.1  %
Percentage of revenue                   6.4  %           5.6  %                                                        6.3  %            5.5  %


Operations and support expense was $95.1 million and $308.9 million during the
three and nine months ended September 30, 2022, a decrease of $1.9 million, or
2.0%, and an increase of $45.2 million, or 17.1%, compared to the prior year
periods, respectively. Included in Operations and support expense were non-cash
expenses related to stock-based compensation of $3.9 million and $12.3 million
for the three and nine months ended September 30, 2022 and $4.5 million and
$12.3 million for the three and nine months ended September 30, 2021,
respectively. Excluding a one-time acceleration of stock-based compensation
expense of $3.1 million incurred on March 31, 2021 in connection with our IPO,
stock-based compensation expense remained flat year over year. Operations and
support expense excluding such non-cash stock-based compensation expense was
$91.2 million and $296.6 million, or 6.1% and 6.0% of revenue, for the three and
nine months ended September 30, 2022 and $92.5 million and $251.4 million, or
5.3% and 5.2% of revenue, for the three and nine months ended September 30,
2021, respectively. During the three months ended September 30, 2022, Operations
and support, excluding non-cash stock-based compensation expense, remained
relatively flat when compared to the prior year period. The increase in absolute
dollars, excluding such non-cash stock-based compensation expense, during the
nine months ended September 30, 2022 was primarily driven by an increase in
compensation and other personnel-related costs due to increased headcount. The
increase as a percentage of revenue, excluding such non-cash stock-based
compensation expense, for both the three and nine months ended September 30,
2022 was primarily driven by an increase in compensation and other
personnel-related costs due to increased headcount compared to the year ago
periods combined with a decrease in revenue for the three months ended
September 30, 2022 compared to the year ago period.

Research and development

                                                    Three Months Ended September 30,                                                Nine Months Ended September 30,
                                      2022              2021            $ Change            % Change                2022                2021            $ Change            % Change
                                                                                            (in millions, except percentages)
Research and development         $     81.5           $ 89.7          $    (8.2)                (9.1  %)       $     296.9           $ 259.8          $    37.1                  14.3  %
Percentage of revenue                   5.5  %           5.1  %                                                        6.0  %            5.4  %


Research and development expense was $81.5 million and $296.9 million during the
three and nine months ended September 30, 2022, a decrease of $8.2 million, or
9.1%, and an increase of $37.1 million, or 14.3%, compared to the prior year
periods, respectively. Included in Research and development expense were
non-cash expenses related to stock-based compensation of $9.4 million and $45.2
million for the three and nine months ended September 30, 2022 and $13.2 million
and $76.2 million for the three and nine months ended September 30, 2021,
respectively. The decrease in stock-based compensation expense for the three
months ended September 30, 2022 as compared to the three months ended
September 30, 2021 was primarily driven by workforce reductions taken in
connection with our restructuring activities. The decrease in stock-based
compensation expense for the nine months ended September 30, 2022 as compared to
the nine months ended September 30, 2021 was primarily due to a one-time
acceleration of stock-based compensation expense of $46.9 million incurred on
March 31, 2021 in connection with our IPO, partially offset by increased expense
for awards resulting from increased headcount. Research and development expense,
excluding such non-cash stock-based compensation expense, was $72.1 million and
$251.7 million, or 4.8% and 5.1% of revenue, for the three and nine months ended
September 30, 2022 and $76.5 million and $183.6 million, or 4.4% and 3.8% of
revenue, for the three and nine months ended September 30, 2021, respectively.
While Research and development expense, excluding non-cash stock-based
compensation expense, for the three month periods ended September 30, 2022 and
2021 remained relatively flat, the increase of Research and development expense,
excluding non-cash stock-based compensation expense, in absolute dollars and as
a percentage of revenue during the nine months ended September 30, 2022 was
primarily driven by an increase in compensation and other personnel-related
costs due to increased headcount during the nine months ended September 30,
2022.
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General and administrative

                                                     Three Months Ended September 30,                                                Nine Months Ended September 30,
                                       2022              2021           $ Change            % Change                2022                    2021           $ Change            % Change
                                                                                              (in millions, except percentages)
General and administrative         $    56.5           $ 79.5          $  (23.0)               (28.9  %)       $    167.0                $ 231.8          $  (64.8)               (28.0  %)
Percentage of revenue                    3.8  %           4.6  %                                                      3.4  %                 4.8  %


General and administrative expense was $56.5 million and $167.0 million during
the three and nine months ended September 30, 2022, a decrease of $23.0 million,
or 28.9%, and $64.8 million, or 28.0%, compared to the prior year periods,
respectively. General and administrative expense includes charges of $10.5
million in connection with the Realogy Holdings Corp. matter and $21.3 million
in connection with the Avi Dorfman and RentJolt, Inc. matter (collectively, the
"Litigation Matters") for the three and nine months ended September 30, 2022 and
2021, respectively. Also included in General and administrative expense were
non-cash expenses related to stock-based compensation of $13.3 million and $46.8
million for the three and nine months ended September 30, 2022 and $16.8 million
and $93.9 million for the three and nine months ended September 30, 2021,
respectively. While stock-based compensation expense for the three months ended
September 30, 2022 compared to the year ago period in 2021 remained relatively
flat, the decrease in stock-based compensation expense for the nine months ended
September 30, 2022 as compared to the year ago period was primarily due to a
one-time acceleration of stock-based compensation expense of $55.0 million
incurred on March 31, 2021 in connection with our IPO partially offset by
increased expense for awards resulting from increased headcount. General and
administrative expense, excluding such non-cash stock-based compensation expense
and the Litigation Matters, was $32.7 million and $109.7 million, or 2.2% and
2.2% of revenue, for the three and nine months ended September 30, 2022 and
$41.4 million and $116.6 million, or 2.4% and 2.4% of revenue, for the three and
nine months ended September 30, 2021, respectively. The decrease in absolute
dollars and as a percentage of revenue, excluding such non-cash stock-based
compensation expense and the Litigation Matters, during the three and nine
months ended September 30, 2022 as compared to the three and nine months ended
September 30, 2021 was primarily due to our cost reduction initiatives taken
during the nine months ended September 30, 2022.

Restructuring costs

                                                   Three Months Ended September 30,                                               Nine Months Ended September 30,
                                    2022               2021            $ Change            % Change                2022               2021            $ Change            % Change
                                                                                          (in millions, except percentages)
Restructuring costs            $      29.0           $    -          $    29.0                 100.0  %       $      47.9           $    -          $    47.9                 100.0  %
Percentage of revenue                  1.9  %             -  %                                                        1.0  %             -  %


Restructuring costs in the three and nine months ended September 30, 2022
primarily consisted of costs associated with workforce reduction actions and the
wind-down of Modus. See Note 12 - "Restructuring Activities" in our condensed
consolidated financial statements included elsewhere in this Quarterly Report,
for information.

Depreciation and amortization

                                            Three Months Ended September 30,                                               Nine Months Ended September 30,
                              2022              2021            $ Change            % Change                2022              2021            $ Change            % Change
                                                                                   (in millions, except percentages)
Depreciation and
amortization             $     21.0           $ 16.7          $     4.3                  25.7  %       $     65.1           $ 45.1          $    20.0                  44.3  %
Percentage of revenue           1.4  %           1.0  %                                                       1.3  %           0.9  %


Depreciation and amortization expense increased by $4.3 million, or 25.7%, and
$20.0 million, or 44.3%, for the three and nine months ended September 30, 2022
compared to the three and nine months ended September 30, 2021, respectively.
These increases were primarily driven by an increase in the amortization of
intangible assets related to the impact of acquisitions completed during the
year ended December 31, 2021 and incremental depreciation of recent capital
expenditures.
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Investment income, net

                                                    Three Months Ended September 30,                                             Nine Months Ended September 30,
                                     2022              2021            $ Change            % Change               2022              2021            $ Change            % Change
                                                                                          (in millions, except percentages)
Investment income, net           $      1.1          $  0.1          $     1.0                1000.0  %       $      1.5          $  0.1          $     1.4                1400.0  %

Investment income, net has increased slightly during the three and nine months
ended September 30, 2022 and 2021 as a result of increased average interest
rates on our short-term interest-bearing investments.

Interest expense

                                                Three Months Ended September 30,                                               Nine Months Ended September 30,
                                  2022              2021            $ Change            % Change                2022              2021            $ Change            % Change
                                                                                       (in millions, except percentages)
Interest expense             $      (0.9)         $ (0.7)         $    (0.2)                 28.6  %       $      (2.3)         $ (1.8)         $    (0.5)                 27.8  %


Interest expense was $0.9 million and $2.3 million for the three and nine months
ended September 30, 2022, respectively. This amount was driven by the interest
expense incurred on both our Concierge Facility and Revolving Credit Facility,
including the commitment fees related to the available borrowing capacities on
such facilities.

Benefit from income taxes

                                         Three Months Ended September 30,                                            Nine Months Ended September 30,
                          2022            2021            $ Change             % Change               2022             2021            $ Change            % Change
                                                                              (in millions, except percentages)

Benefit from income
taxes                  $     -          $  1.3          $    (1.3)               (100.0  %)       $     1.4          $  3.3          $    (1.9)               (57.6  %)



Benefit from income taxes decreased by $1.3 million for the three months ended
September 30, 2022 compared to the three months ended September 30, 2021. For
the nine months ended September 30, 2022, Benefit from income taxes decreased by
$1.9 million when compared to the nine months ended September 30, 2021. These
decreases resulted from a reduction in current year acquisition related
activities.

Equity in loss of unconsolidated entity

                                               Three Months Ended September 30,                                                 Nine Months Ended September 30,
                                2022                2021            $ Change            % Change                2022                2021            $ Change            % Change
                                                                                       (in millions, except percentages)

Equity in loss of
unconsolidated entity $ (2.5) $ – $ (2.5)

                100.0  %       $       (7.5)         $     -          $    (7.5)                100.0  %


During the three and nine months ended September 30, 2022, Equity in losses of
unconsolidated entity was $2.5 million and $7.5 million, respectively, from our
joint venture, which was formed in July 2021.
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              KEY BUSINESS METRICS AND NON-GAAP FINANCIAL MEASURES

In addition to the measures presented in our condensed consolidated financial
statements, we use the following key business metrics and non-GAAP financial
measures to evaluate our business, measure our performance, develop financial
forecasts, and make strategic decisions.

                                            Three Months Ended September

30, Nine Months Ended September 30,

                                                2022                2021                 2022                2021
Total Transactions                              54,606              62,349              168,819             168,360

Gross Transaction Value (in billions) $ 57.3 $ 69.1

         $     187.8          $    189.9
Average Number of Principal Agents              13,314              11,616               12,956              10,686
Net loss attributable to Compass, Inc. (in
millions)                                  $    (154.2)         $      (99.8)       $      (443.4)       $     (319.3)
Net loss attributable to Compass, Inc.
margin                                            (10.3%)              (5.7%)               (9.0%)              (6.6%)
Adjusted EBITDA(1) (in millions)           $     (42.2)         $     12.2          $    (134.7)         $     52.9
Adjusted EBITDA margin(1)                          (2.8%)                0.7%               (2.7%)                1.1%


(1)Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures.
For more information regarding our use of these measures and a reconciliation of
Net loss attributable to Compass, Inc. to Adjusted EBITDA, see the section
titled "-Non-GAAP Financial Measures" below.

Key Business Metrics

Total Transactions


Total Transactions is a key measure of the scale of our platform, which drives
our financial performance. We define Total Transactions as the sum of all
transactions closed on our platform in which our agent represented the buyer or
seller in the purchase or sale of a home. We include a single transaction twice
when one or more of our agents represent both the buyer and seller in any given
transaction. This metric excludes rental transactions.

Our Total Transactions for the three months ended September 30, 2022 declined to
54,606, or 12.4%, and slightly increased during the nine months ended
September 30, 2022 to 168,819, or 0.3%, from the year ago periods, respectively.
The decline for the three months ended September 30, 2022 was primarily driven
by the macroeconomic conditions that contributed to the slowdown in the U.S.
residential real estate market while the nine months ended September 30, 2022
has slightly increased as we recruited new agents in both existing and new
markets, retained top-performing agents and existing agents increased their
productivity on our platform.

Gross Transaction Value


Gross Transaction Value is a key measure of the scale of our platform and
success of our agents, which ultimately impacts revenue. Gross Transaction Value
is the sum of all closing sale prices for homes transacted by agents on our
platform. We include the value of a single transaction twice when our agents
serve both the home buyer and home seller in the transaction. This metric
excludes rental transactions.

Gross Transaction Value is primarily driven by home values in the markets we
serve and by changes in the number of our agents in those markets, as well as
seasonality and macroeconomic factors.

Our Gross Transaction Value for the three and nine months ended September 30,
2022 was $57.3 billion and $187.8 billion, representing decreases of 17.1% and
1.1% from the year ago periods, respectively. The decline for the three months
ended September 30, 2022 was primarily driven by the macroeconomic conditions
that contributed to the slowdown in the U.S. residential real estate market
while the nine months ended September 30, 2022 only slightly decreased as the
macroeconomic conditions were partially offset by production from new agents in
both existing and new markets, the retention of top-performing agents and
existing agents increasing their productivity on our platform.

Average Number of Principal Agents

The Average Number of Principal Agents represents the number of agents who are
leaders of their respective agent teams or individual agents operating
independently on our platform during a given period. The Average Number of
Principal Agents is

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an indicator of the potential future growth of our business, as well as the size
and strength of our platform. This figure is calculated by taking the average of
the number of principal agents at the end of each month included in the period.
We use the Average Number of Principal Agents, in combination with our other key
metrics such as Total Transactions and Gross Transaction Value, as a measure of
agent productivity.

Our Average Number of Principal Agents for the three and nine months ended
September 30, 2022 was 13,314 and 12,956, representing increases of 14.6% and
21.2% from the year ago periods, respectively. Our principal agents generate
revenue across a diverse set of real estate markets in the U.S.

Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted EBITDA margin


Adjusted EBITDA is a non-GAAP financial measure that represents our Net loss
attributable to Compass, Inc. adjusted for depreciation and amortization,
investment income, net, interest expense, stock-based compensation expense,
income tax (expense) benefit and other items. During the periods presented,
other items included (i) restructuring charges associated with lease termination
and severance costs, (ii) acquisition-related expenses related to adjustments to
the fair value of contingent consideration and acquisition consideration treated
as compensation expense over underlying retention periods and (iii) litigation
charges in connection with the Realogy Holdings Corp. matter and the Avi Dorfman
and RentJolt, Inc. matter. Adjusted EBITDA margin is calculated by dividing
Adjusted EBITDA by revenue.

We use Adjusted EBITDA and Adjusted EBITDA margin in conjunction with GAAP
measures as part of our overall assessment of our performance, including the
preparation of our annual operating budget and quarterly forecasts, to evaluate
the effectiveness of our business strategies and to communicate with our board
of directors concerning our financial performance. We believe Adjusted EBITDA
and Adjusted EBITDA margin are also helpful to investors, analysts and other
interested parties because these measures can assist in providing a more
consistent and comparable overview of our operations across our historical
financial periods. Adjusted EBITDA and Adjusted EBITDA margin have limitations
as analytical tools, however, and you should not consider them in isolation or
as substitutes for analysis of our results as reported under GAAP. Because of
these limitations, you should consider Adjusted EBITDA and Adjusted EBITDA
margin alongside other financial performance measures, including Net loss
attributable to Compass, Inc. and our other GAAP results. In evaluating Adjusted
EBITDA and Adjusted EBITDA margin, you should be aware that in the future we may
incur expenses that are the same as or similar to some of the adjustments in
this presentation. Our presentation of Adjusted EBITDA and Adjusted EBITDA
margin should not be construed to imply that our future results will be
unaffected by the types of items excluded from the calculation of Adjusted
EBITDA and Adjusted EBITDA margin. Adjusted EBITDA and Adjusted EBITDA margin
are not presented in accordance with GAAP and the use of these terms varies from
others in our industry.
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The following table provides a reconciliation of Net loss attributable to
Compass, Inc. to Adjusted EBITDA (in millions):


                                          Three Months Ended September 30,             Nine Months Ended September 30,
                                               2022                  2021                  2022                   2021
Net loss attributable to Compass, Inc. $       (154.2)            $ (99.8)          $      (443.4)            $ (319.3)
Adjusted to exclude the following:
Depreciation and amortization                    21.0                16.7                    65.1                 45.1
Investment income, net                           (1.1)               (0.1)                   (1.5)                (0.1)
Interest expense                                  0.9                 0.7                     2.3                  1.8
Stock-based compensation                         50.1                71.1                   173.1                292.9
Benefit from income taxes                           -                (1.3)                   (1.4)                (3.3)
Restructuring costs                              29.0                   -                    47.9                    -
Acquisition-related expenses(1)                   1.6                 3.6                    12.7                 14.5
Litigation charge(2)                             10.5                21.3                    10.5                 21.3
Adjusted EBITDA                        $        (42.2)            $  12.2           $      (134.7)            $   52.9
Net loss attributable to Compass, Inc.
margin                                          (10.3  %)            (5.7  %)                (9.0  %)             (6.6  %)
Adjusted EBITDA margin                           (2.8  %)             0.7  %                 (2.7  %)              1.1  %

(1)Includes adjustments related to the change in fair value of contingent
consideration and adjustments related to acquisition consideration treated as
compensation expense over the underlying retention periods. See Note 3 –
“Acquisitions” to our condensed consolidated financial statements included
elsewhere in this Quarterly Report for more information.


(2)Represents a charge of $10.5 million incurred during the three and nine
months ended September 30, 2022 in connection with the Realogy Holdings Corp.
matter and a $21.3 million expense incurred during the three and nine months
ended September 30, 2021 in connection with the settlement of the Avi Dorfman
and RentJolt, Inc. matter.

Adjusted EBITDA was a loss of $42.2 million and $134.7 million during the three
and nine months ended September 30, 2022 compared to income of $12.2 million and
$52.9 million during the three and nine months ended September 30, 2021,
respectively. The decrease in Adjusted EBITDA during the three and nine months
ended September 30, 2022 as compared to the three and nine months ended
September 30, 2021 was primarily due to the growth in operating expenses as a
percentage of revenue resulting from investments in research and development and
continued geographic expansion into new markets and a slow down in revenue
resulting from the current macroeconomic conditions impacting the U.S.
residential real estate market as described in more detail under the section
entitled "Impact of the Macroeconomic Conditions on the U.S. Residential Real
Estate Market and Our Business - Management's Discussion and Analysis of
Financial Condition and Results of Operations".

The following tables provide supplemental information to the Reconciliation of
Net loss attributable to Compass, Inc. to Adjusted EBITDA presented above. These
tables identify how certain Operating expenses related financial statement line
items contained within the accompanying condensed consolidated statements of
operations elsewhere in this Quarterly Report are impacted by the items excluded
from Adjusted EBITDA (in millions):

Three Months Ended September 30, 2022

                                          Commissions and
                                           other related            Sales and           Operations and          Research and              General and
                                              expense               marketing              support               development             administrative
GAAP Basis                              $        1,218.0          $     144.4          $        95.1          $         81.5          $

56.5

Adjusted to exclude the following:
Stock-based compensation                           (12.7)               (10.8)                  (3.9)                   (9.4)                     (13.3)
Acquisition-related expenses                           -                    -                   (1.6)                      -                          -
Litigation charge                                      -                    -                      -                       -                      (10.5)
Non-GAAP Basis                          $        1,205.3          $     133.6          $        89.6          $         72.1          $            32.7


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                                                                              Three Months Ended September 30, 2021
                                          Commissions and
                                           other related            Sales and           Operations and          Research and              General and
                                              expense               marketing              support               development             administrative
GAAP Basis                              $        1,430.6          $     130.6          $        97.0          $         89.7          $

79.5

Adjusted to exclude the following:
Stock-based compensation                           (26.3)               (10.3)                  (4.5)                  (13.2)

(16.8)

Acquisition-related expenses                           -                    -                   (3.6)                      -                          -
Litigation charge                                      -                    -                      -                       -                      (21.3)
Non-GAAP Basis                          $        1,404.3          $     120.3          $        88.9          $         76.5          $            41.4


                                                                              Nine Months Ended September 30, 2022
                                         Commissions and
                                          other related            Sales and           Operations and          Research and              General and
                                             expense               marketing              support               development            administrative
GAAP Basis                              $       4,017.3          $     444.3          $       308.9          $        296.9          $          167.0
Adjusted to exclude the following:
Stock-based compensation                          (36.1)               (32.7)                 (12.3)                  (45.2)                    (46.8)
Acquisition-related expenses                          -                    -                  (12.7)                      -                         -
Litigation charge                                     -                    -                      -                       -                     (10.5)
Non-GAAP Basis                          $       3,981.2          $     411.6          $       283.9          $        251.7          $          109.7

Nine Months Ended September 30, 2021

                                        Commissions and
                                         other related            Sales and           Operations and          Research and              General and
                                            expense               marketing              support               development            administrative
GAAP Basis                             $       3,963.2          $     366.2          $       263.7          $        259.8          $          231.8
Adjusted to exclude the following:
Stock-based compensation                         (82.6)               (27.9)                 (12.3)                  (76.2)                    (93.9)
Acquisition-related expenses                         -                    -                  (14.5)                      -                         -
Litigation charge                                    -                    -                      -                       -                     (21.3)
Non-GAAP Basis                         $       3,880.6          $     338.3          $       236.9          $        183.6          $          116.6


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                        LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have primarily generated negative cash flows from operations
and have primarily financed our operations from net proceeds from the sale of
convertible preferred stock and common stock. As of September 30, 2022, we had
cash and cash equivalents of $354.9 million and an accumulated deficit of $2.0
billion.

We expect that operating losses and negative cash flows from operations may
continue in certain periods in the foreseeable future as a result of the current
slowdown in the U.S. residential real estate market as described in more detail
under the section entitled "Impact of the Macroeconomic Conditions on the U.S.
Residential Real Estate Market and Our Business - Management's Discussion and
Analysis of Financial Condition and Results of Operations". We believe our
existing cash and cash equivalents, the Concierge Facility (which, as disclosed
in the footnotes to the condensed consolidated financial statements, may be used
to support our Compass Concierge Program) and the Revolving Credit Facility will
be sufficient to meet our working capital and capital expenditures needs for at
least the next 12 months and beyond.

Our future capital requirements will depend on many factors, including, but not
limited to, growth in the number of our agents and the associated costs to
attract, support and retain them, our decision to resume expansion into new
geographic markets, continued investment in adjacent services and other new
revenue streams, future acquisitions, the timing of investments in technology
and personnel to support the overall growth in our business and the extent and
duration of the current and any future slowdown in the U.S. residential real
estate market. To the extent that current and anticipated future sources of
liquidity are insufficient to fund our future business activities and
requirements, we may be required to seek additional equity or debt financing.
The sale of additional equity would result in additional dilution to our
stockholders. The incurrence of debt financing would result in debt service
obligations and the instruments governing such debt could provide for operating
and financing covenants that would restrict our operations. There can be no
assurances that we will be able to raise additional capital. In the event that
additional financing is required from outside sources, we may not be able to
negotiate terms acceptable to us or at all. If we are unable to raise additional
capital when desired, our business, financial condition and results of
operations could be adversely affected. See the sections entitled "Risk
Factors-Risks Related to Ownership of Our Class A Common Stock-We may need to
raise additional capital to continue to grow our business and we may not be able
to raise additional capital on terms acceptable to us, or at all" and "Risk
Factors-Risks Related to Our Business and Operations-Covenants in our debt
agreements may restrict our borrowing capacity or operating activities and
adversely affect our financial condition" included in the 2021 Form 10-K.

Financial Obligations


See Note 5 - "Debt" in our condensed consolidated financial statements included
elsewhere in this Quarterly Report, for information on our indebtedness as of
September 30, 2022.

Cash Flows

The following table summarizes our cash flows for the periods indicated (in
millions):

                                                                   Nine Months Ended September 30,
                                                                      2022                     2021
Net cash (used in) provided by operating activities           $           (173.9)         $      48.3
Net cash used in investing activities                                      (86.9)              (160.9)
Net cash (used in) provided by financing activities                         (2.6)               463.9

Net (decrease) increase in cash and cash equivalents $ (263.4) $ 351.3



Operating Activities

For the nine months ended September 30, 2022, net cash used in operating
activities was $173.9 million. The outflow was primarily due to a $443.5 million
Net loss adjusted for $249.7 million of non-cash charges, partially offset by
cash inflows due to changes in assets and liabilities of $19.9 million.

For the nine months ended September 30, 2021, net cash provided by operating
activities was $48.3 million. The inflow was primarily due to a $319.3 million
Net loss adjusted for $343.4 million of non-cash charges and cash inflows due to
changes in assets and liabilities of $24.2 million.
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Investing Activities

During the nine months ended September 30, 2022, net cash used in investing
activities was $86.9 million consisting of $56.9 million in capital
expenditures, $15.0 million in payments for acquisitions, net of cash acquired,
and $15.0 million for investments in an unconsolidated entity.

During the nine months ended September 30, 2021, net cash used in investing
activities was $160.9 million consisting of $127.3 million in payments for
acquisitions, net of cash acquired, and $33.6 million in capital expenditures.

Financing Activities


During the nine months ended September 30, 2022, net cash used in financing
activities was $2.6 million primarily consisting of $19.5 million in taxes paid
related to the net share settlement of equity awards, $13.9 million in payments
related to acquisitions, including contingent consideration payments and $0.4
million in paid deferred debt issuance costs for our credit facilities,
partially offset by $20.3 million in net proceeds from drawdowns and repayments
on the Concierge Facility, $8.6 million in proceeds from the exercise of stock
options and $2.3 million in proceeds from the issuance of common stock under the
Employee Stock Purchase Plan.

During the nine months ended September 30, 2021, net cash provided by financing
activities was $463.9 million, primarily consisting of $439.6 million in net
proceeds from the issuance of common stock upon our initial public offering,
$19.1 million in proceeds from the exercise and early exercise of stock options,
$10.3 million in net proceeds from drawdowns on the Concierge Facility and $5.0
million in proceeds from the capital contribution of non-controlling interests,
partially offset by $8.2 million in payments of contingent consideration related
to acquisitions and $1.9 million in paid deferred debt issuance costs for our
credit facilities.

Off-Balance Sheet Arrangements


We administer escrow and trust deposits which represent undistributed amounts
for the settlement of real estate transactions. We are contingently liable for
these escrow and trust deposits totaling $186.1 million and $172.1 million as of
September 30, 2022 and December 31, 2021, respectively. We did not have any
other off-balance sheet arrangements as of or during the periods presented.

                   CRITICAL ACCOUNTING ESTIMATES AND POLICIES

Critical Accounting Estimates and Policies


Our condensed consolidated financial statements and accompanying notes have been
prepared in accordance with U.S. GAAP. The preparation of these condensed
consolidated financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenue and expenses,
and related disclosures. We base our estimates on historical experience and on
various other assumptions that we believe are reasonable under the
circumstances. We evaluate our estimates and assumptions on an ongoing basis.
Actual results may differ from these estimates. To the extent that there are
material differences between these estimates and our actual results, our future
financial statements will be affected.

There have been no material changes to our critical accounting policies and
estimates disclosed in our 2021 Form 10-K. For additional information about our
critical accounting policies and estimates, see the disclosure included in our
2021 Form 10-K, as well as Note 1 and Note 2 to our condensed consolidated
financial statements included in Part I, Item 1, of this Quarterly Report.

                        RECENT ACCOUNTING PRONOUNCEMENTS

For a description of our recently adopted accounting pronouncements and
accounting pronouncements issued but not yet adopted, see Note 2 to our
condensed consolidated financial statements included in Part 1, Item 1 of this
Quarterly Report.

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REDFIN CORP Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

Post By: Olivia November 9, 2022 0 Comment(s) accompanying, analysis, and, and | RDFN | US75737F1084, be, condition, consolidated, discussion, financial, following, information, News, of, our, press release, read, REDFIN CORPORATION stock exchange, Results, should, the, Together, With

The following discussion and analysis of our financial condition and results of
operations should be read together with our consolidated financial statements,
the accompanying notes, and other information included in this quarterly report
and our annual report for the year ended December 31, 2021. In particular, the
disclosure contained in Item 1A in our annual report, as updated by Part II,
Item 1A in this quarterly report, may reflect trends, demands, commitments,
events, or uncertainties that could materially impact our results of operations
and liquidity and capital resources.

The following discussion contains forward-looking statements, such as statements
regarding our future operating results and financial position, our business
strategy and plans, our market growth and trends, and our objectives for future
operations. Please see "Note Regarding Forward-Looking Statements" for more
information about relying on these forward-looking statements. The following
discussion also contains information using industry publications. Please see
"Note Regarding Industry and Market Data" for more information about relying on
these industry publications.

When we use the term “basis points” in the following discussion, we refer to
units of one-hundredth of one percent.

Overview


We help people buy and sell homes. Representing customers in over 100 markets in
the United States and Canada, we are a residential real estate brokerage. We
pair our own agents with our own technology to create a service that is faster,
better, and costs less. We meet customers through our listings-search website
and mobile application.

We use the same combination of technology and local service to originate and
service mortgage loans and offer title and settlement services. We also buy
homes directly from homeowners who want an immediate sale, taking responsibility
for selling the home while the original owner moves on. Beginning in April 2021,
we started using digital platforms to connect consumers with available
apartments and houses for rent.

Our mission is to redefine real estate in the consumer’s favor.

Adverse Macroeconomic Conditions and Our Associated Actions


On November 7, 2022, we decided to wind-down RedfinNow and to reduce our number
of employees by approximately 862, which represents 13 percent of our total
employees. Of these, 264 job eliminations are directly related to the wind-down
of RedfinNow. In addition, approximately 218 employees will have their current
role eliminated, but are being offered a new role within the company.

Winding down RedfinNow is a strategic decision we made in order to focus our
resources on our core business in the face of the rising cost of capital.


The remaining workforce reductions are primarily among our real estate services
and headquarters employees in response to macroeconomic conditions. This
workforce reduction will reduce our number of lead agents by approximately 197,
which represents 9 percent of total lead agents. This action comes in the wake
of our June workforce reduction, which was a response to slowing 2022 home
sales. Since June, mortgage interest rates have continued to climb and
expectations for home sales have come down even further. Today's workforce
reduction assumes a housing downturn that lasts at least through 2023. Since
April 2022, through involuntary reductions and attrition, we have reduced our
total number of employees by 27 percent, including a reduction in lead agents of
28 percent.

See Note 16 to our consolidated financial statements for more information on
this workforce reduction and wind-down of our RedfinNow operations.

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Key Business Metrics

In addition to the measures presented in our consolidated financial statements,
we use the following key metrics to evaluate our business, develop financial
forecasts, and make strategic decisions.

                                                                                                                    Three Months Ended
                           Sep. 30, 2022          Jun. 30, 2022

Mar. 31, 2022 Dec. 31, 2021 Sep. 30, 2021 Jun. 30, 2021 Mar. 31, 2021 Dec. 31, 2020 Sep. 30 2020
Monthly average visitors 50,785

                 52,698                 51,287                 44,665                 49,147                 48,437                 46,202                 44,135                49,258
(in thousands)
Real estate services
transactions
Brokerage                        18,245                 20,565                 15,001                 19,428                 21,929                 21,006                 14,317                 16,951                18,980
Partner                           3,507                  3,983                  3,417                  4,603                  4,755                  4,597                  3,944                  4,940                 5,180
Total                            21,752                 24,548                 18,418                 24,031                 26,684                 25,603                 18,261                 21,891                24,160
Real estate services
revenue per transaction
Brokerage                 $      11,103          $      11,692          $      11,191          $      10,900          $      11,107          $      11,307          $      10,927          $      10,751          $     10,241
Partner                           2,556                  2,851                  2,814                  2,819                  2,990                  3,195                  3,084                  3,123                 2,988
Aggregate                         9,725                 10,258                  9,637                  9,352                  9,661                  9,850                  9,233                  9,030                 8,686
U.S. market share by               0.80  %                0.82  %                0.79  %                0.78  %                0.78  %                0.77  %                0.75  %                0.68  %               0.70  %
units(1)
Revenue from top-10
Redfin markets as a                  58  %                  59  %                  57  %                  61  %                  62  %                  64  %                  62  %                  63  %                 63  %
percentage of real estate
services revenue
Average number of lead            2,293                  2,640                  2,750                  2,485                  2,370                  2,456                  2,277                  1,981                 1,820

agents

RedfinNow homes sold                530                    423                    617                    600                    388                    292                    171                     83                    37

Revenue per RedfinNow $ 550,903 $ 604,120 $

608,851 $ 622,519 $ 599,963 $ 571,670 $ 525,765 $ 471,895 $ 504,730
home sold (in ones)
Mortgage originations by $ 1,557 $ 1,565 $ 159 $ 242 $ 258 $ 261 $ 227 $ 206 $ 185
dollars (in millions)
Mortgage originations by 3,720 3,860 414 591 671 749 632 570 539
units (in ones)

(1) Prior to the second quarter of 2022, we reported our U.S. market share based
on the aggregate home value of our real estate services transactions, relative
to the aggregate value of all U.S. home sales, which we computed based on the
mean sale price of U.S. homes provided by the National Association of REALTORS®
("NAR"). Beginning in the second quarter of 2022, NAR (1) revised its
methodology of computing the mean sale price, (2) restated its previously
reported mean sale price beginning from January 2020 (and indicated that
previously reported mean sale price prior to January 2020 is not comparable),
and (3) discontinued publication of the mean sale price as part of its primary
data set. Due to these changes, as of the second quarter of 2022, we report our
U.S. market share based on the number of homes sold, rather than the dollar
value of homes sold. Our market share by number of homes sold has historically
been lower than our market share by dollar value of homes sold. We also stopped
reporting the aggregate home value of our real estate services transactions.

Monthly Average Visitors


The number of, and growth in, visitors to our website and mobile application are
important leading indicators of our business activity because these channels are
the primary ways we meet customers. The number of visitors is influenced by,
among other things, market conditions that affect interest in buying or selling
homes, the level and success of our marketing programs, seasonality, and how our
website appears in search results. We believe we can continue to increase
visitors, which helps our growth, including through adding rental properties to
our website and mobile application.

Given the lengthy process to buy or sell a home, a visitor during one month may
not convert to a revenue-generating customer until many months later, if at all.

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When we refer to "monthly average visitors" for a particular period, we are
referring to the average number of unique visitors to our website and our mobile
applications for each of the months in that period, as measured by Google
Analytics, a product that provides digital marketing intelligence. Google
Analytics tracks visitors using cookies, with a unique cookie being assigned to
each browser or mobile application on a device. For any given month, Google
Analytics counts all of the unique cookies that visited our website and mobile
applications during that month. Google Analytics considers each unique cookie as
a unique visitor. Due to third-party technological limitations, user software
settings, or user behavior, it is possible that Google Analytics may assign a
unique cookie to different visits by the same person to our website or mobile
application. In such instances, Google Analytics would count different visits by
the same person as separate visits by unique visitors. Accordingly, reliance on
the number of unique cookies counted by Google Analytics may overstate the
actual number of unique persons who visit our website or our mobile applications
for a given month.

Our monthly average visitors exclude visitors to the websites and mobile
applications of Bay Equity, our mortgage business, and Rent., our rental
business.

Real Estate Services Transactions


We record a brokerage real estate services transaction when one of our lead
agents represented the homebuyer or home seller in the purchase or sale,
respectively, of a home. We record a partner real estate services transaction
(i) when one of our partner agents represented the homebuyer or home seller in
the purchase or sale, respectively, of a home or (ii) when a Redfin customer
sold his or her home to a third-party institutional buyer following our
introduction of that customer to the buyer. We include a single transaction
twice when our lead agents or our partner agents serve both the homebuyer and
the home seller of the transaction. Additionally, when one of our lead agents
represents RedfinNow in its sale of a home, we include that transaction as a
brokerage real estate services transaction.

Increasing the number of real estate services transactions is critical to
increasing our revenue and, in turn, to achieving profitability. Real estate
services transaction volume is influenced by, among other things, the pricing
and quality of our services as well as market conditions that affect home sales,
such as local inventory levels and mortgage interest rates. Real estate services
transaction volume is also affected by seasonality and macroeconomic factors.

Real Estate Services Revenue per Transaction


Real estate services revenue per transaction, together with the number of real
estate services transactions, is a factor in evaluating revenue growth. We also
use this metric to evaluate pricing changes. Changes in real estate services
revenue per transaction can be affected by, among other things, our pricing, the
mix of transactions from homebuyers and home sellers, changes in the value of
homes in the markets we serve, the geographic mix of our transactions, and the
transactions we refer to partner agents and any third-party institutional buyer.
We calculate real estate services revenue per transaction by dividing brokerage,
partner, or aggregate revenue, as applicable, by the corresponding number of
real estate services transactions in any period.

We generally generate more real estate services revenue per transaction from
representing homebuyers than home sellers. However, we believe that representing
home sellers has unique strategic value, including the marketing power of yard
signs and other campaigns, and the market effect of controlling listing
inventory.

Prior to July 2022, homebuyers who purchased their home using our brokerage
services would receive a commission refund in a substantial majority of our
markets. In July 2022, we began a pilot program in certain of those markets to
eliminate our commission refund. If this pilot is successful, we intend to
eliminate our commission refund in all markets as early as December 2022. We
expect that elimination of our commission refund in all markets will increase
our real estate services revenue per transaction.

U.S. Market Share by Units


Increasing our U.S. market share by units is critical to our ability to grow our
business and achieve profitability over the long term. We believe there is a
significant opportunity to increase our share in the markets we currently serve.

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We calculate our market share by aggregating the number of brokerage and partner
real estate services transactions. We then divide that number by two times the
aggregate number of U.S. home sales, in order to account for both the sell- and
buy-side components of each home sale. We obtain the aggregate number of U.S.
home sales from the National Association of REALTORS® ("NAR"). NAR data for the
most recent period is preliminary and may subsequently be updated by NAR.

Revenue from Top-10 Markets as a Percentage of Real Estate Services Revenue


Our top-10 markets by real estate services revenue are the metropolitan areas of
Boston, Chicago, Denver (including Boulder and Colorado Springs), Los Angeles
(including Santa Barbara), Maryland, Northern Virginia, Portland (including
Bend), San Diego, San Francisco, and Seattle. This metric is an indicator of the
geographic concentration of our real estate services segment. We expect our
revenue from top-10 markets to decline as a percentage of our total real estate
services revenue over time.

Average Number of Lead Agents


The average number of lead agents, in combination with our other key metrics
such as the number of brokerage transactions, is a basis for calculating agent
productivity and is one indicator of the potential future growth of our
business. We systematically evaluate traffic to our website and mobile
application and customer activity to anticipate changes in customer demand,
helping determine when and where to hire lead agents.

We calculate the average number of lead agents by taking the average of the
number of lead agents at the end of each month included in the period.

RedfinNow Homes Sold


The number of homes sold by RedfinNow is an indicator for investors to
understand the underlying transaction volume growth of our RedfinNow business.
This number is influenced by, among other things, the level and quality of our
homes available for sale inventory and market conditions that affect home sales,
such as local inventory levels and mortgage interest rates.

Revenue per RedfinNow Home Sold


Revenue per RedfinNow home sold, together with the number of RedfinNow homes
sold, is a factor in evaluating revenue growth. Changes in revenue per RedfinNow
home sold can be affected by, among other things, the geographic mix of home
sales, the types and sizes of homes that it had previously purchased, pricing of
homes listed for sale, and changes in the value of homes in the markets it
serves. For any period, we calculate revenue per RedfinNow home sold by dividing
revenue from sales of homes by RedfinNow, including any revenue from leasebacks,
by the number of homes sold by RedfinNow during that period.

Mortgage Originations


Mortgage originations is the volume of mortgage loans originated by our mortgage
business, measured by both dollar value of loans and number of loans. This
volume is an indicator for the growth of our mortgage business. Mortgage
originations is affected by mortgage interest rates, the ability of our mortgage
loan officers to close loans, and the number of our homebuyer customers who use
our mortgage business for a mortgage loan, among other factors.

Prior to April 1, 2022, our mortgage business consisted solely of Redfin
Mortgage, LLC. From April 1, 2022 through June 30, 2022, our mortgage business
consisted of both Bay Equity LLC and Redfin Mortgage, LLC. We dissolved Redfin
Mortgage, LLC on June 30, 2022, and since that time, our mortgage business has
consisted solely of Bay Equity LLC.

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Components of Our Results of Operations

Revenue


We generate revenue primarily from commissions and fees charged on each real
estate services transaction closed by our lead agents or partner agents, from
the sale of RedfinNow homes, from subscription-based product offerings for our
rentals business, and from the origination, sales, and servicing of mortgages.

Real Estate Services Revenue


Brokerage Revenue-Brokerage revenue includes our offer and listing services,
where our lead agents represent homebuyers and home sellers. We recognize
commission-based brokerage revenue upon closing of a brokerage transaction, less
the amount of any commission refunds, closing-cost reductions, or promotional
offers that may result in a material right. Brokerage revenue is affected by the
number of brokerage transactions we close, the mix of brokerage transactions,
home-sale prices, commission rates, and the amount we give to customers.

Partner Revenue-Partner revenue consists of fees paid to us from partner agents
or under other referral agreements, less the amount of any payments we make to
homebuyers and home sellers. We recognize these fees as revenue on the closing
of a transaction. Partner revenue is affected by the number of partner
transactions closed, home-sale prices, commission rates, and the amount we
refund to customers. If the portion of customers we introduce to our own lead
agents increases, we expect the portion of revenue closed by partner agents to
decrease.

Properties Revenue

Properties Revenue-Properties revenue consists of revenues earned when we sell
homes that we previously bought directly from homeowners and when we perform
maintenance on customers' homes. Properties revenue is recorded at closing on a
gross basis, representing the sales price of the home or maintenance performed.

Rentals Revenue

Rentals Revenue-Rentals revenue is primarily composed of subscription-based
product offerings for internet listing services, as well as lead management and
digital marketing solutions.


Mortgage Revenue

Mortgage Revenue-Mortgage revenue includes fees from the origination and
subsequent sale of loans, loan servicing income, interest income on loans held
for sale, origination of IRLCs, and the changes in fair value of our IRLCs,
forward sales commitments, loans held for sale, and MSRs.

Other Revenue


Other Revenue-Other services revenue includes fees earned from title settlement
services, Walk Score data services, and advertising. Substantially all fees and
revenue from other services are recognized when the service is provided.

Intercompany Eliminations


Intercompany Eliminations-Revenue earned from transactions between operating
segments are eliminated in consolidating our financial statements. Intercompany
transactions primarily consist of services performed from our real estate
services segment for our properties segment.

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Cost of Revenue and Gross Margin

Cost of revenue consists primarily of personnel costs (including base pay,
benefits, and stock-based compensation), transaction bonuses, home-touring and
field expenses, listing expenses, home costs related to our properties segment,
customer fulfillment costs related to our rentals segment, office and occupancy
expenses, and depreciation and amortization related to fixed assets and acquired
intangible assets. Home costs related to our properties segment include home
purchase costs, capitalized improvements, selling expenses directly attributable
to the transaction, and home maintenance expenses.

Gross profit is revenue less cost of revenue. Gross margin is gross profit
expressed as a percentage of revenue. Our gross margin has and will continue to
be affected by a number of factors, but the most important are the mix of
revenue from our relatively higher-gross-margin real estate services segment and
our relatively lower-gross-margin properties segment, real estate services
revenue per transaction, agent and support-staff productivity, personnel costs
and transaction bonuses, and, for properties, the home purchase costs.

Operating Expenses

Technology and Development


Our primary technology and development expenses are building software for our
customers, lead agents, and support staff to work together on a transaction, and
building a website and mobile application to meet customers looking to move.
These expenses primarily include personnel costs (including base pay, bonuses,
benefits, and stock-based compensation), data licenses, software and equipment,
and infrastructure such as for data centers and hosted services. The expenses
also include amortization of capitalized internal-use software and website and
mobile application development costs as well as amortization of acquired
intangible assets. We expense research and development costs as incurred and
record them in technology and development expenses.

Marketing

Marketing expenses consist primarily of media costs for online and offline
advertising, as well as personnel costs (including base pay, benefits, and
stock-based compensation).

General and Administrative


General and administrative expenses consist primarily of personnel costs
(including base pay, benefits, and stock-based compensation), facilities costs
and related expenses for our executive, finance, human resources, and legal
organizations, depreciation related to our fixed assets, and fees for outside
services. Outside services are principally comprised of external legal, audit,
and tax services. For our rentals business, personnel costs include employees in
the sales department. These employees are responsible for attracting potential
rental properties and agreeing to contract terms, but they are not responsible
for delivering a service to the rental property.

Restructuring and Reorganization

Restructuring and reorganization expenses primarily consist of employee
termination costs (including severance, retention, benefits, and payroll taxes)
associated with the restructuring and reorganization activities from our
acquisitions of Bay Equity and Rent. and from our June 2022 workforce reduction.

Interest Income, Interest Expense, Income Tax Expense, and Other (Expense)
Income, Net

Interest Income

Interest income consists primarily of interest earned on our cash, cash
equivalents, and investments, and interest income related to originated mortgage
loans.

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Interest Expense

Interest expense consists primarily of any interest payable on our convertible
senior notes and, for the three and nine months ended September 30, 2022, the
amortization of debt discounts and issuance cost related to our convertible
senior notes. See Note 15 to our consolidated financial statements for
information regarding interest on our convertible senior notes.

Interest expense also includes interest on borrowings and the amortization of
debt issuance costs related to our secured revolving credit facility and our
warehouse credit facilities. See Note 15 to our consolidated financial
statements for information regarding interest for the facility.

Income Tax (Expense) Benefit


Income tax (expense) benefit relates to the partial release of our valuation
allowance as a result of the intangible assets we acquired in connection with
acquiring Rent. and certain state income taxes.

Other (Expense) Income, Net


Other (expense) income, net consists primarily of realized and unrealized gains
and losses on investments and other assets. See Note 4 to our consolidated
financial statements for information regarding unrealized gains and losses on
our investments.

Results of Operations

The following tables set forth our results of operations for the periods
presented and as a percentage of our revenue for those periods. As a result of
our decision to wind-down RedfinNow operations, we expect the portion of
intercompany revenue and cost of revenue related to services performed from our
real estate services and other segments for our properties segment will decrease
throughout 2022 and eventually decline to zero in 2023. Given the remaining
uncertainty surrounding our plans to wind-down our RedfinNow business, financial
performance for prior and current periods may not be indicative of future
performance.

                                            Three Months Ended September 30,             Nine Months Ended September 30,
                                                2022                2021                    2022                    2021

                                                                             (in thousands)

Revenue                                    $   600,517          $  540,074          $       1,804,778          $ 1,279,708
Cost of revenue(1)                             542,440             412,772                  1,556,161              983,912
Gross profit                                    58,077             127,302                    248,617              295,796
Operating expenses
Technology and development(1)                   48,063              43,658                    149,209              112,824
Marketing(1)                                    33,748              49,143                    133,832              116,343
General and administrative(1)                   61,005              54,395                    191,704              151,352
Restructuring and reorganization                   284                   -                     18,670                    -
Total operating expenses                       143,100             147,196                    493,415              380,519
Loss from operations                           (85,023)            (19,894)                  (244,798)             (84,723)
Interest income                                  1,174                 178                      1,948                  472
Interest expense                                (5,359)             (3,672)                   (12,841)              (7,822)
Income tax (expense) benefit                      (132)                311                       (425)               5,363
Other (expense) income, net                       (905)              4,128                     (3,081)               4,099
Net loss                                   $   (90,245)         $  (18,949)         $        (259,197)         $   (82,611)


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(1) Includes stock-based compensation as follows:

                                             Three Months Ended September 30,               Nine Months Ended September 30,
                                                 2022                   2021                   2022                   2021

                                                                             (in thousands)

Cost of revenue                           $          4,387          $

3,283 $ 11,644 $ 10,019
Technology and development

                           7,371               5,455                    23,036              16,987
Marketing                                            1,028                 537                     3,024               1,615
General and administrative                           5,284               3,835                    13,968              10,817
Total stock-based compensation            $         18,070          $   13,110          $         51,672          $   39,438




                                                 Three Months Ended September 30,                   Nine Months Ended September 30,
                                                  2022                      2021                     2022                      2021

                                                                            (as a percentage of revenue)

Revenue                                               100.0  %                 100.0  %                  100.0  %                 100.0  %
Cost of revenue(1)                                     90.3                     76.4                      86.2                     76.9
Gross profit                                            9.7                     23.6                      13.8                     23.1
Operating expenses
Technology and development(1)                           8.0                      8.1                       8.3                      8.8
Marketing(1)                                            5.6                      9.1                       7.4                      9.1
General and administrative(1)                          10.2                     10.1                      10.6                     11.8
Restructuring and reorganization                        0.0                      0.0                       1.0                      0.0
Total operating expenses                               23.8                     27.3                      27.3                     29.7
Loss from operations                                  (14.2)                    (3.7)                    (13.6)                    (6.6)
Interest income                                         0.2                      0.0                       0.1                      0.0
Interest expense                                       (0.9)                    (0.7)                     (0.7)                    (0.6)
Income tax (expense) benefit                            0.0                      0.1                       0.0                      0.4
Other expense, net                                     (0.2)                     0.8                      (0.2)                     0.3
Net loss                                              (15.0) %                  (3.5) %                  (14.4) %                  (6.5) %

(1) Includes stock-based compensation as follows:

                                              Three Months Ended September 30,                 Nine Months Ended September 30,
                                                2022                     2021                    2022                     2021

                                                                        (as a percentage of revenue)

Cost of revenue                                       0.7  %                 0.6  %                    0.6  %                 0.8  %
Technology and development                            1.2                    1.0                       1.3                    1.4
Marketing                                             0.2                    0.1                       0.2                    0.1
General and administrative                            0.9                    0.7                       0.8                    0.8
Total                                                 3.0  %                 2.4  %                    2.9  %                 3.1  %


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Comparison of the Three Months Ended September 30, 2022 and 2021

Revenue

                                            Three Months Ended September 30,                            Change
                                                2022                   2021               Dollars               Percentage

                                                                   (in