Exhibit 99.1
Contact: Joel S. Marcus
Chief Executive Officer
Alexandria Real Estate Equities, Inc.
(626) 578-9693
Alexandria Real Estate Equities, Inc.
Reports
Year Ended December 31, 2005
And
Fourth Quarter 2005 Results
Company Reports 2005 Funds from Operations Per Share (Diluted) of $4.82,
Up 9% Over 2004, and Earnings Per Share (Diluted) of $2.22
for Year Ended December 31, 2005
Highlights
Year Ended December 31, 2005:
- 2005 Funds from Operations (FFO) Per Share (Diluted) of $4.82
- 2005 Total Revenues Up 33%, FFO Available to Common Stockholders Up 19% and FFO Per Share (Diluted) Up 9% Over 2004
- 2005 Earnings Per Share (Diluted) of $2.22
- Executed 107 Leases for 1,519,000 Square Feet
- Added 19 Properties Aggregating 1,197,000 Square Feet for Total Consideration of $263 million
- Added Four Land Parcels Aggregating 1,438,000 Square Feet
- Commenced Ground-Up Development of Three Properties Aggregating 339,000 Square Feet
- 2005 Common Stock Dividends Up 6% Over 2004 to $0.70 Per Share
- 2005 GAAP Basis Same Property Revenues Less Operating Expenses Up 2% Over 2004
- Debt to Total Market Capitalization at December 31, 2005 of 41%
Fourth Quarter 2005:
- Fourth Quarter 2005 FFO Per Share (Diluted) of $1.22
- Fourth Quarter 2005 Total Revenues Up 31%, FFO Available to Common Stockholders Up 18% and FFO Per Share (Diluted) Up 3% Over Fourth Quarter 2004
- Fourth Quarter 2005 Earnings Per Share (Diluted) of $0.54
- Executed 35 Leases for 590,000 Square Feet
- Added Five Properties Aggregating 368,000 Square Feet for Total Consideration of $59 million
- Added Two Land Parcels Aggregating 603,000 Square Feet
- Closed $109 Million in Fixed Rate Loans
- Increased Capacity of Unsecured Credit Facilities to $1 Billion with an Option to Increase Capacity by an Additional $200 Million
PASADENA, CA. - February 9, 2006 -- Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced operating and financial results for the year ended December 31, 2005 and fourth quarter 2005.
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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS YEAR ENDED DECEMBER 31, 2005 AND FOURTH QUARTER 2005 RESULTS
Page 2
For the year ended December 31, 2005, we reported total revenues of $244,084,000 and FFO available to common stockholders of $102,689,000, or $4.82 per share (diluted), compared to total revenues of $183,081,000 and FFO available to common stockholders of $86,620,000, or $4.41 per share (diluted), for the year ended December 31, 2004. Comparing the year ended December 31, 2005 to the year ended December 31, 2004, total revenues increased 33%, FFO available to common stockholders increased 19% and FFO per share (diluted) increased 9%. FFO for the year ended December 31, 2004 included the impact of the preferred stock redemption charge of $1,876,000, or $0.10 per share (diluted), recorded in the second quarter of 2004. For the fourth quarter of 2005, we reported total revenues of $66,076,000 and FFO available to common stockholders of $27,592,000, or $1.22 per share (diluted), compared to total revenues of $50,426,000 and FFO available to common stockholders of $23,362,000, or $1.18 per share (diluted), for the fourth quarter of 2004. Comparing the fourth quarter of 2005 to the fourth quarter of 2004, total revenues increased 31%, FFO available to common stockholders increased 18% and FFO per share (diluted) increased 3%.
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 year ended December 31, 2005 and 2004 was $55,416,000 and $42,523,000, respectively. Depreciation and amortization expense for the three months ended December 31, 2005 and 2004 was $15,451,000 and $11,880,000, respectively. Net income available to common stockholders for the year ended December 31, 2005 was $47,343,000, or $2.22 per share (diluted), compared to net income available to common stockholders of $45,724,000, or $2.33 per share (diluted) for the year ended December 31, 2004. Net income available to common stockholders for the year ended December 31, 2004 included a gain on the sale of property of $1,627,000, or $0.08 per share (diluted), recorded in the first quarter of 2004, and also included the impact of the preferred stock redemption charge of $1,876,000, or $0.10 per share (diluted), recorded in the second quarter of 2004. Net income available to common stockholders for the fourth quarter of 2005 was $12,157,000, or $0.54 per share (diluted), compared to net income available to common stockholders of $11,482,000, or $0.58 per share (diluted) for the fourth quarter of 2004.
We executed a total of 107 leases during the year ended December 31, 2005 for approximately 1,519,000 square feet of space at 51 different properties (excluding month-to-month leases for approximately 56,000 square feet). Of this total, approximately 797,000 square feet were for new or renewal leases related to previously leased space and approximately 722,000 square feet were for redeveloped, developed or previously vacant space. Of the 722,000 square feet, approximately 523,000 square feet were delivered from our redevelopment or development programs, with the remaining approximately 199,000 square feet for previously vacant space. Rental rates for these new or renewal leases were on average approximately 3% higher (on a GAAP basis) than rental rates for expiring leases. Excluding two renewal leases for approximately 76,000 square feet related to one tenant in an East Bay submarket of San Francisco and two leases for approximately 47,000 square feet related to one tenant in the Sorrento Valley submarket of San Diego, rental rates for new or renewal leases for the year ended December 31, 2005 were on average approximately 8% higher (on a GAAP basis) than rental rates for expiring leases.
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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS YEAR ENDED DECEMBER 31, 2005 AND FOURTH QUARTER 2005 RESULTS
Page 3
For the fourth quarter 2005 we executed a total of 35 leases for approximately 590,000 square feet of space at 24 different properties (excluding month-to-month leases). Of this total, approximately 451,000 square feet were for new or renewal leases related to previously leased space and approximately 139,000 square feet were for redeveloped, developed or previously vacant space. Of the 139,000 square feet, approximately 105,000 square feet were delivered from our redevelopment or development programs, with the remaining approximately 34,000 square feet for previously vacant space. Rental rates for these new or renewal leases were on average approximately 1% lower (on a GAAP basis) than rental rates for expiring leases. Excluding two leases for approximately 47,000 square feet related to one tenant in the Sorrento Valley submarket of San Diego, rental rates for new or renewal leases for the fourth quarter of 2005 were on average approximately 3% higher (on a GAAP basis) than rental rates for expiring leases.
During the fourth quarter of 2005, we acquired five properties aggregating approximately 368,000 square feet in the San Francisco Bay, Eastern Massachusetts and Canadian markets. We paid approximately $52.8 million cash for the properties and also assumed a secured note payable of approximately $6.1 million for total consideration of $58.9 million. Also during the fourth quarter of 2005, we acquired two land parcels with approximately 603,000 developable square feet. We paid approximately $10.4 million cash for the land parcels and closed a secured note payable for approximately $19.3 million concurrent with the acquisitions for total consideration of $29.7 million.
As of December 31, 2005, approximately 85% 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 December 31, 2005, approximately 6% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses. Additionally, as of December 31, 2005, 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:
| | | | |
| | 2006 | | |
FFO per share (diluted) | $5.15 | | |
Earnings per share (diluted) | $2.35 | | |
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 of properties containing office/laboratory space. Such properties are designed and improved for lease primarily to institutional (universities and not-for-profit institutions), pharmaceutical, biotechnology, life science product, service, biodefense and translational research entities, as well as government agencies. Our portfolio currently consists of 136 properties comprising approximately 8.9 million square feet of office/laboratory space.
This press release contains forward-looking statements, including earnings guidance, within the meaning of the federal securities laws. Our 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.
(Tables follow)
3
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Three Months Year Year
Ended Ended Ended Ended
December 31, 2005 December 31, 2004 December 31, 2005 December 31, 2004
----------------- ----------------- ----------------- -----------------
Income statement data
Total revenues $ 66,076 $ 50,426 $ 244,084 $ 183,081
Expenses
Rental operations 14,767 10,686 54,540 38,394
General and administrative 5,914 3,993 21,094 15,105
Interest 13,387 8,409 49,116 28,670
Depreciation and amortization 15,451 11,861 55,399 42,476
----------------- ----------------- ----------------- -----------------
49,519 34,949 180,149 124,645
Minority interest 377 -- 634 --
----------------- ----------------- ----------------- -----------------
Income from continuing operations 16,180 15,477 63,301 58,436
Income from discontinued operations, net -- 27 132 1,759
----------------- ----------------- ----------------- -----------------
Net income 16,180 15,504 63,433 60,195
Dividends on preferred stock 4,023 4,022 16,090 12,595
Preferred stock redemption charge -- -- -- 1,876
----------------- ----------------- ----------------- -----------------
Net income available to common stockholders $ 12,157 $ 11,482 $ 47,343 $ 45,724
================= ================= ================= =================
Weighted average shares of common stock outstanding
Basic 22,267,275 19,415,687 20,948,915 19,315,364
================= ================= ================= =================
Diluted 22,672,986 19,755,325 21,316,886 19,658,759
================= ================= ================= =================
Earnings per share - basic:
Continuing operations (net of preferred stock dividends
and preferred stock redemption charge) $ 0.55 $ 0.59 $ 2.25 $ 2.28
Discontinued operations, net -- -- 0.01 0.09
----------------- ----------------- ----------------- -----------------
Earnings per share - basic $ 0.55 $ 0.59 $ 2.26 $ 2.37
================= ================= ================= =================
Earnings per share - diluted:
Continuing operations (net of preferred stock dividends
and preferred stock redemption charge) $ 0.54 $ 0.58 $ 2.21 $ 2.24
Discontinued operations, net -- -- 0.01 0.09
----------------- ----------------- ----------------- -----------------
Earnings per share - diluted $ 0.54 $ 0.58 $ 2.22 $ 2.33
================= ================= ================= =================
4
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 months and years ended December 31, 2005 and 2004 (in thousands, except per share data):
Three Months Three Months Year Year
Ended Ended Ended Ended
December 31, 2005 December 31, 2004 December 31, 2005 December 31, 2004
----------------- ----------------- ----------------- -----------------
Reconciliation of net income available to common stockholders to
funds from operations available to common stockholders
Net income available to common stockholders (1) $ 12,157 $ 11,482 $ 47,343 $ 45,724
Add:
Depreciation and amortization (2) 15,451 11,880 55,416 42,523
Minority interest 377 -- 634 --
Subtract:
Gain on sales of property (3) -- -- (36) (1,627)
FFO allocable to minority interest (393) -- (668) --
----------------- ----------------- ----------------- -----------------
Funds from operations available to common stockholders (1) $ 27,592 $ 23,362 $ 102,689 $ 86,620
================= ================= ================= =================
FFO per share (1)
Basic $ 1.24 $ 1.20 $ 4.90 $ 4.48
================= ================= ================= =================
Diluted $ 1.22 $ 1.18 $ 4.82 $ 4.41
================= ================= ================= =================
Reconciliation of earnings per share (diluted) to
FFO per share (diluted)
Earnings per share (diluted) (1) $ 0.54 $ 0.58 $ 2.22 $ 2.33
Depreciation and amortization (2) 0.68 0.60 2.60 2.16
Minority interest 0.02 -- 0.03 --
Gain on sales of property (3) -- -- -- (0.08)
FFO allocable to minority interest (0.02) -- (0.03) --
----------------- ----------------- ----------------- -----------------
FFO per share (diluted) (1) $ 1.22 $ 1.18 $ 4.82 $ 4.41
================= ================= ================= =================
- During the second quarter of 2004, the Company elected to redeem its 9.5% Series A cumulative redeemable preferred stock. Accordingly, in compliance with Emerging Issues Task Force Topic D-42, the Company recorded a charge of $1,876,000, or $0.10 per share (diluted).
- 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 Southeast market during the third quarter of 2005, and the disposition of one property in the Suburban Washington D.C. market during the first quarter of 2004. Gain on sales of property is included in the income statement in income from discontinued operations, net.
5
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Supplemental Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
Annual Supplemental Financial Information
For the Year Ended
12/31/2005 12/31/2004 12/31/2003 12/31/2002 12/31/2001
----------- ----------- ----------- ----------- -----------
Operational data
Breakdown of revenues from continuing operations (a)
Rental income $ 189,312 $ 143,700 $ 126,236 $ 111,516 $ 93,417
Tenant recoveries 49,974 35,840 32,050 28,995 24,121
Other income 4,798 3,541 2,068 1,556 3,120
----------- ----------- ----------- ----------- -----------
Total $ 244,084 $ 183,081 $ 160,354 $ 142,067 $ 120,658
=========== =========== =========== =========== ===========
Funds from operations per share - diluted (b) $ 4.82 $ 4.41 (c)$ 4.23 $ 3.81 $ 3.53
Dividends per share on common stock $ 2.72 $ 2.52 $ 2.20 $ 2.00 $ 1.84
Dividend payout ratio (common stock) 57.9% 56.7%(d) 51.8% 52.7% 52.3%
As of
12/31/2005 12/31/2004 12/31/2003 12/31/2002 12/31/2001
----------- ----------- ----------- ----------- -----------
Other data
Number of shares of common stock outstanding
at end of period 22,441,294 19,594,418 19,264,023 18,973,957 16,354,541
Number of properties (e)
Acquired/added/completed during period 22 23 4 6 7
Sold/reconstructed during period (1) (1) (4) -- --
Owned at end of period 134 113 91 91 85
Rentable square feet (e)
Acquired/added/completed during period 1,392,299 1,717,209 267,164 427,077 453,090
Sold/reconstructed during period (16,500) 2,891 (338,256) -- --
Owned at end of period 8,824,369 7,448,570 5,728,470 5,799,562 5,372,485
Debt to total market capitalization (f)
Total debt $1,406,666 $1,186,946 $ 709,007 $ 614,878 $ 573,161
Preferred stock 192,419 199,360 104,421 100,670 42,246
Common stock 1,806,524 1,458,217 1,115,387 808,291 672,172
----------- ----------- ----------- ----------- -----------
Total market capitalization $3,405,609 $2,844,523 $1,928,815 $1,523,839 $1,287,579
=========== =========== =========== =========== ===========
Debt to total market capitalization ratio 41.3% 41.7% 36.8% 40.4% 44.5%
Quarterly Supplemental Financial Information
For the Three Months Ended
12/31/2005 09/30/2005 06/30/2005 03/31/2005 12/31/2004
----------- ----------- ----------- ----------- -----------
Operational data
Breakdown of revenues from continuing operations (a)
Rental income $ 51,068 $ 48,814 $ 45,699 $ 43,731 $ 39,660
Tenant recoveries 13,350 13,588 11,449 11,587 9,504
Other income 1,658 1,350 1,069 721 1,262
----------- ----------- ----------- ----------- -----------
Total $ 66,076 $ 63,752 $ 58,217 $ 56,039 $ 50,426
=========== =========== =========== =========== ===========
Funds from operations per share - diluted (b) $ 1.22 $ 1.21 $ 1.20 $ 1.19 $ 1.18
Dividends per share on common stock $ 0.70 $ 0.68 $ 0.68 $ 0.66 $ 0.66
Dividend payout ratio (common stock) 57.2% 59.0% 56.8% 58.9% 55.6%
Straight line rent $ 1,492 $ 3,020 $ 3,305 $ 2,836 $ 3,047
As of
12/31/2005 09/30/2005 06/30/2005 03/31/2005 12/31/2004
----------- ----------- ----------- ----------- -----------
Other data
Number of shares of common stock outstanding
at end of period 22,441,294 22,437,761 21,204,620 21,075,793 19,594,418
Number of properties (e)
Acquired/added/completed during period 6 5 5 6 10
Sold/reconstructed during period -- (1) -- -- --
Owned at end of period 134 128 124 119 113
Rentable square feet (e)
Acquired/added/completed during period 415,978 301,458 333,788 341,075 917,794
Sold/reconstructed during period -- (16,500) -- -- --
Owned at end of period 8,824,369 8,408,391 8,123,433 7,789,645 7,448,570
Debt to total market capitalization (f)
Total debt $ 1,406,666 $ 1,271,698 $ 1,301,934 $ 1,217,917 $ 1,186,946
Preferred stock 192,419 196,420 197,474 194,692 199,360
Common stock 1,806,524 1,855,378 1,557,479 1,356,860 1,458,217
----------- ----------- ----------- ----------- -----------
Total market capitalization $ 3,405,609 $ 3,323,496 $ 3,056,887 $ 2,769,469 $ 2,844,523
=========== =========== =========== =========== ===========
Debt to total market capitalization ratio 41.3% 38.3% 42.6% 44.0% 41.7%
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).
- Includes the effect of the preferred stock redemption charge of $1,876,000, or $0.10 per common share (diluted) recorded in the second quarter of 2004.
- Excluding the impact of the preferred stock redemption charge, the dividend payout ratio (common stock) for 2004 was 55.5%.
- 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 stock prices at the end of each period presented, plus total debt.
7
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Condensed Consolidated Balance Sheets
(In thousands)
December 31, December 31,
2005 2004
------------ ------------
(Unaudited)
Assets
Rental properties, net $ 1,788,818 $ 1,427,853
Properties under development 329,338 252,249
Cash and cash equivalents 3,911 3,158
Tenant security deposits and other restricted cash 21,013 17,669
Tenant receivables 4,764 2,542
Deferred rent 54,573 43,166
Investments 82,010 67,419
Other assets 78,023 58,228
------------- --------------
Total assets $ 2,362,450 $ 1,872,284
============= ==============
Liabilities and Stockholders' Equity
Secured notes payable $ 666,666 $ 638,946
Unsecured line of credit and unsecured term loan 740,000 548,000
Accounts payable, accrued expenses and
tenant security deposits 86,391 48,581
Dividends payable 19,478 16,284
------------- --------------
Total liabilities 1,512,535 1,251,811
------------- --------------
Minority interest 20,115 --
Stockholders' equity:
Series B preferred stock 57,500 57,500
Series C preferred stock 129,638 129,638
Common stock 224 196
Additional paid-in capital 607,405 414,028
Retained earnings -- 5,267
Accumulated other comprehensive income 35,033 13,844
------------- --------------
Total stockholders' equity 829,800 620,473
------------- --------------
Total liabilities and stockholders' equity $ 2,362,450 $ 1,872,284
============= ==============
8
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Debt
December 31, 2005
(Dollars in thousands)
(Unaudited)
Principal Maturities/Rates
Secured Debt Unsecured Debt
---------------------------- ----------------------------
Weighted Weighted
Average Average
Year Amount Interest Rate(1) Amount Interest Rate(2)
- ----------------------- ------------ ------------- ----------- -------------
2006 $ 44,552 6.32% $ -- --
2007 83,623 6.26% 240,000 5.69%
2008 123,190 6.16% -- --
2009 42,084 6.52% 500,000 5.67%
2010 88,553 6.48% -- --
Thereafter 280,145 6.24% -- --
------------ -----------
Subtotal 662,147 740,000
Unamortized Premium 4,519 --
------------ -----------
Total $ 666,666 $ 740,000
============ ===========
Secured and Unsecured Debt Analysis
Weighted
% of Weighted Average Average
Balance Balance Interest Rate Maturity
----------- ------- -------------- -----------
Secured Debt $ 666,666 47.4% 6.31% 5.2 Years
Unsecured Debt 740,000 52.6% 5.68% 3.3 Years
----------- ------- -------------- -----------
Total Debt $ 1,406,666 100.0% 5.98% 4.2 Years
=========== ======= ============== ===========
Fixed and Floating Rate Debt Analysis
Weighted
% of Weighted Average Average
Balance Balance Interest Rate Maturity
----------- ------- -------------- -----------
Fixed Rate Debt $ 595,858 42.4% 6.32% 5.5 Years
Floating Rate Debt 810,808 (3) 57.6% 5.72% (3) 3.3 Years
----------- ------- -------------- -----------
Total Debt $ 1,406,666 100.0% 5.98% 4.2 Years
=========== ======= ============== ===========
- The weighted average interest rate related to our secured debt is calculated based on the outstanding debt as of January 1st for each year.
- The weighted average interest rates related to our unsecured line of credit and unsecured term loan are calculated based on borrowings outstanding as of December 31, 2005.
- A portion of our floating rate debt is hedged by existing swap agreements (see page 10). The interest rate on floating rate debt shown above does not reflect the impact of such swap agreements.
9
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Interest Rate Swap Agreements(1)
December 31, 2005
(Dollars in thousands)
(Unaudited)
Effective at
Notional December 31, Interest
Transaction Dates Effective Dates Amounts 2005 Pay Rates (2) Termination Dates
- ----------------------- -------------------- ------------ -------------- ------------ -----------------
December 2002 January 2, 2003 $ 25,000 $ 25,000 3.285% June 30, 2006
December 2002 January 2, 2003 25,000 25,000 3.285% June 30, 2006
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 29, 2005 50,000 50,000 3.140% April 28, 2006
April 2004 April 28, 2006 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 -- 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 -- 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
--------------
Total Interest Rate Swap Agreements in Effect at 12/31/05 $ 325,000
==============
- For all interest rate swap agreements, interest is received based on one month LIBOR.
- The interest pay rates represent the interest rate we will pay for one month LIBOR under the respective interest rate swap agreement. These rates do not include any spread in addition to one month LIBOR that is due monthly as interest expense under our unsecured line of credit and unsecured term loan credit facilities.
10
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Same Property Comparisons
(Dollars in thousands)
(Unaudited)
GAAP Basis (1) Cash Basis (1)
-------------------------------- -------------------------------
Year Ended Year Ended
---------- ---------- --------- ---------- ---------- --------
12/31/05 12/31/04 % Change 12/31/05 12/31/04 % Change
---------- ---------- --------- ---------- ---------- --------
Revenue (2) $ 139,173 $ 135,738 2.5% $ 136,565 $ 127,579 7.0%
Operating expenses 27,823 26,521 4.9% 27,823 26,521 4.9%
---------- ---------- --------- ---------- ---------- --------
Revenue less
operating expenses $ 111,350 $ 109,217 2.0% $ 108,742 $ 101,058 7.6%(3)
========== ========== ========= ========== ========== ========
GAAP Basis (1) Cash Basis (1)
-------------------------------- -------------------------------
Quarter Ended Quarter Ended
---------- ---------- --------- ---------- ---------- --------
12/31/05 12/31/04 % Change 12/31/05 12/31/04 % Change
---------- ---------- --------- ---------- ---------- --------
Revenue (2) $ 38,672 $ 37,854 2.2% $ 38,309 $ 35,715 7.3%
Operating expenses 7,240 7,232 0.1% 7,240 7,232 0.1%
---------- ---------- --------- ---------- ---------- --------
Revenue less
operating expenses $ 31,432 $ 30,622 2.6% $ 31,069 $ 28,483 9.1%(3)
========== ========== ========= ========== ========== ========
NOTE: This summary represents operating data for all properties that were owned and fully operating for the entire periods presented ("2005 Same Properties" for the Full Year periods and "Fourth Quarter Same Properties" for the Quarter periods). Properties under redevelopment are excluded from same property results.
- Revenue less operating expenses computed under GAAP is total revenue associated with the 2005 Same Properties and the Fourth Quarter Same Properties, as applicable, (excluding lease termination fees, if any) less property operating expenses. Under GAAP, rental revenue is recognized on a straight-line basis over the respective lease terms. Revenue less operating expenses on a cash basis is total revenue associated with the 2005 Same Properties and the Fourth Quarter Same Properties, as applicable, (excluding lease termination fees, if any) less property operating expenses, adjusted to exclude the effect of straight-line rent adjustments required by GAAP. Straight-line rent adjustments for the years ended December 31, 2005 and 2004 for the 2005 Same Properties were $2,608,000 and $8,159,000, respectively. Straight-line rent adjustments for the quarters ended December 31, 2005 and 2004 for the Fourth Quarter Same Properties were $363,000 and $2,139,000, 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.
- Revenue less operating expenses on a cash basis for the 2005 Same Properties and the Fourth Quarter Same Properties were impacted by prepayment of a portion of rents due under one lease of $1,570,000 and $387,000, respectively. Pursuant to SFAS 13, "Accounting for Leases", these payments are recognized on a straight-line basis over the lease term. Excluding the impact of this lease, the percentage change in revenue less operating expenses on a cash basis for the 2005 Same Properties and the Fourth Quarter Same Properties would have been 5.8% and 7.5%, respectively. Also, excluding the impact of this lease, straight-line rent adjustments for the years ended December 31, 2005 and 2004 for the 2005 Same Properties were $4,178,000 and $8,159,000, respectively, and straight-line rent adjustments for the quarters ended December 31, 2005 and 2004 for the Fourth Quarter Same Properties were $750,000 and $2,139,000, respectively.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties
December 31, 2005
(Dollars in thousands)
December 31, 2005 September 30, 2005
----------------------------------------------- -------------
Number of Rentable Annualized Occupancy Occupancy
Properties Square Feet Base Rent Percentage Percentage
----------- ----------- ---------- ----------- -------------
Markets
California - Pasadena 1 31,343 $ 793 100.0% 98.9%
California - San Diego 23 1,070,477 27,509 92.2% 92.8%
California - San Francisco Bay 15 1,043,737 30,583 96.5% 97.6%
Eastern Massachusetts 22 1,263,077 34,603 93.6% 93.0%
New Jersey/Suburban Philadelphia 7 458,623 7,900 98.5% 98.5%
Southeast 8 432,127 7,460 85.9%(1) 83.8% (1)
Suburban Washington D.C. 31 2,439,146 46,936 93.0%(2) 97.8% (2)
Washington - Seattle 9 780,211 23,081 87.8% 87.3%
International - Canada 3 296,362 6,223 100.0% 100.0%
----------- ----------- ---------- ----------- -------------
Total Operating Properties 119 7,815,103 $ 185,088 93.2%(2) 94.5%
=========== =========== ========== =========== =============
Properties Under Redevelopment (3) 15 1,009,266 14,662 45.7% 49.1%
----------- ----------- ---------- ----------- -------------
Total Properties 134 8,824,369 $ 199,750 87.7%(2) 89.5%
----------- ----------- ---------- ----------- -------------
- Substantially all of the vacant space is office or warehouse space.
- The decrease in occupancy percentage from September 30, 2005 to December 31, 2005 is primarily related to one lease with one tenant for approximately 103,000 square feet. Excluding this one lease, occupancy percentages for Suburban Washington D.C., total operating properties and total properties would have been 97.2%, 94.5% and 88.9%, respectively, as of December 31, 2005.
- See Properties Under Redevelopment on page 18.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Leasing Activity
For the Year Ended December 31, 2005
TI's/Lease
Rental Commissions Average
Number Square Expiring New Rate Per Lease
of Leases Footage Rates Rates Changes Square Foot Terms
--------- ---------- --------- --------- ------- ----------- ---------
Leasing Activity
Lease Expirations
Cash Basis 79 1,258,034 $22.95 -- -- -- --
GAAP Basis 79 1,258,034 $24.40 -- -- -- --
Renewed/Releasable Space Leased
Cash Basis 47 796,945 $22.66 $23.63 4.3% (1) $1.38 4.6 years
GAAP Basis 47 796,945 $22.66 $23.42 3.4% (1) $1.38 4.6 years
Month-to-Month Leases In Effect
Cash Basis 23 55,693 $24.82 $24.88 -- -- --
GAAP Basis 23 55,693 $25.52 $25.93 -- -- --
Redeveloped/Developed/
Vacant Space Leased
Cash Basis 60 721,961 -- $24.42 -- $12.19 8.0 years
GAAP Basis 60 721,961 -- $25.65 -- $12.19 8.0 years
Leasing Activity Summary
Excluding Month-to-Month Leases
Cash Basis 107 1,518,906 -- $24.01 -- $6.52 6.2 years
GAAP Basis 107 1,518,906 -- $24.48 -- $6.52 6.2 years
Including Month-to-Month Leases
Cash Basis 130 1,574,599 -- $24.04 -- -- --
GAAP Basis 130 1,574,599 -- $24.53 -- -- --
(1) Excluding two renewal leases for 76,000 square feet related to one tenant in the East Bay submarket of San Francisco and two leases for 47,000 square feet related to one tenant in the Sorrento Valley submarket of San Diego, rental rates for renewed/released space were on average 8.2% higher than rental rates for expiring leases on a Cash Basis and 7.6% higher than rental rates for expiring leases on a GAAP basis.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Leasing Activity
For the Quarter Ended December 31, 2005
TI's/Lease
Rental Commissions Average
Number Square Expiring New Rate Per Lease
of Leases Footage Rates Rates Changes Square Foot Terms
--------- ---------- --------- --------- ------- ----------- ---------
Leasing Activity
Lease Expirations
Cash Basis 55 657,957 $21.58 -- -- -- --
GAAP Basis 55 657,957 $23.72 -- -- -- --
Renewed/Releasable Space Leased
Cash Basis 21 450,751 $22.73 $23.53 3.5% (1) $1.39 4.8 years
GAAP Basis 21 450,751 $23.37 $23.15 -0.9%(1) $1.39 4.8 years
Month-to-Month Leases In Effect
Cash Basis 23 55,693 $24.86 $24.88 -- -- --
GAAP Basis 23 55,693 $25.57 $25.93 -- -- --
Redeveloped/Developed/
Vacant Space Leased
Cash Basis 14 139,380 -- $23.90 -- $3.59 7.6 years
GAAP Basis 14 139,380 -- $25.64 -- $3.59 7.6 years
Leasing Activity Summary
Excluding Month-to-Month Leases
Cash Basis 35 590,131 -- $23.62 -- $1.91 5.5 years
GAAP Basis 35 590,131 -- $23.74 -- $1.91 5.5 years
Including Month-to-Month Leases
Cash Basis 58 645,824 -- $23.73 -- -- --
GAAP Basis 58 645,824 -- $23.93 -- -- --
(1) Excluding two leases for 47,000 square feet related to one tenant in the Sorrento Valley submarket of San Diego, rental rates for renewed released space were on average 9.1% higher than rental rates for expiring leases on a Cash Basis and 3.3% higher than rental rates for expiring leases on a GAAP basis.14
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Lease Expirations
December 31, 2005
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 79 (1) 924,223 11.9% $24.98
2007 39 786,824 10.2% $26.30
2008 27 630,784 8.1% $26.24
2009 26 492,926 6.4% $21.77
2010 33 740,788 9.6% $22.40
Square Footage of Expiring Leases
Markets 2006 2007
- ----------------------------------- ----------- -----------
California - Pasadena 14,193 3,653
California - San Diego 281,378 42,862
California - San Francisco Bay 111,732 73,042
Eastern Massachusetts 198,231 74,693
New Jersey/Suburban Philadelphia 12,239 21,000
Southeast 77,885 35,637
Suburban Washington D.C. 170,472 528,395
Washington - Seattle 58,093 7,542
International - Canada -- --
----------- -----------
Total 924,223 (1) 786,824
=========== ===========
- Includes month-to-month leases for approximately 56,000 square feet.
15
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Additions to and Dispositions of Properties
For The Quarter Ended December 31, 2005
(Dollars in thousands)
Acquisition Month of Rentable
Markets Amount Acquisition Square Feet
- -------------------------------------------------- -------------- -------------- --------------
Additions to Operating Properties/Properties
Under Redevelopment
Eastern Massachusetts $ 8,414 November 54,391
International - Canada 27,000 November 162,362
International - Canada 10,181 (1) December 66,000
-------------- --------------
Additions to Operating Properties 45,595 282,753
Eastern Massachusetts 4,800 October 26,589
California - San Francisco Bay 8,490 December 58,400
-------------- --------------
Additions to Properties Under Redevelopment 13,290 84,989
-------------- --------------
Total Additions to Operating Properties/Properties
Under Redevelopment $ 58,885 367,742
============== ==============
Acquisition Month of Developable
Markets Amount Acquisition Square Feet
- -------------------------------------------------- -------------- -------------- --------------
Additions of Land:
California - San Francisco Bay $ 27,500 (2) December 550,000
Washington - Seattle 2,167 November 53,000
-------------- --------------
Total Additions of Land $ 29,667 603,000
============== ==============
Disposition Month of Rentable
Markets Amount Disposition Square Feet
- -------------------------------------------------- -------------- -------------- --------------
Dispositions:
None N/A N/A N/A
(1) Acquisition amount includes assumption of a secured note payable of approximately $6.1 million.
(2) Acquisition amount includes a secured note payable of approximately $19.3 million that closed concurrent with the acquisition.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties Under Development
December 31, 2005
| | Estimated | Total | |
| | In-Service | Rentable | |
Markets | Dates | Square Footage | Status |
| | | | |
San Diego | 2Q06 | 64,000 | Leased |
San Francisco Bay | 4Q07 | 121,000 | Negotiating |
San Francisco Bay | 4Q07 | 154,000 | Pre-marketing |
Southeast | 1Q06 | 48,000 | Leased/Negotiating |
Suburban Washington D.C. | 2Q06 | 73,000 | Leased/Negotiating |
Seattle | 1Q06 | 50,000 (1) | Leased/Negotiating |
Total | | 510,000 | |
| | | | |
- Excludes certain phases of a property which were previously delivered to tenants.
As required under GAAP, interest is being capitalized on these ground-up development projects as activities are ongoing to bring these assets to their intended use. Interest capitalized on ground-up development and other construction projects for the three months ended December 31, 2005 was approximately $6.9 million.
In addition to properties under development, as of December 31, 2005, our asset base contains strategically located ground-up development opportunities for approximately 5.2 million developable square feet of office/laboratory space with an aggregate cost basis of approximately $225 million. See Summary of Imbedded Future Development and Redevelopment Square Footage on page 19.
The current construction cost of these ground-up development projects will average between $250 and $350 per developable square foot. Our aggregate construction costs to date approximate $160 per developable square foot.
17
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties Under Redevelopment
December 31, 2005
| | | Total Rentable | |
| | Estimated | Square Footage | Total Rentable |
| | In-Service | Under | Square Footage |
Markets | Dates | Redevelopment | of Property |
| | | | |
San Diego | 2Q06 | 17,590 | 17,590 |
San Diego | 3Q06 | 71,510 | 71,510 |
San Diego | 3Q07 | 87,140 | 87,140 |
San Francisco Bay | 1Q06 | 24,039 | 140,143 |
San Francisco Bay | 3Q06 | 30,000 | 60,000 |
San Francisco Bay | 3Q07 | 58,400 | 58,400 |
Eastern Massachusetts | 1Q07 | 17,187 | 45,820 |
Eastern Massachusetts | 2Q06 | 27,665 | 115,179 |
Eastern Massachusetts | 2Q07 | 26,589 | 26,589 |
New Jersey/Suburban Philadelphia | 2Q06 | 20,727 | 42,600 |
Southeast | 1Q06 | 33,321 | 60,519 |
Suburban Washington D.C. | 3Q06 | 44,208 | 131,415 |
Suburban Washington D.C. | 3Q06 | 60,443 | 92,449 |
Seattle | 4Q07 | 12,719 | 27,633 |
Seattle | 2Q06 | 16,513 | 32,279 |
Total | | 548,051 | 1,009,266 |
Our redevelopment program involves ongoing activities necessary for the permanent change of use of applicable redevelopment space to office/laboratory space. For properties undergoing redevelopment, the entire property is excluded 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. Average occupancy for properties under full or partial redevelopment as of December 31, 2005 was 45.5% and is not included in the occupancy of the operating properties. The current construction cost of properties under redevelopment will average between $75 and $100 per square foot. In addition to properties under active redevelopment, as of December 31, 2005 our asset base contains imbedded opportunities for a future permanent change of use to office/laboratory space through redevelopment aggregating approximately 1.0 million rentable square feet. See Summary of Imbedded Future Development and Redevelopment Square Footage on page 19.
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Imbedded Future Development and Redevelopment Square Footage
December 31, 2005
Imbedded Future Development and Redevelopment
-------------------------------------------------
Development Redevelopment
Markets Square Footage Square Footage Total
- -------------------------------------------------- -------------- -------------- --------------
California - San Francisco Bay 3,422,000 (1) 55,000 3,477,000
California - San Diego 467,000 (2) 143,000 610,000
Suburban Washington D.C. 392,000 382,000 774,000
Eastern Massachusetts 225,000 179,000 404,000
Washington - Seattle 203,000 (3) 120,000 323,000
Other 430,000 (4) 157,000 587,000
-------------- -------------- --------------
Total Imbedded Future Development and Redevelopment 5,139,000 1,036,000 6,175,000
============== ============== ==============
A significant portion of our imbedded future development and redevelopment square footage is in the preconstruction phase (entitlement, permitting, design, etc.) of development. As required under GAAP, interest is being capitalized during the preconstruction phase while activities are ongoing to bring these assets to their intended use.
- Approximately 3.4 million developable square feet located in the San Francisco Bay market is in the preconstruction phase of development.
- Approximately 430,000 developable square feet located in the San Diego market is in the preconstruction phase of development.
- Approximately 75,000 developable square feet located in the Seattle market is in the preconstruction phase of development.
- Approximately 100,000 developable square feet is in the preconstruction phase of development.
19
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Capital Costs
For the Year Ended December 31, 2005
(In thousands)
Property-related capital expenditures(1) | $ 2,250 |
Leasing costs(2) | $ 346 |
Property-related development costs(3) | $ 94,037 |
Property-related redevelopment costs(3) | $ 89,721 |
- 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.
20
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Conference Call Information
For the Year and Fourth Quarter Ended December 31, 2005
Alexandria Real Estate Equities, Inc. will be hosting a conference call to discuss its operating and financial results for the year and fourth quarter ended December 31, 2005:
Date: | February 9, 2006 |
Time: | 3:00 P.M. Eastern Standard Time |
Phone Number: | (913) 981-5507 |
Confirmation Code: | 7475142 |
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