8-K
Alexandria Real Estate Equities, Inc. (ARE)
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 7, 2012
ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
| Maryland | 1-12993 | 95-4502084 |
|---|---|---|
| (State or other jurisdiction of<br> incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
| 385 East Colorado Boulevard, Suite 299 | **** | |
| Pasadena, California | 91101 | |
| (Address of 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))
Item 2.02. Results of Operations and Financial Condition.
On February 7, 2012, Alexandria Real Estate Equities, Inc. (the “Company”) issued a press release entitled “Alexandria Real Estate Equities, Inc. Reports Fourth Quarter and Year Ended December 31, 2011, Financial and Operating Results” which sets forth the Company’s results of operations and financial condition for the fourth quarter and year ended December 31, 2011. The press release referred to certain supplemental information that is available on the Company’s website at www.are.com. Copies of the press release and supplemental information are attached hereto as Exhibits 99.1 and 99.2, respectively.
The information contained in this Item 2.02, including the exhibits referenced herein, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. Such information shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| 99.1 | Press Release dated February 7, 2012. |
|---|---|
| 99.2 | Alexandria Real Estate Equities, Inc.’s Supplemental Financial, Operating, & Property Information for the Fourth Quarter and Year Ended December 31, 2011. |
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 8, 2012 | By: | /s/ Joel S. Marcus |
| Joel S. Marcus | ||
| Chairman/Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Dean A. Shigenaga | |
| Dean A. Shigenaga | ||
| Chief Financial Officer | ||
| (Principal Financial and Chief Accounting Officer) |
3
EXHIBIT INDEX
| Exhibit **** Number | Exhibit Title |
|---|---|
| 99.1 | Press Release dated February 7, 2012. |
| 99.2 | Alexandria Real Estate Equities, Inc.’s Supplemental Financial, Operating, & Property Information for the Fourth Quarter and Year Ended December 31, 2011. |
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, 2011, Financial and
Operating Results
FFO Per Share Diluted of $1.10 for 4Q11 and $4.38 for 2011
EPS Diluted of $0.44 for 4Q11 and $1.73 for 2011
Highest Quarter and Year of Leasing Activity
PASADENA, CA. – February 7, 2012 – Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced financial and operating results for the fourth quarter and year ended December 31, 2011.
RESULTS
Funds from operations
FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the three months ended December 31, 2011, was $67.8 million, or $1.10 per share (diluted), compared to FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders before loss on early extinguishment of debt for the three months ended December 31, 2010, of $60.8 million, or $1.11 per share (diluted). FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders before loss on early extinguishment of debt and non-cash impairment charge for the year ended December 31, 2011, was $266.0 million, or $4.50 per share (diluted), compared to FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders before loss on early extinguishment of debt for the year ended December 31, 2010, of $224.5 million, or $4.40 per share (diluted).
| Three Months Ended | Year Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |||||||
| (dollars in thousands, except per share amounts) | |||||||||||
| FFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders – diluted | $ | 67,804 | $ | 58,474 | $ | 258,635 | $ | 179,764 | |||
| Loss on early extinguishment of debt | – | 2,372 | 6,485 | 45,168 | |||||||
| Non-cash impairment charge | – | – | 994 | – | |||||||
| Impact of unvested restricted stock awards | – | (20 | ) | (69 | ) | (394 | ) | ||||
| FFO (diluted), as adjusted | $ | 67,804 | $ | 60,826 | $ | 266,045 | $ | 224,538 | |||
| FFO per share (diluted), as adjusted | $ | 1.10 | $ | 1.11 | $ | 4.50 | $ | 4.40 | |||
| FFO per share (diluted) | $ | 1.10 | $ | 1.07 | $ | 4.38 | $ | 3.52 | |||
| Common dividends declared | $ | 0.49 | $ | 0.45 | $ | 1.86 | $ | 1.50 | |||
| Dividend payout ratio | 45% | 41% | 42% | 34% |
Adjusted funds from operations
AFFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the three months ended December 31, 2011, was $55.4 million, or $0.90 per share (diluted), compared to AFFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the three months ended December 31, 2010, of $56.3 million, or $1.03 per share (diluted). AFFO attributed to Alexandria Real Estate Equities, Inc.’s common stockholders for the year ended December 31, 2011, was $246.9 million, or $4.18 per share (diluted), compared to AFFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the year ended December 31, 2010, of $217.7 million, or $4.50 per share (diluted).
| Three Months Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |||||
| (dollars in thousands, except per share amounts) | ||||||||
| AFFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders | $ | 58,930 | $ | 56,272 | $ | 250,458 | $ | 217,724 |
| AFFO per share (diluted) | $ | 0.96 | $ | 1.03 | $ | 4.24 | $ | 4.50 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS
FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2011 RESULTS
Page 2
(Tabular dollar amounts in thousands, except per share amounts)
Earnings per share
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the three months ended December 31, 2011, was $27.0 million, or $0.44 per share (diluted), compared to net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the three months ended December 31, 2010, of $83.2 million, or $1.52 per share (diluted). Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the year ended December 31, 2011, was $102.0 million, or $1.73 per share (diluted), compared to net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the year ended December 31, 2010, of $105.9 million, or $2.19 per share (diluted).
| Three Months Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| **** | December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | ||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | ||||||||
| Basic | $ | 26,960 | $ | 83,241 | $ | 101,973 | $ | 105,941 |
| Diluted | $ | 26,960 | $ | 83,243 | $ | 101,973 | $ | 105,941 |
| Earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | ||||||||
| Basic | $ | 0.44 | $ | 1.52 | $ | 1.73 | $ | 2.19 |
| Diluted | $ | 0.44 | $ | 1.52 | $ | 1.73 | $ | 2.19 |
During the year ended December 31, 2011, we recognized an aggregate loss on early extinguishment of debt of approximately $6.5 million related to the repurchase, in privately negotiated transactions, of approximately $217.1 million of certain of our 3.70% unsecured senior convertible notes (the “3.70 Unsecured Convertible Notes”) and the partial and early repayment of our 2012 unsecured bank term loan (“2012 Unsecured Bank Term Loan”). Additionally, in September 2011, we recognized a non-cash impairment charge of approximately $1.0 million related to one property. We sold this property to a user in October 2011 for approximately $2.9 million.
During the three months and year ended December 31, 2010, we recognized an aggregate loss on early extinguishment of debt of approximately $2.4 million related to the repurchase, in privately negotiated transactions, of approximately $82.8 million of certain of our 3.70% Unsecured Convertible Notes. In addition, during the year ended December 31, 2010, we recognized an aggregate loss on early extinguishment of debt of approximately $42.8 million related to the retirement of approximately $239.8 million of certain of our 8.00% unsecured convertible notes.
The following table highlights certain items noted above impacting comparability of results:
| Three Months Ended | Year Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |||||||||
| Income from continuing operations before loss on early extinguishment of debt | $ | 35,574 | $ | 34,922 | $ | 142,720 | $ | 123,642 | ||||
| Loss on early extinguishment of debt | – | (2,372 | ) | (6,485 | ) | (45,168 | ) | |||||
| Income from continuing operations | 35,574 | 32,550 | 136,235 | 78,474 | ||||||||
| (Loss) income from discontinued operations before non-cash impairment charge and gain on sales of real estate | (112 | ) | 8 | 106 | 1,082 | |||||||
| Non-cash impairment charge | – | – | (994 | ) | – | |||||||
| Gain on sales of real estate | – | – | – | 24 | ||||||||
| (Loss) income from discontinued operations, net | (112 | ) | 8 | (888 | ) | 1,106 | ||||||
| Gain on sales of land parcels | – | 59,442 | 46 | 59,442 | ||||||||
| Net income | $ | 35,462 | $ | 92,000 | $ | 135,393 | $ | 139,022 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS
FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2011 RESULTS
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(Tabular dollar amounts in thousands)
BALANCE SHEET
Investment grade ratings and credit metrics
In July 2011, we received investment grade ratings from two major rating agencies. Receipt of our investment grade ratings was a significant milestone for the Company that we believe will provide long-term value to our stockholders. Key strengths of our balance sheet and business which highlight our investment grade credit profile include, among others, balance sheet liquidity, diverse and credit worthy tenant base, well located properties proximate to leading research institutions, favorable lease terms, stable occupancy and cash flows, and demonstrated life science and real estate expertise. This significant milestone broadens our access to another key source of debt capital and allows us to continue to pursue our long-term capital, investment, and operating strategies. Issuance of investment grade unsecured notes will allow us to transition from bank debt financing to unsecured notes, from variable rate debt to fixed rate debt, and from short-term debt to long-term debt.
| Three Months Ended (1) | Year Ended | |||
|---|---|---|---|---|
| Credit Metrics | December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 |
| Net debt to Adjusted EBITDA | 7.1x | 6.9x | 7.1x | 7.4x |
| Net debt to Gross Assets at end of period | 37% | 39% | 37% | 39% |
| Fixed charge coverage ratio | 2.7x | 2.6x | 2.7x | 2.2x |
| Interest coverage ratio | 3.4x | 3.2x | 3.4x | 2.7x |
| Unencumbered net operating income as a percentage of total net operating income | 70% | 60% | 69% | 60% |
| Liquidity – unsecured line of credit availability and unrestricted cash | $1.2 billion | $0.5 billion | $1.2 billion | $0.5 billion |
| Non-income producing assets as a percentage of gross real estate | 24% | 24% | 24% | 24% |
(1) Represents annualized three months ended December 31, 2011 and 2010.
Unhedged variable rate debt
We expect to transition from short-term and medium-term bank debt to long-term fixed rate debt over the next several years. While this transition of bank debt is in process, we will utilize interest rate swap and/or cap agreements to reduce our interest rate risk. In December 2011, we executed interest rate swap agreements and reduced our unhedged variable rate debt exposure from 51% as of September 30, 2011, to 21% as of December 31, 2011. We expect to keep our unhedged variable rate debt at approximately 20% or less of our total debt.
| Year Ended | ||||
|---|---|---|---|---|
| December 31, 2011 | December 31, 2010 | |||
| Unhedged variable rate debt as a percentage of total debt | 21% | 37% | ||
| Unhedged variable rate debt | $ | 596,720 | $ | 948,960 |
Debt financings
During 2011, we refinanced and extended debt maturities, significantly increasing our liquidity as of December 31, 2011.
| December 31, 2011 | |||||
|---|---|---|---|---|---|
| Amount | Weighted Average | Date | |||
| Key Debt Financings | Maturity Date | Outstanding | Interest Rate (2) | of Loan | |
| 2017 Unsecured Bank Term Loan | 1/31/2017 | $ | 600,000 | 1.93% | December 2011 |
| Refinancing of a secured loan | 4/20/2014 | 76,000 | 2.29% | December 2011 | |
| 2016 Unsecured Bank Term Loan | 6/30/2016 | 750,000 | 3.28% | June 2011 | |
| Unsecured line of credit (1) | 1/31/2015 | 370,000 | 2.59% | January 2011 | |
| $ | 1,796,000 | 2.65% |
(1) Total commitments available for borrowing aggregate $1.5 billion under our unsecured line of credit. As of December 31, 2011, we had $1.1 billion available for borrowing under our unsecured line of credit.
(2) Represents the contractual interest rate as of the end of the period plus the impact of our interest rate hedge agreements.
2017 unsecured bank term loan
In December 2011, we closed a $600 million unsecured bank term loan (the “2017 Unsecured Bank Term Loan”), which matures in January 2017, assuming we exercise our sole right to extend the maturity date by one year. The applicable margin for LIBOR borrowings under the 2017 Unsecured Bank Term Loan as of December 31, 2011, was 1.50%. Our 2017 Unsecured Bank Term Loan may be repaid at any date prior to maturity without a prepayment penalty. Net proceeds from the 2017 Unsecured Bank Term Loan were used to reduce outstanding borrowings on our unsecured line of credit.
Refinancing of secured loan
In December 2011, we extended the maturity date of a $76 million secured loan to April 2014. As of December 31, 2011, the interest rate for this secured loan was 2.29%.
2016 unsecured bank term loan
In February 2011, we entered into a $250 million unsecured bank term loan. In June 2011, we amended this $250 million unsecured bank term loan (as amended, the “2016 Unsecured Bank Term Loan”) to, among other things, increase the borrowings from $250 million to $750 million and to extend the maturity from January 2015 to June 2016, assuming we exercise our sole right to extend the maturity date by one year. The applicable margin for the LIBOR borrowings under the 2016 Unsecured Bank Term Loan as of December 31, 2011, was 1.65%. The 2016 Unsecured Bank Term Loan may be repaid at any date prior to maturity without a prepayment penalty. The net proceeds from this 2016 Unsecured Bank Term Loan were used to reduce outstanding borrowings on the 2012 Unsecured Bank Term Loan (defined below) from $750 million to $250 million. As a result of this early repayment, in the three months ended June 30, 2011, we recognized a loss on early extinguishment of debt of approximately $1.2 million related to the write-off of unamortized loan fees.
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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS
FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2011 RESULTS
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(Tabular dollar amounts in thousands, except per square foot amounts)
Debt financings (continued)
Unsecured line of credit
In January 2011, we entered into a third amendment (the “Third Amendment”) to our second amended and restated credit agreement dated October 31, 2006, as further amended on December 1, 2006, and May 2, 2007 (the “Prior Credit Agreement,” and as amended by the Third Amendment, the “Amended Credit Agreement”), with Bank of America, N.A., as administrative agent, and certain lenders. The Third Amendment amended the Prior Credit Agreement to, among other things, increase the maximum permitted borrowings under the unsecured line of credit from $1.15 billion to $1.5 billion, plus a $750 million unsecured bank term loan (the “2012 Unsecured Bank Term Loan” and together with the unsecured line of credit, the “Unsecured Credit Facility”) and provided an accordion option to increase commitments under the Unsecured Credit Facility by up to an additional $300 million. The applicable margin for LIBOR borrowings outstanding under our unsecured line of credit as of December 31, 2011, was 2.30%. The applicable margin for the LIBOR borrowings under the 2012 Unsecured Bank Term Loan was not amended in the Third Amendment and was 0.70% as of December 31, 2011.
Under the Third Amendment, the maturity date for the unsecured line of credit is January 2015, assuming we exercise our sole right under the amendment to extend this maturity date twice by an additional six months after each exercise. The maturity date of the 2012 Unsecured Bank Term Loan is October 2012. The Third Amendment modified certain financial covenants with respect to the Unsecured Credit Facility, including the fixed charge coverage ratio, secured debt ratio, leverage ratio, and minimum book value, and added covenants relating to an unsecured leverage ratio and unsecured debt yield.
Debt repayments
During the year ended December 31, 2011, we reduced the outstanding balances of our 3.70% Unsecured Convertible Notes, 2012 Unsecured Bank Term Loan, and various secured loans.
| Three Months Ended December 31, 2011 | Year Ended December 31, 2011 | |||||||
|---|---|---|---|---|---|---|---|---|
| Loss on Early | Loss on Early | |||||||
| Debt | Extinguishment | Debt | Extinguishment | |||||
| Repayments | of Debt | Repayments | of Debt | |||||
| Repurchase of 3.70% Unsecured Convertible Notes | $ | – | $ | – | $ | 217,133 | $ | 5,237 |
| Repayment of 2012 Unsecured Bank Term Loan (1) | – | – | 500,000 | 1,248 | ||||
| Secured loan repayments | 34,060 | – | 55,677 | – | ||||
| $ | 34,060 | $ | – | $ | 772,810 | $ | 6,485 |
(1) See 2016 Unsecured Bank Term Loan discussion above.
At the beginning of 2011, our strategy was to reduce a portion of our outstanding balance of the 3.70% Unsecured Convertible Notes. We were also focused on the refinancing of certain near term bank debt maturities, prior to engaging in the rating assessment process with certain rating agencies. During the year ended December 31, 2011, we repurchased, in privately negotiated transactions, approximately $217.1 million of certain of our 3.70% Unsecured Convertible Notes for an aggregate cash price of approximately $221.4 million. As a result of these repurchases, we recognized an aggregate loss on early extinguishment of debt of approximately $5.2 million for the year ended December 31, 2011. We did not repurchase any of our 3.70% Unsecured Convertible Notes during the three months ended December 31, 2011. During January 2012, we repurchased approximately $83.8 million in principal amount of our 3.70% Unsecured Convertible Notes at par, pursuant to options exercised by holders thereof under the indenture governing the notes. We do not expect to recognize any gain or loss as a result of this repurchase. As of February 7, 2012, approximately $1.0 million of our 3.70% Unsecured Convertible Notes remained outstanding.
Asset sales
During the year ended December 31, 2011, we sold two properties. The net proceeds from these sales were used to reduce outstanding borrowings under our unsecured line of credit.
| Date of Sale | Sale Price | Sale Price Per<br> Rentable Square Foot | Gain on Sale | ||||
|---|---|---|---|---|---|---|---|
| Land parcel in San Diego, California | August 2011 | $ | 17,300 | $ | 70 | $ | 46 |
| 13-15 DeAngelo Drive, Suburbs of Boston, Massachusetts | October 2011 | 2,900 | 97 | – | |||
| $ | 20,200 | $ | 72 | $ | 46 |
In August 2011, we sold a parcel of land located in San Diego, California, for approximately $17.3 million at a gain of $46,000. The buyer is expected to construct a building with approximately 249,000 rentable square feet, representing a sale price of approximately $70 per rentable square foot.
During the three months ended September 30, 2011, 13-15 DeAngelo Drive, a vacant 30,000 rentable square foot property, located in the suburbs of Boston, Massachusetts, met the criteria for classification as “held for sale.” This property had been occupied by a life science tenant through June 30, 2011. Upon move out, a user of the building presented an offer for the purchase of the building in the three months ended September 30, 2011. As a result, we recognized an impairment charge of approximately $1.0 million in the three months ended September 30, 2011, to adjust the carrying value to the estimated fair value less costs to sell. In October 2011, we sold 13-15 DeAngelo Drive to that user for approximately $2.9 million, representing a sale price of approximately $97 per rentable square foot.
Follow-on common stock offering
In May 2011, we completed a follow-on common stock offering to fund the purchase of 409 and 499 Illinois Street and to fund construction activities among other uses. We acquired 409 and 499 Illinois Street, a newly and partially completed world-class 453,256 rentable square foot laboratory/office development project located on a highly desirable waterfront location in Mission Bay, San Francisco, for approximately $293 million. 409 Illinois Street is a 241,659 rentable square foot tower that is 97% leased to a life science company through November 2023. 499 Illinois Street is a vacant 211,597 rentable square foot tower in shell condition for which we plan to complete the development.
| Date of Offering | Net Proceeds | Shares | ||
|---|---|---|---|---|
| Follow-on common stock offering | May 2011 | $ | 451,539 | 6,250,651 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS
FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2011 RESULTS
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(Tabular dollar amounts in thousands)
CORE OPERATING METRICS
Total revenues, net operating income, and operating margin
Total revenues for the three months ended December 31, 2011, were $145.8 million, as compared to total revenues for the three months ended December 31, 2010, of $131.8 million. Total revenues for the year ended December 31, 2011, were $573.4 million as compared to the total revenues for the year ended December 31, 2010, of $485.7 million. Net operating income for the three months ended December 31, 2011, was $101.8 million, compared to net operating income for the three months ended December 31, 2010, of $95.1 million. Net operating income for the year ended December 31, 2011, was $404.8 million, compared to net operating income for the year ended December 31, 2010 of $353.6 million. Our operating margin for the three months ended December 31, 2011, was 70%, compared to operating margin for the three months ended December 31, 2010, of 72%. Our operating margin for the year ended December 31, 2011, was 71%, compared to operating margin for the year ended December 31, 2010, of 73%.
Net operating income is projected to increase significantly quarter to quarter from the three months ended December 31, 2011, to the three months ended December 31, 2012, primarily related to the completion and delivery of current and future redevelopment and development projects, a significant amount of which is pre-leased. Additionally, the increase in net operating income is also due to recent and anticipated leasing activity, and lease-up of vacant space. See additional information related to projected net operating income for the three months ended December 31, 2012, in the guidance section of this report. As we complete and deliver projects currently under construction, certain project costs, including interest, property taxes, and other project costs, will no longer qualify for capitalization and will be expensed as incurred.
| Three Months Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |||||
| Rental revenues | $ | 109,042 | $ | 99,531 | $ | 431,359 | $ | 367,184 |
| Tenant recoveries | 35,153 | 30,614 | 136,322 | 113,351 | ||||
| Other income | 1,584 | 1,633 | 5,762 | 5,213 | ||||
| Total revenues | 145,779 | 131,778 | 573,443 | 485,748 | ||||
| Rental operations | 43,959 | 36,688 | 168,627 | 132,181 | ||||
| Net operating income | $ | 101,820 | $ | 95,090 | $ | 404,816 | $ | 353,567 |
| Operating margin | 70% | 72% | 71% | 73% |
Leasing activity
For the three months ended December 31, 2011, we executed a total of 58 leases for approximately 1,142,000 rentable square feet at 38 different properties (excluding month-to-month leases), representing the highest level of leasing activity in a single quarter in the history of the Company. Of this total, approximately 650,000 rentable square feet related to new or renewal leases of previously leased space (renewed/re-leased space) and approximately 492,000 rentable square feet related to developed, redeveloped, or previously vacant space. Of the 492,000 rentable square feet, approximately 356,000 rentable square feet were related to our development or redevelopment programs, with the remaining approximately 136,000 rentable square feet related to previously vacant space. Rental rates for these new or renewal leases (renewed/re-leased space) were on average approximately 4.1% lower on a cash basis and approximately 7.6% higher on a GAAP basis than rental rates for the respective expiring leases.
For the year ended December 31, 2011, we executed a total of 190 leases for approximately 3,407,000 rentable square feet at 87 different properties (excluding month-to-month leases), representing the highest level of leasing activity in a single year in the history of the Company. Of this total, approximately 1,822,000 rentable square feet related to new or renewal leases of previously leased space (renewed/re-leased space) and approximately 1,585,000 rentable square feet related to developed, redeveloped, or previously vacant space. Of the 1,585,000 rentable square feet, approximately 993,000 rentable square feet were related to our development or redevelopment programs, and the remaining approximately 592,000 rentable square feet were related to previously vacant space. Rental rates for these new or renewal leases (renewed/re-leased space) were on average approximately 1.9% lower on a cash basis and approximately 4.2% higher on a GAAP basis than rental rates for the respective expiring leases.
| Three Months Ended | Year Ended | |||||
|---|---|---|---|---|---|---|
| Leasing Activity | December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | ||
| New or renewal of previously leased space | 650,163 | 758,344 | 1,821,866 | 1,777,966 | ||
| Development/redevelopment space leased | 355,641 | 274,696 | 993,655 | 711,622 | ||
| Previously vacant space leased | 136,251 | 41,195 | 591,955 | 254,651 | ||
| Total leasing activity | 1,142,055 | 1,074,235 | 3,407,476 | 2,744,239 | ||
| Three Months Ended | Year Ended | |||||
| --- | --- | --- | --- | --- | --- | --- |
| Leasing Activity – New or Renewal of Previously Leased Space | December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | ||
| Rental rate changes – cash basis | (4.1% | ) | 4.2% | (1.9% | ) | 2.0% |
| Rental rate changes – GAAP basis | 7.6% | 4.3% | 4.2% | 4.9% | ||
| Lease Structure | December 31, 2011 | December 31, 2010 | ||||
| --- | --- | --- | ||||
| Percentage of triple net leases | 95% | 96% | ||||
| Percentage of leases containing annual rent escalations | 94% | 91% | ||||
| Percentage of leases providing for recapture of capital expenditures | 92% | 93% |
Occupancy
| December 31, 2011 | December 31, 2010 | |
|---|---|---|
| Operating | 94.9% | 94.3% |
| Operating and redevelopment | 88.5% | 88.9% |
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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS
FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2011 RESULTS
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(Tabular dollar amounts in thousands)
Same property performance
| Three Months Ended | Year Ended | |||||
|---|---|---|---|---|---|---|
| Percentage Change in Same Property NOI | December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | ||
| Cash basis | 3.1% | 2.0% | 4.1% | 1.5% | ||
| GAAP basis | (0.5% | ) | 1.3% | (0.6% | ) | 0.4% |
| Three Months Ended | Year Ended | |||||
| --- | --- | --- | --- | --- | ||
| Same Property Information | December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | ||
| Number of properties | 135 | 134 | 127 | 129 | ||
| Rentable square feet | 10,097,201 | 9,875,434 | 9,489,070 | 9,426,729 | ||
| Occupancy at end of current period | 93.9% | 93.8% | 93.7% | 94.6% | ||
| Occupancy at end of same period prior year | 93.9% | 93.8% | 94.5% | 95.1% |
As of December 31, 2011 and 2010, we owned 173 and 167 properties, respectively. As a result of changes within our total property portfolio, our financial results included significant changes in revenue and expenses from period to period. In order to supplement an evaluation of our results of operations over a given period, we analyze the operating performance for all properties that were fully operating for the entire periods presented separate from properties acquired subsequent to the first period presented, properties undergoing active redevelopment and active development, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results. Additionally, rental revenues from lease termination fees, if any, are excluded from the results of the same properties.
Client tenant base
The quality, diversity, breadth, and depth of our significant relationships with our life science client tenants provide Alexandria Real Estate Equities, Inc. with solid cash flows. As of December 31, 2011, Alexandria’s multinational pharmaceutical client tenants represented approximately 26% of our annualized base rent, led by Novartis AG, Eli Lilly and Company, Roche Holding Ltd, Bristol-Myers Squibb Company, GlaxoSmithKline plc, and Pfizer Inc.; public biotechnology companies represented approximately 18% and included Amgen Inc., Gilead Sciences, Inc., Biogen Idec Inc., and Celgene Corporation; revenue-producing life science product and service companies represented approximately 22%, led by Illumina, Inc., Quest Diagnostics Incorporated, Qiagen N.V., Laboratory Corporation of America Holdings, and Monsanto Company; government agencies and renowned medical and research institutions represented approximately 16% and included Massachusetts Institute of Technology, The Scripps Research Institute, The Regents of the University of California, Fred Hutchinson Cancer Research Center, University of Washington, Sanford-Burnham Medical Research Institute, and the United States Government; private biotechnology companies represented approximately 15% and included high-quality, leading-edge companies with blue-chip venture and institutional investors, including FibroGen, Inc., Achaogen Inc., and Forma Therapeutics, Inc.; and the remaining approximately 3% consisted of traditional office tenants. Alexandria’s strong life science underwriting skills, long-term life science industry relationships, and sophisticated management with both real estate and life science operating expertise set the Company apart from all other publicly traded REITs and real estate companies.
VALUE ADDED OPPORTUNITIES AND EXTERNAL GROWTH
Development and redevelopment
During the year ended December 31, 2011, we executed leases aggregating 542,120 and 451,535 rentable square feet related to our development and redevelopment projects, respectively. The leases aggregating 542,120 rentable square feet related to our development projects include the recent lease up of 45,255 rentable square feet at 4755 Nexus Center Drive, a recently acquired property currently undergoing redevelopment.
During the year ended December 31, 2011, we delivered approximately 58,804 rentable square feet at 455 Mission Bay Boulevard, a 210,000 rentable square foot multi-tenant ground-up development project located in the San Francisco — Mission Bay market. This property is currently 92.4% leased. Our stabilized yields on a cash and GAAP basis for this property were approximately 8.5% and 8.4%, respectively. Stabilized yield on cost is calculated as the quotient of net operating income and our investment in the property at stabilization (“Stabilized Yield”).
In August 2011, we completed the ground-up development of 7 Triangle Drive, a 96,626 rentable square foot single-tenant building located in the Research Triangle Park market, which is currently 100% leased as of December 31, 2011. The Stabilized Yield on a cash and GAAP basis for this property was approximately 8.5% and 9.8%, respectively.
In October 2011, we commenced the ground up development of a 303,143 rentable square feet single tenant building for Biogen Idec, Inc. at Alexandria CenterTM at Kendall Square. We expect to achieve a Stabilized Yield on a cash and GAAP basis for this property of 7.5% and 8.1%, respectively.
Key development and redevelopment projects completed in 2011 are as follows:
| Completion | RSF Delivered | Total Development/ | Occupancy | Investment | Stabilized Yield (1) | |||
|---|---|---|---|---|---|---|---|---|
| Key Development Projects Completed in 2011 | Date | In 2011 | Redevelopment RSF (1) | as of 12/31/11 (2) | at Completion (1) | Cash | GAAP | |
| 455 Mission Bay Boulevard | 12/2011 | 58,804 | 210,000 | 92.4% | $ | 109,950 | 8.5% | 8.4% |
| 7 Triangle Drive | 8/2011 | 96,626 | 96,626 | 100% | $ | 32,511 | 8.5% | 9.8% |
| 400/450 East Jamie Court | 9/2011 | 62,548 | 163,307 | 100% | $ | 108,490 | 4.2% | 4.3% |
| Key Redevelopment Projects Completed in 2011 | ||||||||
| 10300 Campus Point Drive | 11/2011 | 89,576 | 279,138 | 100% | $ | 131,600 | 7.6% | 7.7% |
| 500 Arsenal Street | 9/2011 | 48,516 | 48,516 | 100% | $ | 24,348 | 6.9% | 7.4% |
(1) Represents rentable square feet, investment at completion, and Stabilized Yield of the entire development or redevelopment project. Portions of certain projects may still be under construction.
(2) Represents occupancy related operating rentable square feet.
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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS
FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2011 RESULTS
Page 7
(Tabular dollar amounts in thousands)
Acquisitions
In June 2011, we acquired 285 Bear Hill Road, a 26,270 rentable square foot office property located in the Greater Boston market, for approximately $3.9 million. We commenced the redevelopment of this property into life science laboratory space during the three months ended December 31, 2011. Based on our view of existing market conditions and certain assumptions, we expect to achieve a Stabilized Yield on a cash and GAAP basis for this property of approximately 8.0% and 8.6%, respectively.
In April 2011, we acquired 409 and 499 Illinois Street, a newly and partially completed world-class 453,256 rentable square foot life science laboratory development project located on a highly desirable waterfront location in Mission Bay, San Francisco, for approximately $293 million. 409 Illinois Street is a 241,659 rentable square foot tower that is 97% leased to a life science company through November 2023. 499 Illinois Street is a vacant 211,597 rentable square foot tower in shell condition for which we plan to complete the development. Based on our view of existing market conditions and certain assumptions at the time of the acquisition, we expect to achieve a Stabilized Yield on a cash and GAAP basis for this property in the range of 6.5% to 7.0% and 7.2% to 7.6%, respectively.
During the three months ended March 31, 2011, we acquired 4755 Nexus Center Drive, a newly and partially completed 45,255 rentable square foot development project located in University Town Center, San Diego for approximately $7.4 million. During the three months ended December 31, 2011, we leased 100% of this building to a biopharmaceutical company. We expect to achieve a Stabilized Yield on a cash and GAAP basis for this property of 7.0% and 7.7%, respectively.
| Acquisition | Occupancy | Purchase | Stabilized Yield | |||||
|---|---|---|---|---|---|---|---|---|
| Property/Market | Date | RSF | at Acquisition | Price | Cash | GAAP | ||
| 285 Bear Hill Road, Greater Boston | June 2011 | 26,270 | N/A | (1) | $ | 3,900 | 8.0% | 8.6% |
| 409/499 Illinois Street, San Francisco | April 2011 | 453,256 | 100% | (2) | $ | 293,000 | 6.5% - 7.0% | 7.2% - 7.6% |
| 4755 Nexus Center Drive, San Diego | March 2011 | 45,255 | N/A | (3) | $ | 7,400 | 7.0% | 7.7% |
(1) Currently under redevelopment.
(2) Approximately 234,249 rentable square feet is leased, occupied, and in service. The remaining 219,007 rentable square feet is currently under development.
(3) Currently under development and 100% leased.
Significant announcements
· In October 2011, our Board of Directors elected Stephen A. Richardson as Chief Operating Officer and Regional Market Director – San Francisco.
· In April 2011, we were awarded LEED® Platinum certification for 10300 Campus Point Drive, a property located in University Town Center in the San Diego market.
· During the three months ended March 31, 2011, we were awarded LEED Gold certifications for four properties, 1) Alexandria Center™ for Life Science – New York City; 2) 199 E. Blaine Street, a property located in the Seattle market; 3) 1500 Owens Street, San Francisco/Mission Bay; and 4) 455 Mission Bay Blvd., San Francisco/Mission Bay.
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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS
FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2011 RESULTS
Page 8
Earnings outlook
Based on our current view of existing market conditions and certain current assumptions, we expect our FFO per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders and earnings per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the year ended December 31, 2012, will be as follows:
| **** | Guidance Reported on February 7, 2012 |
|---|---|
| 2012 guidance | |
| FFO per share (diluted) | 4.50 - 4.54 |
| Earnings per share (diluted) | 1.73 - 1.77 |
| Key assumptions | |
| Same property net operating income growth – cash basis | 3% to 5% |
| Same property net operating income growth – GAAP basis | 0% to 2% |
| Rental rate steps on lease renewals and re-leasing of space – cash basis | Slightly negative/positive |
| Rental rate steps on lease renewals and re-leasing of space – GAAP basis | Up to 5% |
| Straight-line rents | 6.5 million/qtr |
| Amortization of above and below market leases | 0.8 million/qtr |
| General and administrative expenses in comparison to prior year | Up 5% to 8% |
| Capitalization of interest | 54 to 60 million |
| Interest expense, net | 68 to 75 million |
All values are in US Dollars.
Net operating income, net income, and FFO for the three months ended December 31, 2011, and the three months ended December 31, 2012
Net operating income is projected to increase significantly quarter to quarter from the three months ended December 31, 2011, to the three months ended December 31, 2012, primarily related to current and future redevelopment and development projects, a significant amount which is pre-leased. Additionally, the increase in net operating income is due to recent and anticipated leasing and lease-up of vacant space.
| **** | Actual | Projected |
|---|---|---|
| **** | Three Months Ended<br> December 31, 2011 | Three Months Ended<br> December 31, 2012 |
| **** | (in millions, except per share amounts) | |
| Net operating income | $101.8 | $111.0 - 113.0 |
| General and administrative | $10.6 | $10.0 - 11.0 |
| Interest | $14.8 | $20.1 - 23.1 |
| Depreciation and amortization | $40.9 | $42.6 - 47.7 |
| Income from continuing operations | $35.6 | $40.3 - 41.3 |
| Preferred stock dividends | $7.1 | $7.1 |
| Other | $1.5 | $1.0 - 1.4 |
| Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | $27.0 | $28.1 - 32.1 |
| FFO | $67.8 | $71.7 - 74.1 |
| FFO per share (diluted) | $1.10 | $1.16 - 1.20 |
Sources and uses of capital
We expect that our principal liquidity needs for the year ended December 31, 2012, will be satisfied by the following multiple sources of capital as shown in the table below. There can be no assurance that our sources and uses of capital will not be materially higher or lower than these expectations.
| **** | Year Ended<br> December 31, 2012 | **** | |
|---|---|---|---|
| **** | (in millions) | **** | |
| Sources of capital | |||
| Net cash provided by operating activities less dividends | $ | 89 | |
| Asset and land sales | 112 | (1) | |
| Unsecured senior notes | TBD | (2) | |
| Debt, equity, and joint venture capital | 698 | ||
| Total sources of capital | $ | 899 | |
| Liquidity available under unsecured line of credit and cash and cash equivalents as of December 31, 2011 | $ | 1,209 | |
| Uses of capital | **** | **** | |
| Development, redevelopment, and construction | $ | 553 | |
| Acquisitions | – | ||
| Secured debt repayments | 11 | ||
| 2012 Unsecured Bank Term Loan repayment | 250 | ||
| 3.70% Unsecured Convertible Notes retirement | 85 | ||
| Total uses of capital | $ | 899 |
(1) We expect to implement a more aggressive asset disposition strategy, beyond estimated asset sales in this table, to provide capital for reinvestment into our business.
(2) Amount and timing of issuance of unsecured notes will be subject to the debt capital market environment.
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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS
FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2011 RESULTS
Page 9
Earnings call information
We will host a conference call on Wednesday, February 8, 2012, at 3:00 p.m. Eastern Time (“ET”)/12:00 p.m. noon Pacific Time (“PT”) that is open to the general public to discuss our financial and operating results for the three months and year ended December 31, 2011. To participate in this conference call, dial (800) 510-0219 and confirmation code 46221155, shortly before 3:00 p.m. ET/12:00 p.m. noon PT. The audio web cast can be accessed at: www.are.com, in the Corporate Information section. A replay of the call will be available for a limited time from 6:00 p.m. ET/3:00 p.m. PT on Wednesday, February 8, 2012. The replay number is (888) 286-8010 and the confirmation code is 98479916.
Additionally, a copy of Alexandria Real Estate Equities, Inc.’s Supplemental Financial, Operating, & Property Information and this press release for the three months and year ended December 31, 2011, are available in the Corporate Information section of our website at www.are.com.
About the Company
Alexandria Real Estate Equities, Inc., Landlord of Choice to the Life Science Industry®, is the largest owner and preeminent REIT focused principally on cluster development through the ownership, operation, management, and selective acquisition, redevelopment, and development of properties containing life science laboratory space. Alexandria is the leading provider of high-quality, environmentally sustainable real estate, technical infrastructure, and services to the broad and diverse life science industry. Client tenants include institutional (universities and independent non-profit institutions), pharmaceutical, biotechnology, medical device, product, and service entities, and government agencies. Alexandria’s primary business objective is to maximize stockholder value by providing its stockholders with the greatest possible total return based on a multifaceted platform of internal and external growth. Alexandria’s operating platform is based on the principle of “clustering” with assets and operations located adjacent to life science entities driving growth and technological advances within each cluster.
***********
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2012 earnings per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders, 2012 FFO per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders, net operating income, net income and FFO for the three months ended December 31, 2012, and our projected sources and uses of capital in 2012. Our actual results may differ materially from those projected in such forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully complete and lease our existing space held for redevelopment and new properties acquired for that purpose and any properties undergoing development, our failure to successfully operate or lease acquired properties, decreased rental rates or increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, general and local economic conditions, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission (“SEC”). All forward-looking statements are made as of the date of this press release, and we assume no obligation to update this information. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.
(Tables follow)
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
| **** | Three Months Ended | Year Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | 12/31/11 | 12/31/10 | 12/31/11 | 12/31/10 | ||||||||
| Revenues | ||||||||||||
| Rental | $ | 109,042 | $ | 99,531 | $ | 431,359 | $ | 367,184 | ||||
| Tenant recoveries | 35,153 | 30,614 | 136,322 | 113,351 | ||||||||
| Other income | 1,584 | 1,633 | 5,762 | 5,213 | ||||||||
| Total revenues | 145,779 | 131,778 | 573,443 | 485,748 | ||||||||
| Expenses | ||||||||||||
| Rental operations | 43,959 | 36,688 | 168,627 | 132,181 | ||||||||
| General and administrative | 10,604 | 8,601 | 41,163 | 34,383 | ||||||||
| Interest | 14,757 | 17,158 | 63,407 | 69,509 | ||||||||
| Depreciation and amortization | 40,885 | 34,409 | 157,526 | 126,033 | ||||||||
| Total expenses | 110,205 | 96,856 | 430,723 | 362,106 | ||||||||
| Income from continuing operations before loss on early extinguishment of debt | 35,574 | 34,922 | 142,720 | 123,642 | ||||||||
| Loss on early extinguishment of debt | – | (2,372 | ) | (6,485 | ) | (45,168 | ) | |||||
| Income from continuing operations | 35,574 | 32,550 | 136,235 | 78,474 | ||||||||
| (Loss) income from discontinued operations, net | (112 | ) | 8 | (888 | ) | 1,106 | ||||||
| Gain on sales of land parcels | – | 59,442 | 46 | 59,442 | ||||||||
| Net income | 35,462 | 92,000 | 135,393 | 139,022 | ||||||||
| Net income attributable to noncontrolling interests | 1,142 | 944 | 3,975 | 3,729 | ||||||||
| Dividends on preferred stock | 7,090 | 7,089 | 28,357 | 28,357 | ||||||||
| Net income attributable to unvested restricted stock awards | 270 | 726 | 1,088 | 995 | ||||||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | $ | 26,960 | $ | 83,241 | $ | 101,973 | $ | 105,941 | ||||
| Earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic | ||||||||||||
| Continuing operations | $ | 0.44 | $ | 1.52 | $ | 1.75 | $ | 2.17 | ||||
| Discontinued operations, net | – | – | (0.02 | ) | 0.02 | |||||||
| Earnings per share – basic | $ | 0.44 | $ | 1.52 | $ | 1.73 | $ | 2.19 | ||||
| Earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | ||||||||||||
| Continuing operations | $ | 0.44 | $ | 1.52 | $ | 1.75 | $ | 2.17 | ||||
| Discontinued operations, net | – | – | (0.02 | ) | 0.02 | |||||||
| Earnings per share – diluted | $ | 0.44 | $ | 1.52 | $ | 1.73 | $ | 2.19 |
10
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
| **** | December 31, | December 31, | **** | |||
|---|---|---|---|---|---|---|
| **** | 2011 | 2010 | **** | |||
| Assets | **** | |||||
| Investments in real estate | $ | 6,750,975 | $ | 6,060,821 | ||
| Less: accumulated depreciation | (742,535 | ) | (616,007 | ) | ||
| Investments in real estate, net | 6,008,440 | 5,444,814 | ||||
| Cash and cash equivalents | 78,539 | 91,232 | ||||
| Restricted cash | 23,332 | 28,354 | ||||
| Tenant receivables | 7,480 | 5,492 | ||||
| Deferred rent receivable | 142,097 | 116,849 | ||||
| Deferred leasing and financing costs, net | 135,550 | 89,046 | ||||
| Investments | 95,777 | 83,899 | ||||
| Other assets | 82,914 | 46,175 | ||||
| Total assets | $ | 6,574,129 | $ | 5,905,861 | ||
| Liabilities, Noncontrolling Interests, and Equity | ||||||
| Secured notes payable | $ | 724,305 | $ | 790,869 | ||
| Unsecured line of credit | 370,000 | 748,000 | ||||
| Unsecured bank term loans | 1,600,000 | 750,000 | ||||
| Unsecured convertible notes | 84,959 | 295,293 | ||||
| Accounts payable, accrued expenses, and tenant security deposits | 325,393 | 304,257 | ||||
| Dividends payable | 36,579 | 31,114 | ||||
| Total liabilities | 3,141,236 | 2,919,533 | ||||
| Redeemable **** noncontrolling interests | 16,034 | 15,920 | ||||
| Alexandria Real Estate Equities, Inc.’s stockholders’ equity: | ||||||
| Series C preferred stock | 129,638 | 129,638 | ||||
| Series D cumulative convertible preferred stock | 250,000 | 250,000 | ||||
| Common stock | 616 | 550 | ||||
| Additional paid-in capital | 3,028,558 | 2,566,238 | ||||
| Retained earnings | – | 734 | ||||
| Accumulated other comprehensive loss | (34,511 | ) | (18,335 | ) | ||
| Alexandria Real Estate Equities, Inc.’s stockholders’ equity | 3,374,301 | 2,928,825 | ||||
| Noncontrolling interests | 42,558 | 41,583 | ||||
| Total equity | 3,416,859 | 2,970,408 | ||||
| Total **** liabilities, noncontrolling interests, and equity | $ | 6,574,129 | $ | 5,905,861 |
11
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Earnings per Share
(Dollars in thousands, except per share amounts)
(Unaudited)
Earnings per Share
| **** | Three Months Ended | Year Ended | ||||||
|---|---|---|---|---|---|---|---|---|
| **** | 12/31/11 | 12/31/10 | 12/31/11 | 12/31/10 | ||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders –basic | $ | 26,960 | $ | 83,241 | $ | 101,973 | $ | 105,941 |
| Effect of assumed conversion and dilutive securities: | ||||||||
| Assumed conversion of 8% unsecured convertible notes | – | 2 | – | – | ||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders – diluted | $ | 26,960 | $ | 83,243 | $ | 101,973 | $ | 105,941 |
| Weighted average shares of common stock outstanding for calculating earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic | 61,427,495 | 54,865,654 | 59,066,812 | 48,375,474 | ||||
| Effect of assumed conversion and dilutive securities: | ||||||||
| Assumed conversion of 8% unsecured convertible notes | – | 6,047 | – | – | ||||
| Dilutive effect of stock options | 3,939 | 21,709 | 10,798 | 29,566 | ||||
| Weighted average shares of common stock outstanding for calculating earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | 61,431,434 | 54,893,410 | 59,077,610 | 48,405,040 |
12
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Funds from Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Funds from Operations (“FFO”)
The following table presents a reconciliation of net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders, the most directly comparable financial measure calculated and presented in accordance with GAAP, to FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the periods below:
| **** | Three Months Ended | **** | Year Ended | **** | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | 12/31/11 | 12/31/10 | 12/31/11 | 12/31/10 | ||||||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | $ | 26,960 | $ | 83,241 | $ | 101,973 | $ | 105,941 | ||||
| Add: Depreciation and amortization | 40,966 | 34,551 | 158,026 | 126,640 | ||||||||
| Add: Net income attributable to noncontrolling interests | 1,142 | 944 | 3,975 | 3,729 | ||||||||
| Add: Net income attributable to unvested restricted stock | 270 | 726 | 1,088 | 995 | ||||||||
| Subtract: Gain on sales of property | – | (59,442 | ) | (46 | ) | (59,466 | ) | |||||
| Subtract: FFO attributable to noncontrolling interests | (939 | ) | (1,036 | ) | (3,970 | ) | (4,226 | ) | ||||
| Subtract: FFO attributable to unvested restricted stock awards | (600 | ) | (512 | ) | (2,432 | ) | (1,608 | ) | ||||
| FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic | 67,799 | 58,472 | 258,614 | 172,005 | ||||||||
| Effect of assumed conversion and dilutive securities: | ||||||||||||
| Assumed conversion of 8% unsecured convertible notes | 5 | 2 | 21 | 7,781 | ||||||||
| Amounts attributable to unvested restricted stock awards | – | – | – | (22 | ) | |||||||
| FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | $ | 67,804 | $ | 58,474 | $ | 258,635 | $ | 179,764 | ||||
| Weighted average shares of common stock outstanding for calculating FFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic | 61,427,495 | 54,865,654 | 59,066,812 | 48,375,474 | ||||||||
| Effect of assumed conversion and dilutive securities: | ||||||||||||
| Assumed conversion of 8% unsecured convertible notes | 6,087 | 6,047 | 6,087 | 2,638,422 | ||||||||
| Dilutive effect of stock options | 3,939 | 21,709 | 10,798 | 29,566 | ||||||||
| Weighted average shares of common stock outstanding for calculating FFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | 61,437,521 | 54,893,410 | 59,083,697 | 51,043,462 | ||||||||
| FFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | ||||||||||||
| Basic | $ | 1.10 | $ | 1.07 | $ | 4.38 | $ | 3.56 | ||||
| Diluted | $ | 1.10 | $ | 1.07 | $ | 4.38 | $ | 3.52 |
See note regarding FFO on the page 15.
13
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Adjusted Funds from Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Adjusted funds from operations (“AFFO”)
The following table presents a reconciliation of FFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders to AFFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders:
| Three Months Ended | Year Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/11 | 12/31/10 | 12/31/11 | 12/31/10 | |||||||||
| FFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders | $ | 67,799 | $ | 58,472 | $ | 258,614 | $ | 172,005 | ||||
| Add/(deduct): | ||||||||||||
| Major and recurring capital expenditures | (675 | ) | (260 | ) | (2,531 | ) | (1,332 | ) | ||||
| Tenant improvements and leasing costs | (6,083 | ) | (2,583 | ) | (10,600 | ) | (6,725 | ) | ||||
| Amortization of loan fees | 2,551 | 1,999 | 9,300 | 7,892 | ||||||||
| Amortization of debt premiums/discounts | 565 | 2,032 | 3,819 | 9,999 | ||||||||
| Amortization of acquired above and below market leases | (812 | ) | (2,364 | ) | (9,332 | ) | (7,868 | ) | ||||
| Deferred rent/straight-line rent | (9,558 | ) | (9,092 | ) | (26,797 | ) | (22,832 | ) | ||||
| Stock compensation | 3,306 | 2,767 | 11,755 | 10,816 | ||||||||
| Capitalized income from development projects | 537 | 1,486 | 3,973 | 5,688 | ||||||||
| Deferred rent/straight-line rent on ground leases | 1,221 | 1,424 | 4,704 | 5,337 | ||||||||
| Loss on early extinguishment of debt | – | 2,372 | 6,485 | 45,168 | ||||||||
| Impairment of real estate | – | – | 994 | – | ||||||||
| Allocation to unvested restricted stock awards | 79 | 19 | 74 | (424 | ) | |||||||
| AFFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders | $ | 58,930 | $ | 56,272 | $ | 250,458 | $ | 217,724 | ||||
| Weighted average shares of common stock outstanding for calculating AFFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic | 61,427,495 | 54,865,654 | 59,066,812 | 48,375,474 | ||||||||
| Add: Dilutive effect of stock options | 3,939 | 21,709 | 10,798 | 29,566 | ||||||||
| Weighted average shares of common stock outstanding for calculating AFFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | 61,431,434 | 54,887,363 | 59,077,610 | 48,405,040 | ||||||||
| AFFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | ||||||||||||
| Basic | $ | 0.96 | $ | 1.03 | $ | 4.24 | $ | 4.50 | ||||
| Diluted | $ | 0.96 | $ | 1.03 | $ | 4.24 | $ | 4.50 |
See note regarding AFFO on the following page.
14
Non-GAAP measures
Funds from operations
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 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 (computed in accordance with GAAP), excluding gains from sales, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The primary reconciling item between GAAP net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders and FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders is depreciation and amortization expense. Impairment write-downs of depreciable real estate are excluded from the calculation of FFO and no adjustment to net income (computed in accordance with GAAP) is made. A reconciliation of net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders in accordance with United States generally accepted accounting principles (“GAAP”) to FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders is included in the financial information accompanying this press release. FFO 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.
Adjusted funds from operations
Adjusted funds from operations (“AFFO”) is a non-GAAP financial measure we believe is a useful supplemental measure of our performance. We compute AFFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders by adding to or deducting from FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders (1) recurring and non-recurring capital expenditures required to maintain and re-tenant our properties, (2) second generation tenant improvements and leasing costs on re-tenanted and renewal space (excludes redevelopment expenditures), (3) capitalized income from development projects, (4) gains or losses on early extinguishment of debt, (5) amortization of loan fees, debt premiums/discounts and acquired above and below market leases, (6) effects of deferred rent/straight-line rent and deferred rent/straight-line rent on ground leases, (7) non-cash compensation expense related to restricted stock awards, and (8) other non-cash income or charges, including impairment charges. AFFO is not intended to represent cash flow for the period, and is only intended to provide an additional measure of performance by adjusting the effect of certain items noted above included in FFO, as well as recurring capital expenditures and leasing costs. We believe that net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders is the most directly comparable GAAP financial measure to AFFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders. We also believe that AFFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders provides useful performance information to the investment community about our financial position as compared to other REITs since AFFO is a widely reported measure used by other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to other REITs.
Net operating income
Net operating income is a non-GAAP financial measure equal to income from continuing operations, the most directly comparable GAAP financial measure, plus loss from early extinguishment of debt, depreciation and amortization, interest expense, and general and administrative expense. We believe net operating income provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Therefore, we believe net operating income is a useful measure for evaluating the operating performance of our real estate assets. Net operating income on a cash basis is net operating income on a GAAP basis, adjusted to exclude the effect of straight-line rent adjustments required by GAAP. We believe that net operating income on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent adjustments to rental revenue.
Further, we believe net operating income is useful to investors as a performance measure because, when compared across periods, net operating income reflects the impact on operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not immediately apparent from income from continuing operations. Net operating income excludes certain components from income from continuing operations in order to provide results that are more closely related to our results of operations from our properties. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level rather than at the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. Net operating income presented by us may not be comparable to net operating income reported by other REITs that define net operating income differently. We believe that in order to facilitate a clear understanding of our operating results, net operating income should be examined in conjunction with income from continuing operations as presented in our condensed consolidated statements of income. Net operating income should not be considered as an alternative to income from continuing operations as an indication of our performance or as an alternative to cash flows as a measure of liquidity or our ability to make distributions.
15
Exhibit 99.2
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Table of Contents
December 31, 2011
| Page | |
|---|---|
| Company Profile | 3 |
| Investor Information | 4 |
| Results | |
| Fourth Quarter and Year Ended December 31, 2011, Financial and Operating Results | 5 |
| Condensed Consolidated Statements of Income | 11 |
| Condensed Consolidated Balance Sheets | 12 |
| Funds from Operations | 13 |
| Adjusted Funds from Operations | 14 |
| Financial and Asset Base Highlights | 15 |
| Guidance | |
| Guidance | 16 |
| Balance Sheet | |
| Credit Metrics | 17 |
| Summary of Debt | 18 |
| Summary of Dispositions of Properties and Discontinued Operations | 20 |
| Core Operating Metrics | |
| Core Operating Metrics | 21 |
| Summary of Same Property Comparisons | 22 |
| Summary of Leasing Activity | 23 |
| Summary of Lease Expirations | 25 |
| Summary of Properties and Summary of Occupancy Percentages | 26 |
| Property Listing | 27 |
| Top 20 Tenants and Client Tenant Mix | 30 |
| Value Added Opportunities and External Growth | |
| Value-Added Projects | 31 |
| Summary of Real Estate and Development and Redevelopment | 32 |
| Development and Redevelopment | 33 |
| Summary of Capital Expenditures and Non-Income Producing Real Estate as a Percentage of Gross Investment in Real Estate | 34 |
| Future Value-Added Projects | 35 |
| Definitions and Other Information | |
| Definitions and Other Information | 36 |
This Supplemental Financial, Operating, & Property Information package includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify the forward-looking statements by their use of forward-looking words, such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or “anticipates,” or the negative of those words or similar words. Our actual results may differ materially from those projected in such forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully complete and lease our existing space held for redevelopment and new properties acquired for that purpose and any properties undergoing development, our failure to successfully operate or lease acquired properties, lower rental rates or higher vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, general and local economic conditions, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission (“SEC”). All forward-looking statements are made as of February 7, 2012, the date this Supplemental Financial, Operating, & Property Information package was first made available on our website, and we assume no obligation to update this information. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.
This Supplemental Financial, Operating, & Property Information package is not an offer to sell or solicitation to buy securities of Alexandria Real Estate Equities, Inc. Any offers to sell or solicitations to buy securities of Alexandria Real Estate Equities, Inc. shall be made only by means of a prospectus approved for that purpose. Unless otherwise indicated, the “Company,” “we,” “us,” and “our” refer to Alexandria Real Estate Equities, Inc. and its consolidated subsidiaries.
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 2 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Company Profile
December 31, 2011
The Company
Alexandria Real Estate Equities, Inc. (the “Company” or “Alexandria”), a self-administered and self-managed real estate investment trust (“REIT”), is the largest owner and preeminent REIT, and leading life science real estate company, focused principally on science-driven cluster formation. Our operating platform is based on the principle of “clustering” with high-quality assets and operations located adjacent to life science research and innovation entities driving growth and technological advances. The Company has significant real estate assets adjacent to these key life science entities which we believe results in higher occupancy levels, longer lease terms, higher rental income, and higher returns. Our targeted locations are in the best submarkets within each of the top life science cluster destinations, including San Francisco and San Diego, California; Greater Boston; New York City, New Jersey, and Suburban Philadelphia; Research Triangle Park, North Carolina; Suburban Washington, D.C.; Seattle, Washington; and international locations. Client tenants include institutional (universities and independent non-profit institutions), pharmaceutical, biotechnology, medical device, product, and service entities, and government agencies. The Company was founded in 1994 by Jerry M. Sudarsky and Joel S. Marcus and the Company executed its initial public offering in 1997.
Management
Alexandria’s executive and senior management team is highly experienced in the REIT industry (uniquely with both real estate and life science experience and expertise) and is the most accomplished team focused on providing high-quality, environmentally sustainable real estate, technical infrastructure, and unique expertise to the broad and diverse life science industry. Our deep and talented team has decades of life science industry experience. Our management team also includes highly experienced regional market directors averaging over 20 years of real estate experience, including approximately 10 years with Alexandria. We believe that our expertise, experience, reputation, and key life science relationships and networks provide Alexandria significant competitive advantages in attracting new business opportunities.
Strategy
Alexandria’s primary business objective is to maximize stockholder value by providing its stockholders with the greatest possible total return based on a multifaceted platform of internal and external growth. The key elements to our strategy include our consistent focus on high-quality assets and operations in the top life science cluster locations with our properties located adjacent to life science entities driving growth and technological advances within each cluster. These adjacency locations are characterized by high barriers to entry and exit, limited supply of available space, and represent highly desirable locations for tenancy by life science entities. Alexandria’s strategy also includes drawing on its deep and broad life science and real estate relationships in order to attract new and leading life science client tenants and value-added real estate opportunities.
Summary as of December 31, 2011
| Corporate headquarters | Pasadena, California |
|---|---|
| Markets | San Francisco, San Diego, Greater Boston, NYC/New Jersey/Suburban Philadelphia, Research Triangle Park, Suburban Washington, D.C., Seattle, and International |
| Fiscal year-end | December 31 |
| Total properties | 173 |
| Total rentable square feet | 15.3 million |
| Dividend – quarter/annualized | $0.49/$1.96 |
| Dividend yield – annualized | 2.8% |
| Closing stock price | $68.97 |
| Common shares outstanding | 61.6 million |
| Total market capitalization | $7.4 billion |
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 3 |
| --- | --- |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Investor Information
December 31, 2011
| Executive/Senior Management | |||
|---|---|---|---|
| Joel S. Marcus | Chairman, Chief Executive Officer, & Founder | Thomas J. Andrews | EVP-Regional Market Director-Greater Boston |
| Dean A. Shigenaga | SVP, Chief Financial Officer, & Treasurer | John J. Cox | SVP-Regional Market Director-Seattle |
| Stephen A. Richardson | Chief Operating Officer & Regional Market Director-<br><br><br>San Francisco | John H. Cunningham | SVP-Regional Market Director-NY & Strategic Operations |
| Larry J. Diamond | SVP-Regional Market Director-Mid Atlantic | ||
| Peter M. Moglia | Chief Investment Officer | Daniel J. Ryan | SVP-Regional Market Director-San Diego & Strategic Operations |
| Jennifer J. Pappas | SVP, General Counsel, & Corporate Secretary | ||
| Vincent R. Ciruzzi | SVP-Construction & Development | ||
| **** | Company Information | **** | |
| --- | --- | --- | --- |
| Corporate Headquarters | Trading Symbols | Information Requests | |
| 385 East Colorado Boulevard, Suite 299 | New York Stock Exchange (“NYSE”) | Phone: | (626) 396-4828 |
| Pasadena, California 91101 | Common stock: ARE | E-mail: | corporateinformation@are.com |
| Series C preferred stock: ARE-C | Web: | www.are.com |
| Common Stock Data (NYSE: ARE) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| **** | 4Q11 | 3Q11 | 2Q11 | 1Q11 | 4Q10 | |||||
| High trading price | $ | 71.07 | $ | 85.33 | $ | 83.08 | $ | 80.72 | $ | 76.19 |
| Low trading price | $ | 56.10 | $ | 59.33 | $ | 75.09 | $ | 72.99 | $ | 65.60 |
| Closing stock price, average for period | $ | 65.83 | $ | 72.68 | $ | 78.31 | $ | 76.79 | $ | 71.25 |
| Closing stock price, at the end of the quarter | $ | 68.97 | $ | 61.39 | $ | 77.42 | $ | 77.97 | $ | 73.26 |
| Dividends per share – annualized | $ | 1.96 | $ | 1.88 | $ | 1.80 | $ | 1.80 | $ | 1.80 |
| Closing dividend yield – annualized | 2.8% | 3.1% | 2.3% | 2.3% | 2.5% | |||||
| Common shares outstanding at the end of the quarter | 61,560,472 | 61,463,839 | 61,380,268 | 55,049,730 | 54,966,925 | |||||
| Closing market value of outstanding common shares (in thousands) | $ | 4,245,826 | $ | 3,773,265 | $ | 4,752,060 | $ | 4,292,227 | $ | 4,026,877 |
Equity Research Coverage
| Argus Research | The Goldman Sachs Group, Inc. | Morningstar | |||
|---|---|---|---|---|---|
| William Eddleman, Jr. | (212) 425-7500 | Jonathan Habermann | (917) 343-4260 | Phillip Martin | (312) 286-9905 |
| Sloan Bohlen | (212) 902-2796 | Jason Ren | (312) 244-7008 | ||
| Conor Fennerty | (212) 902-4227 | ||||
| Banc of America Securities-Merrill Lynch | Green Street Advisors | RBC Capital Markets | |||
| James Feldman | (646) 855-5808 | John Stewart | (949) 640-8780 | Dave Rodgers | (440) 715-2647 |
| Jeffrey Spector | (646) 855-1363 | John Hornbeak | (949) 640-8780 | Michael Carroll | (440) 715-2649 |
| Ji Zhang | (646) 855-2926 | ||||
| Barclays Capital | International Strategy & Investment Group Inc. | RW Baird | |||
| Ross Smotrich | (212) 526-2306 | George Auerbach | (212) 446-9459 | David AuBuchon | (314) 445-6520 |
| Matthew Rand | (212) 526-0248 | Steve Sakwa | (212) 446-9462 | Justin Webb | (314) 445-6515 |
| Gwen Clark | (212) 446-5611 | ||||
| Citigroup Global Markets | JMP Securities | Standard & Poor’s | |||
| Michael Bilerman | (212) 816-1383 | William Marks | (415) 835-8944 | Robert McMillan | (212) 438-9522 |
| Quentin Velleley | (212) 816-6981 | Rochan Raichura | (415) 835-3909 | ||
| David Shamis | (212) 816-5186 | ||||
| Cowen and Company | JP Morgan Securities | UBS | |||
| James Sullivan | (646) 562-1380 | Anthony Paolone | (212) 622-6682 | Ross Nussbaum | (212) 713-2484 |
| Michael Gorman | (646) 562-1381 | Joseph Dazio | (212) 622-6416 | Gabriel Hilmoe | (212) 713-3876 |
| Jeremy Woods | (212) 713-1102 | ||||
| Credit Suisse | Keefe, Bruyette & Woods | ||||
| Andrew Rosivach | (415) 249-7942 | Sheila McGrath | (212) 887-7793 | ||
| Kristin Brown | (212) 887-7738 | ||||
| Rating Agencies | |||||
| Moody’s Investors Service | Standard & Poor’s | ||||
| Philip Kibel | (212) 553-4569 | Lisa Sarajian | (212) 438-2597 | ||
| Maria Maslovsky | (212) 553-4831 | George Skoufis | (212) 438-2608 |
Alexandria Real Estate Equities, Inc. is currently covered by the research analysts listed above. This list may not be complete and is subject to change as firms initiate or discontinue coverage of our company. Please note that any opinions, estimates, or forecasts regarding our historical or predicted performance made by these analysts are theirs alone and do not represent opinions, forecasts, or predictions of Alexandria Real Estate Equities, Inc. or its management. Alexandria Real Estate Equities, Inc. does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions, or recommendations. Interested persons may obtain copies of analysts’ reports on their own as we do not distribute these reports. Several of these firms may from time-to-time own our stock and/or hold other long or short positions in our stock, and may provide compensated services to us.
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 4 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Fourth Quarter and Year Ended December 31, 2011, Financial and Operating Results
(Tabular dollar amounts in thousands, except per share amounts)
RESULTS
Funds from operations
FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the three months ended December 31, 2011, was $67.8 million, or $1.10 per share (diluted), compared to FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders before loss on early extinguishment of debt for the three months ended December 31, 2010, of $60.8 million, or $1.11 per share (diluted). FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders before loss on early extinguishment of debt and non-cash impairment charge for the year ended December 31, 2011, was $266.0 million, or $4.50 per share (diluted), compared to FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders before loss on early extinguishment of debt for the year ended December 31, 2010, of $224.5 million, or $4.40 per share (diluted).
| Three Months Ended | Year Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | ||||||||
| FFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders – diluted | $ | 67,804 | $ | 58,474 | $ | 258,635 | $ | 179,764 | |||
| Loss on early extinguishment of debt | – | 2,372 | 6,485 | 45,168 | |||||||
| Non-cash impairment charge | – | – | 994 | – | |||||||
| Impact of unvested restricted stock awards | – | (20 | ) | (69 | ) | (394 | ) | ||||
| FFO (diluted), as adjusted | $ | 67,804 | $ | 60,826 | $ | 266,045 | $ | 224,538 | |||
| FFO per share (diluted), as adjusted | $ | 1.10 | $ | 1.11 | $ | 4.50 | $ | 4.40 | |||
| FFO per share (diluted) | $ | 1.10 | $ | 1.07 | $ | 4.38 | $ | 3.52 | |||
| Common dividends declared | $ | 0.49 | $ | 0.45 | $ | 1.86 | $ | 1.50 | |||
| Dividend payout ratio | 45% | 41% | 42% | 34% |
Adjusted funds from operations
AFFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the three months ended December 31, 2011, was $58.9 million, or $0.96 per share (diluted), compared to AFFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the three months ended December 31, 2010, of $56.3 million, or $1.03 per share (diluted). AFFO attributed to Alexandria Real Estate Equities, Inc.’s common stockholders for the year ended December 31, 2011, was $250.5 million, or $4.24 per share (diluted), compared to AFFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the year ended December 31, 2010, of $217.7 million, or $4.50 per share (diluted).
| Three Months Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |||||
| AFFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders | $ | 58,930 | $ | 56,272 | $ | 250,458 | $ | 217,724 |
| AFFO per share (diluted) | $ | 0.96 | $ | 1.03 | $ | 4.24 | $ | 4.50 |
Earnings per share
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the three months ended December 31, 2011, was $27.0 million, or $0.44 per share (diluted), compared to net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the three months ended December 31, 2010, of $83.2 million, or $1.52 per share (diluted). Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the year ended December 31, 2011, was $102.0 million, or $1.73 per share (diluted), compared to net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the year ended December 31, 2010, of $105.9 million, or $2.19 per share (diluted).
| **** | Three Months Ended | Year Ended | ||||||
|---|---|---|---|---|---|---|---|---|
| **** | December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | ||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | ||||||||
| Basic | $ | 26,960 | $ | 83,241 | $ | 101,973 | $ | 105,941 |
| Diluted | $ | 26,960 | $ | 83,243 | $ | 101,973 | $ | 105,941 |
| Earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | ||||||||
| Basic | $ | 0.44 | $ | 1.52 | $ | 1.73 | $ | 2.19 |
| Diluted | $ | 0.44 | $ | 1.52 | $ | 1.73 | $ | 2.19 |
During the year ended December 31, 2011, we recognized an aggregate loss on early extinguishment of debt of approximately $6.5 million related to the repurchase, in privately negotiated transactions, of approximately $217.1 million of certain of our 3.70% unsecured senior convertible notes (the “3.70 Unsecured Convertible Notes”) and the partial and early repayment of our 2012 unsecured bank term loan (“2012 Unsecured Bank Term Loan”). Additionally, in September 2011, we recognized a non-cash impairment charge of approximately $1.0 million related to one property. We sold this property to a user in October 2011 for approximately $2.9 million.
During the three months and year ended December 31, 2010, we recognized an aggregate loss on early extinguishment of debt of approximately $2.4 million related to the repurchase, in privately negotiated transactions, of approximately $82.8 million of certain of our 3.70% Unsecured Convertible Notes. In addition, during the year ended December 31, 2010, we recognized an aggregate loss on early extinguishment of debt of approximately $42.8 million related to the retirement of approximately $239.8 million of certain of our 8.00% unsecured convertible notes.
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 5 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Fourth Quarter and Year Ended December 31, 2011, Financial and Operating Results
(Tabular dollar amounts in thousands, except per share amounts)
Earnings per share (continued)
The following table highlights certain items noted above impacting comparability of results:
| Three Months Ended | Year Ended | **** | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |||||||||
| Income from continuing operations before loss on early extinguishment of debt | $ | 35,574 | $ | 34,922 | $ | 142,720 | $ | 123,642 | ||||
| Loss on early extinguishment of debt | – | (2,372 | ) | (6,485 | ) | (45,168 | ) | |||||
| Income from continuing operations | 35,574 | 32,550 | 136,235 | 78,474 | ||||||||
| (Loss) income from discontinued operations before non-cash impairment charge and gain on sales of real estate | (112 | ) | 8 | 106 | 1,082 | |||||||
| Non-cash impairment charge | – | – | (994 | ) | – | |||||||
| Gain on sales of real estate | – | – | – | 24 | ||||||||
| (Loss) income from discontinued operations, net | (112 | ) | 8 | (888 | ) | 1,106 | ||||||
| Gain on sales of land parcels | – | 59,442 | 46 | 59,442 | ||||||||
| Net income | $ | 35,462 | $ | 92,000 | $ | 135,393 | $ | 139,022 |
BALANCE SHEET
Investment grade ratings and credit metrics
In July 2011, we received investment grade ratings from two major rating agencies. Receipt of our investment grade ratings was a significant milestone for the Company that we believe will provide long-term value to our stockholders. Key strengths of our balance sheet and business which highlight our investment grade credit profile include, among others, balance sheet liquidity, diverse and credit worthy tenant base, well located properties proximate to leading research institutions, favorable lease terms, stable occupancy and cash flows, and demonstrated life science and real estate expertise. This significant milestone broadens our access to another key source of debt capital and allows us to continue to pursue our long-term capital, investment, and operating strategies. Issuance of investment grade unsecured notes will allow us to transition from bank debt financing to unsecured notes, from variable rate debt to fixed rate debt, and from short-term debt to long-term debt.
| Three Months Ended (1) | |||||
|---|---|---|---|---|---|
| Credit Metrics | December 31, 2011 | ||||
| Net debt to Adjusted EBITDA | 7.1x | ||||
| Net debt to Gross Assets at end of period | 37% | ||||
| Fixed charge coverage ratio | 2.7x | ||||
| Interest coverage ratio | 3.4x | ||||
| Unencumbered net operating income as a percentage of total net operating income | 70% | ||||
| Liquidity — unsecured line of credit availability and unrestricted cash | 1.2 billion | 0.5 billion | 1.2 billion | $0.5 billion | |
| Non-income producing assets as a percentage of gross real estate | 24% |
All values are in US Dollars.
(1) Represents annualized three months ended December 31, 2011 and 2010.
Unhedged variable rate debt
We expect to transition from short-term and medium-term bank debt to long-term fixed rate debt over the next several years. While this transition of bank debt is in process, we will utilize interest rate swap and/or cap agreements to reduce our interest rate risk. In December 2011, we executed interest rate swap agreements and reduced our unhedged variable rate debt exposure from 51% as of September 30, 2011, to 21% as of December 31, 2011. We expect to keep our unhedged variable rate debt at approximately 20% or less of our total debt.
| Year Ended | ||||
|---|---|---|---|---|
| December 31, 2011 | December 31, 2010 | |||
| Unhedged variable rate debt as a percentage of total debt | 21% | 37% | ||
| Unhedged variable rate debt | $ | 596,720 | $ | 948,960 |
Debt financings
During 2011, we refinanced and extended debt maturities, significantly increasing our liquidity as of December 31, 2011.
| December 31, 2011 | **** | ||||
|---|---|---|---|---|---|
| Amount | Weighted Average | Date | |||
| Key Debt Financings | Maturity Date | Outstanding | Interest Rate (2) | of Loan | |
| 2017 Unsecured Bank Term Loan | 1/31/2017 | $ | 600,000 | 1.93% | December 2011 |
| Refinancing of a secured loan | 4/20/2014 | 76,000 | 2.29% | December 2011 | |
| 2016 Unsecured Bank Term Loan | 6/30/2016 | 750,000 | 3.28% | June 2011 | |
| Unsecured line of credit (1) | 1/31/2015 | 370,000 | 2.59% | January 2011 | |
| $ | 1,796,000 | 2.65% |
(1) Total commitments available for borrowing aggregate $1.5 billion under our unsecured line of credit. As of December 31, 2011, we had $1.1 billion available for borrowing under our unsecured line of credit.
(2) Represents the contractual interest rate as of the end of the period plus the impact of our interest rate hedge agreements.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Fourth Quarter and Year Ended December 31, 2011, Financial and Operating Results
(Tabular dollar amounts in thousands, except per square foot amounts)
Debt financings (continued)
2017 unsecured bank term loan
In December 2011, we closed a $600 million unsecured bank term loan (the “2017 Unsecured Bank Term Loan”), which matures in January 2017, assuming we exercise our sole right to extend the maturity date by one year. The applicable margin for LIBOR borrowings under the 2017 Unsecured Bank Term Loan as of December 31, 2011, was 1.50%. Our 2017 Unsecured Bank Term Loan may be repaid at any date prior to maturity without a prepayment penalty. Net proceeds from the 2017 Unsecured Bank Term Loan were used to reduce outstanding borrowings on our unsecured line of credit.
Refinancing of secured loan
In December 2011, we extended the maturity date of a $76 million secured loan to April 2014. As of December 31, 2011, the interest rate for this secured loan was 2.29%.
2016 unsecured bank term loan
In February 2011, we entered into a $250 million unsecured bank term loan. In June 2011, we amended this $250 million unsecured bank term loan (as amended, the “2016 Unsecured Bank Term Loan”) to, among other things, increase the borrowings from $250 million to $750 million and to extend the maturity from January 2015 to June 2016, assuming we exercise our sole right to extend the maturity date by one year. The applicable margin for the LIBOR borrowings under the 2016 Unsecured Bank Term Loan as of December 31, 2011, was 1.65%. The 2016 Unsecured Bank Term Loan may be repaid at any date prior to maturity without a prepayment penalty. The net proceeds from this 2016 Unsecured Bank Term Loan were used to reduce outstanding borrowings on the 2012 Unsecured Bank Term Loan (defined below) from $750 million to $250 million. As a result of this early repayment, in the three months ended June 30, 2011, we recognized a loss on early extinguishment of debt of approximately $1.2 million related to the write-off of unamortized loan fees.
Unsecured line of credit
In January 2011, we entered into a third amendment (the “Third Amendment”) to our second amended and restated credit agreement dated October 31, 2006, as further amended on December 1, 2006, and May 2, 2007 (the “Prior Credit Agreement,” and as amended by the Third Amendment, the “Amended Credit Agreement”), with Bank of America, N.A., as administrative agent, and certain lenders. The Third Amendment amended the Prior Credit Agreement to, among other things, increase the maximum permitted borrowings under the unsecured line of credit from $1.15 billion to $1.5 billion, plus a $750 million unsecured bank term loan (the “2012 Unsecured Bank Term Loan” and together with the unsecured line of credit, the “Unsecured Credit Facility”) and provided an accordion option to increase commitments under the Unsecured Credit Facility by up to an additional $300 million. The applicable margin for LIBOR borrowings outstanding under our unsecured line of credit as of December 31, 2011, was 2.30%. The applicable margin for the LIBOR borrowings under the 2012 Unsecured Bank Term Loan was not amended in the Third Amendment and was 0.70% as of December 31, 2011.
Under the Third Amendment, the maturity date for the unsecured line of credit is January 2015, assuming we exercise our sole right under the amendment to extend this maturity date twice by an additional six months after each exercise. The maturity date of the 2012 Unsecured Bank Term Loan is October 2012. The Third Amendment modified certain financial covenants with respect to the Unsecured Credit Facility, including the fixed charge coverage ratio, secured debt ratio, leverage ratio, and minimum book value, and added covenants relating to an unsecured leverage ratio and unsecured debt yield.
Debt repayments
During the year ended December 31, 2011, we reduced the outstanding balances of our 3.70% Unsecured Convertible Notes, 2012 Unsecured Bank Term Loan, and various secured loans.
| Three Months Ended December 31, 2011 | Year Ended December 31, 2011 | |||||||
|---|---|---|---|---|---|---|---|---|
| Loss on Early | Loss on Early | |||||||
| Debt | Extinguishment | Debt | Extinguishment | |||||
| Repayments | of Debt | Repayments | of Debt | |||||
| Repurchase of 3.70% Unsecured Convertible Notes | $ | – | $ | – | $ | 217,133 | $ | 5,237 |
| Repayment of 2012 Unsecured Bank Term Loan (1) | – | – | 500,000 | 1,248 | ||||
| Secured loan repayments | 34,060 | – | 55,677 | – | ||||
| $ | 34,060 | $ | – | $ | 772,810 | $ | 6,485 |
(1) See 2016 Unsecured Bank Term Loan discussion above.
At the beginning of 2011, our strategy was to reduce a portion of our outstanding balance of the 3.70% Unsecured Convertible Notes. We were also focused on the refinancing of certain near term bank debt maturities, prior to engaging in the rating assessment process with certain rating agencies. During the year ended December 31, 2011, we repurchased, in privately negotiated transactions, approximately $217.1 million of certain of our 3.70% Unsecured Convertible Notes for an aggregate cash price of approximately $221.4 million. As a result of these repurchases, we recognized an aggregate loss on early extinguishment of debt of approximately $5.2 million for the year ended December 31, 2011. We did not repurchase any of our 3.70% Unsecured Convertible Notes during the three months ended December 31, 2011. During January 2012, we repurchased approximately $83.8 million in principal amount of our 3.70% Unsecured Convertible Notes at par, pursuant to options exercised by holders thereof under the indenture governing the notes. We do not expect to recognize any gain or loss as a result of this repurchase. As of February 7, 2012, approximately $1.0 million of our 3.70% Unsecured Convertible Notes remained outstanding.
Asset sales
During the year ended December 31, 2011, we sold two properties. The net proceeds from these sales were used to reduce outstanding borrowings under our unsecured line of credit.
| **** | Date of Sale | Sale Price | Sale Price Per<br> Rentable Square Foot | Gain on Sale | |||
|---|---|---|---|---|---|---|---|
| Land parcel in San Diego, California | August 2011 | $ | 17,300 | $ | 70 | $ | 46 |
| 13-15 DeAngelo Drive, Suburbs of Boston, Massachusetts | October 2011 | 2,900 | 97 | – | |||
| $ | 20,200 | $ | 72 | $ | 46 | ||
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Fourth Quarter and Year Ended December 31, 2011, Financial and Operating Results
(Tabular dollar amounts in thousands, except per share amounts)
Asset sales (continued)
In August 2011, we sold a parcel of land located in San Diego, California, for approximately $17.3 million at a gain of $46,000. The buyer is expected to construct a building with approximately 249,000 rentable square feet, representing a sale price of approximately $70 per rentable square foot.
During the three months ended September 30, 2011, 13-15 DeAngelo Drive, a vacant 30,000 rentable square foot property, located in the suburbs of Boston, Massachusetts, met the criteria for classification as “held for sale.” This property had been occupied by a life science tenant through June 30, 2011. Upon move out, a user of the building presented an offer for the purchase of the building in the three months ended September 30, 2011. As a result, we recognized an impairment charge of approximately $1.0 million in the three months ended September 30, 2011, to adjust the carrying value to the estimated fair value less costs to sell. In October 2011, we sold 13-15 DeAngelo Drive to that user for approximately $2.9 million, representing a sale price of approximately $97 per rentable square foot.
Follow-on common stock offering
In May 2011, we completed a follow-on common stock offering to fund the purchase of 409 and 499 Illinois Street and to fund construction activities among other uses. We acquired 409 and 499 Illinois Street, a newly and partially completed world-class 453,256 rentable square foot laboratory/office development project located on a highly desirable waterfront location in Mission Bay, San Francisco, for approximately $293 million. 409 Illinois Street is a 241,659 rentable square foot tower that is 97% leased to a life science company through November 2023. 499 Illinois Street is a vacant 211,597 rentable square foot tower in shell condition for which we plan to complete the development.
| Date of Offering | Net Proceeds | Shares | ||
|---|---|---|---|---|
| Follow-on common stock offering | May 2011 | $ | 451,539 | 6,250,651 |
CORE OPERATING METRICS
Total revenues, net operating income, and operating margin
Total revenues for the three months ended December 31, 2011, were $145.8 million, as compared to total revenues for the three months ended December 31, 2010, of $131.8 million. Total revenues for the year ended December 31, 2011, were $573.4 million as compared to the total revenues for the year ended December 31, 2010, of $485.7 million. Net operating income for the three months ended December 31, 2011, was $101.8 million, compared to net operating income for the three months ended December 31, 2010, of $95.1 million. Net operating income for the year ended December 31, 2011, was $404.8 million, compared to net operating income for the year ended December 31, 2010 of $353.6 million. Our operating margin for the three months ended December 31, 2011, was 70%, compared to operating margin for the three months ended December 31, 2010, of 72%. Our operating margin for the year ended December 31, 2011, was 71%, compared to operating margin for the year ended December 31, 2010, of 73%.
Net operating income is projected to increase significantly quarter to quarter from the three months ended December 31, 2011, to the three months ended December 31, 2012, primarily related to the completion and delivery of current and future redevelopment and development projects, a significant amount of which is pre-leased. Additionally, the increase in net operating income is also due to recent and anticipated leasing activity, and lease-up of vacant space. See additional information related to projected net operating income for the three months ended December 31, 2012, in the guidance section of this report. As we complete and deliver projects currently under construction, certain project costs, including interest, property taxes, and other project costs, will no longer qualify for capitalization and will be expensed as incurred.
| Three Months Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |||||
| Rental revenues | $ | 109,042 | $ | 99,531 | $ | 431,359 | $ | 367,184 |
| Tenant recoveries | 35,153 | 30,614 | 136,322 | 113,351 | ||||
| Other income | 1,584 | 1,633 | 5,762 | 5,213 | ||||
| Total revenues | 145,779 | 131,778 | 573,443 | 485,748 | ||||
| Rental operations | 43,959 | 36,688 | 168,627 | 132,181 | ||||
| Net operating income | $ | 101,820 | $ | 95,090 | $ | 404,816 | $ | 353,567 |
| Operating margin | 70% | 72% | 71% | 73% |
Leasing activity
For the three months ended December 31, 2011, we executed a total of 58 leases for approximately 1,142,000 rentable square feet at 38 different properties (excluding month-to-month leases), representing the highest level of leasing activity in a single quarter in the history of the Company. Of this total, approximately 650,000 rentable square feet related to new or renewal leases of previously leased space (renewed/re-leased space) and approximately 492,000 rentable square feet related to developed, redeveloped, or previously vacant space. Of the 492,000 rentable square feet, approximately 356,000 rentable square feet were related to our development or redevelopment programs, with the remaining approximately 136,000 rentable square feet related to previously vacant space. Rental rates for these new or renewal leases (renewed/re-leased space) were on average approximately 4.1% lower on a cash basis and approximately 7.6% higher on a GAAP basis than rental rates for the respective expiring leases.
For the year ended December 31, 2011, we executed a total of 190 leases for approximately 3,407,000 rentable square feet at 87 different properties (excluding month-to-month leases), representing the highest level of leasing activity in a single year in the history of the Company. Of this total, approximately 1,822,000 rentable square feet related to new or renewal leases of previously leased space (renewed/re-leased space) and approximately 1,585,000 rentable square feet related to developed, redeveloped, or previously vacant space. Of the 1,585,000 rentable square feet, approximately 993,000 rentable square feet were related to our development or redevelopment programs, and the remaining approximately 592,000 rentable square feet were related to previously vacant space. Rental rates for these new or renewal leases (renewed/re-leased space) were on average approximately 1.9% lower on a cash basis and approximately 4.2% higher on a GAAP basis than rental rates for the respective expiring leases.
| Three Months Ended | Year Ended | |||
|---|---|---|---|---|
| Leasing Activity | December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 |
| New or renewal of previously leased space | 650,163 | 758,344 | 1,821,866 | 1,777,966 |
| Development/redevelopment space leased | 355,641 | 274,696 | 993,655 | 711,622 |
| Previously vacant space leased | 136,251 | 41,195 | 591,955 | 254,651 |
| Total leasing activity | 1,142,055 | 1,074,235 | 3,407,476 | 2,744,239 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Fourth Quarter and Year Ended December 31, 2011, Financial and Operating Results
Leasing activity (continued)
| Three Months Ended | Year Ended | |||||
|---|---|---|---|---|---|---|
| Leasing Activity – New or Renewal of Previously Leased Space | December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | ||
| Rental rate changes – cash basis | (4.1% | ) | 4.2% | (1.9% | ) | 2.0% |
| Rental rate changes – GAAP basis | 7.6% | 4.3% | 4.2% | 4.9% | ||
| Lease Structure | December 31, 2011 | December 31, 2010 | ||||
| --- | --- | --- | ||||
| Percentage of triple net leases | 95% | 96% | ||||
| Percentage of leases containing annual rent escalations | 94% | 91% | ||||
| Percentage of leases providing for recapture of capital expenditures | 92% | 93% |
Occupancy
| December 31, 2011 | December 31, 2010 | |
|---|---|---|
| Operating | 94.9% | 94.3% |
| Operating and redevelopment | 88.5% | 88.9% |
Same property performance
| Three Months Ended | Year Ended | |||||
|---|---|---|---|---|---|---|
| Percentage Change in Same Property NOI | December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | ||
| Cash basis | 3.1% | 2.0% | 4.1% | 1.5% | ||
| GAAP basis | (0.5% | ) | 1.3% | (0.6% | ) | 0.4% |
| Three Months Ended | Year Ended | |||||
| --- | --- | --- | --- | --- | ||
| Same Property Information | December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | ||
| Number of properties | 135 | 134 | 127 | 129 | ||
| Rentable square feet | 10,097,201 | 9,875,434 | 9,489,070 | 9,426,729 | ||
| Occupancy at end of current period | 93.9% | 93.8% | 93.7% | 94.6% | ||
| Occupancy at end of same period prior year | 93.9% | 93.8% | 94.5% | 95.1% |
As of December 31, 2011 and 2010, we owned 173 and 167 properties, respectively. As a result of changes within our total property portfolio, our financial results included significant changes in revenue and expenses from period to period. In order to supplement an evaluation of our results of operations over a given period, we analyze the operating performance for all properties that were fully operating for the entire periods presented separate from properties acquired subsequent to the first period presented, properties undergoing active redevelopment and active development, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results. Additionally, rental revenues from lease termination fees, if any, are excluded from the results of the same properties.
Client tenant base
The quality, diversity, breadth, and depth of our significant relationships with our life science client tenants provide Alexandria Real Estate Equities, Inc. with solid cash flows. As of December 31, 2011, Alexandria’s multinational pharmaceutical client tenants represented approximately 26% of our annualized base rent, led by Novartis AG, Eli Lilly and Company, Roche Holding Ltd, Bristol-Myers Squibb Company, GlaxoSmithKline plc, and Pfizer Inc.; public biotechnology companies represented approximately 18% and included Amgen Inc., Gilead Sciences, Inc., Biogen Idec Inc., and Celgene Corporation; revenue-producing life science product and service companies represented approximately 22%, led by Illumina, Inc., Quest Diagnostics Incorporated, Qiagen N.V., Laboratory Corporation of America Holdings, and Monsanto Company; government agencies and renowned medical and research institutions represented approximately 16% and included Massachusetts Institute of Technology, The Scripps Research Institute, The Regents of the University of California, Fred Hutchinson Cancer Research Center, University of Washington, Sanford-Burnham Medical Research Institute, and the United States Government; private biotechnology companies represented approximately 15% and included high-quality, leading-edge companies with blue-chip venture and institutional investors, including FibroGen, Inc., Achaogen Inc., and Forma Therapeutics, Inc.; and the remaining approximately 3% consisted of traditional office tenants. Alexandria’s strong life science underwriting skills, long-term life science industry relationships, and sophisticated management with both real estate and life science operating expertise set the Company apart from all other publicly traded REITs and real estate companies.
VALUE ADDED OPPORTUNITIES AND EXTERNAL GROWTH
Development and redevelopment
During the year ended December 31, 2011, we executed leases aggregating 542,120 and 451,535 rentable square feet related to our development and redevelopment projects, respectively. The leases aggregating 542,120 rentable square feet related to our development projects include the recent lease up of 45,255 rentable square feet at 4755 Nexus Center Drive, a recently acquired property currently undergoing redevelopment.
During the year ended December 31, 2011, we delivered approximately 58,804 rentable square feet at 455 Mission Bay Boulevard, a 210,000 rentable square foot multi-tenant ground-up development project located in the San Francisco – Mission Bay market. This property is currently 92.4% leased. Our stabilized yields on a cash and GAAP basis for this property were approximately 8.5% and 8.4%, respectively. Stabilized yield on cost is calculated as the quotient of net operating income and our investment in the property at stabilization (“Stabilized Yield”).
In August 2011, we completed the ground-up development of 7 Triangle Drive, a 96,626 rentable square foot single-tenant building located in the Research Triangle Park market, which is currently 100% leased as of December 31, 2011. The Stabilized Yield on a cash and GAAP basis for this property was approximately 8.5% and 9.8%, respectively.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Fourth Quarter and Year Ended December 31, 2011, Financial and Operating Results
(Tabular dollar amounts in thousands)
Development and redevelopment (continued)
In October 2011, we commenced the ground up development of a 303,143 rentable square feet single tenant building for Biogen Idec, Inc. at Alexandria CenterTM at Kendall Square. We expect to achieve a Stabilized Yield on a cash and GAAP basis for this property of 7.5% and 8.1%, respectively.
Key development and redevelopment projects completed in 2011 are as follows:
| Completion | RSF Delivered | Total Development/ | Occupancy | Investment | Stabilized Yield (1) | |||
|---|---|---|---|---|---|---|---|---|
| Key Development Projects Completed in 2011 | Date | In 2011 | Redevelopment RSF (1) | as of 12/31/11 (2) | at Completion (1) | Cash | GAAP | |
| 455 Mission Bay Boulevard | 12/2011 | 58,804 | 210,000 | 92.4% | $ | 109,950 | 8.5% | 8.4% |
| 7 Triangle Drive | 8/2011 | 96,626 | 96,626 | 100% | $ | 32,511 | 8.5% | 9.8% |
| 400/450 East Jamie Court | 9/2011 | 62,548 | 163,307 | 100% | $ | 108,490 | 4.2% | 4.3% |
| Key Redevelopment Projects Completed in 2011 | ||||||||
| 10300 Campus Point Drive | 11/2011 | 89,576 | 279,138 | 100% | $ | 131,600 | 7.6% | 7.7% |
| 500 Arsenal Street | 9/2011 | 48,516 | 48,516 | 100% | $ | 24,348 | 6.9% | 7.4% |
| (1) | Represents rentable square feet, investment at completion, and Stabilized Yield of the entire development or redevelopment project. Portions of certain projects may still be under construction. | |||||||
| --- | --- | |||||||
| (2) | Represents occupancy related operating rentable square feet. |
Acquisitions
In June 2011, we acquired 285 Bear Hill Road, a 26,270 rentable square foot office property located in the Greater Boston market, for approximately $3.9 million. We commenced the redevelopment of this property into life science laboratory space during the three months ended December 31, 2011. Based on our view of existing market conditions and certain assumptions, we expect to achieve a Stabilized Yield on a cash and GAAP basis for this property of approximately 8.0% and 8.6%, respectively.
In April 2011, we acquired 409 and 499 Illinois Street, a newly and partially completed world-class 453,256 rentable square foot life science laboratory development project located on a highly desirable waterfront location in Mission Bay, San Francisco, for approximately $293 million. 409 Illinois Street is a 241,659 rentable square foot tower that is 97% leased to a life science company through November 2023. 499 Illinois Street is a vacant 211,597 rentable square foot tower in shell condition for which we plan to complete the development. Based on our view of existing market conditions and certain assumptions at the time of the acquisition, we expect to achieve a Stabilized Yield on a cash and GAAP basis for this property in the range of 6.5% to 7.0% and 7.2% to 7.6%, respectively.
During the three months ended March 31, 2011, we acquired 4755 Nexus Center Drive, a newly and partially completed 45,255 rentable square foot development project located in University Town Center, San Diego for approximately $7.4 million. During the three months ended December 31, 2011, we leased 100% of this building to a biopharmaceutical company. We expect to achieve a Stabilized Yield on a cash and GAAP basis for this property of 7.0% and 7.7%, respectively.
| Acquisition | Occupancy | Purchase | Stabilized Yield | |||||
|---|---|---|---|---|---|---|---|---|
| Property/Market | Date | RSF | at Acquisition | Price | Cash | GAAP | ||
| 285 Bear Hill Road, Greater Boston | June 2011 | 26,270 | N/A | (1) | $ | 3,900 | 8.0% | 8.6% |
| 409/499 Illinois Street, San Francisco | April 2011 | 453,256 | 100% | (2) | $ | 293,000 | 6.5% - 7.0% | 7.2% - 7.6% |
| 4755 Nexus Center Drive, San Diego | March 2011 | 45,255 | N/A | (3) | $ | 7,400 | 7.0% | 7.7% |
| (1) | Currently under redevelopment. | |||||||
| --- | --- | |||||||
| (2) | Approximately 234,249 rentable square feet is leased, occupied, and in service. The remaining 219,007 rentable square feet is currently under development. | |||||||
| (3) | Currently under development and 100% leased. |
Significant announcements
| · | In October 2011, our Board of Directors elected Stephen A. Richardson as Chief Operating Officer and Regional Market Director - San Francisco. |
|---|---|
| · | In April 2011, we were awarded LEED® Platinum certification for 10300 Campus Point Drive, a property located in University Town Center in the San Diego market. |
| · | During the three months ended March 31, 2011, we were awarded LEED Gold certifications for four properties, 1) Alexandria Center™ for Life Science – New York City; 2) 199 E. Blaine Street, a property located in the Seattle market; 3) 1500 Owens Street, San Francisco/Mission Bay; and 4) 455 Mission Bay Blvd., San Francisco/Mission Bay. |
Earnings call information
We will host a conference call on Wednesday, February 8, 2012, at 3:00 p.m. Eastern Time (“ET”)/12:00 p.m. noon Pacific Time (“PT”) that is open to the general public to discuss our financial and operating results for the three months and year ended December 31, 2011. To participate in this conference call, dial (800) 510-0219 and confirmation code 46221155, shortly before 3:00 p.m. ET/12:00 p.m. noon PT. The audio web cast can be accessed at: www.are.com, in the Corporate Information section. A replay of the call will be available for a limited time from 6:00 p.m. ET/3:00 p.m. PT on Wednesday, February 8, 2012. The replay number is (888) 286-8010 and the confirmation code is 98479916.
Additionally, a copy of Alexandria Real Estate Equities, Inc.’s Supplemental Financial, Operating, & Property Information and this press release for the three months and year ended December 31, 2011, are available in the Corporate Information section of our website at www.are.com.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
| Three Months Ended | Year Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/11 | 9/30/11 | 6/30/11 | 3/31/11 | 12/31/10 | 12/31/11 | 12/31/10 | |||||||||||||||
| Revenues | |||||||||||||||||||||
| Rental | $ | 109,042 | $ | 106,614 | $ | 109,450 | $ | 106,253 | $ | 99,531 | $ | 431,359 | $ | 367,184 | |||||||
| Tenant recoveries | 35,153 | 35,104 | 33,175 | 32,890 | 30,614 | 136,322 | 113,351 | ||||||||||||||
| Other income | 1,584 | 2,475 | 926 | 777 | 1,633 | 5,762 | 5,213 | ||||||||||||||
| Total revenues | 145,779 | 144,193 | 143,551 | 139,920 | 131,778 | 573,443 | 485,748 | ||||||||||||||
| Expenses | |||||||||||||||||||||
| Rental operations | 43,959 | 42,986 | 40,621 | 41,061 | 36,688 | 168,627 | 132,181 | ||||||||||||||
| General and administrative | 10,604 | 10,297 | 10,765 | 9,497 | 8,601 | 41,163 | 34,383 | ||||||||||||||
| Interest | 14,757 | 14,273 | 16,567 | 17,810 | 17,158 | 63,407 | 69,509 | ||||||||||||||
| Depreciation and amortization | 40,885 | 39,848 | 40,211 | 36,582 | 34,409 | 157,526 | 126,033 | ||||||||||||||
| Total expenses | 110,205 | 107,404 | 108,164 | 104,950 | 96,856 | 430,723 | 362,106 | ||||||||||||||
| Income from continuing operations before loss on early extinguishment of debt | 35,574 | 36,789 | 35,387 | 34,970 | 34,922 | 142,720 | 123,642 | ||||||||||||||
| Loss on early extinguishment of debt | – | (2,742 | ) | (1,248 | ) | (2,495 | ) | (2,372 | ) | (6,485 | ) | (45,168 | ) | ||||||||
| Income from continuing operations | 35,574 | 34,047 | 34,139 | 32,475 | 32,550 | 136,235 | 78,474 | ||||||||||||||
| (Loss) income from discontinued operations, net | (112 | ) | (1,098 | ) | 172 | 150 | 8 | (888 | ) | 1,106 | |||||||||||
| Gain on sales of land parcels | – | 46 | – | – | 59,442 | 46 | 59,442 | ||||||||||||||
| Net income | 35,462 | 32,995 | 34,311 | 32,625 | 92,000 | 135,393 | 139,022 | ||||||||||||||
| Net income attributable to noncontrolling interests | 1,142 | 966 | 938 | 929 | 944 | 3,975 | 3,729 | ||||||||||||||
| Dividends on preferred stock | 7,090 | 7,089 | 7,089 | 7,089 | 7,089 | 28,357 | 28,357 | ||||||||||||||
| Net income attributable to unvested restricted stock awards | 270 | 278 | 298 | 242 | 726 | 1,088 | 995 | ||||||||||||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | $ | 26,960 | $ | 24,662 | $ | 25,986 | $ | 24,365 | $ | 83,241 | $ | 101,973 | $ | 105,941 | |||||||
| Earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic | |||||||||||||||||||||
| Continuing operations | $ | 0.44 | $ | 0.42 | $ | 0.44 | $ | 0.44 | $ | 1.52 | $ | 1.75 | $ | 2.17 | |||||||
| Discontinued operations, net | – | (0.02 | ) | – | – | – | (0.02 | ) | 0.02 | ||||||||||||
| Earnings per share – basic | $ | 0.44 | $ | 0.40 | $ | 0.44 | $ | 0.44 | $ | 1.52 | $ | 1.73 | $ | 2.19 | |||||||
| Earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | |||||||||||||||||||||
| Continuing operations | $ | 0.44 | $ | 0.42 | $ | 0.44 | $ | 0.44 | $ | 1.52 | $ | 1.75 | $ | 2.17 | |||||||
| Discontinued operations, net | – | (0.02 | ) | – | – | – | (0.02 | ) | 0.02 | ||||||||||||
| Earnings per share – diluted | $ | 0.44 | $ | 0.40 | $ | 0.44 | $ | 0.44 | $ | 1.52 | $ | 1.73 | $ | 2.19 |
| Three Months Ended | Year Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/11 | 9/30/11 | 6/30/11 | 3/31/11 | 12/31/10 | 12/31/11 | 12/31/10 | ||||||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders –basic | $ | 26,960 | $ | 24,662 | $ | 25,986 | $ | 24,365 | $ | 83,241 | $ | 101,973 | $ | 105,941 |
| Effect of assumed conversion and dilutive securities: | ||||||||||||||
| Assumed conversion of 8.00% unsecured convertible notes | – | – | – | – | 2 | – | – | |||||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders –diluted | $ | 26,960 | $ | 24,662 | $ | 25,986 | $ | 24,365 | $ | 83,243 | $ | 101,973 | $ | 105,941 |
| Weighted average shares of common stock outstanding for calculating earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic | 61,427,495 | 61,295,659 | 58,500,055 | 54,948,345 | 54,865,654 | 59,066,812 | 48,375,474 | |||||||
| Effect of assumed conversion and dilutive securities: | ||||||||||||||
| Assumed conversion of 8.00% unsecured convertible notes | – | – | – | – | 6,047 | – | – | |||||||
| Dilutive effect of stock options | 3,939 | 8,310 | 13,067 | 19,410 | 21,709 | 10,798 | 29,566 | |||||||
| Weighted average shares of common stock outstanding for calculating earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | 61,431,434 | 61,303,969 | 58,513,122 | 54,967,755 | 54,893,410 | 59,077,610 | 48,405,040 | |||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 11 | |||||||||||||
| --- | --- |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2011 | 2011 | 2011 | 2011 | 2010 | |||||||||||
| Assets | **** | ||||||||||||||
| Investments in real estate | $ | 6,750,975 | $ | 6,635,872 | $ | 6,534,433 | $ | 6,145,499 | $ | 6,060,821 | |||||
| Less: accumulated depreciation | (742,535 | ) | (710,580 | ) | (679,081 | ) | (647,034 | ) | (616,007 | ) | |||||
| Investments in real estate, net | 6,008,440 | 5,925,292 | 5,855,352 | 5,498,465 | 5,444,814 | ||||||||||
| Cash and cash equivalents | 78,539 | 73,056 | 60,925 | 78,196 | 91,232 | ||||||||||
| Restricted cash | 23,332 | 27,929 | 23,432 | 30,513 | 28,354 | ||||||||||
| Tenant receivables | 7,480 | 6,599 | 4,487 | 7,018 | 5,492 | ||||||||||
| Deferred rent receivable | 142,097 | 132,954 | 125,867 | 123,091 | 116,849 | ||||||||||
| Deferred leasing and financing costs, net | 135,550 | 134,366 | 130,147 | 111,315 | 89,046 | ||||||||||
| Investments | 95,777 | 88,777 | 88,862 | 88,694 | 83,899 | ||||||||||
| Other assets | 82,914 | 66,583 | 54,212 | 48,051 | 46,175 | ||||||||||
| Total assets | $ | 6,574,129 | $ | 6,455,556 | $ | 6,343,284 | $ | 5,983,343 | $ | 5,905,861 | |||||
| Liabilities, Noncontrolling Interests, and Equity | |||||||||||||||
| Secured notes payable | $ | 724,305 | $ | 760,882 | $ | 774,691 | $ | 787,945 | $ | 790,869 | |||||
| Unsecured line of credit | 370,000 | 814,000 | 575,000 | 679,000 | 748,000 | ||||||||||
| Unsecured bank term loans | 1,600,000 | 1,000,000 | 1,000,000 | 1,000,000 | 750,000 | ||||||||||
| Unsecured convertible notes | 84,959 | 84,484 | 203,638 | 202,521 | 295,293 | ||||||||||
| Accounts payable, accrued expenses, and tenant security deposits | 325,393 | 330,044 | 300,030 | 283,013 | 304,257 | ||||||||||
| Dividends payable | 36,579 | 35,287 | 34,068 | 31,172 | 31,114 | ||||||||||
| Total liabilities | 3,141,236 | 3,024,697 | 2,887,427 | 2,983,651 | 2,919,533 | ||||||||||
| Redeemable **** noncontrolling interests | 16,034 | 15,931 | 15,899 | 15,915 | 15,920 | ||||||||||
| Alexandria Real Estate Equities, Inc.’s stockholders’ equity: | |||||||||||||||
| Series C preferred stock | 129,638 | 129,638 | 129,638 | 129,638 | 129,638 | ||||||||||
| Series D cumulative convertible preferred stock | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | ||||||||||
| Common stock | 616 | 614 | 614 | 551 | 550 | ||||||||||
| Additional paid-in capital | 3,028,558 | 3,025,444 | 3,024,603 | 2,568,976 | 2,566,238 | ||||||||||
| Retained earnings | – | – | – | 360 | 734 | ||||||||||
| Accumulated other comprehensive loss | (34,511 | ) | (32,202 | ) | (6,272 | ) | (7,193 | ) | (18,335 | ) | |||||
| Alexandria Real Estate Equities, Inc.’s stockholders’ equity | 3,374,301 | 3,373,494 | 3,398,583 | 2,942,332 | 2,928,825 | ||||||||||
| Noncontrolling interests | 42,558 | 41,434 | 41,375 | 41,445 | 41,583 | ||||||||||
| Total equity | 3,416,859 | 3,414,928 | 3,439,958 | 2,983,777 | 2,970,408 | ||||||||||
| Total **** liabilities, noncontrolling interests, and equity | $ | 6,574,129 | $ | 6,455,556 | $ | 6,343,284 | $ | 5,983,343 | $ | 5,905,861 | |||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 12 | ||||||||||||||
| --- | --- |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Funds from Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Funds from operations (“FFO”)
The following table presents a reconciliation of net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders, the most directly comparable financial measure calculated and presented in accordance with GAAP, to FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the periods below:
| Three Months Ended (1) | Year Ended (1) | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/11 | 9/30/11 | 6/30/11 | 3/31/11 | 12/31/10 | 12/31/11 | 12/31/10 | |||||||||||||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders | $ | 26,960 | $ | 24,662 | $ | 25,986 | $ | 24,365 | $ | 83,241 | $ | 101,973 | $ | 105,941 | |||||||
| Add: Depreciation and amortization | 40,966 | 39,990 | 40,363 | 36,707 | 34,551 | 158,026 | 126,640 | ||||||||||||||
| Add: Net income attributable to noncontrolling interests | 1,142 | 966 | 938 | 929 | 944 | 3,975 | 3,729 | ||||||||||||||
| Add: Net income attributable to unvested restricted stock awards | 270 | 278 | 298 | 242 | 726 | 1,088 | 995 | ||||||||||||||
| Subtract: Gain on sales of property | – | (46 | ) | – | – | (59,442 | ) | (46 | ) | (59,466 | ) | ||||||||||
| Subtract: FFO attributable to noncontrolling interests | (939 | ) | (933 | ) | (1,033 | ) | (1,065 | ) | (1,036 | ) | (3,970 | ) | (4,226 | ) | |||||||
| Subtract: FFO attributable to unvested restricted stock awards | (600 | ) | (647 | ) | (638 | ) | (547 | ) | (512 | ) | (2,432 | ) | (1,608 | ) | |||||||
| FFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders – basic | 67,799 | 64,270 | 65,914 | 60,631 | 58,472 | 258,614 | 172,005 | ||||||||||||||
| Effect of assumed conversion and dilutive securities: | |||||||||||||||||||||
| Assumed conversion of 8.00% unsecured convertible notes | 5 | 4 | 7 | 5 | 2 | 21 | 7,781 | ||||||||||||||
| Amounts attributable to unvested restricted stock awards | – | – | – | – | – | – | (22 | ) | |||||||||||||
| FFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders – diluted | $ | 67,804 | $ | 64,274 | $ | 65,921 | $ | 60,636 | $ | 58,474 | $ | 258,635 | $ | 179,764 | |||||||
| Weighted average shares of common stock outstanding for calculating FFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic | 61,427,495 | 61,295,659 | 58,500,055 | 54,948,345 | 54,865,654 | 59,066,812 | 48,375,474 | ||||||||||||||
| Effect of assumed conversion and dilutive securities: | |||||||||||||||||||||
| Assumed conversion of 8.00% unsecured convertible notes | 6,087 | 6,047 | 6,047 | 6,047 | 6,047 | 6,087 | 2,638,422 | ||||||||||||||
| Dilutive effect of stock options | 3,939 | 8,310 | 13,067 | 19,410 | 21,709 | 10,798 | 29,566 | ||||||||||||||
| Weighted average shares of common stock outstanding for calculating FFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | 61,437,521 | 61,310,016 | 58,519,169 | 54,973,802 | 54,893,410 | 59,083,697 | 51,043,462 | ||||||||||||||
| FFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | |||||||||||||||||||||
| Basic | $ | 1.10 | $ | 1.05 | $ | 1.13 | $ | 1.10 | $ | 1.07 | $ | 4.38 | $ | 3.56 | |||||||
| Diluted | $ | 1.10 | $ | 1.05 | $ | 1.13 | $ | 1.10 | $ | 1.07 | $ | 4.38 | $ | 3.52 |
(1) See Funds from Operations on page 5 for additional information on significant items impacting comparability of results.
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 13 |
|---|
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Adjusted Funds from Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Adjusted funds from operations (“AFFO”)
The following table presents a reconciliation of FFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders to AFFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders:
| Three Months Ended | Year Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/11 | 9/30/11 | 6/30/11 | 3/31/11 | 12/31/10 | 12/31/11 | 12/31/10 | |||||||||||||||
| FFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders | $ | 67,799 | $ | 64,270 | $ | 65,914 | $ | 60,631 | $ | 58,472 | $ | 258,614 | $ | 172,005 | |||||||
| Add/(deduct): | |||||||||||||||||||||
| Major and recurring capital expenditures (1) | (675 | ) | (550 | ) | (698 | ) | (608 | ) | (260 | ) | (2,531 | ) | (1,332 | ) | |||||||
| Tenant improvements and leasing costs (1) | (6,083 | ) | (2,119 | ) | (1,595 | ) | (803 | ) | (2,583 | ) | (10,600 | ) | (6,725 | ) | |||||||
| Amortization of loan fees | 2,551 | 2,144 | 2,327 | 2,278 | 1,999 | 9,300 | 7,892 | ||||||||||||||
| Amortization of debt premiums/discounts | 565 | 750 | 1,169 | 1,335 | 2,032 | 3,819 | 9,999 | ||||||||||||||
| Amortization of acquired above and below market leases | (812 | ) | (940 | ) | (2,726 | ) | (4,854 | ) | (2,364 | ) | (9,332 | ) | (7,868 | ) | |||||||
| Deferred rent/straight-line rent | (9,558 | ) | (7,647 | ) | (2,885 | ) | (6,707 | ) | (9,092 | ) | (26,797 | ) | (22,832 | ) | |||||||
| Stock compensation | 3,306 | 3,344 | 2,749 | 2,356 | 2,767 | 11,755 | 10,816 | ||||||||||||||
| Capitalized income from development projects | 537 | 930 | 1,078 | 1,428 | 1,486 | 3,973 | 5,688 | ||||||||||||||
| Deferred rent/straight-line rent on ground leases | 1,221 | 1,143 | 1,099 | 1,241 | 1,424 | 4,704 | 5,337 | ||||||||||||||
| Loss on early extinguishment of debt | – | 2,742 | 1,248 | 2,495 | 2,372 | 6,485 | 45,168 | ||||||||||||||
| Impairment of real estate | – | 994 | – | – | – | 994 | – | ||||||||||||||
| Allocation to unvested restricted stock awards | 79 | (7 | ) | (14 | ) | 16 | 19 | 74 | (424 | ) | |||||||||||
| AFFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders | $ | 58,930 | $ | 65,054 | $ | 67,666 | $ | 58,808 | $ | 56,272 | $ | 250,458 | $ | 217,724 | |||||||
| Weighted average shares of common stock outstanding for calculating AFFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic | 61,427,495 | 61,295,659 | 58,500,055 | 54,948,345 | 54,865,654 | 59,066,812 | 48,375,474 | ||||||||||||||
| Add: Dilutive effect of stock options | 3,939 | 8,310 | 13,067 | 19,410 | 21,709 | 10,798 | 29,566 | ||||||||||||||
| Weighted average shares of common stock outstanding for calculating AFFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | 61,431,434 | 61,303,969 | 58,513,122 | 54,967,755 | 54,887,363 | 59,077,610 | 48,405,040 | ||||||||||||||
| AFFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | |||||||||||||||||||||
| Basic | $ | 0.96 | $ | 1.06 | $ | 1.16 | $ | 1.07 | $ | 1.03 | $ | 4.24 | $ | 4.50 | |||||||
| Diluted | $ | 0.96 | $ | 1.06 | $ | 1.16 | $ | 1.07 | $ | 1.03 | $ | 4.24 | $ | 4.50 |
(1) See page 34 for further information.
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 14 |
|---|
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Financial and Asset Base Highlights
(Dollars in thousands, except per share and per square foot amounts)
(Unaudited)
| **** | Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | 12/31/11 | 9/30/11 | 6/30/11 | 3/31/11 | 12/31/10 | ||||||||||
| Operating data | |||||||||||||||
| Total revenues | $ | 145,779 | $ | 144,193 | $ | 143,551 | $ | 139,920 | $ | 131,778 | |||||
| Deferred rent/straight-line rent | $ | 9,558 | $ | 7,647 | $ | 2,885 | $ | 6,707 | $ | 9,092 | |||||
| Amortization of acquired above and below market leases | $ | 812 | $ | 940 | $ | 2,726 | $ | 4,854 | $ | 2,364 | |||||
| Operating margin | 70% | 70% | 72% | 71% | 72% | ||||||||||
| General and administrative expense as a percentage of total revenues | 7.3% | 7.1% | 7.5% | 6.8% | 6.5% | ||||||||||
| Adjusted EBITDA margin | 65% | 65% | 66% | 66% | 68% | ||||||||||
| Adjusted EBITDA – quarter annualized | $ | 377,964 | $ | 377,168 | $ | 380,968 | $ | 368,100 | $ | 357,756 | |||||
| Adjusted EBITDA – trailing 12 months | $ | 376,050 | $ | 370,998 | $ | 359,247 | $ | 345,055 | $ | 331,822 | |||||
| Capitalized interest | $ | 16,151 | $ | 16,666 | $ | 15,046 | $ | 13,193 | $ | 14,629 | |||||
| Weighted average interest rate used for capitalization during period | 4.35% | 4.54% | 4.60% | 4.57% | 4.67% | ||||||||||
| Non-cash amortization of discount on unsecured convertible notes | $ | 474 | $ | 675 | $ | 1,117 | $ | 1,268 | $ | 1,971 | |||||
| Non-cash amortization of discounts (premiums) on secured notes payable | $ | 91 | $ | 75 | $ | 52 | $ | 67 | $ | 61 | |||||
| Loss on early extinguishment of debt | $ | – | $ | 2,742 | $ | 1,248 | $ | 2,495 | $ | 2,372 | |||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | $ | 26,960 | $ | 24,662 | $ | 25,986 | $ | 24,365 | $ | 83,243 | |||||
| Weighted average common shares outstanding – EPS – diluted | 61,431,434 | 61,303,969 | 58,513,122 | 54,967,755 | 54,893,410 | ||||||||||
| Earnings per share – diluted | $ | 0.44 | $ | 0.40 | $ | 0.44 | $ | 0.44 | $ | 1.52 | |||||
| FFO attributable to Alexandria Real Estate, Inc.’s **** common stockholders – diluted | $ | 67,804 | $ | 64,274 | $ | 65,921 | $ | 60,636 | $ | 58,474 | |||||
| Weighted average common shares outstanding – FFO – diluted | 61,437,521 | 61,310,016 | 58,519,169 | 54,973,802 | 54,893,410 | ||||||||||
| FFO per share – diluted | $ | 1.10 | $ | 1.05 | $ | 1.13 | $ | 1.10 | $ | 1.07 | |||||
| **** | 12/31/11 | 9/30/11 | 6/30/11 | 3/31/11 | 12/31/10 | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| Asset base statistics | |||||||||||||||
| Number of properties at end of period | 173 | 171 | 171 | 168 | 167 | ||||||||||
| Rentable square feet at end of period | 15,305,874 | 14,871,118 | 14,147,863 | 13,702,749 | 13,661,039 | ||||||||||
| Occupancy of operating properties at end of period | 94.9% | 94.6% | 93.8% | 94.2% | 94.3% | ||||||||||
| Occupancy including redevelopment properties at end of period | 88.5% | 89.3% | 88.3% | 88.6% | 88.9% | ||||||||||
| Annualized base rent per leased rentable square foot | $ | 34.39 | $ | 34.39 | $ | 34.06 | $ | 33.90 | $ | 33.95 | |||||
| Leasing activity – YTD rentable square feet | 3,407,476 | 2,265,421 | 1,280,084 | 551,622 | 2,744,239 | ||||||||||
| Leasing activity – Qtr rentable square feet | 1,142,055 | 985,337 | 728,462 | 551,622 | 1,074,235 | ||||||||||
| Leasing activity – YTD percentage change in rental rates – GAAP basis | 4.2% | 2.5% | 2.4% | 1.6% | 4.9% | ||||||||||
| Leasing activity – Qtr percentage change in rental rates – GAAP basis | 7.6% | 2.8% | 3.1% | 1.6% | 4.3% | ||||||||||
| Leasing activity – YTD percentage change in rental rates – cash basis | (1.9% | ) | (0.7% | ) | 1.0% | 0.8% | 2.0% | ||||||||
| Leasing activity – Qtr percentage change in rental rates – cash basis | (4.1% | ) | (3.0% | ) | 1.5% | 0.8% | 4.2% | ||||||||
| Same property YTD percentage change in net operating income – GAAP basis | (0.6% | ) | 0.2% | 0.5% | 0.3% | 0.4% | |||||||||
| Same property Qtr percentage change in net operating income – GAAP basis | (0.5% | ) | (0.2% | ) | 1.7% | 0.3% | 1.3% | ||||||||
| Same property YTD percentage change in net operating income – cash basis | 4.1% | 5.5% | 6.5% | 5.8% | 1.5% | ||||||||||
| Same property Qtr percentage change in net operating income – cash basis | 3.1% | 4.8% | 9.4% | 5.8% | 2.0% | ||||||||||
| **** | 12/31/11 | 9/30/11 | 6/30/11 | 3/31/11 | 12/31/10 | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance sheet data / credit metrics | |||||||||||||||
| Investments in real estate | $ | 6,750,975 | $ | 6,635,872 | $ | 6,534,433 | $ | 6,145,499 | $ | 6,060,821 | |||||
| Accumulated depreciation | $ | (742,535 | ) | $ | (710,580 | ) | $ | (679,081 | ) | $ | (647,034 | ) | $ | (616,007 | ) |
| Investments in real estate, net | $ | 6,008,440 | $ | 5,925,292 | $ | 5,855,352 | $ | 5,498,465 | $ | 5,444,814 | |||||
| Tangible non-real estate assets | $ | 249,884 | $ | 237,277 | $ | 210,113 | $ | 237,805 | $ | 240,873 | |||||
| Total assets | $ | 6,574,129 | $ | 6,455,556 | $ | 6,343,284 | $ | 5,983,343 | $ | 5,905,861 | |||||
| Gross assets (excluding cash and restricted cash) | $ | 7,214,793 | $ | 7,065,151 | $ | 6,938,008 | $ | 6,521,668 | $ | 6,402,282 | |||||
| Secured notes payable | $ | 724,305 | $ | 760,882 | $ | 774,691 | $ | 787,945 | $ | 790,869 | |||||
| Unsecured line of credit | $ | 370,000 | $ | 814,000 | $ | 575,000 | $ | 679,000 | $ | 748,000 | |||||
| Unsecured bank term loans | $ | 1,600,000 | $ | 1,000,000 | $ | 1,000,000 | $ | 1,000,000 | $ | 750,000 | |||||
| 3.70% Unsecured Convertible Notes | $ | 84,724 | $ | 84,250 | $ | 203,405 | $ | 202,290 | $ | 295,063 | |||||
| 8.00% unsecured convertible notes | $ | 235 | $ | 234 | $ | 233 | $ | 231 | $ | 230 | |||||
| Total unsecured debt | $ | 2,054,959 | $ | 1,898,484 | $ | 1,778,638 | $ | 1,881,521 | $ | 1,793,293 | |||||
| Total debt | $ | 2,779,264 | $ | 2,659,366 | $ | 2,553,329 | $ | 2,669,466 | $ | 2,584,162 | |||||
| Net debt | $ | 2,677,393 | $ | 2,558,381 | $ | 2,468,972 | $ | 2,560,757 | $ | 2,464,576 | |||||
| Total liabilities | $ | 3,141,236 | $ | 3,024,697 | $ | 2,887,427 | $ | 2,983,651 | $ | 2,919,533 | |||||
| Common shares outstanding | 61,560,472 | 61,463,839 | 61,380,268 | 55,049,730 | 54,966,925 | ||||||||||
| Total market capitalization | $ | 7,412,402 | $ | 6,815,380 | $ | 7,689,383 | $ | 7,344,442 | $ | 6,994,306 | |||||
| **** | 12/31/11 | 9/30/11 | 6/30/11 | 3/31/11 | 12/31/10 | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||
| Financial, debt, and other ratios | |||||||||||||||
| Unencumbered net operating income as a percentage of total net operating income | 70% | 67% | 64% | 65% | 60% | ||||||||||
| Unencumbered assets gross book value | $ | 5,715,357 | $ | 5,496,616 | $ | 5,342,433 | $ | 4,933,395 | $ | 4,825,963 | |||||
| Unencumbered assets gross book value as a percentage of gross assets | 78% | 77% | 76% | 74% | 74% | ||||||||||
| Percentage outstanding on unsecured line of credit at end of period | 25% | 54% | 38% | 45% | 50% | ||||||||||
| Net debt to Gross Assets (excluding cash and restricted cash) at end of period | 37% | 36% | 36% | 39% | 39% | ||||||||||
| Secured debt as a percentage of gross assets at end of period | 10% | 11% | 11% | 12% | 12% | ||||||||||
| Net debt to Adjusted EBITDA – quarter annualized | 7.1x | 6.8x | 6.5x | 7.0x | 6.9x | ||||||||||
| Net debt to Adjusted EBITDA – trailing 12 months | 7.1x | 6.9x | 6.9x | 7.4x | 7.4x | ||||||||||
| Scheduled debt principal payments | $ | 2,620 | $ | 2,826 | $ | 2,886 | $ | 2,990 | $ | 2,902 | |||||
| Fixed charge coverage ratio – quarter annualized | 2.7x | 2.7x | 2.7x | 2.7x | 2.6x | ||||||||||
| Fixed charge coverage ratio – trailing 12 months | 2.7x | 2.7x | 2.6x | 2.4x | 2.2x | ||||||||||
| Interest coverage ratio – quarter annualized | 3.4x | 3.4x | 3.4x | 3.4x | 3.2x | ||||||||||
| Dividends per share declared on common stock | $ | 0.49 | $ | 0.47 | $ | 0.45 | $ | 0.45 | $ | 0.45 | |||||
| Dividend payout ratio (common stock) | 45% | 43% | 41% | 40% | 41% | ||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 15 | ||||||||||||||
| --- | --- |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Guidance
December 31, 2011
Earnings outlook
Based on our current view of existing market conditions and certain current assumptions, we expect our FFO per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders and earnings per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the year ended December 31, 2012, will be as follows:
| **** | Guidance Reported on February 7, 2012 |
|---|---|
| 2012 guidance | |
| FFO per share (diluted) | 4.50 - 4.54 |
| Earnings per share (diluted) | 1.73 - 1.77 |
| Key assumptions | |
| Same property net operating income growth – cash basis | 3% to 5% |
| Same property net operating income growth – GAAP basis | 0% to 2% |
| Rental rate steps on lease renewals and re-leasing of space – cash basis | Slightly negative/positive |
| Rental rate steps on lease renewals and re-leasing of space – GAAP basis | Up to 5% |
| Straight-line rents | 6.5 million/qtr |
| Amortization of above and below market leases | 0.8 million/qtr |
| General and administrative expenses in comparison to prior year | Up 5% to 8% |
| Capitalization of interest | 54 to 60 million |
| Interest expense, net | 68 to 75 million |
All values are in US Dollars.
Net operating income, net income, and FFO for the three months ended December 31, 2011, and the three months ended December 31, 2012
Net operating income is projected to increase significantly quarter to quarter from the three months ended December 31, 2011, to the three months ended December 31, 2012, primarily related to current and future redevelopment and development projects, a significant amount which is pre-leased. Additionally, the increase in net operating income is due to recent and anticipated leasing and lease-up of vacant space.
| Actual | Projected | |
|---|---|---|
| Three Months Ended<br> December 31, 2011 | Three Months Ended<br> December 31, 2012 | |
| (in millions, except per share amounts) | ||
| Net operating income | $101.8 | $111.0 - 113.0 |
| General and administrative | $10.6 | $10.0 - 11.0 |
| Interest | $14.8 | $20.1 - 23.1 |
| Depreciation and amortization | $40.9 | $42.6 - 47.7 |
| Income from continuing operations | $35.6 | $40.3 - 41.3 |
| Preferred stock dividends | $7.1 | $7.1 |
| Other | $1.5 | $1.0 - 1.4 |
| Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | $27.0 | $28.1 - 32.1 |
| FFO | $67.8 | $71.7 - 74.1 |
| FFO per share (diluted) | $1.10 | $1.16 - 1.20 |
Sources and uses of capital
We expect that our principal liquidity needs for the year ended December 31, 2012, will be satisfied by the following multiple sources of capital as shown in the table below. There can be no assurance that our sources and uses of capital will not be materially higher or lower than these expectations.
| **** | Year Ended<br> December 31, 2012 | ||
|---|---|---|---|
| (in millions) | |||
| Sources of capital | |||
| Net cash provided by operating activities less dividends | $ | 89 | |
| Asset and land sales | 112 | (1) | |
| Unsecured senior notes | TBD | (2) | |
| Debt, equity, and joint venture capital | 698 | ||
| Total sources of capital | $ | 899 | |
| Liquidity available under unsecured line of credit and cash and cash equivalents as of December 31, 2011 | $ | 1,209 | |
| Uses of capital | **** | **** | |
| Development, redevelopment, and construction | $ | 553 | |
| Acquisitions | – | ||
| Secured debt repayments | 11 | ||
| 2012 Unsecured Bank Term Loan repayment | 250 | ||
| 3.70% Unsecured Convertible Notes retirement | 85 | ||
| Total uses of capital | $ | 899 |
(1) We expect to implement a more aggressive asset disposition strategy, beyond estimated asset sales in this table, to provide capital for reinvestment into our business.
(2) Amount and timing of issuance of unsecured notes will be subject to the debt capital market environment.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Credit Metrics
December 31, 2011
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Debt December 31, 2011 (Tabular dollar amounts in thousands)
(Unaudited)
Debt maturities
| Secured Notes Payable | Unsecured Debt | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Our Share | Noncontrolling<br> Interests’<br> Share | Total<br> Consolidated | Line of Credit and<br> Bank Term Loans | Convertible Notes | ||||||||
| 2012 | $ | 10,493 | $ | 364 | $ | 10,857 | $ | 250,000 | $ | 84,801 | ||
| 2013 | 51,869 | 384 | 52,253 | – | – | |||||||
| 2014 | 284,731 | 20,869 | 305,600 | – | 250 | |||||||
| 2015 | 7,171 | – | 7,171 | 370,000 | – | |||||||
| 2016 | 233,454 | – | 233,454 | 750,000 | – | |||||||
| Thereafter | 115,790 | – | 115,790 | 600,000 | – | |||||||
| Subtotal | $ | 703,508 | $ | 21,617 | 725,125 | 1,970,000 | 85,051 | |||||
| Unamortized discounts | (820 | ) | – | (92 | ) | |||||||
| Total | $ | 724,305 | $ | 1,970,000 | $ | 84,959 |
Secured notes payable, unsecured debt analysis, and fixed and hedge/floating rate debt
| Fixed Rate/Hedged | Floating Rate | Total | Percentage of<br> Outstanding<br> Balance | Weighted Average<br> Interest Rate at<br> End of Period (1) | Weighted<br> Average<br> Remaining Term | **** | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Secured notes payable | $ | 647,585 | $ | 76,720 | $ | 724,305 | 26.1 | % | 5.77 | % | 4.1 Years | |
| Unsecured line of credit (2) | – | 370,000 | 370,000 | 13.3 | 2.59 | 3.1 Years | (4) | |||||
| 2012 Unsecured Bank Term Loan | 250,000 | – | 250,000 | 9.0 | 5.63 | 0.8 Years | (4) | |||||
| 2016 Unsecured Bank Term Loan | 750,000 | – | 750,000 | 27.0 | 3.28 | 4.5 Years | (4) | |||||
| 2017 Unsecured Bank Term Loan | 450,000 | 150,000 | 600,000 | 21.6 | 1.93 | 5.1 Years | (4) | |||||
| Unsecured convertible notes | 84,959 | – | 84,959 | 3.0 | 5.97 | 15.0 Days | (3) | |||||
| Total debt | $ | 2,182,544 | $ | 596,720 | $ | 2,779,264 | 100.0 | % | 3.84 | % | 3.9 Years | |
| Percentage of outstanding balance | 79% | 21% | 100% | |||||||||
| (1) | Represents the contractual interest rate as of the end of the period plus the impact of debt premiums/discounts and our interest rate hedge agreements on our secured notes payable, unsecured line of credit, Unsecured Bank Term Loans, and unsecured convertible notes. The weighted average interest rate excludes bank fees and amortization of loan fees. See also the “Summary of Interest Rate Hedge Agreements” section of this report. The weighted average interest rate related to outstanding borrowings for our unhedged floating rate debt is based upon one-month LIBOR. The interest rate resets periodically and will vary in future periods. | |||||||||||
| --- | --- | --- | --- | --- | ||||||||
| (2) | Total commitments available for borrowing aggregate 1.5 billion under our unsecured line of credit. As of December 31, 2011, we had 1.1 billion available for borrowing under our unsecured line of credit. | |||||||||||
| (3) | During January 2012, we repurchased approximately 83.8 million in principal amount of our 3.70% Unsecured Convertible Notes at par, pursuant to options exercised by holders thereof under the indenture governing the notes. We do not expect to recognize any gain or loss as a result of this repurchase. Approximately 1.0 million of our 3.70% Unsecured Convertible Notes remained outstanding as of February 7, 2012. | |||||||||||
| (4) | Our unsecured line of credit and unsecured bank term loans may be repaid prior to maturity without a prepayment penalty. The applicable margins and maturity dates of these loans are as follows, assuming we exercise our sole right to extend the maturity dates: | |||||||||||
| Stated Maturity Date | Extension Option | Extended Maturity Date | ||||||||||
| Unsecured line of credit | January 2014 | Two extensions of 6 months each | January 2015 | |||||||||
| 2012 Unsecured Bank Term Loan | October 2012 | N/A | October 2012 | |||||||||
| 2016 Unsecured Bank Term Loan | June 2015 | One year | June 2016 | |||||||||
| 2017 Unsecured Bank Term Loan | January 2016 | One year | January 2017 | |||||||||
| Each extension option shown above represents extensions at our sole election with delivery of notice to our lenders. Interest on outstanding borrowings under our unsecured line of credit or unsecured bank term loans are based upon our election of one, two, three, or six month LIBOR plus an applicable margin. |
All values are in US Dollars.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Debt
December 31, 2011
(Dollars in thousands) (Unaudited)
Summary of secured notes payable principal maturities
| Description | Maturity Date | Type | Stated Rate | Effective Rate (1) | Amount | ||||
|---|---|---|---|---|---|---|---|---|---|
| Other scheduled principal repayments/amortization | $ | 10,857 | |||||||
| 2012 Total | $ | 10,857 | |||||||
| California – San Diego | 3/1/13 | Insurance Co. | 6.21 | % | 6.21 | % | $ | 7,934 | |
| Suburban Washington, D.C. | 9/1/13 | CMBS | 6.36 | 6.36 | 26,093 | ||||
| California – San Francisco | 11/16/13 | Other | 6.14 | 6.14 | 7,527 | ||||
| Other scheduled principal repayments/amortization | 10,699 | ||||||||
| 2013 Total | $ | 52,253 | |||||||
| Suburban Washington, D.C. | 4/20/14 | Bank | 2.29 | % | 2.29 | % | $ | 76,000 | |
| Greater Boston | 4/1/14 | Insurance Co. | 5.26 | 5.59 | 208,685 | ||||
| San Diego | 7/1/14 | Bank | 6.05 | 4.88 | 6,458 | ||||
| San Diego | 11/1/14 | Bank | 5.39 | 4.00 | 7,495 | ||||
| Washington – Seattle | 11/18/14 | Other | 5.90 | 5.90 | 240 | ||||
| Other scheduled principal repayments/amortization | 6,722 | ||||||||
| 2014 Total | $ | 305,600 | |||||||
| Other scheduled principal repayments/amortization | $ | 7,171 | |||||||
| 2015 Total | $ | 7,171 | |||||||
| California – San Diego, California – San Francisco, and Greater Boston | 1/1/16 | CMBS | 5.73 | % | 5.73 | % | $ | 75,501 | |
| Greater Boston and NYC/New Jersey/Suburban Philadelphia | 4/1/16 | CMBS | 5.82 | 5.82 | 29,389 | ||||
| California – San Francisco | 8/1/16 | CMBS | 6.35 | 6.35 | 126,715 | ||||
| Other scheduled principal repayments/amortization | 1,849 | ||||||||
| 2016 Total | $ | 233,454 | |||||||
| Thereafter | 115,790 | ||||||||
| Subtotal | 725,125 | ||||||||
| Unamortized discounts | (820 | ) | |||||||
| $ | 724,305 |
(1) Represents the contractual interest rate as of the end of the period plus the impact of debt premiums/discounts. The effective rate excludes bank fees and amortization of loan fees.
Summary of interest rate hedge agreements
| Notional Amount in | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Transaction | Effective | Termination | Interest Pay | Fair Value | Effect as of December 31, | |||||||
| Date | Date | Date | Rate (1) | as of 12/31/11 (2) | 2011 | 2012 | 2013 | |||||
| December 2006 | December 29, 2006 | March 31, 2014 | 4.990 | % | $ | 4,968 | $ | 50,000 | $ | 50,000 | $ | 50,000 |
| October 2007 | October 31, 2007 | September 30, 2012 | 4.546 | 1,559 | 50,000 | – | – | |||||
| October 2007 | October 31, 2007 | September 30, 2013 | 4.642 | 3,625 | 50,000 | 50,000 | – | |||||
| October 2007 | July 1, 2008 | March 31, 2013 | 4.622 | 1,298 | 25,000 | 25,000 | – | |||||
| October 2007 | July 1, 2008 | March 31, 2013 | 4.625 | 1,299 | 25,000 | 25,000 | – | |||||
| December 2006 | November 30, 2009 | March 31, 2014 | 5.015 | 7,494 | 75,000 | 75,000 | 75,000 | |||||
| December 2006 | November 30, 2009 | March 31, 2014 | 5.023 | 7,507 | 75,000 | 75,000 | 75,000 | |||||
| December 2006 | December 31, 2010 | October 31, 2012 | 5.015 | 3,879 | 100,000 | – | – | |||||
| December 2011 | December 30, 2011 | December 31, 2012 | 0.480 | 76 | 250,000 | – | – | |||||
| December 2011 | December 30, 2011 | December 31, 2012 | 0.480 | 75 | 250,000 | – | – | |||||
| December 2011 | December 30, 2011 | December 31, 2012 | 0.480 | 38 | 125,000 | – | – | |||||
| December 2011 | December 30, 2011 | December 31, 2012 | 0.480 | 38 | 125,000 | – | – | |||||
| December 2011 | December 30, 2011 | December 31, 2012 | 0.495 | 57 | 125,000 | – | – | |||||
| December 2011 | December 30, 2011 | December 31, 2012 | 0.508 | 73 | 125,000 | – | – | |||||
| December 2011 | December 31, 2012 | December 31, 2013 | 0.640 | 136 | – | 250,000 | – | |||||
| December 2011 | December 31, 2012 | December 31, 2013 | 0.640 | 131 | – | 250,000 | – | |||||
| December 2011 | December 31, 2012 | December 31, 2013 | 0.644 | 72 | – | 125,000 | – | |||||
| December 2011 | December 31, 2012 | December 31, 2013 | 0.644 | 73 | – | 125,000 | – | |||||
| December 2011 | December 31, 2013 | December 31, 2014 | 0.977 | 301 | – | – | 250,000 | |||||
| December 2011 | December 31, 2013 | December 31, 2014 | 0.976 | 281 | – | – | 250,000 | |||||
| Total | $ | 32,980 | $ | 1,450,000 | $ | 1,050,000 | $ | 700,000 |
(1) Interest pay rate represents the interest rate we will pay for one month LIBOR under the applicable interest rate swap agreement. This rate does not include any spread in addition to one month LIBOR that is due monthly as interest expense.
(2) Including accrued interest and credit valuation (Accounting Standards Codification 820 – Fair Value Measurements and Disclosures) adjustment.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Dispositions of Properties and Discontinued Operations
December 31, 2011
(Tabular dollar amounts in thousands)
(Unaudited)
Summary of dispositions
In August 2011, we sold a parcel of land located in San Diego, California, for approximately $17.3 million at a gain of $46,000. The buyer is expected to construct a building with approximately 249,000 rentable square feet, representing a sale price of approximately $70 per rentable square foot.
During the three months ended September 30, 2011, 13-15 DeAngelo Drive, a vacant 30,000 rentable square foot property, located in the suburbs of Boston, Massachusetts, met the criteria for classification as “held for sale.” This property was occupied by a credit life science tenant through June 30, 2011. Upon move out, a user of the building presented an offer for the purchase of the building in the three months ended September 30, 2011. As a result, we recognized an impairment charge of approximately $1.0 million in the three months ended September 30, 2011, to adjust the carrying value to the estimated fair value less costs to sell. In October 2011, we sold 13-15 DeAngelo Drive to that user for approximately $2.9 million, representing a sale price of approximately $97 per rentable square foot.
| Rentable | Sale | Month of | ||
|---|---|---|---|---|
| Property/Market | Square Feet | Price | Sale | |
| Land parcel in San Diego | N/A | $ | 17,300 | August 2011 |
| 13-15 DeAngelo Drive, suburbs of Boston, Massachusetts | 30,000 | $ | 2,900 | October 2011 |
(Loss)/income from discontinued operations and net assets of discontinued operations
| **** | Year Ended December 31, 2011 | ||||||
|---|---|---|---|---|---|---|---|
| **** | 2011 | 2010 | 2009 | ||||
| Total revenue | $ | 1,080 | $ | 2,349 | $ | 6,479 | |
| Operating expenses | 438 | 527 | 1,050 | ||||
| Revenue less operating expenses | 642 | 1,822 | 5,429 | ||||
| Interest expense | 36 | 133 | 162 | ||||
| Depreciation expense | 500 | 607 | 1,262 | ||||
| Income from discontinued operations before gain/loss on sales of real estate | 106 | 1,082 | 4,005 | ||||
| Non-cash impairment charge | (994 | ) | – | – | |||
| Gain on sales of real estate | – | 24 | 2,627 | ||||
| (Loss)/income from discontinued operations, net | $ | (888 | ) | $ | 1,106 | $ | 6,632 |
| December 31, 2011 | |||||||
| 2011 | 2010 | ||||||
| Properties “held for sale,” net | $ | 15,011 | $ | 18,773 | |||
| Other assets | 197 | 247 | |||||
| Total assets | $ | 15,208 | $ | 19,020 | |||
| Secured note payable | $ | – | $ | 2,237 | |||
| Other liabilities | 298 | 467 | |||||
| Total liabilities | 298 | 2,704 | |||||
| Net assets of discontinued operations | $ | 14,910 | $ | 16,316 | |||
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| --- | --- |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Core Operating Metrics
December 31, 2011
(Unaudited)
Quarterly percentage change same property net operating income
Percentage change in rental rates on renewed/re-leased space
* GAAP and cash percentage changes in rental rates on renewed/re-leased space during 1999 were 27% and 24%, respectively.
Occupancy percentage
Unique, positive leasing capabilities
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Same Property Comparisons
December 31, 2011
(Dollars in thousands)
(Unaudited)
Current period same property performance
The following table presents a comparison of the components of same property and non-same property net operating income for the three months and year ended December 31, 2011, compared to the three months and year ended December 31, 2010, and a reconciliation of net operating income to income from continuing operations, the most directly comparable GAAP financial measure:
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | 2011 | 2010 | % Change | 2011 | 2010 | **** | % Change | ||||||||
| Revenues: | **** | ||||||||||||||
| Total revenues – Same Properties | $ | 105,331 | $ | 103,465 | 1.8 | % | $ | 395,479 | $ | 390,989 | 1.1 | % | |||
| Total revenues – Non-Same Properties | 40,448 | 28,313 | 42.9 | 177,964 | 94,759 | 87.8 | |||||||||
| Total revenues – GAAP basis | 145,779 | 131,778 | 10.6 | 573,443 | 485,748 | 18.1 | |||||||||
| Expenses | |||||||||||||||
| Rental operations – Same Properties | 30,680 | 28,410 | 8.0 | 113,748 | 107,481 | 5.8 | |||||||||
| Rental operations – Non-Same Properties | 13,279 | 8,278 | 60.4 | 54,879 | 24,700 | 122.2 | |||||||||
| Total rental operations | 43,959 | 36,688 | 19.8 | 168,627 | 132,181 | 27.6 | |||||||||
| Net operating income: | |||||||||||||||
| Net operating income – Same Properties | 74,651 | 75,055 | (0.5 | ) | 281,731 | 283,508 | (0.6 | ) | |||||||
| Net operating income – Non-Same Properties | 27,169 | 20,035 | 35.6 | 123,085 | 70,059 | 75.7 | |||||||||
| Total net operating income – GAAP basis | 101,820 | 95,090 | 7.1 | 404,816 | 353,567 | 14.5 | |||||||||
| Other expenses: | |||||||||||||||
| General and administrative | 10,604 | 8,601 | 23.3 | 41,163 | 34,383 | 19.7 | |||||||||
| Interest | 14,757 | 17,158 | (14.0 | ) | 63,407 | 69,509 | (8.8 | ) | |||||||
| Depreciation and amortization | 40,885 | 34,409 | 18.8 | 157,526 | 126,033 | 25.0 | |||||||||
| Loss on early extinguishment of debt | – | 2,372 | (100.0 | ) | 6,485 | 45,168 | (85.6 | ) | |||||||
| Total other expenses | 66,246 | 62,540 | 5.9 | 268,581 | 275,093 | (2.4 | ) | ||||||||
| Income from continuing operations | $ | 35,574 | $ | 32,550 | 9.3 | % | $ | 136,235 | $ | 78,474 | 73.6 | % | |||
| Net operating income – Same Properties – GAAP basis | $ | 74,651 | $ | 75,055 | (0.5 | )% | $ | 281,731 | $ | 283,508 | (0.6 | )% | |||
| Straight line rent adjustments | (1,594 | ) | (4,168 | ) | 61.8 | 1,324 | (11,611 | ) | 111.4 | ||||||
| Net operating income – Same Properties – cash basis | $ | 73,057 | $ | 70,887 | 3.1 | % | $ | 283,055 | $ | 271,897 | 4.1 | % |
Same property data
| Three Months Ended | Year Ended | |||
|---|---|---|---|---|
| December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |
| Number of properties | 135 | 134 | 127 | 129 |
| Rentable square feet | 10,097,201 | 9,875,434 | 9,489,070 | 9,426,729 |
| Occupancy at end of current period | 93.9% | 93.8% | 93.7% | 94.6% |
| Occupancy at end of same period prior year | 93.9% | 93.8% | 94.5% | 95.1% |
The following table reconciles same properties to total properties for the year ended December 31, 2011:
| **** | Number of<br> Properties | Number of<br> Properties | **** | Number of<br> Properties | **** | ||
|---|---|---|---|---|---|---|---|
| Redevelopment – active | Redevelopment – deliveries since January 1, 2010 | Properties acquired since January 1, 2010 | |||||
| 10300 Campus Point Drive | 1 | 15010 Broschart Road | 1 | 14920 Broschart Road | 1 | ||
| 11119 North Torrey Pines Road | 1 | 215 First Street | 1 | 285 Bear Hill Road | 1 | ||
| 1551 Eastlake Avenue | 1 | 3 Preston Court | 1 | 3985 Sorrento Valley Boulevard | 1 | ||
| 20 Walkup Drive | 1 | 3535/3565 General Atomics Court | 2 | 409/499 Illinois Avenue | 2 | ||
| 3530/3550 John Hopkins Court | 2 | 5 Research Place | 1 | 5200 Illumina Way | 1 | ||
| 400 Technology Square | 1 | 500 Arsenal Street | 1 | 5871 Oberlin Drive | 1 | ||
| 6101 Quadrangle Drive | 1 | 555 Heritage Drive | 1 | 7330 Carroll Road | 1 | ||
| 620 Professional Drive | 1 | 9393 Towne Center Drive | 1 | 950 Wind River Lane | 1 | ||
| 6275 Nancy Ridge Drive | 1 | 9 | 9 | ||||
| 9800 Medical Center Drive | 3 | ||||||
| 13 | |||||||
| Development – active | Development – deliveries since January 1, 2010 | ||||||
| 225 Binney Street | 1 | 1500 Owens Street | 1 | ||||
| 400/450 East Jamie Court | 2 | 199 E. Blaine Street | 1 | Total properties excluded from same properties | 41 | ||
| 409/499 Illinois Street | – | (1) | 249 E. Grand Ave | 1 | Properties held for sale | 3 | |
| 4755 Nexus Center Drive | 1 | 450 East 29th Street | 1 | 219 Terry Avenue | 1 | (2) | |
| 5200 Illumina Way | – | (1) | 455 Mission Bay Boulevard | 1 | Miscellaneous – Toronto | 1 | |
| Canada | – | (1) | 7 Triangle Drive | 1 | Same properties | 127 | |
| 4 | 6 | Total properties as of December 31, 2011 | 173 | **** |
(1) Property count is included in operating portfolio as of December 31, 2011.
(2) Represents a value-added property reclassified from land to operating property during the three months ended December 31, 2011.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Leasing Activity
December 31, 2011
(Unaudited)
| Three Months Ended December 31, 2011 | Rentable | TI’s/Lease | ||||||
|---|---|---|---|---|---|---|---|---|
| Number | Square | Expiring | New | Rental Rate | Commissions Per | Average Lease | ||
| of Leases | Footage | Rates | Rates | Changes | Square Foot | Terms | ||
| Leasing activity: | ||||||||
| Lease expirations | ||||||||
| Cash basis | 53 | 1,044,687 | $30.37 | – | – | – | – | |
| GAAP basis | 53 | 1,044,687 | $27.65 | – | – | – | – | |
| Renewed/re-leased space leased | ||||||||
| Cash basis | 33 | 650,163 | $29.89 | $28.66 | (4.1% | ) | $9.43 | 4.8 years |
| GAAP basis | 33 | 650,163 | $26.81 | $28.84 | 7.6% | $9.43 | 4.8 years | |
| Developed/redeveloped/vacant space leased | ||||||||
| Cash basis | 25 | 491,892 | – | $32.66 | – | $16.91 | 9.4 years | |
| GAAP basis | 25 | 491,892 | – | $36.88 | – | $16.91 | 9.4 years | |
| Month-to-month leases in effect | ||||||||
| Cash basis | 5 | 11,095 | $38.33 | $40.42 | – | – | – | |
| GAAP basis | 5 | 11,095 | $37.98 | $40.42 | – | – | – | |
| Leasing activity summary: | ||||||||
| Excluding month-to-month leases | ||||||||
| Cash basis | 58 | 1,142,055 | – | $30.38 | – | $12.65 | 6.8 years | |
| GAAP basis | 58 | 1,142,055 | – | $32.30 | – | $12.65 | 6.8 years | |
| Including month-to-month leases | ||||||||
| Cash basis | 63 | 1,153,150 | – | $30.48 | – | – | – | |
| GAAP basis | 63 | 1,153,150 | – | $32.38 | – | – | – |
During the three months ended December 31, 2011, we granted tenant concessions/free rent averaging approximately 2.5 months with respect to the 1,142,055 rentable square feet leased.
| Year Ended December 31, 2011 | Rentable | TI’s/Lease | ||||||
|---|---|---|---|---|---|---|---|---|
| Number | Square | Expiring | New | Rental Rate | Commissions Per | Average Lease | ||
| of Leases | Footage | Rates | Rates | Changes | Square Foot | Terms | ||
| Leasing activity: | ||||||||
| Lease expirations | ||||||||
| Cash basis | 158 | 2,689,257 | $29.98 | – | – | – | – | |
| GAAP basis | 158 | 2,689,257 | $28.42 | – | – | – | – | |
| Renewed/re-leased space leased | ||||||||
| Cash basis | 109 | 1,821,866 | $30.73 | $30.16 | (1.9% | ) | $5.82 | 4.2 years |
| GAAP basis | 109 | 1,821,866 | $28.79 | $30.00 | 4.2% | $5.82 | 4.2 years | |
| Developed/redeveloped/vacant space leased | ||||||||
| Cash basis | 81 | 1,585,610 | – | $33.45 | – | $12.78 | 8.9 years | |
| GAAP basis | 81 | 1,585,610 | – | $36.00 | – | $12.78 | 8.9 years | |
| Month-to-month leases in effect | ||||||||
| Cash basis | 5 | 11,095 | $38.33 | $40.42 | – | – | – | |
| GAAP basis | 5 | 11,095 | $37.98 | $40.42 | – | – | – | |
| Leasing activity summary: | ||||||||
| Excluding month-to-month leases | ||||||||
| Cash basis | 190 | 3,407,476 | – | $31.69 | – | $9.06 | 6.4 years | |
| GAAP basis | 190 | 3,407,476 | – | $32.79 | – | $9.06 | 6.4 years | |
| Including month-to-month leases | ||||||||
| Cash basis | 195 | 3,418,571 | – | $31.72 | – | – | – | |
| GAAP basis | 195 | 3,418,571 | – | $32.82 | – | – | – |
During the year ended December 31, 2011, we granted tenant concessions/free rent averaging approximately 2.0 months with respect to the 3,407,476 rentable square feet leased. Additionally, approximately 64% of the number of leases executed during the year ended December 31, 2011, had no tenant concessions/free rent.
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 23 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Leasing Activity
December 31, 2011
(Unaudited)
| **** | Year Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| **** | December 31, 2011 | December 31, 2010 | December 31, 2009 | December 31, 2008 | December 31, 2007 | |||||
| **** | Cash | GAAP | Cash | GAAP | Cash | GAAP | Cash | GAAP | Cash | GAAP |
| Lease expirations | ||||||||||
| Rentable square footage | 2,689,257 | 2,689,257 | 2,416,291 | 2,416,291 | 1,842,597 | 1,842,597 | 1,664,944 | 1,664,944 | 1,626,033 | 1,626,033 |
| Expiring rates | $29.98 | $28.42 | $27.18 | $28.54 | $30.61 | $30.70 | $26.88 | $25.52 | $25.98 | $26.97 |
| Renewed/re-leased space | ||||||||||
| Leased rentable square footage | 1,821,866 | 1,821,866 | 1,777,966 | 1,777,966 | 1,188,184 | 1,188,184 | 1,254,285 | 1,254,285 | 895,894 | 895,894 |
| New rates | $30.16 | $30.00 | $29.41 | $32.04 | $28.11 | $27.72 | $28.60 | $29.34 | $31.41 | $31.48 |
| Expiring rates | $30.73 | $28.79 | $28.84 | $30.54 | $28.07 | $26.78 | $27.08 | $25.51 | $29.38 | $28.66 |
| Rental rate changes | (1.9%) | 4.2% | 2.0% | 4.9% | 0.1% | 3.5% | 5.6% | 15.0% | 6.9% | 9.8% |
| Average lease terms | 4.2 years | 4.2 years | 8.1 years | 8.1 years | 3.3 years | 3.3 years | 4.3 years | 4.3 years | 4.0 years | 4.0 years |
| Developed/redeveloped/vacant space leased | ||||||||||
| Rentable square footage | 1,585,610 | 1,585,610 | 966,273 | 966,273 | 676,163 | 676,163 | 906,859 | 906,859 | 686,856 | 686,856 |
| New rates | $33.45 | $36.00 | $36.33 | $39.89 | $33.57 | $36.00 | $35.04 | $37.64 | $31.59 | $33.68 |
| Average lease terms | 8.9 years | 8.9 years | 9.7 years | 9.7 years | 6.6 years | 6.6 years | 7.2 years | 7.2 years | 6.5 years | 6.5 years |
| Totals | ||||||||||
| Rentable square footage | 3,407,476 | 3,407,476 | 2,744,239 | 2,744,239 | 1,864,347 | 1,864,347 | 2,161,144 | 2,161,144 | 1,582,750 | 1,582,750 |
| New rates | $31.69 | $32.79 | $31.84 | $34.80 | $30.09 | $30.73 | $31.30 | $32.82 | $31.49 | $32.44 |
| TI’s/lease commissions per square foot | $9.06 | $9.06 | $5.70 | $5.70 | $5.49 | $5.49 | $7.23 | $7.23 | $6.95 | $6.95 |
| Average lease terms | 6.4 years | 6.4 years | 8.7 years | 8.7 years | 4.5 years | 4.5 years | 5.5 years | 5.5 years | 5.1 years | 5.1 years |
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 24 | |||||||||
| --- | --- |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Lease Expirations
December 31, 2011
(Unaudited)
| Year of Lease<br> Expiration | Number of Leases<br> Expiring | Rentable Square <br> Footage (“RSF”) of<br> Expiring Leases | Percentage of<br> Aggregate<br> Total RSF | Annualized Base Rent<br> of Expiring Leases<br> (per RSF) | |||
|---|---|---|---|---|---|---|---|
| 2012 | 89 | (1) | 1,289,154 | (1) | 9.5 | % | $27.13 |
| 2013 | 84 | 1,338,019 | 9.8 | 29.27 | |||
| 2014 | 77 | 1,305,724 | 9.6 | 29.73 | |||
| 2015 | 57 | 1,222,622 | 9.0 | 32.79 | |||
| 2016 | 47 | 1,370,504 | 10.1 | 31.21 | |||
| 2017 | 30 | 1,069,380 | 7.9 | 32.88 | |||
| 2018 | 21 | 1,160,033 | 8.5 | 36.24 | |||
| 2019 | 11 | 499,498 | 3.7 | 35.50 | |||
| 2020 | 15 | 731,631 | 5.4 | 40.39 | |||
| 2021 | 18 | 611,863 | 4.5 | 38.42 | |||
| **** | Annualized Base | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| 2012 RSF of Expiring Leases | Rent of | ||||||
| Negotiating/ | Targeted for | Remaining | Expiring Leases | ||||
| Markets | Leased | Anticipating | Redevelopment | Expiring Leases | Total | (per RSF) | |
| California – San Diego | 62,047 | 5,193 | 76,791 | 61,253 | 205,284 | 26.22 | |
| California – San Francisco | 35,847 | 13,980 | 32,074 | 119,207 | 201,108 | 23.49 | |
| Greater Boston | 70,736 | 45,217 | – | 165,418 | 281,371 | 40.85 | |
| NYC | – | – | – | – | – | – | |
| New Jersey/Suburban Philadelphia | – | – | – | 7,239 | 7,239 | 13.24 | |
| North Carolina – Research Triangle Park | 8,940 | 12,196 | – | 33,252 | 54,388 | 13.81 | |
| Suburban Washington, D.C. | 108,604 | 8,793 | – | 268,932 | 386,329 | 21.17 | |
| Washington – Seattle | 2,468 | 45,780 | 65,936 | 39,251 | 153,435 | 28.31 | |
| International | – | – | – | – | – | – | |
| Total | 288,642 | 131,159 | 174,801 | 694,552 | 1,289,154 | (1) | 27.13 |
| Percentage of expiring leases | 22% | 10% | 14% | 54% | 100% |
All values are in US Dollars.
| **** | **** | Annualized Base | ||||
|---|---|---|---|---|---|---|
| **** | 2013 RSF of Expiring Leases | Rent of | ||||
| **** | **** | Negotiating/ | Targeted for | Remaining | **** | Expiring Leases |
| Markets | Leased | Anticipating | Redevelopment | Expiring Leases | Total | (per RSF) |
| California – San Diego | 9,849 | 8,683 | 14,030 | 139,708 | 172,270 | 21.33 |
| California – San Francisco | – | 49,108 | – | 244,270 | 293,378 | 27.15 |
| Greater Boston | – | 102,594 | – | 374,814 | 477,408 | 34.81 |
| NYC | – | – | – | – | – | – |
| New Jersey/Suburban Philadelphia | – | – | – | – | – | – |
| North Carolina – Research Triangle Park | – | 8,795 | – | 56,893 | 65,688 | 22.31 |
| Suburban Washington, D.C. | – | 118,470 | – | 188,596 | 307,066 | 28.72 |
| Washington – Seattle | – | – | – | 15,373 | 15,373 | 28.18 |
| International | – | – | – | 6,836 | 6,836 | 27.14 |
| Total | 9,849 | 287,650 | 14,030 | 1,026,490 | 1,338,019 | 29.27 |
| Percentage of expiring leases | 1% | 21% | 1% | 77% | 100% |
All values are in US Dollars.
(1) Excludes five month-to-month leases for approximately 11,000 rentable square feet.
(2) Based upon rental rates achieved in recently executed leases.
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 25 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties and Summary of Occupancy Percentages
December 31, 2011
(Unaudited)
Summary of properties
| Rentable Square Feet | Number of | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Markets | Operating | Redevelopment | Development | Total | Properties | Annualized Base Rent | |||
| California – San Diego | 2,038,575 | 407,474 | 168,685 | 2,614,734 | 35 | $ | 65,628 | 16 | % |
| California – San Francisco | 2,269,578 | – | 319,766 | 2,589,344 | 24 | 83,542 | 20 | ||
| Greater Boston | 3,124,818 | 329,438 | 303,143 | 3,757,399 | 39 | 117,080 | 29 | ||
| NYC/New Jersey/Suburban Philadelphia | 748,216 | – | – | 748,216 | 9 | 33,186 | 8 | ||
| North Carolina – Research Triangle Park | 822,919 | 18,060 | – | 840,979 | 13 | 17,787 | 4 | ||
| Suburban Washington, D.C. | 2,447,674 | 105,706 | – | 2,553,380 | 32 | 54,074 | 13 | ||
| Washington – Seattle | 887,824 | 59,179 | – | 947,003 | 11 | 33,527 | 8 | ||
| Other non-cluster markets | 61,002 | – | – | 61,002 | 2 | 763 | – | ||
| Domestic markets | 12,400,606 | 919,857 | 791,594 | 14,112,057 | 165 | 405,587 | 98 | ||
| International | 1,069,651 | – | 26,426 | 1,096,077 | 5 | 8,503 | 2 | ||
| Subtotal | 13,470,257 | 919,857 | 818,020 | 15,208,134 | 170 | $ | 414,090 | 100 | % |
| Discontinued | 97,740 | – | – | 97,740 | 3 | ||||
| Total | 13,567,997 | 919,857 | 818,020 | 15,305,874 | 173 |
Summary of occupancy percentages
| Operating Properties | Operating and Redevelopment Properties | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Markets | December 31, 2011 | September 30, 2011 | June 30, 2011 | December 31, 2011 | September 30, 2011 | June 30, 2011 | ||||||
| California – San Diego | 96.4 | % | 94.4 | % | 93.9 | % | 80.3 | % | 77.7 | % | 77.0 | % |
| California – San Francisco | 96.7 | 95.9 | 94.5 | 96.7 | 95.9 | 94.5 | ||||||
| Greater Boston | 93.9 | 94.2 | 91.3 | 85.0 | 89.3 | 86.1 | ||||||
| NYC/New Jersey/Suburban Philadelphia | 87.9 | 87.7 | 88.2 | 87.9 | 87.7 | 88.2 | ||||||
| North Carolina – Research Triangle Park | 94.3 | 95.7 | 96.6 | 92.3 | 92.3 | 92.7 | ||||||
| Suburban Washington, D.C. | 96.2 | 96.0 | 96.5 | 92.2 | 91.6 | 92.0 | ||||||
| Washington – Seattle | 96.7 | 97.1 | 99.1 | 90.6 | 97.1 | 99.1 | ||||||
| Other non-cluster markets | 62.2 | 62.2 | 56.4 | 62.2 | 62.2 | 56.4 | ||||||
| Domestic markets | 95.0 | 94.6 | 93.9 | 88.4 | 89.2 | 88.3 | ||||||
| International | 91.8 | 91.8 | 90.2 | 91.8 | 91.8 | 90.2 | ||||||
| Total | 94.9 | % | 94.6 | % | 93.8 | % | 88.5 | % | 89.3 | % | 88.3 | % |
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 26 | |||||||||||
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Property Listing December 31, 2011 (Dollars in thousands)
(Unaudited)
| Rentable Square Feet | Occupancy Percentage | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Address | Submarket | Operating | Redevelopment | Development | Total | Number of<br> Properties | Annualized<br> Base Rent | Operating | Operating and<br> Redevelopment | |||
| California – San Diego | **** | **** | **** | **** | **** | **** | **** | **** | **** | |||
| 10931/10933 North Torrey Pines<br> Road (1) | Torrey Pines | 96,641 | – | – | 96,641 | 1 | $ | 2,969 | 99.5 | % | 99.5 | % |
| 10975 North Torrey Pines Road | Torrey Pines | 44,733 | – | – | 44,733 | 1 | 1,638 | 100.0 | 100.0 | |||
| 11119 North Torrey Pines Road | Torrey Pines | – | 72,245 | – | 72,245 | 1 | – | N/A | – | |||
| 3010 Science Park Road | Torrey Pines | 74,557 | – | – | 74,557 | 1 | 3,215 | 100.0 | 100.0 | |||
| 3115/3215 Merryfield Row | Torrey Pines | 158,645 | – | – | 158,645 | 2 | 7,098 | 100.0 | 100.0 | |||
| 3530/3550 John Hopkins Court &<br> 3535/3565 General Atomics Court | Torrey Pines | 117,058 | 98,320 | – | 215,378 | 4 | 2,997 | 91.7 | 49.8 | |||
| 10300 Campus Point Drive | University Town Center | 260,197 | 189,562 | – | 449,759 | 1 | 9,591 | 100.0 | 57.9 | |||
| 4755/4757/4767 Nexus Center<br> Drive (2) | University Town Center | 132,330 | – | 45,255 | 177,585 | 3 | 4,914 | 100.0 | 100.0 | |||
| 5200 Illumina Way | University Town Center | 346,581 | – | 123,430 | 470,011 | 1 | 13,260 | 100.0 | 100.0 | |||
| 9363/9373/9393 Towne Center Drive | University Town Center | 111,513 | – | – | 111,513 | 3 | 3,337 | 100.0 | 100.0 | |||
| 9880 Campus Point Drive | University Town Center | 71,510 | – | – | 71,510 | 1 | 2,774 | 100.0 | 100.0 | |||
| 5810-5820 Nancy Ridge Drive | Sorrento Mesa | 87,298 | – | – | 87,298 | 1 | 1,715 | 100.0 | 100.0 | |||
| 5871 Oberlin Drive | Sorrento Mesa | 33,817 | – | – | 33,817 | 1 | 878 | 100.0 | 100.0 | |||
| 6138-6150 Nancy Ridge Drive | Sorrento Mesa | 56,698 | – | – | 56,698 | 1 | 1,586 | 100.0 | 100.0 | |||
| 6146/6166 Nancy Ridge Drive | Sorrento Mesa | 51,273 | – | – | 51,273 | 2 | 1,008 | 87.4 | 87.4 | |||
| 6175/6225/6275 Nancy Ridge Drive | Sorrento Mesa | 60,232 | 47,347 | – | 107,579 | 3 | 419 | 47.2 | 26.4 | |||
| 7330 Carroll Road | Sorrento Mesa | 66,244 | – | – | 66,244 | 1 | 2,141 | 89.4 | 89.4 | |||
| 10505 Roselle Street &<br> 3770 Tansy Street | Sorrento Valley | 33,013 | – | – | 33,013 | 2 | 1,001 | 100.0 | 100.0 | |||
| 11025/11035/11045 Roselle Street | Sorrento Valley | 65,910 | – | – | 65,910 | 3 | 1,035 | 72.4 | 72.4 | |||
| 3985 Sorrento Valley Boulevard | Sorrento Valley | 60,545 | – | – | 60,545 | 1 | 1,557 | 100.0 | 100.0 | |||
| 13112 Evening Creek Drive | I-15 Corridor | 109,780 | – | – | 109,780 | 1 | 2,495 | 100.0 | 100.0 | |||
| California – San Diego | 2,038,575 | 407,474 | 168,685 | 2,614,734 | 35 | $ | 65,628 | 96.4 | % | 80.3 | % | |
| California – San Francisco | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| 1500 Owens Street | Mission Bay | 158,267 | – | – | 158,267 | 1 | $ | 6,721 | 93.8 | % | 93.8 | % |
| 1700 Owens Street | Mission Bay | 157,340 | – | – | 157,340 | 1 | 6,962 | 97.5 | 97.5 | |||
| 455 Mission Bay Boulevard | Mission Bay | 210,000 | – | – | 210,000 | 1 | 7,850 | 92.4 | 92.4 | |||
| 409/499 Illinois Street | Mission Bay | 234,249 | – | 219,007 | 453,256 | 2 | 14,318 | 100.0 | 100.0 | |||
| 249 E. Grand Avenue | South San Francisco | 129,501 | – | – | 129,501 | 1 | 5,084 | 100.0 | 100.0 | |||
| 341/343 Oyster Point Blvd | South San Francisco | 107,960 | – | – | 107,960 | 2 | 1,961 | 100.0 | 100.0 | |||
| 400/450 East Jamie Court | South San Francisco | 62,548 | – | 100,759 | 163,307 | 2 | 1,743 | 100.0 | 100.0 | |||
| 500 Forbes Boulevard | South San Francisco | 155,685 | – | – | 155,685 | 1 | 5,540 | 100.0 | 100.0 | |||
| 600/630/650 Gateway Boulevard | South San Francisco | 150,960 | – | – | 150,960 | 3 | 3,798 | 91.0 | 91.0 | |||
| 681 Gateway Boulevard | South San Francisco | 126,971 | – | – | 126,971 | 1 | 6,161 | 100.0 | 100.0 | |||
| 7000 Shoreline Court | South San Francisco | 136,393 | – | – | 136,393 | 1 | 4,084 | 100.0 | 100.0 | |||
| 901/951 Gateway Boulevard | South San Francisco | 170,244 | – | – | 170,244 | 2 | 5,355 | 88.3 | 88.3 | |||
| 2425 Garcia Ave &<br> 2400/2450 Bayshore Pky | Peninsula | 98,964 | – | – | 98,964 | 1 | 3,224 | 96.4 | 96.4 | |||
| 2625/2627/2631 Hanover Street (3) | Peninsula | 32,074 | – | – | 32,074 | 1 | 1,335 | 100.0 | 100.0 | |||
| 3165 Porter Drive | Peninsula | 91,644 | – | – | 91,644 | 1 | 3,929 | 100.0 | 100.0 | |||
| 3350 W. Bayshore Road | Peninsula | 60,000 | – | – | 60,000 | 1 | 1,531 | 100.0 | 100.0 | |||
| 75 & 125 Shoreway Road | Peninsula | 82,815 | – | – | 82,815 | 1 | 1,864 | 92.3 | 92.3 | |||
| 849/863 Mitten Road &<br> 866 Malcolm Road | Peninsula | 103,963 | – | – | 103,963 | 1 | 2,082 | 99.3 | 99.3 | |||
| California – San Francisco | 2,269,578 | – | 319,766 | 2,589,344 | 24 | $ | 83,542 | 96.7 | % | 96.7 | % |
(1) Includes 9,741 and 14,030 rentable square feet targeted for redevelopment in 2012 and 2013, respectively.
(2) Includes 67,050 rentable square feet targeted for redevelopment in 2012.
(3) Includes 32,074 rentable square feet targeted for redevelopment in 2012.
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 27 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Property Listing December 31, 2011 (Dollars in thousands)
(Unaudited)
| Rentable Square Feet | Occupancy Percentage | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Address | Submarket | Operating | Redevelopment | Development | Total | Number of<br> Properties | Annualized<br> Base Rent | Operating | Operating and<br> Redevelopment | |||
| Greater Boston | **** | **** | **** | **** | **** | **** | **** | **** | **** | |||
| 100 Technology Square | Cambridge/Inner Suburbs | 255,441 | – | – | 255,441 | 1 | $ | 17,640 | 100.0 | % | 100.0 | % |
| 200 Technology Square | Cambridge/Inner Suburbs | 177,101 | – | – | 177,101 | 1 | 10,264 | 100.0 | 100.0 | |||
| 300 Technology Square | Cambridge/Inner Suburbs | 175,609 | – | – | 175,609 | 1 | 10,422 | 99.4 | 99.4 | |||
| 400 Technology Square | Cambridge/Inner Suburbs | – | 212,123 | – | 212,123 | 1 | – | N/A | – | |||
| 500 Technology Square | Cambridge/Inner Suburbs | 184,207 | – | – | 184,207 | 1 | 10,022 | 98.4 | 98.4 | |||
| 600 Technology Square | Cambridge/Inner Suburbs | 128,224 | – | – | 128,224 | 1 | 4,363 | 99.6 | 99.6 | |||
| 700 Technology Square | Cambridge/Inner Suburbs | 48,930 | – | – | 48,930 | 1 | 1,753 | 94.2 | 94.2 | |||
| 161 First Street | Cambridge/Inner Suburbs | 46,356 | – | – | 46,356 | 1 | 1,812 | 99.5 | 99.5 | |||
| 167 Sidney Street | Cambridge/Inner Suburbs | 26,589 | – | – | 26,589 | 1 | 1,392 | 100.0 | 100.0 | |||
| 215 First Street | Cambridge/Inner Suburbs | 366,719 | – | – | 366,719 | 1 | 10,887 | 90.9 | 90.9 | |||
| 225 Binney Street | Cambridge/Inner Suburbs | – | – | 303,143 | 303,143 | 1 | – | N/A | N/A | |||
| 300 Third Street | Cambridge/Inner Suburbs | 131,963 | – | – | 131,963 | 1 | 6,575 | 100.0 | 100.0 | |||
| 480 Arsenal | Cambridge/Inner Suburbs | 140,744 | – | – | 140,744 | 1 | 4,549 | 100.0 | 100.0 | |||
| 500 Arsenal Street | Cambridge/Inner Suburbs | 93,516 | – | – | 93,516 | 1 | 3,584 | 100.0 | 100.0 | |||
| 780/790 Memorial Drive | Cambridge/Inner Suburbs | 98,497 | – | – | 98,497 | 2 | 6,554 | 96.9 | 96.9 | |||
| 79/96 Charlestown Navy Yard | Cambridge/Inner Suburbs | 24,940 | – | – | 24,940 | 1 | – | – | – | |||
| 99 Erie Street | Cambridge/Inner Suburbs | 27,960 | – | – | 27,960 | 1 | 594 | 42.3 | 42.3 | |||
| 100 Beaver Street | Rte 128 | 82,330 | – | – | 82,330 | 1 | 2,093 | 88.2 | 88.2 | |||
| 285 Bear Hill Road | Rte 128 | – | 26,270 | – | 26,270 | 1 | – | N/A | – | |||
| 19 Presidential Way | Rte 128 | 128,325 | – | – | 128,325 | 1 | 3,398 | 100.0 | 100.0 | |||
| 29 Hartwell Avenue | Rte 128 | 59,000 | – | – | 59,000 | 1 | 2,049 | 100.0 | 100.0 | |||
| 3 Preston Court | Rte 128 | 30,000 | – | – | 30,000 | 1 | 184 | 22.1 | 22.1 | |||
| 35 Hartwell Avenue | Rte 128 | 46,700 | – | – | 46,700 | 1 | 1,650 | 100.0 | 100.0 | |||
| 35 Wiggins Avenue | Rte 128 | 48,640 | – | – | 48,640 | 1 | 724 | 100.0 | 100.0 | |||
| 44 Hartwell Avenue | Rte 128 | 26,828 | – | – | 26,828 | 1 | 1,105 | 100.0 | 100.0 | |||
| 45-47 Wiggins Avenue | Rte 128 | 38,000 | – | – | 38,000 | 1 | 1,114 | 100.0 | 100.0 | |||
| 60 Westview Street | Rte 128 | 40,200 | – | – | 40,200 | 1 | 1,147 | 100.0 | 100.0 | |||
| 6-8 Preston Court | Rte 128 | 54,391 | – | – | 54,391 | 1 | 553 | 84.0 | 84.0 | |||
| 111 Forbes Boulevard | Rte 495/Worcester | 58,280 | – | – | 58,280 | 1 | 261 | 28.6 | 28.6 | |||
| 130 Forbes Boulevard | Rte 495/Worcester | 97,566 | – | – | 97,566 | 1 | 871 | 100.0 | 100.0 | |||
| 155 Fortune Boulevard | Rte 495/Worcester | 36,000 | – | – | 36,000 | 1 | 806 | 100.0 | 100.0 | |||
| 20 Walkup Drive | Rte 495/Worcester | – | 91,045 | – | 91,045 | 1 | – | N/A | – | |||
| 30 Bearfoot Road | Rte 495/Worcester | 60,759 | – | – | 60,759 | 1 | 2,765 | 100.0 | 100.0 | |||
| 306 Belmont Street | Rte 495/Worcester | 78,916 | – | – | 78,916 | 1 | 1,139 | 100.0 | 100.0 | |||
| 350 Plantation Street | Rte 495/Worcester | 11,774 | – | – | 11,774 | 1 | 173 | 100.0 | 100.0 | |||
| 377 Plantation Street | Rte 495/Worcester | 92,711 | – | – | 92,711 | 1 | 2,082 | 85.1 | 85.1 | |||
| 381 Plantation Street | Rte 495/Worcester | 92,423 | – | – | 92,423 | 1 | 2,162 | 100.0 | 100.0 | |||
| One Innovation Drive | Rte 495/Worcester | 115,179 | – | – | 115,179 | 1 | 2,393 | 93.6 | 93.6 | |||
| Greater Boston | 3,124,818 | 329,438 | 303,143 | 3,757,399 | 39 | $ | 117,080 | 93.9 | % | 85.0 | % | |
| NYC/New Jersey/Suburban Philadelphia | **** | **** | **** | **** | **** | **** | **** | |||||
| 450 E. 29th Street | Midtown Manhattan | 309,141 | – | – | 309,141 | 1 | $ | 24,447 | 99.0 | % | 99.0 | % |
| 100 Phillips Parkway | Bergen County | 78,501 | – | – | 78,501 | 1 | 2,221 | 100.0 | 100.0 | |||
| 102 Witmer Road | Pennsylvania | 50,000 | – | – | 50,000 | 1 | 3,345 | 100.0 | 100.0 | |||
| 200 Lawrence Road | Pennsylvania | 111,451 | – | – | 111,451 | 1 | 1,254 | 100.0 | 100.0 | |||
| 210 Welsh Pool Road | Pennsylvania | 59,415 | – | – | 59,415 | 1 | 946 | 100.0 | 100.0 | |||
| 5100 Campus Drive | Pennsylvania | 21,782 | – | – | 21,782 | 1 | – | – | – | |||
| 701 Veterans Circle | Pennsylvania | 35,155 | – | – | 35,155 | 1 | 735 | 100.0 | 100.0 | |||
| 702 Electronic Drive | Pennsylvania | 40,171 | – | – | 40,171 | 1 | 238 | 42.5 | 42.5 | |||
| 279 Princeton Road | Princeton | 42,600 | – | – | 42,600 | 1 | – | – | – | |||
| NYC/New Jersey/Suburban Philadelphia | 748,216 | – | – | 748,216 | 9 | $ | 33,186 | 87.9 | % | 87.9 | % | |
| North Carolina – Research Triangle Park | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | ||
| 100 Capitola Drive | Research Triangle Park | 65,992 | – | – | 65,992 | 1 | $ | 978 | 95.8 | % | 95.8 | % |
| 108/110/112/114 Alexander Road | Research Triangle Park | 158,417 | – | – | 158,417 | 1 | 4,954 | 100.0 | 100.0 | |||
| 2525 E. NC Highway 54 | Research Triangle Park | 81,580 | – | – | 81,580 | 1 | 1,655 | 100.0 | 100.0 | |||
| 5 Triangle Drive | Research Triangle Park | 32,120 | – | – | 32,120 | 1 | 824 | 100.0 | 100.0 | |||
| 601 Keystone Park Drive | Research Triangle Park | 77,395 | – | – | 77,395 | 1 | 1,306 | 100.0 | 100.0 | |||
| 6101 Quadrangle Drive | Research Triangle Park | 12,083 | 18,060 | – | 30,143 | 1 | 227 | 100.0 | 40.1 | |||
| 7 Triangle Drive | Research Triangle Park | 96,626 | – | – | 96,626 | 1 | 2,879 | 100.0 | 100.0 | |||
| 7010/7020/7030 Kit Creek | Research Triangle Park | 133,654 | – | – | 133,654 | 3 | 2,395 | 85.3 | 85.3 | |||
| 800/801 Capitola Drive | Research Triangle Park | 120,197 | – | – | 120,197 | 2 | 1,901 | 83.8 | 83.8 | |||
| 555 Heritage Drive | Palm Beach | 44,855 | – | – | 44,855 | 1 | 668 | 88.6 | 88.6 | |||
| North Carolina – Research Triangle Park | 822,919 | 18,060 | – | 840,979 | 13 | $ | 17,787 | 94.3 | % | 92.3 | % | |
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 28 | |||||||||||
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Property Listing December 31, 2011 (Dollars in thousands)
(Unaudited)
| Rentable Square Feet | Occupancy Percentage | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Address | Submarket | Operating | Redevelopment | Development | Total | Number of<br> Properties | Annualized<br> Base Rent | Operating | Operating and<br> Redevelopment | |||
| Suburban Washington, D.C. | **** | **** | **** | **** | **** | **** | **** | **** | **** | |||
| 12301 Parklawn Drive | Rockville | 49,185 | – | – | 49,185 | 1 | $ | 1,024 | 100.0 | % | 100.0 | % |
| 1330 Piccard Drive | Rockville | 131,415 | – | – | 131,415 | 1 | 3,209 | 91.9 | 91.9 | |||
| 1405/1413 Research Boulevard | Rockville | 176,669 | – | – | 176,669 | 2 | 5,047 | 100.0 | 100.0 | |||
| 1500/1550 East Gude Drive | Rockville | 90,489 | – | – | 90,489 | 2 | 1,937 | 100.0 | 100.0 | |||
| 14920 Broschart Road | Rockville | 48,500 | – | – | 48,500 | 1 | 961 | 100.0 | 100.0 | |||
| 15010 Broschart Road | Rockville | 38,203 | – | – | 38,203 | 1 | 663 | 81.7 | 81.7 | |||
| 5 Research Court | Rockville | 54,906 | – | – | 54,906 | 1 | 1,564 | 100.0 | 100.0 | |||
| 5 Research Place | Rockville | 63,852 | – | – | 63,852 | 1 | 2,341 | 100.0 | 100.0 | |||
| 9800 Medical Center Drive | Rockville | 201,896 | 79,579 | – | 281,475 | 4 | 6,768 | 97.2 | 69.7 | |||
| 9920 Medical Center Drive | Rockville | 58,733 | – | – | 58,733 | 1 | 455 | 100.0 | 100.0 | |||
| 1201 Clopper Road | Gaithersburg | 143,585 | – | – | 143,585 | 1 | 3,480 | 100.0 | 100.0 | |||
| 1300 Quince Orchard Road | Gaithersburg | 54,874 | – | – | 54,874 | 1 | 812 | 100.0 | 100.0 | |||
| 16020 Industrial Drive | Gaithersburg | 83,541 | – | – | 83,541 | 1 | 1,410 | 100.0 | 100.0 | |||
| 19/20/22 Firstfield Road | Gaithersburg | 132,639 | – | – | 132,639 | 3 | 2,900 | 100.0 | 100.0 | |||
| 25/35/45 West Watkins Mill Road | Gaithersburg | 138,938 | – | – | 138,938 | 1 | 3,619 | 100.0 | 100.0 | |||
| 401 Professional Drive | Gaithersburg | 63,154 | – | – | 63,154 | 1 | 1,046 | 89.5 | 89.5 | |||
| 620 Professional Drive | Gaithersburg | – | 26,127 | – | 26,127 | 1 | – | N/A | – | |||
| 708 Quince Orchard Road | Gaithersburg | 49,624 | – | – | 49,624 | 1 | 1,138 | 99.3 | 99.3 | |||
| 9 W. Watkins Mill Road | Gaithersburg | 92,449 | – | – | 92,449 | 1 | 2,598 | 100.0 | 100.0 | |||
| 910 Clopper Road | Gaithersburg | 180,650 | – | – | 180,650 | 1 | 3,147 | 85.6 | 85.6 | |||
| 930/940 Clopper Road | Gaithersburg | 104,302 | – | – | 104,302 | 2 | 1,654 | 93.4 | 93.4 | |||
| 950 Wind River Lane | Gaithersburg | 50,000 | – | – | 50,000 | 1 | 1,082 | 100.0 | 100.0 | |||
| 8000/9000/10000 Virginia Manor Road | Beltsville | 191,884 | – | – | 191,884 | 1 | 2,878 | 84.1 | 84.1 | |||
| 14225 Newbrook Drive | Northern Virginia | 248,186 | – | – | 248,186 | 1 | 4,341 | 100.0 | 100.0 | |||
| Suburban Washington, D.C. | 2,447,674 | 105,706 | – | 2,553,380 | 32 | $ | 54,074 | 96.2 | % | 92.2 | % | |
| Washington - Seattle | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| 1201/1208 Eastlake Avenue | Lake Union | 203,369 | – | – | 203,369 | 2 | $ | 8,747 | 100.0 | % | 100.0 | % |
| 1551 Eastlake Avenue | Lake Union | 58,304 | 59,179 | – | 117,483 | 1 | 1,541 | 100.0 | 49.6 | |||
| 1600 Fairview Avenue | Lake Union | 27,991 | – | – | 27,991 | 1 | 1,294 | 100.0 | 100.0 | |||
| 1616 Eastlake Avenue (1) | Lake Union | 165,493 | – | – | 165,493 | 1 | 5,225 | 94.7 | 94.7 | |||
| 199 E. Blaine Street | Lake Union | 115,084 | – | – | 115,084 | 1 | 6,140 | 100.0 | 100.0 | |||
| 219 Terry Avenue | Lake Union | 30,845 | – | – | 30,845 | 1 | 1,410 | 93.4 | 93.4 | |||
| 1124 Columbia Street | First Hill | 203,817 | – | – | 203,817 | 1 | 6,592 | 96.3 | 96.3 | |||
| 3000/3018 Western Avenue | Elliott Bay | 47,746 | – | – | 47,746 | 1 | 1,795 | 100.0 | 100.0 | |||
| 410 W. Harrison/410 Elliott Avenue West | Elliott Bay | 35,175 | – | – | 35,175 | 2 | 783 | 67.4 | 67.4 | |||
| Washington - Seattle | 887,824 | 59,179 | – | 947,003 | 11 | $ | 33,527 | 96.7 | % | 90.6 | % | |
| Other non-cluster market properties | 61,002 | – | – | 61,002 | 2 | $ | 763 | 62.2 | % | 62.2 | % | |
| Domestic Properties | 12,400,606 | 919,857 | 791,594 | 14,112,057 | 165 | $ | 405,587 | 95.0 | % | 88.4 | % | |
| International | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** | |
| Canada | 46,032 | – | – | 46,032 | 1 | $ | 1,889 | 100.0 | % | 100.0 | % | |
| Canada | 66,000 | – | – | 66,000 | 1 | 1,225 | 100.0 | 100.0 | ||||
| Canada | 106,364 | – | 26,426 | 132,790 | 1 | 2,181 | 78.0 | 78.0 | ||||
| Canada | 68,000 | – | – | 68,000 | 1 | 3,208 | 100.0 | 100.0 | ||||
| Canada (2) | **** | 783,255 | – | – | 783,255 | 1 | N/A | N/A | N/A | |||
| International | 1,069,651 | – | 26,426 | 1,096,077 | 5 | $ | 8,503 | 91.8 | % | 91.8 | % | |
| Subtotal | **** | 13,470,257 | 919,857 | 818,020 | 15,208,134 | 170 | $ | 414,090 | 94.9 | % | 88.5 | % |
| Properties “held for sale” | 97,740 | – | – | 97,740 | 3 | **** | **** | **** | **** | **** | ||
| Total | **** | 13,567,997 | 919,857 | 818,020 | 15,305,874 | 173 | **** | **** | **** | **** | **** |
(1) In 2012, we expect to convert 65,936 rentable square feet of office space through redevelopment into life science laboratory space.
(2) Represents land and improvements subject to a ground lease with a tenant.
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 29 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Top 20 Tenants and Client Tenant Mix
December 31, 2011
(Tabular dollar amounts in thousands)
(Unaudited)
Top 20 tenants
| Remaining Lease | Approximate<br> Aggregate | Percentage<br> of<br> Aggregate | Percentage<br> of<br> Aggregate | Investment Grade Entities (3) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Number | Term in Years | Rentable | Total | Annualized | Annualized | Fitch | Moody’s | S&P | Education/ | ||||||
| Tenant | of Leases | (1) | (2) | Square Feet | Square Feet | Base Rent | Base Rent | Rating | Rating | Rating | Research | ||||
| 1 | Novartis AG | 7 | 4.7 | 5.0 | 453,000 | 3.0 | % | $ | 26,437 | 6.4 | % | AA | Aa2 | AA- | - |
| 2 | Eli Lilly and Company | 5 | 9.6 | 11.2 | 262,182 | 1.7 | 15,048 | 3.6 | A | A2 | AA- | - | |||
| 3 | Roche Holding Ltd | 5 | 5.8 | 6.0 | 387,813 | 2.5 | 14,833 | 3.6 | AA- | A1 | AA- | - | |||
| 4 | FibroGen, Inc. | 1 | 11.9 | 11.9 | 234,249 | 1.5 | 14,318 | 3.5 | - | - | - | - | |||
| 5 | Illumina, Inc. | 1 | 19.8 | 19.8 | 346,581 | 2.3 | 13,260 | 3.2 | - | - | - | - | |||
| 6 | United States Government | 8 | 3.0 | 3.2 | 378,526 | 2.5 | 11,641 | 2.8 | AAA | Aaa | AA+ | - | |||
| 7 | Bristol-Myers Squibb Company | 3 | 6.9 | 7.0 | 250,454 | 1.6 | 10,086 | 2.4 | A+ | A2 | A+ | - | |||
| 8 | GlaxoSmithKline plc | 4 | 7.6 | 7.4 | 182,387 | 1.2 | 9,565 | 2.3 | A+ | A1 | A+ | - | |||
| 9 | Massachusetts Institute of Technology | 3 | 3.0 | 2.7 | 178,952 | 1.2 | 8,154 | 2.0 | - | Aaa | AAA | ü | |||
| 10 | The Regents of the University of California | 3 | 9.6 | 9.6 | 182,242 | 1.2 | 7,428 | 1.8 | AA+ | Aa1 | AA | ü | |||
| 11 | NYU-Neuroscience Translational Research Institute | 2 | 13.8 | 12.9 | 79,788 | 0.5 | 7,224 | 1.7 | - | Aa3 | AA- | - | |||
| 12 | Alnylam Pharmaceuticals, Inc. (4) | 1 | 4.8 | 4.8 | 129,424 | 0.8 | 6,120 | 1.5 | - | - | - | - | |||
| 13 | Gilead Sciences, Inc. | 1 | 8.5 | 8.5 | 109,969 | 0.7 | 5,824 | 1.4 | - | Baa1 | A- | - | |||
| 14 | Amylin Pharmaceuticals, Inc. | 3 | 4.4 | 4.5 | 168,308 | 1.1 | 5,753 | 1.4 | - | - | - | - | |||
| 15 | Pfizer Inc. | 2 | 7.4 | 7.2 | 116,518 | 0.8 | 5,502 | 1.3 | A+ | A1 | AA | - | |||
| 16 | Theravance, Inc. (5) | 2 | 7.3 | 7.7 | 150,330 | 1.0 | 5,355 | 1.3 | - | - | - | - | |||
| 17 | The Scripps Research Institute | 2 | 4.9 | 4.9 | 99,377 | 0.6 | 5,197 | 1.3 | AA- | Aa3 | - | ü | |||
| 18 | Quest Diagnostics Incorporated | 2 | 4.6 | 4.6 | 280,113 | 1.8 | 4,989 | 1.2 | BBB+ | Baa2 | BBB+ | - | |||
| 19 | Infinity Pharmaceuticals, Inc. | 2 | 3.1 | 3.1 | 67,167 | 0.4 | 4,382 | 1.1 | - | - | - | - | |||
| 20 | Kadmon Corporation, LLC | 2 | 8.9 | 8.8 | 46,958 | 0.3 | 4,172 | 1.0 | - | - | - | - | |||
| Total/Weighted Average: | 59 | 7.5 | 8.0 | 4,104,338 | 26.7 | % | $ | 185,288 | 44.8 | % | |||||
| (1) | Represents remaining lease term in years based on percentage of leased square feet. | ||||||||||||||
| --- | --- | ||||||||||||||
| (2) | Represents remaining lease term in years based on percentage of annualized base rent in effect as of December 31, 2011. | ||||||||||||||
| (3) | Ratings obtained from each of the following rating agencies: Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s. | ||||||||||||||
| (4) | As of September 30, 2011, Novartis AG owned approximately 13% of the outstanding stock of Alnylam Pharmaceuticals, Inc. | ||||||||||||||
| (5) | As of October 26, 2011, GlaxoSmithKline plc owned approximately 18% of the outstanding stock of Theravance, Inc. |
Client tenant mix by annualized base rent
| Multinational Pharmaceutical | Institutional: Independent Non-Profit, University, and Government | Biotechnology: Public & Private | Medical Device, Life Science **** Product, Service, and Biofuels |
|---|---|---|---|
| · Abbott Laboratories<br><br><br>· Astellas Pharma Inc.<br><br><br>· AstraZeneca PLC<br><br><br>· Baxter International Inc.<br><br><br>· Bayer AG<br><br><br>· Bristol-Myers Squibb Company<br><br><br>· Eisai Co., Ltd.<br><br><br>· Eli Lilly and Company<br><br><br>· GlaxoSmithKline plc<br><br><br>· Johnson & Johnson<br><br><br>· Merck & Co., Inc.<br><br><br>· Novartis AG<br><br><br>· Pfizer Inc.<br><br><br>· Roche Holding Ltd<br><br><br>· Sanofi<br><br><br>· Shire plc<br><br><br>· The Genomics Institute of the Novartis Research Foundation | · California Institute of Technology<br><br><br>· Duke University<br><br><br>· Environmental Protection Agency<br><br><br>· Fred Hutchinson Cancer Research Center<br><br><br>· Massachusetts Institute of Technology<br><br><br>· National Institutes of Health<br><br><br>· NYU-Neuroscience Translational Research Institute<br><br><br>· Sanford-Burham Medical Research Institute<br><br><br>· Stanford University<br><br><br>· The Scripps Research Institute<br><br><br>· The Regents of the University of California<br><br><br>· UMass Memorial Health Care, Inc.<br><br><br>· UNC Health Care System<br><br><br>· United States Government<br><br><br>· University of Washington | · Achaogen Inc.<br><br><br>· Alnylam Pharmaceuticals, Inc.<br><br><br>· Amgen Inc.<br><br><br>· Amylin Pharmaceuticals, Inc.<br><br><br>· Avila Therapeutics, Inc.<br><br><br>· Biogen Idec Inc.<br><br><br>· Celgene Corporation<br><br><br>· Constellation Pharmaceuticals, Inc.<br><br><br>· Fate Therapeutics, Inc<br><br><br>· FibroGen, Inc.<br><br><br>· Forma Therapeutics, Inc.<br><br><br>· Gilead Sciences, Inc.<br><br><br>· Infinity Pharmaceuticals, Inc.<br><br><br>· Kadmon Corporation, LLC<br><br><br>· Medicago Inc.<br><br><br>· Proteostasis Therapeutics, Inc.<br><br><br>· Theravance, Inc.<br><br><br>· Warp Drive Biosynthetics, Inc. | · Canon U.S. Life Sciences, Inc.<br><br><br>· Illumina, Inc.<br><br><br>· Laboratory Corporation of America Holdings<br><br><br>· Life Technologies Corporation<br><br><br>· LS9, Inc.<br><br><br>· Monsanto Company<br><br><br>· Qiagen N.V.<br><br><br>· Quest Diagnostics Incorporated<br><br><br>· Sapphire Energy, Inc. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 30 | ||
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Value-Added Projects
December 31, 2011
| ALEXANDRIA CENTER TM FOR LIFE SCIENCE – NEW YORK CITY | |
|---|---|
 |
 <br><br><br><br><br><br>The Alexandria CenterTM for Life Science – New York City (“ACNYC”) will consist of three buildings aggregating approximately 1.1 million rentable square feet. The east tower consists of 309,141 rentable square feet and is approximately 99% occupied as of December 31, 2011. The ACNYC campus also includes 407,000 developable square feet, site of the future west tower, as well as a parcel supporting the future ground-up development of approximately 385,000 rentable square feet on the north end of the campus.<br><br><br>**** |
| ALEXANDRIA CENTER TM FOR SCIENCE AND TECHNOLOGY – MISSION BAY | ALEXANDRIA CENTER TM AT KENDALL SQUARE |
| The Alexandria CenterTM for Science and Technology – Mission Bay will consist of up to seven high-quality facilities aggregating approximately 1.3 million rentable square feet. We currently have five buildings aggregating approximately 760,000 rentable square feet leased to FibroGen, Inc., Merck & Co., Inc., Pfizer Inc., Bayer AG, and UCSF as well as other top-tier life science entities, 219,000 rentable square feet undergoing development, and future potential buildings aggregating approximately 290,000 rentable square feet. **** | Buildings in the white outline represent renderings of five future ground-up life science laboratory developments aggregating 1.9 million rentable square feet. We continue to advance various important preconstruction activities for this development site, including Building Information Modeling (3-D virtual modeling), design development, construction drawings (required for each of the five new buildings), sustainability and energy optimization review, budgeting, planning for future site and infrastructure work, and other activities prior to commencement of vertical construction of aboveground shell and core improvements. Our objective is to advance preconstruction activities in order to reduce the time to deliver a new ground-up development to a prospective tenant. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 31 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Real Estate and Development and Redevelopment
December 31, 2011
(Tabular dollar amounts in thousands, except per square foot amounts)
(Unaudited)
Summary of real estate
| December 31, 2011 | September 30, 2011 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Book Value | Square Footage | Cost per<br> Square Foot | Book Value | Square Footage | Cost per<br> Square Foot | |||||||
| Rental properties | $ | 5,112,759 | 13,567,997 | $ | 377 | $ | 5,000,700 | 13,590,125 | $ | 368 | ||
| Less: accumulated depreciation | (742,535 | ) | (710,580 | ) | ||||||||
| Rental properties, net | 4,370,224 | 4,290,120 | ||||||||||
| Construction in progress (“CIP”)/current value-added projects: | ||||||||||||
| Active redevelopment | 281,555 | 919,857 | 306 | 300,398 | 747,248 | 402 | ||||||
| Active development | 198,644 | 818,020 | 243 | 190,427 | 531,486 | 358 | ||||||
| Projects in India and China | 106,775 | 817,000 | 131 | 113,136 | 916,000 | 124 | ||||||
| Generic infrastructure/building improvement projects | 92,338 | – | – | – | – | – | ||||||
| 679,312 | 2,554,877 | 266 | 603,961 | 2,194,734 | 275 | |||||||
| Land/future value-added projects | ||||||||||||
| Land held for future development | 341,678 | 10,939,000 | 31 | 452,732 | 11,715,000 | 39 | ||||||
| Land undergoing preconstruction activities (additional CIP) (2) | 574,884 | 2,668,000 | 215 | 538,437 | 2,456,000 | 219 | ||||||
| 916,562 | 13,607,000 | 67 | 991,169 | 14,171,000 | 70 | |||||||
| Investment in unconsolidated real estate entity | 42,342 | 414,000 | 102 | 40,042 | 428,000 | 94 | ||||||
| Real estate, net | 6,008,440 | 30,143,874 | $ | 200 | 5,925,292 | 30,383,859 | $ | 195 | ||||
| Add: accumulated depreciation | 742,535 | 710,580 | ||||||||||
| Gross investment in real estate (1) | $ | 6,750,975 | 30,143,874 | $ | 6,635,872 | 30,383,859 | ||||||
| (1) | In addition to assets included in our gross investment in real estate, we also hold options/rights for parcels supporting approximately 3.0 million developable square feet. These parcels consist of: (a) a parcel supporting the future ground-up development of approximately 385,000 rentable square feet in Alexandria Center™ for Life Science - New York City related to an option under our ground lease; (b) right to acquire land parcels supporting ground-up development of 636,000 rentable square feet in Edinburgh, Scotland; and (c) an option to increase our land use rights by up to approximately 2.0 million additional developable square feet in China. | |||||||||||
| --- | --- | |||||||||||
| (2) | We generally will not commence ground-up development of any parcels undergoing preconstruction activities without first securing significant pre-leasing for such space. If vertical aboveground construction is not initiated at completion of preconstruction activities, the land parcel will be classified as land held for future development. The two largest projects included in preconstruction consist of our 1.6 million developable square feet at Alexandria Center™ at Kendall Square in East Cambridge, Massachusetts and our 407,000 developable square foot site for the second tower at Alexandria Center™ for Life Science – New York City. |
Development and redevelopment
| CIP | Investment | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Leased/ | RSF | RSF | December 31, 2011 | Cost to Complete | Total at Completion | Stabilized Yield | ||||||||||||
| Description | Negotiating | In CIP | In Service | In Service | CIP | 2012 | Thereafter | Amount | % | Cash | GAAP | |||||||
| Development projects | 69% | 717,261 | – | $ | – | $ | 171,592 | $ | 117,047 | 36% | $ | 102,773 | $ | 391,412 | 36% | 7.1% | 8.2% | |
| Urban/central business district redevelopment projects | 66 | 559,184 | 147,880 | 58,088 | 148,369 | 144,482 | 44 | 34,621 | 385,560 | 35 | 7.8 | 8.3 | ||||||
| Subtotal | 68 | 1,276,445 | 147,880 | 58,088 | 319,961 | 261,529 | 80 | 137,394 | 776,972 | 71 | 7.5% | 8.2% | ||||||
| Development – 400/450 East Jamie Court | 36 | 100,759 | 62,548 | 51,112 | 40,721 | 13,076 | 4 | 3,581 | 108,490 | 10 | 4.2% | 4.3% | ||||||
| Other – 400/450 East Jamie Court (1) | 13,669 | (13,669 | ) | |||||||||||||||
| Suburban and other redevelopment projects | 50 | 360,673 | 12,083 | 3,526 | 156,593 | 51,772 | 16 | 3,461 | 215,352 | 19 | ||||||||
| Other – Suburban and other redevelopment projects (1) | 23,407 | (23,407 | ) | |||||||||||||||
| Total development and redevelopment projects | 62% | 1,737,877 | 222,511 | 149,802 | 480,199 | 326,377 | 100% | 144,436 | 1,100,814 | 100% | ||||||||
| Projects in India and China | 817,000 | 106,775 | 41,350 | TBD | 148,125 | |||||||||||||
| Generic infrastructure/building improvement projects | 92,338 | 50,376 | TBD | 142,714 | ||||||||||||||
| Subtotal | 2,554,877 | 222,511 | 149,802 | 679,312 | 418,103 | 144,436 | 1,391,653 | |||||||||||
| Preconstruction | 2,668,000 | 574,884 | 46,657 | TBD | 621,541 | |||||||||||||
| Future projected construction | 87,905 | TBD | 87,905 | |||||||||||||||
| Total | 5,222,877 | 222,511 | $ | 149,802 | $ | 1,254,196 | $ | 552,665 | $ | 144,436 | $ | 2,101,099 |
(1) See footnote 1 on page 33.
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 32 |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Development and Redevelopment December 31 , 2011
(Tabular dollar amounts in thousands)
(Unaudited)
Development and redevelopment (continued)
| CIP | RSF | Investment | Stabilized | Project | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Negotiating/ | RSF | In | In | Cost to Complete | Total at | Yield | Start | Initial | Stabilization | |||||||||||
| Market/Property | Leased | Committed | In CIP | Service | Service | CIP | 2012 | Thereafter | Completion | Cash | GAAP | Date | Occupancy | Date | ||||||
| Development projects | **** | **** | **** | |||||||||||||||||
| San Diego – University Town Center | **** | |||||||||||||||||||
| 4755 Nexus Center Drive | 100% | – | 45,255 | – | $ | – | $ | 8,594 | $ | 13,747 | $ | – | $ | 22,341 | 7.0% | 7.7% | 1Q11 | 3Q12 | 3Q12 | |
| 5200 Illumina Way | 100 | – | 123,430 | – | – | 19,077 | 29,207 | 1,016 | 49,300 | 7.0 | 10.8 | 4Q10 | 4Q12 | 4Q12 | ||||||
| San Francisco – Mission Bay | **** | **** | **** | |||||||||||||||||
| 409/499 Illinois Street | – | – | 219,007 | – | – | 101,729 | 21,766 | 24,605 | 148,100 | 6.7 | 7.4 | 2Q11 | 4Q12 | 2Q14 | ||||||
| Greater Boston – Cambridge/Inner Suburbs | **** | **** | **** | |||||||||||||||||
| 225 Binney Street | 100 | – | 303,143 | – | – | 38,382 | 47,016 | 77,152 | 162,550 | 7.5 | 8.1 | 4Q11 | 4Q13 | 4Q13 | ||||||
| Canada | 100 | – | 26,426 | – | – | 3,810 | 5,311 | – | 9,121 | 4Q11 | 3Q12 | 3Q12 | ||||||||
| Development Projects | 69% | – | 717,261 | – | $ | – | $ | 171,592 | $ | 117,047 | $ | 102,773 | $ | 391,412 | 7.1% | 8.2% | ||||
| Urban/central business district redevelopment projects | ||||||||||||||||||||
| San Diego – Torrey Pines | ||||||||||||||||||||
| 3530/3550 John Hopkins Court | 100% | – | 98,320 | – | $ | – | $ | 26,304 | $ | 23,923 | $ | 173 | $ | 50,400 | 8.6% | 9.0% | 2Q10 | 2Q12 | 3Q12 | |
| San Diego – University Town Center | ||||||||||||||||||||
| 10300 Campus Point Drive | 91 | – | 189,562 | 89,576 | 41,686 | 20,961 | 57,051 | 11,902 | 131,600 | 7.6 | 7.7 | 4Q10 | 4Q11 | 3Q12 | ||||||
| Greater Boston – Cambridge/Inner Suburbs | ||||||||||||||||||||
| 400 Technology Square | 39 | – | 212,123 | – | – | 68,717 | 48,909 | 21,924 | 139,550 | 8.1 | 9.1 | 4Q11 | 4Q12 | 4Q13 | ||||||
| Seattle – Lake Union | ||||||||||||||||||||
| 1551 Eastlake Avenue | 13 | 20 | 59,179 | 58,304 | 16,402 | 32,387 | 14,599 | 622 | 64,010 | 7.0 | 7.4 | 4Q11 | 4Q11 | 4Q13 | ||||||
| Total urban/central business district redevelopment | 64% | 2% | 559,184 | 147,880 | $ | 58,088 | $ | 148,369 | $ | 144,482 | $ | 34,621 | $ | 385,560 | 7.8% | 8.3% | ||||
| Subtotal | 67% | 1% | 1,276,445 | 147,880 | $ | 58,088 | $ | 319,961 | $ | 261,529 | $ | 137,394 | $ | 776,972 | 7.5% | 8.2% | ||||
| San Francisco – South SF | ||||||||||||||||||||
| 400/450 East Jamie Court | 9 | 27 | 100,759 | 62,548 | 51,112 | 40,721 | 13,076 | 3,581 | 108,490 | 4.2% | 4.3% | 4Q06 | 3Q11 | 4Q13 | ||||||
| Other – 400/450 East Jamie Court (1) | 13,669 | (13,669 | ) | |||||||||||||||||
| Suburban and other redevelopment projects (2) | 12 | 38 | 360,673 | 12,083 | 3,526 | 156,593 | 51,772 | 3,461 | 215,352 | 2Q07-3Q11 | 4Q11-1Q13 | 3Q12-<br> 1Q13 | ||||||||
| Other – suburban and other redevelopment projects (1) | 23,407 | (23,407 | ) | |||||||||||||||||
| Total | 52% | 10% | 1,737,877 | 222,511 | $ | 149,802 | $ | 480,199 | $ | 326,377 | $ | 144,436 | $ | 1,100,814 | ||||||
| CIP – redevelopment | **** | **** | **** | **** | $ | 281,555 | ||||||||||||||
| CIP – development | **** | **** | **** | **** | 198,644 | |||||||||||||||
| Total | **** | **** | **** | **** | $ | 480,199 |
(1) As of the period ended, some portion of the real estate basis associated with the rentable square feet under redevelopment or development was classified as in-service as activities necessary to prepare the asset for its intended use were no longer in process. In the near future, we anticipate recommencing activities necessary to prepare the asset for its intended use upon execution of leasing and final decisions related to design of each space.
(2) Represents seven projects ranging from approximately 26,000 to 91,000 rentable square feet.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Capital Expenditures and Non-Income Producing Real Estate Assets as a Percentage of Gross Investment in Real Estate
December 31, 2011
(Tabular dollar amounts in thousands, except per square foot amounts)
(Unaudited)
Summary of capital expenditures (1)
| Year Ended | ||
|---|---|---|
| December 31, 2011 | ||
| Development | $ | 98,747 |
| Redevelopment | 139,682 | |
| Preconstruction | 80,535 | |
| Projects in India and China | 47,955 | |
| Generic infrastructure/building improvements projects (2) | 48,734 | |
| Total construction spending | $ | 415,653 |
(1) Amounts include indirect project costs, including interest, property taxes, insurance, and payroll costs.
(2) In addition to revenue-enhancing capital spending, this amount includes non-revenue-enhancing major and recurring capital expenditures and tenant improvements. Non-revenue-enhancing capital expenditures and tenant improvements (excluding expenditures and tenant improvements that are recoverable from tenants, revenue-enhancing, or related to properties that have undergone redevelopment) are summarized in the table below.
The table below shows the average per square foot property-related capital expenditures, tenant improvements, and leasing costs (excluding capital expenditures and tenant improvements that are recoverable from tenants, revenue-enhancing, or related to properties that have undergone redevelopment).
| **** | Year Ended | |
|---|---|---|
| December 31, 2011 | ||
| Capital expenditures (1): | ||
| Major capital expenditures | $ | 641 |
| Recurring capital expenditures | $ | 1,890 |
| Square feet in asset base | 13,384,598 | |
| Per square foot: | ||
| Major capital expenditures | $ | 0.05 |
| Recurring capital expenditures | $ | 0.14 |
| Tenant improvements and leasing costs: | ||
| Re-tenanted space (2) | ||
| Tenant improvements and leasing costs | $ | 4,571 |
| Re-tenanted square feet | 512,573 | |
| Per square foot | $ | 8.92 |
| Renewal space | ||
| Tenant improvements and leasing costs | $ | 6,029 |
| Renewal square feet | 1,309,293 | |
| Per square foot | $ | 4.60 |
(1) Major capital expenditures consist of roof replacements and HVAC systems that are typically identified and considered at the time a property is acquired. Recurring capital expenditures exclude major capital expenditures.
(2) Excludes space that has undergone redevelopment before re-tenanting.
| Non-income producing real estate assets as a percentage of gross investment in real estate |
|---|
As of December 31, 2011, approximately 24% of our gross investment in real estate represents non-income producing assets (land, preconstruction, redevelopment, development, and projects in India and China). Our active development and redevelopment projects represent 7% of gross investment in real estate, a significant amount of which is pre-leased and expected to be delivered over the next four to eight quarters. The completion and delivery of these projects will significantly reduce our non-income producing assets as a percentage of our gross investment in real estate. Over the next few years, we may also identify certain land parcels for potential sale. Over time, our goal is to reduce non-income producing assets to 15% or less of our gross investment in real estate.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Future Value-Added Projects December 31, 2011
(Unaudited)
The following table summarizes the components of our future value-added square footage as of December 31, 2011:
| Markets | Land Undergoing<br> Preconstruction Activities<br> (additional CIP) | Land Held for Future<br> Development | Total Land (1) | Investment in<br> Unconsolidated Real<br> Estate Entity | Future Redevelopment (2) |
|---|---|---|---|---|---|
| California – San Diego | 271,000 | 522,000 | 793,000 | – | 87,000 |
| California – San Francisco/Mission Bay | – | 290,000 | 290,000 | – | – |
| California – San Francisco/So. San Francisco | 171,000 | 1,024,000 | 1,195,000 | – | 40,000 |
| Greater Boston | 1,581,000 | 225,000 | 1,806,000 | 414,000 | 125,000 |
| New York City | 407,000 | – | 407,000 | – | – |
| Suburban Washington, D.C. | – | 1,024,000 | 1,024,000 | – | 416,000 |
| Washington – Seattle | 160,000 | 995,000 | 1,155,000 | – | 80,000 |
| International | 78,000 | 6,184,000 | 6,262,000 | – | – |
| Other | – | 675,000 | 675,000 | – | 237,000 |
| Total | 2,668,000 | 10,939,000 | 13,607,000 | 414,000 | 985,000 |
(1) In addition to assets included in our gross investment in real estate, we also hold options/rights for parcels supporting approximately 3.0 million developable square feet. These parcels consist of: (a) a parcel supporting the future ground-up development of approximately 385,000 rentable square feet in Alexandria Center™ for Life Science — New York City related to an option under our ground lease; (b) right to acquire land parcels supporting ground-up development of 636,000 rentable square feet in Edinburgh, Scotland; and (c) an option to increase our land use rights by up to approximately 2.0 million additional developable square feet in China.
(2) Our asset base also includes non-laboratory space (office, warehouse, and industrial space) identified for future conversion into life science laboratory space through redevelopment. These spaces are classified in rental properties, net.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Definitions and Other Information
December 31, 2011
(Tabular dollar amounts in thousands)
(Unaudited)
This section contains additional information for sections throughout this supplemental information package as well as explanations of certain non-GAAP financial measures and the reasons why management believes these measures provide useful information to investors about our financial condition, results of operations, or liquidity. Additional detail can be found in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, as well as other documents filed with or furnished to the SEC from time to time.
Adjusted EBITDA and Adjusted EBITDA margin
EBITDA represents earnings before interest, taxes, depreciation and amortization (“EBITDA”), a non-GAAP financial measure, and is used as a supplemental measure of operating performance. Adjusted EBITDA (“Adjusted EBITDA”) is calculated as EBITDA excluding impairments, gains or losses from sales of real estate, gains or losses on early extinguishment of debt, and net stock compensation expenses. We use EBITDA and Adjusted EBITDA as a supplemental measure of our operating performance. We consider Adjusted EBITDA to provide investors relevant and useful information because it permits investors to view income from our operations on an unleveraged basis before the effects of taxes, non-cash depreciation and amortization, impairments, gains or losses from sales of real estate, gains or losses on early extinguishment of debt, and net stock compensation expenses. By excluding interest expense, EBITDA and Adjusted EBITDA allow investors to measure our operating performance independent of our capital structure and indebtedness and, therefore, allow for a more meaningful comparison of our operating performance to that of other companies, both in the real estate industry and in other industries. We believe investors should consider EBITDA and Adjusted EBITDA, in conjunction with net income (the primary measure of our performance) and the other required United States generally accepted accounting principles (“GAAP”) measures of our performance, to improve their understanding of our operating results, and to make more meaningful comparisons of our performance between periods and against other companies. EBITDA and Adjusted EBITDA have limitations as analytical tools and should be used in conjunction with our required GAAP presentations. EBITDA and Adjusted EBITDA do not reflect our historical cash expenditures or future cash requirements for capital expenditures or contractual commitments. While EBITDA and Adjusted EBITDA are relevant and widely used measures of operating performance, it does not represent net income or cash flow from operations as defined by GAAP, and it should not be considered as an alternative to those indicators in evaluating operating performance or liquidity. Further, our computation of EBITDA and Adjusted EBITDA may not be comparable to similar measures reported by other companies.
The following table reconciles net income to EBITDA and Adjusted EBITDA:
| Three Months Ended | Year Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/11 | 9/30/11 | 6/30/11 | 3/31/11 | 12/31/10 | 12/31/11 | 12/31/10 | ||||||||||||
| Net income | $ | 35,462 | $ | 32,995 | $ | 34,311 | $ | 32,625 | $ | 92,000 | $ | 135,393 | $ | 139,022 | ||||
| Interest expense – continuing operations | 14,757 | 14,273 | 16,567 | 17,810 | 17,158 | 63,407 | 69,509 | |||||||||||
| Interest expense – discontinued operations | – | – | 4 | 32 | 33 | 36 | 133 | |||||||||||
| Depreciation and amortization – continuing operations | 40,885 | 39,848 | 40,211 | 36,582 | 34,409 | 157,526 | 126,033 | |||||||||||
| Depreciation and amortization – discontinued operations | 81 | 142 | 152 | 125 | 142 | 500 | 607 | |||||||||||
| EBITDA | 91,185 | 87,258 | 91,245 | 87,174 | 143,742 | 356,862 | 335,304 | |||||||||||
| Stock compensation expense | 3,306 | 3,344 | 2,749 | 2,356 | 2,767 | 11,755 | 10,816 | |||||||||||
| Loss on early extinguishment of debt | – | 2,742 | 1,248 | 2,495 | 2,372 | 6,485 | 45,168 | |||||||||||
| Gain on sales of property | – | (46 | ) | – | – | (59,442 | ) | (46 | ) | (59,466 | ) | |||||||
| Impairment of real estate | – | 994 | – | – | – | 994 | – | |||||||||||
| Adjusted EBITDA | $ | 94,491 | $ | 94,292 | $ | 95,242 | $ | 92,025 | $ | 89,439 | $ | 376,050 | $ | 331,822 | ||||
| Total revenues | $ | 145,779 | $ | 144,193 | $ | 143,551 | $ | 139,920 | $ | 131,778 | $ | 573,443 | $ | 485,748 | ||||
| Adjusted EBITDA margin | 65% | 65% | 66% | 66% | 68% | 66% | 68% |
Adjusted funds from operations
Adjusted Funds from Operations (“AFFO”) is a non-GAAP financial measure we believe is a useful supplemental measure of our performance. We compute AFFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders by adding to or deducting from FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders (1) recurring and non-recurring capital expenditures required to maintain and re-tenant our properties, (2) second generation tenant improvements and leasing costs on re-tenanted and renewal space (excludes redevelopment expenditures), (3) capitalized income from development projects, (4) gains or losses on early extinguishment of debt, (5) amortization of loan fees, debt premiums/discounts and acquired above and below market leases, (6) effects of deferred rent/straight-line rent and deferred rent/straight-line rent on ground leases, (7) non-cash compensation expense related to restricted stock awards, and (8) other non-cash income or charges, including impairment charges. AFFO is not intended to represent cash flow for the period, and is only intended to provide an additional measure of performance by adjusting the effect of certain items noted above included in FFO, as well as recurring capital expenditures and leasing costs. We believe that net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders is the most directly comparable GAAP financial measure to AFFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders. We also believe that AFFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders provides useful performance information to the investment community about our financial position as compared to other REITs since AFFO is a widely reported measure used by other REITs. However, other REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to other REITs.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Definitions and Other Information
December 31, 2011
(Tabular dollar amounts in thousands, except for per share amounts)
(Unaudited)
The following table reconciles FFO to AFFO:
| Three Months Ended | Year Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/11 | 9/30/11 | 6/30/11 | 3/31/11 | 12/31/10 | 12/31/11 | 12/31/10 | |||||||||||||||
| FFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders | $ | 67,799 | $ | 64,270 | $ | 65,914 | $ | 60,631 | $ | 58,472 | $ | 258,614 | $ | 172,005 | |||||||
| Add/(deduct): | |||||||||||||||||||||
| Major and recurring capital expenditures (1) | (675 | ) | (550 | ) | (698 | ) | (608 | ) | (260 | ) | (2,531 | ) | (1,332 | ) | |||||||
| Tenant improvements and leasing costs (1) | (6,083 | ) | (2,119 | ) | (1,595 | ) | (803 | ) | (2,583 | ) | (10,600 | ) | (6,725 | ) | |||||||
| Amortization of loan fees | 2,551 | 2,144 | 2,327 | 2,278 | 1,999 | 9,300 | 7,892 | ||||||||||||||
| Amortization of debt premiums/discounts | 565 | 750 | 1,169 | 1,335 | 2,032 | 3,819 | 9,999 | ||||||||||||||
| Amortization of acquired above and below market leases | (812 | ) | (940 | ) | (2,726 | ) | (4,854 | ) | (2,364 | ) | (9,332 | ) | (7,868 | ) | |||||||
| Deferred rent/straight-line rent | (9,558 | ) | (7,647 | ) | (2,885 | ) | (6,707 | ) | (9,092 | ) | (26,797 | ) | (22,832 | ) | |||||||
| Stock compensation | 3,306 | 3,344 | 2,749 | 2,356 | 2,767 | 11,755 | 10,816 | ||||||||||||||
| Capitalized income from development projects | 537 | 930 | 1,078 | 1,428 | 1,486 | 3,973 | 5,688 | ||||||||||||||
| Deferred rent/straight-line rent on ground leases | 1,221 | 1,143 | 1,099 | 1,241 | 1,424 | 4,704 | 5,337 | ||||||||||||||
| Loss on early extinguishment of debt | – | 2,742 | 1,248 | 2,495 | 2,372 | 6,485 | 45,168 | ||||||||||||||
| Impairment of real estate | – | 994 | – | – | – | 994 | – | ||||||||||||||
| Allocation to unvested restricted stock awards | 79 | (7 | ) | (14 | ) | 16 | 19 | 74 | (424 | ) | |||||||||||
| AFFO attributable to Alexandria Real Estate Equities, Inc.’s **** common stockholders | $ | 58,930 | $ | 65,054 | $ | 67,666 | $ | 58,808 | $ | 56,272 | $ | 250,458 | $ | 217,724 | |||||||
| Weighted average shares of common stock outstanding for calculating AFFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic | 61,427,495 | 61,295,659 | 58,500,055 | 54,948,345 | 54,865,654 | 59,066,812 | 48,375,474 | ||||||||||||||
| Add: Dilutive effect of stock options | 3,939 | 8,310 | 13,067 | 19,410 | 21,709 | 10,798 | 29,566 | ||||||||||||||
| Weighted average shares of common stock outstanding for calculating AFFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | 61,431,434 | 61,303,969 | 58,513,122 | 54,967,755 | 54,887,363 | 59,077,610 | 48,405,040 | ||||||||||||||
| AFFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | |||||||||||||||||||||
| Basic | $ | 0.96 | $ | 1.06 | $ | 1.16 | $ | 1.07 | $ | 1.03 | $ | 4.24 | $ | 4.50 | |||||||
| Diluted | $ | 0.96 | $ | 1.06 | $ | 1.16 | $ | 1.07 | $ | 1.03 | $ | 4.24 | $ | 4.50 |
(1) See page 34 for further information.
Annualized base rent
Annualized base rent means the annualized fixed base rental amount in effect as of December 31, 2011, related to our operating rentable square feet (using rental revenue computed on a straight-line basis in accordance with GAAP).
Capitalized interest
A key component of our business model is our value-added redevelopment and development programs. These programs are focused on providing high-quality generic life science laboratory space to meet the real estate requirements of and are reusable by various life science industry tenants. Upon completion, each value-added project is expected to generate significant revenues and cash flows. Our redevelopment and development projects are generally in locations that are highly desirable to life science entities which we believe results in higher occupancy levels, longer lease terms, and higher rental income and returns. Redevelopment projects consist of the permanent change in use of office, warehouse, and shell space into generic life science laboratory space, including the conversion of single-tenancy space to multi-tenancy space or multi-tenancy space to single-tenancy space. Development projects consist of the ground-up development of generic life science laboratory facilities. We also have certain significant value-added projects undergoing important and substantial preconstruction activities to bring these assets to their intended use. These critical activities add significant value and are required for the construction of buildings. The projects will provide high-quality facilities for the life science industry and will generate significant revenue and cash flows for the Company. In accordance with GAAP, we capitalize project costs clearly related to the construction, redevelopment, and development as a cost of the project. Indirect project costs such as construction administration, legal fees, and office costs that clearly relate to projects under construction, redevelopment, and development are also capitalized as a cost of the project. We capitalize project costs only during periods in which activities necessary to prepare an asset for its intended use are in progress. We also capitalize interest cost as a cost of the project only during the period for which activities necessary to prepare an asset for its intended use are ongoing, provided that expenditures for the asset have been made and interest cost is being incurred. Additionally, should activities necessary to prepare an asset for its intended use cease, interest, taxes, insurance, and certain other direct project costs related to these assets would be expensed as incurred.
Cash interest
Cash interest is equal to interest expense calculated in accordance with GAAP, plus capitalized interest, less amortization of loan fees, and amortization of debt premiums/discounts.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Definitions and Other Information
December 31, 2011
(Unaudited)
Construction in progress (“CIP”)/current value-added projects
Active redevelopment/active development projects
A key component of our business model is our value-added redevelopment and development programs. These programs are focused on providing high-quality, generic, and reusable life science laboratory space to meet the real estate requirements of a wide range of clients in the life science industry. Upon completion, each value-added project is expected to generate significant revenues and cash flows. Our redevelopment and development projects are generally in locations that are highly desirable to life science entities, which we believe results in higher occupancy levels, longer lease terms, and higher rental income and returns. Redevelopment projects consist of the permanent change in use of office, warehouse, and shell space into generic life science laboratory space, including the conversion of single-tenancy space to multi-tenancy space or vice versa. Development projects consist of the ground-up development of generic and reusable life science laboratory facilities. We generally will not commence new development projects for aboveground vertical construction of new life science laboratory space without first securing significant pre-leasing for such space.
Projects in India and China
Projects in India and China primarily represent development opportunities and projects focused primarily on life science laboratory space for our current client tenants and other life science relationship entities. These projects focus on real estate investments with targeted returns on investment greater than returns expected in the United States.
Generic infrastructure/building improvement projects
Generic infrastructure/building improvement projects include revenue-enhancing capital spending, non-revenue-enhancing major and recurring capital expenditures, and tenant improvements. These amounts include payments for property-related capital expenditures and tenant improvements that are recoverable from our tenants.
Dividend payout ratio
Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (shares of common stock outstanding on the respective record date multiplied by the related dividend per share) to FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders on a diluted basis. The dividend payout ratio excludes loss on early extinguishment of debt.
Dividend yield
Dividend yield for the quarter represents the annualized quarter dividend divided by the closing common stock price at the end of the quarter.
Earnings per share
We use income from continuing operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders as the “control number” in determining whether potential common shares, including potential common shares issuable upon conversion of our 8.00% unsecured convertible notes, are dilutive or antidilutive to earnings per share. Pursuant to the presentation and disclosure literature on gains/losses on sales or disposals by REITs and earnings per share required by the SEC and the Financial Accounting Standards Board, gains or losses on sales or disposals by a REIT that do not qualify as discontinued operations are classified below income from discontinued operations in the income statement and included in the numerator for the computation of earnings per share for income from continuing operations. The land parcels we sold during the three months ended December 31, 2010, and three months ended September 30, 2011, did not meet the criteria for discontinued operations since these parcels did not have any significant operations prior to disposition. Accordingly, for the three months and year ended December 31, 2010, and the year ended December 31, 2011, we classified the $59.4 million and $46,000, respectively, of gain on sales of land parcels below income from discontinued operations, net in the consolidated income statements, and included the gain in income from continuing operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders, the “control number,” or numerator for the computation of earnings per share.
We account for unvested restricted stock awards which contain nonforfeitable rights to dividends as participating securities and include these securities in the computation of earnings per share using the two-class method. Under the two-class method, we allocate net income after preferred stock dividends and amounts attributable to noncontrolling interests to (1) common stockholders and (2) unvested restricted stock awards based on their respective participation rights to dividends declared (or accumulated) and undistributed earnings. Diluted earnings per share is computed using the weighted average shares of common stock outstanding determined for the basic earnings per share computation plus the effect of any dilutive securities, including the dilutive effect of stock options using the treasury stock method.
We applied the if-converted method of accounting for our 8.00% unsecured senior convertible notes (“8.00% Unsecured Convertible Notes”). In applying the if-converted method of accounting, conversion is assumed for purposes of calculating diluted earnings per share if the effect would be dilutive to earnings per share. If the assumed conversion pursuant to the if-converted method is dilutive, diluted earnings per share would be calculated by adding back interest charges applicable to our 8.00% Unsecured Convertible Notes to the numerator and our 8.00% Unsecured Convertible Notes would be assumed to have been converted at the beginning of the period presented (or from the date of issuance, if occurring on a date later than the date that the period begins) and the resulting incremental shares associated with the assumed conversion would be included in the denominator. Furthermore, we assume that our 8.00% Unsecured Convertible Notes are converted for the period prior to any retirement or actual conversion if the effect of such assumed retirement or conversion would be dilutive, and any shares of common stock issued upon actual conversion are included in the denominator for the period after the date of retirement or conversion. For all periods except the three months ended December 31, 2010, potential common shares issuable upon conversion of our 8.00% unsecured convertible notes were antidilutive to income from continuing operations per share and as such, were excluded from the computation of diluted earnings per share.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Definitions and Other Information
December 31, 2011
(Tabular dollar amounts in thousands, except for per share amounts)
(Unaudited)
The table below is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for income from continuing operations:
| **** | Three Months Ended<br> December 31, | Year Ended<br> December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | 2011 | 2010 | 2011 | 2010 | ||||||||
| Earnings per share – basic | ||||||||||||
| Income from continuing operations | $ | 35,574 | $ | 32,550 | $ | 136,235 | $ | 78,474 | ||||
| Gain on sale of land parcels | – | 59,442 | 46 | 59,442 | ||||||||
| Net income attributable to noncontrolling interests | (1,142 | ) | (944 | ) | (3,975 | ) | (3,729 | ) | ||||
| Dividends on preferred stock | (7,090 | ) | (7,089 | ) | (28,357 | ) | (28,357 | ) | ||||
| Net income attributable to unvested restricted stock awards | (270 | ) | (726 | ) | (1,088 | ) | (995 | ) | ||||
| Income from continuing operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic | 27,072 | 83,233 | 102,861 | 104,835 | ||||||||
| (Loss) income from discontinued operations | (112 | ) | 8 | (888 | ) | 1,106 | ||||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | $ | 26,960 | $ | 83,241 | $ | 101,973 | $ | 105,941 | ||||
| Weighted average shares of common stock outstanding – basic | 61,427,495 | 54,865,654 | 59,066,812 | 48,375,474 | ||||||||
| Earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – basic: | ||||||||||||
| Continuing operations | $ | 0.44 | $ | 1.52 | $ | 1.75 | $ | 2.17 | ||||
| Discontinued operations, net | – | – | (0.02 | ) | 0.02 | |||||||
| Earnings per share – basic | $ | 0.44 | $ | 1.52 | $ | 1.73 | $ | 2.19 | ||||
| Earnings per share – diluted | **** | **** | **** | **** | **** | **** | **** | **** | ||||
| Income from continuing operations | $ | 35,574 | $ | 32,550 | $ | 136,235 | $ | 78,474 | ||||
| Gain on sale of land parcels | – | 59,442 | 46 | 59,442 | ||||||||
| Net income attributable to noncontrolling interests | (1,142 | ) | (944 | ) | (3,975 | ) | (3,729 | ) | ||||
| Dividends on preferred stock | (7,090 | ) | (7,089 | ) | (28,357 | ) | (28,357 | ) | ||||
| Net income attributable to unvested restricted stock awards | (270 | ) | (726 | ) | (1,088 | ) | (995 | ) | ||||
| Effect of assumed conversion and dilutive securities: | **** | **** | **** | **** | **** | **** | **** | **** | ||||
| Assumed conversion of 8.00% Unsecured Convertible Notes | – | 2 | – | – | ||||||||
| Amounts attributable to unvested restricted stock awards | – | – | – | – | ||||||||
| Income from continuing operations attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted | 27,072 | 83,235 | 102,861 | 104,835 | ||||||||
| (Loss) income from discontinued operations | (112 | ) | 8 | (888 | ) | 1,106 | ||||||
| Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | $ | 26,960 | $ | 83,243 | $ | 101,973 | $ | 105,941 | ||||
| Weighted average shares of common stock outstanding – basic | 61,427,495 | 54,865,654 | 59,066,812 | 48,375,474 | ||||||||
| Assumed conversion of 8.00% Unsecured Convertible Notes | – | 6,047 | – | – | ||||||||
| Dilutive effect of stock options | 3,939 | 21,709 | 10,798 | 29,566 | ||||||||
| Weighted average shares of common stock outstanding – diluted | 61,431,434 | 54,893,410 | 59,077,610 | 48,405,040 | ||||||||
| Earnings per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders – diluted: | **** | **** | **** | **** | **** | **** | **** | **** | ||||
| Continuing operations | $ | 0.44 | $ | 1.52 | $ | 1.75 | $ | 2.17 | ||||
| Discontinued operations, net | – | – | (0.02 | ) | 0.02 | |||||||
| Earnings per share – diluted | $ | 0.44 | $ | 1.52 | $ | 1.73 | $ | 2.19 |
EBITDA
See Adjusted EBITDA and Adjusted EBITDA margin
Fixed charge coverage ratio
The fixed charge coverage ratio is primarily used as a supplemental measure of the Company’s ability to satisfy fixed financing obligations. We calculate the fixed charge coverage ratio as our ability to satisfy current cash interest expense and preferred dividends from adjusted EBITDA. The following table outlines our calculation of our fixed charge coverage ratios:
| **** | Three Months Ended | **** | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | December 31, 2011 | September 30, 2011 | June 30, 2011 | March 31, 2011 | December 31, 2010 | ||||||||||
| Adjusted EBITDA | $ | 94,491 | $ | 94,292 | $ | 95,242 | $ | 92,025 | $ | 89,439 | |||||
| Interest expense – continuing operations | 14,757 | 14,273 | 16,567 | 17,810 | 17,158 | ||||||||||
| Interest expense – discontinued operations | – | – | 4 | 32 | 33 | ||||||||||
| Add: capitalized interest | 16,151 | 16,666 | 15,046 | 13,193 | 14,629 | ||||||||||
| Less: amortized loan fees | (2,551 | ) | (2,144 | ) | (2,327 | ) | (2,278 | ) | (1,999 | ) | |||||
| Less: amortization of debt premium/discounts | (565 | ) | (750 | ) | (1,169 | ) | (1,335 | ) | (2,032 | ) | |||||
| Cash interest | 27,792 | 28,045 | 28,121 | 27,422 | 27,789 | ||||||||||
| Preferred dividends | 7,090 | 7,089 | 7,089 | 7,089 | 7,089 | ||||||||||
| Fixed charges | $ | 34,882 | $ | 35,134 | $ | 35,210 | $ | 34,511 | $ | 34,878 | |||||
| Fixed charge coverage ratio – quarter annualized | 2.7x | 2.7x | 2.7x | 2.7x | 2.6x | ||||||||||
| Fixed charge coverage ratio – trailing 12 months | 2.7x | 2.7x | 2.6x | 2.4x | 2.2x | ||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC.<br><br><br>ALL RIGHTS RESERVED © 2012 | 39 | ||||||||||||||
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Definitions and Other Information
December 31, 2011
Funds from operations
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 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 (computed in accordance with GAAP), excluding gains from sales, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Impairment write-downs of depreciable real estate are excluded from the calculation of FFO. FFO 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.
Future value-added projects
Land held for future development
All preconstruction efforts have been advanced to appropriate stages and no further preconstruction activities are ongoing and therefore, interest, property taxes, and other costs related to these assets are expensed as incurred. We generally will not commence new development projects for aboveground vertical construction of new life science laboratory space without first securing significant pre-leasing for such space.
Land undergoing preconstruction activities (additional CIP)
Preconstruction activities include Building Information Modeling (3-D virtual modeling), design development and construction drawings, sustainability and energy optimization review, budgeting, planning for future site and infrastructure work, and other activities prior to commencement of vertical construction of aboveground shell and core improvements. Our objective with preconstruction is to reduce the time it takes to deliver projects to prospective tenants. Project costs are capitalized as a cost of the project during periods when activities necessary to prepare an asset for its intended use are in progress. We generally will not commence ground-up development of any parcels undergoing preconstruction activities without first securing significant pre-leasing for such space. If vertical aboveground construction is not initiated at completion of preconstruction activities, the land parcel will be classified as land held for future development. The two largest projects included in preconstruction consist of our 1.6 million developable square feet at Alexandria Center™ at Kendall Square in East Cambridge, Massachusetts and our 407,000 developable square foot site for the second tower at Alexandria Center™ for Life Science – New York City.
Investment in unconsolidated real estate entity
Our investment in unconsolidated real estate entity represents our equity investment in a real estate entity that owns a land parcel supporting the ground-up development of approximately 414,000 rentable square feet in the Longwood Medical Area of Boston.
Future redevelopment
Our asset base also includes non-laboratory space (office, warehouse, and industrial space) identified for future conversion into life science laboratory space through redevelopment aggregating approximately 1.0 million rentable square feet. These spaces are currently classified in rental properties, net.
FFO per share
FFO per share (diluted) is computed using the weighted average shares of common stock outstanding determined for the basic FFO per share computation plus the effect of any dilutive securities, including the dilutive effect of stock options using the treasury stock method. Additionally, we applied the if-converted method for our 8.00% Unsecured Convertible Notes for FFO per share separately from the if-converted analysis for earnings per share. In applying the if-converted method, conversion is assumed for purposes of calculating FFO per share (diluted) if the effect would be dilutive to FFO per share. If the assumed conversion pursuant to the if-converted method is dilutive, FFO per share (diluted) would be calculated by adding back interest charges applicable to our 8.00% Unsecured Convertible Notes to the numerator and our 8.00% Unsecured Convertible Notes would be assumed to have been converted at the beginning of the period presented (or from the date of issuance, if occurring on a date later than the date that the period begins) and the resulting incremental shares associated with the assumed conversion would be included in the denominator. Furthermore, we assume that our 8.00% Unsecured Convertible Notes are converted for the period prior to any retirement or actual conversion if the effect of such assumed retirement or conversion would be dilutive, and any shares of common stock issued upon actual retirement or conversion are included in the denominator for the period after the date of retirement or conversion. For purposes of calculating FFO per share (diluted), the if-converted method was dilutive to FFO per share (diluted) for all periods presented.
Gross assets
Gross assets are equal to total assets plus accumulated depreciation, less cash, cash equivalents, and restricted cash.
Interest coverage ratio
Interest coverage ratio is the ratio of Adjusted EBITDA to cash interest.
Net debt
Net debt is equal to the sum of secured notes payable, unsecured line of credit, unsecured bank term loans, and unsecured convertible notes, less cash, cash equivalents, and restricted cash.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Definitions and Other Information
December 31, 2011
(Tabular dollar amounts in thousands)
(Unaudited)
Net operating income
Net operating income is a non-GAAP financial measure equal to income from continuing operations, the most directly comparable GAAP financial measure, plus loss from early extinguishment of debt, depreciation and amortization, interest expense, and general and administrative expense. We believe net operating income provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Therefore, we believe net operating income is a useful measure for evaluating the operating performance of our real estate assets. Net operating income on a cash basis is net operating income on a GAAP basis, adjusted to exclude the effect of straight-line rent adjustments required by GAAP. We believe that net operating income on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent adjustments to rental revenue.
Further, we believe net operating income is useful to investors as a performance measure because, when compared across periods, net operating income reflects the impact on operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not immediately apparent from income from continuing operations. Net operating income excludes certain components from income from continuing operations in order to provide results that are more closely related to our results of operations from our properties. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level rather than at the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. Net operating income presented by us may not be comparable to net operating income reported by other REITs that define net operating income differently. We believe that in order to facilitate a clear understanding of our operating results, net operating income should be examined in conjunction with income from continuing operations as presented in our condensed consolidated statements of income. Net operating income should not be considered as an alternative to income from continuing operations as an indication of our performance or as an alternative to cash flows as a measure of liquidity or our ability to make distributions.
Same property comparisons
As a result of changes within our total property portfolio, the financial data presented in the table on the following page shows significant changes in revenue and expenses from period to period. In order to supplement an evaluation of our results of operations over a given period, we analyze the operating performance for all properties that were fully operating for the entire periods presented for the quarter periods (herein referred to as “Same Properties”) separate from properties acquired subsequent to the first period presented, properties undergoing active redevelopment and active development, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results (herein referred to as “Non-Same Properties”). Additionally, rental revenues from lease termination fees, if any, are excluded from the results of the Same Properties.
Tangible non-real estate assets
Tangible non-real estate assets include the following as of each date presented:
| **** | 12/31/11 | 9/30/11 | 6/30/11 | 3/31/11 | 12/31/10 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Cash and cash equivalents | $ | 78,539 | $ | 73,056 | $ | 60,925 | $ | 78,196 | $ | 91,232 |
| Restricted cash | 23,332 | 27,929 | 23,432 | 30,513 | 28,354 | |||||
| Tenant receivables | 7,480 | 6,599 | 4,487 | 7,018 | 5,492 | |||||
| Investments | 95,777 | 88,777 | 88,862 | 88,694 | 83,899 | |||||
| Other tangible non-real estate assets | 44,756 | 40,916 | 32,407 | 33,384 | 31,896 | |||||
| Total tangible non-real estate assets | $ | 249,884 | $ | 237,277 | $ | 210,113 | $ | 237,805 | $ | 240,873 |
Total market capitalization
Total market capitalization is equal to the sum of outstanding shares of series C preferred stock and common stock multiplied by the related closing price at the end of each period presented, the liquidation value of the series D cumulative convertible preferred stock, and total debt (secured notes payable, unsecured line of credit, unsecured bank term loans, and unsecured convertible notes).
Weighted average interest rate for capitalization
The weighted average interest rate for calculating capitalization of interest required pursuant to GAAP represents a weighted average rate based on the rates applicable to borrowings outstanding during the period and includes the impact of our interest rate hedge agreements, amortization of debt discounts/premiums, and amortization of loan fees. A separate calculation is performed each month to determine our weighted average interest rate for capitalization for the month. The rate will vary each month due to changes in variable interest rates, outstanding debt balances, the proportion of variable rate debt to fixed rate debt, the amount and terms of effective interest rate hedge agreements, and the amount of loan fee amortization.
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