Alexandria Real Estate Equities, Inc 8-K, filed Aug 8, 2006
Alexandria Real Estate Equities, Inc. (ARE)
About this 8-K
Alexandria Real Estate Equities, Inc filed this 8-K on August 8, 2006, reporting on events of August 7, 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): August 7, 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 August 7, 2006, we issued a press release entitled "Alexandria Real Estate Equities, Inc. Reports Second Quarter 2006 Results" which sets forth our results of operations for the second quarter and six months ended June 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 August 7, 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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August 8, 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
Second Quarter 2006 Results
- Company Reports Funds from Operations Per Share (Diluted)
of $1.26, up 5%
Over Second Quarter 2005, and Earnings Per Share (Diluted) of
$0.57 -
Highlights
PASADENA, CA. - August 7, 2006 -- Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced operating and financial results for the second quarter 2006.
For the second quarter of 2006, we reported total revenues of $70,484,000 and FFO available to common stockholders of $29,227,000, or $1.26 per share (diluted), compared to total revenues of $57,277,000 and FFO available to common stockholders of $25,501,000, or $1.20 per share (diluted), for the second quarter of 2005. Comparing the second quarter of 2006 to the second quarter of 2005, total revenues increased 23%, FFO available to common stockholders increased 15% and FFO per share (diluted) increased 5%. For the six months ended June 30, 2006, we reported total revenues of $139,075,000 and FFO available to common stockholders of $57,381,000, or $2.49 per share (diluted), compared to total revenues of $112,332,000 and FFO available to common stockholders of $49,109,000, or $2.39 per share (diluted) for the six months ended June 30, 2005. Comparing the six months ended June 30, 2006 to the six months ended June 30, 2005, total revenues increase 24%, FFO available to common stockholders increased 17% and FFO per share (diluted) increased 4%.
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 June 30, 2006 and 2005 was $16,169,000 and $13,251,000, respectively. Depreciation and amortization expense for the six months ended June 30, 2006 and 2005 was $31,612,000 and $25,892,000, respectively. Net income available to common stockholders for the second quarter of 2006 was $13,139,000, or $0.57 per share (diluted), compared to net income available to common stockholders of $12,250,000, or $0.58 per share (diluted) for the second quarter of 2005. Net income available to common stockholders for the six months ended June 30, 2006 was $25,872,000, or $1.12 per share (diluted), compared to net income available to common stockholders of $23,217,000, or $1.13 per share (diluted) for the six months ended June 30, 2005.
For the second quarter 2006, we executed a total of 26 leases for approximately 247,000 square feet of space at 21 different properties (excluding month-to-month leases). Of this total, approximately 140,000 square feet were for new or renewal leases related to previously leased space and approximately 107,000 square feet were for redeveloped, developed or previously vacant space. Of the 107,000 square feet, approximately 24,000 square feet were delivered from our redevelopment or development programs, with the remaining approximately 83,000 square feet for previously vacant space. Rental rates for these new or renewal leases were on average approximately 17.6% higher (on a GAAP basis) than rental rates for expiring leases. For the six months ended June 30, 2006, we executed a total of 52 leases for approximately 743,000 square feet of space at 37 different properties (excluding month-to-month leases). Of this total, approximately 319,000 square feet were for new or renewal leases related to previously leased space and approximately 424,000 square feet were for redeveloped, developed or previously vacant space. Of the 424,000 square feet, approximately 311,000 square feet were delivered from our redevelopment or development programs, with the remaining approximately 113,000 square feet for previously vacant space. Rental rates for new or renewal leases were on average approximately 10.8% higher (on a GAAP basis) than rental rates for expiring leases.
During the second quarter of 2006, we added three properties aggregating approximately 251,000 square feet. We paid approximately $36 million cash for the properties. Also during the second quarter of 2006, we added one land parcel with approximately 144,000 developable square feet. We paid approximately $10.5 million cash for the land parcel.
In August 2006, we announced the closing of our previously reported purchase of an equity interest in the leasehold interest in 10.4 acres commonly known as Technology Square at MIT ("Tech Square") in Cambridge, Massachusetts. The contract price for a 100% equity interest in Tech Square was $600 million. However, MIT retained a 10% interest. We assumed existing financing on the project approximating $225 million with an interest rate of 5.26%. Tech Square consists of a seven building campus (including a 1,593 space covered car parking garage and a 49 space surface parking lot) containing approximately 1.2 million square feet.
As of June 30, 2006, approximately 86% 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 June 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 June 30, 2006, approximately 89% of our leases (on a square footage basis) provided for the recapture of certain capital expenditures and approximately 90% 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 2006 FFO per share (diluted) and earnings per share (diluted) as follows:
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FFO per share (diluted) |
$ 5.16 |
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Earnings per share (diluted) |
$ 2.25 |
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 149 properties comprising approximately 10.5 million square feet plus an imbedded pipeline for the ground-up development of approximately 6.0 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 Six Months Six Months
Ended Ended Ended Ended
June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005
----------------- ----------------- ----------------- -----------------
Income statement data
Total revenues $ 70,484 $ 57,277 $ 139,075 $ 112,332
Expenses
Rental operations 14,330 12,485 29,773 24,886
General and administrative 6,269 4,765 12,721 9,210
Interest 16,317 11,248 31,182 22,569
Depreciation and amortization 16,169 13,088 31,443 25,594
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53,085 41,586 105,119 82,259
Minority interest 370 -- 740 --
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Income from continuing operations 17,029 15,691 33,216 30,073
Income from discontinued operations, net 133 582 701 1,189
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Net income 17,162 16,273 33,917 31,262
Dividends on preferred stock 4,023 4,023 8,045 8,045
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Net income available to common stockholders $ 13,139 $ 12,250 $ 25,872 $ 23,217
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Weighted average shares of common stock outstanding
Basic 22,856,380 20,936,265 22,590,811 20,206,497
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Diluted 23,250,681 21,275,364 23,010,992 20,536,039
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Earnings per share - basic
Continuing operations (net of preferred stock dividends) $ 0.56 $ 0.56 $ 1.11 $ 1.09
Discontinued operations, net 0.01 0.03 0.03 0.06
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Earnings per share - basic $ 0.57 $ 0.59 $ 1.15 $ 1.15
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Earnings per share - diluted
Continuing operations (net of preferred stock dividends) $ 0.56 $ 0.55 $ 1.09 $ 1.07
Discontinued operations, net 0.01 0.03 0.03 0.06
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Earnings per share - diluted $ 0.57 $ 0.58 $ 1.12 $ 1.13
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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 six months ended June 30, 2006 and 2005 (in thousands, except per share data):
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2006 June 30, 2005 June 30, 2006 June 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 $ 13,139 $ 12,250 $ 25,872 $ 23,217
Add:
Depreciation and amortization (1) 16,169 13,251 31,612 25,892
Minority interest 370 -- 740 --
Subtract:
Gain on sales of property (2) (59) -- (59) --
FFO allocable to minority interest (392) -- (784) --
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Funds from operations available to common stockholders $ 29,227 $ 25,501 $ 57,381 $ 49,109
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FFO per share
Basic $ 1.28 $ 1.22 $ 2.54 $ 2.43
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Diluted $ 1.26 $ 1.20 $ 2.49 $ 2.39
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Reconciliation of earnings per share (diluted) to
FFO per share (diluted)
Earnings per share (diluted) $ 0.57 $ 0.58 $ 1.12 $ 1.13
Depreciation and amortization (1) 0.69 0.62 1.37 1.26
Minority interest 0.02 -- 0.03 --
Gain on sales of property (2) -- -- -- --
FFO allocable to minority interest (0.02) -- (0.03) --
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FFO per share (diluted) $ 1.26 $ 1.20 $ 2.49 $ 2.39
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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 and two properties in the Suburban Washington D.C. market during the second quarter of 2006. Gain on sales of property is included in the income statement 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 Inform
For the Three Months Ended
06/30/2006 03/31/2006 12/31/2005 09/30/2005 06/30/2005
Operational data ----------- ----------- ----------- ----------- -----------
Breakdown of revenues from continuing operations (a)
Rental income $ 54,739 $ 52,546 $ 50,231 $ 47,523 $ 45,020
Tenant recoveries 13,265 14,047 13,052 13,153 11,188
Other income 2,480 1,998 1,658 1,350 1,069
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Total $ 70,484 $ 68,591 $ 64,941 $ 62,026 $ 57,277
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Funds from operations per share - diluted (b) $ 1.26 $ 1.24 $ 1.22 $ 1.21 $ 1.20
Dividends per share on common stock $ 0.70 $ 0.70 $ 0.70 $ 0.68 $ 0.68
Dividend payout ratio (common stock) (c) 63.7% 57.0% 57.2% 59.0% 56.8%
Straight-line rent $ 3,674 $ 2,977 $ 1,492 $ 3,020 $ 3,305
As of
06/30/2006 03/31/2006 12/31/2005 09/30/2005 06/30/2005
Other data ----------- ----------- ----------- ----------- -----------
Number of shares of common stock outstanding
at end of period 26,387,076 22,555,587 22,441,294 22,437,761 21,204,620
Number of properties (d)
Acquired/added/completed during period 5 6 6 5 5
Sold/reconstructed during period (3) -- -- (1) --
Owned at end of period 141 139 133 127 123
Rentable square feet (d)
Acquired/added/completed during period 386,776 380,043 415,978 301,458 333,788
Sold/reconstructed during period (268,099) -- -- (16,500) --
Owned at end of period 9,283,125 9,164,448 8,784,405 8,368,427 8,083,469
Debt to total market capitalization (e)
Total debt $ 1,305,103 $ 1,544,430 $ 1,406,666 $ 1,271,698 $ 1,301,934
Preferred stock 193,866 193,917 192,419 196,420 197,474
Common stock 2,340,006 2,150,224 1,806,524 1,855,378 1,557,479
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Total market capitalization $ 3,838,975 $ 3,888,571 $ 3,405,609 $ 3,323,496 $ 3,056,887
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Debt to total market capitalization 34.0% 39.7% 41.3% 38.3% 42.6%
- 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
(In thousands)
June 30, December 31,
2006 2005
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(Unaudited)
Assets
Rental properties, net $ 1,967,859 $ 1,788,818
Properties under development and development land 342,229 329,338
Cash and cash equivalents 3,647 3,911
Tenant security deposits and other restricted cash 24,307 21,013
Tenant receivables 3,656 4,764
Deferred rent 58,342 54,573
Investments 77,719 82,010
Other assets 98,880 78,023
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Total assets $ 2,576,639 $ 2,362,450
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Liabilities and Stockholders' Equity
Secured notes payable $ 768,103 $ 666,666
Unsecured line of credit and unsecured term loan 537,000 740,000
Accounts payable, accrued expenses and
tenant security deposits 91,826 86,391
Dividends payable 22,297 19,478
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Total liabilities 1,419,226 1,512,535
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Minority interest 20,176 20,115
Stockholders' equity:
Series B preferred stock 57,500 57,500
Series C preferred stock 129,638 129,638
Common stock 264 224
Additional paid-in capital 909,739 607,405
Accumulated other comprehensive income 40,096 35,033
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Total stockholders' equity 1,137,237 829,800
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Total liabilities and stockholders' equity $ 2,576,639 $ 2,362,450
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Debt
June 30, 2006
(Dollars in thousands)
(Unaudited)
Principal Maturities/Rates
Secured Debt Unsecured Debt
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Weighted Weighted
Average Average
Year Amount Interest Rate(1) Amount Interest Rate(2)
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2006 $ 31,449 6.44% $ -- --
2007 83,630 6.39% 37,000 6.51% (3)
2008 238,396 6.30% -- --
2009 42,083 6.61% 500,000 6.60% (4)
2010 88,553 6.58% -- --
Thereafter 280,041 6.36% -- --
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Subtotal 764,152 537,000
Unamortized Premium 3,951 --
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Total $ 768,103 $ 537,000
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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 $ 768,103 58.9% 6.44% 4.3 Years
Unsecured Debt 537,000 41.1% 5.64% (5) 3.3 Years
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Total Debt $ 1,305,103 100.0% 6.11% 3.9 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 $ 582,835 44.7% 6.31% 5.0 Years
Floating Rate Debt-Hedged 500,000 38.3% 5.58% (5) 3.5 Years
Floating Rate Debt-Unhedged 222,268 17.0% 6.80% 2.1 Years
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Total Debt $ 1,305,103 100.0% 6.11% 3.9 Years
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- The weighted average interest rate related to our secured debt is calculated based on the outstanding debt as of July 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 June 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 rates include the effect of our interest rate swap agreements. See further detail of our interest rate swap agreements on page 9.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Interest Rate Swap Agreements (1)
June 30, 2006
(Dollars in thousands)
(Unaudited)
Notional Effective at Interest
Transaction Dates Effective Dates Amounts June 30,2006 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 June 30, 2006 $ 500,000
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- 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)
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Quarter Ended Quarter Ended
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06/30/2006 06/30/2005 % Change 06/30/2006 06/30/2005 % Change
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Revenue (2) $ 51,038 $ 50,089 1.9% $ 49,519 $ 47,634 4.0%
Operating expenses 10,690 10,521 1.5% 10,690 10,521 1.5%
---------- ---------- --------- ---------- ---------- --------
Revenue less
operating expenses $ 40,348 $ 39,568 2.0% $ 38,829 $ 37,113 4.6%
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GAAP Basis (1) Cash Basis (1)
-------------------------------- -------------------------------
Six Months Ended Six Months Ended
---------- ---------- --------- ---------- ---------- --------
06/30/2006 06/30/2005 % Change 06/30/2006 06/30/2005 % Change
---------- ---------- --------- ---------- ---------- --------
Revenue (2) $ 94,230 $ 92,512 1.9% $ 91,970 $ 88,469 4.0%
Operating expenses 20,795 20,695 0.5% 20,795 20,695 0.5%
---------- ---------- --------- ---------- ---------- --------
Revenue less
operating expenses $ 73,435 $ 71,817 2.3% $ 71,175 $ 67,774 5.0%
========== ========== ========= ========== ========== ========
NOTE: This summary represents operating data for all properties that were owned and fully operating for the entire periods presented (the "Second Quarter Same Properties") for the Quarter periods and (the "Six Months Same Properties") for the Six Month periods. Same Property Occupancy for the quarters ended June 30, 2006 and 2005 was 94.5% and 94.2%, respectively. Same Property Occupancy for the six months ended June 30, 2006 and 2005 was 94.7% and 94.2%, 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 Second Quarter Same Properties, as applicable, (excluding lease termination fees, if any) less property operating expenses for the quarters ended June 30, 2006 and 2005 would have been 3.7% and 6.7%, 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 Six Months Same Properties, as applicable, (excluding lease termination fees, if any) less property operating expenses for the six months ended June 30, 2006 and 2005 would have been 4.6% and 7.9%, respectively.
- Revenue less operating expenses computed under GAAP is total revenue associated with the Second Quarter Same Properties and Six Months 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 Second Quarter Same Properties and Six Months 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 June 30, 2006 and 2005 for the Second Quarter Same Properties were $1,519,000 and $2,455,000, respectively. Straight-line rent adjustments for the six months ended June 30, 2006 and 2005 for the Six Months Same Properties were $2,260,000 and $4,043,000, 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)
June 30, 2006 March 31, 2006 ------------------------------------------------------------------------- ------------- Rentable Square Feet Number of ----------------------------------- Annualized Occupancy Occupancy Properties Operating Redevelopment Total Base Rent (1)Percentage (1) Percentage (2) ----------- ----------- ----------- ----------- ----------- ----------- ------------- Markets California - Los Angeles Metro 1 31,343 -- 31,343 $ 692 82.5% 100.0% California - San Diego 27 1,151,606 158,650 1,310,256 30,118 94.0% 93.3% California - San Francisco Bay 20 1,352,687 102,633 1,455,320 38,589 92.7%(3) 97.0% Eastern Massachusetts 28 1,709,065 83,758 1,792,823 45,810 96.3% 95.7% New Jersey/Suburban Philadelphia 7 378,337 15,012 393,349 6,545 100.0% 98.2% Southeast 11 539,203 45,841 585,044 9,168 80.8%(4) 82.4% (4) Suburban Washington D.C. 32 2,514,927 60,443 2,575,370 52,127 93.1% 95.7% Washington - Seattle 12 830,539 12,719 843,258 24,513 88.5% 90.0% International - Canada 3 296,362 -- 296,362 6,463 100.0% 100.0% ----------- ----------- ----------- ----------- ----------- ----------- ------------- Total Properties - Continuing Operations 141 8,804,069 479,056 9,283,125 $ 214,025 93.1%(5) 94.5% (6) =========== =========== =========== =========== =========== =========== =============
- Excludes spaces at properties totaling 479,056 square feet undergoing a permanent change in use to office/laboratory space through redevelopment.
- Excludes three properties totaling 268,099 square feet that are classified as "held for sale" as of March 31, 2006 and space at properties totaling 540,875 square feet undergoing a permanent change in use to office/laboratory space through redevelopment.
- The decrease in occupancy from March 31, 2006 to June 30, 2006 is primarily due to a property with approximately 83,000 total rentable square feet (with approximately 63,000 square feet of vacancy) acquired in the second quarter of 2006. This property is an operating property, may be redeveloped in the future and is included in our Summary of Imbedded Future Development and Redevelopment Square Footage on page 17.
- 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 June 30, 2006 was 88.3%. 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 March 31, 2006 was 88.7%. See page 16 for additional information on our redevelopment program.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Leasing Activity
For the Three Months Ended June 30, 2006TI'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 41 297,851 $25.59 -- -- -- -- GAAP Basis 41 297,851 $24.28 -- -- -- -- Renewed/Releasable Space Leased Cash Basis 12 139,981 $23.55 $24.70 4.9% $4.98 4.5 years GAAP Basis 12 139,981 $21.93 $25.80 17.6% $4.98 4.5 years Month-to-Month Leases In Effect Cash Basis 17 50,285 $26.70 $26.70 -- -- -- GAAP Basis 17 50,285 $26.62 $26.69 -- -- -- Redeveloped/Developed/ Vacant Space Leased Cash Basis 14 106,643 -- $23.76 -- $3.30 4.8 years GAAP Basis 14 106,643 -- $24.04 -- $3.30 4.8 years Leasing Activity Summary Excluding Month-to-Month Leases Cash Basis 26 246,624 -- $24.29 -- $4.25 4.6 years GAAP Basis 26 246,624 -- $25.04 -- $4.25 4.6 years Including Month-to-Month Leases Cash Basis 43 296,909 -- $24.70 -- -- -- GAAP Basis 43 296,909 -- $25.32 -- -- --
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Leasing Activity
For the Six Months Ended June 30, 2006TI'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 57 536,669 $25.68 -- -- -- -- GAAP Basis 57 536,669 $24.48 -- -- -- -- Renewed/Releasable Space Leased Cash Basis 24 319,266 $24.66 $25.84 4.8% $4.20 4.4 years GAAP Basis 24 319,266 $23.34 $25.87 10.8% $4.20 4.4 years Month-to-Month Leases In Effect Cash Basis 17 50,285 $26.70 $26.70 -- -- -- GAAP Basis 17 50,285 $26.61 $26.69 -- -- -- Redeveloped/Developed/ Vacant Space Leased Cash Basis 28 424,026 -- $30.81 -- $4.85 8.2 years GAAP Basis 28 424,026 -- $34.25 -- $4.85 8.2 years Leasing Activity Summary Excluding Month-to-Month Leases Cash Basis 52 743,292 -- $28.67 -- $4.57 6.6 years GAAP Basis 52 743,292 -- $30.65 -- $4.57 6.6 years Including Month-to-Month Leases Cash Basis 69 793,577 -- $28.55 -- -- -- GAAP Basis 69 793,577 -- $30.40 -- -- --
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Lease Expirations
June 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 54 (1) 588,362 7.2% $23.97 2007 51 958,245 11.7% $26.30 2008 35 703,846 8.6% $26.61 2009 38 590,571 7.2% $21.81 2010 32 733,121 8.9% $23.82Square Footage of Expiring Leases Markets 2006 2007 - ----------------------------------- ----------- ----------- California - Los Angeles Metro -- 3,653 California - San Diego 191,656 132,362 California - San Francisco Bay 42,504 179,186 Eastern Massachusetts 133,662 107,443 New Jersey/Suburban Philadelphia -- 21,000 Southeast 105,158 28,857 Suburban Washington D.C. 69,464 466,202 Washington - Seattle 45,918 19,542 International - Canada -- -- ----------- ----------- Total 588,362 (1) 958,245 =========== ===========
- Includes month-to-month leases for approximately 50,000 square feet.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Additions to and Dispositions of Properties
For The Quarter Ended June 30, 2006
(Dollars in thousands)Acquisition Month of Rentable Markets Amount Acquisition Square Feet - ---------------------------------------------- ------------ ------------ ------------ Additions to Operating Properties/Properties Under Redevelopment California - San Francisco Bay (1) $ 13,950 April 82,712 California - San Francisco Bay (2) 9,540 April 70,328 Eastern Massachusetts 12,335 May 97,566 ------------- ------------ Additions to Operating Properties 35,825 250,606 None N/A N/A N/A ------------- ------------ Additions to Properties Under Redevelopment -- -- ------------- ------------ Total Additions to Operating Properties/ Properties Under Redevelopment $ 35,825 250,606 ============= ============ Acquisition Month of Developable Markets Amount Acquisition Square Feet - ---------------------------------------------- ------------ ------------ ------------ Additions of Land: California - San Francisco Bay $ 10,500 June 144,000 ------------- ------------ Total Additions of Land $ 10,500 144,000 ============= ============ Disposition Month of Rentable Markets Amount Disposition Square Feet - ---------------------------------------------- ------------ ------------ ------------ Dispositions: New Jersey/Suburban Philadelpia $ 14,512 April 107,874 Suburban Washington D.C. 27,300 June 160,225 ------------- ------------ Total Dispositions $ 41,812 268,099 ============= ============
- This property is intended to be redeveloped in the future and is included in our Imbedded Future Development and Redevelopment Square Footage on page 17.
- In addition to the existing rentable square feet of 70,328, this property also has an additional 96,000 of developable square footage. This additional 96,000 of developable square footage is included in our Imbedded Future Development and Redevelopment Square Footage on page 17.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties Under Ground-Up Development, Square Footage Under Redevelopment and Square Footage Under Development/Pre- Construction
June 30, 2006Estimated In-Service Rentable Markets Dates Square Footage - --------------------------------------- -------------- --------------- Properties Under Ground-Up Development (1) San Francisco Bay 4Q06 121,000 (2) San Francisco Bay 4Q07 154,000 (3) Seattle 4Q06 50,000 (2) --------------- Total 325,000 --------------- Square Footage Under Redevelopment (4) San Diego 4Q06 71,510 San Diego 3Q07 87,140 San Francisco Bay 3Q06 14,233 San Francisco Bay 3Q06 30,000 San Francisco Bay 3Q07 58,400 Eastern Massachusetts 1Q07 21,517 Eastern Massachusetts 2Q07 26,589 Eastern Massachusetts 1Q08 35,652 New Jersey/Suburban Philadelphia 3Q06 15,012 Southeast 1Q08 45,841 Suburban Washington D.C. 3Q06 60,443 Seattle 4Q07 12,719 --------------- Total 479,056 --------------- Square Footage Under Development/Pre-Construction (5) Square Footage Under Development/Pre-Construction 4,950,000 --------------- Grand Total 5,754,000 ===============In accordance with Statement of Financial Accounting Standards No. 34, "Capitalization of Interest Cost" ("SFAS 34") and Statement of Financial Accounting Standards No. 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects" ("SFAS 67"), we are required to capitalize direct construction, including pre-construction costs, interest, property taxes, insurance and other costs directly related and essential to the 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 June 30, 2006 was $8.8 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 $246 per developable square foot.
- This development project is 100% leased.
- This development project is partially leased and the balance of the space is under negotiation.
- Our redevelopment program involves ongoing activities necessary for the permanent change of use of applicable redevelopment space to office/laboratory space. Spaces currently built out with laboratory improvements are generally not placed into our value-add redevelopment program. For properties undergoing redevelopment, only the portion of the asset undergoing active redevelopment is excluding from operating properties and related statistics (e.g. occupancy information, same property performance, etc.). 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 June 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
June 30, 2006Imbedded Future Development and Redevelopment ---------------------------------------------- Development Redevelopment Markets Square Footage Square Footage Total - ------------------------------------- -------------- -------------- -------------- San Francisco Bay 3,662,000 (1) 138,000 3,800,000 San Diego 467,000 (2) 143,000 610,000 Suburban Washington D.C. 886,000 (3) 397,000 1,283,000 Eastern Massachusetts 225,000 179,000 404,000 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 6,010,000 1,134,000 7,144,000 ============== ============== ==============
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.). 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 when activities are ongoing to bring these assets to their intended use.
- Approximately 3.6 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 Six Months Ended June 30, 2006
(In thousands)
Property-related capital expenditures (1)
$ 625
Leasing costs (2)
$ 194
Property-related redevelopment costs (3)
$ 44,097
Property-related development costs (3)
$ 65,844
- 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 89% 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 Second Quarter Ended June 30, 2006
Alexandria Real Estate Equities, Inc. will be hosting a conference call to discuss its operating and financial results for the second quarter and six months ended June 30, 2006:
Date:
August 8, 2006
Time:
2:00 P.M. Eastern Daylight Time
Phone Number:
(719) 457-2633
Confirmation Code:
5234233