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): January 2, 2002
ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
Maryland | 1-12993 | 95-4502084 |
(State or other jurisdiction of incorporation) | (Commission | (I.R.S. Employer |
135 North Los Robles Avenue, Suite 250 | 91101 |
Pasadena, California | |
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (626) 578-0777
Item 5. OTHER EVENTS
Alexandria Real Estate Equities, Inc. or one of our wholly owned subsidiaries acquired the properties and land parcels listed below. Two of the properties (930 Clopper Road and 9880 Campus Point Drive) contain a combination of office/laboratory space for lease to tenants in the life science industry ("Life Science Facilities") and the remainder are being redeveloped as Life Science Facilities. We acquired each of the properties and land parcels from sellers that were unrelated to each other and unaffiliated with us.
On January 18, 2001, we acquired 930 Clopper Road, located in Gaithersburg, Maryland. We purchased the property for $7,575,000, which was based on arm's length negotiations. We funded the purchase price through a draw on our unsecured line of credit. The property contains approximately 60,000 rentable square feet. It is presently 100% leased to a single tenant. We purchased the property from Clopper Owners, LLC.
On February 28, 2001, we acquired 29 Hartwell Avenue, located in Lexington, Massachusetts. We purchased the property for $8,500,000, which was based on arm's length negotiations. We funded the purchase price through a draw on our unsecured line of credit. The property contains approximately 59,000 rentable square feet and is presently vacant and under redevelopment. We purchased the property from The McGraw-Hill Companies, Inc.
On April 25, 2001, we acquired a 3.8 acre property, located in Cambridge, Massachusetts, with two buildings under development. We purchased the property for $35,650,000, which was based on arm's length negotiations. Of this amount, $21,350,000 was set aside in an escrow account for the completion of the development of the property. We funded the purchase price through a draw on our unsecured line of credit. When completed, the buildings will contain approximately 100,000 rentable square feet of office/laboratory space. We purchased the property from 784 Memorial Drive LLC.
On June 19, 2001, we acquired 480 Arsenal Street, located in Watertown, Massachusetts. We purchased the property for $11,775,000, which was based on arm's length negotiations. We funded the purchase price through a draw on our unsecured line of credit. The property contains approximately 96,000 rentable square feet and is presently vacant and under redevelopment. We purchased the property from AMB Property, L.P.
On August 3, 2001, we acquired 9880 Campus Point Drive, located in San Diego, California. We purchased the property for $20,350,000, which was based on arm's length negotiations. We financed $12,000,000 of the purchase price with a secured note payable to Aid Association for Lutherans, the seller of the property. The debt bears interest at a rate of 7.5% per annum, with monthly payments of principal and interest based on a 20-year amortization schedule. The loan matures in August 2011. We funded the remainder of the purchase price through a draw on our unsecured line of credit. The property contains approximately 72,000 rentable square feet. It is presently 100% leased to a single tenant.
On August 17, 2001, we acquired 5 Research Place, located in Rockville, Maryland. We purchased the property for $7,036,000, which was based on arm's length negotiations. We funded the purchase price through a draw on our unsecured line of credit. The property contains approximately 59,000 rentable square feet and is presently vacant and under redevelopment. We purchased the property from John F. Jaeger, Steven J. Virostek and James A. Fangmeyer.
On December 14, 2001, we acquired a land parcel consisting of approximately 4.7 acres, located in Gaithersburg, Maryland. We purchased the land parcel for $2,760,000, which was based on arm's length negotiations. We funded the purchase price through a draw on our unsecured line of credit. We purchased the land parcel from BAE Systems Aerospace Electronics Inc.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Properties Acquired
9880 CAMPUS POINT DRIVE
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the year ended December 31, 2000
Notes to Statement of Revenues and Certain Expenses
(b) Unaudited pro forma condensed consolidated financial statements
(c) Exhibits
23.1 Consent of Ernst & Young LLP
Report of Independent Auditors
To the Board of Directors
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of 9880 Campus Point Drive (the Property) for the year ended December 31, 2000. This statement of revenue and certain expenses is the responsibility of management of the Property. Our responsibility is to express an opinion on the statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenue and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission. Certain expenses (described in Note 1) that would not be comparable to those resulting from the proposed future operations of the Property are excluded and the statement is not intended to be a complete presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly, in all material respects, the revenue and certain expenses, as defined above, of the Property for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Los Angeles, California
July 13, 2001
Statement of Revenue and Certain Expenses
Year ended December 31, 2000
(in thousands)
Revenue: | |
Rental | $ 2,265 |
Tenant recoveries | 172 |
Other income | 6 |
Total revenue | 2,443 |
Certain Expenses: | |
Repairs and maintenance | 23 |
Insurance | 37 |
Taxes and license | 111 |
Total certain expenses | 171 |
Excess of revenue over certain expenses | $ 2,272 |
See accompanying notes to statement of revenue and certain expenses.
9880 Campus Point Drive
Notes to Statement of Revenue and Certain Expenses
December 31, 2000
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenue and certain expenses includes the operations of 9880 Campus Point Drive, located in San Diego, California (the "Property"). ARE-9880 Campus Point Drive, LLC, an indirect wholly owned subsidiary of Alexandria Real Estate Equities, Inc., acquired the Property from a nonaffiliated third party. As of December 31, 2000, the Property was 100% occupied and leased to a single tenant under a triple-net lease, which requires the tenant to pay substantially all expenses associated with the Property, including operating and maintenance, utilities, taxes and insurance.
Basis of Presentation
The accompanying statement has been prepared to comply with the rules and regulations of the Securities and Exchange Commission.
The Property is not a legal entity and the accompanying statement is not representative of the actual operations for the period presented, as certain expenses that may not be comparable to the expenses we expect to incur in the future operations of the Property have been excluded. Excluded expenses consist of interest, depreciation and amortization, and property general and administrative costs not directly comparable to the future operations of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the terms of the related leases.
Risks and Uncertainties
The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
2. Future Minimum Lease Payments
The future minimum lease payments to be received under a noncancelable operating lease as of December 31, 2000 are as follows (in thousands):
2001 | $ 2,045 |
2002 | 2,117 |
2003 | 2,190 |
2004 | 2,267 |
2005 | 2,347 |
Thereafter | 8,422 |
Total | $ 19,388 |
The above future minimum lease payments do not include specified payments for tenant reimbursements of operating expenses.
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated balance sheet of Alexandria Real Estate Equities, Inc. as of September 30, 2001 is presented as if the acquisition of the land parcel acquired subsequent to September 30, 2001 (the "Fourth Quarter 2001 Acquisition") described in Item 5 had been acquired on September 30, 2001. The following unaudited pro forma condensed consolidated income statements of Alexandria Real Estate Equities, Inc. for the nine months ended September 30, 2001 and for the year ended December 31, 2000 are presented as if the acquisition of all of the properties and land parcels described in Item 5 had been acquired on January 1, 2000.
The pro forma condensed consolidated financial statements are not necessarily indicative of what the actual financial position or results of operations would have been had we completed the transactions on the dates described above, nor do they purport to represent our future financial position or our results of operations.
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2001
(dollars in thousands)
Pro Forma | |||
Historical | Adjustments | Pro Forma | |
Assets | |||
Rental properties, net | $ 783,474 | $ 2,760(A) | $ 786,234 |
Property under development | 46,306 | - | 46,306 |
Cash and cash equivalents | 2,720 | - | 2,720 |
Tenant security deposits and other restricted | |||
cash | 15,721 | - | 15,721 |
Secured note receivable | 6,000 | - | 6,000 |
Tenant receivables | 2,929 | - | 2,929 |
Deferred rent | 19,160 | - | 19,160 |
Other assets | 52,478 | - | 52,478 |
Total assets | $ 928,788 | $ 2,760 | $ 931,548 |
Liabilities and stockholders' equity | |||
Secured notes payable | $ 244,697 | $ - | $ 244,697 |
Unsecured line of credit | 308,000 | 2,760(A) | 310,760 |
Accounts payable, accrued expenses and tenant security deposits |
|
| 38,975 |
Dividends payable | 8,250 | - | 8,250 |
Total liabilities | 599,922 | 2,760 | 602,682 |
Stockholders' equity: | |||
Preferred stock | 38,588 | - | 38,588 |
Common stock | 163 | - | 163 |
Additional paid-in capital | 299,265 | - | 299,265 |
Deferred compensation | (1,775) | - | (1,775) |
Retained earnings | - | - | - |
Accumulated other comprehensive income | (7,375) | - | (7,375) |
Total stockholders' equity | 328,866 | - | 328,866 |
Total liabilities and stockholders' equity | $ 928,788 | $ 2,760 | $ 931,548 |
See accompanying notes.
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Income Statement
Nine Months Ended September 30, 2001
(dollars in thousands, except per share amounts)
Pro Forma | |||
Historical | Adjustments | Pro Forma | |
Revenues: | |||
Rental revenue | $ 72,666 | $ 1,782(B) | $ 74,448 |
Tenant recoveries and other income | 21,458 | 19(B) | 21,477 |
Total revenues | 94,124 | 1,801 | 95,925 |
Expenses: | |||
Rental operations | 19,555 | 14(B) | 19,569 |
General and administrative | 8,578 | - | 8,578 |
Interest | 21,522 | 771(C) | 22,293 |
Depreciation and amortization | 22,388 | 244(D) | 22,632 |
Total expenses | 72,043 | 1,029 | 73,072 |
Net income | $ 22,081 | $ 772 | $ 22,853 |
Dividends on preferred stock | $ 2,748 | $ 2,748 | |
Net income available to common stock outstanding | $ 19,333 | $ 20,105 | |
Pro forma weighted average shares of common stock outstanding | 16,118,022 | 16,118,022 | |
Net income per pro forma share | |||
of common stock | $ 1.20 | $ 1.25 |
See accompanying notes.
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Income Statement
Year ended December 31, 2000
(dollars in thousands, except per share amounts)
Pro Forma | |||
Historical | Adjustments | Pro Forma | |
Revenues: | |||
Rental revenue | $ 82,499 | $ 3,131(B) | $ 85,630 |
Tenant recoveries and other income | 24,411 | 343(B) | 24,754 |
Total revenues | 106,910 | 3,474 | 110,384 |
Expenses: | |||
Rental operations | 21,873 | 323(B) | 22,196 |
General and administrative | 8,986 | - | 8,986 |
Interest | 25,791 | 1,829(C) | 27,620 |
Depreciation and amortization | 24,251 | 625(D) | 24,876 |
Total expenses | 80,901 | 2,777 | 83,678 |
Net income | $ 26,009 | $ 697 | $ 26,706 |
Dividends on preferred stock | $ 3,666 | $ 3,666 | |
Net income available to common stock outstanding | $ 22,343 | $ 23,040 | |
Pro forma weighted average shares of common stock outstanding | 14,699,478 | 14,699,478 | |
Net income per pro forma share | |||
of common stock | $ 1.52 | $ 1.57 |
See accompanying notes.
Alexandria Real Estate Equities, Inc.
Adjustments to the Unaudited Pro Forma Condensed
Consolidated Financial Statements
1. Adjustments to the Unaudited Pro Forma Condensed Consolidated Balance Sheet
The pro forma adjustments to the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2001 are as follows:
2. Adjustments to the Unaudited Pro Forma Condensed Consolidated Income Statements
The pro forma adjustments to the Unaudited Pro Forma Condensed Consolidated Income Statements for the nine months ended September 30, 2001 and for the year ended December 31, 2000 are as follows:
(B) Preacquisition results, adjusted to include the effect of straight line rent adjustments (in thousands):
Alexandria Real Estate Equities, Inc.
Adjustments to the Unaudited Pro Forma Condensed
Consolidated Financial Statements (continued)
2. Adjustments to the Unaudited Pro Forma Condensed Consolidated Income Statements (continued)
Preacquisition Period for the Nine Months Ended September 30, 2001
930 Clopper Road | 9880 Campus Point Drive | Total | |
Acquisition Date | January 18, 2001 | August 3, 2001 | |
Revenues: | |||
Rental revenue | $ 37 | $ 1,745 | $ 1,782 |
Tenant recoveries and | 8 | 11 | 19 |
45 | 1,756 | 1,801 | |
Expenses: | |||
Rental operations | 7 | 7 | 14 |
Net Income | $ 38 | $ 1,749 | $ 1,787 |
Preacquisition Period for the Year Ended December 31, 2000
930 Clopper Road | 9880 Campus Point Drive | Total | |
Acquisition Date | January 18, 2001 | August 3, 2001 | |
Revenues: | |||
Rental revenue | $ 804 | $ 2,327 | $ 3,131 |
Tenant recoveries and | 165 | 178 | 343 |
969 | 2,505 | 3,474 | |
Expenses: | |||
Rental operations | 152 | 171 | 323 |
Net Income | $ 817 | $ 2,334 | $ 3,151 |
Alexandria Real Estate Equities, Inc.
Adjustments to the Unaudited Pro Forma Condensed
Consolidated Financial Statements (continued)
2. Adjustments to the Unaudited Pro Forma Condensed Consolidated Income Statements (continued)
The adjustments shown above are not necessarily indicative of the results of operations had we completed the transactions at the beginning of the periods presented. The adjustments presented for the nine months ended September 30, 2001 reflect the results of operations for January 1, 2001 through the date of acquisition. The adjustments presented for the year ended December 31, 2000 reflect the results of operations for the entire year.
No pro forma adjustments have been made for 29 Hartwell Avenue and 5 Research Place for the periods prior to acquisition because the properties were vacant prior to purchase, and, as a result, there were no operating results as rental properties. No pro forma adjustment has been made for 480 Arsenal Street for the periods presented because the property would have been under redevelopment after acquisition (assuming the purchase had occurred on January 1, 2000).
(C) Increase in interest expense due to the draw on our unsecured line of credit for the acquisition of 930 Clopper Road and 9880 Campus Point Drive. Increase in interest expense is also due to the assumption that the secured note payable to Aid Association for Lutherans in the amount of $12,000,000 associated with the purchase of 9880 Campus Point Drive was outstanding for the entire period presented. The note bears interest at a rate of 7.5% per annum and matures in August 2011. No pro forma adjustments have been made for 29 Hartwell Avenue, 480 Arsenal Street and 5 Research Place for the periods presented because the properties would have been under redevelopment after acquisition (assuming the purchase had occurred on January 1, 2000). Any interest incurred from the acquisition of these properties would have been offset by the interest capitalized while the properties were under redevelopment.
(D) Increase in depreciation expense to reflect a full period of depreciation for 930 Clopper Road and 9880 Campus Point Drive. No pro forma adjustments have been made for 29 Hartwell Avenue, 480 Arsenal Street and 5 Research Place for the periods presented because no depreciation expense would have been incurred while the properties were under redevelopment.
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.
Date: January 2, 2002 By:/s/ Peter J. Nelson____________
Peter J. Nelson
Chief Financial Officer
