Exhibit 99.1
Contact: | Joel S. Marcus |
| Chairman/Chief Executive Officer |
| Alexandria Real Estate Equities, Inc. |
| (626) 578-9693 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
REPORTS FIRST QUARTER 2009
OPERATING AND FINANCIAL RESULTS
Highlights
First Quarter 2009:
· First Quarter 2009 Funds from Operations Per Share (Diluted) Attributable to Alexandria Real Estate Equities, Inc.’s Common Stockholders of $1.89, up 56%, Compared to First Quarter 2008 Funds from Operations Per Share (Diluted) Attributable to Alexandria Real Estate Equities, Inc.’s Common Stockholders of $1.21
· First Quarter 2009 Earnings Per Share (Diluted) Attributable to Alexandria Real Estate Equities, Inc.’s Common Stockholders of $1.01
· First Quarter 2009 GAAP Same Property Revenues Less Operating Expenses up 3.6%
· Executed 37 Leases for 465,000 Rentable Square Feet
· First Quarter 2009 GAAP Rental Rate Increase of 5.4% on Renewed/Released Space
· Occupancy at 94.3%; Average Occupancy Rate as of December 31 From 1997 to 2008 at 95.5%
· Completed Redevelopment of Multiple Spaces Aggregating 57,000 Rentable Square Feet
· Sold Three Properties to a Life Science User for $14 Million at a Gain of $2 Million
· Operating Margins Steady at 75%
· Closed Follow-on Common Stock Offering with Net Proceeds of $255 Million
· Extended Beyond 2012 $92 Million of Secured Debt Maturities
Other:
· In April, Closed 8.00% Unsecured Convertible Notes Offering with Net Proceeds of $233 Million
· In April, Repurchased, in Privately Negotiated Transactions, $75 Million (Par Value) of Our 3.70% Unsecured Convertible Notes
· In 2009, Reduced Debt Maturities Through 2013 by $363 Million
· In May, Leased 59,000 Rentable Square Foot Vacant Single Tenant Building to a Credit Tenant in the Suburban Washington, D.C. Market
· Since January 1, 2008, Completed Redevelopment of Multiple Spaces Aggregating 393,000 Rentable Square Feet; 90% Leased
PASADENA, CA. — May 7, 2009 — Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced operating and financial results for the first quarter ended March 31, 2009.
For the first quarter of 2009, we reported Funds from Operations (“FFO”) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders of $61,329,000, or $1.89 per share (diluted), compared to FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders of $38,266,000, or $1.21 per share (diluted), for the first quarter of 2008. Comparing the first quarter of 2009 to the first quarter of 2008, FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders and FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders per share (diluted) increased 60% and 56%, respectively. In the first quarter of 2009, we recognized additional rental income related to a modification of a lease for a property in South San Francisco, California. Excluding the property in South San Francisco, California, FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders was $43,424,000, or $1.34 per share (diluted), and $36,204,000, or $1.14 per share (diluted), for the first quarter of 2009 and 2008, respectively.
(more)
ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS FIRST QUARTER 2009 RESULTS
Page 2
FFO is a non-GAAP measure widely used by publicly traded real estate investment trusts. A reconciliation of GAAP net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders to FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders both on an aggregate and per share (diluted) basis, is included in the financial information accompanying this press release. The primary reconciling item between GAAP net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders and FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders is depreciation and amortization expense. Depreciation and amortization expense for the three months ended March 31, 2009 and 2008 was $31,446,000 and $25,810,000, respectively. Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the first quarter of 2009 was $32,768,000, or $1.01 per share (diluted), compared to net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders of $32,769,000, or $1.03 per share (diluted), for the first quarter of 2008. Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the first quarter of 2009 included a gain on sale of three properties of $2,234,000 and additional net income related to a modification of a lease for a property in South San Francisco, California. Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the first quarter of 2008 included aggregate gains of $20,213,000 on sales of six properties. Excluding the gains on sales of properties and the property in South San Francisco, California, net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the first quarter of 2009 was $13,858,000, or $0.43 per share (diluted), compared to net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders of $11,288,000, or $0.36 per share (diluted), for the first quarter of 2008.
For the first quarter of 2009, we executed a total of 37 leases for approximately 465,000 rentable square feet of space at 23 different properties (excluding month-to-month leases). Of this total, approximately 252,000 rentable square feet related to new or renewal leases of previously leased space and approximately 213,000 rentable square feet related to developed, redeveloped or previously vacant space. Of the 213,000 rentable square feet, approximately 43,000 rentable square feet were delivered from our development or redevelopment programs, with the remaining approximately 170,000 rentable square feet related to previously vacant space. Rental rates for these new or renewal leases were on average approximately 5.4% higher (on a GAAP basis) than rental rates for expiring leases.
During the first quarter of 2009, we sold three properties aggregating 64,218 rentable square feet to a life science user. These properties were located in San Diego and were sold for approximately $14,449,000 at a gain of approximately $2,234,000.
As of March 31, 2009, approximately 89% of our leases (on a rentable 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, approximately 8% of our leases (on a rentable square footage basis) required the tenants to pay a majority of operating expenses. Additionally, approximately 92% of our leases (on a rentable square footage basis) provided for the recapture of certain capital expenditures, and approximately 94% of our leases (on a rentable square footage basis) contained effective annual rent escalations that were 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 updated guidance for FFO per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders and earnings per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders are as follows:
|
| 2009 |
|
FFO per share (diluted) (1) |
| $ 5.43(1) |
|
Earnings per share (diluted) (1) |
| $ 2.50(1) |
|
(1) Our guidance for 2009 includes the estimated additional non-cash interest we will recognize under FSP APB 14-1 which affects the accounting treatment for convertible debt instruments, such as our outstanding unsecured convertible notes. In addition, our guidance for 2009 includes the estimated impact related to FSP EITF 03-6-1 which requires unvested share-based payment awards with nonforfeitable rights to receive dividends or dividend equivalents to be considered participating securities for the purposes of applying the two-class method of calculating earnings per share. FFO per share (diluted) and earnings per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for 2008, as adjusted for FSP APB 14-1 and FSP EITF 03-6-1, was $5.62 and $2.89, respectively.
(more)
ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS FIRST QUARTER 2009 RESULTS
Page 3
Alexandria Real Estate Equities, Inc. (“Alexandria”) has a very broad and diversified quality client tenant base. As of March 31, 2009, on a rental revenue basis by sector, Alexandria’s multinational pharmaceutical client tenants represented approximately 27% of its client tenant mix, led by its top three client tenants Novartis AG, GlaxoSmithKline plc and Roche Holding Ltd; public biopharmaceutical companies represented approximately 20% and included the three largest in the sector, Amgen Inc., Gilead Sciences, Inc. and Celgene Corporation; revenue producing life science product and service companies represented approximately 17%, led by Quest Diagnostics Incorporated, Laboratory Corporation of America Holdings and Qiagen N.V.; government agencies and renown medical and research institutions represented approximately 15%, including The Scripps Research Institute, Massachusetts Institute of Technology, Fred Hutchinson Cancer Research Center, University of Washington, the Burnham Institute for Medical Research and the United States Government; private biopharmaceutical companies represented approximately 14% and were dominated by high-quality, leading-edge companies with blue chip venture investors, including Ambrx, Inc., aTyr Pharma, Inc., BrainCells Inc., Genocea Biosciences, Inc., Ikaria Holdings, Inc. and Tolerx, Inc.; the remaining approximately 7% consisted of traditional office tenants. The two fastest growing sectors by revenue currently include leading institutional and multinational pharmaceutical client tenants. Alexandria’s innovative business model, very strong and unique life sciences and financial underwriting skills with substantial experience and expertise, long-term client tenant relationships and sophisticated management with both real estate and life science operating experience and expertise, set Alexandria apart from all other publicly-traded real estate investment trusts (“REITs”).
Alexandria Real Estate Equities, Inc., Landlord of Choice to the Life Science Industry®, is the largest owner and pre-eminent first-in-class REIT focused principally on science-driven cluster formation. Alexandria is the leading provider of high-quality environmentally sustainable real estate, technical infrastructure, and services to the broad and diverse life science industry. Client tenants include institutional (universities and independent not-for-profit institutions), pharmaceutical, biopharmaceutical, medical device, product, service and translational entities, as well as government agencies. Alexandria’s operating platform is based on the principle of “clustering,” with assets and operations located in key life science markets. Our asset base approximates 12.8 million rentable square feet consisting of 156 properties approximating 11.7 million rentable square feet (including spaces undergoing active redevelopment) and properties undergoing ground-up development approximating 1.1 million rentable square feet.
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2009 earnings per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders, 2009 FFO per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders and our redevelopment and development projects. Our actual results may differ materially from those projected in such forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing and or equity) or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully complete and lease our existing space held for redevelopment and new properties acquired for that purpose and any properties undergoing development, our failure to successfully operate or lease acquired properties, decreased rental rates or increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, general and local economic conditions and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission (“SEC”). All forward-looking statements are made as of today, and we assume no obligation to update this information. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.
(Tables follow)
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
|
| Three Months Ended |
| ||||
|
| March 31, |
| ||||
|
| 2009 |
| 2008 (1) |
| ||
Income statement data |
|
|
|
|
| ||
Total revenues |
| $ | 132,757 |
| $ | 109,562 |
|
|
|
|
|
|
| ||
Expenses |
|
|
|
|
| ||
Rental operations |
| 32,684 |
| 28,261 |
| ||
General and administrative |
| 9,418 |
| 8,787 |
| ||
Interest |
| 20,199 |
| 23,460 |
| ||
Depreciation and amortization |
| 31,446 |
| 25,591 |
| ||
Non-cash impairment on investments |
| — |
| 1,985 |
| ||
|
| 93,747 |
| 88,084 |
| ||
|
|
|
|
|
| ||
Income from continuing operations |
| 39,010 |
| 21,478 |
| ||
|
|
|
|
|
| ||
Income from discontinued operations, net |
| 2,239 |
| 15,673 |
| ||
|
|
|
|
|
| ||
Net income |
| 41,249 |
| 37,151 |
| ||
|
|
|
|
|
| ||
Net income attributable to noncontrolling interests |
| 875 |
| 951 |
| ||
Dividends on preferred stock |
| 7,089 |
| 2,928 |
| ||
Net income attributable to unvested restricted stock awards |
| 517 |
| 503 |
| ||
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders |
| $ | 32,768 |
| $ | 32,769 |
|
|
|
|
|
|
| ||
Earnings per share attributable to Alexandria Real Estate Equities, Inc.’s |
|
|
|
|
| ||
Continuing operations |
| $ | 0.94 |
| $ | 0.55 |
|
Discontinued operations, net |
| 0.07 |
| 0.49 |
| ||
Earnings per share — basic |
| $ | 1.01 |
| $ | 1.04 |
|
|
|
|
|
|
| ||
Earnings per share attributable to Alexandria Real Estate Equities, Inc.’s |
|
|
|
|
| ||
Continuing operations |
| $ | 0.94 |
| $ | 0.54 |
|
Discontinued operations, net |
| 0.07 |
| 0.49 |
| ||
Earnings per share — diluted |
| $ | 1.01 |
| $ | 1.03 |
|
|
|
|
|
|
| ||
Weighted average shares of common stock outstanding |
|
|
|
|
| ||
Basic |
| 32,478,671 |
| 31,546,591 |
| ||
Diluted |
| 32,498,107 |
| 31,687,241 |
| ||
(1) Includes the retrospective impact of FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”), FASB Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”) and Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”).
(Continued on next page)
4
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Financial Information
(Unaudited)
Funds from Operations
United States 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 among real estate investment trusts (“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.
FFO 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 tables present 1) a reconciliation of net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders, the most directly comparable GAAP financial measure to FFO, to FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders and 2) a reconciliation of earnings per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders to FFO per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders, in each case, for the three months ended March 31, 2009 and 2008 (in thousands, except per share data):
Reconciliation of net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders to FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders |
| Three Months |
| Three Months |
| ||
Net income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders |
| $ | 32,768 |
| $ | 32,769 |
|
Add: Depreciation and amortization (2) |
| 31,446 |
| 25,810 |
| ||
Add: Net income attributable to noncontrolling interests |
| 875 |
| 951 |
| ||
Add: Net income attributable to unvested restricted stock awards |
| 517 |
| 503 |
| ||
Subtract: Gain on sales of property (3) |
| (2,234 | ) | (20,213 | ) | ||
Subtract: FFO attributable to noncontrolling interests |
| (1,077 | ) | (967 | ) | ||
Subtract: FFO attributable to unvested restricted stock awards |
| (966 | ) | (587 | ) | ||
FFO attributable to Alexandria Real Estate, Inc.’s common stockholders |
| $ | 61,329 |
| $ | 38,266 |
|
FFO per share attributable to Alexandria Real Estate Equities, Inc.’s common stockholders |
|
|
|
|
| ||
Basic |
| $ | 1.89 |
| $ | 1.21 |
|
Diluted |
| $ | 1.89 |
| $ | 1.21 |
|
Reconciliation of earnings per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders to FFO per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders |
|
|
|
|
| ||
Earnings per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders |
| $ | 1.01 |
| $ | 1.03 |
|
Depreciation and amortization (2) |
| 0.97 |
| 0.82 |
| ||
Net income attributable to noncontrolling interests |
| 0.03 |
| 0.03 |
| ||
Net income attributable to unvested restricted stock awards |
| 0.01 |
| 0.02 |
| ||
Gain on sales of property (3) |
| (0.07 | ) | (0.64 | ) | ||
FFO attributable to noncontrolling interests |
| (0.03 | ) | (0.03 | ) | ||
FFO attributable to unvested stock awards |
| (0.03 | ) | (0.02 | ) | ||
FFO per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders |
| $ | 1.89 |
| $ | 1.21 |
|
(1) | Includes the retrospective impact of FSP APB 14-1, FSP EITF 03-6-1 and SFAS 160. |
(2) | Includes depreciation and amortization for assets “held for sale” reflected as discontinued operations (for the periods prior to when such assets were designated as “held for sale”). |
(3) | Gain on sales of property relates to the disposition of three properties sold during the first quarter 2009 and six properties sold during the first quarter 2008. Gain on sales of property is included in the income statement in income from discontinued operations, net. |
5
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Quarterly Supplemental Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
|
| For the Three Months Ended |
| |||||||||||||
Operational data |
| 3/31/2009 |
| 12/31/2008 |
| 9/30/2008 |
| 6/30/2008 |
| 3/31/2008 |
| |||||
Rental income |
| $ | 104,941 |
| $ | 97,778 |
| $ | 85,503 |
| $ | 82,861 |
| $ | 81,841 |
|
Tenant recoveries |
| 27,062 |
| 26,347 |
| 26,726 |
| 23,904 |
| 24,471 |
| |||||
Other income |
| 754 |
| 2,447 |
| 2,648 |
| 2,892 |
| 3,250 |
| |||||
Total revenues (continuing operations) (a) |
| $ | 132,757 |
| $ | 126,572 |
| $ | 114,877 |
| $ | 109,657 |
| $ | 109,562 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
FFO per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders (b) |
| $ | 1.89 |
| $ | 1.49 |
| $ | 1.47 |
| $ | 1.45 |
| $ | 1.21 | (c) |
Dividends per share on common stock |
| $ | 0.80 |
| $ | 0.80 |
| $ | 0.80 |
| $ | 0.80 |
| $ | 0.78 |
|
Dividend payout ratio (common stock) (d) |
| 51.4% |
| 54.6% |
| 55.0% |
| 55.9% |
| 65.3% |
| |||||
Straight-line rent |
| $ | 1,509 |
| $ | 2,547 |
| $ | 3,274 |
| $ | 3,437 |
| $ | 3,015 |
|
Capitalized interest (b) |
| $ | 16,919 | (e) | $ | 19,571 |
| $ | 17,912 |
| $ | 18,667 |
| $ | 17,377 |
|
Number of properties (f) |
|
|
|
|
|
|
|
|
|
|
| |||||
Acquired/added/completed during period |
| — |
| — |
| — |
| 2 |
| — |
| |||||
Sold/transferred (g) |
| (3 | ) | (1 | ) | — |
| (1 | ) | (7 | ) | |||||
At end of period |
| 156 |
| 159 |
| 160 |
| 160 |
| 159 |
| |||||
Rentable square feet (f) |
|
|
|
|
|
|
|
|
|
|
| |||||
Acquired/added/completed during period |
| — |
| — |
| — |
| 60,000 |
| — |
| |||||
Sold/transferred (g) |
| (64,218 | ) | (24,867 | ) | — |
| (49,437 | ) | (475,976 | ) | |||||
At end of period |
| 11,705,813 |
| 11,770,031 |
| 11,794,898 |
| 11,794,898 |
| 11,784,335 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| As of |
| |||||||||||||
Other data |
| 3/31/2009 |
| 12/31/2008 |
| 9/30/2008 |
| 6/30/2008 |
| 3/31/2008 |
| |||||
Number of shares of common stock outstanding |
| 38,974,166 |
| 31,899,037 |
| 31,839,622 |
| 31,773,117 |
| 31,673,359 |
| |||||
Closing price of common stock |
| $ | 36.40 |
| $ | 60.34 |
| $ | 112.50 |
| $ | 97.34 |
| $ | 92.72 |
|
Debt to total market capitalization (h) |
|
|
|
|
|
|
|
|
|
|
| |||||
Total debt |
| $ | 2,829,120 |
| $ | 2,936,966 |
| $ | 2,772,325 |
| $ | 2,658,911 |
| $ | 2,589,284 |
|
Less debt attributable to noncontrolling interests |
| (45,484 | ) | (44,984 | ) | (42,384 | ) | (40,762 | ) | (39,838 | ) | |||||
Our share of total debt |
| 2,783,636 |
| 2,891,982 |
| 2,729,941 |
| 2,618,149 |
| 2,549,446 |
| |||||
Preferred stock |
| 351,117 |
| 353,658 |
| 368,489 |
| 377,616 |
| 352,127 |
| |||||
Common stock market capitalization |
| 1,418,660 |
| 1,924,788 |
| 3,581,957 |
| 3,092,795 |
| 2,936,754 |
| |||||
Total market capitalization |
| $ | 4,553,413 |
| $ | 5,170,428 |
| $ | 6,680,387 |
| $ | 6,088,560 |
| $ | 5,838,327 |
|
Debt to total market capitalization |
| 61.1% |
| 55.9% |
| 40.9% |
| 43.0% |
| 43.7% |
| |||||
Debt to gross assets (i) |
| 48.9% |
| 52.1% |
| 51.2% |
| 50.5% |
| 50.6% |
| |||||
(a) | The historical results above exclude the results of assets “held for sale” which have been classified as discontinued operations. |
(b) | The historical results above include the retrospective impact of FSP APB 14-1, FSP EITF 03-6-1 and SFAS 160. See page 5 for a reconciliation of earnings per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders to FFO per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders. |
(c) | In March 2008, we recognized aggregate non-cash impairment charges of approximately $1,985,000 for other-than-temporary declines in the fair value of certain investments and non-cash impairment charges of approximately $4,650,000 on two properties which were sold in May and October 2008. FFO per share (diluted) attributable to Alexandria Real Estate Equities, Inc.’s common stockholders for the first quarter of 2008 before these items was $1.41. |
(d) | 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 FFO attributable to Alexandria Real Estate Equities, Inc.’s common stockholders. The historical ratios above include the retrospective impact of FSP APB 14-1, FSP EITF 03-6-1 and SFAS 160. |
(e) | As of March 31, 2009, assets for which capitalization of interest is required pursuant to Statement of Financial Accounting Standards No. 34, “Capitalization of Interest Cost” (“SFAS 34”), approximated $1.5 billion. This amount is classified as properties undergoing development and redevelopment, and land held for development on our balance sheet. The weighted average interest rate used in the calculation of capitalized interest required pursuant to SFAS 34 was approximately 4.84% and 5.46% for the three months ended March 31, 2009 and December 31, 2008, respectively. The majority of the decrease in interest capitalized in the first quarter of 2009 as compared to fourth quarter 2008 is due to the decrease in our weighted average interest rate used for capitalization. SFAS 34 requires the interest rate for capitalization to be based on applicable interest costs related to borrowings outstanding during the period, including the impact of interest rate swap agreements, debt premiums/discounts and amortization of loan fees. |
(f) | Includes properties “held for sale” during the applicable periods such assets were “held for sale.” |
(g) | During the first quarter of 2009, we sold three assets located in the San Diego market. During the fourth quarter of 2008, we sold one asset located in the Eastern Massachusetts market. During the second quarter of 2008, we sold one asset located in the San Diego market. During the first quarter of 2008, we sold six properties and transferred one property from operating assets to embedded future development opportunities. |
(h) | Debt to total market capitalization is the ratio of our share of total debt (secured notes payable, unsecured line of credit, unsecured term loan and unsecured convertible notes) to total market capitalization. Total market capitalization is equal to outstanding shares of series C preferred stock and common stock multiplied by the related closing price at the end of each period presented, plus series D cumulative convertible preferred stock at liquidation value, plus our share of total debt. Historical amounts have been adjusted to include the effects of adopting FSP APB 14-1. |
(i) | Debt to gross assets is the ratio of our share of total debt (secured notes payable, unsecured line of credit, unsecured term loan and unsecured convertible notes) to gross assets. Gross assets is equal to total assets plus accumulated depreciation. |
6
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
|
| March 31, |
| December 31, |
| ||
|
| 2009 |
| 2008 (1) |
| ||
Assets |
|
|
|
|
| ||
Rental properties, net |
| $ | 3,339,992 |
| $ | 3,325,031 |
|
Properties undergoing development and redevelopment, and land held for development |
| 1,451,566 |
| 1,397,917 |
| ||
Cash and cash equivalents |
| 125,281 |
| 71,161 |
| ||
Tenant security deposits and other restricted cash |
| 54,770 |
| 67,782 |
| ||
Tenant receivables |
| 5,992 |
| 6,453 |
| ||
Deferred rent |
| 85,970 |
| 85,733 |
| ||
Investments |
| 64,788 |
| 61,861 |
| ||
Other assets |
| 106,822 |
| 109,144 |
| ||
Total assets |
| $ | 5,235,181 |
| $ | 5,125,082 |
|
|
|
|
|
|
| ||
Liabilities and Equity |
|
|
|
|
| ||
Secured notes payable |
| $ | 1,041,854 |
| $ | 1,081,963 |
|
Unsecured line of credit and unsecured term loan |
| 1,355,000 |
| 1,425,000 |
| ||
Unsecured convertible notes |
| 432,266 |
| 430,003 |
| ||
Accounts payable, accrued expenses and tenant security deposits |
| 331,715 |
| 386,801 |
| ||
Dividends payable |
| 37,701 |
| 32,105 |
| ||
Total liabilities |
| 3,198,536 |
| 3,355,872 |
| ||
|
|
|
|
|
| ||
Noncontrolling interests |
| 32,887 |
| 33,963 |
| ||
|
|
|
|
|
| ||
Alexandria Real Estate Equities, Inc. stockholders’ equity: |
|
|
|
|
| ||
Series C preferred stock |
| 129,638 |
| 129,638 |
| ||
Series D cumulative convertible preferred stock |
| 250,000 |
| 250,000 |
| ||
Common stock |
| 390 |
| 319 |
| ||
Additional paid-in capital |
| 1,662,694 |
| 1,401,441 |
| ||
Accumulated other comprehensive loss |
| (79,868 | ) | (87,241 | ) | ||
Total Alexandria Real Estate Equities, Inc. stockholders’ equity |
| 1,962,854 |
| 1,694,157 |
| ||
Noncontrolling interests |
| 40,904 |
| 41,090 |
| ||
Total equity |
| 2,003,758 |
| 1,735,247 |
| ||
Total liabilities and equity |
| $ | 5,235,181 |
| $ | 5,125,082 |
|
(1) Includes the retrospective impact of FSP APB 14-1, FSP EITF 03-6-1 and SFAS 160.
7
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Debt
March 31, 2009
(Dollars in thousands)
(Unaudited)
Debt Maturities / Rates
|
| Secured Debt |
| Unsecured Debt |
| |||||||||||||||||
|
|
|
| Noncontrolling |
|
|
| Weighted |
|
|
| |||||||||||
|
|
|
| Interests’ |
|
|
| Average |
|
|
| |||||||||||
| Year |
| Our Share |
| Share |
| Total |
| Interest Rate |
| Amount |
| ||||||||||
2009 |
| $ | 69,982 |
| $ | 23,494 |
| $ | 93,476 | (1) | 5.07 | % | (2) |
| $ | — |
| |||||
2010 |
| 184,923 |
| 270 |
| 185,193 |
| 5.23 |
| (3) |
| — |
| |||||||||
2011 |
| 162,452 |
| 286 |
| 162,738 |
| 6.08 |
| (3) |
| 605,000 | (4)(5) | |||||||||
2012 |
| 14,102 |
| 302 |
| 14,404 |
| 6.70 |
| (3) |
| 1,182,266 | (4)(5)(6) | |||||||||
2013 |
| 51,403 |
| 319 |
| 51,722 |
| 6.72 |
| (3) |
| — |
| |||||||||
Thereafter |
| 513,508 |
| 20,813 |
| 534,321 |
| 6.75 |
| (3) |
| — |
| |||||||||
Total |
| $ | 996,370 |
| $ | 45,484 |
| $ | 1,041,854 |
|
|
|
|
| $ | 1,787,266 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Secured and Unsecured Debt Analysis
|
| Balance |
| Percentage |
| Weighted |
| Weighted |
| ||||
Secured Debt |
| $ | 1,041,854 |
| 36.8 | % |
| 5.07 | % |
| 5.6 Years |
| |
Unsecured Debt |
| 1,787,266 |
| 63.2 |
|
| 4.81 |
|
| 3.1 Years | (8) | ||
Total Debt |
| $ | 2,829,120 |
| 100.0 | % |
| 4.91 | % |
| 4.0 Years | (8) | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fixed and Floating Rate Debt Analysis
|
| Balance |
| Percentage |
| Weighted |
| Weighted |
| ||||
Fixed Rate Debt |
| $ | 1,201,838 |
| 42.5 | % |
| 5.97 | % |
| 5.6 Years |
| |
Floating Rate Debt — Hedged |
| 953,500 |
| 33.7 |
|
| 5.71 |
|
| 3.3 Years | (8) | ||
Floating Rate Debt — Unhedged |
| 673,782 |
| 23.8 |
|
| 1.88 |
|
| 2.0 Years | (8) | ||
Total Debt |
| $ | 2,829,120 |
| 100.0 | % |
| 4.91 | % |
| 4.0 Years | (8) | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
(1) | Includes two loans. One loan approximating $51.8 million has an option to extend the maturity to 2010. We anticipate closing an amendment shortly to extend the maturity date to December 31, 2011 with an option to further extend the maturity to 2013. |
(2) | The weighted average interest rate is calculated based on outstanding debt as of March 31, 2009. |
(3) | The weighted average interest rate is calculated based on outstanding debt as of December 31st of the year immediately preceding the year presented. |
(4) | Interest on outstanding borrowings under our unsecured credit facility is based upon LIBOR plus 1.00% to 1.45% depending on our leverage or the higher of the Federal Funds rate plus 0.50% or Bank of America’s (“BofA’s”) prime rate plus 0.0% to 0.25% depending on our leverage. As of March 31, 2009, one-month LIBOR was 0.50%, the Federal Funds rate was 0-0.25%, and BofA’s prime rate was 3.25%. |
(5) | Assumes we exercise our sole right to extend the maturity date of our unsecured line of credit from October 2010 to October 2011 and our unsecured term loan from October 2011 to October 2012. Our multi-year capital plan assumes that we will successfully amend and renegotiate our $1.9 billion unsecured credit facility to a significant availability level that will consider our business needs, including a portion of the total commitment allocated to an unsecured line of credit and an unsecured term loan. See our 2008 Form 10-K for additional disclosures on our unsecured line of credit and unsecured term loan. As of March 31, 2009, cash and cash equivalents were approximately $125.3 million. Additionally, as of March 31, 2009 restricted cash to fund certain construction costs was approximately $34.8 million. |
(6) | Amount includes approximately $27.7 million of unamortized discount as of March 31, 2009 on our 3.70% unsecured convertible notes (“the Notes”). On or after January 15, 2012, we have the right to redeem our Notes, in whole or in part, at any time from time to time, for cash equal to 100% of the principal amounts of the notes to be redeemed plus any accrued and unpaid interest to, but excluding, the redemption date. Holders of the Notes may require us to repurchase their notes, in whole or in part, on January 15, 2012, 2017 and 2022 for cash equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the repurchase date. In April 2009, we repurchased, in privately negotiated transactions, certain of the Notes aggregating approximately $75 million (par value). Additional information regarding the Notes is contained in our 2008 Form 10-K filed with the Securities and Exchange Commission. |
(7) | Represents the weighted average contractual interest rate plus the impact of debt premiums/discounts and our interest rate swap agreements. The weighted average interest rate excludes bank fees and amortization of loan fees. See page 10 for further details of our interest rate swap agreements. |
(8) | Assumes we exercise our sole right to extend the maturity date of our unsecured line of credit and unsecured term loan to October 2011 and October 2012, respectively. The interest rate related to outstanding borrowings for our unhedged floating rate debt is based upon one-month LIBOR. The interest rate resets periodically and will vary in future periods. |
8
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Debt Maturities Through 2013
(Dollars in thousands)
(Unaudited)
Debt Maturities Through 2013 as of April 30, 2009
| Year |
| Our Share |
| Noncontrolling |
| Total |
| ||||||
| 2009 |
| $ | 69,513 |
| $ | 23,743 |
| $ | 93,256 |
| |||
| 2010 |
| 159,923 |
| 270 |
| 160,193 |
| ||||||
| 2011 |
| 698,452 |
| 286 |
| 698,738 | (1) | ||||||
| 2012 |
| 1,126,246 |
| 302 |
| 1,126,548 | (1)(2)(3) | ||||||
| 2013 |
| 51,403 |
| 319 |
| 51,722 |
| ||||||
| Total Maturities Through 2013 |
| $ | 2,105,537 |
| $ | 24,920 |
| $ | 2,130,457 |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Total Debt Maturities Through 2013 by Period
|
|
| December 31, |
| March 31, |
| April 30, |
| ||||||
| Year |
| 2008 |
| 2009 |
| 2009 |
| ||||||
| 2009 |
| $ | 94,998 |
| $ | 93,476 |
| $ | 93,256 |
| |||
| 2010 |
| 258,038 |
| 185,193 |
| 160,193 |
| ||||||
| 2011 |
| 865,965 | (1) | 767,738 | (1) | 698,738 | (1) | ||||||
| 2012 |
| 1,217,585 | (1)(2) | 1,196,670 | (1)(2) | 1,126,548 | (1)(2)(3) | ||||||
| 2013 |
| 49,819 |
| 51,722 |
| 51,722 |
| ||||||
| Total Maturities Through 2013 |
| $ | 2,486,405 |
| $ | 2,294,799 |
| $ | 2,130,457 |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||
(1) Assumes we exercise our sole right to extend the maturity date of our unsecured line of credit from October 2010 to October 2011 and our unsecured term loan from October 2011 to October 2012. The balances of our unsecured line of credit and unsecured term loan as of April 30, 2009 were approximately $536 million and $750 million, respectively. Our multi-year capital plan assumes that we will successfully amend and renegotiate our $1.9 billion unsecured credit facility to a significant availability level that will consider our business needs, including a portion of the total commitment allocated to an unsecured line of credit and an unsecured term loan. See our 2008 Form 10-K for additional disclosures on our unsecured line of credit and unsecured term loan.
(2) Amounts include approximately $30.0 million, $27.7 million and $22.6 million of unamortized discount as of December 31, 2008, March 31, 2009 and April 30, 2009, respectively, on our Notes.
(3) In April 2009, we repurchased, in privately negotiated transactions, certain of the Notes aggregating approximately $75 million (par value).
9
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Interest Rate Swap Agreements
March 31, 2009
(Dollars in thousands)
(Unaudited)
Transaction Dates |
| Effective |
| Termination |
| Interest Pay |
| Notional |
| Effective at |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||
June 2006 |
| June 30, 2006 |
| September 30, 2009 |
| 5.299 | % |
| $ | 125,000 |
| $ | 125,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
December 2005 |
| December 29, 2006 |
| November 30, 2009 |
| 4.730 |
|
| 50,000 |
| 50,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
December 2005 |
| December 29, 2006 |
| November 30, 2009 |
| 4.740 |
|
| 50,000 |
| 50,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
December 2006 |
| December 29, 2006 |
| March 31, 2014 |
| 4.990 |
|
| 50,000 |
| 50,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
December 2006 |
| January 2, 2007 |
| January 3, 2011 |
| 5.003 |
|
| 28,500 |
| 28,500 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
October 2007 |
| October 31, 2007 |
| September 30, 2012 |
| 4.546 |
|
| 50,000 |
| 50,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
October 2007 |
| October 31, 2007 |
| September 30, 2013 |
| 4.642 |
|
| 50,000 |
| 50,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
December 2005 |
| January 2, 2008 |
| December 31, 2010 |
| 4.768 |
|
| 50,000 |
| 50,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
May 2005 |
| June 30, 2008 |
| June 30, 2009 |
| 4.509 |
|
| 50,000 |
| 50,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
June 2006 |
| June 30, 2008 |
| June 30, 2010 |
| 5.325 |
|
| 50,000 |
| 50,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
June 2006 |
| June 30, 2008 |
| June 30, 2010 |
| 5.325 |
|
| 50,000 |
| 50,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
October 2007 |
| July 1, 2008 |
| March 31, 2013 |
| 4.622 |
|
| 25,000 |
| 25,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
October 2007 |
| July 1, 2008 |
| March 31, 2013 |
| 4.625 |
|
| 25,000 |
| 25,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
October 2008 |
| October 10, 2008 |
| December 31, 2009 |
| 2.750 |
|
| 75,000 |
| 75,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
October 2008 |
| October 16, 2008 |
| January 31, 2010 |
| 2.755 |
|
| 100,000 |
| 100,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
June 2006 |
| October 31, 2008 |
| December 31, 2010 |
| 5.340 |
|
| 50,000 |
| 50,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
June 2006 |
| October 31, 2008 |
| December 31, 2010 |
| 5.347 |
|
| 50,000 |
| 50,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
May 2005 |
| November 28, 2008 |
| November 30, 2009 |
| 4.615 |
|
| 25,000 |
| 25,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
October 2008 |
| September 30, 2009 |
| January 31, 2011 |
| 3.119 |
|
| 100,000 |
| — |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
December 2006 |
| November 30, 2009 |
| March 31, 2014 |
| 5.015 |
|
| 75,000 |
| — |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
December 2006 |
| November 30, 2009 |
| March 31, 2014 |
| 5.023 |
|
| 75,000 |
| — |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
December 2006 |
| December 31, 2010 |
| October 31, 2012 |
| 5.015 |
|
| 100,000 |
| — |
| ||
Total |
|
|
|
|
|
|
|
|
|
| $ | 953,500 |
| |
(1) 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.
10
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties
(Dollars in thousands)
(Unaudited)
|
| March 31, 2009 |
| December 31, 2008 |
| ||||||||||||||
|
| Number of |
| Rentable Square Feet |
| Annualized |
| Occupancy |
| Occupancy |
| ||||||||
|
| Properties |
| Operating |
| Redevelopment |
| Total |
| Base Rent (1) |
| Percentage (1) (2) |
| Percentage (3)(4) |
| ||||
Markets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
California – San Diego |
| 32 |
|
| 1,525,894 |
| 148,657 |
| 1,674,551 |
| $ | 45,605 |
| 92.7 | % |
| 92.5 | % |
|
California – San Francisco Bay |
| 17 |
|
| 1,424,680 |
| 53,980 |
| 1,478,660 |
| 49,278 |
| 96.7 |
|
| 98.4 |
|
| |
Eastern Massachusetts |
| 38 |
|
| 3,163,553 |
| 292,743 |
| 3,456,296 |
| 112,875 |
| 95.6 |
|
| 96.7 |
|
| |
New Jersey/Suburban Philadelphia |
| 8 |
|
| 459,904 |
| — |
| 459,904 |
| 8,708 |
| 88.0 |
|
| 87.5 |
|
| |
Southeast |
| 13 |
|
| 712,414 |
| 40,725 |
| 753,139 |
| 15,853 |
| 96.4 |
|
| 94.7 |
|
| |
Suburban Washington, D.C. |
| 31 |
|
| 2,444,468 |
| 50,633 |
| 2,495,101 |
| 48,611 |
| 89.8 | (5) |
| 90.5 |
|
| |
Washington – Seattle |
| 13 |
|
| 1,045,768 |
| — |
| 1,045,768 |
| 32,462 |
| 99.0 |
|
| 98.7 |
|
| |
International – Canada |
| 4 |
|
| 342,394 |
| — |
| 342,394 |
| 7,420 |
| 100.0 |
|
| 100.0 |
|
| |
Total Properties (Continuing Operations) |
| 156 |
|
| 11,119,075 |
| 586,738 |
| 11,705,813 |
| $ | 320,812 |
| 94.3 | % |
| 94.8 | % |
|
(1) | Excludes spaces at properties totaling approximately 586,738 rentable square feet undergoing a permanent change in use to office/laboratory space through redevelopment. |
(2) | Including spaces undergoing a permanent change in use to office/laboratory space through redevelopment, occupancy as of March 31, 2009 was 89.6%. See page 16 for additional information on our redevelopment program. |
(3) | Excludes spaces at properties totaling approximately 590,057 rentable square feet undergoing a permanent change in use to office/laboratory space through redevelopment and three properties with approximately 64,218 rentable square feet that were classified as “held for sale” as of December 31, 2008. Including spaces undergoing a permanent change in use to office/laboratory space through redevelopment, occupancy as of December 31, 2008 was 90.0%. See page 16 for additional information on our redevelopment program. |
(4) | Average occupancy rate as of December 31 from 1997 to 2008 was approximately 95.5%. |
(5) | In May 2009, we leased 58,632 rentable square feet to a credit tenant at a single tenant building in the Suburban Washington, D.C. market. As of March 31, 2009, this building was vacant and in our operating asset base. This lease represents approximately 2.4% of the operating rentable square feet of the Suburban Washington, D.C. market. |
11
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Same Property Comparisons
(Dollars in thousands)
(Unaudited)
|
| GAAP Basis |
| Cash Basis |
| ||||||||||||||
|
| Quarter Ended |
| Quarter Ended |
| ||||||||||||||
|
| 3/31/2009 |
| 3/31/2008 |
| % Change |
| 3/31/2009 |
| 3/31/2008 |
| % Change |
| ||||||
Revenue |
| $ | 99,322 |
| $ | 94,558 |
| 5.0 | % |
| $ | 97,370 |
| $ | 91,566 |
| 6.3 | % |
|
Operating expenses |
| 27,381 |
| 25,100 |
| 9.1 |
|
| 27,381 |
| 25,100 |
| 9.1 |
|
| ||||
Revenue less operating expenses |
| $ | 71,941 |
| $ | 69,458 |
| 3.6 | % |
| $ | 69,989 |
| $ | 66,466 |
| 5.3 | % |
|
This summary represents operating data for all properties that were fully operating for the entire periods presented for the quarter periods (the “First Quarter Same Properties”). Same property occupancy for the quarters ended March 31, 2009 and 2008 was 94.4% and 94.5%, respectively. Properties undergoing redevelopment are excluded from same property results.
Revenue less operating expenses computed in accordance with GAAP is total revenue associated with the First Quarter Same Properties (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 term. Revenue less operating expenses on a cash basis is total revenue associated with the First Quarter Same Properties (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 March 31, 2009 and 2008 for the First Quarter Same Properties were $1,952,000 and $2,992,000, 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 Summary of Same Property Comparisons. As of March 31, 2009, approximately 89% of our leases (on a rentable 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, approximately 8% of our leases (on a rentable square footage basis) required the tenants to pay a majority of operating expenses. | |
|
|
In the first quarter of 2009, we recognized additional rental income related to a modification of a lease for a property in South San Francisco. The operating results of this property have been excluded from the same property results. Including the results of this property, first quarter 2009 GAAP same property revenue less operating expenses would have increased by 25.9%. | |
12
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Leasing Activity
For the Quarter Ended March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
| TI’s/Lease |
|
|
|
|
|
|
| Rentable |
|
|
|
|
| Rental |
| Commissions |
| Average |
|
|
| Number |
| Square |
| Expiring |
| New |
| Rate |
| Per |
| Lease |
|
|
| of Leases |
| Footage |
| Rates |
| Rates |
| Changes |
| Square Foot |
| Terms (1) |
|
Leasing Activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Expirations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Basis |
| 46 |
| 615,860 |
| $32.42 |
| — |
| — |
| — |
| — |
|
GAAP Basis |
| 46 |
| 615,860 |
| $34.28 |
| — |
| — |
| — |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renewed/Released Space Leased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Basis |
| 26 |
| 251,951 |
| $25.61 |
| $26.40 |
| 3.1% |
| $2.74 |
| 1.8 years |
|
GAAP Basis |
| 26 |
| 251,951 |
| $24.24 |
| $25.54 |
| 5.4% |
| $2.74 |
| 1.8 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed/Redeveloped/Vacant Space Leased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Basis |
| 11 |
| 212,652 |
| — |
| $24.57 |
| — |
| $8.68 |
| 3.5 years |
|
GAAP Basis |
| 11 |
| 212,652 |
| — |
| $29.20 |
| — |
| $8.68 |
| 3.5 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month-to-Month Leases in Effect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Basis |
| 12 |
| 71,678 |
| $22.23 |
| $22.23 |
| — |
| — |
| — |
|
GAAP Basis |
| 12 |
| 71,678 |
| $21.95 |
| $22.23 |
| — |
| — |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing Activity Summary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding Month-to-Month Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Basis |
| 37 |
| 464,603 |
| — |
| $25.56 |
| — |
| $5.46 |
| 2.6 years |
|
GAAP Basis |
| 37 |
| 464,603 |
| — |
| $27.22 |
| — |
| $5.46 |
| 2.6 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Including Month-to-Month Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Basis |
| 49 |
| 536,281 |
| — |
| $25.11 |
| — |
| — |
| — |
|
GAAP Basis |
| 49 |
| 536,281 |
| — |
| $26.55 |
| — |
| — |
| — |
|
(1) | Quarterly leasing statistic (shorter lease terms) may be impacted by certain leasing activity in an individual quarter period. Leasing statistics over a longer period of time (6-12 months) generally are a better indicator of leasing trends for our business. Average lease terms over the past five years (2004-2008) averaged approximately 4.5 years and 7.4 years for renewed/released space leased and developed/redeveloped/ vacant space leased, respectively. |
13
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Lease Expirations
March 31, 2009
Year of Lease |
| Number of |
| Rentable Square |
| Percentage of |
| Annualized Base Rent |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
2009 |
| 58 | (1) |
| 727,605 | (1) |
| 6.9 | % |
| $22.99 |
|
|
2010 |
| 70 |
|
| 1,057,607 |
|
| 10.1 |
|
| 27.13 |
|
|
2011 |
| 73 |
|
| 1,786,463 |
|
| 17.0 |
|
| 29.25 |
|
|
2012 |
| 60 |
|
| 1,348,488 |
|
| 12.9 |
|
| 33.45 |
|
|
2013 |
| 52 |
|
| 1,030,381 |
|
| 9.8 |
|
| 30.21 |
|
|
2014 |
| 33 |
|
| 959,840 |
|
| 9.2 |
|
| 28.52 |
|
|
2015 |
| 15 |
|
| 647,441 |
|
| 6.2 |
|
| 30.84 |
|
|
2016 |
| 15 |
|
| 826,117 |
|
| 7.9 |
|
| 28.24 |
|
|
2017 |
| 12 |
|
| 600,032 |
|
| 5.7 |
|
| 36.89 |
|
|
2018 |
| 11 |
|
| 732,876 |
|
| 7.0 |
|
| 44.39 |
|
|
|
| Rentable Square |
| ||
Markets |
| 2009 |
| 2010 |
|
|
|
|
|
|
|
California – San Diego |
| 185,789 |
| 129,574 |
|
California – San Francisco Bay |
| 75,951 |
| 294,584 |
|
Eastern Massachusetts |
| 229,259 |
| 296,766 |
|
New Jersey/Suburban Philadelphia |
| 21,000 |
| 42,460 |
|
Southeast |
| 82,114 |
| 101,658 |
|
Suburban Washington, D.C. |
| 120,398 |
| 56,845 |
|
Washington – Seattle |
| 13,094 |
| 135,720 |
|
International – Canada |
| — |
| — |
|
|
|
|
|
|
|
Total |
| 727,605 | (1) | 1,057,607 |
|
(1) Excludes 12 month-to-month leases for approximately 72,000 rentable square feet.
14
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Additions and Dispositions of Properties
For the Quarter Ended March 31, 2009
(Dollars in thousands)
|
|
| Acquisition |
| Month of |
| Rentable |
|
| Markets |
| Amount |
| Acquisition |
| Square Feet |
|
|
|
|
|
|
|
|
|
|
| Additions to Operating Properties: |
| N/A |
| N/A |
| N/A |
|
|
|
|
|
|
|
|
|
|
|
|
| Acquisition |
| Month of |
| Developable |
|
| Markets |
| Amount |
| Acquisition |
| Square Feet |
|
|
|
|
|
|
|
|
|
|
| Additions to Land: |
| N/A |
| N/A |
| N/A |
|
|
|
|
|
|
|
|
|
|
|
|
| Disposition |
| Month of |
| Rentable |
|
| Markets |
| Amount |
| Disposition |
| Square Feet |
|
|
|
|
|
|
|
|
|
|
| Dispositions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| California – San Diego (1) |
| $14,449 |
| January |
| 64,218 |
|
|
|
|
|
|
|
|
|
|
(1) Represents sales of three properties in the San Diego market.
15
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Square Footage Undergoing Redevelopment
March 31, 2009
|
|
|
|
|
|
|
| Rentable |
|
|
|
|
|
|
|
|
|
|
| Square Footage |
|
|
|
|
| Placed |
| Estimated |
| Estimated |
| Undergoing |
|
|
|
|
| in |
| In-Service |
| Investment |
| Redevelopment/ |
|
|
|
Markets/Submarkets |
| Redevelopment |
| Dates |
| Per Square Foot |
| Total Property |
| Status |
|
|
|
|
|
|
|
|
|
|
|
|
|
California – San Diego/Torrey Pines |
| 2007 |
| 2010 |
| $100-120 |
| 84,504 / 84,504 |
| Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
California – San Diego/Torrey Pines |
| 2006 |
| 2009 |
| $80-100 |
| 13,591 / 43,600 |
| Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
California – San Diego/Torrey Pines |
| 2007 |
| 2009 |
| $80-100 |
| 11,338 / 107,709 |
| Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
California – San Diego/Torrey Pines |
| 2007 |
| 2009 |
| $80-100 |
| 39,224 / 76,084 |
| Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
California – San Francisco Bay |
| 2009 |
| 2011 |
| $50-70 |
| 53,980 / 53,980 |
| Design/Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern Massachusetts/Cambridge |
| 2006 |
| 2009 |
| $120-175 |
| 58,857 / 177,101 |
| Design/Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern Massachusetts/Cambridge |
| 2007 |
| 2010 |
| $100-130 |
| 90,841 / 369,831 |
| Design/Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern Massachusetts/Suburban |
| 2007 |
| 2010 |
| $70-80 |
| 113,045 / 113,045 |
| Design/Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern Massachusetts/Suburban |
| 2008 |
| 2010 |
| $120-140 |
| 30,000 / 30,000 |
| Design/Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
Southeast/Florida |
| 2006 |
| 2009 |
| $80-100 |
| 40,725 / 44,855 |
| Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
Suburban Washington, D.C./Shady Grove |
| 2007 |
| 2009 |
| $70-80 |
| 50,633 / 123,501 |
| Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 586,738 / 1,224,210 |
|
|
|
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 the basis allocable only to that portion of space undergoing redevelopment. In addition to properties undergoing redevelopment, as of March 31, 2009, our asset base contained embedded opportunities for future permanent change of use to office/laboratory space through redevelopment aggregating approximately 1,565,000 rentable square feet. As of March 31, 2009, our estimated costs to complete the 586,738 rentable square feet undergoing redevelopment was approximately $95 per rentable square foot. Our final costs for these redevelopment projects will ultimately depend on many factors, including construction requirements for each tenant, final lease negotiations and the amount of costs funded by each tenant.
16
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties Undergoing Ground-Up Development
March 31, 2009
Markets/Submarkets |
| Building |
| Construction |
| Estimated |
| Estimated |
| Rentable |
| Development |
| Leasing Status |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California – San Francisco Bay/ Mission Bay |
| Multi-tenant Bldg. |
| 2007 |
| 2010 |
| $350 |
| 158,000 |
| Construction |
| 100% Leased or Committed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California – San Francisco Bay/ Mission Bay |
| Two Bldgs., |
| 2009 |
| 2010/2011 |
| $300 |
| 210,000 |
| Construction |
| 48% Leased with Option for Additional 24% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California – San Francisco Bay/ |
| Two Bldgs., |
| 2006 |
| 2009 |
| $350 |
| 162,000 |
| Construction |
| 16% Leased; Negotiating for Remaining Space |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California – San Francisco Bay/ |
| Single Tenant Bldg. |
| 2006 |
| 2009 |
| $350 |
| 130,000 |
| Construction |
| 55% Leased with Option for Remaining Space Through 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York – New York City |
| Multi-tenant Bldg. |
| 2007 |
| 2010/2011 |
| $500 |
| 310,000 |
| Construction |
| Marketing; Negotiating Lease with Credit Anchor Tenant for 90,000 Rentable Square Feet; Negotiating LOIs for Multiple Requirements Approximating 90,000 Rentable Square Feet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington – Seattle |
| Single Tenant |
| 2007 |
| 2010 |
| $390 |
| 115,000 |
| Construction |
| 92% Leased with Option for Additional 3%; 5% Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Properties Undergoing Ground-Up Development |
|
|
|
|
|
|
| 1,085,000 |
|
|
|
|
| ||
In accordance with Statement of Financial Accounting Standards No. 34, “Capitalization of Interest Cost” (“SFAS 34”) and Statement of Financial Accounting Standards No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects” (“SFAS 67”), we are required to capitalize direct construction costs, including preconstruction costs, interest, property taxes, insurance and other costs directly related and essential to the construction of a project while activities are ongoing to prepare an asset for its intended use. Preconstruction costs include costs related to the development of plans and the process of obtaining entitlements and permits from government authorities. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Should development, redevelopment or construction activity cease, construction costs, including interest, would no longer be capitalized under SFAS 34 and SFAS 67 and would be expensed as incurred. Our aggregate construction costs to date, excluding land, related to major properties undergoing vertical ground-up development approximate $397 per developable square foot. As of March 31, 2009, our estimated costs to complete the approximately 1.1 million rentable square feet undergoing ground-up development was approximately $100 per rentable square foot. Our final costs for these development projects will ultimately depend on many factors including construction requirements for each tenant, final lease negotiations and the amount of costs funded by each tenant.
17
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Significant Value Add Projects
March 31, 2009
Markets |
| Square Footage |
|
|
|
|
|
California – San Francisco Bay |
| 3,260,000 |
|
|
|
|
|
Eastern Massachusetts |
| 2,050,000 |
|
|
|
|
|
Total |
| 5,310,000 |
|
The table above summarizes significant and impactful value add projects undergoing important and substantial preconstruction activities to bring these assets to their intended use. These critical activities add significant value for future ground-up development (which are projected to yield substantial revenues) and are required for the ultimate vertical construction of buildings. Pursuant to SFAS 34 and SFAS 67, we are required to capitalize direct construction, including preconstruction costs, directly related and essential to the construction of a project while activities are ongoing to prepare an asset for its intended use.
Our significant value add projects in San Francisco, California consist of approximately 2.3 million rentable square feet in Mission Bay with the remainder primarily located in South San Francisco. Our value add projects in San Francisco, that have been completed or are now under construction, have attracted first-in-class life science entities, including Merck & Co., Inc., Celgene Corporation, Pfizer Inc. (“Pfizer”), Roche Holding Ltd (“Roche”) and University of California, San Francisco (“UCSF”).
At the heart of Mission Bay is UCSF, one of the nation’s most prolific generators of life science commercial enterprises based upon its intellectual property and talent pool and the number two recipient of National Institutes of Health grants. At least 75 California life science companies, including two of the largest, Genentech, Inc. (now a subsidiary of Roche) and Chiron Corporation (now a subsidiary of Novartis AG), have been successfully launched by UCSF faculty, alumni or by their scientific inventors. UCSF’s expansion of major research functions to its Mission Bay campus serves as a hub for basic scientific inquiry and a meeting place for academics from around the world. The wide range of UCSF’s sophisticated laboratories built for the 21st Century include the Molecular Design Institute, the Center for Advanced Technology, as well as significant efforts in structural and chemical biology, molecular, cell and developmental biology, advanced microscopy, neurology and cardiology. Finally, the UCSF Mission Bay hospital campus is well underway in the design phase, and will initially offer 280 beds in an integrated facility to serve women, children and cancer patients. The overriding emphasis of this array of diverse life science entities is to translate research discoveries into viable commercial products to solve critical unmet medical needs.
The Alexandria Center for Science and Technology at Mission Bay (“The Alexandria Center”) when completed will be comprised of 13 Class-A facilities totaling approximately 2.7 million rentable square feet suitable for the most demanding requirements of any scientific or technology enterprise. The Alexandria Center is organized into four discrete but highly interactive and collaborative campuses: the north campus which includes the 455 Mission Bay Boulevard project leased to Pfizer; the east campus, a “super block” that is perhaps the most desirable site on the entire west coast, featuring the ability to accommodate a corporate headquarters facility of more than one million square feet; the south campus which is directly across the street from the UCSF hospital complex and certain to be an important location for physicians, clinicians and translational researchers; and the west campus which features a wide range of unique life science client tenant spaces.
18
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Significant Value Add Projects
March 31, 2009
(continued)
Alexandria’s largest ongoing value add project in Eastern Massachusetts is located along Binney Street in Kendall Square, a 5-minute walk from the MIT campus. In February 2009, the Cambridge City Council approved Alexandria’s petition for significantly increased zoning density in this location, enabling the future development of up to 1.7 million rentable square feet of office/laboratory space on multiple adjacent sites. These sites currently hold income-producing low-rise buildings and surface parking lots which will eventually be replaced by highly sustainable state-of-the-art life science facilities in this desirable, land-constrained location. We will continue to advance our entitlement efforts for this site.
Our significant value add projects in Eastern Massachusetts are located in Cambridge and nearby communities. Cambridge is home to Harvard University (“Harvard”) and the Massachusetts Institute of Technology (“MIT”), two of world’s leading universities for life science and technology research. Both Harvard and MIT have a long and successful history of translational collaborations between academic scientists and industry. Working with local venture capitalists and experienced entrepreneurs, the universities have spawned a thriving life science industry including leading biotech companies such as Genzyme Corporation and Biogen Idec and well over a hundred smaller life science firms in Cambridge alone. This fertile science and technology ecosystem has subsequently attracted investment by leading international pharmaceutical companies such as Novartis and GlaxoSmithKline and has led to the creation of important new independent research organizations such as the Broad Institute and the Whitehead Institute for Biomedical Research. Among the most recent new members of the Cambridge science and technology cluster are: Microsoft’s New England Research and Development Center; Schlumberger-Doll Research Center; a Google engineering unit; and the Koch Center for Integrative Cancer Research at MIT.
Among Alexandria’s completed value add projects in Cambridge is the conversion of an approximately 175,000 square foot office building at Technology Square to office/laboratory use. This space has been substantially leased to Sirtris Pharmaceuticals, a GlaxoSmithKline company, the Novartis Institutes of Biomedical Research, and a unit of Pfizer. Another suburban building conversion resulted in a 59,000 square foot lease to a research division of Johnson & Johnson.
19
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Conference Call Information
For the First Quarter Ended March 31, 2009
Alexandria Real Estate Equities, Inc. will be hosting a conference call to discuss its operating and financial results for the first quarter ended March 31, 2009:
Date: |
| May 7, 2009 |
|
|
|
Time: |
| 3:00 P.M. Eastern Time/12:00 P.M. Noon Pacific Time |
|
|
|
Phone Number: |
| (719) 325-4764 |
|
|
|
Confirmation Code: |
| 4563912 |
20