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): July 26, 2013

 

 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

Registrant’s telephone number, including area code: (626) 578-0777

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o               Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o               Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o               Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o               Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4 (c))

 

 

Item 1.01.  Entry into a Material Definitive Agreement.

 

On July 26, 2013, Alexandria Real Estate Equities, Inc. and Alexandria Real Estate Equities, L.P. (collectively, the “Company”) entered into a Second Amended and Restated Term Loan Agreement with Citibank, N.A., as administrative agent, Citigroup Global Markets Inc., RBC Capital Markets and RBS Securities Inc., as joint lead arrangers and joint book running managers, and certain financial institutions party thereto as lenders (the “Amended Term Loan Agreement”).  The Amended Term Loan Agreement amends and restates that certain Amended and Restated Term Loan Agreement, dated June 30, 2011, as amended on April 30, 2012, among the Company, Citibank N.A. and certain financial institutions party thereto as lenders (the “Prior Term Loan Agreement”) to, among other things, decrease the applicable interest rate margins in respect of the loan thereunder (the “Loan”) and extend the maturity date of the loan originally provided under the Prior Term Loan Agreement from June 30, 2015, to July 31, 2015, subject to the Company’s sole option to extend the maturity date up to two times for an additional term of six months each time upon the satisfaction of certain conditions.

 

Under the Amended Term Loan Agreement, the Loan will bear interest at a “Eurodollar Rate” or a “Base Rate” specified in the Amended Term Loan Agreement, plus, in either case, a margin specified in the Amended Term Loan Agreement.  The margin at closing was 1.20% and was applied to the Eurodollar Rate.

 

The “Eurodollar Rate” is the rate per annum equal to the British Bankers Association (or any other person which takes over the administration of that rate) LIBOR Rate, or if such rate is not available at the time of determination, the rate per annum determined by the administrative agent to be the rate at which deposits in US dollars for delivery on the date of determination in same day funds in the approximate amount of the borrowing would be offered by Citibank’s London Branch to major banks in the London interbank Eurodollar market at their request.  The “Base Rate” means for any day a fluctuating rate per annum equal to the highest of (a) the federal funds rate plus 1/2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Citibank as its “base rate,” and (c) the Eurodollar Rate plus 1.00%.

 

Under the Amended Term Loan Agreement, the financial covenants under the Prior Term Loan Agreement were not amended and are identical to the financial covenants required under the Company’s existing unsecured credit facility.  The Company must not, as of the last day of any fiscal quarter, permit its:

 

·                  leverage ratio to exceed 60.0%, except for four calculation dates immediately following any acquisition in which the assets acquired exceed 5% of the Company’s total assets (a “Material Acquisition”), in which case its leverage ratio is not to exceed 65.0%

·                  unsecured leverage ratio to exceed 60.0%, except for four calculation dates immediately following any Material Acquisition, in which case its unsecured leverage ratio is not to exceed 65.0%

·                  unsecured interest coverage ratio to be less than 1.75 to 1.00

·                  secured debt ratio to exceed 40.0%, except for four calculation dates immediately following any Material Acquisition, in which case its secured debt ratio is not to exceed 45.0%

·                  fixed charge coverage ratio to be less than 1.50:1.00

·                  minimum book value to be less than the sum of $2.0 billion and 50% of the net proceeds of equity offerings after January 28, 2011

 

The Company may, upon notice to the administrative agent, at any time or from time to time voluntarily prepay the Loan in whole or in part without premium or penalty; provided that any prepayment shall be in a principal amount of at least $500,000 or, if less, the entire principal amount thereof then outstanding.

 

The foregoing summary of the Amended Term Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended Term Loan Agreement, a copy of which will be filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2013.

 

Item 2.02.  Results of Operations and Financial Condition.

 

On July 29, 2013, the Company issued a press release entitled “Alexandria Real Estate Equities, Inc. Reports Second Quarter Ended June 30, 2013 Financial and Operating Results” which sets forth the Company’s results of operations and financial condition for the second quarter ended June 30, 2013.  The press release referred to certain supplemental information that is available on the Company’s website at www.are.com.  Copies of the press release and supplemental information are attached hereto as Exhibits 99.1 and 99.2, respectively.

 

2

 

The information contained in this Item 2.02, including the exhibits referenced herein, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section.  Such information shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

Item 2.03.  Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The information included in Item 1.01 is incorporated herein by reference.

 

Item 9.01.  Financial Statements and Exhibits.

 

(d)  Exhibits.

 

99.1                Press Release dated July 29, 2013.

 

99.2                Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the Second Quarter Ended June 30, 2013.

 

Forward-looking Statements

 

This current report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These statements include words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates,” or “anticipates,” or the negative of these words or similar words, and include (without limitation) statements regarding the anticipated maturity date of the Amended Term Loan Agreement.  Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in each such statement.  A number of important factors could cause actual results to differ materially from those included within or contemplated by the forward-looking statements, including, but not limited to, the factors described in the Company’s filings with the Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.  The Company does not undertake any responsibility to update any of these factors or to announce publicly any revisions to any of the forward-looking statements contained in this or any other document, whether as a result of new information, future events, or otherwise.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

		ALEXANDRIA REAL ESTATE EQUITIES, INC.
July 30, 2013		By:	/s/ Joel S. Marcus
			Joel S. Marcus
			Chairman/Chief Executive Officer
			(Principal Executive Officer)
		By:	/s/ Dean A. Shigenaga
			Dean A. Shigenaga
			Chief Financial Officer
			(Principal Financial Officer)

 

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EXHIBIT INDEX

 

Exhibit Number		Exhibit Title
99.1		Press Release dated July 29, 2013.
99.2		Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the Second Quarter Ended June 30, 2013.

 

5

Exhibit 99.1

 

 

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

 

 

Alexandria Real Estate Equities, Inc.

Reports

 

Second Quarter Ended June 30, 2013

Financial and Operating Results

 

FFO Per Share – Diluted, as Adjusted, of $1.07 for 2Q13

AFFO Per Share – Diluted of $1.00 for 2Q13

EPS Per Share – Diluted of $0.38 for 2Q13

Total Revenues of $154.2 Million for 2Q13

NOI of $107.9 Million for 2Q13

Continued Solid Life Science Space Demand in Key Cluster Submarkets

 

PASADENA, CA. – July 29, 2013 – Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced financial and operating results for the second quarter ended June 30, 2013.

 

Second quarter ended June 30, 2013, highlights

 

Results

 

·       Funds from operations (“FFO”) attributable to Alexandria Real Estate Equities, Inc.’s (“Alexandria’s”) common stockholders – diluted, as adjusted:

·       $71.6 million, or $1.07 per share, for 2Q13 compared to $65.8 million, or $1.07 per share, for 2Q12

·       $141.6 million, or $2.18 per share, for YTD 2Q13 compared to $132.0 million, or $2.14 per share, for YTD 2Q12

·       Adjusted funds from operations (“AFFO”) attributable to Alexandria’s common stockholders – diluted:

·       $66.8 million, or $1.00 per share, for 2Q13 compared to $64.0 million, or $1.04 per share, for 2Q12

·       $134.7 million, or $2.07 per share, for YTD 2Q13 compared to $126.4 million, or $2.05 per share, for YTD 2Q12

·       Net income attributable to Alexandria’s common stockholders – diluted:

·       $25.5 million, or $0.38 per share, for 2Q13 compared to $17.6 million, or $0.29 per share, for 2Q12

·       $47.9 million, or $0.74 per share, for YTD 2Q13 compared to $36.0 million, or $0.58 per share, for YTD 2Q12

 

Core operating metrics

 

·       Total revenues from continuing operations:

·       $154.2 million for 2Q13, up 5.9%, compared to $145.6 million for 2Q12

·       $304.6 million YTD 2Q13, up 8.3%, compared to $281.3 million for YTD 2Q12

·       Net operating income (“NOI”) from continuing operations:

·       $107.9 million for 2Q13, up 4.3%, compared to $103.5 million for 2Q12

·       $213.1 million for YTD 2Q13, up 7.2%, compared to $198.7 million for YTD 2Q12

·       Same property NOI performance:

·       7.2% and 3.2% increases on a cash and GAAP basis, respectively, for 2Q13 compared to 2Q12

·       8.3% and 2.0% increases on a cash and GAAP basis, respectively, for YTD 2Q13 compared to YTD 2Q12

·       Leasing activity solid during the three months ended June 30, 2013:

·       Executed 66 leases for 768,000 rentable square feet (“RSF”), including 270,000 RSF of development and redevelopment space

·       Rental rate increase of 6.7% and 12.7% on a cash and GAAP basis, respectively, on renewed/re-leased space

·       Key life science space leasing:

·       Investment-grade entity leased 121,632 RSF at 430 East 29th Street development in the Greater NYC market

·       Illumina, Inc. leased 97,702 RSF at 499 Illinois Street development in the San Francisco Bay Area market

·       Sarepta Therapeutics, Inc. leased 46,376 RSF at 215 First Street in the Greater Boston market

·       Eli Lilly and Company leased 27,950 RSF at 620 Professional Drive in the Suburban Washington, D.C. market

·       Nominal remaining expiring leases in 2013 of 410,254 RSF, or 3% of total operating RSF

·       Occupancy for North American Properties, as of June 30, 2013:

·       94.6% for operating properties and 92.9% for operating and redevelopment properties, up 40 bps and 110 bps, respectively, since March 31, 2013

·       Operating margins remained steady at 70% for 2Q13 and YTD 2Q13

·       Investment-grade client tenants represented 46% of total annualized base rent (“ABR”)

 

 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

June 30, 2013

 

Second Quarter Ended June 30, 2013

Financial and Operating Results

 

Core operating metrics (continued)

 

·       Investment-grade client tenants represented 72% of ABR from our top 10 client tenants

·       Contractual annual rent escalations in 95% of our leases

 

Balance sheet

 

·        Completed in 2Q13 secondary offering of 7.6 million shares of common stock at a price of $73.50 per share.  The net proceeds of $535.5 million were used to repay outstanding balances under our unsecured senior line of credit.

·        Completed in 2Q13 $500 million 3.90% 10-year unsecured senior notes payable offering.  Net proceeds of $495.3 million were used to reduce outstanding variable rate bank debt, including a $150 million partial repayment of our $750 million 2016 Unsecured Senior Bank Term Loan and to increase our available cash balance.  In connection with the partial repayment of our 2016 Unsecured Senior Bank Term Loan, we recognized a loss on the early extinguishment of debt related to the write-off of unamortized loan fees totaling $0.6 million, or $0.01 per share.

·        Liquidity of $1.8 billion, including $1.5 billion available under our unsecured senior line of credit and $302.2 million in cash and cash equivalents as of June 30, 2013.

·        Closed in 2Q13 secured construction loan, with aggregate commitments of $36 million at a rate of LIBOR + 1.40%, for 100% pre-leased development project at 269 East Grand Avenue in the San Francisco Bay Area market.

·        Net debt to EBITDA of 6.6x for the twelve months ended June 30, 2013.

·        Fixed charge coverage ratio of 2.7x for the twelve months ended June 30, 2013.

·        Unhedged variable rate debt totaling 11% of total consolidated debt as of June 30, 2013.

·       Completed in 2Q13 $22.5 million of real estate property sales, at a gain of $1.0 million, as follows:

·       $4.4 million of non-strategic income producing assets at a gain of $0.2 million

·       $18.1 million of non-income-producing land at a gain of $0.8 million

 

Subsequent events

 

Ariad Pharmaceuticals, Inc. expansion

 

On July 3, 2013, Ariad Pharmaceuticals, Inc. executed an LOI to lease an additional 139,374 RSF for a 15 year term at our 75/125 Binney Street development in the Cambridge submarket of Greater Boston.  An amendment to their lease is under negotiation to increase their lease to 383,497 RSF, or 99% of the total RSF of the project.

 

Sale of land parcel at 1600 Owens Street

 

On July 8, 2013, we executed a purchase and sale agreement to dispose of our land parcel at 1600 Owens Street in the Mission Bay submarket of the San Francisco Bay Area for an aggregate sales price of $55.2 million, inclusive of certain parking spaces.  Ownership of the parcel was strategically important to the buyer and we will earn a fee to manage the construction of the building.  This sale is expected to close in December 2013.

 

Acquisition of 10121/10151 Barnes Canyon Road

 

On July 5, 2013, we acquired 10121/10151 Barnes Canyon Road, an approximate 116,000 RSF office property located in the Sorrento Mesa submarket of San Diego, for a total purchase price of $13.1 million.  The acquisition will be funded in two installments:  i) $5.4 million to be funded in August, 2013 (which will earn a 7% return until the next payment is made), and ii) $7.7 million to be funded no later than October 2014.  The property is currently 100% occupied with leases that expire in 2014 and 2015. We intend to convert the existing office space into laboratory space through redevelopment when the space becomes available. Initial stabilized yields will be provided in the future upon commencement of the redevelopment.

 

Unsecured senior bank loan financings

 

On July 26, 2013, we amended our $600 million 2016 Unsecured Senior Bank Term Loan to reduce our interest rate on outstanding borrowings.  We did not extend the maturity of this loan as we expect to repay the loan over the next one to three years.  In addition, we expect to complete amendments to our $1.5 billion unsecured senior line of credit and our $600 million 2017 Unsecured Senior Bank Term Loan in the third quarter of 2013 to reduce our interest rate on outstanding borrowings, extend the maturity dates and amend certain financial covenants.  The commitments available for each facility will not change.

 

Maturity Date (including extensions)

Applicable Rate

Facility Fee

Facility

Status

Prior/ Current

Extended/ Proposed

Prior/ Current

Extended/ Proposed

Prior/ Current

Extended/ Proposed

$600 million 2016 Unsecured Senior Bank Term Loan

Complete

June 2016

July 2016

L +1.75%

L +1.20%

N/A

N/A

$600 million 2017 Unsecured Senior Bank Term Loan

In Progress

January 2017

January 2019

L +1.50%

L +1.20%

N/A

N/A

$1.5 billion unsecured senior line of credit

In Progress

April 2017

January 2019

L +1.20%

L +1.10%

0.25%

0.20%

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. ALL RIGHTS RESERVED © 2013

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ALEXANDRIA REAL ESTATE EQUITIES, INC.

June 30, 2013

 

Guidance

 

Based on our current view of existing market conditions and certain current assumptions, we have updated guidance for earnings per share attributable to Alexandria’s common stockholders – diluted and FFO per share attributable to Alexandria’s common stockholders – diluted for the year ended December 31, 2013, as set forth in the table below.  The table below provides a reconciliation of FFO per share, a non-GAAP measure, to earnings per share, the most directly comparable GAAP measure, as well as other key assumptions included in our guidance for the year ended December 31, 2013.  To the extent our full year earnings guidance is updated during the year, we will provide additional disclosure supporting reasons for any significant changes to such guidance.

 

Guidance for the Year Ended December 31, 2013		Reported on July 29, 2013		Reported on May 13, 2013
Earnings per share attributable to Alexandria’s common stockholders – diluted		$1.53 to $1.63		$1.50 to $1.60
Depreciation and amortization		$2.76 to $2.86		$2.80 to $2.90
(Gain) loss on sale of real estate		$(0.01)		$0.01
Other		$(0.01)		$(0.01)
FFO per share attributable to Alexandria’s common stockholders – diluted		$4.32 to $4.42		$4.35 to $4.45
Add back: actual 2Q13 per share loss on early extinguishment of debt (1)		$0.01		N/A
Add back: projected 3Q13 per share loss on early extinguishment of debt (1)		$0.02		N/A
FFO per share attributable to Alexandria’s common stockholders - diluted, as adjusted		$4.35 to $4.45		$4.35 to $4.45
Key projection assumptions:
Same property NOI growth – cash basis		5% to 7%		5% to 7%
Same property NOI growth – GAAP basis		1% to 3%		1% to 3%
Rental rate steps on lease renewals and re-leasing of space – cash basis		3% to 5%		1% to 3%
Rental rate steps on lease renewals and re-leasing of space – GAAP basis		11% to 13%		7% to 12%
Occupancy percentage for all operating properties at December 31, 2013		94.3% to 94.7%		94.3% to 94.7%
Straight-line rents		$24 to $26 million		$24 to $26 million
Amortization of above and below market leases		$3 to $4 million		$3 to $4 million
General and administrative expenses		$48 to $51 million		$48 to $51 million
Capitalization of interest		$51 to $57 million		$51 to $57 million
Interest expense, net		$71 to $81 million		$71 to $81 million
Net debt to adjusted EBITDA for the annualized three months ended December 31, 2013		6.5x		6.5x
Fixed charge coverage ratio for the annualized three months ended December 31, 2013		3.0x		3.0x
Non-income-producing land as a percentage of gross real estate by December 31, 2013		15% to 17%		15% to 17%

 

(1)             Represents loss on early extinguishment of debt related to the write-off of unamortized loan fees of $0.01 per share as a result of the $150 million partial repayment of our 2016 Unsecured Senior Bank Term Loan during the three months ended June 30, 2013, and the estimated loss on early extinguishment of debt related to the write-off of unamortized loan fees of $0.02 per share as a result of amendments of our 2016 Unsecured Senior Bank Term Loan, 2017 Unsecured Senior Bank Term Loan, and $1.5 billion unsecured senior line of credit which we expect to complete in the third quarter of 2013.

 

We expect that our principal liquidity needs for the year ended December 31, 2013, will be satisfied by the following multiple sources of capital as shown in the table below.  There can be no assurance that our sources and uses of capital will not be materially higher or lower than these expectations.

 

		Reported on July 29, 2013									Reported on May 13, 2013
Sources and Uses of Capital for the Year Ended December 31, 2013 (in millions)		Completed			Projected			Total			Total
Sources of capital:
Net cash provided by operating activities less dividends		$	66		$	64 - 84		$	130 - 150		$	130 - 150
Non-income-producing land sales		18			131 - 171		(1)	149 - 189			149 - 189
Income producing asset sales		129			0 - 5			129 - 134			125 - 138
Secured construction loan borrowings		26			19 - 39			45 - 65			45 - 55
Unsecured senior notes payable		500			–			500			350 - 450
Common stock offering		536			–			536			415 - 490
Available cash and borrowings on unsecured senior line of credit (2)		–			324 - 369			324 - 369			–
Total sources of capital		$	1,275		$	538 - 668		$	1,813 - 1,943		$	1,214 - 1,472
Uses of capital:
Development, redevelopment, and construction		$	253		$	346 - 376		$	599 - 629		$	617 - 667
Seller financing of asset sales		39			–			39			39
Acquisitions:
Completed/in process acquisitions		13			64			77			–
Additional acquisitions		-			123 - 223			123 - 223			200 - 300
Secured notes payable repayments		32			5			37			37
Unsecured senior bank term loan repayment		150			–			150			125 - 175
Excess cash retained from issuance of unsecured senior notes payable/pay down of unsecured senior line of credit		788			–			788			196 - 254
Total uses of capital		$	1,275		$	538 - 668		$	1,813 - 1,943		$	1,214 - 1,472

 

(1)             See Balance Sheet section of our Supplemental Package for additional information.

 

(2)             We had $302.2 million in cash and cash equivalents as of June 30, 2013.

 

The key assumptions behind the sources and uses of capital in the table are a favorable capital market environment and performance of our core operations in areas such as delivery of current and future development and redevelopment projects, leasing activity, and renewals.  Our expected sources and uses of capital are subject to a number of variables and uncertainties, including those discussed under the “Forward-looking statements” section under Part I, the “Risk Factors” section under Item 1A, and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section under Item 7, of our annual report on Form 10-K for the year ended December 31, 2012.  We expect to update our forecast of sources and uses of capital on a quarterly basis.

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. ALL RIGHTS RESERVED © 2013

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ALEXANDRIA REAL ESTATE EQUITIES, INC.

June 30, 2013

 

Earnings Call Information

 

We will host a conference call on Tuesday, July 30, 2013, at 3:00 p.m. Eastern Time (“ET”)/12:00 p.m. noon Pacific Time (“PT”) that is open to the general public to discuss our financial and operating results for the three months ended June 30, 2013.  To participate in this conference call, dial (888) 724-9493 or (913) 312-1456 and confirmation code 7393551, shortly before 3:00 p.m. ET/12:00 p.m. noon PT.  The audio web cast can be accessed at: www.are.com, in the “For Investors” section.  A replay of the call will be available for a limited time from 6:00 p.m. ET/3:00 p.m. PT on Tuesday, July 30, 2013.  The replay number is (888) 203-1112 or (719) 457-0820 and the confirmation code is 7393551.

 

Additionally, a copy of this Earnings Press Release and Supplemental Information for the second quarter ended June 30, 2013, is available in the “For Investors” section of our website at www.are.com or by following this link: http://www.are.com/fs/2013q2.pdf.

 

About the Company

 

Alexandria Real Estate Equities, Inc. (NYSE: ARE), a self-administered and self-managed investment-grade REIT, is the largest and leading REIT focused principally on owning, operating, developing, redeveloping, and acquiring high-quality, sustainable real estate for the broad and diverse life science industry.  Founded in 1994, Alexandria was the first REIT to identify and pursue the laboratory niche and has since had the first-mover advantage in the core life science cluster locations including Greater Boston, the San Francisco Bay Area, San Diego, New York City, Seattle, Suburban Washington, D.C., and Research Triangle Park.  Alexandria’s high-credit client tenants span the life science industry, including renowned academic and medical institutions, multinational pharmaceutical companies, public and private biotechnology entities, United States government research agencies, medical device companies, industrial biotech companies, venture capital firms, and life science product and service companies.  As the recognized real estate partner of the life science industry, Alexandria has a superior track record in driving client tenant productivity, collaboration, and innovation through its best-in-class laboratory and office space adjacent to leading academic medical research centers, unparalleled life science real estate expertise and services, and a longstanding and expansive network in the life science community.  We believe these advantages result in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.  For additional information on Alexandria, please visit www.are.com.

 

***********

 

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Such forward-looking statements include, without limitation, statements regarding our 2013 earnings per share attributable to Alexandria’s common stockholders – diluted, 2013 FFO per share attributable to Alexandria’s common stockholders – diluted, NOI and our projected sources and uses of capital for the year ended December 31, 2013.  These forward-looking statements are based on our current expectations, beliefs, projections, future plans, strategies, anticipated events, trends, and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events.  These statements are subject to risks, uncertainties, assumptions and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements.  Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully complete and lease our existing space held for redevelopment and new properties acquired for that purpose and any properties undergoing development, our failure to successfully operate or lease acquired properties, decreased rental rates or increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by client tenants, general and local economic conditions, and other risks and uncertainties detailed in our filings with the SEC.  Accordingly, you are cautioned not to place undue reliance on such forward-looking statements.  All forward-looking statements are made as of the date of this press release, and we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.  For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. ALL RIGHTS RESERVED © 2013

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ALEXANDRIA REAL ESTATE EQUITIES, INC.

June 30, 2013

 

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

 

		Three Months Ended															Six Months Ended
		6/30/13			3/31/13			12/31/12			9/30/12			6/30/12			6/30/13			6/30/12
Revenues:
Rental		$	114,743		$	111,776		$	112,048		$	106,216		$	104,329		$	226,519		$	205,530
Tenant recoveries		35,923			35,611			35,721			34,006			31,881			71,534			63,763
Other income		3,569			2,993			3,785			2,628			9,383			6,562			12,011
Total revenues		154,235			150,380			151,554			142,850			145,593			304,615			281,304
Expenses:
Rental operations		46,323			45,224			46,176			44,203			42,102			91,547			82,555
General and administrative		12,472			11,648			12,635			12,470			12,298			24,120			22,655
Interest		15,978			18,020			17,941			17,092			17,922			33,998			34,148
Depreciation and amortization		46,580			46,065			47,515			46,584			50,741			92,645			92,527
Impairment of land parcel		–			–			2,050			–			–			–			–
Loss on early extinguishment of debt		560			–			–			–			1,602			560			2,225
Total expenses		121,913			120,957			126,317			120,349			124,665			242,870			234,110
Income from continuing operations		32,322			29,423			25,237			22,501			20,928			61,745			47,194
Income (loss) from discontinued operations:
Income from discontinued operations before impairment of real estate		243			814			5,171			5,603			4,713			1,057			9,358
Impairment of real estate		–			–			(1,601		)	(9,799		)	–			–			–
Income (loss) from discontinued operations, net		243			814			3,570			(4,196		)	4,713			1,057			9,358
Gain on sale of land parcel		772			–			–			–			–			772			1,864
Net income		33,337			30,237			28,807			18,305			25,641			63,574			58,416
Net income attributable to noncontrolling interests		980			982			1,012			828			851			1,962			1,562
Dividends on preferred stock		6,471			6,471			6,471			6,471			6,903			12,942			14,386
Preferred stock redemption charge		–			–			–			–			–			–			5,978
Net income attributable to unvested restricted stock awards		403			342			324			360			271			745			506
Net income attributable to Alexandria’s common stockholders		$	25,483		$	22,442		$	21,000		$	10,646		$	17,616		$	47,925		$	35,984
Earnings per share attributable to Alexandria’s common stockholders – basic and diluted:
Continuing operations		$	0.38		$	0.35		$	0.27		$	0.24		$	0.21		$	0.72		$	0.43
Discontinued operations, net		–			0.01			0.06			(0.07		)	0.08			0.02			0.15
Earnings per share – basic and diluted		$	0.38		$	0.36		$	0.33		$	0.17		$	0.29		$	0.74		$	0.58
Weighted average shares of common stock outstanding for calculating earnings per share attributable to Alexandria’s common stockholders:
– Basic		66,973			63,161			63,092			62,364			61,663			65,078			61,586
– Diluted		66,973			63,161			63,092			62,364			61,664			65,078			61,586

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. ALL RIGHTS RESERVED © 2013

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ALEXANDRIA REAL ESTATE EQUITIES, INC.

June 30, 2013

 

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

		June 30,			March 31,			December 31,			September 30,			June 30,
		2013			2013			2012			2012			2012
Assets
Investments in real estate, net		$	6,453,379		$	6,375,182		$	6,424,578		$	6,300,027		$	6,208,354
Cash and cash equivalents		302,205			87,001			140,971			94,904			80,937
Restricted cash		30,914			30,008			39,947			44,863			41,897
Tenant receivables		7,577			9,261			8,449			10,124			6,143
Deferred rent		177,507			170,100			170,396			160,914			155,295
Deferred leasing and financing costs, net		164,362			159,872			160,048			152,021			151,355
Investments		122,605			123,543			115,048			107,808			104,454
Other assets		120,740			135,952			90,679			94,356			93,304
Total assets		$	7,379,289		$	7,090,919		$	7,150,116		$	6,965,017		$	6,841,739
Liabilities, Noncontrolling Interests, and Equity
Secured notes payable		$	711,029		$	730,714		$	716,144		$	719,350		$	719,977
Unsecured senior notes payable		1,048,395			549,816			549,805			549,794			549,783
Unsecured senior line of credit		–			554,000			566,000			413,000			379,000
Unsecured senior bank term loans		1,200,000			1,350,000			1,350,000			1,350,000			1,350,000
Accounts payable, accrued expenses, and tenant security deposits		368,249			367,153			423,708			376,785			348,037
Dividends payable		52,141			43,955			41,401			39,468			38,357
Total liabilities		3,379,814			3,595,638			3,647,058			3,448,397			3,385,154
Commitments and contingencies
Redeemable noncontrolling interests		14,505			14,534			14,564			15,610			15,817
Alexandria Real Estate Equities, Inc.’s stockholders’ equity:
Series D Cumulative Convertible Preferred Stock		250,000			250,000			250,000			250,000			250,000
Series E Cumulative Redeemable Preferred Stock		130,000			130,000			130,000			130,000			130,000
Common stock		710			633			632			632			622
Additional paid-in capital		3,596,477			3,075,860			3,086,052			3,094,987			3,053,269
Accumulated other comprehensive loss		(39,565		)	(22,890		)	(24,833		)	(19,729		)	(37,370		)
Alexandria’s stockholders’ equity		3,937,622			3,433,603			3,441,851			3,455,890			3,396,521
Noncontrolling interests		47,348			47,144			46,643			45,120			44,247
Total equity		3,984,970			3,480,747			3,488,494			3,501,010			3,440,768
Total liabilities, noncontrolling interests, and equity		$	7,379,289		$	7,090,919		$	7,150,116		$	6,965,017		$	6,841,739

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. ALL RIGHTS RESERVED © 2013

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ALEXANDRIA REAL ESTATE EQUITIES, INC.

June 30, 2013

 

Funds From Operations and Adjusted Funds From Operations

(In thousands, except per share amounts)

(Unaudited)

 

The following table presents a reconciliation of net income attributable to Alexandria’s common stockholders – basic, the most directly comparable financial measure presented in accordance with GAAP, to FFO attributable to Alexandria’s common stockholders – diluted, FFO attributable to Alexandria’s common stockholders – diluted, as adjusted, and AFFO attributable to Alexandria’s common stockholders – diluted, for the periods below:

 

		Three Months Ended															Six Months Ended
		6/30/13			3/31/13			12/31/12			9/30/12			6/30/12			6/30/13			6/30/12
Net income attributable to Alexandria’s common stockholders – basic		$	25,483		$	22,442		$	21,000		$	10,646		$	17,616		$	47,925		$	35,984
Depreciation and amortization		46,580			46,995			48,072			48,173			52,355			93,575			95,760
Loss (gain) on sale of real estate		(219		)	340			–			(1,562		)	(2		)	121			(2		)
Impairment of real estate		–			–			1,601			9,799			–			–			–
Gain on sale of land parcel		(772		)	–			–			–			–			(772		)	(1,864		)
Amount attributable to noncontrolling interests/unvested restricted stock awards:
Net income		1,383			1,324			1,336			1,188			1,122			2,707			2,068
FFO		(1,437		)	(1,064		)	(1,109		)	(1,148		)	(1,133		)	(2,501		)	(2,305		)
FFO attributable to Alexandria’s common stockholders – basic		71,018			70,037			70,900			67,096			69,958			141,055			129,641
Assumed conversion of 8.00% Unsecured Senior Convertible Notes		5			5			5			5			6			10			11
FFO attributable to Alexandria’s common stockholders – diluted		71,023			70,042			70,905			67,101			69,964			141,065			129,652
Realized gain on equity investment primarily related to one non-tenant life science entity		–			–			–			–			(5,811		)	–			(5,811		)
Impairment of land parcel		–			–			2,050			–			–			–			–
Loss on early extinguishment of debt		560			–			–			–			1,602			560			2,225
Preferred stock redemption charge		–			–			–			–			–			–			5,978
Allocation to unvested restricted stock awards		(12		)	–			(19		)	–			35			(12		)	(20		)
FFO attributable to Alexandria’s common stockholders – diluted, as adjusted		71,571			70,042			72,936			67,101			65,790			141,613			132,024
Non-revenue-enhancing capital expenditures:
Maintenance building improvements		(337		)	(596		)	(329		)	(935		)	(594		)	(933		)	(804		)
Tenant improvements and leasing commissions		(2,990		)	(882		)	(3,170		)	(1,844		)	(2,148		)	(3,872		)	(4,167		)
Straight-line rent revenue		(8,239		)	(6,198		)	(9,240		)	(5,225		)	(5,195		)	(14,437		)	(13,991		)
Straight-line rent expense on ground leases		539			538			471			201			1,207			1,077			2,613
Capitalized income from development projects		9			22			45			50			72			31			550
Amortization of acquired above and below market leases		(830		)	(830		)	(844		)	(778		)	(778		)	(1,660		)	(1,578		)
Amortization of loan fees		2,427			2,386			2,505			2,470			2,214			4,813			4,857
Amortization of debt premiums/discounts		115			115			110			112			110			230			289
Stock compensation		4,463			3,349			3,748			3,845			3,274			7,812			6,567
Allocation to unvested restricted stock awards		50			19			63			19			15			69			48
AFFO attributable to Alexandria’s common stockholders – diluted		$	66,778		$	67,965		$	66,295		$	65,016		$	63,967		$	134,743		$	126,408

 

The following table presents a reconciliation of net income per share attributable to Alexandria’s common stockholders – basic, to FFO per share attributable to Alexandria’s common stockholders – diluted, FFO per share attributable to Alexandria’s common stockholders – diluted, as adjusted, and AFFO per share attributable to Alexandria’s common stockholders – diluted, for the periods below.  For the computation of the weighted average shares used to compute the per share information, refer to the “Definitions and Other Information” section in our supplemental information:

 

		Three Months Ended															Six Months Ended
		6/30/13			3/31/13			12/31/12			9/30/12			6/30/12			6/30/13			6/30/12
Net income per share attributable to Alexandria’s common stockholders – basic		$	0.38		$	0.36		$	0.33		$	0.17		$	0.29		$	0.74		$	0.58
Depreciation and amortization		0.69			0.74			0.76			0.78			0.84			1.43			1.56
Loss (gain) on sale of real estate		–			0.01			–			(0.03		)	–			0.01			–
Impairment of real estate		–			–			0.03			0.16			–			–			–
Gain on sale of land parcel		(0.01		)	–			–			–			–			(0.01		)	(0.03		)
Amount attributable to noncontrolling interests/unvested restricted stock awards:
Net income		0.02			0.02			0.02			0.02			0.02			0.04			0.03
FFO		(0.02		)	(0.02		)	(0.02		)	(0.02		)	(0.02		)	(0.04		)	(0.04		)
FFO per share attributable to Alexandria’s common stockholders – basic		1.06			1.11			1.12			1.08			1.13			2.17			2.11
Assumed conversion of 8.00% Unsecured Senior Convertible Notes		–			–			–			–			–			–			–
FFO per share attributable to Alexandria’s common stockholders – diluted		1.06			1.11			1.12			1.08			1.13			2.17			2.11
Realized gain on equity investment primarily related to one non-tenant life science entity		–			–			–			–			(0.09		)	–			(0.09		)
Impairment of land parcel		–			–			0.04			–			–			–			–
Loss on early extinguishment of debt		0.01			–			–			–			0.03			0.01			0.03
Preferred stock redemption charge		–			–			–			–			–			–			0.10
Allocation to unvested restricted stock awards		–			–			–			–			–			–			–
FFO per share attributable to Alexandria’s common stockholders – diluted, as adjusted		1.07			1.11			1.16			1.08			1.07			2.18			2.14
Non-revenue-enhancing capital expenditures:
Maintenance building improvements		(0.01		)	(0.01		)	(0.01		)	(0.01		)	(0.01		)	(0.01		)	(0.01		)
Tenant improvements and leasing commissions		(0.04		)	(0.01		)	(0.05		)	(0.03		)	(0.03		)	(0.06		)	(0.07		)
Straight-line rent revenue		(0.12		)	(0.10		)	(0.15		)	(0.08		)	(0.08		)	(0.22		)	(0.23		)
Straight-line rent expense on ground leases		0.01			0.01			0.01			–			0.02			0.02			0.04
Amortization of acquired above and below market leases		(0.01		)	(0.01		)	(0.01		)	(0.01		)	(0.01		)	(0.03		)	(0.03		)
Amortization of loan fees		0.03			0.04			0.04			0.03			0.03			0.07			0.09
Stock compensation		0.07			0.05			0.06			0.06			0.05			0.12			0.11
Allocation to unvested restricted stock awards		–			–			–			–			–			–			–
Other		–			–			–			–			–			–			0.01
AFFO per share attributable to Alexandria’s common stockholders – diluted		$	1.00		$	1.08		$	1.05		$	1.04		$	1.04		$	2.07		$	2.05

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. ALL RIGHTS RESERVED © 2013

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