Exhibit 99.2
| PAGE | ||||
Corporate Data | ||||
Corporate Information | 3 | |||
Ownership Structure | 4 | |||
Consolidated Financial Information | ||||
Key Financial Data | 5 | |||
Consolidated Balance Sheets | 6 | |||
Consolidated Quarterly Statements of Operations | 7 | |||
Funds From Operations and Adjusted Funds From Operations | 8 | |||
Reconciliation of Earnings Before Interest, Taxes and Depreciation and Amortization | 9 | |||
Net Operating Income (NOI) and Run-rate NOI for the three months ended June 30, 2006 | 10 | |||
Same Space and New Properties Consolidated Quarterly Statements of Operations | 11 | |||
Debt Summary | 12 | |||
Debt Maturities | 13 | |||
Portfolio Data | ||||
Properties Acquired | 14 | |||
Occupancy Analysis | 15 | |||
Major Tenants | 16 | |||
Lease Expirations & Lease Distribution | 17 | |||
Leasing Activity | 18 | |||
Tenant Improvements and Leasing Commissions | 19 | |||
Historical Capital Expenditures | 20 | |||
Definitions | ||||
Management Statements on Non-GAAP Supplemental Measures | 21 | |||
This supplemental package contains forward-looking statements within the meaning of the federal securities laws, including information related to run rate net operating income. Such statements are based on management’s beliefs and assumptions made based on information currently available to management. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:
| • | adverse economic or real estate developments in our markets or technology related real estate; |
| • | general and local economic conditions; |
| • | defaults on or non-renewal of leases by tenants; |
| • | increased interest rates and operating costs; |
| • | our inability to manage growth effectively; |
| • | our failure to obtain necessary outside financing; |
| • | decreased rental rates or increased vacancy rates; |
| • | difficulties in identifying properties to acquire and completing acquisitions; |
| • | our failure to successfully operate acquired properties and operations; |
| • | our failure to successfully redevelop properties acquired for that purpose; |
| • | our failure to maintain our status as a REIT; |
| • | possible adverse changes to tax laws; environmental uncertainties and risks related to natural disasters; |
| • | financial market fluctuations; |
| • | changes in foreign currency exchange rates; |
| • | and changes in real estate and zoning laws and increases in real property tax rates. |
The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance. We discussed a number of additional material risks in our annual report on Form 10-K for the year ended December 31, 2005 and other filings with the Securities and Exchange Commission. Those risks continue to be relevant to our performance and financial condition. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise.
Corporate Information
Corporate Profile
Digital Realty Trust, Inc. owns, acquires, repositions and manages technology-related real estate. The Company’s properties contain applications and operations critical to the day-to-day operations of technology industry tenants and corporate enterprise data center tenants. At June 30, 2006 the Company owned 50 properties containing approximately 10.3 million rentable square feet, including 1.2 million square feet held for redevelopment. Digital Realty Trust’s property portfolio is located throughout the United States and in Europe. For additional information, please visit the company’s website at www.digitalrealtytrust.com.
Corporate Headquarters
560 Mission Street, Suite 2900
San Francisco, California 94105
Telephone: (415) 738-6500
Facsimile: (415) 738-6501
Web site: www.digitalrealtytrust.com
Senior Management
Richard A. Magnuson: Executive Chairman
Michael F. Foust: Chief Executive Officer
A. William Stein: Chief Financial Officer and Chief Investment Officer
Scott E. Peterson: Senior Vice President, Acquisitions
Christopher J. Crosby: Senior Vice President, Sales and Technical Services
Investor Relations
To request an Investor Relations package or be added to our e-mail distribution list, please visit our website:
www.digitalrealtytrust.com | (Proceed to Information Request in the Investor Relations section) |
| Analyst Coverage | ||||
| Credit Suisse | Merrill Lynch | KeyBanc Capital Markets | ||
| John Stewart | Steve Sakwa | Jordan Sadler | ||
| (212) 538-3183 | (212) 449-0335 | (917) 368-2280 | ||
| JMP Securities | RBC Capital Markets | Citigroup | ||
| William Marks | Srikanth Nagarajan | Jonathan Litt | ||
| (415) 835-8944 | (212) 428-2360 | (212) 816-0231 | ||
Stock Listing Information
The stock of Digital Realty Trust, Inc. is traded primarily on the New York Stock Exchange under the following symbols:
Common Stock: | DLR | |
Series A Preferred Stock: | DLRPA | |
Series B Preferred Stock: | DLRPB |
Note that symbols may vary by stock quote provider.
Common Stock Price Performance
The following summarizes recent activity of Digital Realty’s common stock (DLR):
| 2nd Quarter 2006 | 1st Quarter 2006 | 4th Quarter 2005 | 3rd Quarter 2005 | 2nd Quarter 2005 | 1st Quarter 2005 | |||||||
High Price * | $29.54 | $28.59 | $24.70 | $19.97 | $17.49 | $14.81 | ||||||
Low Price * | $22.66 | $22.29 | $17.73 | $16.80 | $13.67 | $12.50 | ||||||
Closing Price, end of quarter * | $24.69 | $28.17 | $22.63 | $18.00 | $17.38 | $14.37 | ||||||
Average daily trading volume * | 224,662 | 194,179 | 134,046 | 260,942 | 94,248 | 94,884 | ||||||
Indicated dividend per common share ** | $ 1.06 | $ 1.06 | $ 1.06 | $ 0.98 | $ 0.98 | $ 0.98 | ||||||
Closing dividend yield, end of quarter | 4.3% | 3.8% | 4.7% | 5.4% | 5.6% | 6.8% | ||||||
Closing shares and units outstanding end of quarter | 63,052,653 | 59,052,653 | 59,016,949 | 58,826,122 | 52,942,731 | 52,942,731 | ||||||
Closing market value of shares and units outstanding (thousands), end of quarter | 1,556,770 | 1,663,513 | 1,335,554 | 1,058,870 | 920,145 | 760,787 |
| * | New York Stock Exchange trades only |
| ** | On an annual basis |
This Supplemental Operating and Financial Data package supplements the information provided in our quarterly and annual reports filed with the Securities and Exchange Commission. Additional information about us and our properties is also available at our website www.digitalrealtytrust.com.
3
Ownership Structure
As of June 30, 2006
Partner | # of Units (3) | % Ownership (1) | |||
Digital Realty Trust, Inc. | 36,104,961 | 57.3 | % | ||
GI Partners, LLC | 19,669,175 | 31.2 | % | ||
Cambay Tele.com, LLC (4) | 5,623,124 | 8.9 | % | ||
Wave Exchange, LLC (4) | 32,722 | 0.1 | % | ||
Directors, Executive Officers and Others | 1,622,671 | 2.5 | % | ||
Total | 63,052,653 | 100.0 | % | ||
| (1) | Excludes shares issuable with respect to stock options that have been granted but have not yet been exercised, and also excludes shares issuable upon the redemption of Class C units which have not yet vested. |
| (2) | Reflects limited partnership interests held by our officers and directors in the form of vested long-term incentive units and excludes shares issuable upon the redemption of Class C units which have not yet vested and all unexercised common stock options. |
| (3) | The total number of units includes 36,104,961 shares of common stock and 26,947,692 common units and excludes shares issuable upon the redemption of Class C units which have not yet vested and all unexercised common stock options. |
| (4) | These third-party contributors received the units (along with cash and the operating partnership assuming debt) in exchange for their interests in 200 Paul Avenue 1-4, 1100 Space Park Drive, the eXchange colocation business and other specified assets and liabilities. |
4
Key Financial Data
(Dollars in thousands, except per share data)
| For the three months ended or as of | ||||||||||||||||||||||||
| 30-Jun-06 | 31-Mar-06 | 31-Dec-05 | 30-Sep-05 | 30-Jun-05 | 31-Mar-05 | |||||||||||||||||||
Shares and units at end of quarter | ||||||||||||||||||||||||
Common shares outstanding | 36,104,961 | 31,429,296 | 27,363,408 | 27,304,691 | 21,421,300 | 21,421,300 | ||||||||||||||||||
Common units outstanding | 26,947,692 | 27,623,357 | 31,653,541 | 31,521,431 | 31,521,431 | 31,521,431 | ||||||||||||||||||
Total shares and Operating Partnership units | 63,052,653 | 59,052,653 | 59,016,949 | 58,826,122 | 52,942,731 | 52,942,731 | ||||||||||||||||||
| Market Capitalization | ||||||||||||||||||||||||
Market value of common equity (1) | $ | 1,556,770 | $ | 1,663,513 | $ | 1,335,554 | $ | 1,058,870 | $ | 920,145 | $ | 760,787 | ||||||||||||
Stated value of preferred equity | 166,750 | 166,750 | 166,750 | 166,750 | 103,500 | 103,500 | ||||||||||||||||||
Total debt at balance sheet carrying value (2) | 820,501 | 813,655 | 749,067 | 686,909 | 765,687 | 515,701 | ||||||||||||||||||
Total market capitalization including debt (2) | $ | 2,544,021 | $ | 2,643,918 | $ | 2,251,371 | $ | 1,912,529 | $ | 1,789,332 | $ | 1,379,988 | ||||||||||||
Total debt/Total market capitalization including debt | 32.3 | % | 30.8 | % | 33.3 | % | 35.9 | % | 42.8 | % | 37.4 | % | ||||||||||||
| Selected Balance Sheet Data | ||||||||||||||||||||||||
Investments in real estate (before depreciation) (3) | 1,399,752 | 1,289,226 | 1,258,510 | 1,173,332 | 1,099,699 | 889,803 | ||||||||||||||||||
Total assets | 1,713,857 | 1,574,041 | 1,529,170 | 1,454,222 | 1,368,256 | 1,099,727 | ||||||||||||||||||
Total liabilities | 990,422 | 935,039 | 880,228 | 792,538 | 856,617 | 579,393 | ||||||||||||||||||
| Selected Operating Data | ||||||||||||||||||||||||
Total operating revenues from continuing operations (4) | 64,708 | 59,492 | 60,583 | 54,822 | 48,059 | 37,967 | ||||||||||||||||||
Total operating expenses from continuing operations (4) | 46,117 | 41,379 | 43,501 | 38,396 | 31,540 | 25,179 | ||||||||||||||||||
Interest expense from continuing operations (4) | 11,830 | 11,039 | 10,643 | 10,373 | 8,938 | 7,770 | ||||||||||||||||||
Net income | 5,095 | 5,087 | 4,602 | 4,425 | 4,335 | 2,739 | ||||||||||||||||||
Net income available to common stockholders | 1,650 | 1,642 | 1,157 | 1,326 | 2,136 | 1,468 | ||||||||||||||||||
| Financial Ratios | ||||||||||||||||||||||||
EBITDA (2) | 34,106 | 31,286 | 30,949 | 29,007 | 25,753 | 21,732 | ||||||||||||||||||
Adjusted EBITDA (3) | 38,891 | 36,562 | 35,731 | 33,730 | 31,091 | 25,159 | ||||||||||||||||||
Cash interest expense (4) | 13,296 | 10,244 | 9,607 | 9,947 | 8,086 | 7,416 | ||||||||||||||||||
Fixed charges (5) | 17,863 | 15,113 | 14,521 | 15,019 | 12,266 | 10,525 | ||||||||||||||||||
Debt service coverage ratio (6) | 2.9 | 3.6 | 3.7 | 3.4 | 3.8 | 3.4 | ||||||||||||||||||
Fixed charge coverage ratio (7) | 2.2 | 2.4 | 2.5 | 2.2 | 2.5 | 2.4 | ||||||||||||||||||
Profitability measures | ||||||||||||||||||||||||
Net income per common share - basic | $ | 0.05 | $ | 0.06 | $ | 0.04 | $ | 0.05 | $ | 0.10 | $ | 0.07 | ||||||||||||
Net income per common share - diluted | $ | 0.05 | $ | 0.06 | $ | 0.04 | $ | 0.05 | $ | 0.10 | $ | 0.07 | ||||||||||||
Diluted Funds From Operations (FFO) per share (8) | $ | 0.38 | $ | 0.36 | $ | 0.36 | $ | 0.35 | $ | 0.37 | $ | 0.30 | ||||||||||||
Diluted Adjusted Funds From Operations (AFFO) per share (9) | $ | 0.27 | $ | 0.28 | $ | 0.26 | $ | 0.26 | $ | 0.31 | $ | 0.24 | ||||||||||||
Dividends per share and common unit | $ | 0.27 | $ | 0.27 | $ | 0.27 | $ | 0.24 | $ | 0.24 | $ | 0.24 | ||||||||||||
Diluted FFO payout ratio (10) | 71.1 | % | 75.0 | % | 73.8 | % | 70.1 | % | 65.8 | % | 82.0 | % | ||||||||||||
Diluted AFFO payout ratio (11) | 100.0 | % | 96.4 | % | 101.5 | % | 93.6 | % | 79.9 | % | 100.0 | % | ||||||||||||
| Portfolio Statistics | ||||||||||||||||||||||||
Properties | 50 | 46 | 44 | 38 | 33 | 26 | ||||||||||||||||||
Net rentable square feet, excluding redevelopment space | 9,132,357 | 8,135,957 | 8,051,212 | 7,864,760 | 7,791,110 | 6,303,226 | ||||||||||||||||||
Square feet held for redevelopment (12) | 1,156,437 | 1,196,538 | 1,146,538 | 731,663 | 707,920 | 107,563 | ||||||||||||||||||
Occupancy at end of quarter (13) | 94.7 | % | 93.3 | % | 93.9 | % | 93.2 | % | 93.0 | % | 88.9 | % | ||||||||||||
| (1) | The market value of common equity is based on the closing stock price at the end of the quarter and assumes 100% conversion of the limited partnership units in the operating partnership into shares of our common stock. Excludes shares issuable with respect to stock options that have been granted but have not yet been exercised, and also excludes shares issuable upon the redemption of profits interests units and Class C units which have not yet vested. |
| (2) | This amount excludes the outstanding principal for a loan related to 7979 East Tufts Avenue of $26.0 million. We classified this property as held for sale at June 30, 2006. We completed its sale on July 12, 2006 and the eliminated our liability for th |
| (3) | This excludes assets held for sale at East Tufts Avenue at June 30, 2006 of $37.9 million. |
| (4) | Excludes operations at 7979 East Tufts Avenue, a property classified as held for sale at June 30, 2006 for all periods presented. |
| (5) | EBITDA is calculated as earnings before interest, taxes, depreciation and amortization. For a discussion of EBITDA, see page 21. For a reconciliation of net income available to common stockholders to EBITDA, see page 9. |
| (6) | Adjusted EBITDA is EBITDA adjusted for preferred dividends and minority interests. For a discussion of Adjusted EBITDA, see page 21. For a reconciliation of net income available to common stockholders to Adjusted EBITDA, see page 9. |
| (7) | Cash interest expense is interest expense per our statement of operations (including interest expense on discontinued operations) adjusted for noncash interest expense and includes capitalized interest. |
| (8) | Fixed charges consist of cash interest expense, scheduled debt principal payments and preferred dividends. |
| (9) | Debt service coverage ratio is Adjusted EBITDA divided by cash interest expense. |
| (10) | Fixed charge coverage ratio is Adjusted EBITDA divided by fixed charges. |
| (11) | For a definition and discussion of FFO see page 21. For a reconciliation of net income available to common stockholders to FFO, see page 8. |
| (12) | For a definition and discussion of AFFO, see page 21. For a reconciliation of FFO to AFFO, see page 8. |
| (13) | Diluted FFO payout ratio is dividend declared per common share and unit divided by diluted FFO per share and unit. |
| (14) | Diluted AFFO payout ratio is dividend declared per common share and unit divided by diluted AFFO per share and unit. |
| (15) | Redevelopment space requires significant capital investment in order to develop data center facilities that are ready for use. Most often this is shell space. However, in certain circumstances this may include partially built datacenter space that was not completed by previous ownership and requires a large capital investment in order to build out the space. |
| (16) | Occupancy at end of quarter excludes space held for redevelopment. We completed a review of space held for development in the quarter ended September 30, 2005 and have not restated any occupancy statistics for March 31, 2005 and earlier periods. This will cause occupancy statistics for March 31, 2005 to not be comparable to occupancy statistics for later periods. |
5
Consolidated Balance Sheets
(Dollars in thousands, except share data)
| June 30, 2006 | December 31, 2005 | |||||||
| (unaudited) | ||||||||
ASSETS | ||||||||
Investments in real estate | ||||||||
Land | $ | 203,903 | $ | 191,961 | ||||
Acquired ground leases | 2,982 | 1,477 | ||||||
Buildings and improvements | 1,059,608 | 941,115 | ||||||
Tenant improvements | 133,259 | 123,957 | ||||||
Investments in real estate | 1,399,752 | 1,258,510 | ||||||
Accumulated depreciation and amortization | (80,541 | ) | (64,404 | ) | ||||
Net investments in real estate | 1,319,211 | 1,194,106 | ||||||
Cash and cash equivalents | 13,408 | 10,930 | ||||||
Accounts and other receivables, net | 17,403 | 7,587 | ||||||
Deferred rent | 30,639 | 25,094 | ||||||
Acquired above market leases, net | 44,376 | 48,237 | ||||||
Acquired in place lease value and deferred leasing costs, net | 209,940 | 201,141 | ||||||
Deferred financing costs, net | 7,706 | 7,659 | ||||||
Restricted cash | 22,658 | 22,123 | ||||||
Assets held for sale | 37,897 | — | ||||||
Other assets | 10,619 | 12,293 | ||||||
Total Assets | $ | 1,713,857 | $ | 1,529,170 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Notes payable under line of credit | $ | 211,554 | $ | 181,000 | ||||
Mortgage loans | 608,947 | 568,067 | ||||||
Accounts payable and other accrued liabilities | 43,326 | 36,869 | ||||||
Accrued dividends and distributions | — | 15,639 | ||||||
Acquired below market leases, net | 84,185 | 67,177 | ||||||
Liabilities related to assets held for sale | 28,081 | — | ||||||
Security deposits and prepaid rents | 14,329 | 11,476 | ||||||
Total Liabilities | 990,422 | 880,228 | ||||||
Commitments and contingencies | — | — | ||||||
Minority interests in consolidated joint venture related to assets and liabilities held for sale | 191 | 206 | ||||||
Minority interests in operating partnership | 240,808 | 262,239 | ||||||
Stockholders’ equity: | ||||||||
Preferred Stock: $0.01 par value, 20,000,000 authorized: | ||||||||
Series A Cumulative Redeemable Preferred Stock, 8.50%, $103,500,000 liquidation preference ($25.00 per share), 4,140,000 issued and outstanding | 99,297 | 99,297 | ||||||
Series B Cumulative Redeemable Preferred Stock, 7.875%, $63,250,000 liquidation preference ($25.00 per share), 2,530,000 issued and outstanding | 60,502 | 60,502 | ||||||
Common Stock; $0.01 par value: 100,000,000 authorized, 36,104,961 and 27,363,408 shares issued and outstanding as of June 30, 2006 and December 31, 2005 | 361 | 274 | ||||||
Additional paid-in capital | 359,590 | 252,562 | ||||||
Dividends in excess of earnings | (41,312 | ) | (27,782 | ) | ||||
Accumulated other comprehensive income, net | 3,998 | 1,644 | ||||||
Total Stockholders’ Equity | 482,436 | 386,497 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 1,713,857 | $ | 1,529,170 | ||||
6
Consolidated Quarterly Statements of Operations
(unaudited and in thousands, except share data)
| Three Months Ended | ||||||||||||||||||||||||
| 30-Jun-06 | 31-Mar-06 | 31-Dec-05 | 30-Sep-05 | 30-Jun-05 | 31-Mar-05 | |||||||||||||||||||
Rental | $ | 52,033 | $ | 47,824 | $ | 47,504 | $ | 43,587 | $ | 36,148 | $ | 31,189 | ||||||||||||
Tenant reimbursements | 12,675 | 11,500 | 11,647 | 10,970 | 8,079 | 6,478 | ||||||||||||||||||
Other | — | 168 | 1,432 | 265 | 3,832 | 300 | ||||||||||||||||||
Total operating revenues | 64,708 | 59,492 | 60,583 | 54,822 | 48,059 | 37,967 | ||||||||||||||||||
Rental property operating and maintenance | 13,618 | 11,710 | 13,366 | 11,854 | 9,166 | 6,644 | ||||||||||||||||||
Property taxes | 7,096 | 6,839 | 6,737 | 6,052 | 4,721 | 3,482 | ||||||||||||||||||
Insurance | 1,068 | 890 | 886 | 751 | 511 | 580 | ||||||||||||||||||
Depreciation and amortization | 19,511 | 17,513 | 18,040 | 16,309 | 13,728 | 11,539 | ||||||||||||||||||
General and administrative | 4,674 | 4,246 | 4,425 | 3,324 | 2,453 | 2,413 | ||||||||||||||||||
Other | 150 | 181 | 47 | 106 | 961 | 521 | ||||||||||||||||||
Total operating expenses | 46,117 | 41,379 | 43,501 | 38,396 | 31,540 | 25,179 | ||||||||||||||||||
Operating income | 18,591 | 18,113 | 17,082 | 16,426 | 16,519 | 12,788 | ||||||||||||||||||
Interest and other income | 262 | 229 | 870 | 165 | 110 | 129 | ||||||||||||||||||
Interest expense | (11,830 | ) | (11,039 | ) | (10,643 | ) | (10,373 | ) | (8,938 | ) | (7,770 | ) | ||||||||||||
Loss from early extinguishment of debt | (425 | ) | (57 | ) | (896 | ) | — | — | (125 | ) | ||||||||||||||
Income from continuing operations before minority interests | 6,598 | 7,246 | 6,413 | 6,218 | 7,691 | 5,022 | ||||||||||||||||||
Minority interests in continuing operations of operating partnership | (1,413 | ) | (2,022 | ) | (1,592 | ) | (1,719 | ) | (3,272 | ) | (2,235 | ) | ||||||||||||
Income from continuing operations | 5,185 | 5,224 | 4,821 | 4,499 | 4,419 | 2,787 | ||||||||||||||||||
Loss from discontinued operations before minority interests | (163 | ) | (328 | ) | (474 | ) | (169 | ) | (217 | ) | (127 | ) | ||||||||||||
Minority interests attributable to discontinued operations | 73 | 191 | 255 | 95 | 133 | 79 | ||||||||||||||||||
Loss from discontinued operations (1) | (90 | ) | (137 | ) | (219 | ) | (74 | ) | (84 | ) | (48 | ) | ||||||||||||
Net income | 5,095 | 5,087 | 4,602 | 4,425 | 4,335 | 2,739 | ||||||||||||||||||
Preferred stock dividends | (3,445 | ) | (3,445 | ) | (3,445 | ) | (3,099 | ) | (2,199 | ) | (1,271 | ) | ||||||||||||
Net income available to common stockholders | $ | 1,650 | $ | 1,642 | $ | 1,157 | $ | 1,326 | $ | 2,136 | $ | 1,468 | ||||||||||||
Net income per share available to common stockholders - basic | $ | 0.05 | $ | 0.06 | $ | 0.04 | $ | 0.05 | $ | 0.10 | $ | 0.07 | ||||||||||||
Net income per share available to common stockholders - diluted | $ | 0.05 | $ | 0.06 | $ | 0.04 | $ | 0.05 | $ | 0.10 | $ | 0.07 | ||||||||||||
Weighted-average shares outstanding - basic | 33,372,240 | 27,503,248 | 27,314,190 | 25,704,721 | 21,421,300 | 21,421,300 | ||||||||||||||||||
Weighted-average shares outstanding - diluted | 33,872,344 | 28,354,597 | 27,656,496 | 26,004,324 | 21,584,913 | 21,535,485 | ||||||||||||||||||
Weighted-average fully diluted shares and units | 60,959,350 | 59,873,798 | 59,248,243 | 57,525,755 | 53,106,344 | 53,056,916 | ||||||||||||||||||
| (1) | During the quarter ended June 30, 2006 we classified our property located at 7979 East Tufts Avenue as available for sale and we completed this property sale in July 2006. We have presented all activity for this property in Loss from discontinued operations for all periods presented above. This will cause individual line above items to differ from previous supplemental information but does not effect net income available to common stockholders. |
7
Funds From Operations (FFO)
(unaudited and in thousands except per share data)
| Three Months Ended | |||||||||||||||||||||||
| 30-Jun-06 | 31-Mar-06 | 31-Dec-05 | 30-Sep-05 | 30-Jun-05 | 31-Mar-05 | ||||||||||||||||||
Reconciliation of net income available to common stockholders to FFO (1): | |||||||||||||||||||||||
Net income available to common stockholders | $ | 1,650 | $ | 1,642 | $ | 1,157 | $ | 1,326 | $ | 2,136 | $ | 1,468 | |||||||||||
Adjustments: | |||||||||||||||||||||||
Minority interests in operating partnership including discontinued operations | 1,340 | 1,846 | 1,338 | 1,628 | 3,143 | 2,159 | |||||||||||||||||
Real estate related depreciation and amortization (1) | 20,238 | 18,185 | 18,781 | 16,929 | 14,318 | 12,143 | |||||||||||||||||
FFO available to common stockholders and unitholders | $ | 23,228 | $ | 21,673 | $ | 21,276 | $ | 19,883 | $ | 19,597 | $ | 15,770 | |||||||||||
FFO per share: | |||||||||||||||||||||||
Basic | $ | 0.38 | $ | 0.37 | $ | 0.36 | $ | 0.35 | $ | 0.37 | $ | 0.30 | |||||||||||
Diluted | $ | 0.38 | $ | 0.36 | $ | 0.36 | $ | 0.35 | $ | 0.37 | $ | 0.30 | |||||||||||
Weighted-average shares outstanding - basic | 60,459 | 59,022 | 58,906 | 57,226 | 52,943 | 52,943 | |||||||||||||||||
Weighted-average shares outstanding - diluted | 60,959 | 59,874 | 59,248 | 57,526 | 53,106 | 53,057 | |||||||||||||||||
(1) Real estate depreciation and amortization was computed as follows: | |||||||||||||||||||||||
Depreciation and amortization per income statement | $ | 19,511 | $ | 17,513 | $ | 18,040 | $ | 16,309 | $ | 13,728 | $ | 11,539 | |||||||||||
Depreciation and amortization of discontinued operations at 7979 East Tufts Avenue | 764 | 743 | 764 | 648 | 600 | 604 | |||||||||||||||||
Non real estate depreciation | (37 | ) | (71 | ) | (23 | ) | (28 | ) | (10 | ) | — | ||||||||||||
| $ | 20,238 | $ | 18,185 | $ | 18,781 | $ | 16,929 | $ | 14,318 | $ | 12,143 | ||||||||||||
Note: For a definition and discussion of FFO, see page 21. FFO for all periods presented above includes the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006.
Adjusted Funds From Operations (AFFO)
(unaudited and in thousands)
| Three Months Ended | ||||||||||||||||||||||||
| 30-Jun-06 | 31-Mar-06 | 31-Dec-05 | 30-Sep-05 | 30-Jun-05 | 31-Mar-05 | |||||||||||||||||||
Reconciliation of FFO to AFFO: | ||||||||||||||||||||||||
Funds from operations available to common stockholders and unitholders (FFO) | $ | 23,228 | $ | 21,673 | $ | 21,276 | $ | 19,883 | $ | 19,597 | $ | 15,770 | ||||||||||||
Adjustments: | ||||||||||||||||||||||||
Non real estate depreciation | 37 | 71 | 23 | 28 | 10 | — | ||||||||||||||||||
Amortization of deferred financing costs | 937 | 795 | 793 | 790 | 707 | 675 | ||||||||||||||||||
Non cash compensation | 435 | 431 | 335 | 50 | 44 | 52 | ||||||||||||||||||
Loss from early extinguishment of debt | 425 | 57 | 896 | — | — | 125 | ||||||||||||||||||
Straight line rents | (4,233 | ) | (3,843 | ) | (4,172 | ) | (3,815 | ) | (2,483 | ) | (2,553 | ) | ||||||||||||
Above and below market rent amortization | (1,504 | ) | (433 | ) | (632 | ) | (416 | ) | (230 | ) | (439 | ) | ||||||||||||
Capitalized leasing compensation | (888 | ) | (764 | ) | (105 | ) | (549 | ) | (127 | ) | — | |||||||||||||
Recurring capital expenditures and tenant improvements | (338 | ) | (904 | ) | (1,406 | ) | (240 | ) | (732 | ) | (519 | ) | ||||||||||||
Capitalized leasing commissions | (1,682 | ) | (265 | ) | (1,535 | ) | (757 | ) | (579 | ) | (180 | ) | ||||||||||||
AFFO available to common stockholders and unitholders | $ | 16,417 | $ | 16,818 | $ | 15,473 | $ | 14,974 | $ | 16,207 | $ | 12,931 | ||||||||||||
Note: For a definition and discussion of AFFO, see page 21. For a reconciliation of net income available to common stockholders to FFO, see above table. AFFO for all periods presented above includes the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006.
8
Reconciliation of Earnings before interest, taxes, depreciation and amortization (EBITDA) (1)
(unaudited and in thousands)
| Three Months Ended | ||||||||||||||||||
| 30-Jun-06 | 31-Mar-06 | 31-Dec-05 | 30-Sep-05 | 30-Jun-05 | 31-Mar-05 | |||||||||||||
Net income available to common stockholders | $ | 1,650 | $ | 1,642 | $ | 1,157 | $ | 1,326 | $ | 2,136 | $ | 1,468 | ||||||
Interest | 12,181 | 11,388 | 10,988 | 10,724 | 9,289 | 8,121 | ||||||||||||
Depreciation and amortization | 20,276 | 18,256 | 18,804 | 16,957 | 14,328 | 12,143 | ||||||||||||
EBITDA | 34,107 | 31,286 | 30,949 | 29,007 | 25,753 | 21,732 | ||||||||||||
Minority interests | 1,340 | 1,831 | 1,337 | 1,624 | 3,139 | 2,156 | ||||||||||||
Preferred stock dividends | 3,445 | 3,445 | 3,445 | 3,099 | 2,199 | 1,271 | ||||||||||||
Adjusted EBITDA | $ | 38,892 | $ | 36,562 | $ | 35,731 | $ | 33,730 | $ | 31,091 | $ | 25,159 | ||||||
| (1) | For the definition and discussion of EBITDA and Adjusted EBITDA, see page 21. EBITDA and Adjusted EBITDA for all periods presented above includes the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006. |
Financial Ratios
(unaudited and in thousands)
| 30-Jun-06 | 31-Mar-06 | 31-Dec-05 | 30-Sep-05 | 30-Jun-05 | 31-Mar-05 | |||||||||||||
Total interest expense per income statement | 12,181 | 11,388 | 10,988 | 10,724 | 9,289 | 8,121 | ||||||||||||
Less noncash interest | 1,115 | (1,144 | ) | (1,381 | ) | (777 | ) | (1,203 | ) | (705 | ) | |||||||
Cash interest expense (a) | 13,296 | 10,244 | 9,607 | 9,947 | 8,086 | 7,416 | ||||||||||||
Scheduled debt principal payments and preferred dividends | 4,567 | 4,869 | 4,914 | 5,072 | 4,180 | 3,109 | ||||||||||||
Total fixed charges | 17,863 | 15,113 | 14,521 | 15,019 | 12,266 | 10,525 | ||||||||||||
Debt service coverage ratio based on GAAP interest expense (b) | 3.2 | 3.2 | 3.3 | 3.1 | 3.3 | 3.1 | ||||||||||||
Debt service coverage ratio based on cash interest expense (b) | 2.9 | 3.6 | 3.7 | 3.4 | 3.8 | 3.4 | ||||||||||||
Fixed charge coverage ratio based on GAAP interest expense (c) | 2.3 | 2.2 | 2.2 | 2.1 | 2.3 | 2.2 | ||||||||||||
Fixed charge coverage ratio based on cash interest expense (c) | 2.2 | 2.4 | 2.5 | 2.2 | 2.5 | 2.4 | ||||||||||||
Debt to total market capitalization including debt and preferred equity (d) | 32.3 | % | 30.8 | % | 33.3 | % | 35.9 | % | 42.8 | % | 37.4 | % | ||||||
Debt plus preferred stock to total market capitalization including debt and preferred equity (e) | 38.8 | % | 37.1 | % | 40.7 | % | 44.6 | % | 48.6 | % | 44.9 | % | ||||||
Pretax income to interest expense (f) | 1.5 | 1.6 | 1.5 | 1.6 | 1.8 | 1.6 |
| (a) | Cash interest expense is interest expense less amortized deferred financing fees and includes interest that we capitalized. We consider cash interest expense to be a useful measure of interest as it excludes non-cash based interest expense. |
| (b) | Adjusted EBITDA divided by interest expense. |
| (c) | Adjusted EBITDA divided by fixed charges. Fixed charges include interest expense as per (a) above and scheduled debt principal payments and preferred dividends. |
| (d) | Mortgage debt and other loans divided by mortgage debt and other loans plus the liquidation value of preferred stock and the market value of outstanding common stock and operating partnership units, assuming the conversion of operating partnership units into shares of our common stock. |
| (e) | Same as (d), except numerator includes preferred stock. |
| (f) | Calculated as income before minority interest and interest divided by interest expense. |
9
Net Operating Income (NOI) and Run-rate NOI
For the three months ended June 30, 2006
(in thousands)
Rental revenues | $ | 52,033 | ||
Tenant reimbursements | 12,675 | |||
Rental property operating and maintenance | (13,618 | ) | ||
Property taxes | (7,096 | ) | ||
Insurance | (1,068 | ) | ||
NOI | $ | 42,926 | ||
Actual results of properties acquired during the quarter: | ||||
Rental revenues | (2,292 | ) | ||
Tenant reimbursements | (363 | ) | ||
Rental property operating and maintenance | 179 | |||
Property taxes | 220 | |||
Insurance | 32 | |||
Prorated full quarter of actual results of properties acquired during the quarter: | ||||
Rental revenues | 4,284 | |||
Tenant reimbursements | 1,198 | |||
Rental property operating and maintenance | (247 | ) | ||
Property taxes | (971 | ) | ||
Insurance | (65 | ) | ||
Run-rate NOI | $ | 44,901 | ||
Reconciliation of net income available to common stockholders to NOI | ||||
Net income available to common stockholders | $ | 1,650 | ||
Other revenues | — | |||
Interest expense | 11,830 | |||
Depreciation and amortization | 19,511 | |||
General and administrative expenses | 4,674 | |||
Loss from early extinguishment of debt | 425 | |||
Other expenses | 150 | |||
Interest and other income | (262 | ) | ||
Minority interests in continuing operations of operating partnership | 1,413 | |||
Loss from discontinued operations before minority interests | 163 | |||
Minority interests attributable to discontinued operations | (73 | ) | ||
Preferred stock dividends | 3,445 | |||
NOI | $ | 42,926 | ||
Note:For a definition and discussion of NOI and Run-rate NOI, see page 21.
10
Same Space and New Properties Consolidated Quarterly Statements of Operations
(unaudited and in thousands, except share data)
| Three Months Ended | ||||||||||||||||||||||||
| 30-Jun-06 | 31-Mar-06 | 31-Dec-05 | 30-Sep-05 | 30-Jun-05 | 31-Mar-05 | |||||||||||||||||||
Same space (1) | ||||||||||||||||||||||||
Operating Revenues: | ||||||||||||||||||||||||
Rental | $ | 33,324 | $ | 31,546 | $ | 31,558 | $ | 30,841 | $ | 31,246 | $ | 30,215 | ||||||||||||
Tenant reimbursements | 8,593 | 7,336 | 8,153 | 7,106 | 6,565 | 6,157 | ||||||||||||||||||
Other | — | — | 89 | 265 | 3,780 | 300 | ||||||||||||||||||
Total operating revenues | 41,917 | 38,882 | 39,800 | 38,212 | 41,591 | 36,672 | ||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||
Rental property operating and maintenance | 9,318 | 8,597 | 9,160 | 7,718 | 7,350 | 6,147 | ||||||||||||||||||
Property taxes | 3,379 | 3,335 | 3,524 | 3,157 | 3,370 | 3,429 | ||||||||||||||||||
Insurance | 632 | 536 | 636 | 456 | 459 | 572 | ||||||||||||||||||
Depreciation and amortization | 11,971 | 11,286 | 11,181 | 11,220 | 11,000 | 10,990 | ||||||||||||||||||
General and administrative (2) | 4,674 | 4,246 | 4,425 | 3,324 | 2,453 | 2,413 | ||||||||||||||||||
Other | 63 | 142 | 35 | 98 | 961 | 521 | ||||||||||||||||||
Total operating expenses | 30,037 | 28,142 | 28,961 | 25,973 | 25,593 | 24,072 | ||||||||||||||||||
Operating income | 11,880 | 10,740 | 10,839 | 12,239 | 15,998 | 12,600 | ||||||||||||||||||
Other Income (Expenses): | ||||||||||||||||||||||||
Interest and other income | 149 | 123 | 133 | 100 | 80 | 33 | ||||||||||||||||||
Interest expense (3) | (7,034 | ) | (6,494 | ) | (6,804 | ) | (7,187 | ) | (7,120 | ) | (7,095 | ) | ||||||||||||
Loss from early extinguishment of debt | (425 | ) | (57 | ) | (896 | ) | — | — | (125 | ) | ||||||||||||||
Income from continuing operations before minority interests | 4,570 | 4,312 | 3,272 | 5,152 | 8,958 | 5,413 | ||||||||||||||||||
Loss from discontinued operations before minority interests | (163 | ) | (328 | ) | (474 | ) | (169 | ) | (217 | ) | (127 | ) | ||||||||||||
Income before minority interests | $ | 4,407 | $ | 3,984 | $ | 2,798 | $ | 4,983 | $ | 8,741 | $ | 5,286 | ||||||||||||
New properties (1) | ||||||||||||||||||||||||
Operating Revenues: | ||||||||||||||||||||||||
Rental | $ | 18,709 | $ | 16,278 | $ | 15,946 | $ | 12,746 | $ | 4,902 | $ | 974 | ||||||||||||
Tenant reimbursements | 4,082 | 4,164 | 3,494 | 3,864 | 1,514 | 321 | ||||||||||||||||||
Other | — | 168 | 1,343 | — | 52 | — | ||||||||||||||||||
Total operating revenues | 22,791 | 20,610 | 20,783 | 16,610 | 6,468 | 1,295 | ||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||
Rental property operating and maintenance | 4,300 | 3,113 | 4,206 | 4,136 | 1,816 | 497 | ||||||||||||||||||
Property taxes | 3,717 | 3,504 | 3,213 | 2,895 | 1,351 | 53 | ||||||||||||||||||
Insurance | 436 | 354 | 250 | 295 | 52 | 8 | ||||||||||||||||||
Depreciation and amortization | 7,540 | 6,227 | 6,859 | 5,089 | 2,728 | 549 | ||||||||||||||||||
General and administrative (2) | — | — | — | — | — | — | ||||||||||||||||||
Other | 87 | 39 | 12 | 8 | — | — | ||||||||||||||||||
Total operating expenses | 16,080 | 13,237 | 14,540 | 12,423 | 5,947 | 1,107 | ||||||||||||||||||
Operating income | $ | 6,711 | $ | 7,373 | $ | 6,243 | $ | 4,187 | $ | 521 | $ | 188 | ||||||||||||
Other Income (Expenses): | ||||||||||||||||||||||||
Interest and other income | 113 | 106 | 737 | 65 | 30 | 96 | ||||||||||||||||||
Interest expense (3) | (4,796 | ) | (4,545 | ) | (3,839 | ) | (3,186 | ) | (1,818 | ) | (675 | ) | ||||||||||||
Loss from early extinguishment of debt | — | — | — | — | — | — | ||||||||||||||||||
Income from continuing operations before minority interests | 2,028 | 2,934 | 3,141 | 1,066 | (1,267 | ) | (391 | ) | ||||||||||||||||
Loss from discontinued operations before minority interests | — | — | — | — | — | — | ||||||||||||||||||
Income before minority interests | $ | 2,028 | $ | 2,934 | $ | 3,141 | $ | 1,066 | $ | (1,267 | ) | $ | (391 | ) | ||||||||||
| (1) | Same space properties are properties that were acquired before December 31, 2004 and new properties are properties acquired after December 31, 2004. During the quarter ended June 30, 2006 we classified our property located at 7979 East Tufts Avenue as available for sale and we completed the property sale in July 2006. We have presented all activity for this property in loss from discontinued operations for all periods presented above. |
| (2) | General and administrative expenses are included entirely in same space as they are not allocable to specific properties. |
| (3) | Interest expense on our line of credit is allocated entirely to new properties. |
11
Consolidated Debt Analysis
(in thousands)
| Maturity Date | Principal Balance as of June 30, 2006 | % of Debt | Interest Rate as of June 30, 2006 | Interest Rate as of June 30, 2006 including swaps | ||||||||||
Unhedged Floating Rate Debt | ||||||||||||||
6 Braham Street | April 10, 2011 | $ | 24,399 | 3.0 | % | 5.65 | % | 5.65 | % | |||||
Unsecured line of credit | October 31, 2008 (1) | 211,554 | 25.8 | 6.83 | % | 6.83 | % | |||||||
| $ | 235,953 | 28.8 | % | |||||||||||
Fixed Rate Mortgage Debt | ||||||||||||||
Secured Term Debt | November 11, 2014 | $ | 151,905 | 18.5 | % | 5.65 | % | 5.65 | % | |||||
350 East Cermak Road | June 9, 2008 (2) | 100,000 | 12.2 | % | 7.53 | % | 6.23 | % | ||||||
200 Paul Avenue 1-4 | October 8, 2015 | 81,000 | 9.9 | % | 5.74 | % | 5.74 | % | ||||||
600 West Seventh Street | March 15, 2016 | 59,731 | 7.3 | % | 5.80 | % | 5.80 | % | ||||||
2323 Bryan Street | November 6, 2009 | 56,931 | 6.9 | % | 6.04 | % | 6.04 | % | ||||||
34551 Ardenwood Boulevard 1-4, 2334 Lundy Place, 2440 Marsh Lane | August 9, 2006 (3) | 43,000 | 5.2 | % | 6.92 | % | 4.84 | % | ||||||
4055 Valley View Lane | January 1, 2009 | 20,880 | 2.5 | % | 6.68 | % | 4.95 | % | ||||||
100 Technology Center Drive | April 1, 2009 | 20,000 | 2.4 | % | 7.18 | % | 5.52 | % | ||||||
1125 Energy Park Drive | March 1, 2032 | 9,622 | 1.2 | % | 7.62 | % | 7.62 | % | ||||||
375 Riverside Parkway | November 25, 2006 (2) | 8,775 | 1.1 | % | 7.33 | % | 5.18 | % | ||||||
Paul van Vlissingenstraat 16 | July 18, 2013 | 14,325 | 1.7 | % | 4.66 | % | 5.58 | % | ||||||
Chemin de l’Epinglier 2 | July 18, 2013 | 10,334 | 1.3 | % | 4.56 | % | 5.57 | % | ||||||
731 East Trade Street | July 1, 2020 | 5,964 | 0.7 | % | 8.22 | % | 8.22 | % | ||||||
Total Fixed Rate Debt | $ | 582,467 | 70.9 | % | ||||||||||
Loan premium—1125 Energy Park Drive and 731 East Trade Street | 2,081 | 0.3 | % | |||||||||||
Total Consolidated Debt (5) | $ | 820,501 | 100.0 | % | ||||||||||
Weighted average cost of debt (including interest rate swaps) | 6.04 | % | ||||||||||||
| (1) | A one-year extension option is available. |
| (2) | Two one-year extensions are available. |
| (3) | A 13-month extension and a one-year extension are available. |
| (4) | This amount excludes the outstanding principal for a loan related to 7979 East Tufts Avenue of $26.0 million. We classified this property as held for sale at June 30, 2006. We completed its sale on July 12, 2006 and the eliminated our liability for the $26.0 million loan. |
Credit Facility
(in thousands)
| Maximum Available | Available as of June 30, 2006 | Drawn as of June 30, 2006 | |||||||
Unsecured Credit Facility | $ | 350,000 | $ | 91,498 | $ | 211,554 | |||
12
Debt Maturities
(in thousands)
Property | 2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | Total | ||||||||||||||
Unsecured line of credit (1) | $ | — | $ | — | $ | 211,554 | $ | — | $ | — | $ | — | $ | 211,554 | |||||||
Secured Term Debt (2) | 1,018 | 2,150 | 2,276 | 2,410 | 2,552 | 141,499 | 151,905 | ||||||||||||||
350 East Cermak Road (3) | 404 | 874 | 98,722 | — | — | — | 100,000 | ||||||||||||||
200 Paul Avenue 1-4 | — | 231 | 1,433 | 1,533 | 1,624 | 76,179 | 81,000 | ||||||||||||||
600 West Seventh Street | 550 | 1,149 | 1,218 | 1,290 | 1,367 | 54,157 | 59,731 | ||||||||||||||
2323 Bryan Street | 352 | 747 | 784 | 55,048 | — | — | 56,931 | ||||||||||||||
34551 Ardenwood Boulevard 1-4, 2334 Lundy Place, 2440 Marsh Lane (4) | 43,000 | — | — | — | — | — | 43,000 | ||||||||||||||
6 Braham Street | — | — | — | 555 | 739 | 23,105 | 24,399 | ||||||||||||||
4055 Valley View Lane | 270 | 540 | 540 | 19,530 | — | — | 20,880 | ||||||||||||||
100 Technology Center Drive | — | — | — | 20,000 | — | — | 20,000 | ||||||||||||||
1125 Energy Park Drive | 53 | 114 | 121 | 132 | 143 | 9,059 | 9,622 | ||||||||||||||
375 Riverside Parkway (3) | 8,775 | — | — | — | — | — | 8,775 | ||||||||||||||
Paul van Vlissingenstraat 16 | 107 | 215 | 215 | 215 | 215 | 13,358 | 14,325 | ||||||||||||||
Chemin de l’Epinglier 2 | 50 | 155 | 155 | 155 | 155 | 9,664 | 10,334 | ||||||||||||||
731 East Trade Street | 82 | 174 | 189 | 205 | 235 | 5,079 | 5,964 | ||||||||||||||
Total (5) | $ | 54,661 | $ | 6,349 | $ | 317,207 | $ | 101,073 | $ | 7,030 | $ | 332,100 | $ | 818,420 | |||||||
Weighted Average Term to Initial Maturity | 5.2 Years | |
Weighted Average Term to Initial Maturity (assuming exercise of extension options) | 5.9 Years |
| (1) | A one-year extension option is available. |
| (2) | This amount represents six mortgage loans secured by our interests in 36 NE 2nd Street, 3300 East Birch Street, 100 & 200 Quannapowitt Parkway, 300 Boulevard East, 4849 Alpha Road, and 11830 Webb Chapel Road. Each of these loans are cross-collateralized by the six properties. |
| (3) | Two one-year extensions are available. |
| (4) | A 13-month extension and a one-year extension are available. We exercised our 13-month extension option in July 2006. |
| (5) | This amount excludes the outstanding principal for a loan related to 7979 East Tufts Avenue of $26.0 million. We classified this property as held for sale at June 30, 2006 and completed its sale on July 12, 2006 and the buyer assumed the $26.0 million loan. |
Note:Above amounts assume no exercise of extensions and total excludes $2,081 of Loan Premiums.
13
Properties acquired
For the three months ended June 30, 2006
Property | Metropolitan Area | Date Acquired | Purchase Price (in millions) | Net Rentable Square Footage of Property | Total Square Footage Held for Redevelopment | Percentage of Total Rentable Square Footage of Property Occupied (1) | Major Tenant(s) | |||||||||
6800 Millcreek Drive | Toronto, Canada | April-06 | $ | 16.0 | 83,758 | — | 100.0 | % | Fusepoint Managed Services, Inc. | |||||||
101 Aquila Way | Atlanta | April-06 | $ | 25.3 | 313,581 | — | 100.0 | % | Google, Inc. | |||||||
12001 North Freeway | Houston | April-06 | $ | 30.5 | 281,426 | 19,279 | 98.8 | % | Level (3), Qwest, Worldwide Fiber Network | |||||||
14901 FAA Boulevard | Dallas | June-06 | $ | 50.6 | 263,700 | — | 100.0 | % | Savvis | |||||||
| $ | 122.4 | 942,465 | 19,279 | 99.7 | % | |||||||||||
| (1) | Excludes space held for redevelopment. |
14
Occupancy Analysis
As of June 30, 2006
| Occupancy (2) | Net rentable Square Feet as a % of | Gross Annualized Rent | ||||||||||||||||||||||||||||||||||||
Property | Acquisition date | Metropolitan Area | Net Rentable Square Feet | Redevelopment Space | Gross Annualized Rent ($000) (1) | As of 6/30/06 | As of 3/31/06 | As of 12/31/05 | As of 9/30/05 | As of 6/30/05 | Property Type | Total Portfolio | Property Type | Total Portfolio | ||||||||||||||||||||||||
Internet Gateways | ||||||||||||||||||||||||||||||||||||||
350 East Cermak Road | May-05 | Chicago | 870,183 | 263,208 | 20,010 | 93.3 | % | 92.2 | % | 92.2 | % | 92.2 | % | 82.6 | % | 27.5 | % | 9.6 | 24.6 | % | 10.3 | % | ||||||||||||||||
200 Paul Avenue 1-4 | November-04 | San Francisco | 498,761 | 28,919 | 14,467 | 95.1 | 94.2 | 95.8 | 93.8 | 93.7 | 15.8 | 5.5 | 17.8 | 7.5 | ||||||||||||||||||||||||
2323 Bryan Street | January-02 | Dallas | 457,217 | 19,890 | 11,014 | 85.2 | 82.4 | 82.0 | 80.9 | 83.8 | 14.5 | 5.0 | 13.5 | 5.7 | ||||||||||||||||||||||||
600 West Seventh Street | May-04 | Los Angeles | 430,403 | 59,319 | 10,339 | 97.3 | 97.3 | 90.8 | 83.0 | 82.3 | 13.6 | 4.7 | 12.7 | 5.4 | ||||||||||||||||||||||||
1100 Space Park Drive | November-04 | Silicon Valley | 165,297 | — | 6,540 | 100.0 | 97.4 | 94.9 | 94.9 | 94.9 | 5.2 | 1.8 | 8.0 | 3.4 | ||||||||||||||||||||||||
6 Braham Street | July-02 | London, England | 63,233 | — | 5,176 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 2.0 | 0.7 | 6.4 | 2.7 | ||||||||||||||||||||||||
600-780 S. Federal | September-05 | Chicago | 161,547 | — | 4,271 | 83.6 | 81.2 | 86.1 | 84.1 | N/A | 5.1 | 1.8 | 5.3 | 2.2 | ||||||||||||||||||||||||
12001 North Freeway | April-06 | Houston | 281,426 | 19,279 | 4,019 | 98.8 | N/A | N/A | N/A | N/A | 8.9 | 3.1 | 4.9 | 2.1 | ||||||||||||||||||||||||
36 NE 2nd Street | January-02 | Miami | 162,140 | — | 3,645 | 95.9 | 81.2 | 81.2 | 81.2 | 81.2 | 5.1 | 1.8 | 4.5 | 1.9 | ||||||||||||||||||||||||
731 East Trade Street | August-05 | Charlotte | 40,879 | — | 1,066 | 100.0 | 100.0 | 100.0 | 100.0 | N/A | 1.3 | 0.4 | 1.3 | 0.6 | ||||||||||||||||||||||||
113 North Myers | August-05 | Charlotte | 19,511 | 9,707 | 495 | 100.0 | 100.0 | 100.0 | 100.0 | N/A | 0.6 | 0.2 | 0.6 | 0.3 | ||||||||||||||||||||||||
125 North Myers | August-05 | Charlotte | 12,160 | 13,242 | 303 | 100.0 | 85.8 | 85.8 | 85.8 | N/A | 0.4 | 0.1 | 0.4 | 0.2 | ||||||||||||||||||||||||
| 3,162,757 | 413,564 | 81,345 | 93.7 | 91.2 | 90.2 | 88.8 | 86.1 | 100.0 | 34.7 | 100.0 | 42.3 | |||||||||||||||||||||||||||
Data Centers | ||||||||||||||||||||||||||||||||||||||
833 Chestnut Street | March-05 | Philadelphia | 535,098 | 119,660 | 8,643 | 75.5 | 75.5 | 91.5 | 91.3 | 93.3 | 13.4 | 6.0 | 12.1 | 4.4 | ||||||||||||||||||||||||
300 Boulevard East | November-02 | New York | 311,950 | — | 8,621 | 90.9 | 99.7 | 87.4 | 87.4 | 87.4 | 7.9 | 3.4 | 12.0 | 4.5 | ||||||||||||||||||||||||
2045 & 2055 LaFayette Street | May-04 | Silicon Valley | 300,000 | — | 5,940 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 7.6 | 3.3 | 8.3 | 3.1 | ||||||||||||||||||||||||
11830 Webb Chapel Road | August-04 | Dallas | 365,647 | — | 5,791 | 95.0 | 93.3 | 93.3 | 90.5 | 90.5 | 9.2 | 4.0 | 8.2 | 3.0 | ||||||||||||||||||||||||
150 South First Street | September-04 | Silicon Valley | 179,761 | — | 4,757 | 100.0 | 100.0 | 98.5 | 98.5 | 95.7 | 4.5 | 2.0 | 6.7 | 2.5 | ||||||||||||||||||||||||
14901 FAA Boulevard | June-06 | Dallas | 263,700 | — | 4,364 | 100.0 | N/A | N/A | N/A | N/A | 6.7 | 2.9 | 6.1 | 2.3 | ||||||||||||||||||||||||
2334 Lundy Place | December-02 | Silicon Valley | 130,752 | — | 4,090 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 3.3 | 1.4 | 5.8 | 2.1 | ||||||||||||||||||||||||
2401 Walsh Street | June-05 | Silicon Valley | 167,932 | — | 3,118 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 4.2 | 1.8 | 4.4 | 1.6 | ||||||||||||||||||||||||
200 North Nash Street | June-05 | Los Angeles | 113,606 | — | 2,110 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 2.9 | 1.2 | 3.0 | 1.1 | ||||||||||||||||||||||||
2403 Walsh Street | June-05 | Silicon Valley | 103,940 | — | 1,930 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 2.6 | 1.1 | 2.7 | 1.0 | ||||||||||||||||||||||||
Paul van Vlissingenstraat 16 | August-05 | Amsterdam, Netherlands | 77,472 | 35,000 | 1,810 | 58.8 | 62.0 | 62.0 | 62.0 | N/A | 2.0 | 0.8 | 2.6 | 0.9 | ||||||||||||||||||||||||
4700 Old Ironsides Drive | June-05 | Silicon Valley | 90,139 | — | 1,674 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 2.3 | 1.0 | 2.4 | 0.9 | ||||||||||||||||||||||||
8534 Concord Center Drive | June-05 | Denver | 82,229 | — | 1,567 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 2.1 | 0.9 | 2.2 | 0.8 | ||||||||||||||||||||||||
6800 Millcreek Drive | April-06 | Toronto, Canada | 83,758 | — | 1,530 | 100.0 | N/A | N/A | N/A | N/A | 2.1 | 0.9 | 2.2 | 0.8 | ||||||||||||||||||||||||
3065 Gold Camp Drive | October-04 | Sacramento | 62,957 | — | 1,487 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 1.6 | 0.7 | 2.1 | 0.8 | ||||||||||||||||||||||||
3015 Winona Avenue | December-04 | Los Angeles | 82,911 | — | 1,457 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 2.1 | 0.9 | 2.1 | 0.8 | ||||||||||||||||||||||||
101 Aquila Way | April-06 | Atlanta | 313,581 | — | 1,411 | 100.0 | N/A | N/A | N/A | N/A | 7.9 | 3.4 | 2.0 | 0.7 | ||||||||||||||||||||||||
251 Exchange Place | November-05 | Northern Virginia | 70,982 | — | 1,374 | 100.0 | 100.0 | 100.0 | N/A | N/A | 1.8 | 0.8 | 1.9 | 0.7 | ||||||||||||||||||||||||
2440 Marsh Lane | January-03 | Dallas | 135,250 | — | 1,352 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 3.4 | 1.5 | 1.9 | 0.7 | ||||||||||||||||||||||||
1125 Energy Park Drive | March-05 | Minneapolis/St. Paul | 112,827 | — | 1,340 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 2.8 | 1.2 | 1.9 | 0.7 | ||||||||||||||||||||||||
Chemin de l’Epinglier 2 | November-05 | Geneva, Switzerland | 59,190 | — | 1,332 | 100.0 | 100.0 | 100.0 | N/A | N/A | 1.5 | 0.6 | 1.9 | 0.7 | ||||||||||||||||||||||||
3300 East Birch Street | August-03 | Los Angeles | 68,807 | — | 1,277 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 1.7 | 0.8 | 1.8 | 0.7 | ||||||||||||||||||||||||
Clonshaugh Industrial Estate | February-06 | Dublin, Ireland | 20,000 | — | 1205.0 | 100.0 | 0.0 | N/A | N/A | N/A | 0.5 | 0.2 | 1.7 | 0.6 | ||||||||||||||||||||||||
375 Riverside Parkway | June-03 | Atlanta | 126,300 | 123,891 | 1,179 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 3.2 | 1.4 | 1.7 | 0.6 | ||||||||||||||||||||||||
4025 Midway Road | January-06 | Dallas | 49,947 | 50,000 | 1008.0 | 40.5 | 0.0 | N/A | N/A | N/A | 1.3 | 0.5 | 1.4 | 0.5 | ||||||||||||||||||||||||
7520 Metro Center Drive | December-05 | Austin | 45,000 | — | 605 | 100.0 | 100.0 | 100.0 | N/A | N/A | 1.1 | 0.5 | 0.9 | 0.3 | ||||||||||||||||||||||||
7500 Metro Center Drive | December-05 | Austin | — | 74,962 | 0.0 | 0.0 | 0.0 | 0.0 | N/A | N/A | — | — | — | — | ||||||||||||||||||||||||
3 Corporate Place | December-05 | New York | — | 283,124 | 0.0 | 0.0 | 0.0 | 0.0 | N/A | N/A | — | — | — | — | ||||||||||||||||||||||||
115 Second Avenue | October-05 | Boston | 10,494 | 56,236 | 0.0 | 0.0 | 0.0 | 0.0 | N/A | N/A | 0.3 | 0.1 | — | — | ||||||||||||||||||||||||
| 3,964,230 | 742,873 | 70,972 | 93.7 | 91.6 | 94.9 | 94.4 | 95.9 | 100.0 | 43.3 | 100.0 | 36.8 | |||||||||||||||||||||||||||
Technology Manufacturing | ||||||||||||||||||||||||||||||||||||||
34551 Ardenwood Boulevard 1-4 | January-03 | Silicon Valley | 307,657 | — | 7,887 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 50.9 | 3.4 | 56.7 | 4.1 | ||||||||||||||||||||||||
47700 Kato Road & 1055 Page Avenue | September-03 | Silicon Valley | 183,050 | — | 3,472 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 30.3 | 2.0 | 25.0 | 1.8 | ||||||||||||||||||||||||
2010 East Centennial Circle | May-03 | Phoenix | 113,405 | — | 2,549 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 18.8 | 1.2 | 18.3 | 1.3 | ||||||||||||||||||||||||
| 604,112 | — | 13,908 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 6.6 | 100.0 | 7.2 | |||||||||||||||||||||||||||
Technology Office | ||||||||||||||||||||||||||||||||||||||
100 & 200 Quannapowitt Parkway | June-04 | Boston | 388,000 | — | 6,904 | 94.9 | 100.0 | 100.0 | 100.0 | 100.0 | 27.7 | 4.3 | 26.2 | 3.6 | ||||||||||||||||||||||||
7979 East Tufts Avenue (3) | October-03 | Denver | 366,184 | — | 6,222 | 97.2 | 97.5 | 89.0 | 89.8 | 91.9 | 26.1 | 4.0 | 23.5 | 3.2 | ||||||||||||||||||||||||
4055 Valley View Lane | September-03 | Dallas | 240,153 | — | 5,130 | 97.0 | 97.0 | 94.3 | 94.3 | 94.3 | 17.1 | 2.6 | 19.4 | 2.7 | ||||||||||||||||||||||||
100 Technology Center Drive | February-04 | Boston | 197,000 | — | 3,743 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 14.1 | 2.2 | 14.2 | 1.9 | ||||||||||||||||||||||||
4849 Alpha Road | April-04 | Dallas | 125,538 | — | 2,856 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 9.0 | 1.4 | 10.8 | 1.5 | ||||||||||||||||||||||||
4650 Old Ironsides Drive | June-05 | Silicon Valley | 84,383 | — | 1,567 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 6.0 | 0.9 | 5.9 | 0.8 | ||||||||||||||||||||||||
| 1,401,258 | — | 26,422 | 97.3 | 98.8 | 96.1 | 96.4 | 96.9 | 100.0 | 15.4 | 100.0 | 13.7 | |||||||||||||||||||||||||||
Portfolio Total/Weighted Average | 9,132,357 | 1,156,437 | $ | 192,647 | 94.7 | % | 93.3 | % | 93.9 | % | 93.2 | % | 93.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||
| (1) | Gross annualized rent represents the monthly contractual rent under existing leases as of June 30, 2006 multiplied by 12. |
| (2) | Occupancy excludes space held for redevelopment. |
| (3) | This property was sold on July 12, 2006. |
15
Major Tenants
as of June 30, 2006
Tenant | Number of Locations | Total Occupied Square Feet (1) | Percentage of Net Rentable Square Feet | Gross Annualized Rent ($000) (2) | Percentage of Gross Annualized Rent | Weighted Average Remaining Lease Term in Months | |||||||||||
| 1 | Savvis Communications (3) | 10 | 1,355,724 | 14.8 | % | 28,859 | 15.0 | % | 136 | ||||||||
| 2 | Qwest Communications International, Inc. | 11 | 673,339 | 7.4 | % | 19,032 | 9.9 | % | 105 | ||||||||
| 3 | Comverse Network Systems | 1 | 367,033 | 4.0 | % | 6,904 | 3.6 | % | 55 | ||||||||
| 4 | Verio, Inc. (4) | 2 | 241,370 | 2.6 | % | 6,642 | 3.4 | % | 75 | ||||||||
| 5 | Equinix, Inc. | 2 | 294,990 | 3.2 | % | 6,084 | 3.2 | % | 107 | ||||||||
| 6 | AT&T | 10 | 286,454 | 3.1 | % | 5,695 | 3.0 | % | 81 | ||||||||
| 7 | Leslie & Goodwin (5) | 2 | 71,626 | 0.8 | % | 5,361 | 2.8 | % | 37 | ||||||||
| 8 | Amgen | 1 | 131,386 | 1.4 | % | 5,309 | 2.8 | % | 58 | ||||||||
| 9 | AboveNet, Inc. | 7 | 150,661 | 1.6 | % | 4,611 | 2.4 | % | 145 | ||||||||
| 10 | Level 3 Communications, LLC | 9 | 207,954 | 2.3 | % | 4,163 | 2.2 | % | 53 | ||||||||
| 11 | Thomas Jefferson University | 1 | 179,659 | 2.0 | % | 3,821 | 2.0 | % | 51 | ||||||||
| 12 | Stone & Webster, Inc. (6) | 1 | 197,000 | 2.2 | % | 3,743 | 1.9 | % | 81 | ||||||||
| 13 | Seagate (7) | 1 | 183,050 | 2.0 | % | 3,472 | 1.8 | % | 63 | ||||||||
| 14 | XO Communications Services, Inc. | 6 | 98,870 | 1.1 | % | 3,143 | 1.6 | % | 103 | ||||||||
| 15 | Siemens Subscriber Networks, Inc. | 1 | 125,538 | 1.4 | % | 2,856 | 1.5 | % | 46 | ||||||||
| Total/Weighted Average | 4,564,654 | 49.9 | % | $ | 109,695 | 57.1 | % | 97 | |||||||||
| (1) | Occupied square footage is defined as leases that have commenced on or before June 30, 2006. |
| (2) | Gross annualized rent represents the monthly contractual rent under existing leases as of June 30, 2006 multiplied by 12. |
| (3) | Microsoft subleases 192,000 net rentable square feet (approximately $3.8 million of gross annualized rent) of this space and has the right to become tenant if the primary lessor defaults. |
| (4) | Verio is a wholly-owned subsidiary of Nippon Telegraph & Telephone. |
| (5) | Leslie & Godwin is a United Kingdom subsidiary of AON Corporation. |
| (6) | Stone & Webster is a subsidiary of The Shaw Group. |
| (7) | Seagate acquired Maxtor on May 22, 2006. |
16
Lease Expirations and Lease Distribution
Lease Expirations
As of June 30, 2006
Year | Number of Leases Expiring | Square Footage of Expiring Leases | Percentage of Net Rentable Square Feet | Gross Annualized Rent ($000) (1) | Percentage of Gross Annualized Rent | Gross Annualized Rent Per Occupied Square Foot | Gross Annualized Rent Per Occupied Square Foot at Expiration | Gross Annualized Rent at Expiration ($000) | ||||||||||||||
Available | 485,533 | 5.3 | % | $ | — | 0.0 | % | |||||||||||||||
2006 | 38 | 250,764 | 2.7 | % | 3,791 | 2.0 | % | $ | 15.12 | $ | 15.66 | 3,926 | ||||||||||
2007 | 39 | 105,196 | 1.2 | % | 2,900 | 1.5 | % | 27.57 | 28.10 | 2,956 | ||||||||||||
2008 | 67 | 295,209 | 3.2 | % | 9,436 | 4.9 | % | 31.96 | 35.72 | 10,545 | ||||||||||||
2009 | 90 | 520,546 | 5.7 | % | 16,215 | 8.4 | % | 31.15 | 32.52 | 16,930 | ||||||||||||
2010 | 80 | 955,127 | 10.5 | % | 24,544 | 12.7 | % | 25.70 | 27.49 | 26,258 | ||||||||||||
2011 | 51 | 1,386,767 | 15.2 | % | 24,755 | 12.8 | % | 17.85 | 19.94 | 27,648 | ||||||||||||
2012 | 15 | 158,704 | 1.7 | % | 3,581 | 1.9 | % | 22.56 | 24.81 | 3,937 | ||||||||||||
2013 | 23 | 821,144 | 9.0 | % | 16,992 | 8.8 | % | 20.69 | 22.54 | 18,505 | ||||||||||||
2014 | 33 | 421,408 | 4.6 | % | 10,259 | 5.3 | % | 24.34 | 29.28 | 12,338 | ||||||||||||
2015 | 58 | 1,299,861 | 14.2 | % | 33,574 | 17.4 | % | 25.83 | 32.72 | 42,531 | ||||||||||||
Thereafter | 88 | 2,432,098 | 26.7 | % | 46,600 | 24.3 | % | 19.16 | 26.58 | 64,650 | ||||||||||||
Portfolio Total / Weighted Average | 582 | 9,132,357 | 100.0 | % | $ | 192,647 | 100.0 | % | $ | 22.28 | $ | 26.63 | $ | 230,224 | ||||||||
Lease Distribution
As of June 30, 2006
Square Feet Under Lease | Number of Leases | Percentage of All Leases | Total Net Rentable Square Feet | Percentage of Net Rentable Square Feet | Gross ($000) (1) | Percentage of Gross Annualized Rent | ||||||||||
Available | 485,533 | 5.3 | % | 0.0 | % | |||||||||||
2,500 or less | 320 | 55.0 | % | 158,410 | 1.7 | % | 19,791 | 10.3 | % | |||||||
2,501 - 10,000 | 108 | 18.6 | % | 573,988 | 6.3 | % | 10,890 | 5.7 | % | |||||||
10,001 - 20,000 | 51 | 8.8 | % | 754,345 | 8.3 | % | 15,440 | 8.0 | % | |||||||
20,001 - 40,000 | 43 | 7.4 | % | 1,190,383 | 13.0 | % | 20,995 | 10.9 | % | |||||||
40,001 - 100,000 | 38 | 6.5 | % | 2,404,967 | 26.3 | % | 58,274 | 30.2 | % | |||||||
Greater than 100,000 | 22 | 3.7 | % | 3,564,731 | 39.1 | % | 67,257 | 34.9 | % | |||||||
Portfolio Total | 582 | 100.0 | % | 9,132,357 | 100.0 | % | $ | 192,647 | 100.0 | % | ||||||
| (1) | Gross annualized rent represents the monthly contractual rent under existing leases as of June 30, 2006 multiplied by 12. |
17
Leasing Activity
As of June 30, 2006
For the Three June 30, 2006 | % Leased | ||||||
Occupied Square Feet as of March 31, 2006 | 7,592,307 | 93.3 | % | ||||
Q2 2006 Acquisitions: | |||||||
6800 Millcreek Drive | 83,758 | 100.0 | % | ||||
101 Aquila Way | 313,581 | 100.0 | % | ||||
12001 North Freeway | 278,160 | 98.8 | % | ||||
14901 FAA Boulevard | 263,700 | 100.0 | % | ||||
Occupied Square Feet including Q2 2006 Acquisitions | 8,531,506 | 93.5 | % | ||||
Expirations and Reductions (including renewals) | (14,860 | ) | (0.2 | %) | |||
New Leases and Expansions | 135,442 | 1.5 | % | ||||
Renewals and Extensions | 3,509 | 0.0 | % | ||||
Remeasurements (1) | (8,773 | ) | (0.1 | %) | |||
Terminations | — | 0.0 | % | ||||
Occupied Square Feet as of June 30, 2006 | 8,646,824 | 94.7 | % | ||||
GAAP Rent Growth (2) | |||||||
Expiring Rate per Square Foot | $ | 17.36 | |||||
New / Renewed Rate per Square Foot | $ | 52.97 | |||||
Percentage Increase | 205.1 | % | |||||
Weighted Average Lease Term - New (in months) | 110 | ||||||
Weighted Average Lease Term - Renewal (in months) | 29 | ||||||
| (1) | Represents remeasuring of building to Building Owners and Managers Association (BOMA) standards. |
| (2) | Represents estimated cash rent growth adjusted for straight-line rents in accordance with GAAP. |
18
Tenant Improvements and Leasing Commissions
| Three Months Ended | Full Year 2005 | |||||||||||||||||
| 6/30/2006 | 3/31/2006 | 12/31/2005 | 9/30/2005 | 6/30/2005 | ||||||||||||||
Renewals (1) | ||||||||||||||||||
Number of renewals | 2 | — | 2 | 3 | 1 | 6 | ||||||||||||
Square Feet | 3,509 | — | 8,086 | 8,109 | 4,517 | 20,712 | ||||||||||||
Tenant improvement costs per square foot (2) | $ | — | $ | — | $ | 1.14 | $ | 9.67 | $ | 20.00 | $ | 8.59 | ||||||
Leasing commission costs per square foot (2) | 5.19 | — | 2.61 | 2.48 | 6.24 | 3.35 | ||||||||||||
Total renewal lease costs per square foot | $ | 5.19 | $ | — | $ | 3.75 | $ | 12.15 | $ | 26.24 | $ | 11.94 | ||||||
New Leases (3) | ||||||||||||||||||
Number of non-redevelopment leases | 41 | 46 | 16 | 23 | 18 | 57 | ||||||||||||
Non-Redevelopment square feet | 51,021 | 84,488 | 41,784 | 8,410 | 41,967 | 92,161 | ||||||||||||
Non-Redevelopment tenant improvement costs per square foot (2) | $ | 71.73 | $ | 20.64 | $ | 10.37 | $ | 32.86 | $ | 5.10 | $ | 10.02 | ||||||
Non-Redevelopment leasing commission costs per square foot (2) | 22.64 | 8.78 | 26.28 | 21.38 | 8.58 | 17.77 | ||||||||||||
Number of redevelopment leases | 3 | 1 | — | — | — | — | ||||||||||||
Redevelopment square feet | 84,421 | 22,685 | — | — | — | — | ||||||||||||
Redevelopment tenant improvement costs per square foot (2) (5) | $ | 104.28 | $ | 255.62 | — | — | — | — | ||||||||||
Redevelopment leasing commission costs per square foot (2) | $ | 13.99 | $ | 2.92 | — | — | — | — | ||||||||||
Total new lease costs per square foot | $ | 109.26 | $ | 77.91 | $ | 36.65 | $ | 54.24 | $ | 13.68 | $ | 27.79 | ||||||
Total (4) | ||||||||||||||||||
Number of leases | 46 | 47 | 18 | 26 | 19 | 63 | ||||||||||||
Square Feet | 138,951 | 107,173 | 49,870 | 16,519 | 46,484 | 112,873 | ||||||||||||
Tenant improvement costs per square foot (2) | $ | 89.69 | $ | 70.38 | $ | 8.87 | $ | 21.47 | $ | 6.55 | $ | 9.76 | ||||||
Leasing commission costs per square foot (2) | 16.94 | 7.54 | 22.44 | 12.10 | 8.35 | 15.12 | ||||||||||||
Total costs per square foot | $ | 106.64 | $ | 77.92 | $ | 31.31 | $ | 33.58 | $ | 14.90 | $ | 24.88 | ||||||
| (1) | Does not include retained tenants that have relocated to new space or expanded into new space. |
| (2) | Assumes all tenant improvement and leasing commissions are paid in the calendar year in which the lease commences, which may be different than the year in which they are actually paid. |
| (3) | Includes retained tenants that have relocated to new space or expanded into new space within our portfolio. |
| (4) | Recent property acquisitions may make a period over period comparison difficult. For a list of the acquisition dates of our properties see page 14. |
| (5) | Redevelopment Tenant Improvement costs include tenant-specific building improvements for square footage designated as space held for redevelopment. |
19
Historical Capital Expenditures
| Three Months Ended | Full Year 2005 | ||||||||||||||||||||
| 6/30/2006 | 3/31/2006 | 12/31/2005 | 9/30/2005 | 6/30/2005 | 3/31/2005 | ||||||||||||||||
Recurring capital expenditures (1) (3) | $ | 258,169 | $ | 652,438 | $ | 1,167,052 | $ | 240,025 | $ | 91,049 | $ | 266,974 | $ | 1,765,100 | |||||||
Non-recurring capital expenditures (2) (3) | $ | 4,306,049 | $ | 750,817 | $ | 1,689,757 | $ | 1,766,579 | $ | 1,604,007 | $ | 1,352,219 | $ | 6,412,562 | |||||||
Total net rentable square feet at period end excluding redevelopment space | 9,132,357 | 8,135,957 | 8,051,212 | 7,864,760 | 7,791,110 | 6,303,226 | 8,051,212 | ||||||||||||||
Recurring capital expenditures per square foot | $ | 0.03 | $ | 0.08 | $ | 0.14 | $ | 0.03 | $ | 0.01 | $ | 0.04 | $ | 0.22 | |||||||
Non-recurring capital expenditures per square foot (2) (3) | $ | 0.47 | $ | 0.09 | $ | 0.21 | $ | 0.22 | $ | 0.21 | $ | 0.21 | $ | 0.80 | |||||||
| (1) | Recurring capital expenditures represents non-incremental building improvements required to maintain current revenues. Recurring capital expenditures do not include acquisition capital that was taken into consideration when underwriting the purchase of a building or which are incurred to bring a building up to “operating standard”. |
| (2) | Non-recurring capital expenditures for the three months ended June 30, 2006 includes approximately $1.9 million related to 115 Second Avenue and 3 Corporate Place. These properties are currently unoccupied. |
| (3) | Recent property acquisitions may make a period over period comparison difficult. For a list of the acquisition dates of our properties see page 15. |
20
Management Statements on Non-GAAP Supplemental Measures
Funds from Operations:
We calculate Funds from Operations, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other REITs may not calculate FFO in accordance with the NAREIT definition and, accordingly, our FFO may not be comparable to such other REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance. FFO for all periods presented in this supplemental information includes the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006.
Adjusted Funds From Operations:
We present adjusted funds from operations, or AFFO, as a supplemental operating measure because, when compared year over year, it assesses our ability to fund dividend and distribution requirements from our operating activities. We also believe that, as a widely recognized measure of the operations of REITs, AFFO will be used by investors as a basis to assess our ability to fund dividend payments in comparison to other REITs. We calculate adjusted funds from operations, or AFFO, by adding to or subtracting from FFO (i) non-real estate depreciation, (ii) amortization of deferred financing costs (iii) noncash compensation (iv) loss from early extinguishment of debt (v) straight line rents (vi) fair value of lease revenue amortization (vii) capitalized leasing payroll (viii) recurring tenant improvements and (ix) capitalized leasing commissions. Other equity REITs may not calculate AFFO in a consistent manner. Accordingly, our AFFO may not be comparable to other equity REITs’ AFFO. AFFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our operations. A FFO for all periods presented in this supplemental information includes the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006.
EBITDA and Adjusted EBITDA:
We believe that earnings before interest, income taxes, depreciation and amortization, or EBITDA and Adjusted EBITDA (as defined below), are useful supplemental performance measures because they allow investors to view our performance without the impact or noncash depreciation and amortization or the cost of debt and with respect to Adjusted EBITDA preferred dividends and minority interests. Adjusted EBITDA is EBITDA excluding minority interests and preferred stock dividends. In addition, we believe EBITDA and adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. Because EBITDA and adjusted EBITDA are calculated before recurring cash charges including interest expense and income taxes, and are not adjusted for capital expenditures or other recurring cash requirements of our business, their utility as a measure of our performance is limited. Accordingly, EBITDA and Adjusted EBITDA should be considered only as supplements to net income (computed in accordance with GAAP) as a measure of our financial performance. Other equity REITs may calculate EBITDA and Adjusted EBITDA differently than we do; accordingly, our EBITDA and Adjusted EBITDA may not comparable to such other REITs’ EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA for all periods presented in this supplemental information include the results of 7979 East Tufts Avenue, a property which we classify as held for sale and which we sold on July 12, 2006.
NOI and Run-rate NOI:
Net Operating Income (NOI)
NOI represents rental revenue and tenant reimbursement revenue less rental property operating and maintenance, property taxes and insurance expenses (as reflected in statement of operations). NOI is commonly used by stockholders, company management and industry analysts as a measurement of operating performance of the company’s rental portfolio. However, because NOI excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of NOI as a measure of our performance is limited. Other REITs may not calculate NOI in the same manner we do and, accordingly, our NOI may not be comparable to such other REITs’ NOI. Accordingly, NOI should be considered only as a supplement to net income as a measure of our performance.
Run-rate NOI:
Run-rate NOI represents NOI as defined above adjusted for new acquisitions to show an estimate of NOI as if the property had been owned for the entire quarter. Run-rate NOI is commonly used by stockholders, company management and industry analysts as a measurement of future operating performance of the company’s rental portfolio. Run-rate NOI may not be indicative of future performance. Actual performance is subject to risks, uncertainties and assumptions. See the discussion of forward-looking statements on page 2.
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