Contact: Joel S. Marcus Chief Executive Officer Alexandria Real Estate Equities, Inc. (626) 578-9693
Alexandria Real Estate Equities, Inc. Reports Fourth Quarter And Year Ended December 31, 2006 Results
Company Reports Fourth Quarter 2006 Funds from Operations Per Share (Diluted) of $1.34, Up 10% Over 2005, and Earnings Per Share (Diluted) of $0.57, and Year Ended December 31, 2006 Funds from Operations Per Share (Diluted) of $5.16, Up 7% Over 2005, and Earnings Per Share (Diluted) of $2.25
Highlights
Fourth Quarter 2006:
Fourth Quarter 2006 Funds from Operations (FFO) Per Share (Diluted) of $1.34 up 10%
Fourth Quarter 2006 Total Revenues up 45%, FFO Available to Common Stockholders up 42%
Fourth Quarter 2006 Earnings Per Share (Diluted) of $0.57
Executed 34 Leases for 427,000 Square Feet
Fourth Quarter 2006 GAAP Rental Rate Increase of 29%
Fourth Quarter 2006 GAAP Same Property Revenues Less Operating Expenses up 2.3%
Completed Redevelopment of Multiple Spaces at Two Properties aggregating 87,000 Square Feet
Executed East River Science Park ("ERSP") Ground Lease in New York City
Commenced Ground-Up Development of ERSP, consisting of 725,000 Square Feet, Plus One Additional Development of 135,000 Square Feet
Closed $1.4 Billion Credit Facility Consisting of an $800 Million Unsecured Revolving Credit Facility and a $600 Million Term Loan Plus a $500 Million Accordion
In January 2007, Closed $460 Million of 3.70% Convertible Notes Due 2027
Year Ended December 31, 2006:
2006 Funds from Operations (FFO) Per Share (Diluted) of $5.16 up 7%
2006 Total Revenues up 33%, FFO Available to Common Stockholders up 28%
2006 Earnings Per Share (Diluted) of $2.25
Executed 113 Leases for 1,588,000 Square Feet
2006 GAAP Rental Rate Increase of 14.1%
2006 GAAP Same Property Revenues Less Operating Expenses up 2.1%
Acquired 25 Properties aggregating 2.4 Million Square Feet
Acquired Three Land Parcels aggregating 662,000 Square Feet
Completed Redevelopment of Multiple Spaces at Eleven Properties aggregating 356,000 Square Feet
Completed Ground-Up Development of Four Properties aggregating 360,000 Square Feet
Commenced Ground-Up Development of Three Properties aggregating 1,022,000 Square Feet
2006 Common Stock Dividends up 6% Over 2005 to $0.74 Per Share
Closed $146 Million Fixed Rate Financing
PASADENA, CA. - February 8, 2007 -- Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced operating and financial results for the fourth quarter and year ended December 31, 2006.
For the fourth quarter of 2006, we reported total revenues of $93,440,000 and FFO available to common stockholders of $39,054,000, or $1.34 per share (diluted), compared to total revenues of $64,652,000 and FFO available to common stockholders of $27,592,000, or $1.22 per share (diluted), for the fourth quarter of 2005. Comparing the fourth quarter of 2006 to the fourth quarter of 2005, total revenues increased 45%, FFO available to common stockholders increased 42% and FFO per share (diluted) increased 10%. For the year ended December 31, 2006, we reported total revenues of $316,821,000 and FFO available to common stockholders of $131,665,000, or $5.16 per share (diluted), compared to total revenues of $238,138,000 and FFO available to common stockholders of $102,689,000, or $4.82 per share (diluted), for the year ended December 31, 2005. Comparing the year ended December 31, 2006 to the year ended December 31, 2005, total revenues increased 33%, FFO available to common stockholders increased 28% and FFO per share (diluted) increased 7%.
FFO is a non-GAAP measure widely used by publicly-traded real estate investment trusts. A reconciliation of GAAP net income available to common stockholders to FFO available to common stockholders, on both an aggregate and a per share diluted basis, is included in the financial information accompanying this press release. The primary reconciling item between GAAP net income available to common stockholders and FFO available to common stockholders is depreciation and amortization expense. Depreciation and amortization expense for the three months ended December 31, 2006 and 2005 was $22,454,000 and $15,451,000, respectively. Depreciation and amortization expense for the year ended December 31, 2006 and 2005 was $74,039,000 and $55,416,000, respectively. Net income available to common stockholders for the fourth quarter of 2006 was $16,512,000, or $0.57 per share (diluted), compared to net income available to common stockholders of $12,157,000, or $0.54 per share (diluted) for the fourth quarter of 2005. Net income available to common stockholders for the year ended December 31, 2006 was $57,326,000, or $2.25 per share (diluted), compared to net income available to common stockholders of $47,343,000, or $2.22 per share (diluted) for the year ended December 31, 2005.
For the fourth quarter of 2006, we executed a total of 34 leases for approximately 427,000 square feet of space at 23 different properties (excluding month-to-month leases). Of this total, approximately 187,000 square feet related to new or renewal leases of previously leased space and approximately 240,000 square feet related to redeveloped, developed or previously vacant space. Of the 240,000 square feet, approximately 177,000 square feet were delivered from our redevelopment or development programs, with the remaining approximately 63,000 square feet related to previously vacant space. Rental rates for these new or renewal leases were on average approximately 29% higher (on a GAAP basis) than rental rates for expiring leases. For the year ended December 31, 2006, we executed a total of 113 leases for approximately 1,588,000 square feet of space at 54 different properties (excluding month-to-month leases). Of this total, approximately 705,000 square feet related to new or renewal leases of previously leased space and approximately 883,000 square feet related to redeveloped, developed or previously vacant space. Of the 883,000 square feet, approximately 603,000 square feet were delivered from our redevelopment or development programs, with the remaining approximately 280,000 square feet related to previously vacant space. Rental rates for new or renewal leases were on average approximately 14.1% higher (on a GAAP basis) than rental rates for expiring leases.
During the fourth quarter of 2006, we acquired 8 properties aggregating approximately 573,000 square feet. The aggregate consideration was approximately $229 million. The largest property aggregating approximately 185,000 rentable square feet in the Eastern Massachusetts market is currently occupied by multiple tenants. In addition to the existing rentable square footage of approximately 185,000, this property also has an additional 240,000 developable square footage.
As of December 31, 2006, approximately 90% 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, 2006, approximately 4% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses. Additionally, as of December 31, 2006, approximately 91% of our leases (on a square footage basis) provided for the recapture of certain capital expenditures and approximately 89% of our leases (on a square footage basis) contained effective annual rent escalations that are either fixed or indexed based on the consumer price index or another index.
Based on our current view of existing market conditions and certain current assumptions, our guidance for FFO per share (diluted) and earnings per share (diluted) is as follows:
2007
FFO per share (diluted)
$5.71
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 for the life sciences industry. Our properties are designed and improved for lease primarily to institutional (universities and independent not-for-profit institutions), pharmaceutical, biotechnology, medical device, life science product, service, biodefense and translational research entities, as well as governmental agencies. We are the leading provider of real estate to the life science industry with an asset base that currently consists of 159 properties comprising approximately 11.2 million square feet plus an imbedded pipeline for the ground-up development of approximately 6.0 million additional square feet.
This press release contains forward-looking statements, including earnings guidance, within the meaning of the federal securities laws. Actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our Annual Report on Form 10-K and our other periodic reports filed with the Securities and Exchange Commission.
ALEXANDRIA REAL ESTATE EQUITIES, INC. Financial Information (Dollars in thousands, except per share data) (Unaudited)
Three Months Three Months Year Year
Ended Ended Ended Ended
December 31, 2006 December 31, 2005 December 31, 2006 December 31, 2005
----------------- ----------------- ----------------- -----------------
Income statement data
Total revenues $ 93,440 $ 64,652 $ 316,821 $ 238,138
Expenses
Rental operations 22,029 14,371 71,550 53,107
General and administrative 6,697 5,908 26,071 21,088
Interest 21,148 13,387 71,371 49,116
Depreciation and amortization 22,389 14,885 73,572 53,993
----------------- ----------------- ----------------- -----------------
72,263 48,551 242,564 177,304
Minority interests' share of income 838 377 2,287 634
----------------- ----------------- ----------------- -----------------
Income from continuing operations 20,339 15,724 71,970 60,200
Income from discontinued operations, net 196 456 1,446 3,233
----------------- ----------------- ----------------- -----------------
Net income 20,535 16,180 73,416 63,433
Dividends on preferred stock 4,023 4,023 16,090 16,090
----------------- ----------------- ----------------- -----------------
Net income available to common stockholders $ 16,512 $ 12,157 $ 57,326 $ 47,343
================= ================= ================= =================
Weighted average shares of common stock outstanding
Basic 28,821,942 22,267,275 25,102,200 20,948,915
================= ================= ================= =================
Diluted 29,222,144 22,672,986 25,524,478 21,316,886
================= ================= ================= =================
Earnings per share - basic
Continuing operations (net of preferred stock dividends) $ 0.56 $ 0.53 $ 2.22 $ 2.11
Discontinued operations, net 0.01 0.02 0.06 0.15
----------------- ----------------- ----------------- -----------------
Earnings per share - basic $ 0.57 $ 0.55 $ 2.28 $ 2.26
================= ================= ================= =================
Earnings per share - diluted
Continuing operations (net of preferred stock dividends) $ 0.56 $ 0.52 $ 2.19 $ 2.07
Discontinued operations, net 0.01 0.02 0.06 0.15
----------------- ----------------- ----------------- -----------------
Earnings per share - diluted $ 0.57 $ 0.54 $ 2.25 $ 2.22
================= ================= ================= =================
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 year ended December 31, 2006 and 2005 (in thousands, except per share data):
Three Months Three Months Year Year
Ended Ended Ended Ended
December 31, 2006 December 31, 2005 December 31, 2006 December 31, 2005
----------------- ----------------- ----------------- -----------------
Reconciliation of net income available to common stockholders to
funds from operations available to common stockholders
Net income available to common stockholders $ 16,512 $ 12,157 $ 57,326 $ 47,343
Add:
Depreciation and amortization (1) 22,454 15,451 74,039 55,416
Minority interests' share of income 838 377 2,287 634
Subtract:
Gain on sales of property (2) -- -- (59) (36)
FFO allocable to minority interest (750) (393) (1,928) (668)
----------------- ----------------- ----------------- -----------------
Funds from operations available to common stockholders $ 39,054 $ 27,592 $ 131,665 $ 102,689
================= ================= ================= =================
FFO per share
Basic $ 1.36 $ 1.24 $ 5.25 $ 4.90
================= ================= ================= =================
Diluted $ 1.34 $ 1.22 $ 5.16 $ 4.82
================= ================= ================= =================
Reconciliation of earnings per share (diluted) to
FFO per share (diluted)
Earnings per share (diluted) $ 0.57 $ 0.54 $ 2.25 $ 2.22
Depreciation and amortization (1) 0.77 0.68 2.90 2.60
Minority interests' share of income 0.03 0.02 0.09 0.03
Gain on sales of property (2) -- -- -- --
FFO allocable to minority interest (0.03) (0.02) (0.08) (0.03)
----------------- ----------------- ----------------- -----------------
FFO per share (diluted) $ 1.34 $ 1.22 $ 5.16 $ 4.82
================= ================= ================= =================
Includes depreciation and amortization on assets "held for sale" reflected as discontinued operations (for the periods prior to when such assets were designated as "held for sale").
Gain on sales of property relates to the disposition of one property in the New Jersey/Suburban Philadelphia market during the second quarter of 2006, two properties in the Suburban Washington D.C. market during the second quarter of 2006 and one property in the Southeast market during the third quarter of 2005. Gain on sales of property is included in the income statement in income from discontinued operations, net.
ALEXANDRIA REAL ESTATE EQUITIES, INC. Supplemental Financial Information (Dollars in thousands, except per share data) (Unaudited)
Quarterly Supplemental Financial Information
For the Three Months Ended
12/31/2006 09/30/2006 06/30/2006 03/31/2006 12/31/2005
Operational data ----------- ------------ ----------- ----------- -----------
Breakdown of revenues from continuing operations (a)
Rental income $ 70,435 63,996 54,485 $ 52,293 $ 49,978
Tenant recoveries 19,062 17,484 13,222 13,992 13,016
Other income 3,943 3,431 2,480 1,998 1,658
----------- ------------ ----------- ----------- -----------
Total $ 93,440 84,911 70,187 $ 68,283 $ 64,652
=========== ============ =========== =========== ===========
Funds from operations per share - diluted (b) $ 1.34 1.32 1.26 $ 1.24 $ 1.22
Dividends per share on common stock $ 0.74 0.72 0.70 $ 0.70 $ 0.70
Dividend payout ratio (common stock) (c) 55.6% 59.6% 63.7% 57.0% 57.2%
Straight-line rent $ 5,671 4,515 3,674 $ 2,977 $ 1,492
As of
12/31/2006 09/30/2006 06/30/2006 03/31/2006 12/31/2005
Other data ----------- ------------ ----------- ----------- -----------
Number of shares of common stock outstanding
at end of period 29,012,135 28,957,698 26,387,076 22,555,587 22,441,294
Number of properties (d)
Acquired/added/completed during period 8 10 5 6 6
Sold/reconstructed during period -- -- (3) -- --
Owned at end of period 159 151 141 139 133
Rentable square feet (d)
Acquired/added/completed during period 573,027 1,342,365 386,776 380,043 415,978
Sold/reconstructed during period -- -- (268,099) -- --
Owned at end of period 11,232,351 10,659,324 9,315,959 9,197,282 8,817,239
Debt to total market capitalization (e)
Total debt $ 2,024,866 1,721,348 1,305,103 $ 1,544,430 $ 1,406,666
Preferred stock market capitalization 193,360 194,142 193,866 193,917 192,419
Common stock market capitalization 2,912,818 2,716,232 2,340,006 2,150,224 1,806,524
----------- ------------ ----------- ----------- -----------
Total market capitalization $ 5,131,044 4,631,722 3,838,975 $ 3,888,571 $ 3,405,609
----------- ------------ ----------- ----------- -----------
Debt to total market capitalization 39.5% 37.2% 34.0% 39.7% 41.3%
The historical results above exclude the results of assets "held for sale" which have been reflected as discontinued operations.
See page 5 for a reconciliation of earnings per share (diluted) to FFO per share (diluted).
Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (common stock shares outstanding on the respective record date multiplied by the related dividend per share) to funds from operations for the respective quarter.
Includes assets "held for sale" during the applicable periods such assets were "held for sale".
Debt to market capitalization is the ratio of total debt (secured notes payable and unsecured line of credit and unsecured term loan) to total market capitalization. Total market capitalization is equal to outstanding shares of preferred stock and common stock multiplied by the related closing prices at the end of each period presented, plus total debt.
ALEXANDRIA REAL ESTATE EQUITIES, INC. Supplemental Financial Information (Dollars in thousands, except per share data) (Unaudited)
Annual Supplemental Financial Information
For the Year Ended
12/31/2006 12/31/2005 12/31/2004 12/31/2003 12/31/2002
Operational data ----------- ----------- ----------- -----------
Breakdown of revenues from continuing operations (a)
Rental income $ 241,209 $184,812 $140,391 $ 122,565 $ 107,863
Tenant recoveries 63,760 48,528 34,386 30,619 27,589
Other income 11,852 4,798 3,523 2,051 1,538
----------- ------------ ----------- ----------- -----------
Total $ 316,821 238,138 178,300 $ 155,235 $ 136,990
=========== ============ =========== =========== ===========
Funds from operations per share - diluted (b) $ 5.16 4.82 4.41 (f) $ 4.23 $ 3.81
Dividends per share on common stock $ 2.86 2.72 2.52 $ 2.20 $ 2.00
Dividend payout ratio (common stock) (c) 58.8% 57.9% 56.7%(g) 51.8% 52.7%
As of
12/31/2006 12/31/2005 12/31/2004 12/31/2003 12/31/2002
Other data ----------- ------------ ----------- ----------- -----------
Number of shares of common stock outstanding
at end of period 29,012,135 22,441,294 19,594,418 19,264,023 18,973,957
Number of properties (d)
Acquired/added/completed during period 29 22 23 4 6
Sold/reconstructed during period (3) (1) (1) (4) --
Owned at end of period 159 133 112 90 90
Rentable square feet (d)
Acquired/added/completed during period 2,683,211 1,392,299 1,717,209 267,164 427,077
Sold/reconstructed during period (268,099) (16,500) 2,891 (338,256) --
Owned at end of period 11,232,351 8,817,239 7,441,440 5,721,340 5,792,432
Debt to total market capitalization (e)
Total debt $ 2,024,866 1,406,666 1,186,946 $ 709,007 $ 614,878
Preferred stock market capitalization 193,360 192,419 199,360 104,421 100,670
Common stock market capitalization 2,912,818 1,806,524 1,458,217 1,115,387 808,291
----------- ------------ ----------- ----------- -----------
Total market capitalization $ 5,131,044 3,405,609 2,844,523 $ 1,928,815 $ 1,523,839
----------- ------------ ----------- ----------- -----------
Debt to total market capitalization 39.5% 41.3% 41.7% 36.8% 40.4%
The historical results above exclude the results of assets "held for sale" which have been reflected as discontinued operations.
See page 5 for a reconciliation of earnings per share (diluted) to FFO per share (diluted).
Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (common stock shares outstanding on the respective record date multiplied by the related dividend per share) to funds from operations for the respective quarter.
Includes assets "held for sale" during the applicable periods such assets were "held for sale".
Debt to total 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 outstanding shares of preferred stock and common stock multiplied by the related closing prices at the end of each period presented, plus total debt.
Includes the effect of the preferred stock redemption charge of $1,876,000 or $0.10 per 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%.
ALEXANDRIA REAL ESTATE EQUITIES, INC. Condensed Consolidated Balance Sheets (In thousands)
December 31, December 31,
2006 2005
------------ ------------ (Unaudited)
Assets
Rental properties, net $ 2,924,881 $ 1,788,818
Properties under development and development land 397,701 329,338
Cash and cash equivalents 2,948 3,911
Tenant security deposits and other restricted cash 34,360 21,013
Tenant receivables 6,330 4,764
Deferred rent 68,412 54,573
Investments 74,824 82,010
Other assets 108,021 78,023
------------- --------------
Total assets $ 3,617,477 $ 2,362,450
============= ==============
Liabilities and Stockholders' Equity
Secured notes payable $ 1,174,866 $ 666,666
Unsecured line of credit and unsecured term loan 850,000 740,000
Accounts payable, accrued expenses and
tenant security deposits 158,119 86,391
Dividends payable 25,363 19,478
------------- --------------
Total liabilities 2,208,348 1,512,535
------------- --------------
Minority interest 57,477 20,115
Stockholders' equity:
Series B preferred stock 57,500 57,500
Series C preferred stock 129,638 129,638
Common stock 290 224
Additional paid-in capital 1,139,629 607,405
Accumulated other comprehensive income 24,595 35,033
------------- --------------
Total stockholders' equity 1,351,652 829,800
------------- --------------
Total liabilities and stockholders' equity $ 3,617,477 $ 2,362,450
============= ==============
ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Debt December 31, 2006 (Dollars in thousands) (Unaudited)
Secured and Unsecured Debt Analysis
Percentage Weighted Weighted
of Average Average
Balance Balance Interest Rate Maturity
----------- ------- -------------- -----------
Secured Debt $ 1,174,866 58.0% 6.21% 5.3 Years
Unsecured Debt 850,000 42.0% 5.98% (3) 4.5 Years
----------- ------- -------------- -----------
Total Debt $ 2,024,866 100.0% 6.11% 5.0 Years
=========== ======= ============== ===========
Fixed and Floating Rate Debt Analysis
Percentage Weighted Weighted
of Average Average
Balance Balance Interest Rate Maturity
----------- ------- -------------- -----------
Fixed Rate Debt $ 939,976 46.4% 6.11% 6.0 Years
Floating Rate Debt - Hedged 628,500 31.0% 5.88% (3) 4.9 Years
Floating Rate Debt - Unhed 456,390 22.6% 6.58% 3.1 Years
----------- ------- -------------- -----------
Total Debt $ 2,024,866 100.0% 6.11% 5.0 Years
=========== ======= ============== ===========
The weighted average interest rate related to our secured debt is calculated based on the outstanding debt as of December 31st of the year immediately preceding the year presented.
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, 2006. The unsecured line of credit matures in October 2010 and may be extended at our sole option for an additional one year period. The unsecured term loan matures in October 2011 and may be extended at our sole option for an additional one year period. The weighted average interest rate includes the effect of our interest rate swap agreements.
The weighted average interest rates include the effect of our interest rate swap agreements. See page 10 for further detail of our interest rate agreements.
ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Interest Rate Swap Agreements(1) December 31, 2006 (Dollars in thousands) (Unaudited)
Effective at
Notional December 31, Interest
Transaction Dates Effective Dates Amounts 2006 Pay Rates (2) Termination Dates
- ----------------------- -------------------- ------------ -------------- ------------ -----------------
December 2003 December 29, 2006 50,000 $ 50,000 5.090% October 31, 2008
April 2004 April 28, 2006 50,000 50,000 4.230% April 30, 2007
April 2004 April 30, 2007 50,000 - 4.850% April 30, 2008
June 2004 June 30, 2005 50,000 50,000 4.343% June 30, 2007
December 2004 December 31, 2004 50,000 50,000 3.590% January 2, 2008
December 2004 January 3, 2006 50,000 50,000 3.927% July 1, 2008
May 2005 June 30, 2006 50,000 50,000 4.270% June 29, 2007
May 2005 November 30, 2006 25,000 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 50,000 4.730% November 30, 2009
December 2005 December 29, 2006 50,000 50,000 4.740% November 30, 2009
December 2005 January 2, 2008 50,000 - 4.768% December 31, 2010
June 2006 June 30, 2006 125,000 125,000 5.299% September 30, 2009
June 2006 October 31, 2008 50,000 - 5.340% December 31, 2010
June 2006 October 31, 2008 50,000 - 5.347% December 31, 2010
June 2006 June 30, 2008 50,000 - 5.325% June 30, 2010
June 2006 June 30, 2008 50,000 - 5.325% June 30, 2010
December 2006 December 31, 2006 50,000 50,000 4.990% March 31, 2014
December 2006 June 29, 2007 50,000 - 4.920% October 31, 2008
December 2006 November 30, 2009 75,000 - 5.015% March 31, 2014
December 2006 November 30, 2009 75,000 - 5.023% March 31, 2014
December 2006 December 31, 2010 100,000 - 5.015% October 31, 2012
--------------
Total Notional Amount in Effect at December 31, 2006 $ 600,000
==============
These interest rate swap agreements relate to our unsecured line of credit and unsecured term loan. For all interest rate swap agreements, interest is received based on one month LIBOR.
The interest pay rates represent the interest rate we will pay for one month LIBOR under the respective interest rate swap agreement. These rates do not include any spread in addition to one month LIBOR that is due monthly as interest expense under our unsecured line of credit and unsecured term loan.
ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Same Property Comparisons (Dollars in thousands) (Unaudited)
NOTE: This summary represents operating data for all properties that were owned and fully operating for the entire periods presented (the "Fourth Quarter Same Properties") for the quarter periods and (the "2006 Same Properties") for the full year periods. Same Property Occupancy for the quarters ended December 31, 2006 and 2005 was 95.5% and 95.7%, respectively. Same Property Occupancy for the year ended December 31, 2006 and 2005 was 95.8% and 95.8%, respectively. Properties undergoing redevelopment are excluded from same property results. If the portion of redevelopment properties not undergoing redevelopment were included in the Same Property results, the percentage change in GAAP Basis and Cash Basis revenue less operating expenses associated with the Fourth Quarter Same Properties, as applicable, (excluding lease termination fees, if any) less property operating expenses for the quarters ended December 31, 2006 and 2005 would have been 2.6% and 3.9%, respectively. If the portion of redevelopment properties not undergoing redevelopment were included in the Same Property results, the percentage change in GAAP Basis and Cash Basis revenue less operating expenses associated with the 2006 Same Properties, as applicable, (excluding lease termination fees, if any) less property operating expenses for the year ended December 31, 2006 and 2005 would have been 3.2% and 5.0%, respectively.
Revenue less operating expenses computed under GAAP is total revenue associated with the Fourth Quarter Same Properties and 2006 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 Fourth Quarter Same Properties and 2006 Same Properties, as applicable, (excluding lease termination fees, if any) less property operating expenses, adjusted to exclude the effect of straight- line rent adjustments required by GAAP. Straight-line rent adjustments for the quarters ended December 31, 2006 and 2005 for the Fourth Quarter Same Properties were $1,764,000 and $2,433,000, respectively. Straight-line rent adjustments for the year ended December 31, 2006 and 2005 for the 2006 Same Properties were $7,032,000 and $9,436,000, 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. As of December 31, 2006, approximately 90% 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, 2006, approximately 4% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties
(Dollars in thousands)
December 31, 2006 September 30, 2006
------------------------------------------------------------------------- -------------
Rentable Square Feet
Number of ----------------------------------- Annualized Occupancy Occupancy
Properties Operating Redevelopment Total Base Rent (1)Percentage (1) Percentage (2)
----------- ----------- ----------- ----------- ----------- ----------- -------------
Markets
California - Los Angeles Metro 2 31,343 29,660 61,003 $ 775 82.5% 86.4%
California - San Diego 27 1,149,369 160,887 1,310,256 29,385 89.5% 93.3%
California - San Francisco Bay 24 1,660,349 72,902 1,733,251 49,666 94.0% 94.4%
Eastern Massachusetts 39 3,044,186 230,917 3,275,103 99,515 95.9% 95.3%
New Jersey/Suburban Philadelphia 8 443,349 - 443,349 8,907 96.6% 96.6%
Southeast 12 612,565 45,841 658,406 9,221 78.1%(3) 78.8%(3)
Suburban Washington D.C. 32 2,575,370 - 2,575,370 54,063 92.5% 92.8%
Washington - Seattle 12 806,759 72,492 879,251 25,557 94.9% 89.0%
International - Canada 3 296,362 - 296,362 6,486 100.0% 100.0%
----------- ----------- ----------- ----------- ----------- ----------- -------------
Total Properties 159 10,619,652 612,699 11,232,351 $ 283,575 93.1%(4) 93.1%(5)
=========== =========== =========== =========== =========== =========== =============
Excludes spaces at properties totaling 612,699 square feet undergoing a permanent change in use to office/laboratory space through redevelopment.
Excludes spaces at properties totaling 533,696 square feet undergoing a permanent change in use to office/laboratory space through redevelopment.
Substantially all of the vacant space is office or warehouse space.
Including spaces undergoing a permanent change in use to office/laboratory space through redevelopment, occupancy as of December 31, 2006 was 88.0%. See page 17 for additional information on our redevelopment program.
Including spaces undergoing a permanent change in use to office/laboratory space through redevelopment, occupancy as of September 30, 2006 was 88.4%. See page 17 for additional information on our redevelopment program.
ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Leasing Activity For the Quarter Ended December 31, 2006
ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Lease Expirations December 31, 2006
Square Percentage of Annualized Base Rent
Year of Lease Number of Footage of Aggregate of Expiring Leases
Expiration Leases Expiring Expiring Leases Leased Square Feet (per square foot)
- ------------- --------------- --------------- ------------------ --------------------
2007 90 (1) 1,267,876 12.8% $24.59
2008 43 780,175 7.9% $26.52
2009 50 685,896 6.9% $22.83
2010 40 1,013,669 10.3% $26.97
2011 51 1,457,414 14.7% $27.07
Square Footage of Expiring Leases
Markets 2006 2007
- ----------------------------------- ----------- -----------
California - Los Angeles Metro 3,653 4,006
California - San Diego 194,898 78,208
California - San Francisco Bay 208,038 250,884
Eastern Massachusetts 347,897 210,283
New Jersey/Suburban Philadelphia - 40,000
Southeast 69,448 12,008
Suburban Washington D.C. 397,427 56,986
Washington - Seattle 46,515 127,800
International - Canada - -
----------- -----------
Total 1,267,876 (1) 780,175
=========== ===========
Includes month-to-month leases for approximately 86,000 square feet.
ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Additions to and Dispositions of Properties For The Quarter Ended December 31, 2006 (Dollars in thousands)
Acquisition Month of Rentable
Markets Amount Acquisition Square Feet
- ---------------------------------------------- ------------ ------------ ------------
Addition to Operating Properties:
Eastern Massachusetts $ 11,100 October 27,960
Eastern Massachusetts 95,025 (1) November 184,577
California - San Francisco Bay 71,500 (2) November 150,960
Eastern Massachusetts 39,500 (3) December 132,135
Southeast 12,301 December 77,395
------------- ------------
Additions to Operating Properties 229,426 573,027
Additions to Properties Under Redevelopment:
None N/A N/A N/A
------------ ------------
Additions to Properties Under Redevelopment -- --
Total Additions to Operating Properties/Properties ------------ ------------
Under Redevelopment $ 229,426 573,027
============= ============
Acquisition Month of Developable
Markets Amount Acquisition Square Feet
- ---------------------------------------------- ------------ ------------ ------------
Additions of Land:
None N/A N/A N/A
Disposition Month of Rentable
Markets Amount Disposition Square Feet
- ---------------------------------------------- ------------ ------------ ------------
Dispositions:
None N/A N/A N/A
In addition to the existing rentable square feet of 184,577, this property also has an additional 240,000 developable square footage. This additional 240,000 of future developable square footage is included in our Imbedded Future Development and Redevelopment Square Footage on page 18.
Represents the purchase of three properties for a total contract price of approximately $71.5 million.
Represents the purchase of two properties for a total contract price of approximately $39.5 million.
ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Properties Undergoing Ground-Up Development, Square Footage Undergoing Redevelopment and Square Footage Undergoing Development/Pre- Construction December 31, 2006
Estimated
In-Service Rentable
Markets Dates Square Footage
- --------------------------------------- -------------- ---------------
Properties Undergoing Ground-Up Development (1)
California - San Francisco Bay 4Q07 154,000 (2)
California - San Francisco Bay 1Q09 162,000
California - San Francisco Bay 2009 135,000
New York - New York City 2009/2010/2011 725,000
---------------
Total Properties Undergoing Ground-Up Development (1) 1,176,000
---------------
Square Footage Undergoing Redevelopment (3)
California - Los Angeles Metro 4Q08 29,660
California - San Diego 3Q07 87,140
California - San Diego 2009 43,600
California - San Diego 2009 30,147
California - San Francisco Bay 1Q07 14,502
California - San Francisco Bay 3Q07 58,400
Eastern Massachusetts 1Q07 25,847
Eastern Massachusetts 2Q07 26,589
Eastern Massachusetts 4Q08 155,090
Eastern Massachusetts 2009 23,391
Southeast 2Q08 45,841
Washington - Seattle 4Q07 12,719
Washington - Seattle 3Q07 59,773
---------------
Total Square Footage Undergoing Redevelopment (3) 612,699
Total Square Footage Undergoing Development/Pre-Construction (4) 4,201,000
---------------
Grand Total 5,989,699
===============
In accordance with Statement of Financial Accounting Standards No. 34, "Capitalization of Interest Cost" ("SFAS 34") and Statement of Financial Accounting Standards No. 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects" ("SFAS 67"), we are required to capitalize direct construction, including pre-construction costs, interest, property taxes, insurance and other costs directly related and essential to the acquisition, development, redevelopment or construction of a project. Pursuant to SFAS 34 and SFAS 67, capitalization of construction, development and redevelopment costs, including interest, is required while activities are ongoing to prepare an asset for its intended use. Pre-construction costs includes costs related to the development of plans and the process of obtaining entitlements and permits from government authorities. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Should development, redevelopment or construction activity cease, construction costs, including interest, would no longer be eligible for capitalization, under SFAS 34 and SFAS 67, and would be expensed as incurred. Interest mandated to be capitalized on ground-up development, active redevelopment and other construction projects, including development/pre- construction on certain land parcels, for the three months ended December 31, 2006, was approximately $9.0 million.
Our aggregate construction costs to date approximate $50 per developable square foot.
This development project is partially leased and the balance is under negotiation.
Our redevelopment program involves ongoing activities necessary for the permanent change of use of applicable redevelopment space to office/laboratory space. Spaces currently built out with laboratory improvements are generally not placed into our value-add redevelopment program. As required under GAAP, interest and other costs directly related and essential to the project are capitalized on redevelopment properties on the basis allocable only to that portion of space undergoing redevelopment. In addition to properties undergoing redevelopment, as of December 31, 2006 our asset base contains imbedded opportunities for future permanent change of use to office/laboratory space through redevelopment aggregating approximately 1.2 million rentable square feet. See Summary of Imbedded Future Development and Redevelopment Square Footage on page 18.
See Summary of Imbedded Future Development and Redevelopment Square Footage on page 18.
ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Imbedded Future Development and Redevelopment Square Footage December 31, 2006
Imbedded Future Development and Redevelopment
----------------------------------------------
Development Redevelopment
Markets Square Footage Square Footage Total
- ------------------------------------- -------------- -------------- --------------
California - San Francisco Bay 3,324,000 (1) 138,000 3,462,000
California - San Diego 467,000 (2) 143,000 610,000
Suburban Washington D.C. 886,000 (3) 397,000 1,283,000
Eastern Massachusetts 483,000 (4) 185,000 668,000
Washington - Seattle 386,000 (5) 120,000 506,000
Other 384,000 (6) 173,000 557,000
-------------- -------------- --------------
Total Imbedded Future Development
and Redevelopment Square Footage 5,930,000 1,156,000 7,086,000
============== ============== ==============
The imbedded future development and redevelopment square footage shown above represents future ground-up development projects and future redevelopment (permanent change in use of applicable space to office/laboratory space) projects. A significant portion of our imbedded future development square footage is in the development/pre-construction phase (entitlement, permitting, design, etc.). See discussion on SFAS 34 and SFAS 67 on page 17. The exact date of physical construction will depend on successful completion of development/pre-construction activities and management's assessment of overall market conditions. As required under GAAP, direct construction, interest, property taxes, insurance and other costs directly related and essential to the development/pre-construction, or construction of a project, is mandated to be capitalized during pre-construction when activities are ongoing to bring these assets to their intended use.
Approximately 2.7 million developable square feet located in the San Francisco Bay market is in development/pre-construction.
Approximately 427,000 developable square feet located in the San Diego market is in development/pre-construction.
Approximately 494,000 developable square feet located in the Suburban Washington D.C. market is in development/pre-construction.
Approximately 258,000 developable square feet located in the Eastern Massachusetts market is in development/pre-construction.
Approximately 245,000 developable square feet located in the Seattle market is in development/pre-construction.
Approximately 54,000 developable square feet located in other markets is in development/pre-construction.
ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Capital Costs For the Year Ended December 31, 2006 (In thousands)
Property-related capital expenditures(1)
$ 1,214
Leasing costs(2)
$ 369
Property-related redevelopment costs(3)
$ 107,979
Property-related development costs(3)
$ 169,891
Property-related capital expenditures include all major capital and recurring capital expenditures except capital expenditures that are recoverable from tenants, revenue-enhancing capital expenditures, or costs related to the redevelopment of a property. Major capital expenditures consist of roof replacements and HVAC systems which are typically identified and considered at the time the property is acquired. Capital expenditures fluctuate in any given period due to the nature, extent or timing of improvements required and the extent to which they are recoverable from tenants. Approximately 91% of our leases (based on rentable square feet) provide for the recapture of certain capital expenditures (such as HVAC systems maintenance and/or replacement, roof replacement and parking lot resurfacing). In addition, we implement an active preventative maintenance program at each of our properties to minimize capital expenditures.
Leasing costs consist of tenant improvements and leasing commissions related to leasing of acquired vacant space and second generation space.
Amount includes leasing costs related to development and redevelopment projects.
ALEXANDRIA REAL ESTATE EQUITIES, INC. Conference Call Information For the Fourth Quarter and Year Ended December 31, 2006
Alexandria Real Estate Equities, Inc. will be hosting a conference call to discuss its operating and financial results for the fourth quarter and year ended December 31, 2006:
Date:
February 9, 2007
Time:
11:00 A.M. Pacific Standard Time
Phone Number:
(719) 457-2679
Confirmation Code:
1402414
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