COMPENSATION DISCUSSION AND ANALYSIS – Executive Summary (continued)
Significant Changes to Our Executive Compensation Program as a Result of Stockholder Engagement
The following chart describes actions taken during the last several years as a result of our engagement with stockholders:
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Category | | Actions |
Change-in-control vesting of equity awards | | Changed from single-trigger vesting to double-trigger vesting of equity awards granted to all NEOs. All currently outstanding equity awards are subject to double-trigger vesting. |
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Annual incentive performance goals | | Reduced the number of goals and made them more formulaic for the Executive Chairman and Co-CEOs, and since 2020, incorporated environmental and sustainability performance measures. For a further description, see “Corporate Performance Component of Executive Chairman’s and Co-CEOs’ 2021 Cash Incentive Awards” on page 72. |
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Disclosure of annual incentive corporate performance goals | | Disclosed weighting, goals, and actual performance for the Executive Chairman’s and the Co-CEOs’ annual cash incentive awards; see pages 72–77. |
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Disclosure of long-term incentive (“LTI”) award for performance goals related to FFO per share | | Specific metrics for FFO per share will continue to be disclosed at the end of each performance period and are included below for the grant made to Mr. Marcus in 2019. We believe that disclosure of such metrics during a three-year performance period would be inappropriate since most REITs provide only annual guidance for FFO per share. |
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Disclosure of NEO compensation program | | In addition to disclosures made for the Executive Chairman and Co-CEOs, disclosed key performance considerations underlying compensation awarded to the Other NEOs; see discussion starting on page 90. |
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Performance-based LTI program for all NEOs | | Adopted a performance program whereby each NEO receives an annual LTI award, 50% of which is eligible to vest upon achievement of TSR on a relative basis compared to the constituents of the FTSE Nareit Equity Office Index and 50% of which is eligible to vest upon achievement of TSR on an absolute basis over a three-year performance period. The shares subject to each award are also subject to a one-year holding period after vesting. |
Positive Feedback From Stockholders
For our Other NEOs, the Compensation Committee utilizes a holistic approach to annual incentive compensation. The Compensation Committee has, however, continued to consider a more formulaic approach to annual incentive compensation. The Chair of our Compensation Committee has specifically discussed the existing holistic approach with stockholders during our extensive stockholder outreach program. The feedback from stockholders consisted of the following:
•Support for our current compensation program;
•Hesitation to micromanage our business by insisting upon a rigid, formulaic approach; and
•Support for our Compensation Committee’s structuring of our executive compensation program in a manner it believes to be in the best interests of the Company.
We have also received the following positive feedback from stockholders during our ongoing engagement efforts:
•Praise for our stockholder engagement efforts and the changes to our compensation program made as a result of such engagement;
•Praise for our leadership expansion and retention of key personnel, including our NEOs;
•Appreciation for our enhanced disclosures, which we have maintained and expanded in this Proxy Statement;
•Support for our emphasis on long-term performance-based compensation;
•Support for our corporate responsibility efforts and related disclosures; and
•Appreciation for our leadership in ESG.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Compensation Governance
Our Compensation Committee
The Compensation Committee consists of three independent directors, Messrs. Hash (Chair), Cain, and Klein. The Compensation Committee administers our executive compensation program and is responsible for reviewing and approving our compensation policies and the compensation paid to our NEOs and other executive officers. The Compensation Committee has incorporated the following market-leading governance features into our executive compensation program:
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þ | Stockholder-Friendly Practices We Follow | | x | Stockholder-Unfriendly Practices We Avoid |
ü | Maintain a cap on both short-term and long-term incentive compensation payments | | x | Guaranteed bonuses |
ü | Impose a one-year, post-vesting holding period on certain long-term incentive awards | | x | Excessive perquisites |
ü | Include a “double-trigger” change-in-control provision in all equity awards granted to NEOs | | x | Excessive change-in-control or severance payments |
ü | Maintain robust director and senior officer stock ownership guidelines | | x | Tax gross-up payments |
ü | Maintain hedging and clawback policy | | x | Unrestricted pledging of the Company’s shares |
ü | Conduct an annual say-on-pay vote | | x | Hedging or derivative transactions involving the Company’s shares
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ü | Mitigate inappropriate risk-taking | | |
Compensation Philosophy
The fundamental principle that drives pay decisions of the Compensation Committee is to align pay with performance. The experience, abilities, and commitment of our NEOs (whose tenures average 19 years) provide the Company with unique skill sets in the business of owning and operating essential real estate for the broad and diverse life science, agtech, and technology industries and therefore have been and will continue to be critical to the Company’s long-term success, including the achievement of each of our key business objectives: profitability; growth in FFO per share and NAV, and Common Stock dividends per share; and creation of long-term stockholder value. The Compensation Committee believes that each NEO’s total annual compensation should vary with the performance of the Company and the performance of the individual for the year in question.
The Compensation Committee believes that our compensation program:
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CREATES | | ENSURES | | SETS | | DISTINGUISHES | | ALIGNS | | REWARDS |
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incentives for management to support our key business objectives | | a prudent use of equity | | rigorous performance goals | | between short- and long-term time horizons and objectives | | pay with performance | | our NEOs for accomplishments |
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Consistent with the Compensation Committee’s pay-for-performance philosophy, the Compensation Committee considers the Company’s financial and operational performance, each NEO’s achievement of predetermined individual performance measures, and market conditions when determining executive compensation. For 2021, the Compensation Committee used a disciplined approach for determining each NEO’s compensation, based on the following general principles:
•Base salary should generally be an important but relatively small portion of total compensation;
•Annual cash incentive awards should be performance-based;
•At least 50% of total annual compensation should be “at risk” compensation in the form of equity in order to align a significant amount of compensation with the interests of the Company’s stockholders;
•A portion of each NEO’s equity compensation should include long-term incentive awards that vest solely upon the achievement of performance conditions; and
•Each NEO’s total compensation should include an evaluation of the officer’s individual performance, position, tenure with the Company, experience, expertise, leadership, management capability, and contribution to profitability, growth in FFO per share and NAV, Common Stock dividends per share, and long-term stockholder value.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
As described above, for our Other NEOs, the Compensation Committee has continued to consider a more formulaic approach to annual incentive compensation. The Chair of our Compensation Committee has specifically discussed the existing holistic approach with stockholders during our extensive stockholder outreach program. The feedback from stockholders consisted of the following:
•Support for our current compensation program;
•Hesitation to micromanage our business by insisting upon a rigid, formulaic approach; and
•Support for our Compensation Committee’s structuring of our executive compensation program in a manner it believes to be in the best interests of the Company.
For 2021, our Compensation Committee continued to take the same comprehensive and holistic approach that has been successful and that it believes has led to retaining the team of NEOs with significant tenure with the Company who have been and will continue to be critical to our long-term success.
The key attributes of this approach are as follows:
•Holistic review — The Compensation Committee performs a holistic review of each NEO’s performance and does not assign specific weights to any particular factor.
•Reflection of corporate and individual performance — Compensation is not based on a rigid formula, but rather reflects individual and corporate performance; each NEO’s total annual compensation varies with our performance for the year in question.
•Effective retention — Each NEO has unique skills in the business of owning and operating essential real estate for the broad and diverse life science, agtech, and technology industries. These skills are easily transferable to a variety of direct competitors, as well as others. However, our NEOs’ tenures with the Company average 19 years, which our Compensation Committee attributes, in part, to an effective executive compensation program.
Role of the Compensation Consultant
The Company continued in 2021 to engage FTI, an external compensation consultant that specializes in the real estate industry and has been engaged by the Company for several years, to review our executive compensation program and, if appropriate, to recommend changes to ensure a fair, reasonable, and balanced compensation program for our NEOs that motivates and rewards performance while closely aligning the interests of our NEOs with those of our stockholders. FTI also reviewed the Company’s disclosure of various compensation and benefits payable to each NEO upon certain termination events and provided compensation data and recommendations to the Board. The Compensation Committee has considered and assessed all relevant factors, including but not limited to those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Exchange Act, that could give rise to a potential conflict of interest with respect to FTI’s work. The Compensation Committee determined, based on its analysis of these factors, that the work of FTI, and the individual compensation advisors employed by FTI as compensation consultants, does not create any conflict of interest.
Role of Our Named Executive Officers
Mr. Marcus reviews in depth the performance of our Co-CEOs and the Other NEOs with the Compensation Committee and makes compensation recommendations to the Compensation Committee for its review and final determination. The NEOs and the Company’s finance and talent management teams provide market and Company-specific information to the Compensation Committee that is used in determining each NEO’s compensation in light of the Company’s relative and absolute performance and individual contributions.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Peer Analysis
2021 Peer Group
The Compensation Committee gathers and reviews information about the compensation program and processes of other publicly traded REITs as an informal “market check” of compensation practices, salary levels, and target incentive levels. In reviewing this information, the Compensation Committee considers whether its compensation decisions are consistent with market practices. The Compensation Committee evaluates compensation primarily on the corporate objectives discussed above under “Compensation Philosophy” on page 66, with a comparison to peers being just one of the factors considered.
In selecting a peer group, the Compensation Committee focused first on our direct competitors, which are the REITs that own office/laboratory properties. Because we only had four direct competitors in our complex real estate asset class, the Compensation Committee next added REITs with which we compete for talent, acquisitions, and tenants, and whose total assets, total revenues, and equity capitalization are generally no less than 0.5 times and generally no greater than 2.5 times ours. Our peer group for 2021 (our “2021 Peer Group”) consisted of the following companies:
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● | Boston Properties, Inc.*^ | ● | Hudson Pacific Properties, Inc.** | ● | Prologis, Inc.**^ |
● | Douglas Emmett, Inc.** | ● | Kilroy Realty Corporation* | ● | SL Green Realty Corp.** |
● | Healthpeak Properties, Inc.*^ | ● | Paramount Group, Inc.** | ● | Ventas, Inc.*^ |
* Direct competitor (peer company that owns office/laboratory properties).
** Indirect competitor (peer company with which we compete for talent, acquisitions, and tenants).
^ S&P 500 REIT.
2021 Alexandria Rankings Relative to Our 2021 Peer Group
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Three-year average NEO total compensation percentile ranking within our 2021 Peer Group(6) (compensation of 4 out of 9 peers is consistent with or exceeds Alexandria’s) | 56 | % |
(1)As of December 31, 2021.
(2)For the year ended December 31, 2021.
(3)Represents the year ended December 31, 2021, compared to the year ended December 31, 2018.
(4)For information on the Company’s definitions and a reconciliation from the most directly comparable GAAP measures, see “Non-GAAP Measures and Definitions” under Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
(5)Based on top 10 tenants that are investment-grade or publicly traded large cap companies, as reported by the Company and each company in our 2021 Peer Group as of December 31, 2021. Excludes Douglas Emmett, Inc., which does not disclose its top 10 tenants.
(6)Represents 2021 total compensation for Alexandria and 2020 total compensation for our peer group, the most recently publicly available information at the time of publishing of our 2022 proxy statement. In addition, it assumes that compensation within 5% is consistent with Alexandria’s compensation.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Key Elements of the Compensation Program
Our executive compensation program consists of three principal components, summarized in the table below, that we believe together emphasize long-term performance and creation of long-term stockholder value. The percentages in the table below reflect the actual cash incentives paid and the grant date fair value of equity awards, in each case as reported in our “Summary Compensation Table” for 2021 on page 111.
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Compensation | | What We Pay | | Why We Pay It |
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FIXED | Short-Term | | Base Salary | ●
| The Compensation Committee views base salary as the fixed compensation that is paid for ongoing performance throughout the year and that is required to attract, retain, and motivate Company executives. |
| | ● | The base salaries of our NEOs are determined in consideration of their position, responsibilities, personal expertise, and experience, as well as the prevailing base salaries at the Company and elsewhere for similar positions. |
| ● | NEOs are eligible for periodic increases in their base salary as a result of Company performance and the performance of the NEOs, including leadership, contribution to Company goals, and stability of operations. |
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AT-RISK | Mid-Term | | Annual Cash Incentive Awards1 | ● | Annual cash incentives for NEOs reflect the Compensation Committee’s belief that a significant portion of the annual compensation of each NEO should be “at risk” and therefore contingent upon the performance of the Company, as well as the individual contribution of each NEO. |
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| ● | Annual cash incentives further align NEOs’ interests with those of stockholders and help the Company attract, retain, and motivate executive talent. |
| ● | Annual cash incentives awarded to Executive Chairman and Co-CEOs are subject to a maximum of 225% and Other NEOs to a maximum of 300% of their respective base salaries. |
Long-Term | | Restricted Stock Awards | ● | Equity compensation is designed to align the interests of NEOs and other employees with the interests of stockholders through growth in the value of the Company’s Common Stock. |
| | ● | As determined by the Compensation Committee, the Company awards restricted stock as long-term incentives to motivate, reward, and retain NEOs and other employees. |
| ● | Restricted stock awards are utilized because their ultimate value depends on the performance of the Company’s future stock price, which provides motivation through variable “at risk” compensation and direct alignment with stockholders. |
| ● | A portion of each NEO’s compensation includes long-term incentive awards that vest solely upon the achievement of performance conditions. |
| ● | Regular long-term equity grants ensure competitive compensation opportunities. |
(1)Refer to “Summary Compensation Table” on page 111 for the detail of each NEO’s annual cash incentive award.
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| | = Executive Chairman and Co-CEOs | |
| = Other NEOs | |
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COMPENSATION DISCUSSION AND ANALYSIS (continued)
2021 Compensation Decisions
Base Salaries
The base salary for each NEO is determined by the Compensation Committee. The Compensation Committee decides whether to adjust compensation based on a wide range of factors relating to both Company and individual performance. For 2021, the Compensation Committee approved the following base salaries:
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Name | | Position | | 2021 Base Salary | | 2020 Base Salary | | % Increase(1) |
Joel S. Marcus | | Executive Chairman and Founder | | $ | 1,105,000 | | | $ | 1,080,000 | | | 2.3 | % | |
Peter M. Moglia | | Co-Chief Executive Officer and Co-Chief Investment Officer | | $ | 690,000 | | | $ | 675,000 | | | 2.2 | % | |
Stephen A. Richardson | | Co-Chief Executive Officer | | $ | 690,000 | | | $ | 675,000 | | | 2.2 | % | |
Dean A. Shigenaga | | President and Chief Financial Officer | | $ | 655,000 | | | $ | 640,000 | | | 2.3 | % | |
Daniel J. Ryan | | Co-Chief Investment Officer and Regional Market Director – San Diego | | $ | 650,000 | | | $ | 635,000 | | | 2.4 | % | |
Hunter L. Kass | | Executive Vice President – Regional Market Director – Greater Boston | | $ | 500,000 | | | N/A(2) | | N/A(2) | |
John H. Cunningham | | Executive Vice President – Regional Market Director – New York City | | $ | 535,000 | | | $ | 525,000 | | | 1.9 | % | |
(1)Base salary increase reflected cost-of-living adjustment.
(2)Mr. Kass became an NEO in 2021.
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400 Dexter Avenue North, Lake Union, Seattle |
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Annual Cash Incentive Awards for Executive Chairman and Co-CEOs
Structure and Target Value of Executive Chairman’s and Co-CEOs’ 2021 Cash Incentive Awards
The annual cash incentive awards for Messrs. Marcus, Moglia, and Richardson are based upon achievement of predetermined corporate and individual goals, where 48% of their annual cash incentive award is based upon the achievement of predetermined corporate performance measures, 12% is based upon the achievement of predetermined environmental and sustainability goals, and 40% is based upon the achievement of predetermined individual performance measures. The Compensation Committee believes this mix is appropriate because it balances the teamwork and common purpose necessary to maximize corporate success while motivating each executive to achieve the individual objectives appropriate for their respective positions, as described in more detail below. Annual cash incentives awarded to our Executive Chairman and Co-CEOs are subject to a maximum of 225% of their respective base salaries. For 2021, Messrs. Marcus, Moglia, and Richardson were eligible for the following threshold, target, and maximum percentages of their base salaries:
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| | | | | | | Amount of 2021 Cash Incentive Award |
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Level | | Percentage of Base Salary | | Mr. Marcus | | Mr. Moglia | | Mr. Richardson |
| Threshold | | | 75 | % | | | $ | 828,750 | | | $ | 517,500 | | | $ | 517,500 | |
| Target | | | 150 | % | | | $ | 1,657,500 | | | $ | 1,035,000 | | | $ | 1,035,000 | |
| Maximum | | | 225 | % | | | $ | 2,486,250 | | | $ | 1,552,500 | | | $ | 1,552,500 | |
In comparison to the target annual incentive award (as a percentage of base salary) for each CEO within our 2021 Peer Group, the target bonus amounts for our Executive Chairman and Co-CEOs are below the average and median of CEOs of companies in our 2021 Peer Group, as disclosed in proxy statements filed by the peer companies in 2021:
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Company | | Target as a Percentage of Base Salary | | Target Bonus | | Max as a Percentage of Base Salary | | Max Bonus | |
Boston Properties, Inc. | | 261% | | $ | 2,350,000 | | | 392% | | $ | 3,525,000 | | |
Kilroy Realty Corporation | | 245% | | $ | 3,000,000 | | | 367% | | $ | 4,500,000 | | |
Ventas, Inc. | | 200% | | $ | 2,150,000 | | | 360% | | $ | 3,870,000 | | |
SL Green Realty Corp. | | 200% | | $ | 2,500,000 | | | 300% | | $ | 3,750,000 | | |
Healthpeak Properties, Inc. | | 200% | | $ | 2,300,000 | | | 300% | | $ | 3,450,000 | | |
Hudson Pacific Properties, Inc. | | 175% | | $ | 1,662,500 | | | 225% | | $ | 2,137,500 | | |
Paramount Group, Inc. | | 150% | | $ | 1,650,000 | | | 225% | | $ | 2,475,000 | | |
Prologis, Inc. | | 150% | | $ | 1,500,000 | | | 300% | | $ | 3,000,000 | | |
Douglas Emmett, Inc. | | N/A(1) | | N/A(1) | | N/A(1) | | N/A(1) | |
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Average (excluding Alexandria) | | 198% | | $ | 2,139,063 | | | 309% | | $ | 3,338,438 | | |
50th Percentile (excluding Alexandria) | | 200% | | $ | 2,225,000 | | | 300% | | $ | 3,487,500 | | |
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(1)Not disclosed by company and therefore excluded from average and median.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Corporate Performance Component of Executive Chairman’s and Co-CEOs’ 2021 Cash Incentive Awards
Messrs. Marcus’s, Moglia’s, and Richardson’s employment agreements provide that each is eligible to receive an annual cash incentive award, 60% of which is payable based upon the achievement of rigorous annual corporate performance criteria established by the Compensation Committee (such portion of the annual cash incentive award, the “Corporate Performance Component”). For 2021, the Compensation Committee determined that, with respect to the Corporate Performance Component of Messrs. Marcus’s, Moglia’s, and Richardson’s annual cash incentive awards, (i) 80% would be based on the achievement of predetermined rigorous corporate performance measures, weighted 50% toward balance sheet management goals and 50% toward profitability and NAV-related goals, and (ii) 20% would be based on the achievement of predetermined environmental and sustainability goals. The following section focuses on the predetermined corporate performance measures, and the section thereafter focuses on the predetermined environmental and sustainability goals.
2021 Corporate Performance Measures: Balance Sheet Management Goals and Profitability and NAV-Related Goals
The corporate performance measures for each category were established based upon a comprehensive review of the Company’s strong multiyear financial and operating performance and 2021 budgets. The 2021 corporate performance goals set by the Compensation Committee included annual balance sheet management, profitability, and NAV-related goals. In setting the threshold, target, and maximum achievement levels for each 2021 corporate performance goal, the Compensation Committee considered, among other things, the Company’s historical performance against the achievement levels previously set for each annual cash incentive award metric, the importance of setting rigorous target achievement levels that meaningfully align with our key business objectives, and our 2021 Peer Group’s relative performance, as compared to the Company’s performance, in 2020 with respect to each annual cash incentive award metric. As shown in the tables on the subsequent pages, the Company was generally required to perform at or above our peer companies’ median performance in 2020 in order for Messrs. Marcus, Moglia, and Richardson to earn a payout at the target achievement level.
Ultimately, the Compensation Committee decided to set the target achievement levels for the 2021 corporate performance goals as described in the following pages for the reasons below:
•Messrs. Marcus, Moglia, and Richardson, as well as our Other NEOs, have continued to consistently generate strong operating and financial year-over-year performance on behalf of the Company, so the Compensation Committee decided to continue setting rigorous yet attainable goals that properly incentivize the achievement of this high level of performance year after year.
•The Compensation Committee’s holistic view of the annual cash incentive award metrics, as well as its strong understanding of how these metrics operate in the aggregate to contribute to both strong financial and operating performance and long-term TSR performance, led the Compensation Committee to conclude that the target achievement level for each performance goal was not only rigorous, but also directly aligned with our key business objectives and thus stockholder value creation.
•The 2021 corporate performance goals were based, in part, on the following general principles:
•Recognition of consistently strong long-term performance as opposed to strong growth following periods of significant decline in performance;
•Recognition that many other qualitative goals for each NEO also contribute to both strong financial and operating performance and long-term TSR performance (such as the environmental and corporate responsibility initiatives included in our strategic core business verticals disclosed on pages 4–20); and
•Alignment with strategic goal of maintaining attractive long-term cost of capital to support strategic long-term growth.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
2021 Balance Sheet Management Goals
The 2021 balance sheet management goals established by the Compensation Committee were strategically aligned with the following objectives:
•Liquidity, net debt to Adjusted EBITDA, fixed-charge coverage ratio, and appropriate execution of capital plan represent key credit considerations for our overall credit ratings from Moody’s Investors Service and S&P Global Ratings; and
•Balance sheet management goals are generally based upon December 31, and therefore, goals reflect flexibility to accommodate strategic decisions that may temporarily impact goals based upon a very narrow point in time. For example, an important real estate acquisition may arise late in the calendar year, and although the acquisition may be strategic and focused on generating long-term value, the timing of the real estate acquisition may result in slight temporary adjustments to our balance sheet metrics with no change in our long-term balance sheet management goals.
The following table reflects the threshold, target, and maximum achievement levels established by the Compensation Committee, as well as the relative weighting and actual achievement of each of our 2021 balance sheet management goals. Despite the widespread economic and financial stress caused by the COVID-19 pandemic, the Compensation Committee set 2021 goals above our peer companies’ median performance in 2020, as reflected in the following table:
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Alexandria’s Actual 2021 Performance |
| |
Peers’ 2020 Median Performance |
(Target Achievement Level Above Peer Median Performance) |
(1)This goal was based upon the strategy to maintain a range of liquidity from one to two years primarily to fund construction and normal debt maturities.
(2)These goals were established to drive improvement in the Company’s credit profile. Net debt to Adjusted EBITDA is calculated using the lower of the three months ended December 31, 2021, annualized, or trailing twelve months. Fixed-charge coverage ratio is calculated using the higher of the three months ended December 31, 2021, annualized, or trailing twelve months.
(3)This goal provided the Compensation Committee discretion to evaluate how well the executives executed strategic capital decisions through December 31, 2021, taking into consideration appropriate adjustment in strategy to address changes in the financial and debt and equity capital markets, including the balance of pricing, tenure, capital structure, long-term capital alternatives, and maturity profile. For information regarding each executive’s achievement of this goal in 2021, refer to discussion below under “Goal: Raising capital and further strengthening our long-term capital structure” on page 88.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
2021 Profitability and NAV-Related Goals
Profitability and NAV-related goals are specific to each performance year and therefore will vary from year to year. Key considerations each year include, among others, key leasing to high-quality tenants, some of which may not be investment-grade rated, occupancy and temporary vacancy during the year related to re-tenanting space, and the volume of contractual lease expirations at the beginning of each year. We also consider the consistency of profitability and NAV-related goals over time as opposed to strong growth after periods of significant decline in profitability and NAV.
The 2021 profitability and NAV-related goals established by the Compensation Committee were strategically aligned with the following objectives:
•Recognition that our NEOs have achieved strong operating and financial performance over multiple years, as opposed to outperformance following years of underperformance, and recognition of the need for flexibility to accommodate short-term changes without impacting long-term goals (for example, our tenant roster remains an industry-leading tenant roster, and from time to time, we anticipate a short-term slight reduction in investment-grade tenants);
•High-quality and stable cash flows from a REIT industry-leading, high-quality tenant roster with 51% of annual rental revenue from investment-grade or large equity cap entities as of December 31, 2021;
•Consistency of net operating income growth over multiple years, as opposed to strong growth in one year following periods of significant decline in growth;
•Leasing volume to support continued growth in net operating income, stability of cash flows, and 10-year average occupancy of 96% as of each December 31 for the last 10 years;
•Adjusted EBITDA margin for the Company that ranks among the top of our 2021 Peer Group and is consistent with the strength of our credit profile; and
•Flexibility in a particular year while maintaining a strong long-term Adjusted EBITDA margin (see our relative ranking among our 2021 Peer Group on page 68).
As discussed above, a critical component of the Compensation Committee’s process continues to be maintaining active ongoing engagement with our stockholders. In early 2022, in its evaluation of annual corporate performance criteria related to our Executive Chairman’s and Co-CEOs’ annual cash incentive awards for performance year 2022, the Compensation Committee considered the feedback received from our stockholder outreach discussions in 2021. As a result, the Compensation Committee refined certain profitability and NAV-related performance goals for 2022 to avoid potential duplication of the performance goals while maintaining a formulaic approach to the revised components. We will disclose the revised goals in our 2023 proxy statement, as we believe that providing disclosures before the end of the performance period would be competitively harmful.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
The following table reflects the threshold, target, and maximum achievement levels established by the Compensation Committee, as well as the relative weighting and actual achievement of each of our 2021 profitability and NAV-related goals. The Compensation Committee set 2021 goals above our peer companies’ median performance in 2020, as reflected in the following table:
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Alexandria’s Actual 2021 Performance |
| |
Peers’ 2020 Median Performance |
(Target Achievement Level Above Peer Median Performance) |
(1)This metric is not disclosed by peers, and therefore our peers’ 2020 median performance is not provided.
(2)These goals were established based upon maintaining a REIT industry-leading percentage. Investment-grade or publicly traded large cap tenants represent tenants that are investment-grade or publicly traded companies with an average daily market capitalization greater than $10 billion for the twelve months ended December 31, 2021, as reported by Bloomberg Professional Services.
(3)The maximum goal of >2.750 million RSF leased reflected the minimal contractual lease expirations in 2021 of 1.9 million RSF as of the beginning of 2021 and limited space to lease related to new Class A buildings that were under construction as of the beginning of 2021.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
2021 Environmental and Sustainability Performance Goals
As discussed above, the remaining 20% of the Corporate Performance Component of Messrs. Marcus’s, Moglia’s, and Richardson’s 2021 annual cash incentive awards is based on the achievement of predetermined environmental and sustainability goals. Specifically, our Compensation Committee established the following goals for these NEOs’ 2021 annual cash incentive awards, which were designed to further our sustainability mission of making a positive impact on society by developing and operating efficient buildings, managing climate risk, and advancing human health and nutrition.
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| 2021 Environmental and Sustainability Performance Metric | | Alexandria’s Actual 2021 Performance |
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| Continued pursuit of LEED certification for new Class A development and redevelopment properties | | In our portfolio of 414 properties held as of December 31, 2021, we increased the number of properties certified or pursuing LEED certifications by 22% during 2021. |
| Continued progress on overall 2025 quantitative environmental goals, as outlined in the Company’s 2020 Environmental, Social & Governance Report, with a focus on the management of carbon emissions, energy consumption, potable water usage, and waste diversion | | We are on pace to reach our 2025 environmental goals for carbon emissions, energy consumption, potable water usage, and waste diversion. As of December 31, 2021, for buildings in operation, we reduced like-for-like carbon emissions by 19.5%, energy consumption by 19.4%, and potable water usage by 23.1% relative to a 2015 baseline, and achieved a 48.1% waste diversion rate in 2021. For more detail, see the “2025 Goals and Progress for Buildings in Operation” chart on page 11. Environmental data for fiscal year 2021 in the aforementioned chart received independent limited assurance from DNV Business Assurance USA, Inc. |
Environmental and Sustainability Goals | |
| | | We achieved the following in our 2021 GRESB Real Estate Assessment: (i) Global Sector Leader and a 5 Star rating — GRESB’s highest rating — in the Diversified Listed sector for buildings in development, (ii) #2 ranking in the U.S. in the Science & Technology sector for buildings in operation, and (iii) our fourth consecutive “A” disclosure score.
We received an ESG Rating of “A” from MSCI as a result of our continued advancement of green building opportunities, talent management programs, and below-industry-average turnover rate, among other achievements. Our MSCI ESG Rating of “A” is in the top 10% among all publicly traded U.S. equity REITs.
325 Binney Street, on our Alexandria Center at One Kendall Square mega campus in Cambridge, is expected to yield a 95% reduction in fossil fuel consumption. The project is targeting LEED Platinum Core & Shell and LEED Zero Energy certifications. 100% of the building’s electricity consumption will be powered by on- and off-site renewable energy.
685 Gateway Boulevard, on our Alexandria Technology Center® – Gateway mega campus in South San Francisco, is on pace to achieve Zero Energy Certification from the International Living Future Institute. Upon certification, it will be one of approximately 80 Zero Energy certified projects in the world.
We began the development of science-based targets for emissions reduction and a strategy for renewable electricity and progressed on the analysis of our climate-related risk. |
| Continued pursuit of Fitwel and WELL certifications for healthy buildings, which recognize industry-leading approaches to the health, wellness, and productivity of the Company’s employees and tenants in the workplace | | In our portfolio of 414 properties held as of December 31, 2021, we increased the number of properties certified or pursuing Fitwel and WELL certifications by 59% and 33%, respectively, during 2021. |
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Based on its assessment of the achievements summarized in the table above, in early 2022 our Compensation Committee determined that Messrs. Marcus, Moglia, and Richardson had earned 225% of the target level of the environmental and sustainability metric of their 2021 annual cash incentive awards.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
2021 Cash Incentive Award Decisions for Messrs. Marcus, Moglia, and Richardson
As discussed above, the Company has delivered strong multiyear operating and financial performance, including in 2021. Our TSR of 28.1%, 109.0%, and 130.1% for the one-, three-, and five-year periods ended December 31, 2021, respectively, significantly exceeded the average TSR of our nine peers and was higher than the TSR of various indices — including the FTSE Nareit Equity Office Index and the Russell 2000 Index. See page 63 for more information.
Due to the continued strong operating and financial performance in 2021, the achievement of the corporate performance goals at the maximum level for all 10 goals, the significant achievement of the environmental and sustainability performance goals discussed above, and the continued strong individual performance of Messrs. Marcus, Moglia, and Richardson in 2021, as discussed below, which resulted in each NEO earning the maximum achievement level with respect to the individual performance component of their respective 2021 annual cash incentive awards, the Compensation Committee awarded Mr. Marcus an annual cash incentive award of $2,486,250 and Messrs. Moglia and Richardson each an annual cash incentive award of $1,552,500.
Individual Performance Component of Executive Chairman’s and Co-CEOs’ 2021 Cash Incentive Awards
Messrs. Marcus’s, Moglia’s, and Richardson’s employment agreements also provide that 40% of each of their annual cash incentive awards be based upon the achievement of predetermined individual performance measures, which are to be established each year by the Compensation Committee. As described further below, the Compensation Committee established individual goals for these NEOs for 2021 that align with the Company’s key business objectives of creating value for, and promoting the interests of, our stockholders.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
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COMPENSATION DISCUSSION AND ANALYSIS (continued)
(1)Represents total equity capitalization for all publicly traded U.S. REITs, from Bloomberg Professional Services as of December 31, 2021. Alexandria’s total equity capitalization is calculated using shares outstanding and the closing stock price as of December 31, 2021.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
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COMPENSATION DISCUSSION AND ANALYSIS (continued)
COMPENSATION DISCUSSION AND ANALYSIS (continued)
(1)Source: Barron’s, “10 Real Estate Companies That Are Both Greener and More Profitable,” February 19, 2022.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
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Mr. Marcus’s 2021 Goals and Assessment of 2021 Performance |
The 2021 individual goals established for Mr. Marcus by the Compensation Committee focused on key leadership in the continued pursuit of maximizing long-term stockholder value. The performance goals established for Mr. Marcus in early 2021, and the achievement of each goal determined in early 2022, were as follows:
Goal: Direct the long-term strategy of the Company and oversee strategic business matters
Mr. Marcus led the execution of the following initiatives focused on the long-term strategy of the Company:
•Development of a five-year strategic growth framework through which the Company met and surpassed its goal to double annual rental revenues by 2022, compared to 2017, during the annualized three months ended September 30, 2021.
•Increase in the Company’s total asset base from 29.6 million SF in 2017 to 67.0 million SF in 2021.
•Issuance in 2021 of unsecured senior notes aggregating $1.75 billion with a weighted-average interest rate of 2.51%, representing the largest bond offering in Company history at the time of issuance.
•Achievement of the highest annual leasing volume in Company history in 2021, or approximately double the annual leasing volume of any of the past several years, driven by historic demand for Alexandria’s world-class lab space.
•Deepening of the strategic relationship with Moderna, which led to over 1 million RSF leased during 2021, including the largest life science lease in Company history at 325 Binney Street aggregating 462,100 RSF and long-term renewals aggregating 683,513 RSF at three existing strategic locations in the Greater Boston market.
•Oversight of strategic growth initiatives in each region, including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle; oversight of the Company’s New York City regional strategic operations and expansion.
•Execution of the strategic agtech business initiative and the expansion of the Alexandria Center® for AgTech – Research Triangle, the state-of-the-art, fully integrated, multi-tenant, amenity-rich agtech R&D and greenhouse campus.
•Achievement of growth in our highly leased value-creation pipeline of current and near-term projects that are under construction or that will commence construction over the next six quarters, which is expected to generate greater than $610 million of incremental annual rental revenue, primarily commencing from the first quarter of 2022 through the fourth quarter of 2024.
•Implementation and oversight of the differentiated business strategy that drove the Company’s strong multiyear operating and financial performance.
•Creation, operation, and growth of the Company’s mission-critical proprietary products — including Alexandria LaunchLabs, the premier life science and agtech company startup platform; Alexandria Seed Capital platform, an innovative model for seed-stage investments; Alexandria Science Hotel®, step-up space from Alexandria LaunchLabs; Alexandria AscentLabs™ (known as Alexandria GradLabs® in San Diego), a dynamic life science growth platform for post-seed-stage life science companies; Alexandria Innovation Suites, collaborative space for mature life science and technology entities; and Alexandria VCSuites®, high-end suites for leading venture capitalists — and campus amenities.
Goal: Lead the venture investments strategic core business vertical and life science ecosystem outreach
Mr. Marcus led the execution of the venture investments core business vertical focused on providing long-term strategic investment capital to innovative life science, agrifoodtech, climate change, and technology entities developing transformative therapies and technologies. Alexandria Venture Investments was recognized for a fifth consecutive year as the most active corporate investor in biopharma by new deal volume by Silicon Valley Bank in its “Healthcare Investments and Exits: 2022 Annual Report” and for a second consecutive year as one of the top five most active U.S.-based investors in agrifoodtech by AgFunder in its “2022 AgriFoodTech Investment Report.” During 2021, Alexandria’s key life science investment areas included infectious diseases, neuroscience, and next-generation medicines platforms. Alexandria Venture Investments also committed over $100 million to innovative investments focused on developing groundbreaking technologies to mitigate the effects of climate change. As of December 31, 2021, Alexandria’s unrealized gains on non-real estate investments aggregated $797.7 million.
Goal: Lead the thought leadership strategic core business vertical
Mr. Marcus led the Alexandria Summit® events in 2021, which are focused on convening a diverse group of visionary partners and key stakeholders from the biopharma, technology, agribusiness, medical, academic, venture and private equity capital, philanthropy, patient advocacy, and government communities to address critical challenges to advancing human health.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Goal: Oversee and inspire leadership, culture, management, mission, and retention
Mr. Marcus led the training, education, mentoring, growth, and retention of our entire team with special emphasis on promoting diversity in leadership. Mr. Marcus managed the career development of the Company’s NEOs and senior officers. Leadership, mentoring, and developing careers of the NEOs and senior officers are of strategic importance to Mr. Marcus and the Board, as well as to the long-term success of the Company. Mr. Marcus has consistently been effective in this important area, as evidenced by our low attrition rate and history of finding highly qualified candidates for promotion from within our strong bench. The Other NEOs have an average tenure with the Company of approximately 15 years. Executive management and senior management have an average tenure with the Company of approximately 12 years.
Goal: Lead the corporate responsibility strategic core business vertical with emphasis on environmental and social responsibility and philanthropy
During 2021, we achieved the following in our 2021 GRESB Real Estate Assessment: (i) Global Sector Leader and a 5 Star rating — GRESB’s highest rating — in the Diversified Listed sector for buildings in development, (ii) #2 ranking in the U.S. in the Science & Technology sector for buildings in operation, and (iii) our fourth consecutive “A” disclosure score. In addition, we achieved the Fitwel Viral Response Certification with Distinction, the highest certification level within the Fitwel Viral Response module, for the second consecutive year as well as back-to-back Fitwel Impact Awards for the highest Fitwel certification of all time in 2020 and 2021 for our Alexandria LaunchLabs at the Alexandria Center at One Kendall Square. Alexandria was also ranked #5 in Barron’s publication of the “10 Real Estate Companies That Are Both Greener and More Profitable” on February 19, 2022.
Mr. Marcus had the honor of participating in a virtual fireside chat to kick off the “Washington State Life Science Summit: Celebrating Success and Sustaining Our Growth,” during which he discussed the future of the life science industry in Seattle. He also participated as panel member at the Triangle Business Journal’s “State of RTP (Research Triangle Park).” Mr. Marcus was joined by other executives from technology, real estate, science, and artificial intelligence sectors to discuss opportunities and challenges facing industries in Research Triangle as the region continues to grow.
Mr. Marcus led our pioneering social responsibility efforts, which are fundamental to the fulfillment of our mission. Our social responsibility initiatives are aimed at driving forward significant collaborative and innovative solutions to address some of today’s most urgent and widespread challenges, including disease and other threats to human health, hunger and food insecurity, deficiencies in support services for the military, the opioid epidemic, educational disparities, and homelessness. To further expand such impact, Mr. Marcus and Alexandria established two new social responsibility pillars, with the first addressing the growing mental health crisis by focusing on helping children cope with the loss of a parent or family member to suicide and the second supporting museums to preserve American history and pay tribute to our greatest heroes.
Mr. Marcus also led our partnership with Verily in the creation OneFifteen, an innovative non-profit healthcare system dedicated to the full and sustained recovery of people living with opioid addiction. Together with Verily, we pioneered a fully integrated campus in Dayton, Ohio to house a novel data-driven comprehensive model encompassing a full continuum of care with dedicated facilities and services for crisis stabilization, medication-assisted treatment, residential housing, peer support, family reunification, workforce development, job placement, and community transition. In September 2021, OneFifteen, received an honorable mention in Fast Company’s 2021 Innovation by Design Awards in the Impact category, which recognizes designs that have a major cultural or social impact, and in October 2021, OneFifteen celebrated its second anniversary. Since opening to patients in the fall of 2019, OneFifteen has treated over 4,000 patients and conducted over 11,500 telehealth visits.
Mr. Marcus and Alexandria played a critical role in the Emily Krzyzewski Center’s Game Changer Campaign, which raised nearly $19 million. The campaign funds made the Center’s 7,500 SF facility expansion possible. Opening in November 2021, the building expansion adds much-needed classroom space and advising rooms to better serve the growing number of students attending the Center’s programs, which prepare students for life-changing college access while bolstering their achievement and developing their character and leadership skills.
Mr. Marcus was honored for Distinction in Civic Engagement and Renewal by the National September 11 Memorial & Museum. This prestigious recognition highlights his meaningful contributions to the 9/11 Memorial & Museum and his unwavering support of its mission. As an active supporter of the Memorial & Museum since it opened in 2014, Mr. Marcus has served as a member of its board of trustees since his appointment in 2018 by former New York City Mayor Michael Bloomberg.
We also continued operations of a donated headquarters space for The Honor Foundation, a unique transition program with an aim to prepare the men and women of the Special Operations Forces realize their maximum potential after their military service career and successfully transition to the private-sector workforce.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
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Messrs. Moglia’s and Richardson’s 2021 Goals and Assessment of 2021 Performance |
The 2021 individual goals established for Messrs. Moglia and Richardson by the Compensation Committee focused on key leadership in the continued pursuit of maximizing long-term stockholder value. Mr. Moglia has primary oversight and leadership responsibilities for New York City, San Diego, Seattle, and Maryland, while Mr. Richardson has primary oversight and leadership responsibilities for the San Francisco Bay Area, Greater Boston, and Research Triangle. The performance goals established for Messrs. Moglia and Richardson in early 2021, and the achievement of each goal determined in early 2022, were as follows:
Goal: Supporting our selective development strategy focused on high-quality properties that are well positioned within our identified core markets, have high-quality tenants in place, have a high pre-leasing and/or high leased percentage, offer attractive returns on our investments, and drive the cost-effective completion of the Company’s development and redevelopment properties
Messrs. Moglia and Richardson provided leadership, oversight, and strategic execution of the Company’s selective construction of new Class A properties through developments and redevelopments on unique collaborative life science, agtech, and technology campuses in urban innovation clusters. Additionally, Messrs. Moglia and Richardson provided leadership and oversight of the leasing strategy for these properties focused on high-quality tenants in order to drive high-quality cash flows and attractive returns on the Company’s investment.
•Increase in the Company’s total asset base through a disciplined strategy from 29.6 million SF in 2017 to 67.0 million SF in 2021.
•The Company’s execution of long-term leases aggregating 9.5 million RSF, including 3.9 million RSF related to the development and redevelopment of new Class A properties, representing the highest annual total leasing volume in Company history. During the three months ended December 31, 2021, the Company executed long-term leases aggregating 4.1 million RSF, shattering our previous record of total quarterly leasing volume.
•Furtherance of the Company’s strategic relationship with Moderna, which led to over 1 million RSF leased during 2021, including the largest life science lease in Company history at 325 Binney Street aggregating 462,100 RSF and long-term renewals aggregating 683,513 RSF at three existing strategic locations in the Greater Boston market.
•Commencement of development and redevelopment projects aggregating 3.4 million RSF.
•As of December 31, 2021, our highly leased value-creation pipeline of current and near-term projects that are under construction or that will commence construction in the next six quarters is expected to generate greater than $610 million of incremental annual rental revenue, primarily commencing from the first quarter of 2022 through the fourth quarter of 2024.
•4.8 million RSF of new Class A properties undergoing construction that were 75% leased; and
•2.6 million RSF of pre-leased/negotiating near-term projects expected to commence construction in the next six quarters that were 89% leased/negotiating.
Goal: Execution of selective acquisition of value-added properties in urban innovation clusters
Messrs. Moglia and Richardson oversaw real estate acquisitions aggregating 87 properties for a total purchase price of $5.5 billion, which included, among others, the following:
•The completion of our largest acquisition in Company history at Alexandria Center® for Life Science – Fenway, a collaborative life science campus aggregating 1.9 million RSF, located in our Fenway submarket, for $1.48 billion. The campus comprises one operating property with future redevelopment opportunity, one property undergoing development aggregating 510,116 RSF, and one future development opportunity aggregating 507,997 SF.
•The acquisition of One Rogers Street, aggregating 408,259 RSF and currently undergoing redevelopment located in our Cambridge/Inner Suburbs submarket of Greater Boston, for a purchase price of $849.4 million. This acquisition expands our Alexandria Center® at Kendall Square mega campus in Cambridge.
•The acquisition of five operating buildings at 6260, 6290, 6310, 6340, and 6350 Sequence Drive, aggregating 487,023 RSF, located in our Sorrento Mesa submarket of San Diego, for a purchase price of $298.5 million, with the opportunity to increase the campus by approximately 400,000 SF through ground-up development.
•The acquisition of two operating buildings aggregating 185,228 RSF with future development and redevelopment opportunity, at 3420 and 3440 Hillview Avenue, located in our Greater Stanford submarket of the San Francisco Bay Area, for a purchase price of $203.8 million.
•The acquisitions of one operating building aggregating 223,232 RSF with future development opportunity of 700,000 SF and one land parcel aggregating 620,000 SF at 1122 and 1178 El Camino Real, respectively, located in our South San Francisco submarket of the San Francisco Bay Area, for a purchase price of $105.3 million and $128.0 million, respectively.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
•The acquisition of one operating building at 550 Arsenal Street, aggregating 260,867 RSF with future development opportunity of 775,000 SF, located in our Cambridge/Inner Suburbs submarket of Greater Boston, for a purchase price of $130.0 million.
Goal: Solid growth in same property net operating income
Under Messrs. Moglia and Richardson’s leadership, the Company achieved strong growth in same property net operating income of 4.2% and 7.1% (cash basis) for the year ended December 31, 2021.
Goal: Solid growth in rental rates on lease renewals and re-leasing of space
Messrs. Moglia and Richardson led the execution of leases aggregating 9.5 million RSF in 2021. This includes 4.6 million RSF of lease renewals and re-leasing of space and 4.9 million RSF of developed, redeveloped, and previously vacant space leased in Class A properties. Our rental rate growth of 37.9% and 22.6% (cash basis) on lease renewals and re-leasing of space as well as growth in leased RSF achieved during 2021 represent our highest annual total leasing volume and increases in the aforementioned metrics in Company history.
Goal: Raising capital and further strengthening our long-term capital structure
Under Messrs. Moglia and Richardson’s leadership, the Company achieved the following results to further strengthen the Company’s capital structure:
•Successful execution of the Company’s differentiated business strategy, which drove the Company’s continued strong operating and financial performance.
•Continued strengthening of the Company’s credit profile Baa1/Stable from Moody’s Investors Service and BBB+/Positive from S&P Global Ratings, which was upgraded from BBB+/Stable during 2021 and ranked in the top 10% of credit ratings among all publicly traded REITs.
•Completion of offerings aggregating $1.75 billion of unsecured senior notes with blended interest rate of 2.51%, representing the largest bond offering in Company history at the time of issuance, consisting of:
•$900 million of unsecured senior notes, due in 2032.
•$850 million of unsecured senior notes, due in 2051.
•Completion of strategic real estate dispositions that generated capital aggregating $2.6 billion, at a weighted-average capitalization rate of 4.1% (cash basis), for investments into our highly leased development and redevelopment projects and strategic acquisitions.
•Prudent use of Common Stock to support growth in FFO per share, as adjusted, and NAV.
•Completed issuances of 20.8 million shares of Common Stock under forward equity sales agreements and our at-the-market (“ATM”) common stock program, for aggregate net proceeds of $3.5 billion.
•The items above, combined with solid operating and financial results, in 2021 resulted in the following key attributes of our capital structure (as of December 31, 2021, unless stated otherwise):
•Achieved significant total balance sheet liquidity of $3.8 billion.
•Improved net debt to Adjusted EBITDA (fourth quarter of 2021 annualized) to 5.2x, the lowest in the past 10 years.
•Improved fixed-charge coverage ratio (fourth quarter of 2021 annualized) to 5.3x, the highest in the past 10 years.
•$44.0 billion total market capitalization (calculated as the outstanding shares of common stock multiplied by the closing price, plus total debt outstanding; all inputs as of December 31, 2021).
•$35.2 billion total equity capitalization.
•Disciplined management of our investments in real estate for our future pipeline of new Class A properties, which, as a percentage of our gross investments in real estate, consisted of the following: 9% of under-construction projects (82% leased/negotiating), 2% of pre-leased/negotiating near-term projects (89% leased/negotiating), 6% of income-producing and/or with a potential to generate cash flows from covered land play projects, and only 2% of land representing future development construction projects.
•Extended weighted-average remaining term on outstanding debt to 12.1 years, with no debt maturities until 2024.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Goal: Oversight of industry-leading sustainability initiatives and programming
As members of Alexandria’s sustainability committee, Messrs. Moglia and Richardson oversee our industry-leading sustainability initiatives and programming, which directly benefit our tenants, employees, and communities and create long-term value for our stockholders. During 2021, as a result of these efforts, we achieved the following:
•Global Sector Leader and a 5 Star rating — the highest 2021 GRESB Rating — in the Diversified Listed sector for buildings in development.
•#2 ranking from GRESB in the U.S. in the Science & Technology sector for building in operations.
•Fourth consecutive “A” disclosure score from GRESB, which recognizes our strong ESG policies, practices, and performance.
•ESG Rating of “A” from MSCI as a result of our continued advancement of green building opportunities, our talent management programs, and our below-industry-average turnover rate, among other achievements.
•Fitwel Impact Award for the highest Fitwel certification of all time earned by our Alexandria LaunchLabs® at the Alexandria Center® at One Kendall Square. This marks the second consecutive year Alexandria LaunchLabs® – Cambridge has held the record for Fitwel’s top certification score.
•Fitwel Viral Response Certification with Distinction, the highest certification level within the Fitwel Viral Response module, for the second consecutive year. This evidence-based, third-party certification recognizes the Company’s comprehensive and rigorous approach to protecting the health of our building occupants.
•#5 ranking in Barron’s publication of the “10 Real Estate Companies That Are Both Greener and More Profitable” on February 19, 2022.
•Recognized at the 2021 BOMA Boston TOBY (The Outstanding Building of the Year) & Industry Awards for the Laboratory Building of the Year (100 Binney Street) and the Corporate Facility of the Year (200 Technology Square). The TOBY & Industry Awards recognize excellence in property management, building operations, and service in the commercial real estate industry.
•On pace to achieve Zero Energy Certification from the International Living Future Institute at 685 Gateway Boulevard in our South San Francisco submarket of the San Francisco Bay Area. Upon certification, it will be one of approximately 80 Zero Energy certified projects in the world.
Goal: Effective communication with investors, analysts, and the general public and providing of insight into the Company’s strategy for mission-critical activities
Messrs. Moglia and Richardson engaged with investors and analysts frequently throughout the year with regard to the Company’s interests and during various real estate investor conferences. They were active participants in a significant portion of the nearly 130 investor and analyst meetings held by the Company during 2021 and the Company’s annual Investor Day meeting in December 2021.
Goal: Effective communication with Executive Chairman and the Board on matters of tactical and strategic importance, including risk management matters
During 2021, Messrs. Moglia and Richardson participated in five meetings held by the full Board and met frequently with Mr. Marcus. These meetings covered many key topics, including matters of tactical and strategic importance (such as risk management).
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Special Bonuses Awarded for Performance
Discretionary bonuses may be awarded from time to time for exceptional performance in extraordinary business situations.
In March 2022, the Compensation Committee granted Mr. Ryan a special cash bonus of $1,100,000 in recognition of his exceptional performance during 2021, including his outstanding efforts in leading the Company’s strategy for mega campus design, building design, and placemaking strategy across each of our life science cluster markets.
In February 2021, the Compensation Committee granted Mr. Kass a restricted stock award with a grant date fair value of $500,029 in recognition of outstanding effort in overseeing the largest acquisition in Company history at Alexandria Center® for Life Science – Fenway, a collaborative life science campus aggregating 1.9 million RSF, located in our Fenway submarket.
In March 2022, the Compensation Committee granted Mr. Kass a special cash bonus of $1,100,000 for his extraordinary efforts in 2021 in leading the Company’s Greater Boston market, including his outstanding efforts in providing strategic input into the design of various key development and redevelopment of new Class A buildings and campuses across the Greater Boston market, which experienced an outstanding year of value creation for the Company, bolstered by acquisitions and the expansion of mega campuses.
In March 2022, the Compensation Committee granted Mr. Cunningham a special cash bonus of $100,000 for his extraordinary efforts on behalf of the Company in New York City and Canada in 2021.
Annual Cash Incentive Awards for Other NEOs
The employment agreements for Messrs. Shigenaga, Ryan, Kass, and Cunningham provide for annual cash incentive awards that are awarded at the discretion of the Compensation Committee, none of which are guaranteed. As described above, the Compensation Committee considered a more formulaic approach for our Other NEOs but decided the existing method permits the Compensation Committee to adjust compensation based on a wide range of factors relating to both Company and individual performance. In exercising its discretion, the Compensation Committee performs a holistic assessment of the Company’s performance and each Other NEO’s individual achievements, taking into account competitive market dynamics as well as the macro-economic environment, and does not assign specific weights to any particular factor. Each Other NEO’s annual cash incentive award is subject to a maximum amount equal to 300% of their base salary.
2021 Cash Incentive Award Decisions for Our Other NEOs
In early 2022, the Compensation Committee evaluated each Other NEO’s performance in the context of achievement of the goals established in early 2021, as described below, and each Other NEO’s performance, position, tenure, experience, expertise, leadership, and management capability. As a result, the Compensation Committee awarded each Other NEO a cash incentive award for 2021 in the amount of $1,250,000 to Mr. Shigenaga, $1,500,000 to Mr. Ryan, $1,500,000 to Mr. Kass, and $595,000 to Mr. Cunningham. Annual cash incentives awarded to Other NEOs are subject to a maximum of 300% of their respective base salaries.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Individual Performance Component of Our Other NEOs’ 2021 Cash Incentive Awards
In early 2021, the Compensation Committee established the following individual performance goals for each of the Other NEOs to form the basis for the Compensation Committee’s annual cash incentive award determinations for 2021. The performance goals were intended to be challenging, and they varied for each Other NEO based upon his role and responsibilities.
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Goal | Dean A. Shigenaga | Daniel J. Ryan | Hunter L. Kass | John H. Cunningham |
Oversight of financial strategy and planning | ● | | | |
Management of the Company’s capital structure | ● | | | |
Maintenance of a strong and flexible balance sheet | ● | | | |
Effective communication with executive management on matters of tactical and strategic importance | ● | ● | ● | ● |
Active engagement with investment community | ● | ● | ● | ● |
Oversight of industry-leading sustainability initiatives and programming | ● | | | |
Active oversight of cybersecurity initiatives and safeguards | ● | | | |
Expansion of expertise in mega campus design, building design, and placemaking strategy across each of our life science cluster markets | | ● | | |
Solid growth in same property net operating income | | ● | ● | ● |
Maintaining solid net operating income margin | | ● | ● | ● |
Solid growth in rental rates on lease renewals and re-leasing of space | | ● | ● | ● |
Maintaining solid occupancy | | ● | ● | ● |
Achieving high pre-leasing and/or a high leased percentage of value-creation projects (ground-up development and/or redevelopment) | | ● | ● | ● |
Oversight and execution of value-creation project at solid returns on our investment | | ● | ● | ● |
Execution of selective acquisition of value-added properties in urban innovation clusters | | ● | ● | ● |
Execution of selective real estate dispositions to enable capital allocation into high-value Class A properties | | ● | ● | ● |
Maintaining high operating margins | | ● | ● | ● |
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Each Other NEO’s achievements with respect to his respective 2021 performance goals are described below.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
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Mr. Shigenaga’s 2021 Goals and Assessment of 2021 Performance |
Overview. As President and Chief Financial Officer, Mr. Shigenaga directed the organization to ensure the attainment of revenue and profitability goals and participated with the Co-Chief Executive Officers and the Other NEOs in formulating and executing current and long-term plans, objectives, and policies. Mr. Shigenaga effectively oversaw the Company’s financial functions, including financial plans and policies, accounting practices and procedures, and the Company’s relationship with the financial community. Mr. Shigenaga regularly participated with the Co-Chief Executive Officers and the Other NEOs in representing the Company in relationships with analysts and stockholders. Mr. Shigenaga also directed the controller, treasury, and tax functions and had oversight of cybersecurity matters. Under Mr. Shigenaga’s leadership, the Company continued to strengthen our credit profile to Baa1/Stable from Moody’s Investors Service and BBB+/Positive from S&P Global Ratings, which was upgraded from BBB+/Stable during 2021 and ranked in the top 10% of credit ratings among all publicly traded REITs. In 2021, the Company executed our strategy and accessed diverse sources of capital strategically important to our long-term capital structure. In 2021, Mr. Shigenaga acted as an effective and responsive organizational leader in all of the Company’s financial matters, risk management, and internal controls.
In 2021, under Mr. Shigenaga’s leadership, we were the 2021 recipient of the Nareit Investor CARE (Communications and Reporting Excellence) Gold Award in the Large Cap Equity REIT category as the best-in-class REIT delivering transparency, quality, and efficient communications and reporting to the investment community. This represents our fourth consecutive Nareit Investor CARE Gold Award, and our sixth Gold Award over the last seven years.
Specific Individual Goals. The 2021 individual goals established for Mr. Shigenaga in early 2021, and the achievement of each goal determined in early 2022, were as follows:
Goal: Oversight of financial strategy and planning
Mr. Shigenaga oversaw financial and operating strategy and planning led by the corporate finance team. He was responsible for the disciplined management of key underlying metrics of our financial and operating strategy, including leasing, same property net operating income performance, energy optimization and sustainability projects, construction (development and redevelopment), acquisitions, dispositions, debt and equity capital, as well as solid tenant collections during the ongoing COVID-19 pandemic. This oversight, combined with the execution of our strategy by our entire team led, to our solid FFO per share and NAV growth, our exceptional TSR performance in 2021 ranking at the 85th percentile among FTSE Nareit Equity Office Index peers, and our credit ratings ranking and total equity capitalization ranking in the top 10% among all publicly traded U.S. REITs.
Goal: Management of the Company’s capital structure; maintenance of a strong and flexible balance sheet
Under Mr. Shigenaga’s leadership, the Company achieved the following results to further strengthen the Company’s capital structure:
•Successful execution of the Company’s differentiated business strategy, which drove the Company’s strong multiyear operating and financial performance.
•Continued strengthening of the Company’s credit profile Baa1/Stable from Moody’s Investors Service and BBB+/Positive from S&P Global Ratings, which was upgraded from BBB+/Stable during 2021 and ranked in the top 10% of credit ratings among all publicly traded REITs.
•Completion of offerings aggregating $1.75 billion of unsecured senior notes with a weighted-average interest rate of 2.51%, representing the largest bond offering in Company history at the time of issuance, consisting of:
•$900 million of unsecured senior notes, due in 2032.
•$850 million of unsecured senior notes, due in 2051.
•Completion of strategic real estate dispositions that generated capital aggregating $2.6 billion, at a weighted-average capitalization rate of 4.1% (cash basis), for investments into our highly leased development and redevelopment projects and strategic acquisitions.
•Prudent use of Common Stock to support growth in FFO per share, as adjusted, and NAV.
•Completed issuances of 20.8 million shares of Common Stock under forward equity sales agreements and our ATM common stock program, for aggregate net proceeds of $3.5 billion.
•The items, above combined with solid operating and financial results in 2021, resulted in the following key attributes of our capital structure (as of December 31, 2021, unless stated otherwise):
•Achieved significant total balance sheet liquidity of $3.8 billion.
•Improved net debt to Adjusted EBITDA (fourth quarter of 2021 annualized) to 5.2x, the lowest in the past 10 years.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
•Improved fixed-charge coverage ratio (fourth quarter of 2021 annualized) to 5.3x, the highest in the past 10 years.
•Extended weighted-average remaining term on outstanding debt to 12.1 years, with no debt maturities until 2024.
•Continued to prudently manage outstanding borrowings under our unsecured senior line of credit, our only LIBOR-based debt. As of December 31, 2021, we had no borrowings outstanding under our unsecured senior line of credit.
•$44.0 billion total market capitalization (calculated as the outstanding shares of common stock multiplied by the closing price, plus total debt outstanding; all inputs as of December 31, 2021).
•Disciplined management of our investments in real estate for our future pipeline of new Class A properties, which, as a percentage of our gross investments in real estate, consisted of the following: 9% of under-construction projects (82% leased/negotiating), 2% of pre-leased/negotiating near-term projects (89% leased/negotiating), 6% of income-producing and/or with a potential to generate cash flows from covered land play projects, and only 2% of land representing future development construction projects.
Goal: Effective communication with executive management on matters of tactical and strategic importance
Mr. Shigenaga engaged frequently throughout the year with executive management in strategy meetings focused on strategic growth opportunities, franchise development, development and construction risk management, proactive management of contractual lease expirations, review of Company-wide operational strategy and efficiency, and review of energy efficiency and sustainability initiatives.
Goal: Active engagement with investment community
Mr. Shigenaga established premier reporting practices and set a high standard in financial reporting by consistently providing investors and analysts with efficient and transparent disclosures. As a result, we earned our fourth consecutive and sixth overall Nareit Investor CARE Gold Award in 2021, demonstrating the Company’s transparency, quality, and efficient communications and reporting to the investment community. This award was judged by an independent panel of REIT securities analysts and portfolio managers. In addition, Mr. Shigenaga engaged with investors and analysts frequently throughout the year with regard to the Company’s interest and during various real estate investor conferences. He was an active participant in a significant portion of the nearly 130 investor and analyst meetings held by the Company during 2021 and the Company’s annual Investor Day meeting in December 2021.
Goal: Oversight of industry-leading sustainability initiatives and programming
Mr. Shigenaga, along with other executives, provides oversight of our sustainability initiatives and programming, which directly benefit our tenants, employees, and communities and create long-term value for our stockholders. We aim to be one of the most environmentally innovative, socially responsible, and economically strong companies in the world, and, as a result of Mr. Shigenaga’s efforts during 2021, the Company made great strides toward this goal. During 2021, as a result of these efforts, Alexandria achieved the following:
•Global Sector Leader and a 5 Star rating — the highest 2021 GRESB Rating — in the Diversified Listed sector for buildings in development.
•#2 ranking from GRESB in the U.S. in the Science & Technology sector for building in operations.
•Fourth consecutive “A” disclosure score from GRESB, which recognizes our strong ESG policies, practices, and performance.
•ESG Rating of “A” from MSCI as a result of our continued advancement of green building opportunities, our talent management programs, and our below-industry-average turnover rate, among other achievements.
•Fitwel Impact Award for the highest Fitwel certification of all time earned by our Alexandria LaunchLabs® at the Alexandria Center® at One Kendall Square. This marks the second consecutive year Alexandria LaunchLabs® – Cambridge has held the record for Fitwel’s top certification score.
•Fitwel Viral Response Certification with Distinction, the highest certification level within the Fitwel Viral Response module, for the second consecutive year. This evidence-based, third-party certification recognizes the Company’s comprehensive and rigorous approach to protecting the health of our building occupants.
•#5 ranking in Barron’s publication of the “10 Real Estate Companies That Are Both Greener and More Profitable” on February 19, 2022.
•Recognized at the 2021 BOMA Boston TOBY (The Outstanding Building of the Year) & Industry Awards for the Laboratory Building of the Year (100 Binney Street) and the Corporate Facility of the Year (200 Technology
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Square). The TOBY & Industry Awards recognize excellence in property management, building operations, and service in the commercial real estate industry.
In addition, as a result of the leadership of Mr. Shigenaga and other executives, during 2021, the Company:
•Published our 2021 Green Bond Allocation Report highlighting Alexandria’s commitment to investing in sustainable projects.
•Continued the execution of our 2025 sustainability goals program that guides our comprehensive ESG efforts through 2025, relative to a 2015 baseline for buildings in operation. Goals include:
•30% reduction in carbon emissions
•25% reduction in energy consumption
•45% waste diversion rate
•10% reduction in potable water consumption
•50 healthy building certifications
Goal: Active oversight of cybersecurity initiatives and safeguards
Mr. Shigenaga oversees the development and enhancement of our information technology and network systems, including the implementation of Company-wide security measures to safeguard our systems and data infrastructure, which are used to manage our tenant and vendor relationships, internal communications, accounting and record-keeping systems, and other operational functions. During 2021, Mr. Shigenaga also oversaw implementation of controls around our treasury function, including enhancement of payment authorization, notification procedures, and verification requirements relating to new vendor setup and vendor information changes. Mr. Shigenaga is committed to his oversight role in the development and enhancement of internal controls designed to prevent, detect, address, and mitigate the risk of cyber incidents.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
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Mr. Ryan’s 2021 Goals and Assessment of 2021 Performance |
Overview. As Co-Chief Investment Officer and Regional Market Director – San Diego, Mr. Ryan oversaw the management of the Company’s San Diego market, which as of December 31, 2021 is the Company’s third largest market in terms of rentable square footage (as of December 31, 2021, the San Diego region had 19% of the Company’s total RSF) and, with 103 properties as of December 31, 2021 is the Company’s largest market in terms of the number of properties. In close coordination with the Company’s other senior executives, Mr. Ryan led a team of real estate professionals in implementing the Company’s strategic directives within the San Diego market, including the marketing and leasing of existing and newly developed or redeveloped space; the permitting, design, and construction of new development and redevelopment projects; the ongoing management of operating properties in the regional asset base; and the selective acquisitions and dispositions of properties in the San Diego market. In addition to his management activities in the San Diego market, Mr. Ryan also represented the Company to tenants, key members of the life science community, brokers, partners, analysts, and investors and led certain strategic real estate and leasing initiatives across the Company’s other markets.
Specific Individual Goals. The 2021 individual goals established for Mr. Ryan in early 2021, and the achievement of each goal determined in early 2022, were as follows:
Goal: Expansion of expertise in mega campus design, building design and placemaking strategy across each of our life science cluster markets
Mr. Ryan led the Company’s strategy for mega campus design, building design and placemaking strategy across each of our life science cluster markets. As of December 31, 2021, the Company’s mega campuses represented 63% of the Company’s total operating property RSF. Additionally, our highly leased value-creation pipeline of current and near-term projects that are under construction or that will commence construction in the next six quarters is expected to generate greater than $610 million of incremental annual rental revenue, primarily commencing from the first quarter of 2022 through the fourth quarter of 2024.
Goal: Solid growth in same property net operating income
Under Mr. Ryan’s leadership, the Company achieved strong growth in same property net operating income of 4.2% and 7.1% (cash basis) for the year ended December 31, 2021.
Goal: Solid growth in rental rates on lease renewals and re-leasing of space
Mr. Ryan led the execution of leases aggregating 1.5 million RSF in the San Diego market during 2021. This includes 1.0 million RSF of developed, redeveloped, and previously vacant space leased in Class A properties and 448,075 RSF of lease renewals and re-leasing of space at rental rates reflecting increases of 37.8% and 24.7% (cash basis). As of December 31, 2021, our San Diego market generated 59.9% of its annual rental revenue from investment-grade or publicly traded large cap tenants.
Goal: Maintaining solid occupancy
Under Mr. Ryan’s management, our operating asset base for the San Diego market had an occupancy level of 93.1% as of December 31, 2021.
Goal: Maintaining high operating margins
Under Mr. Ryan’s leadership, the Company achieved a solid same property operating margin of 72%.
Goal: Achieving high pre-leasing and/or a high leased percentage of value-creation projects (ground-up development and/or redevelopment)
During 2021, Mr. Ryan completed and partially delivered two redevelopment projects aggregating 157,069 RSF including 5505 Morehouse Drive in our Sorrento Mesa submarket, which had an operating occupancy of 100% upon delivery in 2021. Due to his continual efforts, as of December 31, 2021, Mr. Ryan commenced construction on three value-creation projects aggregating 409,589 RSF which were 83% leased, including 10555 Barnes Canyon Road and 10102 Hoyt Park Drive under development and 10277 Scripps Ranch Boulevard under redevelopment.
Goal: Oversight and execution of value-creation projects at solid returns on our investment
Mr. Ryan led the diligent management and oversight of construction for each of the projects noted above. Each project is on track for delivery of solid returns on our investment. Mr. Ryan also provided strategic input into the design of various key development and redevelopment of new Class A buildings and campuses across the Company’s cluster markets.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Goal: Execution of selective acquisition of value-added properties in urban innovation clusters
Mr. Ryan contributed to key real estate acquisitions aggregating 87 properties for a total purchase price of $5.5 billion, which included, among others, the following:
•The completion of our largest acquisition in Company history at Alexandria Center® for Life Science – Fenway, a collaborative life science campus aggregating 1.9 million RSF, located in our Fenway submarket, for $1.48 billion. The campus comprises one operating property with future redevelopment opportunity, one property undergoing development aggregating 510,116 RSF, and one future development opportunity aggregating 507,997 SF.
•The acquisition of One Rogers Street, aggregating 408,259 RSF and currently undergoing redevelopment located in our Cambridge/Inner Suburbs submarket of Greater Boston, for a purchase price of $849.4 million. This acquisition expands our Alexandria Center® at Kendall Square mega campus in Cambridge.
•The acquisition of five operating buildings at 6260, 6290, 6310, 6340, and 6350 Sequence Drive, aggregating 487,023 RSF, located in our Sorrento Mesa submarket of San Diego, for a purchase price of $298.5 million, with the opportunity to increase the campus by approximately 400,000 SF through ground-up development.
•The acquisition of two operating buildings aggregating 185,228 RSF with future development and redevelopment opportunity, at 3420 and 3440 Hillview Avenue, located in our Greater Stanford submarket of San Francisco Bay Area, for a purchase price of $203.8 million.
•The acquisitions of one operating building aggregating 223,232 RSF with future development opportunity of 700,000 SF and one land parcel aggregating 620,000 SF at 1122 and 1178 El Camino Real, respectively, located in our South San Francisco submarket of the San Francisco Bay Area, for a purchase price of $105.3 million and $128.0 million, respectively.
•The acquisition of one operating building at 550 Arsenal Street, aggregating 260,867 RSF with future development opportunity of 775,000 SF located in our Cambridge/Inner Suburbs submarket of Greater Boston, for a purchase price of $130.0 million.
Goal: Execution of selective real estate dispositions to enable capital allocation into high-value Class A properties
Mr. Ryan contributed to the completion of strategic real estate dispositions that generated capital aggregating $2.6 billion, at a weighted-average capitalization rate of 4.1% (cash basis), for investments into our highly leased development and redevelopment projects and strategic acquisitions.
Goal: Active engagement with investment community
Mr. Ryan engaged with investors and analysts frequently throughout the year with regard to the Company’s interests in the San Diego market and during various real estate investor events. He was an active participant in a portion of nearly 130 investor and analyst meetings held by the Company during 2021 and the Company’s annual Investor Day meeting in December 2021.
Goal: Effective communication with executive management on matters of tactical and strategic importance
Mr. Ryan engaged frequently throughout the year with executive management in strategy meetings focused on business development, C-suite relationship targets for ongoing development of our future tenant base, development and construction risk management, proactive management of contractual lease expirations, and review of operational efficiency, energy efficiency, and sustainability initiatives.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
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Mr. Kass’s 2021 Goals and Assessment of 2021 Performance |
Overview. As Executive Vice President – Regional Market Director – Greater Boston, Mr. Kass oversaw the management of the Company’s largest region, representing 36% of the Company’s annual rental revenue as of December 31, 2021. In close coordination with the Company’s other senior executives, Mr. Kass led a team of real estate professionals in implementing the Company’s strategic directives within the Greater Boston market, including the marketing and leasing of existing and newly developed or redeveloped space; the permitting, design, and construction of new development and redevelopment projects; the ongoing management of operating properties in the regional asset base; and the selective acquisition and disposition of properties in the Greater Boston market. In addition to his management activities in the Greater Boston market, Mr. Kass also represented the Company to tenants, key members of the life science community, brokers, partners, analysts, and investors.
Specific Individual Goals. The 2021 individual goals established for Mr. Kass in early 2021, and the achievement of each goal determined in early 2022, were as follows:
Goal: Solid growth in rental rates on lease renewals and re-leasing of space
Mr. Kass led the execution of leases aggregating 3.7 million RSF for the Greater Boston market during 2021, exceeding the 3.3 million RSF of leasing volume executed, on average, during each of the five years preceding 2021 by the rest of the Company. Leasing volume executed in the Greater Boston market in 2021 included 1.7 million RSF of developed, redeveloped, and previously vacant space in Class A properties and 2.1 million RSF of lease renewals and re-leasing of space at rental rates reflecting increases of 45.4% and 29.6% (cash basis). As of December 31, 2021, our Greater Boston market achieved a 22% growth in annual rental revenue and generated 53.6% of its annual rental revenue from investment-grade or publicly traded large cap tenants.
Goal: Maintaining solid net operating income margin
Under Mr. Kass’s leadership, our Greater Boston market contributed toward the Company’s solid net operating income margin of 70% for the year ended December 31, 2021.
Goal: Maintaining solid occupancy
Under Mr. Kass’s leadership, our operating asset base for the Greater Boston market had an occupancy level of 95.2% as of December 31, 2021.
Goal: Maintaining high operating margins
Under Mr. Kass’s leadership, the Company achieved a solid same property operating margin of 72%.
Goal: Achieving high pre-leasing and/or a high leased percentage of value-creation projects (ground-up development and/or redevelopment)
During 2021, Mr. Kass completed a portion of one redevelopment project aggregating 137,111 RSF at The Arsenal on the Charles that was 94% leased/negotiating in our Cambridge/Inner Suburbs submarket. As of December 31, 2021, Mr. Kass commenced construction on six value-creation projects aggregating 2.2 million RSF which were 73% leased/negotiating, including a 462,100 RSF and 403,892 RSF development and redevelopment project at 325 Binney Street and One Rogers Street, respectively, in our Cambridge/Inner Suburbs submarket, and a 510,116 RSF development project at 201 Brookline Avenue in our Fenway submarket.
Goal: Oversight and execution of value-creation projects at solid returns on our investment
Mr. Kass led the diligent management and oversight of construction for the project noted above, which is on track for delivery of solid returns on our investment. Mr. Kass also provided strategic input into the design of various key development and redevelopment of new Class A buildings and campuses across the Greater Boston market. Mr. Kass further contributed to our highly leased value-creation pipeline of current and near-term projects that are under construction or that will commence construction in the next six quarters, which is expected to generate greater than $610 million of incremental annual rental revenue, primarily commencing from the first quarter of 2022 through the fourth quarter of 2024.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Goal: Execution of selective acquisition of value-added properties in urban innovation clusters
Mr. Kass contributed to key real estate acquisitions aggregating 87 properties for a total purchase price of $5.5 billion, which included, among others, the following in the Greater Boston market:
•The completion of our largest acquisition in Company history at Alexandria Center® for Life Science – Fenway, a collaborative life science campus aggregating 1.9 million RSF, located in our Fenway submarket, for $1.48 billion.The campus comprises one operating property with future redevelopment opportunity, one property undergoing development aggregating 510,116 RSF, and one future development opportunity aggregating 507,997 SF.
•The acquisition of One Rogers Street, aggregating 408,259 RSF and currently undergoing redevelopment located in our Cambridge/Inner Suburbs submarket of Greater Boston, for a purchase price of $849.4 million. This acquisition expands our Alexandria Center® at Kendall Square mega campus in Cambridge.
•The acquisition of one operating building at 550 Arsenal Street, aggregating 260,867 RSF with future development opportunity of 775,000 SF located in our Cambridge/Inner Suburbs submarket of Greater Boston, for a purchase price of $130.0 million.
•The acquisition of one operating building at One Investors Way, aggregating 240,000 RSF with future development opportunity of 350,000 SF located in our Route 128 submarket of Greater Boston, for a purchase price of $105.0 million.
Goal: Execution of selective real estate dispositions to enable capital allocation into high-value Class A properties
Mr. Kass contributed to the completion of strategic real estate dispositions that generated capital aggregating $2.6 billion, at a weighted-average capitalization rate of 4.1% (cash basis), for investments into our highly leased development and redevelopment projects and strategic acquisitions. Mr. Kass led the execution of a partial interest sale of 66% at 50 and 60 Binney Street, aggregating 532,395 RSF, for a sales price of $782.3 million.
Goal: Active engagement with investment community
Mr. Kass engaged with investors and analysts throughout the year with regard to the Company’s interests in the Greater Boston market. He was an active participant in the Company’s annual Investor Day meeting in December 2021.
Goal: Effective communication with executive management on matters of tactical and strategic importance
Mr. Kass engaged frequently throughout the year with executive management in strategy meetings focused on business development, C-suite relationship targets for ongoing development of our future tenant base, development and construction risk management, proactive management of contractual lease expirations, and review of operational efficiency, energy efficiency, and sustainability initiatives.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
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Mr. Cunningham’s 2021 Goals and Assessment of 2021 Performance |
Overview. As Executive Vice President – Regional Market Director – New York City, Mr. Cunningham oversaw the management of the Company’s New York City region, representing 3% of the Company’s rentable square footage and 5% of our annual rental revenue as of December 31, 2021. In close coordination with the Company’s other senior executives, Mr. Cunningham led a team of real estate professionals in implementing the Company’s strategic directives within the New York City market, including the marketing and leasing of existing and newly developed or redeveloped space; the permitting, design, and construction of new development and redevelopment projects; the ongoing management of operating properties in the regional asset base; and the selective acquisition and disposition of properties in the New York City market. In addition to his management activities in the New York City market, Mr. Cunningham also represented the Company to tenants, key members of the life science community, brokers, partners, analysts, and investors.
Specific Individual Goals. The 2021 individual goals established for Mr. Cunningham in early 2021, and the achievement of each goal determined in early 2022, were as follows:
Goal: Maintaining solid net operating income margin
Under Mr. Cunningham’s leadership, our New York City market contributed toward the Company’s solid net operating income margin of 70% for the year ended December 31, 2021.
Goal: Solid growth in rental rates on lease renewals and re-leasing of space
Mr. Cunningham led the execution of leases aggregating 119,436 RSF for the New York City market during 2021. This includes 93,107 RSF of developed, redeveloped, and previously vacant space in Class A properties and 26,329 RSF of lease renewals and re-leasing of space at rental rates reflecting increases of 4.0% and 5.6% (cash basis). As of December 31, 2021, our New York City market generated 67.4% of its annual rental revenue from investment-grade or publicly traded large cap tenants.
Goal: Maintaining solid occupancy
Under Mr. Cunningham’s leadership, our operating asset base for the New York City market had an occupancy level of 98.4% as of December 31, 2021. He also led the effort in drafting the Back to Campus guidelines, practices, and procedures that were used throughout Alexandria’s portfolio as a template for safe operations during the COVID-19 pandemic.
Goal: Achieving high pre-leasing and/or a high leased percentage of value-creation projects (ground-up development and/or redevelopment)
During 2021, Mr. Cunningham completed a portion of one redevelopment project aggregating 24,132 RSF at Alexandria Center® for Life Science – Long Island City that was 69% leased/negotiating.
Goal: Oversight and execution of value-creation projects at solid returns on our investment
Mr. Cunningham led the diligent management and oversight of construction for the project noted above, which is on track for delivery of solid returns on our investment. Other value-added actions on assets already in the portfolio, including 219 East 42nd Street and 47-50 30th Street, and efforts on pending development projects position Alexandria’s New York City region for continued growth and success in meeting the demands of the nascent market.
Goal: Effective communication with executive management on matters of tactical and strategic importance
Mr. Cunningham engaged frequently throughout the year with executive management in strategy meetings focused on business development, C-suite relationship targets for ongoing development of our future tenant base, development and construction risk management, proactive management of contractual lease expirations, and review of operational efficiency, energy efficiency, and sustainability initiatives.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Long-Term Incentive Awards Granted in 2021 to Executive Chairman and Co-CEOs
Structure of the 2021 Grant —Target 50% Performance-Based Vesting and Target 50% Service-Based Vesting
Mr. Marcus’s Amended and Restated Executive Employment Agreement (as amended, the “Marcus Employment Agreement”), provided for an annual long-term incentive (“LTI”) award in the form of restricted stock to be granted in 2021 with an aggregate target of $2,750,000 (the “Marcus Grant”), which represents a 50% reduction compared to the annual LTI award granted to Mr. Marcus in 2018 with an aggregate target of $5,500,000. Messrs. Moglia’s and Richardson’s respective executive employment agreements provided for an annual long-term incentive award in the form of restricted stock to be granted in 2021 with an aggregate target of $4,500,000 for each Co-CEO.
The structure of the annual LTI awards granted in 2021 to Messrs. Marcus, Moglia, and Richardson is summarized below:
| | | | | | | | | | | | | | |
Overall LTI Award |
| | | | |
Target LTI Award | | Maximum LTI Award | | Vesting Description |
50% | | 156.4% | | 3-Yr growth in FFO per share and 3-Yr TSR relative to FTSE Nareit Equity Office Index |
50% | | N/A | | Time-based vesting over 3 years |
100% | | 128.2% | | |
| | | | | | | | | | | | | | | | | | | | |
50% of LTI Award Subject to Three-Year Performance, Forfeiture, and a Cap |
| | | | | | |
FFO/Share | | Relative TSR Performance Modifier |
Goal | | Vesting | | Goal(1) | | Vesting |
| | | | | | |
Threshold | | Target Less 50% | | ≤25th Percentile | | Decrease 50% |
| | | | | | |
Target | | 50% of LTI Award | | At or Above Median | | No Change |
| | | | | | |
Maximum | | Target Plus 50% | | ≥75th Percentile | | Increase 50% |
(1)Based upon Company TSR relative to the TSR of companies in the FTSE Nareit Equity Office Index.
Rigorous FFO Per Share Performance Goal, Relative TSR Performance Goal, and Three-Year Performance Period
The Compensation Committee designed the performance-based portion of the 2021 LTI awards to vest based upon growth in FFO per share over the three-year period from 2021 to 2023, subject to adjustment based on the Company’s TSR relative to the TSR of companies in the FTSE Nareit Equity Office Index over that same three-year period. FFO is a measure of performance for REITs that was established by the Board of Governors of Nareit and is widely used both internally by REITs and externally by REIT investors and analysts to measure performance. TSR is also widely regarded as an important measure of company performance.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
50% of 2021 LTI Awards Subject to Three-Year Performance Period, Forfeiture If Minimum Level of Performance Not Achieved, and Maximum Size of 2021 LTI Awards Capped
Mr. Marcus:
| | | | | | | | | | | | | | | | | | | | |
Target Equity Award | | Maximum LTI Award | | Accounting Fair Value | | Vesting Description |
$ | 1,375,000 | | | $ | 2,150,500 | | | $ | 1,813,524 | | | 3-Yr growth in FFO per share and 3-Yr TSR relative to FTSE Nareit Equity Office Index |
1,375,000 | | | 1,375,000 | | | 1,375,000 | | | Time-based vesting over 3 years |
$ | 2,750,000 | | | $ | 3,525,500 | | | $ | 3,188,524 | | | |
Messrs. Moglia and Richardson:
| | | | | | | | | | | | | | | | | | | | |
Target Equity Award | | Maximum LTI Award | | Accounting Fair Value | | Vesting Description |
$ | 2,250,000 | | | $ | 3,519,000 | | | $ | 2,967,419 | | | 3-Yr growth in FFO per share and 3-Yr TSR relative to FTSE Nareit Equity Office Index |
2,250,000 | | | 2,250,000 | | | 2,250,000 | | | Time-based vesting over 3 years |
$ | 4,500,000 | | | $ | 5,769,000 | | | $ | 5,217,419 | | | |
If FFO per-share growth over the applicable three-year period is equal to or greater than the minimum amount, then the amount of the award eligible for vesting by application of the FFO per-share growth criterion will be subject to adjustment by application of an additional TSR criterion, which also has threshold, target, and maximum goals. The TSR criterion measures the Company’s TSR over the three-year period from 2021 to 2023 relative to the TSR of companies included in the FTSE Nareit Equity Office Index over the same period. Vesting is interpolated for performance between the minimum and maximum goals.
As shown in the following table, if FFO per-share growth over the applicable three-year period is less than the minimum amount, then the performance-based portion of the 2021 LTI awards will be forfeited in their entirety and no shares will vest. The cap on the amount of the performance-based portion eligible for vesting in the event of outperformance is 156.4% of the target number of performance-based shares, or 12,963 maximum shares based upon 8,288 target shares for Mr. Marcus, and 21,211 maximum shares based upon 13,562 target shares for Messrs. Moglia and Richardson.
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2021 LTI Grants: Goals and Portion Subject to Forfeiture and a Cap |
| | | | | | | | |
FFO/Share | | Relative TSR Performance Modifier | | Grant Cap |
Goal | | | | Goal(1) | | Vesting | | |
| | | | | | | | |
Threshold | | Target Less 50% | | ≤25th Percentile | | Decrease 50% | | |
| | | | | | | | |
Marcus Target | | 8,288 Shares | | At or Above Median | | No Change | | 12,963 Shares |
| | | | | | | | |
Moglia and Richardson Target | | 13,562 Shares | | At or Above Median | | No Change | | 21,211 Shares |
| | | | | | | | |
Maximum | | Target Plus 50% | | ≥75th Percentile | | Increase 50% | | |
(1)Based upon Company TSR relative to the TSR of companies in the FTSE Nareit Equity Office Index.
Timing of Disclosure of FFO Per Share Performance Goals
The specific FFO per share threshold, target, and maximum for the 2021 LTI awards are not disclosed now because we believe such disclosures during the three-year performance period would be inappropriate since most REITs only provide annual guidance for FFO per share. This is a common practice with disclosure of multiyear performance awards. We will disclose the specific FFO per share metrics at the end of the three-year performance period, as included below with respect to the completed performance period for the grant made to Mr. Marcus in 2019 under “2019 Long-Term Equity Incentive Award Payouts to Our Executive Chairman and Co-CEOs” We believe that providing disclosure before the end of the performance period would be competitively harmful.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Determining the Number of Shares Subject to the 2021 LTI Awards and the Reported Value of the 2021 LTI Awards
For Mr. Marcus and Messrs. Moglia and Richardson, the 2021 LTI awards were divided into 8,288 and 13,562 target shares of service-vesting restricted stock. respectively, and 8,288 and 13,562 target shares of performance-vesting restricted stock, respectively. However, the 2021 LTI awards were in the form of a restricted stock award, and therefore, with respect to the performance-vesting portion, the maximum number of shares that could vest in the event of outperformance, aggregating 12,963 shares for Mr. Marcus and 21,211 shares for each of Messrs. Moglia and Richardson, were granted and subject to forfeiture, as described below. With respect to the service-vesting portion, no more than the target number of shares may ever vest.
The 2021 LTI awards are reported for purposes of the tables in this Proxy Statement at their accounting fair value at the grant date of January 8, 2021. For accounting purposes, the grant date fair values of the 2021 LTI awards are based on the January 8, 2021, grant date stock price of $165.91, which was also used to determine the number of shares subject to the 2021 LTI awards, as described above. As a result, the grant date fair values of the 2021 LTI awards are $3,188,524 for Mr. Marcus and $5,217,419 for each of Messrs. Moglia and Richardson. These are the amounts used for disclosure in the “Summary Compensation Table” on page 111 and the “2021 Grants of Plan-Based Awards Table” on page 113. Please also refer to Note 16 of our Form 10-K for the year ended December 31, 2021 for additional information on fair value accounting for stock awards subject to performance and market condition vesting.
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685 Gateway Boulevard, South San Francisco, San Francisco Bay Area |
COMPENSATION DISCUSSION AND ANALYSIS (continued)
2019 Long-Term Equity Incentive Award Payouts to Our Executive Chairman and Co-CEOs
Performance Goals for Long-Term Incentive Awards Granted to Our Executive Chairman and Co-CEOs in 2019 and Vested in 2022
In early 2019, Messrs. Marcus, Moglia, and Richardson were each granted a long-term incentive award, one-half of which was subject to vesting based upon a combination of three-year growth in FFO per share and three-year relative TSR, with the remaining one-half of the award subject to time-based vesting over the three-year performance period ended January 31, 2022. The specific performance goals for each award are provided in the following table:
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2019 LTI Awards: Goals and Portion Subject to Forfeiture and a Cap |
| | | | | | | | |
FFO/Share | | Relative TSR Performance Modifier | | Grant Cap |
Goal | | Vesting | | Goal(1) | | Vesting | | |
| | | | | | | | |
Below 10.0% | | Forfeiture | | | | | | |
| | | | | | | | |
Threshold: 10.0% | | Target Less 50% | | ≤25th Percentile | | Decrease 50% | | |
| | | | | | | | |
Marcus Target: 12.5% | | 11,723 Shares | | At or Above Median | | No Change | | 18,335 Shares |
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Moglia and Richardson Target: 12.5% | | 19,182 Shares | | At or Above Median | | No Change | | 30,001 Shares |
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Maximum: 15.0% | | Target Plus 50% | | ≥75th Percentile | | Increase 50% | | |
Actual: 17.6% | | | | Actual: 95th Percentile | | | | Vested: 48,336 Shares |
(1)Based upon Company TSR relative to the TSR of companies in the FTSE Nareit Equity Office Index.
The maximum vesting for Messrs. Marcus’s, Moglia’s, and Richardson’s 2019 awards was the result of exceptional corporate performance for the three-year performance period. When our Compensation Committee set the goals in 2019, it set rigorous three-year performance goals tied to our long-term strategic goals and creation of long-term stockholder value.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Considerations in Setting Long-Term Incentive Award Goals for Three-Year Performance Period Ended December 31, 2021
The Compensation Committee believes that the consistency of growth in FFO per share, year over year, during a period of multiple years will result in solid long-term TSR performance versus outperformance in FFO per-share growth following a period of underperformance. Annual performance-based awards provide appropriate incentives to drive continued and consistent growth in FFO per share even if the Company generates stronger FFO per-share growth in one or more particular year(s) in the three-year performance period.
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Funds From Operations Per Share by Quarter(1) |
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(1)Represents FFO per share – diluted, as adjusted. For information on the Company’s FFO, including definitions and a reconciliation from the most directly comparable GAAP measure, see “Non-GAAP Measures and Definitions” under Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
When setting the FFO per-share growth goal for Messrs. Marcus’s, Moglia’s, and Richardson’s 2019 awards, the Compensation Committee focused on setting achievement targets at rigorous and challenging levels that would require significant effort and exceptional performance by Messrs. Marcus, Moglia, and Richardson in order to be achieved. The Compensation Committee considered the Company’s actual operating and financial results during the most recent three-year performance period ended December 31, 2018, and performance projections of future operating and financial performance. Ultimately, the Compensation Committee based the maximum achievement level of FFO per-share growth at a level that would have resulted in a strong relative three-year FFO per-share growth compared to companies in the FTSE Nareit Equity Office Index. Accordingly, at the beginning of 2019, the Compensation Committee determined that the achievement of the three-year FFO per-share growth goal of 15% or higher would be exceptional and would require outstanding performance not only by Messrs. Marcus, Moglia, and Richardson but also by each peer in the FTSE Nareit Equity Office Index.
In 2022, upon vesting of Messrs. Marcus’s, Moglia’s, and Richardson’s 2019 awards, the Compensation Committee performed a retrospective analysis to reevaluate the rigor of the three-year FFO per-share growth goal of 15%. The results of the analysis evidenced that in seven out of ten years from 2012 to 2021, the three-year FFO per-share growth of 15% was achieved only by the top-performing companies in the FTSE Nareit Equity Office Index and approximated or exceeded FFO growth results at the 75th percentile during each of the three-year performance periods ended on December 31 of 2012, 2014, 2017, 2018, 2019, 2020, and 2021. The Company’s actual three-year FFO per-share growth of approximately 17.6% for the period ended December 31, 2021 demonstrated consistently remarkable growth that warranted Messrs. Marcus’s, Moglia’s, and Richardson’s payouts at the maximum achievement level.
In addition, the Compensation Committee set the goal for FFO per-share growth at a level where outperformance would require significant contribution from external growth through significant additional leasing of new ground-up development projects following construction of the related new Class A buildings. External growth through acquisitions is much less predictable and less likely given the high-value urban submarkets that generate the majority of the Company’s revenue and the difficulty of locating appropriate opportunities that provide for adequate value-creation post acquisition.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
High Leasing Volume in Light of Minimal Contractual Lease Expirations
•What the Compensation Committee Considered When Setting the Goals at the End of 2018: Contractual lease expirations in 2019, 2020, and 2021 aggregated 4.5 million RSF as of December 31, 2018.
•Key Drivers of Actual FFO Per-Share Growth During the Performance Period: During the three years ended December 31, 2021, we executed leases aggregating 18.9 million RSF, including 9.5 million RSF in 2021, a record for the Company and almost double the RSF leased in each of 2020 and 2019. The continued strong leasing activity during the three years ended December 31, 2021, combined with strong demand for the Company’s properties, resulted in outperformance in FFO per-share growth relative to the goal established at the beginning of the three-year performance period.
Strong Rental Rate Growth
•What the Compensation Committee Considered When Setting the Goals at the End of 2018: The weighted-average rental rate growth achieved in the three years ended December 31, 2018 was 25.6% and 12.9% (cash basis). At the end of 2018, the Company projected rental rate growth on lease renewals and re-leasing of space in a range from 25% to 28%, and from 11% to 14% (cash basis), for the year ended December 31, 2019.
•Key Drivers of Actual FFO Per-Share Growth During the Performance Period: Projected rental rate growth was based upon a different set of contractual lease expirations and anticipation of continued strong but moderating rental rate growth. Continued constrained supply of Class A space resulted in strong demand and outperformance in rental rate growth. Actual weighted-average rental rate growth for the three years ended December 31, 2021 was 36.4% and 20.2% (cash basis), significantly above rental rate growth from leasing activity forecasted for 2019 and actual rental rate growth from leasing activity for the three years ended December 31, 2018.
Addition of Properties That Were Not Under Construction or Identified as Potential Acquisitions
•What the Compensation Committee Considered When Setting the Goals at the End of 2018: As of December 31, 2018, 21 of the 29 properties discussed below were under active construction. The other eight new Class A properties represented development and redevelopment projects that commenced subsequent to December 31, 2018 and generated an additional $36.9 million of incremental annual net operating income.
•Key Drivers of Actual FFO Per-Share Growth During the Performance Period: During the three years ended December 31, 2021:
•We had an addition of 219 properties, including 198 properties that were not under construction or identified as potential acquisitions as of December 31, 2018.
•We completed the acquisition of 165 operating properties aggregating 13.0 million RSF for an aggregate purchase price of $6.7 billion. These 165 properties generated $414.2 million of incremental annual net operating income.
•We placed into service 16 new Class A properties aggregating 3.0 million RSF through ground-up development, which were under active construction as of December 31, 2018.
•We placed into service 13 new Class A properties aggregating 1.4 million RSF through redevelopment. Five of the 13 properties were under active construction as of December 31, 2018. The remaining eight properties were leased, redeveloped, and placed into service subsequent to December 31, 2018 and generated an additional $36.9 million of incremental annual net operating income.
•As of December 31, 2021, the Company had development and redevelopment projects aggregating 4.8 million RSF of new Class A properties under construction that were 75% leased and pre-leased/negotiating near-term projects expected to commence construction in the next six quarters aggregating 2.6 million RSF that were 89% leased/negotiating.
Maintained Solid Occupancy
•What the Compensation Committee Considered When Setting the Goals at the End of 2018: Overall occupancy of 97.2% at the end of 2015 and 97.3% at the end of 2018 remained consistently strong. The Compensation Committee considered maintaining this high level of occupancy to be a significant goal.
•Key Drivers of Actual FFO Per-Share Growth During the Performance Period: Actual occupancy at the end of 2021 was 94.0% and included 4.7% of vacancy in our North America markets, representing lease-up opportunities that will contribute to growth in cash flows at recently acquired properties. Excluding the 4.7% acquired vacancy, our occupancy would have been 98.7%, which is higher than the occupancy achieved as of December 31, 2018 of 97.3%.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Improvement in Long-Term Cost of Capital
•What the Compensation Committee Considered When Setting the Goals at the End of 2018: The corporate credit rating from S&P Global Ratings was BBB/Positive, the credit rating from Moody’s Investors Service was Baa1/Stable, NAV per share(1) was $137.00, and the FFO per share multiple(2) was 18.7x.
•Key Drivers of Actual FFO Per-Share Growth During the Performance Period: The following items, combined with the items noted above, contributed to improvement in our long-term cost of capital and our outperformance in FFO per-share growth for the three-year performance period:
•Improved fourth quarter annualized net debt to Adjusted EBITDA from 5.4x in 2018 to 5.2x in 2021.
•Further strengthening the Company’s credit profile, which resulted in a corporate issuer credit rating increase to BBB+/Stable in February 2019, and a further upgrade to BBB+/Positive in October 2021, by S&P Global Ratings.
•Improved our NAV per share(1) of $137.00 as of December 31, 2018 to $196.00 as of December 31, 2021.
•Improved average FFO per share multiple(2) from 18.7x in 2018 to 24.5x in 2021.
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(1) | NAV per share for each year is calculated as an average of net asset value estimates provided by Bank of America Merrill Lynch, Citigroup Global Markets Inc., Evercore ISI, Green Street, and J.P. Morgan Securities LLC. |
(2) | The FFO per share multiple is calculated using the average quarter-end stock price divided by FFO per share – diluted, as adjusted, for the respective year. |
Performance-Based Cash Incentive Bonus Awarded in 2020 and 2021 to Our Executive Chairman
Mr. Marcus was granted a performance-based cash incentive bonus in an amount up to $2.0 million in each of 2020 and 2021 (the “2020 Cash Bonus” and the “2021 Cash Bonus,” respectively) in recognition of the significant value created in the Company’s portfolio of non-real estate investments during each such year as a result of Mr. Marcus’s experience, expertise, and leadership. Half of the 2020 Cash Bonus was earned in 2020 and paid in 2021, and half of the 2021 Cash Bonus was earned in 2021 and is payable in 2022.
The other half of the 2020 Cash Bonus (the “2020 Net Realized Gains Bonus”) is payable in 2022, subject to (i) Mr. Marcus’s continued service through the applicable payment date and (ii) the amount of recognition of net realized gains, excluding impairments, from the Company’s portfolio of non-real estate investments during the period from January 1, 2021 to December 31, 2021 (the “2021 Net Realized Gains”). The achievement levels established by the Compensation Committee for the 2020 Net Realized Gains Bonus are provided in the table below (with linear interpolation for performance in between levels). In early 2022, the Compensation Committee determined that the amount of 2021 Net Realized Gains, as set forth in the table below, exceeded the maximum achievement level and thus determined that the amount of 2020 Net Realized Gains Bonus would be $1.0 million.
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2020 Net Realized Gains Bonus |
2021 Net Realized Gains1 | | Amount Earned in 2021 |
| | | | | |
Forfeiture: | $0 | | | $0 | |
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Target: | $37,500,000 | | | $500,000 | |
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Maximum | ≥ $75,000,000 | | | $1,000,000 | |
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Actual | $215,845,000 | | | $1,000,000 | |
(1)Represents net realized gains, excluding impairments, from the Company’s portfolio of non-real estate investments.
The other half of the 2021 Cash Bonus (the “2021 Net Realized Gains Bonus”) is payable in 2023, subject to (i) Mr. Marcus’s continued service through the applicable payment date and (ii) the amount of recognition of net realized gains, excluding impairments, reported in FFO, as adjusted during the period from January 1, 2022 to December 31, 2022, from the Company’s portfolio of non-real estate investments (the “2022 Net Realized Gains”). We will disclose the specific achievement levels with respect to 2022 Net Realized Gains at the end of the performance period, as included above with respect to the 2020 Net Realized Gains Bonus. We believe that providing disclosure before end of the performance period would be competitively harmful.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Long-Term Performance-Based Incentive Awards Granted in 2021 to All NEOs
Structure of Awards
Each of our NEOs received an award, 50% of which is eligible to vest upon achievement of TSR on a relative basis compared to the constituents of the FTSE Nareit Equity Office Index (the “Index Companies”) and 50% of which is eligible to vest upon achievement of TSR, on an absolute basis, over a three-year performance period. The shares subject to each award are also subject to a one-year holding period after vesting to further underscore its long-term retentive element.
Rigorous Performance Goals
In order for an NEO to earn the full award, our TSR during the three-year performance period must be in the top 30% of Index Companies and must equal or exceed 24%. If our TSR is 24% during the three-year performance period, the value of the maximum payout will be approximately 0.2% of the overall value generated for stockholders.
The relative and absolute portions of each award can be earned as follows (with linear interpolation for performance in between levels):
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50% Relative TSR | | 50% Absolute TSR |
TSR | | Vesting | | TSR | | Vesting |
| | | | | | | | | | | | |
Forfeiture: | <30th Percentile of Index Companies | | | 0 | % | | | Forfeiture: <12% | | | | 0 | % | |
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Threshold: | 30th Percentile of Index Companies | | | 25 | % | | | Threshold: 12% | | | | 25 | % | |
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Target: | 50th Percentile of Index Companies | | | 62.5 | % | | | Target: 18% | | | | 62.5 | % | |
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Maximum: | ≥70th Percentile of Index Companies | | | 100 | % | | | Maximum: ≥24% | | | | 100 | % | |
Change of Control and Termination of Service
In the event of a change of control during the performance period:
•The performance goals for the relative portion of each award will be earned based on the Company’s TSR through the change of control against that of the Index Companies for the same period. If the change of control occurs during the first year of the performance period, the number of shares earned is also prorated for the same period.
•The performance goals for the absolute portion of each award will be prorated for the portion of the performance period elapsed through the change of control and actual performance measured against those prorated goals. If the change of control occurs during the first year of the performance period, the number of shares earned is also prorated for the same period.
If an NEO is terminated without Cause or resigns for Good Reason, or the NEO’s service is terminated due to his or her death or disability, in each case prior to the vesting date, his award will remain outstanding and subject to vesting based on attainment of the performance goals through the original performance period, as if termination had not occurred, but with the number of shares earned prorated for the portion of the performance period worked.
Long-Term Service-Based Incentive Awards Granted in 2021 to Co-CEOs and Other NEOs
Each of the employment agreements for Messrs. Moglia, Richardson, Shigenaga, Ryan, Kass, and Cunningham provides for long-term incentive awards at the discretion of the Compensation Committee. Annual long-term incentive awards are granted in the year following the year of performance, as shown in the “Summary Compensation Table” for the year of grant in accordance with the rules for disclosing equity compensation. Based on the 2020 corporate performance accomplishments; an evaluation of each NEO’s performance, position, tenure, experience, expertise, leadership, management capability, and contribution to profitability, growth in FFO per share and NAV, and long-term stockholder value; and 2020 individual performance accomplishments, each NEO was granted a restricted stock award for the number of shares set forth below in the “2021 Grants of Plan-Based Awards Table” on page 113. These restricted stock awards vest based on each NEO’s continued service over a four-year period. The value of each restricted stock award increases or decreases with our stock price. Our Compensation Committee believes that granting restricted stock awards is appropriate for several reasons, including that it is consistent with the practices of our peer companies, that it provides a useful retention tool, and that it helps us manage dilution because fewer shares are granted subject to restricted stock awards than would be granted subject to stock options.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Retirement and Benefit Programs
Pension Plan
The Company maintains the Alexandria Real Estate Equities, Inc. Cash Balance Pension Plan (the “Pension Plan”), which is designed to provide eligible employees of the Company, including the NEOs, with benefits upon retirement. The Board believes it is important to the Company’s objectives of attracting and retaining talent that the Company provide a reasonable income replacement for eligible employees, including the NEOs, during retirement.
Under the Pension Plan, a hypothetical account is established for each participant for record-keeping purposes. Each year, a participant’s cash balance account is credited a hypothetical employer contribution and hypothetical earnings. These amounts are hypothetical because the hypothetical account balance must be converted into an annuity payable at normal retirement age (“NRA”), as defined in the Pension Plan. This future benefit at NRA can then be converted into a lump-sum benefit. The lump-sum distribution at NRA may be higher or lower, depending on interest rates in effect at that time. Hypothetical earnings for each calendar year are credited at a rate, compounded annually, equal to the rate for 30-year United States Treasury securities for the December preceding the applicable calendar year. The rate was 1.67% for 2021. Benefits under the Pension Plan are vested at all times, are obligations of the Company, and are payable in the form of a lump sum or a single or joint and survivor annuity in accordance with the participant’s distributions election. Benefits automatically commence upon death, disability, or other termination of employment. Participants may elect to commence receiving benefits while still in our employ at any time on or after the participant has attained age 62. See “Pension Benefits Table” on page 116 for more information.
Deferred Compensation Plan
The Company also has a 2000 Deferred Compensation Plan (the “DC Plan”), which is an unfunded plan designed to permit compensation deferrals for a select group of the Company’s management or highly compensated employees.
Eligibility to participate in the DC Plan is limited to full-time employees of the Company who (i) qualify as accredited investors under the Securities Act, (ii) fall within a select group of management or highly compensated employees for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and (iii) are selected and designated as eligible to participate by the Company with respect to a plan year based on their level of responsibility and anticipated compensation levels for such plan year. Participants’ elected deferral amounts under the DC Plan are credited or charged, as the case may be, with the investment performance of mutual funds, other publicly traded securities, and certain private life science, agtech, and technology company venture investments made available by the Company for the deemed investment of participants’ accounts as elected by participants. During 2021, the Company did not contribute any amount to participants’ accounts under the DC Plan in addition to the compensation deferred by the participants. See “2021 Nonqualified Deferred Compensation Table” on page 116 for more information.
Perquisites and Other Benefits
The Company provides certain perquisites and other benefits to our NEOs as discussed in the “Summary Compensation Table” on page 111. The Compensation Committee believes that these types of benefits are highly effective in retaining qualified executive officers because they provide the executive officers with longer-term security and protection for the future. The Company believes that providing these benefits is a relatively inexpensive way to enhance the competitiveness of the executives’ compensation packages and furthers the Company’s goal of retaining and rewarding highly qualified executives. The Company generally believes that all the perquisites have greater value to the executives than cost to the Company to provide them, thus providing a return on the cost of providing such benefits.
COMPENSATION DISCUSSION AND ANALYSIS (continued)
Other Compensation Policies
Stock Ownership Guidelines
NEOs are subject to the stock ownership requirements described under “Stock Ownership Guidelines” on page 26.
Clawback Policy
The Company has a clawback policy applicable to NEOs. The policy allows for the recoupment of cash and long-term incentive awards paid to an NEO on the basis of the Company’s performance in the event of a material restatement of the Company’s financial results (other than a restatement caused by a change in applicable accounting rules or interpretations) as a result of actual fraud or willful unlawful misconduct by the NEO that materially contributed to the need for the restatement. The policy is administered by the Compensation Committee.
Anti-Hedging and Anti-Pledging Policies
Our NEOs are subject to anti-hedging and anti-pledging policies described under “Anti-Hedging and Anti-Pledging Policies” on page 26.
Tax Treatment
Under Section 162(m) of the Code (“Section 162(m)”), compensation paid to any of the publicly held corporation’s “covered employees” that exceeds $1 million per taxable year for any covered employee is generally non-deductible for tax purposes. Although the Compensation Committee will continue to consider tax implications as one factor in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions and retains the flexibility to provide compensation for the Company’s NEOs in a manner consistent with the goals of the Company’s executive compensation program and the best interests of the Company, which may include providing for compensation that is not deductible by the Company due to the deduction limit under Section 162(m).
Compensation Risk Assessment
The Compensation Committee considers potential risks when reviewing and approving the compensation program and has designed the Company’s compensation program with specific features to address potential risks while rewarding employees for achieving long-term financial and strategic objectives through balancing appropriate entrepreneurship and risk‑taking with the exercise of prudent business judgment. The Compensation Committee believes that the following risk oversight and compensation design features assist in guarding against excessive risk-taking and has concluded that our compensation program does not create risks that are reasonably likely to have a material adverse effect on the Company’s business or financial condition:
•The Company’s processes for developing strategic and annual operating plans, the approval of capital investments, internal control over financial reporting, and other financial, operational, and compliance policies and practices (see “The Board’s Role in Risk Oversight” on page 33 for a discussion of the role of the Board in the risk oversight process);
•The diversified nature of the Company’s overall real estate asset base and tenant mix with respect to industries and markets served and geographic footprints;
•The review and approval of corporate objectives by the Compensation Committee to ensure that these goals are aligned with the Company’s strategic and annual operating plans, achieve the proper risk-reward balance, and do not encourage unnecessary or excessive risk-taking;
•Competitive base salaries consistent with executives’ responsibilities so that they are not motivated to take excessive risks to achieve a reasonable level of financial security;
•The determination of stock awards based on a review of a variety of qualitative factors;
•Stock compensation and vesting periods for stock awards that encourage executives to focus on sustained stock price appreciation;
•A mix between cash and equity compensation that is designed to encourage strategies and actions that are in the long-term best interests of the Company;
•Meaningful stock ownership guidelines for executive officers and directors; and
•The Company’s clawback policy and anti-hedging and anti-pledging policies, which are described above.
Compensation Tables and Related Narrative
Summary Compensation Table Introduction
As described under “Compensation Philosophy,” the fundamental principle that drives pay decisions of the Compensation Committee is to align pay with performance. The experience, abilities, and commitment of our NEOs (whose tenures average 19 years) provide unique skill sets to the Company in our business of owning and operating essential real estate for the broad and diverse life science, agtech, and technology industries and therefore have been and will continue to be critical to the Company’s long-term success, including the achievement of each of our key objectives: profitability, growth in FFO per share and NAV, and creation of long-term stockholder value. The Compensation Committee believes that each NEO’s total annual compensation should vary with the performance of the Company for the year in question. 2021 was a year of significant achievements, as described throughout this Proxy Statement and in the following charts:
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Total Stockholder Return(1) Two Years Ended December 31, 2021 |
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(1)Assumes reinvestment of dividends.
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TSR |
1 Year Ended | | 3 Years Ended | | 5 Years Ended | | 5/28/97 (IPO) through |
12/31/21 | | 12/31/21 | | 12/31/21 | | 12/31/21 |
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S&P 500 | 28.7% | | ARE | 109.0% | | S&P 500 | 133.4% | | ARE | 2,532.0% |
ARE | 28.1% | | S&P 500 | 100.4% | | ARE | 130.1% | | S&P 500 | 789.6% |
FTSE | 22.0% | | Russell | 72.9% | | Russell | 76.4% | | Peers | 735.1% |
Peers | 21.9% | | FTSE | 30.8% | | Peers | 30.3% | | Russell | 720.6% |
Russell | 14.8% | | Peers | 30.2% | | FTSE | 17.7% | | FTSE | 552.1% |
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ARE Percentile Ranking |
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Peers | 89% | | FTSE | 95% | | FTSE | 100% | | FTSE | 100% |
FTSE | 85% | | Peers | 89% | | Peers | 89% | | Peers | 100% |
S&P 500 | 51% | | S&P 500 | 63% | | S&P 500 | 57% | | S&P 500 | 73% |
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Three-year average NEO total compensation percentile ranking within our 2021 Peer Group (1) (compensation of 4 out of 9 peers is consistent with or exceeds Alexandria’s) | 56 | % |
(1)Represents 2021 total compensation for ARE and 2020 total compensation for our peer group, the most recently publicly available information at the time of publishing of our 2022 proxy statement. In addition, it assumes that compensation within 5% is consistent with ARE compensation.
COMPENSATION TABLES AND RELATED NARRATIVE (continued)
Summary Compensation Table
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Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(2) | | All Other Compensation ($)(3) | | Total ($) |
Joel S. Marcus, | | 2021 | | 1,105,000 | | | 2,000,000 | | (4) | | 5,073,393 | | | 2,486,250 | | | 1,600,851 | | | 435,899 | | | 12,701,393 | | |
Executive Chairman and Founder | | 2020 | | 1,080,000 | | | 2,000,000 | | (4) | | 4,983,975 | | | 2,430,000 | | | 863,506 | | | 431,012 | | | 11,788,493 | | |
| 2019 | | 1,040,000 | | | 1,025,000 | | (4),(5) | | 4,994,046 | | | 2,340,000 | | | 1,215,022 | | | 427,422 | | | 11,041,490 | | |
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Peter M. Moglia, | | 2021 | | 690,000 | | | — | | | | 5,874,602 | | | 1,552,500 | | | 13,672 | | | 143,357 | | | 8,274,131 | | |
Co-Chief Executive Officer and Co-Chief Investment Officer | | 2020 | | 675,000 | | | — | | | | 5,786,344 | | | 1,518,750 | | | 18,406 | | | 42,357 | | | 8,040,857 | | |
| 2019 | | 650,000 | | | — | | | | 5,992,601 | | | 1,462,500 | | | 21,056 | | | 141,857 | | | 8,268,014 | | |
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Stephen A. Richardson, | | 2021 | | 690,000 | | | — | | | | 5,874,602 | | | 1,552,500 | | | 59,978 | | | 143,148 | | | 8,320,228 | | |
Co-Chief Executive Officer | | 2020 | | 675,000 | | | 20,000 | | (6) | | 5,786,344 | | | 1,518,750 | | | 47,531 | | | 42,148 | | | 8,089,773 | | |
| 2019 | | 650,000 | | | — | | | | 5,992,601 | | | 1,462,500 | | | 58,889 | | | 141,648 | | | 8,305,638 | | |
| | | | | | | | | | | | | | | | | | |
Dean A. Shigenaga, | | 2021 | | 655,000 | | | 1,250,000 | | | | 5,382,380 | | | — | | | 131,592 | | | 146,403 | | | 7,565,375 | | |
President and Chief Financial Officer | | 2020 | | 640,000 | | | 1,170,000 | | (7) | | 5,159,683 | | | — | | | 49,557 | | | 45,403 | | | 7,064,643 | | |
| 2019 | | 620,000 | | | 1,100,000 | | | | 5,259,280 | | | — | | | 75,429 | | | 144,903 | | | 7,199,612 | | |
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Daniel J. Ryan, | | 2021 | | 650,000 | | | 2,600,000 | | (8) | | 4,850,943 | | | — | | | 1,662,285 | | | 138,500 | | | 9,901,728 | | |
Co-Chief Investment Officer and Regional Market Director – San Diego | | 2020 | | 635,000 | | | 1,535,000 | | (9) | | 4,646,822 | | | — | | | 943,748 | | | 37,500 | | | 7,798,070 | | |
| 2019 | | 620,000 | | | 975,000 | | | | 4,814,235 | | | — | | | 426,180 | | | 137,000 | | | 6,972,415 | | |
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Hunter L. Kass(10) | | 2021 | | 500,000 | | | 2,600,000 | | (11) | | 4,496,417 | | | — | | | — | | | 113,500 | | | 7,709,917 | | |
Executive Vice President – Regional Market Director – Greater Boston | | | | | | | | | | | | | | | | | | |
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John H. Cunningham | | 2021 | | 535,000 | | | 695,000 | | (12) | | 2,670,542 | | | — | | | 5,550 | | | 122,120 | | | 4,028,212 | | |
Executive Vice President – Regional Market Director – New York City | | 2020 | | 525,000 | | | 525,000 | | | | 2,620,140 | | | — | | | 7,472 | | | 46,120 | | | 3,723,732 | | |
| 2019 | | 515,000 | | | 500,000 | | | | 2,555,531 | | | — | | | 7,513 | | | 120,620 | | | 3,698,664 | | |
(1)The dollar values of restricted stock awards set forth in this column are equal to the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. A discussion of the assumptions used in calculating the grant date fair value is set forth in Notes 2 and 16 of the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Certain amounts shown in this column relate to restricted stock awards that were tied to the achievement of predetermined corporate and individual goals. Assuming achievement of the highest level of performance, the accounting fair values of the restricted stock awards that will ultimately be recognized as compensation expense are as follows: (i) Mr. Marcus’s awards: 2019: $5,064,046; 2020: $5,044,020; and 2021: $5,073,393; (ii) each of Messrs. Moglia’s and Richardson’s awards: 2019: $6,102,601; 2020: $5,890,089; and 2021: $5,874,602.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | | Joel S. Marcus | | Peter M. Moglia | | Stephen A. Richardson | | Dean A. Shigenaga | | Daniel J. Ryan | | Hunter L. Kass | | John H. Cunningham | |
| Aggregate change in the actuarial present value of accumulated benefits under the Company’s Pension Plan | | $ | — | | | $ | 13,672 | | | $ | 14,618 | | | $ | 14,491 | | | $ | 10,154 | | | $ | — | | | $ | 5,550 | | |
| Above-market or preferential earnings under the DC Plan | | 1,600,851 | | | — | | | 45,360 | | | 117,101 | | | 1,652,131 | | | — | | | — | | |
| Earnings reflected in the table above | | $ | 1,600,851 | | | $ | 13,672 | | | $ | 59,978 | | | $ | 131,592 | | | $ | 1,662,285 | | | $ | — | | | $ | 5,550 | | |
| Below-market losses under the DC Plan not shown above | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | |
(3)The amounts set forth in this column include the Company’s contribution to (a) NEOs’ employee accounts under the Company’s 401(k) plan and Pension Plan, (b) the Company’s profit-sharing and executive profit-sharing plans, (c) life insurance premiums, (d) medical premiums, and (e) disability premiums:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
All Other Compensation ($) | | Joel S. Marcus | | Peter M. Moglia | | Stephen A. Richardson | | Dean A. Shigenaga | | Daniel J. Ryan | | Hunter L. Kass | | John H. Cunningham | |
Pension Plan | | $ | — | | | $ | 100,000 | | | $ | 100,000 | | | $ | 100,000 | | | $ | 100,000 | | | $ | 75,000 | | | $ | 75,000 | | |
Profit-sharing plan | | 38,500 | | | 38,500 | | | 38,500 | | | 38,500 | | | 38,500 | | | 38,500 | | | 38,500 | | |
Insurance premiums | | 397,399 | | | 4,857 | | | 4,648 | | | 7,903 | | | — | | | — | | | 8,620 | | |
All other compensation | | $ | 435,899 | | | $ | 143,357 | | | $ | 143,148 | | | $ | 146,403 | | | $ | 138,500 | | | $ | 113,500 | | | $ | 122,120 | | |
COMPENSATION TABLES AND RELATED NARRATIVE (continued)
(4)Represents bonus awarded to Mr. Marcus in recognition of the significant value created in the Company’s portfolio of non-real estate investments as a result of Mr. Marcus’s expertise and leadership. See “Performance-Based Cash Incentive Bonus Awarded in 2020 and 2021 to Our Executive Chairman” for more information.
(5)Includes $25,000 awarded to mark the 25-year anniversary of Mr. Marcus’s service to the Company.
(6)Represents bonus awarded to mark the 20-year anniversary of Mr. Richardson’s service to the Company.
(7)Includes $20,000 awarded to mark the 20-year anniversary of Mr. Shigenaga’s service to the Company.
(8)Includes a special cash bonus of $1,100,000 awarded by the Compensation Committee to Mr. Ryan for his exceptional performance during 2021, including his outstanding efforts in leading the Company’s strategy for mega campus design, building design, and placemaking strategy across each of our life science cluster markets.
(9)Includes (i) a special cash bonus of $500,000 awarded in recognition of Mr. Ryan’s exceptional performance during 2020 and (ii) a cash bonus of $10,000 awarded to mark the 10-year anniversary of Mr. Ryan’s service to the Company.
(10)Mr. Kass became NEO in 2021.
(11)Includes a special cash bonus of $1,100,000 awarded by the Compensation Committee to Mr. Kass for his extraordinary efforts in 2021 in leading the Company’s Greater Boston market, including his outstanding efforts in providing strategic input into the design of various key development and redevelopment of new Class A buildings and campuses across the Greater Boston market, which experienced an outstanding year of value creation for the Company, bolstered by acquisitions and the expansion of mega campuses.
(12)Includes a special cash bonus of $100,000 earned by Mr. Cunningham in 2021.
COMPENSATION TABLES AND RELATED NARRATIVE (continued)
2021 Grants of Plan-Based Awards Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | Grant Date Fair Value of Stock Awards ($) |
Name | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | |
Joel S. Marcus | | 1/8/2021 | (1) | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | | 8,288 | | | 1,375,000 | |
| | 1/8/2021 | (2) | | N/A | | N/A | | N/A | | — | | | 8,288 | | | 12,963 | | | N/A | | 1,813,524 | |
| | N/A | (3) | | 828,750 | | | 1,657,500 | | | 2,486,250 | | | N/A | | N/A | | N/A | | N/A | | N/A |
| | 3/31/2021 | (4) | | N/A | | N/A | | N/A | | 5,328 | | | 13,319 | | | 21,310 | | | N/A | | 1,884,870 | |
| | | | | | | | | | | | | | | | | | | |
Peter M. Moglia | | 1/8/2021 | (1) | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | | 13,562 | | | 2,250,000 | |
| | 1/8/2021 | (2) | | N/A | | N/A | | N/A | | — | | | 13,562 | | | 21,211 | | | N/A | | 2,967,419 | |
| | N/A | (3) | | 517,500 | | | 1,035,000 | | | 1,552,500 | | | N/A | | N/A | | N/A | | N/A | | N/A |
| | 3/31/2021 | (4) | | N/A | | N/A | | N/A | | 1,858 | | | 4,644 | | | 7,430 | | | N/A | | 657,184 | |
| | | | | | | | | | | | | | | | | | | |
Stephen A. Richardson | | 1/8/2021 | (1) | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | | 13,562 | | | 2,250,000 | |
| | 1/8/2021 | (2) | | N/A | | N/A | | N/A | | — | | | 13,562 | | | 21,211 | | | N/A | | 2,967,419 | |
| | N/A | (3) | | 517,500 | | | 1,035,000 | | | 1,552,500 | | | N/A | | N/A | | N/A | | N/A | | N/A |
| | 3/31/2021 | (4) | | N/A | | N/A | | N/A | | 1,858 | | | 4,644 | | | 7,430 | | | N/A | | 657,184 | |
| | | | | | | | | | | | | | | | | | | |
Dean A. Shigenaga | | 3/31/2021 | (4) | | N/A | | N/A | | N/A | | 1,858 | | | 4,644 | | | 7,430 | | | N/A | | 657,184 | |
| | 11/15/2021 | (5) | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | | 25,481 | | | 4,725,197 | |
| | | | | | | | | | | | | | | | | | | |
Daniel J. Ryan | | 3/31/2021 | (4) | | N/A | | N/A | | N/A | | 1,628 | | | 4,069 | | | 6,510 | | | N/A | | 575,810 | |
| | 11/15/2021 | (5) | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | | 23,054 | | | 4,275,134 | |
| | | | | | | | | | | | | | | | | | | |
Hunter L. Kass | | 2/16/2021 | (6) | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | | 2,931 | | | 500,029 | |
| | 3/31/2021 | (4) | | N/A | | N/A | | N/A | | 1,120 | | | 2,800 | | | 4,480 | | | N/A | | 396,256 | |
| | 11/15/2021 | (5) | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | | 19,414 | | | 3,600,132 | |
| | | | | | | | | | | | | | | | | | | |
John H. Cunningham | | 3/31/2021 | (4) | | N/A | | N/A | | N/A | | 553 | | | 1,382 | | | 2,210 | | | N/A | | 195,475 | |
| | 11/15/2021 | (5) | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | | 13,347 | | | 2,475,068 | |
(1)Represents restricted stock grant related to performance in 2020 subject to time-based vesting over a three-year period.
(2)Represents restricted stock grant related to performance in 2020 with vesting subject to performance over the three-year period ending December 31, 2023.
(3)Represents an annual cash incentive bonus tied to achievement of predetermined corporate and individual goals. See “Annual Cash Incentive Awards for Executive Chairman and Co-CEOs” on page 71 for additional information. (4)Represents performance grant. See “Long-Term Performance-Based Incentive Awards Granted in 2021 to All NEOs” on page 107 for additional information. The shares subject to each restricted stock grant are also subject to a one-year holding period after vesting to further underscore the long-term retentive element. (5)Represents restricted stock grant related to performance in 2020 subject to time-based vesting over a period ending on September 15, 2025. The shares subject to each restricted stock grant are also subject to a one-year holding period after vesting to further underscore the long-term retentive element.
(6)Represents stock grant awarded to Mr. Kass in recognition of his outstanding performance in 2020.
The stock awards indicated in the table above were granted under the 1997 Incentive Plan. Holders of Common Stock of the Company, including recipients of the restricted stock awards shown above, are eligible to receive distributions as determined by the Board. Refer to the consolidated statements of stockholders’ equity in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for information on dividends declared on Common Stock.
COMPENSATION TABLES AND RELATED NARRATIVE (continued)
Employment Agreements
The Company has individual employment agreements with Messrs. Marcus, Moglia, Richardson, Shigenaga, Ryan, Kass, and Cunningham.
The Marcus Employment Agreement provides that Mr. Marcus serve as full-time Executive Chairman beginning on April 23, 2018, through December 31, 2020, which term will be extended for additional one-year periods thereafter unless and until the Company or Mr. Marcus provides notice of non-renewal. The Marcus Employment Agreement (i) incorporates the annual incentive award criteria described under “Corporate Performance Component of Executive Chairman’s and Co-CEOs’ 2021 Cash Incentive Awards,” (ii) provides for a cash incentive bonus for Mr. Marcus as described above under “Structure and Target Value of Executive Chairman’s and Co-CEOs’ 2021 Cash Incentive Awards,” and (iii) provides for an annual long-term incentive award in the form of restricted stock as described above under “Long-Term Incentive Awards Granted in 2021 to Executive Chairman and Co-CEOs.” The Marcus Employment Agreement also provides for the double-trigger vesting of equity awards granted on or after January 1, 2015. The Marcus Employment Agreement is further described below under “Potential Payments Upon Termination or Change in Control” for Mr. Marcus.
The Company entered into amended and restated executive employment agreements (the “Executive Employment Agreements”) with Messrs. Moglia, Richardson, and Shigenaga effective as of April 2018, with Mr. Ryan effective as of May 2018, with Mr. Kass effective as of January 2021, and with Mr. Cunningham effective as of July 2017. Mr. Moglia’s Executive Employment Agreement was further amended and restated effective as of May 2018. The Executive Employment Agreements provide that each executive be employed at will, with the terms of Messrs. Richardson’s and Shigenaga’s agreements beginning on April 23, 2018, the terms of Messrs. Moglia’s and Ryan’s agreements beginning on May 22, 2018, the term of Mr. Kass’s agreement beginning on January 1, 2021, and the term of Mr. Cunningham’s agreement beginning on July 5, 2017, and, in each case, ending on the date that the agreement is terminated by either party pursuant to the provisions of the applicable agreement. The Executive Employment Agreements provide for a base salary to be increased annually by no less than a cost-of-living adjustment based on the consumer price index for each executive’s residence location.
The Executive Employment Agreements with Messrs. Moglia and Richardson provide that each individual is eligible to receive an annual cash incentive award, 60% of which shall be payable based on the achievement of certain corporate performance criteria and 40% of which shall be payable based on the achievement of each individual’s performance criteria. The cash incentive award payable, if any, will have a threshold amount equal to 75% of each individual’s base salary, a target amount equal to 150% of base salary, and a maximum amount equal to 225% of base salary. Determination and payment of any cash incentive award will be based upon the achievement of personal and corporate goals determined by the Compensation Committee. Each individual is also eligible to receive an annual award of restricted stock for each fiscal year of the Company during the term of his agreement, which ends prior to the fiscal year during which his agreement is terminated, with 50% of any such target award vesting over a three-year period following the grant date based solely on his continued service, and the remaining award vesting not later than 30 days following the end of the third fiscal year following the fiscal year with respect to which the award was made, based on and subject to certain corporate performance criteria over a three-year performance period. The structure of these cash incentive awards and long-term incentive awards is described in “Compensation Discussion and Analysis” on pages 100-102.
COMPENSATION TABLES AND RELATED NARRATIVE (continued)
Outstanding Equity Awards at Fiscal Year End Table
The following table shows unvested stock awards assuming a market value of $222.96 per share (the closing market price of Common Stock on December 31, 2021):
| | | | | | | | | | | | | | |
| | Stock Awards |
| | | | |
Name | | Number of Shares or Units of Stock That Have Not Vested (#)(1) | | Market Value of Shares or Units of Stock That Have Not Vested ($) |
Joel S. Marcus | | 122,654 | | | 27,346,936 | |
Peter M. Moglia | | 120,780 | | | 26,929,109 | |
Stephen A. Richardson | | 120,780 | | | 26,929,109 | |
Dean A. Shigenaga | | 96,286 | | | 21,467,927 | |
Daniel J. Ryan | | 87,474 | | | 19,503,203 | |
Hunter L. Kass | | 46,649 | | | 10,400,861 | |
John H. Cunningham | | 44,501 | | | 9,921,943 | |
(1)Represents restricted stock awards granted pursuant to the 1997 Incentive Plan, which are scheduled to vest in the years shown below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shares scheduled to vest during the year ending December 31, | | Joel S. Marcus | | Peter M. Moglia | | Stephen A. Richardson | | Dean A. Shigenaga | | Daniel J. Ryan | | Hunter L. Kass | | John H. Cunningham |
2022 | | 45,913 | | | 56,181 | | | 56,181 | | | 38,409 | | | 35,601 | | | 17,104 | | | 17,867 | |
2023 | | 42,468 | | | 35,958 | | | 35,958 | | | 30,580 | | | 27,392 | | | 11,810 | | | 13,918 | |
2024 | | 34,273 | | | 28,641 | | | 28,641 | | | 20,926 | | | 18,717 | | | 12,881 | | | 9,379 | |
2025 | | — | | | — | | | — | | | 6,371 | | | 5,764 | | | 4,854 | | | 3,337 | |
Total shares that have not vested | | 122,654 | | | 120,780 | | | 120,780 | | | 96,286 | | | 87,474 | | | 46,649 | | | 44,501 | |
2021 Option Exercises(1) and Stock Vested Table
The following table sets forth certain information regarding vesting of restricted stock awards during 2021 for the NEOs:
| | | | | | | | | | | | | | | | | | | | |
| | Stock Awards(2) |
| | | | |
Name | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($)(3) |
Joel S. Marcus | | | 68,633 | | | | 11,601,108 | |
Peter M. Moglia | | | 42,683 | | | | 7,792,076 | |
Stephen A. Richardson | | | 42,683 | | | | 7,792,076 | |
Dean A. Shigenaga | | | 42,150 | | | | 8,151,896 | |
Daniel J. Ryan | | | 39,198 | | | | 7,554,377 | |
Hunter L. Kass | | | 9,475 | | | | 1,871,471 | |
John H. Cunningham | | | 18,890 | | | | 3,711,577 | |
(1)We have not issued any options since 2002, no options have been exercised since 2012, and no options were outstanding as of December 31, 2021.
(2)Represents restricted stock awards granted pursuant to the 1997 Incentive Plan.
(3)Represents the number of shares of stock that vested multiplied by the market price of Common Stock on the vesting date.
COMPENSATION TABLES AND RELATED NARRATIVE (continued)
Pension Benefits Table
The following table discloses the number of years of credited service of, the actuarial present value of the accumulated benefits for, and payments during the last fiscal year to each NEO under the Alexandria Real Estate Equities, Inc. Cash Balance Pension Plan. For a more detailed description of the Pension Plan, see “Pension Plan” on page 108.
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Name | | Number of Years Credited Service (#) | | Present Value of Accumulated Benefits ($)(1) | | Payments During Last Fiscal Year ($) |
Joel S. Marcus | | 28 | | — | | | — | |
Peter M. Moglia | | 24 | | 932,353 | | | — | |
Stephen A. Richardson | | 22 | | 989,929 | | | — | |
Dean A. Shigenaga | | 21 | | 982,243 | | | — | |
Daniel J. Ryan | | 11 | | 718,162 | | | — | |
Hunter L. Kass | | 4 | | 75,000 | | | — | |
John H. Cunningham | | 15 | | 412,879 | | | — | |
| | | | | | |
(1)The present value of the accumulated benefits represents the present value of the accrued benefits in each NEO’s account under the Pension Plan.
2021 Nonqualified Deferred Compensation Table
The following table discloses contributions, earnings, and balances under the nonqualified deferred compensation plan for each of the NEOs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Executive Contributions in Last Fiscal Year ($)(1) | | Registrant Contributions in Last Fiscal Year ($) | | Aggregate Earnings in Last Fiscal Year ($)(2) | | Aggregate Withdrawals/ Distributions ($) | | Aggregate Balance at Last Fiscal Year End ($)(3) |
Joel S. Marcus | | 1,136,739 | | | — | | | 1,600,851 | | | — | | | 16,735,613 | |
Peter M. Moglia | | — | | | — | | | — | | | — | | | — | |
Stephen A. Richardson | | — | | | — | | | 45,360 | | | (151) | | | 243,662 | |
Dean A. Shigenaga | | 575,000 | | | — | | | 117,101 | | | — | | | 3,243,653 | |
Daniel J. Ryan | | — | | | — | | | 1,652,131 | | | — | | | 5,450,391 | |
Hunter L. Kass | | — | | | — | | | — | | | — | | | — | |
John H. Cunningham | | — | | | — | | | — | | | — | | | — | |
(1)All contributions in this column are also included as compensation to the NEOs in the “Salary” and “Bonus” columns of the “Summary Compensation Table” for 2021 on page 111.
(2)Aggregate earnings include above-market gains/preferential earnings and below-market losses as shown for each NEO in the table under footnote 2 to the “Summary Compensation Table” on page 111. Below-market losses are excluded from the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the “Summary Compensation Table.” Advisory fees paid to the plan administrator have been deducted from aggregate earnings reported in this column.
(3)The following amounts included in this column have been reported as compensation to the NEOs in the “Summary Compensation Table” for 2020 and 2019 as follows (excluding Hunter L. Kass and 2019 for John H. Cunningham, who became NEOs beginning in 2021 and 2020, respectively):
| | | | | | | | | | | | | | |
| | Executive Contributions by Year ($) |
Name | | 2020 | | 2019 |
Joel S. Marcus | | 988,454 | | | 1,013,530 | |
Peter M. Moglia | | — | | | — | |
Stephen A. Richardson | | — | | | — | |
Dean A. Shigenaga | | 550,000 | | | 525,000 | |
Daniel J. Ryan | | — | | | 231,250 | |
John H. Cunningham | | — | | | N/A |
The Company has in place the DC Plan, which is an unfunded plan designed to permit compensation deferrals for a select group of the Company’s management or highly compensated employees. Eligibility to participate in the DC Plan is limited to employees of the Company who (i) qualify as accredited investors under the Securities Act, (ii) fall within a select group of management or highly compensated employees for purposes of ERISA, and (iii) are selected and designated as eligible to participate by the Company with respect to a plan year based on their level of responsibility and anticipated compensation levels for such plan year.
COMPENSATION TABLES AND RELATED NARRATIVE (continued)
Under the DC Plan, a participant may elect annually to defer up to 70% of the participant’s salary, 70% of the participant’s eligible earned leasing incentive compensation (if applicable), and up to 100% of the participant’s cash incentive award, provided that the minimum deferral amount of any cash incentive award be $10,000 and the aggregate minimum deferral amount of any salary and cash incentive award be $10,000. A participant must generally make deferral elections during an election period that is prior to the beginning of the plan year in which the related compensation is earned. The Company may permit a newly eligible participant to make a deferral election within the first 30 days of first becoming eligible to participate in the plan with respect to compensation earned during the portion of the plan year after such election becomes irrevocable.
Participants’ deferral amounts under the DC Plan are credited or charged, as the case may be, with the investment performance of mutual funds, other publicly traded securities, and certain private life science, agtech, and technology company venture investments made available by the Company for the deemed investment of participants’ accounts as elected by the participants. The mutual funds, other publicly traded securities, and certain other private life science, agtech, and technology company venture investments made available by the Company for the deemed investment of participants’ accounts under the DC Plan may change from time to time. Participants may change their deemed investment selections prospectively on a daily basis by contacting the advisor associated with the DC Plan.
Except with respect to certain VIP Grandfathered Amounts (defined below), a participant may elect to receive amounts deferred under the DC Plan on a date specified by the participant or upon the termination of such participant’s service with the Company. With respect to amounts deferred prior to January 1, 2005, such amounts will be distributed in a single lump sum upon termination. With respect to amounts deferred after January 1, 2005 (“409A Non-Grandfathered Amounts”), if such termination is for any reason other than death or disability, such amounts will be in accordance with the participant’s election in either a lump sum or in up to 15 annual installments, which payments either commence immediately upon termination or on the fifth anniversary of termination in accordance with the participant’s election, provided that no payment is made prior to the six-month anniversary of termination. If the participant’s termination is due to death or disability, amounts are distributed immediately in a single lump sum. In addition, if a Change of Control (as defined under the DC Plan) occurs prior to any such date specified by the participant for distribution or the participant’s termination of service, payment of any vested 409A Non-Grandfathered Amounts will be made in a lump sum as soon as administratively feasible following the Change of Control.
A participant’s account under the DC Plan may include amounts that were initially deferred under the Company’s 2000 Venture Investment Deferred Compensation Plan (the “VIP”) prior to January 1, 2005, as adjusted for any gains and losses credited to such amounts (“VIP Grandfathered Amounts”). Any such vested amounts will be distributed to participants upon the occurrence of certain distribution events related to the investments designated by the Company for the deemed investment of such amounts, except that such amounts will continue to be deferred under the DC Plan if the participant made an election at the time of initial deferral of such amounts under the VIP to further defer such amounts under the DC Plan following a distribution event and the participant has not terminated employment prior to the distribution event.
With respect to amounts that are attributable to deferrals made under the DC Plan prior to January 1, 2005, as adjusted for any gains and losses credited to such amounts (“409A Grandfathered Amounts”), other than any VIP Grandfathered Amounts, a participant may elect to receive an early distribution of any such vested amounts if he or she experiences an Unforeseeable Emergency (as defined in the DC Plan). In addition, a participant may elect to receive an early distribution of any vested 409A Grandfathered Amounts, other than any VIP Grandfathered Amounts, credited to the participant’s account for any reason, provided that the amount distributed will be equal to 90% of the amount elected by the participant and the remaining 10% of the amount elected by the participant will be forfeited by the participant. During 2021, the Company did not contribute any amount to participants’ accounts under the DC Plan in addition to the compensation deferred by the participants.
Potential Payments Upon Termination or Change in Control
The discussion and tables below provide information regarding the incremental amount of compensation, if any, that would be paid to each of the NEOs of the Company under various termination scenarios or a change in control.
Mr. Marcus
The Marcus Employment Agreement provides that, in the event of a termination by the Company without Cause, by Mr. Marcus for Good Reason, or on account of Mr. Marcus’s death or Permanent Disability (as such terms are defined in the Marcus Employment Agreement), Mr. Marcus will be entitled to receive the following: (i) any earned and unpaid base salary; (ii) any earned and unpaid cash incentive bonus; (iii) vested benefits under the Company’s employee benefit plans and reimbursable expenses; (iv) any deferred compensation; (v) a pro rata cash incentive bonus for the portion of the year in which the termination occurs; (vi) a severance payment equal to the sum of (1) Mr. Marcus’s base salary, as in effect immediately prior to the date Mr. Marcus was elevated to the role of the Company’s full-time Executive Chairman, plus (2) an amount equal to Mr. Marcus’s cash incentive bonus payable at the target level of performance for the fiscal year ending immediately prior to the date Mr. Marcus was elevated to the role of the Company’s full-time Executive Chairman or, if higher, for the prior fiscal year; (vii) continued participation in the Company’s medical and dental benefit plans for the three-year period following the date of termination, or, if earlier, until Mr. Marcus enrolls in a plan of another employer under which he is entitled to receive such benefits; (viii) continuation of the term life insurance and executive/premium long-term care policy the Company provides to Mr. Marcus for the three-year period following the date of termination; (ix) payment of full salary in lieu of all accrued but unused vacation; (x) outplacement services for 180 days following the date of termination; (xi) full and immediate vesting of all outstanding and unvested equity or equity-based compensation awards, the vesting of which otherwise depends only upon the passage of time; (xii) to the extent that the applicable personal, corporate, or other performance goals are ultimately satisfied, the vesting of all awards of equity or equity-based compensation, the vesting of which otherwise depends upon the satisfaction of personal, corporate, or other performance criteria; (xiii) exercisability of all outstanding stock options for their full terms; (xiv) to the extent an annual restricted stock award has not been made with respect to the fiscal year prior to the fiscal year in which the termination occurs, a fully vested grant in an amount of shares equal to the sum of the time-based stock and the maximum performance-based stock awarded in the year prior to the year in which the termination occurs, or, if higher, the average of the sum of the time-based stock and the maximum performance-based stock awarded in the second, third, and fourth fiscal years prior to the fiscal year in which the termination occurs; and (xv) a fully vested grant in an amount of shares equal to the sum of the time-based stock and the maximum performance-based stock awarded in the year prior to the year in which the termination occurs, or, if higher, the average of the sum of the time-based stock and the maximum performance-based stock awarded in the second, third, and fourth fiscal years prior to the fiscal year in which the termination occurs. If Mr. Marcus’s termination is for any reason other than for Cause, he will be entitled to receive the benefits described in the foregoing clauses (xi), (xii) and (xiii) for (A) any such awards granted on or prior to January 15, 2019, and (B) any such awards granted after January 15, 2019, if such termination occurs after attainment of age 77.
If Mr. Marcus is terminated by the Company for Cause, he will be entitled to receive the following: (i) any earned and unpaid base salary; (ii) any earned and unpaid cash incentive bonus; (iii) vested benefits under the Company’s employee benefit plans and reimbursable expenses; and (iv) any deferred compensation.
If Mr. Marcus terminates his employment other than for Good Reason, he will be entitled to receive the following: (i) any earned and unpaid base salary; (ii) any earned and unpaid cash incentive bonus; (iii) vested benefits under the Company’s employee benefit plans and reimbursable expenses; and (iv) any deferred compensation. In addition, if Mr. Marcus terminates his employment other than for Good Reason or if Mr. Marcus’s termination is for any reason other than for Cause, he will be entitled to receive the following: (i) continued participation in the Company’s medical and dental benefit plans for the three-year period following the date of termination, or, if earlier, until Mr. Marcus enrolls in the plan of another employer under which he is entitled to receive such benefits; (ii) payment of full salary in lieu of all accrued but unused vacation; (iii) to the extent an annual restricted stock award has not been made with respect to the fiscal year prior to the fiscal year in which the termination occurs, a fully vested grant in an amount of shares equal to the sum of the time-based stock and the maximum performance-based stock awarded in the year prior to the year in which the termination occurs, or, if higher, the average of the sum of the time-based stock and the maximum performance-based stock awarded in the second, third, and fourth fiscal years prior to the fiscal year in which the termination occurs; and (iv) a fully vested grant in an amount of shares equal to the sum of the time-based stock and the maximum performance-based stock awarded in the year prior to the year in which the termination occurs, or, if higher, the average of the sum of the time-based stock and the maximum performance-based stock awarded in the second, third, and fourth fiscal years prior to the fiscal year in which the termination occurs.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL (continued)
The Marcus Employment Agreement also provides that, upon a Change in Control (as defined in the agreement), (i) any and all equity or equity-based awards granted before January 1, 2015, the vesting of which depends only upon the passage of time, will vest; (ii) any and all equity or equity-based awards granted before January 1, 2015, the vesting of which depends upon the satisfaction of performance criteria, shall vest in an amount equal to (A) the amount of the award that would have been earned if the target level of performance had been achieved, multiplied by (B) a fraction, (x) the numerator of which is the number of days during the performance period on which Mr. Marcus was employed and (y) the denominator of which is the number of days in the performance period, and (iii) any and all options granted before January 1, 2015, will be exercisable for their full terms. The Marcus Employment Agreement provides that accelerated vesting upon a Change in Control will not apply to an award granted on or after January 1, 2015, which is substituted in the event of a Change in Control with an alternative award (i) in respect of stock which is actively traded on an established U.S. securities market, (ii) which vests on the applicable regularly scheduled vesting date or dates (without regard to performance) of the pre-Change in Control award, or an earlier vesting date or dates, subject only to continued service through such date or dates other than as provided in the Marcus Employment Agreement, (iii) which provides Mr. Marcus with rights, terms, and conditions substantially equivalent to or better than those of the pre-Change in Control award, and (iv) which is the economic equivalent of the pre-Change in Control award, all as further described in the Marcus Employment Agreement. Any such alternative awards will be subject following a Change in Control to the provision of the Marcus Employment Agreement generally applicable upon a termination of employment, i.e., double-trigger vesting upon a severance-qualifying termination.
The Marcus Employment Agreement provides that if payments provided to Mr. Marcus under the Marcus Employment Agreement would constitute a “parachute payment” within the meaning of Section 280G of the Code, then Mr. Marcus is entitled to receive (i) an amount limited so that no portion thereof shall be subject to an excise tax under Section 4999 of the Code (the “Limited Amount”) or (ii) if the amount otherwise payable under the Marcus Employment Agreement reduced by the excise tax imposed by Section 4999 of the Code is greater than the Limited Amount, the amount otherwise payable under the Marcus Employment Agreement.
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50 and 60 Binney Street, Cambridge, Greater Boston |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL (continued)
Other Named Executive Officers
The Executive Employment Agreements with Messrs. Moglia, Richardson, Shigenaga, Ryan, Kass, and Cunningham provide that if the executive’s employment is terminated for any reason (including termination by the Company for Cause (as defined in the applicable agreement) or resignation by the executive without Good Reason (as defined in the applicable agreement), the executive will be entitled to receive all accrued and unused vacation and unpaid base salary earned through his last day of employment. In addition, if the executive terminates employment for any reason, other than a termination by the Company for Cause, after the end of a bonus year and prior to the date when bonuses for such year are paid by the Company to senior executives, then the executive will receive the same cash bonus that would have been awarded in the absence of such termination.
The Executive Employment Agreements with Messrs. Moglia, Richardson, Shigenaga, Ryan, Kass, and Cunningham provide that if the Company terminates the executive’s employment without Cause or the executive resigns for Good Reason not in connection with a Change in Control (as defined in the applicable agreement), the executive is entitled to receive severance generally equal to one year of base salary and a cash incentive bonus equal to the cash incentive bonus the executive earned for the previous year (or the year prior to the previous year if the cash incentive bonus for the previous year has not been determined prior to termination), provided that if the termination is on or after a Change in Control, the amount of the cash incentive bonus will in no event be lower than the highest actual cash bonus amount received by the executive for the two years preceding the year in which the Change in Control occurs.
These agreements further provide that if, upon or within two years following a Change in Control, the Company terminates the agreement without Cause or the executive terminates the agreement for Good Reason, the executive is entitled to receive severance generally equal to a multiple of the sum of one year of his base salary plus the cash incentive bonus amount earned for the previous year (or the year prior to the previous year if the cash incentive bonus for the previous year has not been determined prior to termination), provided that the cash incentive bonus amount will in no event be lower than the highest actual cash bonus amount received by the executive for the two years preceding the year in which the Change in Control occurs. The multiple for Messrs. Moglia, Richardson, Shigenaga, and Ryan is 2.0x, and the multiple for Messrs. Kass and Cunningham is 1.5x.
In addition, these agreements provide that if the Company terminates the executive’s employment without Cause or the executive resigns for Good Reason (either not in connection with a Change in Control or upon or within two years following a Change in Control), (i) all of the executive’s unvested equity awards will vest on the last day of employment, except that for any such awards granted to Messrs. Moglia or Richardson, the vesting of which otherwise depends upon the satisfaction of personal, corporate, or other performance criteria, such accelerated vesting will be provided to the extent that the applicable personal, corporate, or other performance goals are ultimately satisfied; and (ii) the executive will receive (A) a prorated grant of fully vested stock based on the Company’s grant to him for the prior year and the number of days employed in the year of termination and (B) an additional grant of fully vested stock equal to the higher of the number of shares of restricted stock that the Company had determined to grant to the executive for the prior year, but had not yet granted as of termination, or the average number of shares of restricted stock granted to the executive for the second, third, and fourth years prior to the year in which the executive’s employment terminates, except that the number of shares subject to such additional grant will be reduced by any shares the executive already received for the prior year.
The Executive Employment Agreements of Messrs. Moglia, Richardson, Shigenaga, Ryan, Kass, and Cunningham also provide that if the Company terminates the executive’s employment without Cause, or the executive terminates his employment for Good Reason (either not in connection with a Change in Control or upon or within two years following a Change in Control), the Company will pay the applicable premiums for the executive’s continued coverage under the Company’s health insurance plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) or provide a taxable payment calculated such that the after-tax amount of the payment would be equal to the applicable COBRA health insurance premiums if the Company determines that it cannot pay COBRA premiums without a substantial risk of violating applicable law, in each case for 12 months after the executive’s last day of employment with the Company, or if earlier, until the executive becomes entitled to receive similar health insurance coverage from another employer.
These agreements also provide that if the agreement terminates upon the executive’s death or Disability (as defined in the agreement), the Company shall provide the executive (or his beneficiaries or estate, as the case may be) with the same severance benefits as payable upon a termination by the Company without Cause or a resignation by the executive for Good Reason not in connection with a Change in Control.
The table below reflects the amount of compensation and benefits payable to Mr. Marcus under the Marcus Employment Agreement and to each other NEO under his respective Executive Employment Agreement, in each case pursuant to the 1997 Incentive Plan in the event of each scenario listed in the table below. The amounts shown in the table below assume that the termination was effective as of December 31, 2021. The table does not include the pension benefits or nonqualified deferred compensation that would be paid to the NEO, which are set forth in the “Pension Benefits Table” and “2021 Nonqualified Deferred Compensation Table” on page 116. In addition, the table does not include the value of vested restricted stock as of December 31, 2021. Because the payments to be made to the NEO depend on several factors, the actual amounts to be paid out upon the NEO’s termination of employment can be determined only at the time of his separation from the Company.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL (continued)
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Name of Executive Cause of Termination | | Cash Severance Payment ($) | | Pro Rata Bonus ($) | | Restricted Stock Grants ($) | | Acceleration of Equity Awards ($)(1) | | Continued Participation in Medical & Dental Benefit Plans ($) | | Accrued Vacation ($) | | Total ($) |
Joel S. Marcus | | | | | | | | | | | | | | | |
Without Cause/for Good Reason | | 5,450,000 | | | 2,430,000 | | | 16,832,068 | | | 27,346,936 | | | | 1,265,898 | | | 259,250 | | | 53,584,152 | |
Death or Disability | | 5,450,000 | | | 2,430,000 | | | 16,832,068 | | | 27,346,936 | | | | 1,265,898 | | | 259,250 | | | 53,584,152 | |
For Cause/other than Good Reason | | — | | | — | | | — | | | — | | | | — | | | 259,250 | | | 259,250 | |
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Peter M. Moglia | | | | | | | | | | | | | | | |
Without Cause/for Good Reason (CIC) | | 4,417,500 | | | N/A | | 7,010,994 | | | 26,929,109 | | | | 39,426 | | | 92,274 | | | 38,489,303 | |
Without Cause/for Good Reason (no CIC) | | 2,208,750 | | | N/A | | 7,010,994 | | | 26,929,109 | | | | 39,426 | | | 92,274 | | | 36,280,553 | |
Death or Disability | | 2,208,750 | | | N/A | | 7,010,994 | | | 26,929,109 | | | | 39,426 | | | 92,274 | | | 36,280,553 | |
For Cause/other than Good Reason | | — | | | N/A | | — | | | — | | | | — | | | 92,274 | | | 92,274 | |
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Stephen A. Richardson | | | | | | | | | | | | | | | |
Without Cause/for Good Reason (CIC) | | 4,417,500 | | | N/A | | 7,010,994 | | | 26,929,109 | | | | 39,217 | | | 43,128 | | | 38,439,948 | |
Without Cause/for Good Reason (no CIC) | | 2,208,750 | | | N/A | | 7,010,994 | | | 26,929,109 | | | | 39,217 | | | 43,128 | | | 36,231,198 | |
Death or Disability | | 2,208,750 | | | N/A | | 7,010,994 | | | 26,929,109 | | | | 39,217 | | | 43,128 | | | 36,231,198 | |
For Cause/other than Good Reason | | — | | | N/A | | — | | | — | | | | — | | | 43,128 | | | 43,128 | |
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Dean A. Shigenaga | | | | | | | | | | | | | | | |
Without Cause/for Good Reason (CIC) | | 3,610,000 | | | N/A | | 6,263,598 | | | 21,467,927 | | | | 42,640 | | | 88,047 | | | 31,472,212 | |
Without Cause/for Good Reason (no CIC) | | 1,805,000 | | | N/A | | 6,263,598 | | | 21,467,927 | | | | 42,640 | | | 88,047 | | | 29,667,212 | |
Death or Disability | | 1,805,000 | | | N/A | | 6,263,598 | | | 21,467,927 | | | | 42,640 | | | 88,047 | | | 29,667,212 | |
For Cause/other than Good Reason | | — | | | N/A | | — | | | — | | | | — | | | 88,047 | | | 88,047 | |
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Daniel J. Ryan | | | | | | | | | | | | | | | |
Without Cause/for Good Reason (CIC) | | 3,350,000 | | | N/A | | 5,627,573 | | | 19,503,203 | | | | 34,569 | | | 99,375 | | | 28,614,720 | |
Without Cause/for Good Reason (no CIC) | | 1,675,000 | | | N/A | | 5,627,573 | | | 19,503,203 | | | | 34,569 | | | 99,375 | | | 26,939,720 | |
Death or Disability | | 1,675,000 | | | N/A | | 5,627,573 | | | 19,503,203 | | | | 34,569 | | | 99,375 | | | 26,939,720 | |
For Cause/other than Good Reason | | — | | | N/A | | — | | | — | | | | — | | | 99,375 | | | 99,375 | |
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Hunter L. Kass | | | | | | | | | | | | | | | |
Without Cause/for Good Reason (CIC) | | 1,875,000 | | | N/A | | 3,693,459 | | | 10,400,861 | | | | 39,357 | | | 22,452 | | | 16,031,129 | |
Without Cause/for Good Reason (no CIC) | | 1,250,000 | | | N/A | | 3,693,459 | | | 10,400,861 | | | | 39,357 | | | 22,452 | | | 15,406,129 | |
Death or Disability | | 1,250,000 | | | N/A | | 3,693,459 | | | 10,400,861 | | | | 39,357 | | | 22,452 | | | 15,406,129 | |
For Cause/other than Good Reason | | — | | | N/A | | — | | | — | | | | — | | | 22,452 | | | 22,452 | |
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John H. Cunningham | | | | | | | | | | | | | | | |
Without Cause/for Good Reason (CIC) | | 1,590,000 | | | N/A | | 3,068,826 | | | 9,921,943 | | | | 46,807 | | | 61,847 | | | 14,689,423 | |
Without Cause/for Good Reason (no CIC) | | 1,060,000 | | | N/A | | 3,068,826 | | | 9,921,943 | | | | 46,807 | | | 61,847 | | | 14,159,423 | |
Death or Disability | | 1,060,000 | | | N/A | | 3,068,826 | | | 9,921,943 | | | | 46,807 | | | 61,847 | | | 14,159,423 | |
For Cause/other than Good Reason | | — | | | N/A | | — | | | — | | | | — | | | 61,847 | | | 61,847 | |
(1)Represents the value of unvested restricted stock awards based on the closing market price of the Common Stock of $222.96 per share on December 31, 2021, that would vest on an accelerated basis upon the occurrence of certain events. Includes acceleration of vesting for performance-based awards assuming target performance was achieved on the assumed date of termination on December 31, 2021. As of December 31, 2021, none of the executives held stock options.
CEO Pay Ratio
Under SEC rules, we are required to calculate and disclose the total annual compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our Executive Chairman, Mr. Marcus, and our Co-CEOs, Messrs. Moglia and Richardson (the “CEO Pay Ratio”). Set forth below is a description of the methodology, including material assumptions, adjustments, and estimates, we used to identify the median employee for purposes of calculating the CEO Pay Ratio:
•We identified the median employee using our employee population on December 31, 2021. As of December 31, 2021, we had a total population of 559 employees, including full-time, part-time, and temporary employees. From this full population, we excluded our Executive Chairman and Co-CEOs and four employees located in China, and arrived at a population consisting of 552 employees, from which we identified the median total compensation of all employees other than our Executive Chairman and Co-CEOs.
•We identified the median employee by considering the following three elements of compensation: 2021 base salary, discretionary bonus earned in 2021, and equity awards granted in 2021 (at the grant date fair value). For permanent employees (full-time and part-time) hired after January 1, 2021, we annualized the aforementioned components.
Using the methodology described above, we selected the median of our employee population. For fiscal year 2021, the annual total compensation of our median employee was $176,113, and the annual total compensation of Messrs. Marcus, Moglia, and Richardson was $12,701,393, $8,274,131, and $8,320,228, respectively. Based on this information, the ratio of the annual total compensation of Mr. Marcus to the median of the annual total compensation of all employees other than our Executive Chairman and Co-CEOs was 72 to 1, and the ratio of the annual total compensation of each of Messrs. Moglia and Richardson to the median of the annual total compensation of all employees other than our Executive Chairman and Co-CEOs was 47 to 1. The annual total compensation of Messrs. Marcus, Moglia, and Richardson presented for this purpose is equal to the compensation reported for them in the “Summary Compensation Table” on page 111.
The CEO Pay Ratio above represents our reasonable estimate calculated in a manner consistent with SEC rules and applicable guidance. SEC rules and guidance provide significant flexibility in how companies identify the median employee, and each company may use a different methodology and make different assumptions particular to that company. As a result, and as explained by the SEC when it adopted these rules, in considering the pay ratio disclosure, stockholders should keep in mind that the rule was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow stockholders to better understand and assess each particular company’s compensation practices and pay ratio disclosures.
Neither the Compensation Committee nor our management used our CEO Pay Ratio measure in making compensation decisions.