UNITED STATES

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): February 11, 2008

 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

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))

 

 

 

Item 2.02.    Results of Operations and Financial Condition.

 

On February 11, 2008, we issued a press release entitled “Alexandria Real Estate Equities, Inc. Reports Fourth Quarter 2007 Results” which sets forth our results of operations for the fourth quarter and year ended December 31, 2007.  A copy of that press release is attached hereto as Exhibit 99.1.

 

Item 9.01.    Financial Statements and Exhibits.

 

(d)    Exhibits.

 

99.1   Press Release dated February 11, 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 EQUITIES, INC.
February 11, 2008	By:	/s/ Joel S. Marcus
		Joel S. Marcus
		Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Dean A. Shigenaga
		Dean A. Shigenaga
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

 

3

 

EXHIBIT INDEX

 

Exhibit Number		Exhibit Title
99.1		Press Release dated February 11, 2008

 

4

Exhibit 99.1

 

 

Contact:	Joel S. Marcus
	Chairman/Chief Executive Officer
	Alexandria Real Estate Equities, Inc.
	(626) 578-9693

 

ALEXANDRIA REAL ESTATE EQUITIES, INC.
REPORTS
FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2007 RESULTS

 

Highlights

 

Fourth Quarter 2007:

·                  Fourth Quarter 2007 Funds from Operations (FFO) Per Share (Diluted) of $1.46, up 9%, Compared to Fourth Quarter 2006 FFO Per Share (Diluted) of $1.34

·                  Fourth Quarter 2007 Total Revenues up 19%, FFO Available to Common Stockholders up 19%, Compared to Fourth Quarter 2006

·                  Fourth Quarter 2007 Earnings Per Share (Diluted) of $0.70, up 23%, Compared to Fourth Quarter 2006 Earnings Per Share (Diluted) of $0.57

·                  Executed 43 Leases for Approximately 432,000 Rentable Square Feet

·                  Fourth Quarter 2007 GAAP Rental Rate Increase of 12.4% on Renewed/Released Space

·                  Fourth Quarter 2007 GAAP Same Property Revenues Less Operating Expenses up 3.5%

·                  Commenced Ground-Up Development of One Property Aggregating Approximately 115,000 Rentable Square Feet

·                  Completed Redevelopment of Multiple Spaces at Three Properties Aggregating Approximately 67,949 Rentable Square Feet

·                  Sold One Real Estate Asset for Approximately $11 Million; Subsequent to Year End, In January and February 2008, Sold Five Real Estate Assets for Approximately $63.5 Million

·                  Closed $62 Million Pre-Construction Secured Loan

·                  Acquired One Land Parcel Aggregating Approximately 350,000 Developable Square Feet through a Joint Venture

·                  Acquired Two Properties Aggregating Approximately 404,986 Rentable Square Feet

 

Year Ended December 31, 2007:

·                  Total Return Performance of 711% from May 28, 1997 to December 31, 2007, Assuming Reinvestment of All Dividends

·                  2007 FFO Per Share (Diluted) of $5.61 Net of $2.8 Million Preferred Stock Redemption Charge; FFO Per Share (Diluted) of $5.70, up 10%, Before the Preferred Stock Redemption Charge, Compared to 2006 FFO Per Share (Diluted) of $5.16

·                  2007 Total Revenues up 30%, FFO Available to Common Stockholders up 28% , Compared to 2006

·                  2007 Earnings Per Share (Diluted) of $2.63 Net of $2.8 Million Preferred Stock Redemption Charge; Earnings Per Share (Diluted) of $2.72, up 21%, Before the Preferred Stock Redemption Charge, Compared to 2006 Earnings Per Share (Diluted) of $2.25

·                  Executed 136 Leases for Approximately 1,583,000 Rentable Square Feet

·                  2007 GAAP Rental Rate Increase of 9.8% on Renewed/Released Space

·                  2007 GAAP Same Property Revenues Less Operating Expenses up 3.7%

·                  2007 Common Stock Dividends up 5.4% Over 2006

·                  Received First Ever LEED Certified Core and Shell Office/Laboratory Building in the State of California

·                  Completed Ground-Up Development of One Property Aggregating Approximately 157,340 Rentable Square Feet

·                  Commenced Ground-Up Development of Four Properties Aggregating Approximately 553,000 Rentable Square Feet

·                  Completed Redevelopment of Multiple Spaces at Ten Properties Aggregating Approximately 258,411 Rentable Square Feet

·                  Sold Four Real Estate Assets and Four Land Parcels for Approximately $73 Million; Subsequent to Year End In January and February 2008, Sold Five Real Estate Assets for Approximately $63.5 Million; Completed Sales in 2007 and Period to Date in 2008 Aggregating Approximately 519,451 Rentable Square Feet

·                  Closed Follow-on Common Offering with Net Proceeds of Approximately $217 Million

·                  Redeemed 9.10% Series B Cumulative Redeemable Preferred Stock and Incurred Redemption Charge of Approximately $2.8 Million

·                  Closed $460 Million of 3.70% Convertible Notes

·                  Closed $200 Million Secured Loan and $62 Million Pre-Construction Secured Loan

·                  Increased Credit Facility to $1.9 Billion Plus a $500 Million Accordion

·                  Acquired Four Land Parcels Aggregating Approximately 541,592 Developable Square Feet

·                  Acquired Sixteen Properties Aggregating Approximately 1.3 Million Rentable Square Feet

 

(more)

 

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2007 RESULTS

Page 2

 

PASADENA, CA. – February 11, 2008 – Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced operating and financial results for the fourth quarter and year ended December 31, 2007.

 

For the fourth quarter of 2007, we reported total revenues of $109,616,000 and FFO available to common stockholders of $46,324,000, or $1.46 per share (diluted), compared to total revenues of $91,907,000 and FFO available to common stockholders of $39,054,000, or $1.34 per share (diluted), for the fourth quarter of 2006.  Comparing the fourth quarter of 2007 to the fourth quarter of 2006, total revenues increased 19%, FFO available to common stockholders increased 19% and FFO per share (diluted) increased 9%.  For the year ended December 31, 2007, we reported total revenues of $405,360,000 and FFO available to common stockholders of $168,200,000, or $5.61 per share (diluted), net of a preferred stock redemption charge, compared to total revenues of $310,779,000 and FFO available to common stockholders of $131,665,000, or $5.16 per share (diluted), for the year ended December 31, 2006.  Comparing the year ended December 31, 2007 to the year ended December 31, 2006, total revenues increased 30%, FFO available to common stockholders increased 28% and FFO per share (diluted) increased 9%, net of a preferred stock redemption charge recognized in the first quarter of 2007.  The preferred stock redemption charge related to the redemption of our Series B Preferred Stock was approximately $2,799,000.  Excluding the preferred stock redemption charge, FFO available to common stockholders for the year ended December 31, 2007 increased by 30% and FFO per share (diluted) increased by 10% as compared to the year ended December 31, 2006.

 

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, 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 December 31, 2007 and 2006 was $26,969,000 and $22,454,000, respectively.  Depreciation and amortization expense for the years ended December 31, 2007 and 2006 was $97,335,000 and $74,039,000, respectively.  Net income available to common stockholders for the fourth quarter of 2007 was $22,277,000, or $0.70 per share (diluted), compared to net income available to common stockholders of $16,512,000, or $0.57 per share (diluted), for the fourth quarter of 2006.  Net income available to common stockholders for the year ended December 31, 2007 was $78,905,000, or $2.63 per share (diluted), compared to net income available to common stockholders of $57,326,000, or $2.25 per share (diluted), for the year ended December 31, 2006.  In the first quarter of 2007, we recognized a preferred stock redemption charge of approximately $2,799,000 related to the redemption of our Series B Preferred Stock.  Excluding the preferred stock redemption charge, net income available to common stockholders for the year ended December 31, 2007 increased by 43% and net income per share (diluted) increased by 21% as compared to the year ended December 31, 2006.

 

For the fourth quarter of 2007, we executed a total of 43 leases for approximately 432,000 rentable square feet of space at 29 different properties (excluding month-to-month leases).  Of this total, approximately 201,000 rentable square feet related to new or renewal leases of previously leased space and approximately 231,000 rentable square feet related to redeveloped, developed or previously vacant space.  Of the 231,000 rentable square feet, approximately 187,000 rentable square feet were delivered from our redevelopment or development programs, with the remaining approximately 44,000 rentable square feet related to previously vacant space.  Rental rates for these new or renewal leases were on average approximately 12.4% higher (on a GAAP basis) than rental rates for expiring leases.  For the year ended December 31, 2007, we executed a total of 136 leases for approximately 1,583,000 rentable square feet of space at 50 different properties (excluding month-to-month leases).  Of this total, approximately 896,000 rentable square feet were for new or renewal leases related to previously leased space and approximately 687,000 rentable square feet were for redeveloped, developed or previously vacant space.  Of the 687,000 rentable square feet, approximately 399,000 rentable square feet were delivered from our redevelopment or development programs, with the remaining approximately 288,000 rentable square feet for previously vacant space.  Rental rates for new or renewal leases were on average approximately 9.8% higher (on a GAAP basis) than rental rates for expiring leases.

 

During the fourth quarter of 2007, we acquired one property in the Eastern Massachusetts market and one property in the New Jersey/Suburban Philadelphia market with approximately 404,986 aggregate rentable square feet. We paid approximately $101.2 million cash for the properties and closed two secured notes payable of $34.0 million and $23.9 million for total consideration of $159.1 million.  The largest property aggregating approximately 369,831 rentable square feet in the Eastern Massachusetts market is currently occupied by multiple office tenants.  This property also has an additional approximately 390,786 developable square feet. Additionally, during the fourth quarter of 2007, we acquired one development parcel in the Longwood Medical submarket, Boston, MA., with approximately

 

(more)

 

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2007 RESULTS

Page 3

 

350,000 developable square feet through a joint venture.  The purchase price of this land development parcel was approximately $70.0 million.  In connection with this purchase, we closed a $62.0 million pre-construction secured loan of which approximately $38.2 million was drawn and outstanding as of December 31, 2007.

 

During the fourth quarter of 2007, we sold one office/industrial property in the San Francisco Bay market, located south of the city of San Francisco, with approximately 49,874 rentable square feet. The sale price of this property was approximately $10.6 million.  As of December 31, 2007, two properties approximating 136,399 rentable square feet were classified as “held for sale.”  In January 2008, we sold one of these properties located in the San Diego market approximating 86,962 rentable square feet.  In addition, in February 2008, we sold four properties in the San Francisco Bay market aggregating approximately 211,715 rentable square feet. The sales price for the properties sold in 2008 was approximately $63.5 million. The net proceeds from these sales were used to repay secured notes payable totaling approximately $25.2 million with the balance used to reduce outstanding borrowings on our unsecured line of credit.

 

As of December 31, 2007, approximately 88% 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 December 31, 2007, approximately 9% of our leases (on a rentable square footage basis) required the tenants to pay a majority of operating expenses.  Additionally, as of December 31, 2007, approximately 91% 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 guidance for FFO per share (diluted) and earnings per share (diluted) as follows:

 

 

		2008
FFO per share (diluted)		$	6.10
Earnings per share (diluted)		$	3.27

 

 

Alexandria Real Estate Equities, Inc., Landlord and Developer of Choice to the Life Science Industry®, is a publicly-traded real estate investment trust focused principally on the ownership, operation, management, selective development, redevelopment and acquisition of life science properties.  Our properties are designed and improved for lease primarily to institutional (universities and independent not-for-profit institutions), pharmaceutical, biotechnology, medical device, life science product, service, and translational medicine entities, as well as governmental agencies. We are the largest and leading provider of real estate to the broad and diverse life science industry with an asset base, as of December 31, 2007, that will enable us to grow to approximately 22.4 million square feet consisting of 166 properties approximating 12.1 million rentable square feet, properties undergoing ground-up development approximating 1.6 million rentable square feet, plus an imbedded pipeline for ground-up development approximating 8.7 million developable square feet.

 

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.

 

 

 

 

 

(Tables follow)

 

 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Financial Information

(Dollars in thousands, except per share data)

(Unaudited)

 

		Three Months Ended						Year Ended
		December 31,						December 31,
		2007			2006			2007			2006
Income statement data
Total revenues		$	109,616		$	91,907		$	405,360		$	310,779
Expenses
Rental operations		27,446			21,625			99,210			69,775
General and administrative		8,131			6,693			32,456			26,051
Interest		24,013			21,148			88,387			71,371
Depreciation and amortization		26,838			22,095			96,476			72,432
		86,428			71,561			316,529			239,629
Minority interest		951			838			3,669			2,287
Income from continuing operations		22,237			19,508			85,162			68,863
Income from discontinued operations, net		2,755			1,027			8,562			4,553
Net income		24,992			20,535			93,724			73,416
Dividends on preferred stock		2,715			4,023			12,020			16,090
Preferred stock redemption charge		-			-			2,799			-
Net income available to common stockholders		$	22,277		$	16,512		$	78,905		$	57,326
Weighted average shares of common stock outstanding
Basic		31,446,999			28,821,942			29,668,231			25,102,200
Diluted		31,729,054			29,222,144			30,004,462			25,524,478
Earnings per share – basic
Continuing operations (net of preferred stock dividends and preferred stock redemption charge)		$	0.62		$	0.53		$	2.37		$	2.10
Discontinued operations, net		0.09			0.04			0.29			0.18
Earnings per share – basic		$	0.71		$	0.57		$	2.66		$	2.28
Earnings per share – diluted
Continuing operations (net of preferred stock dividends and preferred stock redemption charge)		$	0.62		$	0.53		$	2.34		$	2.07
Discontinued operations, net		0.08			0.04			0.29			0.18
Earnings per share – diluted		$	0.70		$	0.57		$	2.63		$	2.25

 

 

 

 

(Continued on next page)

 

4

 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Financial Information

(Unaudited)

 

Funds from 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 by 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.  While FFO is a relevant and widely used measure of operating performance for REITs, it should not 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, to funds from operations available to common stockholders for the three months and year ended December 31, 2007 and 2006 (in thousands, except per share data):

 

Reconciliation of net income available to		Three Months			Three Months			Year			Year
common stockholders to funds from		Ended			Ended			Ended			Ended
operations available to common stockholders		December 31, 2007			December 31, 2006			December 31, 2007			December 31, 2006
Net income available to common stockholders (1)		$	22,277		$	16,512		$	78,905		$	57,326
Add: Depreciation and amortization (2)		26,969			22,454			97,335			74,039
Add: Minority interest		951			838			3,669			2,287
Subtract: Gain on sales of property (3)		(2,901		)	-			(7,976		)	(59		)
Subtract: FFO allocable to minority interest		(972		)	(750		)	(3,733		)	(1,928		)
Funds from operations available to common stockholders (1)		$	46,324		$	39,054		$	168,200		$	131,665
FFO per share
Basic		$	1.47		$	1.36		$	5.67		$	5.25
Diluted		$	1.46		$	1.34		$	5.61		$	5.16

 

Reconciliation of earnings per share (diluted) to FFO per share (diluted)
Earnings per share (diluted)		$	0.70		$	0.57		$	2.63		$	2.25
Depreciation and amortization (2)		0.85			0.77			3.25			2.90
Minority interest		0.03			0.03			0.12			0.09
Gain on sales of property (3)		(0.09		)	-			(0.27		)	-
FFO allocable to minority interest		(0.03		)	(0.03		)	(0.12		)	(0.08		)
FFO per share (diluted)		$	1.46		$	1.34		$	5.61		$	5.16

 

(1)	During the first quarter of 2007, we redeemed our 9.10% Series B cumulative redeemable preferred stock.  Accordingly, in compliance with EITF Topic D-42, we recorded a charge of $2,799,000 in the first quarter of 2007 for costs related to the redemption of our Series B Preferred Stock.
(2)	Includes depreciation and amortization for assets “held for sale” reflected as discontinued operations (for the periods prior to when such assets were designated as “held for sale.”)
(3)	Gain on sales of property relates to the disposition of one property sold during fourth quarter 2007, four land parcels and one property sold during the third quarter of 2007, one property sold during the second quarter of 2007, one property sold during the first quarter of 2007, and three properties sold during the second quarter of 2006. Gain on sales of property is included in the income statement in income from discontinued operations, net.

 

 

 

5

 

ALEXANDRIA REAL ESTATE EQUITIES, INC.
Quarterly Supplemental Financial Information
(Dollars in thousands, except per share data)
(Unaudited)

 

			For the Three Months Ended
	Operational data		12/31/2007				9/30/2007					6/30/2007					3/31/2007					12/31/2006
	Breakdown of revenues from continuing operations (a)
	Rental income		$	83,086			$	78,309				$	72,923				$	72,392				$	69,329
	Tenant recoveries		22,553				21,733					19,055					20,441					18,642
	Other income		3,977				3,731					3,410					3,750					3,936
	Total revenues		$	109,616			$	103,773				$	95,388				$	96,583				$	91,907
	Funds from operations per share-diluted (b)		$	1.46			$	1.45				$	1.42				$	1.28			(c)	$	1.34
	Dividends per share on common stock		$	0.78			$	0.76				$	0.76				$	0.74				$	0.74
	Dividend payout ratio (common stock) (d)		53.9%				56.3%					53.8%					58.1%					55.6%
	Straight-line rent		$	4,601			$	4,508				$	2,720			(e)	$	5,082				$	5,671
	Capitalized interest		$	16,609		(f)	$	15,035				$	13,548				$	10,844				$	9,010
	Number of properties (g)
	Acquired/added/completed during period		2				13					2					-					8
	Sold/transferred to development (h)		(3			)	(1				)	(4				)	(1				)	-
	Owned at end of period		166				167					155					157					158
	Rentable square feet (g)
	Acquired/added/completed during period		404,986				994,024					104,312					-					573,027
	Sold/transferred to development (h)		(92,927			)	(37,000				)	(375,112				)	(75,500				)	-
	Owned at end of period		12,125,992				11,813,933					10,856,909					11,127,709					11,203,209
			As of
			12/31/2007				9/30/2007					6/30/2007					3/31/2007					12/31/2006
	Other data
	Number of shares of common stock outstanding		31,603,344				31,243,448					29,180,700					29,129,238					29,012,135
	Closing price of common stock		$		101.67		$			96.26		$			96.82		$			100.37		$			100.40
	Debt to total market capitalization (i)
	Total debt		$		2,787,904		$			2,502,832		$			2,274,269		$			2,176,594		$			2,024,866
	Less minority interest share of debt		(39,320			)	(22,102				)	(22,089				)	(22,076				)	(22,064				)
	Our share of debt		2,748,584				2,480,730					2,252,180					2,154,518					2,002,802
	Preferred stock market capitalization		136,845				130,156					132,593					140,579					193,360
	Common stock market capitalization		3,213,112				3,007,494					2,825,275					2,923,702					2,912,818
	Total market capitalization		$	6,098,541			$		5,618,380			$		5,210,048			$		5,218,799			$		5,108,980
	Debt to total market capitalization		45.1%				44.2%					43.2%					41.3%					39.2%

 

(a)	The historical results above exclude the results of assets “held for sale” which have been reflected as discontinued operations.
(b)	See page 5 for a reconciliation of earnings per share (diluted) to FFO per share (diluted).
(c)	During the first quarter of 2007, we redeemed our 9.10% Series B cumulative redeemable preferred stock. Accordingly, in compliance with EITF Topic D-42, we recorded a charge of $2,799,000, or $0.10 per share (diluted), in the first quarter of 2007 for costs related to the redemption of our Series B Preferred Stock.
(d)	Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (common stock shares outstanding on the respective record date multiplied by the related dividend per share) to funds from operations for the respective quarter.
(e)	Includes a rental payment of approximately $1.4 million from one tenant, the U.S. Government, in the second quarter of 2007. Pursuant to Statement of Financial Accounting Standards No. 13, “Accounting for Leases” rental payments due under this lease are recognized on a straight-line basis over the lease term.
(f)	As of December 31, 2007, assets for which capitalization of interest is required pursuant to Statement of Financial Accounting Standards No. 34, “Capitalization of Interest Cost” (“SFAS 34”), approximated $1.1 billion. This amount is classified as properties undergoing development and redevelopment and land held for development on our balance sheet. As of December 31, 2007, the weighted average interest rate used in the calculation of capitalized interest required pursuant to SFAS 34 was approximately 6.27%. SFAS 34 requires the interest rate for capitalization to be based on applicable interest costs related to borrowings outstanding during the period, including the impact of interest rate swap agreements, debt premiums/discounts and amortization of loan fees.
(g)	Includes properties “held for sale” during the applicable periods such assets were “held for sale.” As of December 31, 2007, two properties aggregating approximately 136,399 square feet were classified as “held for sale.”
(h)	During the fourth quarter of 2007, we sold one asset and transferred two properties from operating assets to imbedded future development opportunities. During the third quarter of 2007, we sold one asset located in the New Jersey/Suburban Philadelphia market and four land parcels to the Massachusetts Institute of Technology. During the second quarter of 2007, we sold one asset and transferred three properties from operating assets to imbedded future development opportunities. During the first quarter of 2007, we sold one asset located in the Suburban Washington D.C. market.
(i)	Debt to total market capitalization is the ratio of our share of total debt (secured notes payable, unsecured line of credit and unsecured term loan and unsecured convertible notes) to total market capitalization. Total market capitalization is equal to outstanding shares of preferred stock and common stock multiplied by the related closing price at the end of each period presented, plus our share of total debt.

 

6

 

ALEXANDRIA REAL ESTATE EQUITIES, INC.
Annual Supplemental Financial Information
(Dollars in thousands, except per share data)
(Unaudited)

			For the Year Ended
	Operational data		12/31/2007			12/31/2006			12/31/2005			12/31/2004			12/31/2003
	Breakdown of revenues from continuing operations (a)
	Rental income		$	306,710		$	236,848		$	180,100		$	135,900		$	117,329
	Tenant recoveries		83,782			62,104			46,739			33,077			29,076
	Other income		14,868			11,827			4,767			3,489			1,964
	Total revenues		$	405,360		$	310,779		$	231,606		$	172,466		$	148,369
	Funds from operations per share-diluted (b)		$	5.61	(c)	$	5.16		$	4.82		$	4.41	(d)	$	4.23
	Dividends per share on common stock		$	3.04		$	2.86		$	2.72		$	2.52		$	2.20
	Dividend payout ratio (common stock) (e)		55.4%			58.8%			57.9%			56.7%			51.8%
	Number of properties (f)
	Acquired/added/completed during period		17			29			22			23			4
	Sold/transferred to development		(9		)	(3		)	(1		)	(1		)	(4		)
	Owned at end of period		166			158			132			111			89
	Rentable square feet (f)
	Acquired/added/completed during period		1,503,322			2,683,211			1,392,299			1,717,209			267,164
	Sold/transferred to development		(580,539		)	(268,099		)	(16,500		)	2,891			(338,256		)
	Owned at end of period		12,125,992			11,203,209			8,788,097			7,412,298			5,692,198
			As of
			12/31/2007			12/31/2006			12/31/2005			12/31/2004			12/31/2003
	Other data
	Number of shares of common stock outstanding		31,603,344			29,012,135			22,441,294			19,594,418			19,264,023
	Closing price of common stock		$	101.67		$	100.40		$	80.50		$	74.42		$	57.90
	Debt to total market capitalization (g)
	Total debt		$	2,787,904		$	2,024,866		$	1,406,666		$	1,186,946		$	709,007
	Less minority interest share of debt		(39,320		)	(22,064		)	-			-			-
	Our share of debt		2,748,584			2,002,802			1,406,666			1,186,946			709,007
	Preferred stock market capitalization		136,845			193,360			192,419			199,360			104,421
	Common stock market capitalization		3,213,112			2,912,818			1,806,524			1,458,217			1,115,387
	Total market capitalization		$	6,098,541		$	5,108,980		$	3,405,609		$	2,844,523		$	1,928,815
	Debt to total market capitalization		45.1%			39.2%			41.3%			41.7%			36.8%

 

(a)	The historical results above exclude the results of assets “held for sale” which have been reflected as discontinued operations.
(b)	See page 5 for a reconciliation of earnings per share (diluted) to FFO per share (diluted).
(c)	During the first quarter of 2007, we redeemed our 9.10% Series B cumulative redeemable preferred stock. Accordingly, in compliance with EITF Topic D-42, we recorded a charge of $2,799,000 in the first quarter of 2007 for costs related to the redemption of our Series B Preferred Stock.
(d)	Includes the effect of the preferred stock redemption charge of $1,876,000 recorded in the second quarter of 2004 for cost related to the redemption of our Series A Preferred Stock.
(e)	Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (common stock shares outstanding on the respective record date multiplied by the related dividend per share) to funds from operations for the respective year.
(f)	Includes assets “held for sale” during the applicable periods such assets were “held for sale.”
(g)	Debt to total market capitalization is the ratio of our share of total debt (secured notes payable, unsecured line of credit and unsecured term loan and unsecured convertible notes) to total market capitalization. Total market capitalization is equal to outstanding shares of preferred stock and common stock multiplied by the related closing price at the end of each period presented, plus our share of total debt.

 

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ALEXANDRIA REAL ESTATE EQUITIES, INC.

Condensed Consolidated Balance Sheets

(In thousands)

 

		December 31,
		2007			2006
		(Unaudited)
Assets
Rental properties, net		$	3,146,915		$	2,726,251
Properties undergoing development and redevelopment and land held for development		1,143,302			596,331
Cash and cash equivalents		8,030			2,948
Tenant security deposits and other restricted cash		51,911			34,360
Tenant receivables		6,759			6,330
Deferred rent		81,496			68,412
Investments		84,322			74,824
Other assets		119,359			108,021
Total assets		$	4,642,094		$	3,617,477
Liabilities and Stockholders’ Equity
Secured notes payable		$	1,212,904		$	1,174,866
Unsecured line of credit and unsecured term loan		1,115,000			850,000
Unsecured convertible notes		460,000			-
Accounts payable, accrued expenses and tenant security deposits		247,289			158,119
Dividends payable		27,575			25,363
Total liabilities		3,062,768			2,208,348
Minority interest		75,506			57,477
Stockholders’ equity:
Series B preferred stock		-			57,500
Series C preferred stock		129,638			129,638
Common stock		316			290
Additional paid-in capital		1,365,773			1,139,629
Accumulated other comprehensive income		8,093			24,595
Total stockholders’ equity		1,503,820			1,351,652
Total liabilities and stockholders’ equity		$	4,642,094		$	3,617,477

 

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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Debt
December 31, 2007
(Dollars in thousands)
(Unaudited)

Principal Maturities / Rates

			Secured Debt							Unsecured Debt
	Year		Amount				Weighted Average Interest Rate (1)			Amount
	2008		$	160,074		(2)	6.08	%		$	-
	2009		284,220				6.20			-
	2010		93,259				6.18			365,000			(3)
	2011		108,191				6.04			750,000			(3)
	2012		39,348				6.00			460,000			(4)
	Thereafter		527,812				5.93			-
	Total		$	1,212,904		(5)				$	1,575,000

 

Secured and Unsecured Debt Analysis

			Balance			Percentage of Balance			Weighted Average Interest Rate (6)			Weighted Average Maturity
	Secured Debt		$	1,212,904		43.5	%		6.08	%		4.4 Years
	Unsecured Debt			1,575,000		56.5			5.27			3.7 Years
	Total Debt		$	2,787,904		100.0	%		5.62	%		4.0 Years

 

Fixed and Floating Rate Debt Analysis

			Balance			Percentage of Balance			Weighted Average Interest Rate (6)			Weighted Average Maturity
	Fixed Rate Debt		$	1,362,949		48.9	%		5.27	%		4.8 Years
	Floating Rate Debt - Hedged			778,500		27.9			5.85			3.8 Years
	Floating Rate Debt - Unhedged			646,455		23.2			6.09			2.4 Years
	Total Debt		$	2,787,904		100.0	%		5.62	%		4.0 Years

 

(1)	The weighted average interest rate is calculated based on outstanding debt as of December 31st of the year immediately preceding the year presented.
(2)	A secured note payable totaling $34.0 million was repaid in early January 2008. Approximately $76.4 million matures in the fourth quarter of 2008. We are in discussions with our lender to extend/refinance this secured loan.
(3)	The unsecured line of credit matures in October 2010 and may be extended at our sole option for an additional one year period. The unsecured term loan matures in October 2011 and may be extended at our sole option for an additional one year period.
(4)	On or after January 15, 2012, we have the right to redeem our 3.70% unsecured convertible notes, in whole or in part, at any time from time to time, for cash equal to 100% of the principal amounts of the notes to be redeemed plus any accrued and unpaid interest to, but excluding, the redemption date. Holders of the notes may require us to repurchase their notes, in whole or in part, on January 15, 2012, 2017 and 2022 for cash equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the repurchase date. Additional information regarding our unsecured convertible notes is contained in our Form 10-K filed with the Securities and Exchange Commission.
(5)	Includes minority interests’ share of scheduled principal maturities including lump sum principal payments of $38.2 million and $211.3 million in 2009 and thereafter, respectively, of which our share is approximately $21.0 million and $190.2 million, respectively.
(6)	Represents the weighted average contractual interest rate plus the impact of debt premiums/discounts and our interest rate swap agreements. The weighted average interest rate excludes bank fees and amortization of loan fees. See page 10 for further details of our interest rate swap agreements.

 

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