Alexandria Real Estate Equities, Inc 8-K, filed Nov 3, 2006
Alexandria Real Estate Equities, Inc. (ARE)
About this 8-K
Alexandria Real Estate Equities, Inc filed this 8-K on November 3, 2006, reporting on events of November 2, 2006.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
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): November 2, 2006
ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
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385 East Colorado Boulevard, Suite 299
Pasadena, California 91101
(Address of principal executive offices including zip code)
(626) 578-0777
(Registrant's telephone number, including area code)
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 November 2, 2006, we issued a press release entitled "Alexandria Real Estate Equities, Inc. Reports Third Quarter 2006 Results" which sets forth our results of operations for the third quarter and nine months ended September 30, 2006. A copy of that press release is attached hereto as Exhibit 99.1.
ITEM 9.01 Financial Statements and Exhibits
(c) Exhibits
99.1 Press Release dated November 2, 2006.
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.
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ALEXANDRIA REAL ESTATE EQUITIES, INC. |
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November 3, 2006 |
By: /s/ JOEL S. MARCUS |
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Joel S. Marcus |
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Chief Executive Officer |
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(Principal Executive Officer) |
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By: /s/ DEAN A. SHIGENAGA |
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Dean A. Shigenaga |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
EXHIBIT INDEX
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Exhibit Title |
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* Also provided in PDF format as a courtesy.
Exhibit 99.1
Contact: Joel S. Marcus
Chief Executive Officer
Alexandria Real Estate Equities, Inc.
(626) 578-9693
Alexandria Real Estate Equities, Inc.
Reports
Third Quarter 2006 Results
- Company Reports Funds from Operations
Per Share (Diluted) of $1.32, up 9%
over Third Quarter 2005, and Earnings Per Share (Diluted) of
$0.56 -
Highlights
- Third Quarter 2006 Funds from Operations (FFO) Per Share (Diluted) of $1.32 up 9%
- Third Quarter 2006 Total Revenues up 37%, FFO Available to Common Stockholders up 36%
- Third Quarter 2006 Earnings Per Share (Diluted) of $0.56
- Executed 36 Leases for 441,000 Square Feet
- Third Quarter 2006 GAAP Rental Rate Increase of 19%
- Third Quarter 2006 GAAP Same Property Revenues Less Operating Expenses up 2.2% Over Third Quarter 2005
- Added Nine Properties aggregating 1.2 Million Square Feet
- Added One Land Parcel with 24,000 Developable Square Feet
- Completed Redevelopment of Multiple Spaces at Four Properties aggregating 125,000 Square Feet
- Completed Ground-Up Development of One Property aggregating 127,000 Square Feet
- Commenced Ground-Up Development of One Property aggregating 133,000 Square Feet
- Closed $146 Million Fixed Rate Financing
- In October 2006, Closed $1.4 Billion Credit Facility Agreement Consisting of an $800 Million Unsecured Revolving Credit Facility and a $600 Million Term Loan
- In November 2006, Added a Campus with 185,000 Square Feet of Existing Space including a Land Bank providing for 425,000 of Developable Square Feet (which includes the Existing Space)
PASADENA, CA. - November 2, 2006 -- Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced operating and financial results for the third quarter 2006.
For the third quarter of 2006, we reported total revenues of $85,208,000 and FFO available to common stockholders of $35,230,000, or $1.32 per share (diluted), compared to total revenues of $62,026,000 and FFO available to common stockholders of $25,969,000, or $1.21 per share (diluted), for the third quarter of 2005. Comparing the third quarter of 2006 to the third quarter of 2005, total revenues increased 37%, FFO available to common stockholders increased 36% and FFO per share (diluted) increased 9%. For the nine months ended September 30, 2006, we reported total revenues of $224,283,000 and FFO available to common stockholders of $92,611,000, or $3.82 per share (diluted), compared to total revenues of $174,358,000 and FFO available to common stockholders of $75,097,000, or $3.60 per share (diluted) for the nine months ended September 30, 2005. Comparing the nine months ended September 30, 2006 to the nine months ended September 30, 2005, total revenues increased 29%, FFO available to common stockholders increased 23% and FFO per share (diluted) increased 6%.
FFO is a non-GAAP measure widely used by publicly-traded real estate investment trusts. A reconciliation of GAAP net income available to common stockholders to FFO available to common stockholders, on both an aggregate and a per share diluted basis, is included in the financial information accompanying this press release. The primary reconciling item between GAAP net income available to common stockholders and FFO available to common stockholders is depreciation and amortization expense. Depreciation and amortization expense for the three months ended September 30, 2006 and 2005 was $19,973,000 and $14,073,000, respectively. Depreciation and amortization expense for the nine months ended September 30, 2006 and 2005 was $51,585,000 and $39,965,000, respectively. Net income available to common stockholders for the third quarter of 2006 was $14,942,000, or $0.56 per share (diluted), compared to net income available to common stockholders of $11,969,000, or $0.56 per share (diluted) for the third quarter of 2005. Net income available to common stockholders for the nine months ended September 30, 2006 was $40,814,000, or $1.68 per share (diluted), compared to net income available to common stockholders of $35,186,000, or $1.69 per share (diluted) for the nine months ended September 30, 2005.
For the third quarter 2006, we executed a total of 36 leases for approximately 441,000 square feet of space at 25 different properties (excluding month-to-month leases). Of this total, approximately 221,000 square feet were for new or renewal leases related to previously leased space and approximately 220,000 square feet were for redeveloped, developed or previously vacant space. Of the 220,000 square feet, approximately 115,000 square feet were delivered from our redevelopment or development programs, with the remaining approximately 105,000 square feet for previously vacant space. Rental rates for these new or renewal leases were on average approximately 19% higher (on a GAAP basis) than rental rates for expiring leases. For the nine months ended September 30, 2006, we executed a total of 85 leases for approximately 1,196,000 square feet of space at 46 different properties (excluding month-to-month leases). Of this total, approximately 552,000 square feet were for new or renewal leases related to previously leased space and approximately 644,000 square feet were for redeveloped, developed or previously vacant space. Of the 644,000 square feet, approximately 426,000 square feet were delivered from our redevelopment or development programs, with the remaining approximately 218,000 square feet for previously vacant space. Rental rates for new or renewal leases were on average approximately 14% higher (on a GAAP basis) than rental rates for expiring leases.
During the third quarter of 2006, we added nine properties aggregating approximately 1.2 million square feet. The aggregate contract price was approximately $626 million and included the assumption of secured notes payable of approximately $225 million and minority interests of approximately $37 million. Also during the third quarter of 2006, we added one land parcel with approximately 24,000 developable square feet. We paid approximately $1 million cash for this land parcel.
As of September 30, 2006, approximately 88% of our leases (on a square footage basis) were triple net leases, requiring tenants to pay substantially all real estate taxes and insurance, common area and other operating expenses, including increases thereto. In addition, as of September 30, 2006, approximately 5% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses. Additionally, as of September 30, 2006, approximately 91% of our leases (on a square footage basis) provided for the recapture of certain capital expenditures and approximately 89% of our leases (on a square footage basis) contained effective annual rent escalations that are either fixed or indexed based on the consumer price index or another index.
Based on our current view of existing market conditions and certain current assumptions, we have updated our prior guidance for FFO per share (diluted) and earnings per share (diluted) as follows:
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2006 |
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FFO per share (diluted) |
$5.16 |
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Earnings per share (diluted) |
$2.22 |
Alexandria Real Estate Equities, Inc. is a publicly-traded real estate investment trust focused principally on the ownership, operation, management, acquisition and selective redevelopment and development for our Life Science Real Estate NicheSM. Our properties are designed and improved for lease primarily to institutional (universities and independent not-for-profit institutions), pharmaceutical, biotechnology, medical device, life science product, service, biodefense and translational research entities, as well as government agencies. Our asset base currently consists of 154 properties comprising approximately 10.9 million square feet plus an imbedded pipeline for the ground-up development of approximately 6.1 million additional square feet.
This press release contains forward-looking statements, including earnings guidance, within the meaning of the federal securities laws. Actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our Annual Report on Form 10-K and our other periodic reports filed with the Securities and Exchange Commission.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, 2006 September 30, 2005 September 30, 2006 September 30, 2005
----------------- ----------------- ----------------- -----------------
Income statement data
Total revenues $ 85,208 $ 62,026 $ 224,283 $ 174,358
Expenses
Rental operations 19,868 13,950 49,641 38,836
General and administrative 6,653 5,993 19,374 15,180
Interest 19,041 13,160 50,223 35,729
Depreciation and amortization 19,973 13,744 51,416 39,338
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65,535 46,847 170,654 129,083
Minority interests' share of income 709 234 1,449 257
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Income from continuing operations 18,964 14,945 52,180 45,018
Income from discontinued operations, net -- 1,046 701 2,235
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Net income 18,964 15,991 52,881 47,253
Dividends on preferred stock 4,022 4,022 12,067 12,067
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Net income available to common stockholders $ 14,942 $ 11,969 $ 40,814 $ 35,186
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Weighted average shares of common stock outstanding
Basic 26,323,345 21,091,183 23,848,661 20,504,633
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Diluted 26,714,050 21,486,731 24,268,236 20,857,755
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Earnings per share - basic
Continuing operations (net of preferred stock dividends) $ 0.57 $ 0.52 $ 1.68 $ 1.61
Discontinued operations, net -- 0.05 0.03 0.11
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Earnings per share - basic $ 0.57 $ 0.57 $ 1.71 $ 1.72
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Earnings per share - diluted
Continuing operations (net of preferred stock dividends) $ 0.56 $ 0.51 $ 1.65 $ 1.58
Discontinued operations, net -- 0.05 0.03 0.11
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Earnings per share - diluted $ 0.56 $ 0.56 $ 1.68 $ 1.69
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Financial Information
(Unaudited)
Funds from Operations
Generally accepted accounting principles ("GAAP") basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") established the measurement tool of Funds From Operations ("FFO"). Since its introduction, FFO has become a widely used non- GAAP financial measure by REITs. We believe that FFO is helpful to investors as an additional measure of the performance of an equity REIT. We compute FFO in accordance with standards established by the Board of Governors of NAREIT in its April 2002 White Paper (the "White Paper") and related implementation guidance, which may differ from the methodology for calculating FFO utilized by other equity REITs, and, accordingly, may not be comparable to such other REITs. The White Paper defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. While FFO is a relevant and widely used measure of operating performance for REITs, it should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.
The following table presents a reconciliation of net income available to common stockholders, the most directly comparable GAAP financial measure to FFO, to funds from operations available to common stockholders for the three and nine months ended September 30, 2006 and 2005 (in thousands, except per share data):
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, 2006 September 30, 2005 September 30, 2006 September 30, 2005
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Reconciliation of net income available to common stockholders to
funds from operations available to common stockholders
Net income available to common stockholders $ 14,942 $ 11,969 $ 40,814 $ 35,186
Add:
Depreciation and amortization (1) 19,973 14,073 51,585 39,965
Minority interests' share of income 709 234 1,449 257
Subtract:
Gain on sales of property (2) -- (36) (59) (36)
FFO allocable to minority interest (394) (271) (1,178) (275)
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Funds from operations available to common stockholders $ 35,230 $ 25,969 $ 92,611 $ 75,097
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FFO per share
Basic $ 1.34 $ 1.23 $ 3.88 $ 3.66
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Diluted $ 1.32 $ 1.21 $ 3.82 $ 3.60
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Reconciliation of earnings per share (diluted) to
FFO per share (diluted)
Earnings per share (diluted) $ 0.56 $ 0.56 $ 1.68 $ 1.69
Depreciation and amortization (1) 0.75 0.65 2.13 1.91
Minority interests' share of income 0.03 0.01 0.06 0.01
Gain on sales of property (2) -- -- -- --
FFO allocable to minority interest (0.02) (0.01) (0.05) (0.01)
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FFO per share (diluted) $ 1.32 $ 1.21 $ 3.82 $ 3.60
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- Includes depreciation and amortization on assets "held for sale" reflected as discontinued operations (for the periods prior to when such assets were designated as "held for sale").
- Gain on sales of property relates to the disposition of one property in the New Jersey/Suburban Philadelphia market during the third quarter of 2006, two properties in the Suburban Washington D.C. market during the third quarter of 2006 and one property in the Southeast market during the third quarter of 2005. Gain on sales of property is included in the income statement in income from discontinued operations, net.
Alexandria Real Estate Equities, Inc. and Subsidiaries
Supplemental Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
Quarterly Supplemental Financial Information
For the Three Months Ended
09/30/2006 06/30/2006 03/31/2006 12/31/2005 09/30/2005
Operational data ----------- ------------ ----------- ----------- -----------
Breakdown of revenues from continuing operations (a)
Rental income $ 64,250 54,739 52,546 $ 50,231 $ 47,523
Tenant recoveries 17,527 13,265 14,047 13,052 13,153
Other income 3,431 2,480 1,998 1,658 1,350
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Total $ 85,208 70,484 68,591 $ 64,941 $ 62,026
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Funds from operations per share - diluted (b) $ 1.32 1.26 1.24 $ 1.22 $ 1.21
Dividends per share on common stock $ 0.72 0.70 0.70 $ 0.70 $ 0.68
Dividend payout ratio (common stock) (c) 59.6% 63.7% 57.0% 57.2% 59.0%
Straight-line rent $ 4,515 3,674 2,977 $ 1,492 $ 3,020
As of
09/30/2006 06/30/2006 03/31/2006 12/31/2005 09/30/2005
Other data ----------- ------------ ----------- ----------- -----------
Number of shares of common stock outstanding
at end of period 28,957,698 26,387,076 22,555,587 22,441,294 22,437,761
Number of properties (d)
Acquired/added/completed during period 10 5 6 6 5
Sold/reconstructed during period -- (3) -- -- (1)
Owned at end of period 151 141 139 133 127
Rentable square feet (d)
Acquired/added/completed during period 1,343,365 386,776 380,043 415,978 301,458
Sold/reconstructed during period -- (268,099) -- -- (16,500)
Owned at end of period 10,633,286 9,289,921 9,171,244 8,791,201 8,375,223
Debt to total market capitalization (e)
Total debt $ 1,721,348 1,305,103 1,544,430 $ 1,406,666 $ 1,271,698
Preferred stock 194,142 193,866 193,917 192,419 196,420
Common stock 2,716,232 2,340,006 2,150,224 1,806,524 1,855,378
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Total market capitalization $ 4,631,722 3,838,975 3,888,571 $ 3,405,609 $ 3,323,496
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Debt to total market capitalization 37.2% 34.0% 39.7% 41.3% 38.3%
- The historical results above exclude the results of assets "held for sale" which have been reflected as discontinued operations.
- See page 5 for a reconciliation of earnings per share (diluted) to FFO per share (diluted).
- Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (common stock shares outstanding on the respective record date multiplied by the related dividend per share) to funds from operations for the respective quarter.
- Includes assets "held for sale" during the applicable periods such assets were "held for sale".
- Debt to market capitalization is the ratio of total debt (secured notes payable and unsecured line of credit and unsecured term loan) to total market capitalization. Total market capitalization is equal to the outstanding shares of preferred stock and common stock multiplied by the related closing prices at the end of each period presented, plus total debt.
Alexandria Real Estate Equities, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(IN THOUSANDS)
September 30, December 31,
2006 2005
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(Unaudited)
Assets
Rental properties, net $ 2,683,222 $ 1,788,818
Properties under development and development land 326,392 329,338
Cash and cash equivalents 7,821 3,911
Tenant security deposits and other restricted cash 43,772 21,013
Tenant receivables 5,012 4,764
Deferred rent 62,820 54,573
Investments 72,096 82,010
Other assets 104,707 78,023
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Total assets $ 3,305,842 $ 2,362,450
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Liabilities and Stockholders' Equity
Secured notes payable $ 1,169,348 $ 666,666
Unsecured line of credit and unsecured term loan 552,000 740,000
Accounts payable, accrued expenses and
tenant security deposits 149,278 86,391
Dividends payable 24,692 19,478
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Total liabilities 1,895,318 1,512,535
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Minority interest 57,389 20,115
Stockholders' equity:
Series B preferred stock 57,500 57,500
Series C preferred stock 129,638 129,638
Common stock 290 224
Additional paid-in capital 1,140,088 607,405
Accumulated other comprehensive income 25,619 35,033
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Total stockholders' equity 1,353,135 829,800
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Total liabilities and stockholders' equity $ 3,305,842 $ 2,362,450
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Debt
September 30, 2006
(Dollars in thousands)
(Unaudited)
Principal Maturities/Rates
Secured Debt Unsecured Debt
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Weighted Weighted
Average Average
Year Amount Interest Rat(1) Amount Interest Rat(2)
- ----------------------- ------------ ------------- ----------- -------------
2006 $ 14,034 6.26% $ -- --
2007 85,144 6.23% 52,000 6.48% (3)
2008 289,910 6.17% -- --
2009 45,955 6.26% 500,000 5.43% (4)
2010 93,358 6.23% -- --
Thereafter 638,761 6.09% -- --
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Subtotal 1,167,162 552,000
Unamortized Premium 2,186 --
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Total $ 1,169,348 $ 552,000
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Secured and Unsecured Debt Analysis
Weighted
% of Weighted Average Average
Balance Balance Interest Rate Maturity
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Secured Debt $ 1,169,348 67.9% 6.26% 5.5 Years
Unsecured Debt 552,000 32.1% 5.53% (5) 3.0 Years
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Total Debt $ 1,721,348 100.0% 6.02% 4.7 Years
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Fixed and Floating Rate Debt Analysis
Weighted
% of Weighted Average Average
Balance Balance Interest Rate Maturity
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Fixed Rate Debt $ 949,741 55.2% 6.14% 6.2 Years
Floating Rate Debt - Hedged 500,000 29.0% 5.43% (5) 3.2 Years
Floating Rate Debt - Unhedged 271,607 15.8% 6.70% 2.1 Years
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Total Debt $ 1,721,348 100.0% 6.02% 4.7 Years
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- The weighted average interest rate related to our secured debt is calculated based on the outstanding debt as of October 1, 2006, and as of January 1st for each year thereafter.
- The weighted average interest rates related to our unsecured line of credit and unsecured term loan are calculated based on borrowings outstanding as of September 30, 2006.
- The unsecured line of credit matures in December 2007 and may be extended at our sole option for an additional one-year period.
- The unsecured term loan matures in December 2009. The weighted average interest rate includes the effect of our interest rate swap agreements.
- The weighted average interest rates include the effect of our interest rate swap agreements. See further detail of our interest rate agreements on page 9.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Interest Rate Swap Agreements (1)
September 30, 2006
(Dollars in thousands)
(Unaudited)
Effective at
Notional September 30, Interest
Transaction Dates Effective Dates Amounts 2006 Pay Rates (2) Termination Dates
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December 2003 December 30, 2005 $ 50,000 50,000 4.150% December 29, 2006
December 2003 December 29, 2006 50,000 -- 5.090% October 31, 2008
March 2004 December 31, 2004 25,000 25,000 2.956% December 31, 2006
March 2004 December 31, 2004 25,000 25,000 2.956% December 31, 2006
April 2004 April 28, 2006 50,000 50,000 4.230% April 30, 2007
April 2004 April 30, 2007 50,000 -- 4.850% April 30, 2008
June 2004 June 30, 2005 50,000 50,000 4.343% June 30, 2007
December 2004 December 31, 2004 50,000 50,000 3.590% January 2, 2008
December 2004 January 3, 2006 50,000 50,000 3.927% July 1, 2008
May 2005 December 30, 2005 25,000 25,000 4.120% November 30, 2006
May 2005 June 30, 2006 50,000 50,000 4.270% June 29, 2007
May 2005 November 30, 2006 25,000 -- 4.330% November 30, 2007
May 2005 June 29, 2007 50,000 -- 4.400% June 30, 2008
May 2005 November 30, 2007 25,000 -- 4.460% November 28, 2008
May 2005 June 30, 2008 50,000 -- 4.509% June 30, 2009
May 2005 November 28, 2008 25,000 -- 4.615% November 30, 2009
December 2005 December 29, 2006 50,000 -- 4.730% November 30, 2009
December 2005 December 29, 2006 50,000 -- 4.740% November 30, 2009
December 2005 January 2, 2008 50,000 -- 4.768% December 31, 2010
June 2006 June 30, 2006 125,000 125,000 5.299% September 30, 2009
June 2006 October 31, 2008 50,000 -- 5.340% December 31, 2010
June 2006 October 31, 2008 50,000 -- 5.347% December 31, 2010
June 2006 June 30, 2008 50,000 -- 5.325% June 30, 2010
June 2006 June 30, 2008 50,000 -- 5.325% June 30, 2010
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Total Notional Amount in Effect at September 30, 2006 $ 500,000
==============
- For all interest rate swap agreements, interest is received based on one month LIBOR.
- The interest pay rates represent the interest rate we will pay for one month LIBOR under the respective interest rate swap agreement. These rates do not include any spread in addition to one month LIBOR that is due monthly as interest expense under our unsecured line of credit and unsecured term loan.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Same Property Comparisons
(Dollars in thousands)
(Unaudited)
GAAP Basis (1) Cash Basis (1)
-------------------------------- -------------------------------
Quarter Ended Quarter Ended
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09/30/06 09/30/05 % Change 09/30/06 09/30/05 % Change
---------- ---------- --------- ---------- ---------- --------
Revenue (2) $ 54,327 $ 53,024 2.5% $ 52,289 $ 50,184 4.2%
Operating expenses 12,733 12,323 3.3% 12,733 12,323 3.3%
---------- ---------- --------- ---------- ---------- --------
Revenue less
operating expenses $ 41,594 $ 40,701 2.2% $ 39,556 $ 37,861 4.5%
========== ========== ========= ========== ========== ========
GAAP Basis (1) Cash Basis (1)
-------------------------------- -------------------------------
Nine Months Ended Nine Months Ended
---------- ---------- --------- ---------- ---------- --------
09/30/06 09/30/05 % Change 09/30/06 09/30/05 % Change
---------- ---------- --------- ---------- ---------- --------
Revenue (2) $ 142,160 $ 138,953 2.3% $ 136,580 $ 131,161 4.1%
Operating expenses 32,318 31,920 1.2% 32,318 31,920 1.2%
---------- ---------- --------- ---------- ---------- --------
Revenue less
operating expenses $ 109,842 $ 107,033 2.6% $ 104,262 $ 99,241 5.1%
========== ========== ========= ========== ========== ========
NOTE: This summary represents operating data for all properties that were owned and fully operating for the entire periods presented (the "Third Quarter Same Properties") for the Quarter periods and (the "Nine Months Same Properties") for the Nine Month periods. Same Property Occupancy for the quarters ended September 30, 2006 and 2005 was 94.7% and 94.0%, respectively. Same Property Occupancy for the nine months ended September 30, 2006 and 2005 was 94.7% and 94.4%, respectively. Properties under redevelopment are excluded from same property results. If the portion of redevelopment properties not under active redevelopment were included in the Same Property results, the percentage change in GAAP Basis and Cash Basis revenue less operating expenses associated with the Third Quarter Same Properties, as applicable, (excluding lease termination fees, if any) less property operating expenses for the quarters ended September 30, 2006 and 2005 would have been 2.4% and 5.5%, respectively. If the portion of redevelopment properties not under active redevelopment were included in the Same Property results, the percentage change in GAAP Basis and Cash Basis revenue less operating expenses associated with the Nine Months Same Properties, as applicable, (excluding lease termination fees, if any) less property operating expenses for the nine months ended September 30, 2006 and 2005 would have been 3.4% and 6.9%, respectively.
- Revenue less operating expenses computed under GAAP is total revenue associated with the Third Quarter Same Properties, as applicable, (excluding lease termination fees, if any) less property operating expenses. Under GAAP, rental revenue is recognized on a straight-line basis over the respective lease terms. Revenue less operating expenses on a cash basis is total revenue associated with the Third Quarter Same Properties, as applicable, (excluding lease termination fees, if any) less property operating expenses, adjusted to exclude the effect of straight-line rent adjustments required by GAAP. Straight-line rent adjustments for the quarters ended September 30, 2006 and 2005 for the Third Quarter Same Properties were $2,038,000 and $2,840,000, respectively. Straight-line rent adjustments for the nine months ended September 30, 2006 and 2005 for the Nine Months Same Properties were $5,580,000 and $7,792,000, respectively. We believe that revenue less operating expenses 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.
- Fees received from tenants in connection with termination of their leases, if any, are excluded from revenue in the Same Property Comparisons.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties
(Dollars in thousands)
September 30, 2006 June 30, 2006
------------------------------------------------------------------------- -------------
Rentable Square Feet
Number of ----------------------------------- Annualized Occupancy Occupancy
Properties Operating Redevelopmen Total Base Rent (1)Percentage (1) Percentage (2)
----------- ----------- ----------- ----------- ----------- ----------- -------------
Markets
California - Los Angeles Metro 2 40,443 20,560 61,003 $ 882 86.4% 82.5%
California - San Diego 27 1,151,606 158,650 1,310,256 29,955 93.3% 94.0%
California - San Francisco Bay 21 1,493,891 88,400 1,582,291 44,853 94.4% 92.7%
Eastern Massachusetts 35 2,722,031 207,526 2,929,557 92,433 95.3% 96.3%
New Jersey/Suburban Philadelphia 8 443,349 -- 443,349 8,906 96.6% 100.0%
Southeast 11 539,203 45,841 585,044 8,802 78.8%(3) 80.8% (3)
Suburban Washington D.C. 32 2,575,370 -- 2,575,370 53,805 92.8% 93.1%
Washington - Seattle 12 837,335 12,719 850,054 24,937 89.0% 88.5%
International - Canada 3 296,362 -- 296,362 6,490 100.0% 100.0%
----------- ----------- ----------- ----------- ----------- ----------- -------------
Total Properties 151 10,099,590 533,696 10,633,286 $ 271,063 93.1%(4) 93.1% (5)
=========== =========== =========== =========== =========== =========== =============
- Excludes spaces at properties totaling 533,696 square feet undergoing a permanent change in use to office/laboratory space through redevelopment.
- Excludes spaces at properties totaling 479,056 sqaure feet undergoing a permanent change in use to office/laboratory space through development.
- Substantially all of the vacant space is office or warehouse space.
- Including spaces undergoing a permanent change in use to office/laboratory space through redevelopment, occupancy as of September 30, 2006 was 88.4%. See page 16 for additional information on our redevelopment program.
- Including spaces undergoing a permanent change in use to office/laboratory space through redevelopment, occupancy as of June 30, 2006 was 88.3%. See page 16 for additional information on our redevelopment program.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Leasing Activity
For the Quarter Ended September 30, 2006
TI's/Lease
Rental Commissions Average
Number Square Expiring New Rate Per Lease
of Leases Footage Rates Rates Changes Square Foot Terms
--------- ---------- --------- --------- ------- ----------- ---------
Leasing Activity
Lease Expirations
Cash Basis 40 372,316 $22.04 -- -- -- --
GAAP Basis 40 372,316 $21.17 -- -- -- --
Renewed/Releasable Space Leased
Cash Basis 15 220,731 $21.09 $22.10 4.8% $1.94 4.8 years
GAAP Basis 15 220,731 $19.69 $23.41 18.9% $1.94 4.8 years
Month-to-Month Leases In Effect
Cash Basis 15 58,335 $20.74 $20.74 -- -- --
GAAP Basis 15 58,335 $20.74 $20.74 -- -- --
Redeveloped/Developed/
Vacant Space Leased
Cash Basis 21 219,719 -- $30.41 -- $6.83 5.9 years
GAAP Basis 21 219,719 -- $30.89 -- $6.83 5.9 years
Leasing Activity Summary
Excluding Month-to-Month Leases
Cash Basis 36 440,450 -- $26.25 -- $4.38 5.4 years
GAAP Basis 36 440,450 -- $27.14 -- $4.38 5.4 years
Including Month-to-Month Leases
Cash Basis 51 498,785 -- $25.60 -- -- --
GAAP Basis 51 498,785 -- $26.39 -- -- --
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Leasing Activity
For the Nine Months Ended September 30, 2006
TI's/Lease
Rental Commissions Average
Number Square Expiring New Rate Per Lease
of Leases Footage Rates Rates Changes Square Foot Terms
--------- ---------- --------- --------- ------- ----------- ---------
Leasing Activity
Lease Expirations
Cash Basis 80 816,044 $23.81 -- -- -- --
GAAP Basis 80 816,044 $22.69 -- -- -- --
Renewed/Releasable Space Leased
Cash Basis 40 551,804 $22.86 $24.04 5.2% $3.21 4.6 years
GAAP Basis 40 551,804 $21.60 $24.60 13.9% $3.21 4.6 years
Month-to-Month Leases In Effect
Cash Basis 15 58,335 $20.74 $20.74 -- -- --
GAAP Basis 15 58,335 $20.73 $20.74 -- -- --
Redeveloped/Developed/
Vacant Space Leased
Cash Basis 45 643,745 -- $30.67 -- $5.52 7.4 years
GAAP Basis 45 643,745 -- $33.11 -- $5.52 7.4 years
Leasing Activity Summary
Excluding Month-to-Month Leases
Cash Basis 85 1,195,549 -- $27.61 -- $4.45 6.1 years
GAAP Basis 85 1,195,549 -- $29.18 -- $4.45 6.1 years
Including Month-to-Month Leases
Cash Basis 100 1,253,884 -- $27.29 -- -- --
GAAP Basis 100 1,253,884 -- $28.79 -- -- --
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Lease Expirations
September 30, 2006
Square Percentage of Annualized Base Rent
Year of Lease Number of Footage of Aggregate of Expiring Leases
Expiration Leases Expiring Expiring Leases Leased Square Feet (per square foot)
- ------------- --------------- --------------- ------------------ --------------------
2006 44 (1) 440,647 4.7% $23.21
2007 55 1,007,782 10.7% $27.71
2008 37 717,550 7.6% $26.85
2009 43 658,136 7.0% $21.81
2010 34 795,862 8.5% $26.50
Square Footage of Expiring Leases
Markets 2006 2007
- ----------------------------------- ----------- -----------
California - Los Angeles Metro 9,100 3,653
California - San Diego 165,071 194,672
California - San Francisco Bay 34,614 184,030
Eastern Massachusetts 113,495 163,416
New Jersey/Suburban Philadelphia -- --
Southeast 50,695 31,570
Suburban Washington D.C. 29,796 410,899
Washington - Seattle 37,876 19,542
International - Canada -- --
----------- -----------
Total 440,647 (1) 1,007,782
=========== ===========
- Includes month-to-month leases for approximately 58,000 square feet.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Additions to and Dispositions of Properties
For The Quarter Ended September 30, 2006
(Dollars in thousands)
Acquisition Month of Rentable
Markets Amount Acquisition Square Feet
- ---------------------------------------------- ------------ ------------ ------------
Additions to Operating Properties/Properties
Under Redevelopment
Eastern Massachusetts $ 600,000 (1) July 981,644
New Jersey/Surburban Philadelphia 21,050 September 50,000
------------- ------------
Additions to Operating Properties 621,050 1,031,644
California - Los Angeles Metro 4,954 July 29,660
Eastern Massachusetts -- (1) July 155,090
------------ ------------
Additions to Properties Under Redevelopment 4,954 184,750
Total Additions to Operating Properties/Properties ------------ ------------
Under Redevelopment $ 626,004 1,216,394
============= ============
Acquisition Month of Developable
Markets Amount Acquisition Square Feet
- ---------------------------------------------- ------------ ------------ ------------
Additions of Land:
California - San Francisco Bay $ 1,000 September 24,000
------------- ------------
Total Additions of Land $ 1,000 24,000
============= ============
Disposition Month of Rentable
Markets Amount Disposition Square Feet
- ---------------------------------------------- ------------ ------------ ------------
Dispositions:
None N/A N/A N/A
------------- ------------
Total Dispositions $ -- --
============= ============
- Represents the purchase of a seven building campus for a total contract price of $600 million. The contract price of $600 million includes assumption of a secured note payable of approximately $225 million. One building totaling approximately 155,090 square feet is under active redevelopment.
ALEXANDRIA REAL ESTATE EQUITIES,
INC.
Summary of Properties Under Ground-Up Development, Square
Footage Under Redevelopment and Square Footage Under Development/Pre-
Construction
September 30, 2006
Estimated
In-Service Rentable
Markets Dates Square Footage
- --------------------------------------- -------------- ---------------
Properties Under Ground-Up Development (1)
California - San Francisco Bay 4Q07 154,000 (2)
California - San Francisco Bay 1Q09 133,000
Washington - Seattle 4Q06 50,000 (3)
---------------
Total 337,000
---------------
Square Footage Under Redevelopment (4)
California - Los Angeles Metro 4Q08 20,560
California - San Diego 4Q06 71,510
California - San Diego 3Q07 87,140
California - San Francisco Bay 1Q07 30,000
California - San Francisco Bay 3Q07 58,400
Eastern Massachusetts 1Q07 25,847
Eastern Massachusetts 2Q07 26,589
Eastern Massachusetts 4Q08 155,090
Southeast 2Q08 45,841
Washington - Seattle 4Q07 12,719
---------------
Total 533,696
---------------
Square Footage Under Development/Pre-Construction (5) 4,350,000
---------------
Grand Total 5,220,696
===============
In accordance with Statement of Financial Accounting Standards No. 34, "Capitalization of Interest Cost" ("SFAS 34") and Statement of Financial Accounting Standards No. 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects" ("SFAS 67"), we are required to capitalize direct construction, including pre-construction costs, interest, property taxes, insurance and other costs directly related and essential to the acquisition, development, redevelopment or construction of a project. Pursuant to SFAS 34 and SFAS 67, capitalization of construction, development and redevelopment costs, including interest, is required while activities are ongoing to prepare an asset for its intended use. Pre-construction costs include costs related to the development of plans and the process of obtaining entitlements and permits from government authorities. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Should development, redevelopment or construction activity cease, construction costs, including interest, would no longer be eligible for capitalization, under SFAS 34 and SFAS 67, and would be expensed as incurred. Interest mandated to be capitalized on ground-up development, active redevelopment and other construction projects, including development/pre-construction on certain land parcels, for the three months ended September 30, 2006 was $9.7 million.
- The current construction cost of ground-up development is expected to average between $250 and $350 per developable square foot. Our aggregate construction costs to date approximate $80 per developable square foot.
- This development project is partially leased.
- This development project is 100% leased.
- Our redevelopment program involves ongoing activities necessary for the permanent change of use of applicable redevelopment space to office/laboratory space. Spaces currently built out with laboratory improvements are generally not placed into our value-added redevelopment program. As required under GAAP, interest is capitalized on redevelopment properties on the basis allocable only to that portion of space actively undergoing redevelopment. The current construction cost of properties under redevelopment will average $75 and $100 per square foot. In addition to properties under active redevelopment, as of September 30, 2006 our asset base contains imbedded opportunities for future permanent change in use to office/laboratory space through redevelopment aggregating approximately 1.1 million square feet. See Summary of Imbedded Future Development and Redevelopment Square Footage on page 17.
- See Summary of Imbedded Future Development and Redevelopment Square Footage on page 17.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Imbedded Future Development and Redevelopment
Square Footage
September 30, 2006
Imbedded Future Development and Redevelopment
----------------------------------------------
Development Redevelopment
Markets Square Footage Square Footage Total
- ------------------------------------- -------------- -------------- --------------
California - San Francisco Bay 3,553,000 (1) 138,000 3,691,000
California - San Diego 467,000 (2) 143,000 610,000
California - Suburban Washington D.C. 886,000 (3) 397,000 1,283,000
Eastern Massachusetts 225,000 185,000 410,000
Washington - Seattle 386,000 (4) 120,000 506,000
Other 384,000 (5) 157,000 541,000
-------------- -------------- --------------
Total Imbedded Future Development
and Redevelopment Square Footage 5,901,000 1,140,000 7,041,000
============== ============== ==============
The imbedded future development and redevelopment square footage shown above represents future ground-up development projects and future redevelopment (permanent change in use of applicable space to office/laboratory space) projects. A significant portion of our imbedded future development square footage is in the development/pre-construction phase (entitlement, permitting, design, etc.) of development. See discussion on SFAS 34 and SFAS 67 on page 16. The exact date of physical construction will depend on successful completion of development/pre-construction activities and management's assessment of overall market conditions. As required under GAAP, direct construction, interest, property taxes, insurance and other costs directly related and essential to the development/pre-construction, or construction of a project, is mandated to be capitalized during pre-construction phase when activities are ongoing to bring these assets to their intended use.
- Approximately 3.0 million developable square feet located in the San Francisco Bay market is in development/pre-construction.
- Approximately 350,000 developable square feet located in the San Diego market is in development/pre-construction.
- Approximately 590,000 developable square feet located in the Suburban Washington D.C. market is in development/pre-construction.
- Approximately 360,000 developable square feet located in the Seattle market is in development/pre-construction.
- Approximately 50,000 developable square feet is in development/pre- construction.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Capital Costs
For the Nine Months Ended September 30, 2006
(In thousands)
|
Property-related capital expenditures (1) |
$ 952 |
|
Leasing costs (2) |
$ 289 |
|
Property-related redevelopment costs (3) |
$ 81,610 |
|
Property-related development costs (3) |
$ 96,971 |
- Property-related capital expenditures include all major capital and recurring capital expenditures except capital expenditures that are recoverable from tenants, revenue-enhancing capital expenditures, or costs related to the redevelopment of a property. Major capital expenditures consist of roof replacements and HVAC systems which are typically identified and considered at the time the property is acquired. Capital expenditures fluctuate in any given period due to the nature, extent or timing of improvements required and the extent to which they are recoverable from tenants. Approximately 91% of our leases (based on rentable square feet) provide for the recapture of certain capital expenditures (such as HVAC systems maintenance and/or replacement, roof replacement and parking lot resurfacing). In addition, we implement an active preventative maintenance program at each of our properties to minimize capital expenditures.
- Leasing costs consist of tenant improvements and leasing commissions related to leasing of acquired vacant space and second generation space.
- Amount includes leasing costs related to development and redevelopment projects.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Conference Call Information
For the Third Quarter Ended September 30, 2006
Alexandria Real Estate Equities, Inc. will be hosting a conference call to discuss its operating and financial results for the third quarter and nine months ended September 30, 2006:
|
Date: |
November 3, 2006 |
|
Time: |
11:00 A.M. Pacific Standard Time |
|
Phone Number: |
(719) 457-2692 |
|
Confirmation Code: |
5973441 |