8-K
Alexandria Real Estate Equities, Inc. (ARE)
UNITEDSTATES
SECURITIESAND EXCHANGE COMMISSION
Washington,D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) ofThe Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 7, 2008
ALEXANDRIAREAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
| Maryland | 1-12993 | 95-4502084 |
|---|---|---|
| (State or other<br> jurisdiction of<br><br> incorporation) | (Commission File<br> Number) | (I.R.S. Employer<br> Identification No.) |
| 385 East Colorado Boulevard, Suite 299 | **** | |
| --- | --- | |
| Pasadena, California | 91101 | |
| (Address of<br> principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (626)578-0777
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4 (c))
Item2.02. Results of Operations andFinancial Condition.
On August 7, 2008, we issued a press release entitled “Alexandria Real Estate Equities, Inc. Reports Second Quarter 2008 Operating and Financial Results” which sets forth our results of operations for the second quarter ended June 30, 2008. A copy of that press release is attached hereto as Exhibit 99.1.
Item9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1 Press Release dated August 7, 2008.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ALEXANDRIA REAL ESTATE<br> EQUITIES, INC. | ||
|---|---|---|
| August 7,<br> 2008 | By: | /s/ Joel S. Marcus |
| Joel S. Marcus | ||
| Chairman/Chief<br> Executive Officer | ||
| (Principal Executive<br> Officer) | ||
| By: | /s/ Dean A. Shigenaga | |
| Dean A. Shigenaga | ||
| Chief Financial Officer | ||
| (Principal Financial<br> and Accounting Officer) |
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EXHIBITINDEX
| Exhibit Number | Exhibit Title |
|---|---|
| 99.1 | Press Release dated<br> August 7, 2008 |
4
Exhibit 99.1
| Contact: | Joel S. Marcus |
|---|---|
| **** | Chairman/Chief Executive Officer |
| **** | Alexandria Real Estate Equities, Inc. |
| **** | (626) 578-9693 |
ALEXANDRIAREAL ESTATE EQUITIES, INC.
REPORTSSECOND QUARTER 2008
OPERATINGAND FINANCIAL RESULTS
Highlights
SecondQuarter 2008:
· Second Quarter 2008 Funds from Operations (FFO) Per Share (Diluted) of $1.51, up 6%, Compared to Second Quarter 2007 FFO Per Share (Diluted) of $1.42
· Second Quarter 2008 Total Revenues up 17%, FFO Available to Common Stockholders up 15%, Compared to Second Quarter 2007
· Second Quarter 2008 Earnings Per Share From Continuing Operations (Diluted) of $0.67
· Second Quarter 2008 GAAP Same Property Revenues Less Operating Expenses up 3.7%
· Executed 37 Leases for 530,000 Rentable Square Feet in Second Quarter 2008; Approximately 1.1 Million Rentable Square Feet Leased in First Half 2008
· Second Quarter 2008 GAAP Rental Rate Increase of 19.4% on Renewed/Released Space
· Second Quarter 2008 Occupancy Increases to 95.0%
· Second Quarter 2008 Operating Margins at 74%
· Sold One Property Previously Classified as Held For Sale for $15 Million; Sold Seven Properties for $84 Million in First Half 2008
· In August 2008, Executed 100,000 Square Foot Lease Plus Option for an Additional 50,000 Square Feet with Pfizer Inc. at the Alexandria Center for Science and Technology at Mission Bay
PASADENA, CA. – August 7, 2008 – Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced operating and financial results for the second quarter ended June 30, 2008.
For the second quarter of 2008, we reported total revenues of $110,054,000 and FFO available to common stockholders of $48,054,000, or $1.51 per share (diluted), compared to total revenues of $93,769,000 and FFO available to common stockholders of $41,607,000, or $1.42 per share (diluted), for the second quarter of 2007. Comparing the second quarter of 2008 to the second quarter of 2007, total revenues increased 17%, FFO available to common stockholders increased 15% and FFO per share (diluted) increased 6%. For the six months ended June 30, 2008, we reported total revenues of $220,013,000 and FFO available to common stockholders of $95,030,000, or $2.98 per share (diluted), before non-cash impairment charges, compared to total revenues of $188,555,000 and FFO available to common stockholders of $81,952,000, or $2.80 per share (diluted), before a preferred stock redemption charge, for the six months ended June 30, 2007. Comparing the six months ended June 30, 2008 to the six months ended June 30, 2007, total revenues increased 17%, FFO available to common stockholders and FFO per share (diluted) increased 16% and 6%, respectively, before non-cash impairment and preferred stock redemption charges. In the first quarter of 2008, we incurred non-cash impairment charges aggregating $6,635,000, or $0.21 per share (diluted), related to assets “held for sale” and certain investments, and in the first quarter of 2007 we recognized a preferred stock redemption charge of $2,799,000, or $0.10 per share (diluted).
FFO is a non-GAAP measure widely used by publicly traded real estate investment trusts. A reconciliation of GAAP net income available to common stockholders to FFO available to common stockholders and FFO available to common stockholders after supplemental adjustments on both an aggregate and per share (diluted) basis, is included in the financial information accompanying this press release. The primary reconciling item between GAAP net income available to common stockholders and FFO available to common stockholders is depreciation and amortization expense. Depreciation and amortization expense for the three months ended June 30, 2008 and 2007 was $27,003,000 and $22,654,000, respectively.
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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS SECOND QUARTER2008 RESULTS Page 2
Depreciation and amortization expense for the six months ended June 30, 2008 and 2007 was $52,813,000 and $46,172,000, respectively. Net income available to common stockholders for the second quarter of 2008 was $21,303,000, or $0.67 per share (diluted), compared to net income available to common stockholders of $21,334,000, or $0.73 per share (diluted), for the second quarter of 2007. Net income available to common stockholders for the second quarter of 2008 included a gain of $182,000 on the sale of one property. Net income available to common stockholders for the second quarter of 2007 included a gain of $2,340,000 on the sale of one property. Excluding gains on sales of properties, net income available to common stockholders for the second quarter of 2008 was $21,121,000, or $0.66 per share (diluted), compared to net income available to common stockholders of $18,994,000, or $0.65 per share (diluted), for the second quarter of 2007. Net income available to common stockholders for the six months ended June 30, 2008 was $56,063,000, or $1.76 per share (diluted), compared to net income available to common stockholders of $36,442,000, or $1.24 per share (diluted), for the six months ended June 30, 2007. Net income available to common stockholders for the six months ended June 30, 2008 included aggregate gains of $20,395,000 on sales of seven properties and non-cash impairment charges aggregating $6,635,000 related to one property “held for sale” as of June 30, 2008, a property sold during the second quarter of 2008 and certain investments. Net income available to common stockholders for the six months ended June 30, 2007 included a gain on sales of two properties of $3,461,000 and a preferred stock redemption charge of $2,799,000. Excluding gains on sales of properties and non-cash impairment and preferred stock redemption charges, net income available to common stockholders for the six months ended June 30, 2008 was $42,303,000, or $1.33 per share (diluted), compared to net income available to common stockholders of $35,780,000, or $1.22 per share (diluted), for the six months ended June 30, 2007.
For the second quarter of 2008, we executed a total of 37 leases for approximately 530,000 rentable square feet of space at 29 different properties (excluding month-to-month leases). Of this total, approximately 343,000 rentable square feet related to new or renewal leases of previously leased space and approximately 187,000 rentable square feet related to developed, redeveloped or previously vacant space. Of the 187,000 rentable square feet, approximately 124,000 rentable square feet were delivered from our development or redevelopment programs, with the remaining approximately 63,000 rentable square feet related to previously vacant space. Rental rates for these new or renewal leases were on average approximately 19.4% higher (on a GAAP basis) than rental rates for expiring leases.
For the six months ended June 30, 2008, we executed a total of 82 leases for approximately 1,095,000 square feet of space at 48 different properties (excluding month-to-month leases). Of this total, approximately 722,000 square feet were for new or renewal leases related to previously leased space and approximately 373,000 square feet were for redeveloped, developed or previously vacant space. Of the 373,000 square feet, approximately 182,000 square feet were delivered from our redevelopment or development programs, with the remaining approximately 191,000 square feet for previously vacant space. Rental rates for new or renewal leases were on average approximately 16.5% higher (on a GAAP basis) than rental rates for expiring leases.
During the second quarter of 2008, we sold one property located in the San Diego market with approximately 49,437 rentable square feet for approximately $15 million. During the six months ended June 30, 2008, we sold seven properties, including five properties in the east bay area of the San Francisco Bay market, aggregating approximately 409,000 rentable square feet. The aggregate sales price for the properties sold in the six months ended June 30, 2008 was approximately $84 million.
In August 2008, we announced that Pfizer Inc. entered into a long-term lease for approximately 100,000 square feet, with an option for an additional 50,000 square feet, at 455 Mission Bay Boulevard South, San Francisco, California. Pfizer will locate its Biotherapeutics and Bioinnovation Center at the Alexandria Center for Science and Technology at Mission Bay and joins other prominent life science entities that comprise this world-class life science cluster.
As of June 30, 2008, approximately 89% of our leases (on a rentable square footage basis) were triple net leases, requiring tenants to pay substantially all real estate taxes and insurance, common area and other operating expenses, including increases thereto. In addition, as of June 30, 2008, approximately 8% of our leases (on a rentable square footage basis) required the tenants to pay a majority of operating expenses. Additionally, as of June 30, 2008, approximately 92% of our leases (on a rentable square footage basis) provided for the recapture of certain capital expenditures and approximately 94% of our leases (on a rentable square footage basis) contained effective annual rent escalations that were either fixed or indexed based on the consumer price index or another index.
Based on our current view of existing market conditions and certain current assumptions, our updated guidance for FFO per share (diluted) and earnings per share (diluted) is as follows:
| **** | 2008 |
|---|---|
| FFO per share<br> (diluted) (1) | $5.86 (1) |
| Earnings per<br> share (diluted) (2) | $3.02 (2) |
| Non–cash impairment charges recognized in<br> the first quarter of 2008 | $0.21 |
| (1) | Includes non-cash impairment charges aggregating<br> $6,635,000, or $0.21 per share (diluted), related to one property “held for<br> sale” as of June 30, 2008, a property sold during the second quarter of<br> 2008 and certain investments. Our<br> guidance for 2008 FFO per share (diluted) after supplemental adjustments for<br> the non-cash impairment charges is $6.07. |
| --- | --- |
| (2) | Includes non-cash impairment charges aggregating<br> $6,635,000 and gains on sales of property aggregating $20,395,000. |
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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS SECONDQUARTER 2008 RESULTS Page 3
Alexandria Real Estate Equities, Inc., Landlord of Choice to the Life Science Industry^®^, is the largest owner and pre-eminent first-in-class international real estate investment trust focused principally on science-driven cluster formation through the ownership, operation, management, redevelopment, selective development and acquisition of properties containing technical environments, including office/laboratory space. Alexandria is the leading provider of high-quality environmentally sustainable real estate, technical infrastructure, services and capital to the broad and diverse life science industry. Client tenants include institutional (universities and independent not-for-profit institutions), pharmaceutical, biotechnology, medical device, product, service, and translational entities, as well as government agencies. Alexandria’s operating platform is based on the principle of “clustering”, with assets and operations located in key life science markets. Our asset base approximates 13.3 million rentable square feet consisting of 160 properties approximating 11.7 million rentable square feet (including spaces undergoing active redevelopment) and properties undergoing ground-up development approximating 1.6 million rentable square feet. In addition, our asset base will enable us to grow to approximately 22.4 million square feet through future ground-up development approximating 9.1 million square feet of office/laboratory space.
This press release contains forward-looking statements, including earnings guidance, within the meaning of the federal securities laws. Actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our Annual Report on Form 10-K and our other periodic reports filed with the Securities and Exchange Commission.
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ALEXANDRIAREAL ESTATE EQUITIES, INC.
FinancialInformation
(Dollarsin thousands, except per share data)
(Unaudited)
| **** | Three Months Ended June 30, | Six Months Ended June 30, | ||||||
|---|---|---|---|---|---|---|---|---|
| **** | 2008 | 2007 | 2008 | 2007 | ||||
| Income statement data | ||||||||
| Total revenues | $ | 110,054 | $ | 93,769 | $ | 220,013 | $ | 188,555 |
| Expenses | ||||||||
| Rental<br> operations | 27,588 | 22,169 | 55,917 | 45,446 | ||||
| General and<br> administrative | 8,452 | 7,808 | 17,239 | 15,882 | ||||
| Interest | 17,732 | 19,580 | 39,977 | 39,843 | ||||
| Depreciation and<br> amortization | 27,002 | 22,134 | 52,675 | 45,054 | ||||
| Non-cash impairment<br> on investments | – | – | 1,985 | – | ||||
| 80,774 | 71,691 | 167,793 | 146,225 | |||||
| Minority<br> interest | 948 | 902 | 1,899 | 1,809 | ||||
| Income from<br> continuing operations | 28,332 | 21,176 | 50,321 | 40,521 | ||||
| Income from<br> discontinued operations, net | 89 | 2,872 | 15,788 | 5,311 | ||||
| Net income | 28,421 | 24,048 | 66,109 | 45,832 | ||||
| Dividends on<br> preferred stock | 7,118 | 2,714 | 10,046 | 6,591 | ||||
| Preferred stock<br> redemption charge | – | – | – | 2,799 | ||||
| Net income<br> available to common stockholders | $ | 21,303 | $ | 21,334 | $ | 56,063 | $ | 36,442 |
| Weighted average<br> shares of common stock outstanding | ||||||||
| Basic | 31,615,359 | 29,045,354 | 31,580,974 | 28,972,732 | ||||
| Diluted | 31,887,477 | 29,362,514 | 31,856,468 | 29,337,440 | ||||
| Earnings per<br> share – basic | ||||||||
| Continuing<br> operations (net of preferred stock dividends and preferred stock redemption<br> charge) | $ | 0.67 | $ | 0.63 | $ | 1.28 | $ | 1.08 |
| Discontinued<br> operations, net | – | 0.10 | 0.50 | 0.18 | ||||
| Earnings per<br> share – basic | $ | 0.67 | $ | 0.73 | $ | 1.78 | $ | 1.26 |
| Earnings per<br> share – diluted | ||||||||
| Continuing<br> operations (net of preferred stock dividends and preferred stock redemption<br> charge) | $ | 0.67 | $ | 0.63 | $ | 1.26 | $ | 1.06 |
| Discontinued<br> operations, net | – | 0.10 | 0.50 | 0.18 | ||||
| Earnings per<br> share – diluted | $ | 0.67 | $ | 0.73 | $ | 1.76 | $ | 1.24 |
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ALEXANDRIAREAL ESTATE EQUITIES, INC.
FinancialInformation
(Unaudited)
Fundsfrom Operations
Generally accepted accounting principles (“GAAP”) basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) established the measurement tool of Funds From Operations (“FFO”). Since its introduction, FFO has become a widely used non-GAAP financial measure among real estate investment trusts (“REITs”). We believe that FFO is helpful to investors as an additional measure of the performance of an equity REIT. We compute FFO in accordance with standards established by the Board of Governors of NAREIT in its April 2002 White Paper (the “White Paper”) and related implementation guidance, which may differ from the methodology for calculating FFO utilized by other equity REITs, and, accordingly, may not be comparable to such other REITs. The White Paper defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
We also present FFO after supplemental adjustments which excludes non-cash impairment and preferred stock redemption charges. FFO after supplemental adjustments differs from FFO established by NAREIT and may not be comparable to that of other REITs. We believe FFO after supplemental adjustments provides a meaningful supplemental financial measure.
Neither FFO nor FFO after supplemental adjustments should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.
The following table presents a reconciliation of net income available to common stockholders, the most directly comparable GAAP financial measure to FFO, and FFO after supplemental adjustments to funds from operations available to common stockholders and funds from operations available to common stockholders after supplemental adjustments for the three and six months ended June 30, 2008 and 2007 (in thousands, except per share data):
| **** | Three Months Ended June 30, 2008 | **** | Three Months Ended June 30, 2007 | **** | Six Months Ended June 30, 2008 | **** | Six Months Ended June 30, 2007 | **** | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Reconciliation of net income available to common stockholders to funds from operations available to common stockholders after supplemental adjustments | ||||||||||||
| Net income<br> available to common stockholders | $ | 21,303 | $ | 21,334 | $ | 56,063 | $ | 36,442 | ||||
| Add:<br> Depreciation and amortization (1) | 27,003 | 22,654 | 52,813 | 46,172 | ||||||||
| Add: Minority<br> interest | 948 | 902 | 1,899 | 1,809 | ||||||||
| Subtract: Gain<br> on sales of property (2) | (182 | ) | (2,340 | ) | (20,395 | ) | (3,461 | ) | ||||
| Subtract: FFO<br> allocable to minority interest | (1,018 | ) | (943 | ) | (1,985 | ) | (1,809 | ) | ||||
| Funds from<br> operations available to common stockholders | 48,054 | 41,607 | 88,395 | 79,153 | ||||||||
| Add: Preferred<br> stock redemption charge (3) | – | – | – | 2,799 | ||||||||
| Add: Non-cash<br> impairment charges (4) | – | – | 6,635 | – | ||||||||
| Funds from<br> operations available to common stockholders after supplemental adjustments | $ | 48,054 | $ | 41,607 | $ | 95,030 | $ | 81,952 | ||||
| FFO per share<br> (diluted) after supplemental adjustments | ||||||||||||
| Basic | $ | 1.52 | $ | 1.43 | $ | 3.01 | $ | 2.83 | ||||
| Diluted | $ | 1.51 | $ | 1.42 | $ | 2.98 | $ | 2.80 | ||||
| Reconciliation of earnings per share (diluted) to FFO per share (diluted) after supplemental adjustments | ||||||||||||
| Earnings per<br> share (diluted) | $ | 0.67 | $ | 0.73 | $ | 1.76 | $ | 1.24 | ||||
| Depreciation and<br> amortization (1) | 0.85 | 0.77 | 1.66 | 1.58 | ||||||||
| Minority<br> interest | 0.03 | 0.03 | 0.06 | 0.06 | ||||||||
| Gain on sales of<br> property (2) | (0.01 | ) | (0.08 | ) | (0.65 | ) | (0.12 | ) | ||||
| FFO allocable to<br> minority interest | (0.03 | ) | (0.03 | ) | (0.06 | ) | (0.06 | ) | ||||
| FFO per share<br> (diluted) | 1.51 | 1.42 | 2.77 | 2.70 | ||||||||
| Preferred stock<br> redemption charge (3) | – | – | – | 0.10 | ||||||||
| Non-cash<br> impairment charges (4) | – | – | 0.21 | – | ||||||||
| FFO per share<br> (diluted) after supplemental adjustments | $ | 1.51 | $ | 1.42 | $ | 2.98 | $ | 2.80 | ||||
| (1) | Includes<br> depreciation and amortization for assets “held for sale” reflected as<br> discontinued operations (for the periods prior to when such assets were<br> classified as “held for sale”). | |||||||||||
| --- | --- | |||||||||||
| (2) | Gain<br> on sales of property relates to the disposition of one property sold during<br> the second quarter 2008, six properties sold during the first quarter 2008,<br> one property sold during the second quarter of 2007 and one property sold<br> during the first quarter of 2007. Gain on sales of property is included in<br> the income statement in income from discontinued operations, net. | |||||||||||
| (3) | During<br> the first quarter of 2007, we redeemed our 9.10% series B cumulative<br> redeemable preferred stock. Accordingly, in compliance with FASB Emerging<br> Issues Task Force D-42 (“EITF Topic D-42”), we recorded a charge of<br> $2,799,000, or $0.10 per share (diluted), in the first quarter of 2007 for<br> costs related to the redemption of our series B preferred stock. | |||||||||||
| (4) | In<br> March 2008, we recognized aggregate non-cash impairment charges of<br> approximately $1,985,000 for other-than-temporary declines in the fair value<br> of certain investments and non-cash impairment charges on two properties<br> “held for sale” of approximately $4,650,000 related to an industrial building<br> located in a suburban submarket south of Boston and an office building<br> located in the San Diego market. The non-cash impairment charges recognized<br> in March 2008 on these two properties are classified in income from<br> discontinued operations, net. |
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ALEXANDRIAREAL ESTATE EQUITIES, INC.Quarterly Supplemental Financial Information*(Dollars in thousands, except per share data)(Unaudited)*
| **** | For the Three Months Ended | **** | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Operational data | 6/30/2008 | **** | 3/31/2008 | **** | 12/31/2007 | **** | 9/30/2007 | **** | 6/30/2007 | **** | |||||
| Rental income | $ | 83,176 | $ | 82,156 | $ | 81,695 | $ | 76,970 | $ | 71,570 | |||||
| Tenant<br> recoveries | 23,986 | 24,553 | 22,344 | 21,420 | 18,800 | ||||||||||
| Other income | 2,892 | 3,250 | 3,965 | 3,717 | 3,399 | ||||||||||
| Total revenues<br> (continuing operations) (a) | $ | 110,054 | $ | 109,959 | $ | 108,004 | $ | 102,107 | $ | 93,769 | |||||
| Funds from<br> operations per share (diluted) after supplemental adjustments (b) | $ | 1.51 | $ | 1.48 | $ | 1.46 | $ | 1.45 | $ | 1.42 | |||||
| Dividends per<br> share on common stock | $ | 0.80 | $ | 0.78 | $ | 0.78 | $ | 0.76 | $ | 0.76 | |||||
| Dividend payout<br> ratio (common stock) (c) | 53.5% | 53.2% | 53.9% | 56.3% | 53.8% | ||||||||||
| Straight-line rent | $ | 3,437 | $ | 3,015 | $ | 4,615 | $ | 4,335 | $ | 2,617 | (d) | ||||
| Capitalized<br> interest | $ | 18,437 | (e) | $ | 17,262 | $ | 16,609 | $ | 15,035 | $ | 13,548 | ||||
| Number of<br> properties (f) | |||||||||||||||
| Acquired/added/completed<br> during period | 2 | – | 2 | 13 | 2 | ||||||||||
| Sold/transferred<br> (g) | (1 | ) | (7 | ) | (3 | ) | (1 | ) | (4 | ) | |||||
| At end of period | 160 | 159 | 166 | 167 | 155 | ||||||||||
| Rentable square<br> feet (f) | |||||||||||||||
| Acquired/added/completed<br> during period | 60,000 | – | 404,986 | 988,030 | 104,312 | ||||||||||
| Sold/transferred<br> (g) | (49,437 | ) | (475,976 | ) | (92,927 | ) | (37,000 | ) | (375,112 | ) | |||||
| At end of period | 11,696,066 | 11,685,503 | 12,161,479 | 11,849,420 | 10,898,390 | ||||||||||
| **** | As of | ||||||||||||||
| Other data | 6/30/2008 | **** | 3/31/2008 | **** | 12/31/2007 | **** | 9/30/2007 | **** | 6/30/2007 | ||||||
| Number of shares<br> of common stock outstanding | 31,773,117 | 31,673,359 | 31,603,344 | 31,243,448 | 29,180,700 | ||||||||||
| Closing price of<br> common stock | $ | 97.34 | $ | 92.72 | $ | 101.67 | $ | 96.26 | $ | 96.82 | |||||
| Debt to total market capitalization (h) | |||||||||||||||
| Total debt | $ | 2,693,333 | $ | 2,625,852 | $ | 2,787,904 | $ | 2,502,832 | $ | 2,274,269 | |||||
| Less minority<br> interest share of debt | (40,762 | ) | (39,838 | ) | (39,320 | ) | (22,102 | ) | (22,089 | ) | |||||
| Our share of<br> total debt | 2,652,571 | 2,586,014 | 2,748,584 | 2,480,730 | 2,252,180 | ||||||||||
| Preferred stock | 377,616 | 352,127 | 136,845 | 130,156 | 132,593 | ||||||||||
| Common stock<br> market capitalization | 3,092,795 | 2,936,754 | 3,213,112 | 3,007,494 | 2,825,275 | ||||||||||
| Total market<br> capitalization | $ | 6,122,982 | $ | 5,874,895 | $ | 6,098,541 | $ | 5,618,380 | $ | 5,210,048 | |||||
| Debt to total<br> market capitalization | 43.3% | 44.0% | 45.1% | 44.2% | 43.2% | ||||||||||
| (a) | The<br> historical results above exclude the results of assets “held for sale” which<br> have been classified as discontinued operations. | ||||||||||||||
| --- | --- | ||||||||||||||
| (b) | See<br> page 5 for a reconciliation of earnings per share (diluted) to FFO per<br> share (diluted) and FFO per share (diluted) after supplemental adjustments. | ||||||||||||||
| (c) | Dividend<br> payout ratio (common stock) is the ratio of the absolute dollar amount of<br> dividends on our common stock (common stock shares outstanding on the<br> respective record date multiplied by the related dividend per share) to funds<br> from operations after supplemental adjustments for the respective quarter. | ||||||||||||||
| (d) | Includes<br> a rental payment of approximately $1.4 million from one tenant, the U.S.<br> Government, in the second quarter of 2007. Pursuant to Statement of Financial<br> Accounting Standards No. 13, “Accounting for Leases,” rental payments<br> due under this lease are recognized on a straight-line basis over the lease<br> term. | ||||||||||||||
| (e) | As<br> of June 30, 2008, assets for which capitalization of interest is<br> required pursuant to Statement of Financial Accounting Standards No. 34,<br> “Capitalization of Interest Cost” (“SFAS 34”), approximated $1.3 billion.<br> This amount is classified as properties undergoing development and<br> redevelopment and land held for development on our balance sheet. As of<br> June 30, 2008, the weighted average interest rate used in the<br> calculation of capitalized interest required pursuant to SFAS 34 was approximately<br> 5.39%. SFAS 34 requires the interest rate for capitalization to be based on<br> applicable interest costs related to borrowings outstanding during the<br> period, including the impact of interest rate swap agreements, debt<br> premiums/discounts and amortization of loan fees. | ||||||||||||||
| (f) | Includes<br> properties “held for sale” during the applicable periods such assets were<br> “held for sale.” As of June 30, 2008, one property with approximately<br> 24,867 rentable square feet was classified as “held for sale.” | ||||||||||||||
| (g) | During<br> the second quarter of 2008, we sold one asset located in the San Diego<br> market. During the first quarter of 2008, we sold six properties and<br> transferred one property from operating assets to embedded future development<br> opportunities. During the fourth quarter of 2007, we sold one property and<br> transferred two properties from operating assets to embedded future<br> development opportunities. During the third quarter of 2007, we sold one<br> property located in the New Jersey/Suburban Philadelphia market and four land<br> parcels to the Massachusetts Institute of Technology. During the second<br> quarter of 2007, we sold one property and transferred three properties from<br> operating assets to embedded future development opportunities. | ||||||||||||||
| (h) | Debt<br> to total market capitalization is the ratio of our share of total debt<br> (secured notes payable, unsecured line of credit and unsecured term loan and<br> unsecured convertible notes) to total market capitalization. Total market<br> capitalization is equal to outstanding shares of series C preferred stock and<br> common stock multiplied by the related closing price at the end of each<br> period presented, plus series D convertible preferred stock at liquidation<br> value, plus our share of total debt. |
6
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Condensed Consolidated Balance Sheets
(In thousands)
| **** | June 30, | **** | December 31, | ||
|---|---|---|---|---|---|
| **** | 2008 | **** | 2007 | ||
| (Unaudited) | **** | **** | |||
| Assets | **** | **** | **** | ||
| Rental<br> properties, net | $ | 3,119,482 | $ | 3,146,915 | |
| Properties<br> undergoing development and redevelopment and land held for development | 1,316,622 | 1,143,302 | |||
| Cash and cash<br> equivalents | 7,072 | 8,030 | |||
| Tenant security<br> deposits and other restricted cash | 71,927 | 51,911 | |||
| Tenant<br> receivables | 6,448 | 6,759 | |||
| Deferred rent | 87,222 | 81,496 | |||
| Investments | 75,131 | 84,322 | |||
| Other assets | 119,704 | 119,359 | |||
| Total assets | $ | 4,803,608 | $ | 4,642,094 | |
| Liabilities and Stockholders’ Equity | |||||
| Secured notes<br> payable | $ | 1,102,333 | $ | 1,212,904 | |
| Unsecured line<br> of credit and unsecured term loan | 1,131,000 | 1,115,000 | |||
| Unsecured<br> convertible notes | 460,000 | 460,000 | |||
| Accounts<br> payable, accrued expenses and tenant security deposits | 251,652 | 247,289 | |||
| Dividends<br> payable | 32,877 | 27,575 | |||
| Total<br> liabilities | 2,977,862 | 3,062,768 | |||
| Minority<br> interest | 74,788 | 75,506 | |||
| Stockholders’<br> equity: | |||||
| Series C<br> preferred stock | 129,638 | 129,638 | |||
| Series D<br> convertible preferred stock | 250,000 | – | |||
| Common stock | 318 | 316 | |||
| Additional<br> paid-in capital | 1,375,633 | 1,365,773 | |||
| Accumulated<br> other comprehensive (loss) income | (4,631 | ) | 8,093 | ||
| Total<br> stockholders’ equity | 1,750,958 | 1,503,820 | |||
| Total<br> liabilities and stockholders’ equity | $ | 4,803,608 | $ | 4,642,094 |
7
ALEXANDRIAREAL ESTATE EQUITIES, INC.Summary of DebtJune 30, 2008*(Dollars in thousands)(Unaudited)*
PrincipalMaturities / Rates
| **** | Secured Debt | Unsecured Debt | **** | |||||
|---|---|---|---|---|---|---|---|---|
| Year | Amount | **** | Weighted Average Interest Rate | Amount | **** | |||
| 2008 | $ | 4,499 | 5.46% | (1) | $ | – | ||
| 2009 | 285,382 | 5.45 | (2) | – | ||||
| 2010 | 91,123 | 5.91 | (2) | 381,000 | (3) | |||
| 2011 | 181,911 | 5.77 | (2) | 750,000 | (3) | |||
| 2012 | 36,903 | 5.96 | (2) | 460,000 | (4) | |||
| Thereafter | 502,515 | 5.89 | (2) | – | ||||
| Total | $ | 1,102,333 | (5) | $ | 1,591,000 |
Securedand Unsecured Debt Analysis
| **** | Balance | Percentage of Balance | Weighted Average Interest Rate (6) | Weighted Average Maturity | ||||
|---|---|---|---|---|---|---|---|---|
| Secured Debt | $ | 1,102,333 | 40.9 | % | 5.46 | % | 4.3 Years | |
| Unsecured Debt | 1,591,000 | 59.1 | 4.77 | 3.2 Years | ||||
| Total Debt | $ | 2,693,333 | 100.0 | % | 5.05 | % | 3.6 Years |
Fixedand Floating Rate Debt Analysis
| **** | Balance | Percentage of Balance | Weighted Average Interest Rate (6) | Weighted Average Maturity | ||||
|---|---|---|---|---|---|---|---|---|
| Fixed Rate Debt | $ | 1,249,715 | 46.4 | % | 5.14 | % | 4.7 Years | |
| Floating Rate<br> Debt – Hedged | 817,100 | 30.3 | 5.92 | 3.2 Years | ||||
| Floating Rate<br> Debt – Unhedged | 626,518 | 23.3 | 3.76 | 1.9 Years | ||||
| Total Debt | $ | 2,693,333 | 100.0 | % | 5.05 | % | 3.6 Years | |
| (1) | The<br> weighted average interest rate is calculated based on outstanding debt as of<br> June 30, 2008. | |||||||
| --- | --- | |||||||
| (2) | The<br> weighted average interest rate is calculated based on outstanding debt as of<br> December 31^st^ of the year immediately preceding the year<br> presented. | |||||||
| (3) | The<br> unsecured line of credit matures in October 2010 and may be extended at<br> our sole option for an additional one year period. The unsecured term loan<br> matures in October 2011 and may be extended at our sole option for an<br> additional one year period. | |||||||
| (4) | On<br> or after January 15, 2012, we have the right to redeem our 3.70%<br> unsecured convertible notes, in whole or in part, at any time from time to<br> time, for cash equal to 100% of the principal amounts of the notes to be<br> redeemed plus any accrued and unpaid interest to, but excluding, the<br> redemption date. Holders of the notes may require us to repurchase their<br> notes, in whole or in part, on January 15, 2012, 2017 and 2022 for cash<br> equal to 100% of the principal amount of the notes to be purchased plus any<br> accrued and unpaid interest to, but excluding, the repurchase date.<br> Additional information regarding our unsecured convertible notes is contained<br> in our Form 10-K filed with the Securities and Exchange Commission. | |||||||
| (5) | Includes<br> minority interests’ share of scheduled principal maturities of approximately<br> $40.8 million. | |||||||
| (6) | Represents<br> the weighted average contractual interest rate plus the impact of debt<br> premiums/discounts and our interest rate swap agreements. The weighted<br> average interest rate excludes bank fees and amortization of loan fees. See<br> page 9 for further details of our interest rate swap agreements. |
8
ALEXANDRIAREAL ESTATE EQUITIES, INC.
Summaryof Interest Rate Swap Agreements
June 30,2008
(Dollarsin thousands)
(Unaudited)
| Transaction Dates | Effective Dates | Termination Dates | Interest Pay Rates (1) | Notional Amounts | Effective at June 30, 2008 | |||
|---|---|---|---|---|---|---|---|---|
| December 2004 | January 3, 2006 | July 1, 2008 | 3.927 | % | $ | 50,000 | $ | 50,000 |
| June 2006 | June 30, 2006 | September 30, 2009 | 5.299 | 125,000 | 125,000 | |||
| December 2003 | December 29, 2006 | October 31, 2008 | 5.090 | 50,000 | 50,000 | |||
| December 2005 | December 29, 2006 | November 30, 2009 | 4.730 | 50,000 | 50,000 | |||
| December 2005 | December 29, 2006 | November 30, 2009 | 4.740 | 50,000 | 50,000 | |||
| December 2006 | December 29, 2006 | March 31, 2014 | 4.990 | 50,000 | 50,000 | |||
| December 2006 | January 2, 2007 | January 3, 2011 | 5.003 | 28,500 | 28,500 | |||
| December 2006 | June 29, 2007 | October 31, 2008 | 4.920 | 50,000 | 50,000 | |||
| October 2007 | October 31, 2007 | September 30, 2012 | 4.546 | 50,000 | 50,000 | |||
| October 2007 | October 31, 2007 | September 30, 2013 | 4.642 | 50,000 | 50,000 | |||
| May 2005 | November 30, 2007 | November 28, 2008 | 4.460 | 25,000 | 25,000 | |||
| December 2005 | January 2, 2008 | December 31, 2010 | 4.768 | 50,000 | 50,000 | |||
| February 2008 | February 7, 2008 | December 1, 2008 | 2.640 | 38,600 | 38,600 | |||
| May 2005 | June 30, 2008 | June 30, 2009 | 4.509 | 50,000 | 50,000 | |||
| June 2006 | June 30, 2008 | June 30, 2010 | 5.325 | 50,000 | 50,000 | |||
| June 2006 | June 30, 2008 | June 30, 2010 | 5.325 | 50,000 | 50,000 | |||
| October 2007 | July 1, 2008 | March 31, 2013 | 4.622 | 25,000 | – | |||
| October 2007 | July 1, 2008 | March 31, 2013 | 4.625 | 25,000 | – | |||
| June 2006 | October 31, 2008 | December 31, 2010 | 5.340 | 50,000 | – | |||
| June 2006 | October 31, 2008 | December 31, 2010 | 5.347 | 50,000 | – | |||
| May 2005 | November 28, 2008 | November 30, 2009 | 4.615 | 25,000 | – | |||
| December 2006 | November 30, 2009 | March 31, 2014 | 5.015 | 75,000 | – | |||
| December 2006 | November 30, 2009 | March 31, 2014 | 5.023 | 75,000 | – | |||
| December 2006 | December 31, 2010 | October 31, 2012 | 5.015 | 100,000 | – | |||
| Total | $ | 817,100 | ||||||
| (1) | The<br> interest pay rates represent the interest rate we will pay for one month<br> LIBOR under the respective interest rate swap agreement. These rates do not<br> include any spread in addition to one month LIBOR that is due monthly as<br> interest expense. | |||||||
| --- | --- |
9
ALEXANDRIAREAL ESTATE EQUITIES, INC.
Summaryof Properties
(Dollarsin thousands)
(Unaudited)
| **** | June 30, 2008 | March 31, 2008 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| **** | Number of | Rentable Square Feet | Annualized | Occupancy | Occupancy | |||||
| Markets | Properties | Operating | Redevelopment | Total | Base Rent(1) | Percentage (1) (2) | Percentage(3) | |||
| California – Los<br> Angeles Metro | 1 | 31,343 | – | 31,343 | $ | 714 | 70.8 | % | 70.8 | % |
| California – San<br> Diego | 34 | 1,473,715 | 236,347 | 1,710,062 | 43,277 | 94.1 | 94.1 | |||
| California – San<br> Francisco Bay | 17 | 1,452,297 | 26,363 | 1,478,660 | 56,434 | 97.6 | 96.9 | |||
| Eastern<br> Massachusetts | 38 | 3,069,398 | 363,896 | 3,433,294 | 111,538 | 97.0 | 96.6 | |||
| International –<br> Canada | 4 | 342,394 | – | 342,394 | 9,192 | 100.0 | 100.0 | |||
| New Jersey/Suburban Philadelphia | 8 | 441,504 | – | 441,504 | 8,239 | 87.5 | 96.6 | |||
| Southeast | 13 | 604,502 | 83,904 | 688,406 | 11,741 | 94.2 | 89.5 | (4) | ||
| Suburban<br> Washington D.C. | 31 | 2,431,630 | 68,138 | 2,499,768 | 48,050 | 91.0 | 91.0 | |||
| Washington –<br> Seattle | 13 | 1,034,477 | 11,291 | 1,045,768 | 31,413 | 98.7 | 97.3 | |||
| Total Properties<br> (Continuing Operations) | 159 | 10,881,260 | 789,939 | 11,671,199 | $ | 320,598 | 95.0 | % | 94.8 | % |
| (1) | Excludes<br> spaces at properties totaling approximately 789,939 rentable square feet undergoing<br> a permanent change in use to office/laboratory space through redevelopment<br> and one property with approximately 24,867 rentable square feet that is<br> classified as “held for sale”. | |||||||||
| --- | --- | |||||||||
| (2) | Including<br> spaces undergoing a permanent change in use to office/laboratory space<br> through redevelopment, occupancy as of June 30, 2008 was 88.6%. See<br> page 16 for additional information on our redevelopment program. | |||||||||
| (3) | Excludes<br> spaces at properties totaling 731,519 rentable square feet undergoing a<br> permanent change in use to office/laboratory space through redevelopment and<br> two properties totaling approximately 74,304 rentable square feet that were<br> classified as “held for sale”. Including spaces undergoing a permanent change<br> in use to office/laboratory space through redevelopment, occupancy as of<br> March 31, 2008 was 88.8%. See page 16 for additional information on<br> our redevelopment program. | |||||||||
| (4) | Substantially<br> all of the vacant space is office or warehouse space. |
10
ALEXANDRIAREAL ESTATE EQUITIES, INC.
Summaryof Same Property Comparisons
(Dollarsin thousands)
(Unaudited)
| **** | GAAP Basis (1) | Cash Basis (1) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Quarter Ended | Quarter Ended | |||||||||||
| 6/30/2008 | 6/30/2007 | % Change | 6/30/2008 | 6/30/2007 | % Change | |||||||
| Revenue (2) | $ | 83,982 | $ | 79,209 | 6.0 | % | $ | 82,544 | $ | 75,998 | 8.6 | % |
| Operating<br> expenses | 21,891 | 19,347 | 13.1 | 21,891 | 19,347 | 13.1 | ||||||
| Revenue less<br> operating expenses | $ | 62,091 | $ | 59,862 | 3.7 | % | $ | 60,653 | $ | 56,651 | 7.1 | % |
| **** | GAAP Basis (1) | Cash Basis (1) | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Six Months Ended | Six Months Ended | |||||||||||
| 6/30/2008 | 6/30/2007 | % Change | 6/30/2008 | 6/30/2007 | % Change | |||||||
| Revenue (2) | $ | 165,996 | $ | 158,372 | 4.8 | % | $ | 163,100 | $ | 151,222 | 7.9 | % |
| Operating expenses | 43,420 | 39,538 | 9.8 | 43,420 | 39,538 | 9.8 | ||||||
| Revenue less<br> operating expenses | $ | 122,576 | $ | 118,834 | 3.1 | % | $ | 119,680 | $ | 111,684 | 7.2 | % |
NOTE: This summary represents operating data for all properties that were fully operating for the entire periods presented for the quarter periods (the “Second Quarter Same Properties”) and for the Six Month periods (the “Six Months Same Properties”). Same property occupancy for the quarters ended June 30, 2008 and 2007 was 96.0% and 95.4%, respectively. Same Property Occupancy for the six months ended June 30, 2008 and 2007 was 95.9% and 95.3%, respectively. Properties undergoing redevelopment are excluded from same property results.
| (1) | Revenue less operating<br> expenses computed in accordance with GAAP is total revenue associated with<br> the Second Quarter Same Properties and Six Months Same Properties, as<br> applicable (excluding lease termination fees, if any), less property<br> operating expenses. Under GAAP, rental revenue is recognized on a<br> straight-line basis over the respective lease terms. Revenue less operating<br> expenses on a cash basis is total revenue associated with the Second Quarter<br> Same Properties and Six Months Same Properties (excluding lease termination<br> fees, if any), less property operating expenses, adjusted to exclude the<br> effect of straight-line rent adjustments required by GAAP. Straight-line rent<br> adjustments for the quarters ended June 30, 2008 and 2007 for the Second<br> Quarter Same Properties were $1,438,000 and $3,211,000, respectively. Straight-line<br> rent adjustments for the six months ended June 30, 2008 and 2007 for the<br> Six Months Same Properties were $2,896,000 and $7,150,000, respectively. We<br> believe that revenue less operating expenses on a cash basis is helpful to<br> investors as an additional measure of operating performance because it<br> eliminates straight-line rent adjustments to rental revenue. |
|---|---|
| (2) | Fees received from<br> tenants in connection with termination of their leases, if any, are excluded<br> from revenue in the Summary of Same Property Comparisons. As of June 30,<br> 2008, approximately 89% of our leases (on a square footage basis) were triple<br> net leases, requiring tenants to pay substantially all real estate taxes and<br> insurance, common area and other operating expenses, including increases<br> thereto. In addition, as of June 30, 2008, approximately 8% of our<br> leases (on a square footage basis) required the tenants to pay a majority of<br> operating expenses. |
11
ALEXANDRIAREAL ESTATE EQUITIES, INC.
Summaryof Leasing Activity
Forthe Quarter Ended June 30, 2008
| **** | **** | **** | **** | **** | **** | TI’s/Lease | **** |
|---|---|---|---|---|---|---|---|
| **** | **** | Rentable | **** | **** | Rental | Commissions | **** |
| **** | Number | Square | Expiring | New | Rate | Per | Lease |
| **** | of Leases | Footage | Rates | Rates | Changes | Square Foot | Terms |
| Leasing Activity | |||||||
| Lease<br> Expirations | |||||||
| Cash Basis | 42 | 505,620 | $24.93 | – | – | – | – |
| GAAP Basis | 42 | 505,620 | $23.06 | – | – | – | – |
| Renewed/Released<br> Space Leased | |||||||
| Cash Basis | 22 | 343,412 | $25.48 | $26.55 | 4.2% | $2.87 | 5.0 years |
| GAAP Basis | 22 | 343,412 | $23.35 | $27.87 | 19.4% | $2.87 | 5.0 years |
| Developed/Redeveloped/Vacant<br> Space Leased | |||||||
| Cash Basis | 15 | 186,482 | – | $30.55 | – | $12.49 | 7.4 years |
| GAAP Basis | 15 | 186,482 | – | $33.74 | – | $12.49 | 7.4 years |
| Month-to-Month<br> Leases in Effect | |||||||
| Cash Basis | 14 | 106,264 | $22.23 | $22.34 | – | – | – |
| GAAP Basis | 14 | 106,264 | $21.44 | $22.34 | – | – | – |
| Leasing Activity Summary | |||||||
| Excluding<br> Month-to-Month Leases | |||||||
| Cash Basis | 37 | 529,894 | – | $27.96 | – | $6.26 | 5.9 years |
| GAAP Basis | 37 | 529,894 | – | $29.94 | – | $6.26 | 5.9 years |
| Including<br> Month-to-Month Leases | |||||||
| Cash Basis | 51 | 636,158 | – | $27.02 | – | – | – |
| GAAP Basis | 51 | 636,158 | – | $28.67 | – | – | – |
12
ALEXANDRIAREAL ESTATE EQUITIES, INC.
Summaryof Leasing Activity
Forthe Six Months Ended June 30, 2008
| **** | **** | **** | **** | **** | **** | TI’s/Lease | **** |
|---|---|---|---|---|---|---|---|
| **** | **** | Rentable | **** | **** | Rental | Commissions | **** |
| **** | Number | Square | Expiring | New | Rate | Per | Lease |
| **** | of Leases | Footage | Rates | Rates | Changes | Square Foot | Terms |
| Leasing Activity | |||||||
| Lease<br> Expirations | |||||||
| Cash Basis | 69 | 1,053,287 | $26.11 | – | – | – | – |
| GAAP Basis | 69 | 1,053,287 | $24.59 | – | – | – | – |
| Renewed/Released<br> Space Leased | |||||||
| Cash Basis | 43 | 722,484 | $26.06 | $27.61 | 5.9% | $4.36 | 4.2 years |
| GAAP Basis | 43 | 722,484 | $24.30 | $28.30 | 16.5% | $4.36 | 4.2 years |
| Developed/Redeveloped/Vacant<br> Space Leased | |||||||
| Cash Basis | 39 | 372,673 | – | $31.39 | – | $9.63 | 5.8 years |
| GAAP Basis | 39 | 372,673 | – | $33.06 | – | $9.63 | 5.8 years |
| Month-to-Month<br> Leases in Effect | |||||||
| Cash Basis | 14 | 106,264 | $22.23 | $22.34 | – | – | – |
| GAAP Basis | 14 | 106,264 | $21.44 | $22.34 | – | – | – |
| Leasing Activity Summary | |||||||
| Excluding<br> Month-to-Month Leases | |||||||
| Cash Basis | 82 | 1,095,157 | – | $28.90 | – | $6.15 | 4.7 years |
| GAAP Basis | 82 | 1,095,157 | – | $29.92 | – | $6.15 | 4.7 years |
| Including<br> Month-to-Month Leases | |||||||
| Cash Basis | 96 | 1,201,421 | – | $28.32 | – | – | – |
| GAAP Basis | 96 | 1,201,421 | – | $29.25 | – | – | – |
13
ALEXANDRIAREAL ESTATE EQUITIES, INC.
Summaryof Lease Expirations
June 30,2008
| **** | **** | **** | **** | Annualized Base Rent | ||
|---|---|---|---|---|---|---|
| **** | **** | Rentable Square | Percentage of | of Expiring Leases | ||
| Year of Lease | Number of | Footage of | Aggregate | (per rentable | ||
| Expiration | Leases Expiring | Expiring Leases | Leased Square Feet | square foot) | ||
| 2008 | 36 | (1) | 332,947(1) | 3.2 | % | $23.01 |
| 2009 | 66 | 813,077 | 7.9 | 25.61 | ||
| 2010 | 57 | 993,996 | 9.6 | 28.60 | ||
| 2011 | 69 | 1,812,134 | 17.5 | 27.91 | ||
| 2012 | 59 | 1,371,022 | 13.3 | 34.89 | ||
| **** | Rentable Square Footage of Expiring Leases | |||||
| --- | --- | --- | --- | |||
| Markets | 2008 | **** | 2009 | |||
| California – Los<br> Angeles Metro | 4,006 | 4,354 | ||||
| California – San<br> Diego | 5,698 | 205,919 | ||||
| California – San<br> Francisco Bay | 37,808 | 104,476 | ||||
| Eastern<br> Massachusetts | 166,095 | 126,242 | ||||
| International –<br> Canada | – | – | ||||
| New<br> Jersey/Suburban Philadelphia | – | 21,000 | ||||
| Southeast | 27,115 | 87,015 | ||||
| Suburban<br> Washington D.C. | 71,582 | 230,135 | ||||
| Washington –<br> Seattle | 20,643 | 33,936 | ||||
| Total | 332,947 | (1) | 813,077 |
(1) Includes 14 month-to-month leases for approximately 106,000 rentable square feet.
14
ALEXANDRIAREAL ESTATE EQUITIES, INC.
Summaryof Additions and Dispositions
Forthe Quarter Ended June 30, 2008
(Dollarsin thousands)
| **** | Acquisition | Month of | Rentable | |
|---|---|---|---|---|
| Markets | Amount | Acquisition | Square Feet | |
| Additions to Properties Under Redevelopment: | ||||
| Eastern<br> Massachusetts | $ | 2,840 | May | 30,000 |
| Additions to Operating Properties: | ||||
| Southeast | 4,805 | June | 30,000 | |
| Total Additions to Properties Under Redevelopment/Operating Properties: | $ | 7,645 | 60,000 | |
| **** | Acquisition | Month of | Developable | |
| --- | --- | --- | --- | |
| Markets | Amount | Acquisition | Square Feet | |
| Additions to Land: | ||||
| **** | Disposition | Month of | Rentable | |
| --- | --- | --- | --- | --- |
| Markets | Amount | Disposition | Square Feet | |
| Dispositions: | ||||
| California – San Diego | $ | 14,750 | May | 49,437 |
15
ALEXANDRIAREAL ESTATE EQUITIES, INC.Summary of Square Footage Undergoing RedevelopmentJune 30, 2008
| **** | **** | **** | **** | Square Footage | **** |
|---|---|---|---|---|---|
| **** | Placed | Estimated | Estimated | Undergoing | **** |
| **** | in | In-Service | Investment | Redevelopment/ | **** |
| Markets/Submarkets | Redevelopment | Dates | Per Square Foot | Total Property | Status |
| California – San<br> Diego | 2006 | 2008 | $80-100 | 29,660 / 29,660 | Construction |
| California – San<br> Diego/Sorrento | 2006 | 2008 | $70-80 | 21,464 / 30,147 | Construction |
| California – San<br> Diego/Torrey Pines | 2004 | 2009 | $100-120 | 87,140 / 87,140 | Construction (1) |
| California – San<br> Diego/Torrey Pines | 2006 | 2009 | $80-100 | 43,600 / 43,600 | Construction |
| California – San<br> Diego/Torrey Pines | 2007 | 2009 | $80-100 | 15,259 / 107,709 | Construction |
| California – San<br> Diego/Torrey Pines | 2007 | 2009 | $80-100 | 39,224 / 76,084 | Construction |
| California – San<br> Francisco Bay/Peninsula | 2007 | 2008/2009 | $80-100 | 26,363 / 82,712 | Construction |
| Eastern<br> Massachusetts/Cambridge | 2006 | 2008/2009 | $120-175 | 124,075 / 177,101 | Design/Construction |
| Eastern<br> Massachusetts/Cambridge | 2007 | 2009 | $100-130 | 73,776 / 369,831 | Design/Construction |
| Eastern<br> Massachusetts/Suburban | 2007 | 2009 | $100-120 | 23,000 / 38,000 | Construction |
| Eastern<br> Massachusetts/Suburban | 2007 | 2009 | $70-80 | 113,045 / 113,045 | Redesign/Construction |
| Eastern<br> Massachusetts/Suburban | 2008 | 2010 | $120-140 | 30,000 / 30,000 | Design/Demolition |
| Southeast/Florida | 2006 | 2008 | $80-100 | 44,238 / 45,841 | Construction |
| Southeast/North<br> Carolina | 2008 | 2010 | $80-100 | 13,029 / 60,519 | Construction |
| Southeast/North<br> Carolina | 2008 | 2009 | $90-110 | 10,244 / 38,861 | Construction |
| Southeast/Research<br> Triangle Park | 2007 | 2008 | $100-120 | 16,393 / 77,395 | Design/Construction |
| Suburban<br> Washington D.C./Gaithersburg | 2007 | 2008 | $40-50 | 15,504 / 44,464 | Construction |
| Suburban<br> Washington D.C./Shady Grove | 2007 | 2009 | $70-80 | 52,634 / 125,004 | Construction |
| Washington –<br> Seattle | 2007 | 2008 | $125-150 | 11,291 / 32,279 | Construction |
| 789,939 / 1,609,392 |
Our redevelopment program involves ongoing activities necessary for the permanent change of use of applicable redevelopment space to office/laboratory space. Spaces currently built out with laboratory improvements are generally not placed into our value-add redevelopment program. As required under GAAP, interest and other costs directly related and essential to the project are capitalized on redevelopment properties on the basis allocable only to that portion of space undergoing redevelopment. In addition to properties undergoing redevelopment, as of June 30, 2008, our asset base contained embedded opportunities for future permanent change of use to office/laboratory space through redevelopment aggregating approximately 1,615,000 rentable square feet. See Summary of Embedded Future Development and Redevelopment Square Footage on page 18.
| (1) | This<br> project also includes site work and a multi-story below and above ground<br> parking structure to support both the existing building undergoing<br> redevelopment and an additional building targeted for development in the<br> future. The entitlement process for this project was completed in 2007. |
|---|
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ALEXANDRIA REAL ESTATE EQUITIES, INC.Summary of Properties Undergoing Ground-Up DevelopmentJune 30, 2008
| Markets/Submarkets | Building Descriptions | Construction Start Dates | Estimated In-Service Dates | Estimated Investment Per Square Foot (1) | Rentable Square Feet | **** | Development Status | Leasing Status |
|---|---|---|---|---|---|---|---|---|
| California – San<br> Francisco Bay/<br><br> Mission Bay | One Multi-tenant Bldg. | 2007 | 2010 | $350 | 158,000 | Construction | Marketing/26% Leased with Option for<br><br> Additional 17% | |
| California – San<br> Francisco Bay/<br><br> So. San Francisco | Two Bldgs.,<br><br> Single or Multi-tenant | 2006 | 2009 | $350 | 162,000 | Construction | Marketing/16% Leased | |
| California – San<br> Francisco Bay/<br><br> So. San Francisco | One Single or<br><br> Multi-tenant Bldg. | 2006 | 2009 | $350 | 130,000 | Construction | 55% Leased with Option for Balance | |
| International –<br> China | Two Bldgs.,<br><br> Single or Multi-tenant | 2007 | 2009 | $40 | 280,000 | Construction | Marketing/18% Pre-committed | |
| New York – New<br> York City – East Tower | Multi-tenant Bldg. | 2007 | 2010/2011 | $500 | 310,000 | (2) | Construction | Marketing/Negotiating First Lease for 7% of Space; Negotiating<br> LOI for 40% of Space (could also be a west tower tenant) |
| New York – New<br> York City – West Tower | Multi-tenant Bldg. | 2007 | 2011/2012 | $500 | 410,000 | (2) | Site Work | Pre-marketing |
| Washington –<br> Seattle | One Single Tenant<br><br> Bldg. with 8% Retail | 2007 | 2010 | TBD | 115,000 | Site Work | Committed/Negotiating Lease for 92% of Space | |
| Total Properties Undergoing Ground–Up Development (1) | 1,565,000 |
In accordance with Statement of Financial Accounting Standards No. 34, “Capitalization of Interest Cost” (“SFAS 34”) and Statement of Financial Accounting Standards No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects” (“SFAS 67”), we are required to capitalize direct construction, including pre-construction costs, interest, property taxes, insurance and other costs directly related and essential to the construction of a project while activities are ongoing to prepare an asset for its intended use. Pre-construction costs include costs related to the development of plans and the process of obtaining entitlements and permits from government authorities. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Should development, redevelopment or construction activity cease, construction costs, including interest, would no longer be eligible for capitalization, under SFAS 34 and SFAS 67, and would be expensed as incurred.
| (1) | Our<br> aggregate construction costs to date approximate $170 per developable square<br> foot. Amount excludes our investment per square foot in land. |
|---|---|
| (2) | In<br> addition, we have the right to develop an additional parcel with<br> approximately 442,000 rentable square feet. This square footage is not<br> included in the embedded developable square footage shown on page 18. |
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ALEXANDRIAREAL ESTATE EQUITIES, INC.Summary of Embedded Future Development and Redevelopment Square FootageJune 30, 2008
| **** | Embedded Future Development | **** | **** | **** | |
|---|---|---|---|---|---|
| Markets | ****<br><br> <br>Development/ Pre-construction Square Footage (1) | Total Embedded Development Square Footage | **** | Embedded Future Redevelopment Square Footage | Total |
| California – San Diego | 298,000 | 443,000 | 178,000 | 621,000 | |
| California – San Francisco Bay/Mission Bay | 2,386,000 | 2,386,000 | – | 2,386,000 | |
| California – San Francisco Bay/So. San Francisco | 825,000 | 921,000 | 25,000 | 946,000 | |
| Eastern<br> Massachusetts | 2,050,000 | 2,275,000 | 589,000 | 2,864,000 | |
| International – Canada | 763,000 | 827,000 | – | 827,000 | |
| Suburban<br> Washington D.C. | 522,000 | 787,000 | 467,000 | 1,254,000 | |
| Washington – Seattle | 274,000 | 912,000 | 135,000 | 1,047,000 | |
| Other | 176,000 | 516,000 | 221,000 | 737,000 | |
| Total | 7,294,000 | 9,067,000 | (2) | 1,615,000 | 10,682,000 |
The embedded future development and redevelopment square footage shown above represents future ground-up development projects and future redevelopment (permanent change in use of applicable space to office/laboratory space) projects. A significant portion of our embedded future development square footage is in the development/pre-construction phase (entitlement, permitting, design, etc.). See discussion on SFAS 34 and SFAS 67 on page 17. Commencement of construction will depend on numerous factors, including the successful completion of development/pre-construction activities and management’s assessment of overall market conditions. As required under GAAP, direct construction, interest, property taxes, insurance and other costs directly related and essential to the development/pre-construction, or construction of a project, is mandated to be capitalized during pre-construction when activities are ongoing to bring these assets to their intended use.
| (1) | Development/pre-construction<br> square footage is included in Embedded Future Development – Total Embedded Development Square<br> Footage shown above. |
|---|---|
| (2) | In addition, we have<br> the right to develop an additional parcel with approximately 442,000 rentable<br> square feet. This square footage is not included in the embedded developable<br> square footage shown above. |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summaryof Capital CostsFor the Six Months Ended June 30, 2008
(Inthousands)
| Property-related<br> capital expenditures (1) | $ | 948 |
|---|---|---|
| Leasing costs<br> (2) | $ | 539 |
| Property-related<br> costs (3) | $ | 217,974 |
| (1) | Property-related<br> capital expenditures include all major capital and recurring capital<br> expenditures except capital expenditures that are recoverable from tenants,<br> revenue-enhancing capital expenditures, or costs related to the redevelopment<br> of a property. Major capital expenditures consist of roof replacements and<br> HVAC systems which are typically identified and considered at the time the<br> property is acquired. Capital expenditures fluctuate in any given period due<br> to the nature, extent or timing of improvements required and the extent to<br> which they are recoverable from tenants. Approximately 92% of our leases<br> (based on rentable square feet) provide for the recapture of certain capital<br> expenditures (such as HVAC systems maintenance and/or replacement, roof replacement<br> and parking lot resurfacing). In addition, we implement an active<br> preventative maintenance program at each of our properties to minimize<br> capital expenditures. | |
| --- | --- | |
| (2) | Leasing costs consist<br> of tenant improvements and leasing commissions related to leasing of acquired<br> vacant space and second generation space. | |
| (3) | Amount includes leasing<br> costs related to development and redevelopment projects. |
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ALEXANDRIAREAL ESTATE EQUITIES, INC.
ConferenceCall Information
Forthe Second Quarter Ended June 30, 2008
Alexandria Real Estate Equities, Inc. will be hosting a conference call to discuss its operating and financial results for the second quarter and six months ended June 30, 2008:
| Date: | August 7, 2008 |
|---|---|
| Time: | 12:00 Noon Eastern<br> Daylight Time/9:00 A.M. Pacific Daylight Time |
| Phone Number: | (719) 457-2709 |
| Confirmation Code: | 2680524 |
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