Alexandria Real Estate Equities, Inc 8-K, filed Jun 10, 2002
Alexandria Real Estate Equities, Inc. (ARE)
About this 8-K
Alexandria Real Estate Equities, Inc filed this 8-K on June 10, 2002, reporting on events of June 5, 2002.
Items reported
- Item 5
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 10, 2002
ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
|
Maryland |
1-12993 |
95-4502084 |
|
(State or other jurisdiction of incorporation) |
(Commission |
(I.R.S. Employer |
|
135 North Los Robles Avenue, Suite 250 |
91101 |
|
Pasadena, California |
|
|
(Address of principal executive offices) |
(Zip Code) |
Registrant's telephone number, including area code: (626) 578-0777
Item 5. OTHER EVENTS
Alexandria Real Estate Equities, Inc. or one of our wholly owned subsidiaries acquired the properties listed below. The properties contain a combination of office and laboratory space for lease to tenants in the life science industry ("Life Science Facilities"). We acquired the properties from a seller that was unaffiliated with us.
On April 24, 2002, we acquired Gateway Boulevard #1 and Gateway Boulevard #2 (the "Properties") located in San Francisco, California. We purchased the two properties for an aggregate of $49,000,000, which was based on arm's length negotiations. We funded the purchase price through a draw on our unsecured line of credit. The properties contain approximately 170,000 rentable square feet. The properties are presently 100% leased to a single tenant. We purchased the properties from HMS Gateway Office, L.P.
In determining the price to purchase the Properties, we evaluated various factors, including, among others, the existing leases, which are the primary source of revenue, the competitive nature of the markets and comparative rental rates. Current and anticipated operating expenses, maintenance and repair costs, real estate taxes and capital improvement requirements were also evaluated. After reasonable inquiry, we are not aware of any material factors (other than those stated above) which would cause the reported financial information not to be indicative of future operating results.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Properties Acquired 1
Gateway boulevard #1
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the year ended December 31, 2001
Notes to Statement of Revenues and Certain Expenses
(b) Unaudited pro forma condensed consolidated financial statements
(c) Exhibits
23.1 Consent of Ernst & Young LLP
________________________
1 The financial statement for Gateway Boulevard #2 has not been included because the property was under development, and, as a result, there are no historical operating results as a rental property
Report of Independent Auditors
To the Board of Directors
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of Gateway Boulevard #1 (the Property) for the year ended December 31, 2001. This statement of revenue and certain expenses is the responsibility of management of the Property. Our responsibility is to express an opinion on the statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenue and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission. Certain expenses (described in Note 1) that would not be comparable to those resulting from the proposed future operations of the Property are excluded and the statement is not intended to be a complete presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly, in all material respects, the revenue and certain expenses, as defined above, of the Property for the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Los Angeles, California
April 24, 2002
Statement of Revenue and Certain Expenses
Year ended December 31, 2001
(In thousands)
|
Revenue: |
|
|
Rental |
$ 3,711 |
|
Tenant recoveries |
474 |
|
Total revenue |
4,185 |
|
Certain Expenses: |
|
|
Repairs and maintenance |
109 |
|
Insurance |
61 |
|
Taxes and license |
304 |
|
Total certain expenses |
474 |
|
Excess of revenue over certain expenses |
$ 3,711 |
See accompanying notes.
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenue and certain expenses includes the operations of Gateway Boulevard #1, located in San Francisco, California (the "Property"). An indirect wholly-owned subsidiary of Alexandria Real Estate Equities, Inc., a Maryland corporation, acquired the Property from a nonaffiliated third party. As of December 31, 2001, the Property was 100% occupied and leased to a single tenant under a triple-net lease, which requires the tenant to pay its pro rata share of substantially all expenses associated with the Property, including operating and maintenance, utilities, taxes and insurance.
Basis of Presentation
The accompanying statement has been prepared to comply with the rules and regulations of the Securities and Exchange Commission.
The Property is not a legal entity and the accompanying statement is not representative of the actual operations for the period presented, as certain expenses that may not be comparable to the expenses we expect to incur in the future operations of the Property have been excluded. Excluded expenses consist of interest, depreciation and amortization, and property general and administrative costs not directly comparable to the future operations of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the term of the related lease.
Risks and Uncertainties
The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Gateway Boulevard #1
Notes to Statement of Revenue and Certain Expenses (continued)
2. Future Minimum Lease Payments
The future minimum lease payments to be received under a noncancelable operating lease as of December 31, 2001 are as follows (in thousands):
|
2002 |
$ 3,363 |
|
2003 |
3,441 |
|
2004 |
3,520 |
|
2005 |
3,603 |
|
2006 |
3,687 |
|
Thereafter |
20,841 |
|
Total |
$ 38,455 |
The above future minimum lease payments do not include specified payments for tenant reimbursements of operating expenses.
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated balance sheet of Alexandria Real Estate Equities, Inc. as of March 31, 2002 is presented as if the properties described in Item 5 of this Form 8-K (the "Form 8-K Properties") had been acquired on March 31, 2002. The following unaudited pro forma condensed consolidated income statements of Alexandria Real Estate Equities, Inc. for the three months ended March 31, 2002 and for the year ended December 31, 2001 are presented as if the Form 8-K Properties had been acquired on January 1, 2001.
The pro forma condensed consolidated financial statements are not necessarily indicative of what the actual financial position or results of operations would have been had we completed the transactions on the dates as described above, nor do they purport to represent our future financial position or our results of operations.
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2002
(dollars in thousands)
|
Pro Forma |
|||
|
Historical |
Adjustments |
Pro Forma |
|
|
Assets |
|||
|
Rental properties, net |
$ 798,570 |
$ 49,000 (A) |
$ 847,570 |
|
Property under development |
77,454 |
- |
77,454 |
|
Cash and cash equivalents |
5,012 |
- |
5,012 |
|
Tenant security deposits and other restricted |
|||
|
cash |
9,398 |
- |
9,398 |
|
Tenant receivables |
2,864 |
- |
2,864 |
|
Deferred rent |
22,006 |
- |
22,006 |
|
Other assets |
62,682 |
- |
62,682 |
|
Total assets |
$ 977,986 |
$ 49,000 |
$ 1,026,986 |
|
Liabilities and stockholders' equity |
|||
|
Secured notes payable |
$ 246,272 |
$ - |
$ 246,272 |
|
Unsecured line of credit and unsecured term loan |
273,000 |
49,000 (A) |
322,000 |
|
Accounts payable, accrued expenses and tenant security deposits |
|
|
41,889 |
|
Dividends payable |
10,173 |
- |
10,173 |
|
Total liabilities |
571,334 |
49,000 |
620,334 |
|
Stockholders' equity: |
|||
|
Series A preferred stock |
38,588 |
- |
38,588 |
|
Series B preferred stock |
57,500 |
- |
57,500 |
|
Common stock |
168 |
- |
168 |
|
Additional paid-in capital |
316,945 |
- |
316,945 |
|
Deferred compensation |
(1,192) |
- |
(1,192) |
|
Retained earnings |
- |
- |
- |
|
Accumulated other comprehensive income |
(5,357) |
- |
(5,357) |
|
Total stockholders' equity |
406,652 |
- |
406,652 |
|
Total liabilities and stockholders' equity |
$ 977,986 |
$ 49,000 |
$ 1,026,986 |
See accompanying notes.
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Income Statement
Three Months Ended March 31, 2002
(dollars in thousands, except per share amounts)
|
Pro Forma |
|||
|
Historical |
Adjustments |
Pro Forma |
|
|
Revenues: |
|||
|
Rental revenue |
$ 27,458 |
$ 928 (B) |
$ 28,386 |
|
Tenant recoveries and other income |
7,469 |
119 (B) |
7,588 |
|
Total revenues |
34,927 |
1,047 |
35,974 |
|
Expenses: |
|||
|
Rental operations |
6,894 |
119 (B) |
7,013 |
|
General and administrative |
3,473 |
- |
3,473 |
|
Interest |
6,720 |
284 (C) |
7,004 |
|
Depreciation and amortization |
8,237 |
151 (D) |
8,388 |
|
Total expenses |
25,324 |
554 |
25,878 |
|
Net income |
$ 9,603 |
$ 493 |
$ 10,096 |
|
Dividends on preferred stock |
$ 1,905 |
$ 1,905 |
|
|
Net income available to common stock outstanding |
$ 7,698 |
$ 8,191 |
|
|
Pro forma weighted average shares of common stock outstanding |
16,720,857 |
16,720,857 |
|
|
Net income per pro forma share |
|||
|
of common stock |
$ 0.46 |
$ 0.49 |
See accompanying notes.
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Income Statement
Year ended December 31, 2001
(dollars in thousands, except per share amounts)
|
Pro Forma |
|||
|
Historical |
Adjustments |
Pro Forma |
|
|
Revenues: |
|||
|
Rental revenue |
$ 99,171 |
$ 3,711 (B) |
$ 102,882 |
|
Tenant recoveries and other income |
28,619 |
474 (B) |
29,093 |
|
Total revenues |
127,790 |
4,185 |
131,975 |
|
Expenses: |
|||
|
Rental operations |
26,115 |
474 (B) |
26,589 |
|
General and administrative |
11,694 |
- |
11,694 |
|
Interest |
29,126 |
1,135 (C) |
30,261 |
|
Depreciation and amortization |
30,578 |
603 (D) |
31,181 |
|
Total expenses |
97,513 |
2,212 |
99,725 |
|
Net income |
$ 30,277 |
$ 1,973 |
$ 32,250 |
|
Dividends on preferred stock |
$ 3,666 |
$ 3,666 |
|
|
Net income available to common stock outstanding |
$ 26,611 |
$ 28,584 |
|
|
Pro forma weighted average shares of common stock outstanding |
16,208,178 |
16,208,178 |
|
|
Net income per pro forma share |
|||
|
of common stock |
$ 1.64 |
$ 1.76 |
See accompanying notes.
Alexandria Real Estate Equities, Inc.
Adjustments to the Unaudited Pro Forma Condensed
Consolidated Financial Statements
1. Adjustments to the Unaudited Pro Forma Condensed Consolidated Balance Sheet
The pro forma adjustments to the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2002 are as follows:
- Acquisition of the Form 8-K Properties, with the related draw on the unsecured line of credit. The purchase price was $49,000,000. The acquisition closed in April 2002.
2. Adjustments to the Unaudited Pro Forma Condensed Consolidated Income Statements
The pro forma adjustments to the Unaudited Pro Forma Condensed Consolidated Income Statements for the three months ended March 31, 2002 and for the year ended December 31, 2001 are as follows:
(B) Preacquisition results, adjusted to include the effect of straight-line rent adjustments (in thousands):
Alexandria Real Estate Equities, Inc.
Adjustments to the Unaudited Pro Forma Condensed
Consolidated Financial Statements (continued)
2. Adjustments to the Unaudited Pro Forma Condensed Consolidated Income Statements (continued)
Preacquisition Period for the Three Months Ended March 31, 2002
|
Gateway Boulevard #1 |
Gateway Boulevard #2 |
Total |
|
|
Acquisition Date |
April 24,2002 |
April 24, 2002 |
|
|
Revenues: |
|||
|
Rental revenue |
$ 928 |
$ - |
$ 928 |
|
Tenant recoveries and |
119 |
- |
119 |
|
1,047 |
- |
1,047 |
|
|
Expenses: |
|
|
|
|
Rental operations |
119 |
- |
119 |
|
Net Income |
$ 928 |
$ - |
$ 928 |
Preacquisition Period for the Year Ended December 31, 2001
|
Gateway Boulevard #1 |
Gateway Boulevard #2 |
Total |
|
|
Acquisition Date |
April 24, 2002 |
April 24, 2002 |
|
|
Revenues: |
|||
|
Rental revenue |
$ 3,711 |
$ - |
$ 3,711 |
|
Tenant recoveries and |
474 |
- |
474 |
|
4,185 |
- |
4,185 |
|
|
Expenses: |
|
|
|
|
Rental operations |
474 |
- |
474 |
|
Net Income |
$ 3,711 |
$ - |
$ 3,711 |
Alexandria Real Estate Equities, Inc.
Adjustments to the Unaudited Pro Forma Condensed
Consolidated Financial Statements (continued)
2. Adjustments to the Unaudited Pro Forma Condensed Consolidated Income Statements (continued)
The adjustments shown above are not necessarily indicative of the results of operations had we completed the transactions at the beginning of the periods presented. The adjustments presented for the three months ended March 31, 2002 reflect the results of operations for January 1, 2002 through March 31, 2002. The adjustments presented for the year ended December 31, 2001 reflect the results of operations for the entire year.
No pro forma adjustment has been made for Gateway Boulevard #2 for the periods presented because the property was under development.
(C) Increase in interest expense due to the draw on our unsecured line of credit for the acqfuisition of Gateway Boulevard #1. No pro forma adjustment has been made for Gateway Boulevard #2 for the periods presented because the property was under development. Any interest incurred from the acquisition of this property would have been offset by the interest capitalized while the property was under development.
(D) Increase in depreciation expense to reflect a full period of depreciation for Gateway Boulevard #1. No pro forma adjustment has been made for Gateway Boulevard #2 for the periods presented because no depreciation expense would have been incurred while the property was under development.
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 EQUITIES, INC.
Date: June 10, 2002 By: /s/ Peter J. Nelson____________
Peter J. Nelson
Chief Financial Officer
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-34223, Form S-8 No. 333-60075, Amendment No. 1 to Form S-3 No. 333-56451, Amendment No. 1 to Form S-3 No. 333-56449, Form S-3 No. 333-81985 and Form S-3 No. 333-89564) of Alexandria Real Estate Equities, Inc. of our report dated April 24, 2002 with respect to the statement of revenue and certain expenses of Gateway Boulevard #1 for the year ended December 31, 2001, included in the Form 8-K of Alexandria Real Estate Equities, Inc. dated June 10, 2002.
/s/ Ernst & Young LLP
Los Angeles, California
June 10, 2002