UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): NOVEMBER 14, 1997
ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its character)
MARYLAND 1-12993 95-4502084
(State of other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
135 NORTH LOS ROBLES AVENUE, SUITE 250 91101
PASADENA, CALIFORNIA
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code: (626) 578-0777
On December 1, 1997, Alexandria Real Estate Equities, Inc. (the
"Company") filed with the Securities and Exchange Commission the Company's
Current Report on Form 8-K, dated November 14, 1997, pertaining to the
acquisition of four properties. At the time of filing, it was impracticable for
the Company to provide the financial statements and pro forma financial
information required by Item 7 on Form 8-K. Accordingly, pursuant to Item 7,
the Company hereby amends such Current Report to include the previously
omitted information as follows:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF PROPERTIES ACQUIRED (1)
940 CLOPPER ROAD
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the year ended
December 31, 1996
Notes to Statement of Revenue and Certain Expenses
1500 EAST GUDE DRIVE AND 3/3-1/2 TAFT COURT
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the year ended
December 31, 1996
Notes to Statement of Revenue and Certain Expenses
1401 RESEARCH BLVD.
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the year ended
December 31, 1996
Notes to Statement of Revenue and Certain Expenses
(b) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(c) EXHIBITS
23.1 Consent of Ernst & Young LLP
- ------------------------------
(1) Financial statements have not been included for 708 Quince Orchard Road,
since this property was not occupied prior to acquisition of the property by
the Company. Concurrently with the acquisition of the property by the
Company, a triple-net lease was executed with a tenant for 100% of the
rentable area of the property.
Report of Independent Auditors
To the Board of Directors
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
940 Clopper Road (the Property) for the year ended December 31, 1996. This
statement of revenue and certain expenses is the responsibility of the
management of the Property. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of revenue and
certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
October 27, 1997
940 Clopper Road
Statement of Revenue and Certain Expenses
Year ended December 31, 1996
(IN THOUSANDS)
Revenue:
Rental $ 291
Tenant recoveries 56
--------
Total revenue 347
Certain expenses:
Utilities 29
Repairs and maintenance 20
Insurance 7
Taxes and license 51
--------
Total certain expenses 107
--------
Excess of revenue over certain expenses $ 240
--------
--------
See accompanying notes to statement of revenue and certain expenses.
940 Clopper Road
Notes to Statement of Revenue and Certain Expenses
Year ended December 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of 940 Clopper Road located in Rockville, Maryland (the Property)
which was acquired by Alexandria Real Estate Equities, Inc., a Maryland
corporation (the Company) from a nonaffiliated third party. This statement
reflects the operations of the Property during 1996 under its prior ownership
and as such reflects the effect of vacancies that existed during that
period. As of December 31, 1996, the space was 61% occupied and leased under
triple net leases which require the tenants to pay their prorata share of all
expenses associated with the Property including operating and maintenance,
utilities, taxes and insurance.
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual operations for
the period presented as certain expenses that may not be comparable to the
expenses expected to be incurred by the Company in the future operations of the
Property have been excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs not directly
comparable to the future operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
related leases.
RISKS AND UNCERTAINTIES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
2. RENTAL OFFICE PROPERTY
The future minimum lease payments to be received under noncancelable operating
leases as of December 31, 1996, are as follows:
1997 $ 324,000
1998 177,000
1999 124,000
2000 129,000
2001 134,000
Thereafter 198,000
--------------
Total $ 1,086,000
--------------
--------------
The above future minimum lease payments do not include specified payments for
tenant recoveries of operating expenses.
Report of Independent Auditors
To the Board of Directors
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
1500 East Gude Drive and 3/3 1/2 Taft Court (the Property) for the year ended
December 31, 1996. This statement of revenue and certain expenses is the
responsibility of the management of the Property. Our responsibility is to
express an opinion on the statement of revenue and certain expenses based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
November 7, 1997
1500 East Gude Drive and 3/3 1/2 Taft Court
Statement of Revenue and Certain Expenses
Year Ended December 31, 1996
(IN THOUSANDS)
Revenue:
Rental $ 268
Tenant recoveries 42
----------
Total revenue 310
Certain expenses:
Repairs and maintenance 33
Insurance 16
Taxes and license 101
----------
Total certain expenses 150
----------
Excess of revenue over certain expenses $ 160
----------
----------
See accompanying notes to statement of revenue and certain expenses.
1500 East Gude Drive and 3/3 1/2 Taft Court
Notes to Statement of Revenue and Certain Expenses
Year Ended December 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of 1500 East Gude Drive and 3/3 1/2 Taft Court located in
Rockville, Maryland (the Property) which was acquired by Alexandria Real
Estate Equities, Inc., a Maryland corporation (the Company) from a
nonaffiliated third party. This statement reflects the operations of the
Property during 1996 under its prior ownership and as such reflects the
effect of vacancies and terms of prior leases that existed during that
period. As of December 31, 1996, the space was 91% occupied and leased under
triple net leases which require the tenants to pay their prorata share of all
expenses associated with the Property including operating and maintenance,
utilities, taxes, and insurance.
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual operations for
the period presented as certain expenses that may not be comparable to the
expenses expected to be incurred by the Company in the future operations of
the Property have been excluded. Excluded expenses consist of interest,
depreciation and amortization and property general and administrative costs
not directly comparable to the future operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
related leases.
RISKS AND UNCERTAINTIES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
2. RENTAL OFFICE PROPERTY
The future minimum lease payments to be received under noncancelable operating
leases as of December 31, 1996, are as follows:
1997 $ 619,000
1998 474,000
1999 481,000
2000 515,000
2001 515,000
Thereafter 2,614,000
------------
Total $ 5,218,000
------------
------------
The above future minimum lease payments do not include specified payments for
tenant recoveries of operating expenses.
Report of Independent Auditors
To the Board of Directors
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
1401 Research Blvd. (the Property) for the year ended December 31, 1996. This
statement of revenue and certain expenses is the responsibility of the
management of the Property. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
October 27, 1997
1401 Research Blvd.
Statement of Revenue and Certain Expenses
Year ended December 31, 1996
(IN THOUSANDS)
Revenue:
Rental $ 462
Tenant recoveries 19
-----------
Total revenue 481
Certain expenses:
Insurance 9
Taxes and license 44
-----------
Total certain expenses 53
-----------
Excess of revenue over certain expenses $ 428
-----------
-----------
See accompanying notes to statement of revenue and certain expenses.
1401 Research Blvd.
Notes to Statement of Revenue and Certain Expenses
Year ended December 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of 1401 Research Blvd. located in Rockville, Maryland (the
Property) which was acquired by Alexandria Real Estate Equities, Inc., a
Maryland corporation (the Company) from a nonaffiliated third party. The
Property is 100% leased to the United States Government. This statement
reflects the operations of the Property during 1996 under its prior ownership
and as such reflects the terms of a prior lease that existed during that
period.
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual operations for
the period presented as certain expenses that may not be comparable to the
expenses expected to be incurred by the Company in the future operations of the
Property have been excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs not directly
comparable to the future operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
related leases.
RISKS AND UNCERTAINTIES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
2. RENTAL OFFICE PROPERTY
The future minimum lease payments to be received under noncancelable operating
leases as of December 31, 1996, are as follows:
1997 $ 712,000
1998 712,000
1999 712,000
2000 733,000
2001 377,000
--------------
Total $ 3,246,000
--------------
--------------
The lease terms provide for the tenant to pay increases in property taxes and
insurance expenses of the Property in excess of specified amounts. The lease
agreement also provides that expenses of the Property other than property taxes
and insurance are paid directly by the tenant. The above future minimum lease
payments do not include specified payments for such tenant reimbursements.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet as of
September 30, 1997 is presented as if the acquisition of properties described in
Item 2 of the related Form 8-K filed on December 1, 1997 (the "Form 8-K
Properties") had been acquired on September 30, 1997. The following unaudited
pro forma condensed consolidated statements of operations for the nine months
ended September 30, 1997 and for the year ended December 31, 1996 are presented
as if: (i) the consummation of the initial public offering of common stock in
May 1997 (the IPO) and related formation transactions in connection with the
IPO, including the acquisition of properties acquired during 1996 (the "1996
Acquisitions") and the acquisition of properties acquired during 1997 in
connection with the IPO (the "Acquisition LLC Properties"), and (ii) the Form
8-K Properties, had occurred at January 1, 1996.
The pro forma condensed consolidated financial statements are not necessarily
indicative of what the actual financial position or results of operations would
have been had the Company completed the transactions described above, nor do
they purport to represent the future financial position of the Company.
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 1997
(DOLLARS IN THOUSANDS)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
-------------------------------------------------
Assets
Rental properties - net $ 214,922 $ 6,500 (A) $ 221,422
Cash and cash equivalents 6,789 - 6,789
Tenant security deposit funds and other restricted cash 4,655 - 4,655
Tenant receivable and deferred rent 1,153 - 1,153
Loan fees and costs - net 1,602 - 1,602
Other assets 2,403 - 2,403
-------------------------------------------------
Total assets $ 231,524 $ 6,500 $ 238,024
-------------------------------------------------
-------------------------------------------------
Liabilities and stockholders' equity
Secured notes payable and line of credit $ 54,727 $ 6,500 (B) $ 61,227
Accounts payable, accrued expenses and tenant security
deposits 4,965 - 4,965
Dividends payable 4,562 - 4,562
-------------------------------------------------
Total liabilities 64,254 6,500 70,754
Stockholders' equity:
Common stock 114 - 114
Additional paid-in capital 178,297 - 178,297
Accumulated deficit (11,141) - (11,141)
-------------------------------------------------
Total stockholders' equity 167,270 - 167,270
-------------------------------------------------
Total liabilities and stockholders' equity $ 231,524 $ 6,500 $ 238,024
-------------------------------------------------
-------------------------------------------------
SEE ACCOMPANYING NOTES.
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Income Statement
Nine months ended September 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
------------------------------------------------------
PRO FORMA
IPO AND ADJUSTMENTS
RELATED FOR FORM 8-K
HISTORICAL TRANSACTIONS PROPERTIES PRO FORMA
------------------------------------------------------------------------
Revenues:
Rental revenue $ 17,963 $ 2,658 (D) $ 1,678 (L) $ 22,299
Tenant recoveries and other income 6,619 100 (D) 195 (L) 6,738
499 (M) (675) (N)
------------------------------------------------------------------------
Total revenues 24,582 3,257 1,198 29,037
Expenses:
Rental operations 6,216 91 (D) 226 (L) 6,533
General and administrative 1,805 187 (I) - 1,992
Special bonus 353 - - 353
Stock compensation 4,239 - - 4,239
Post retirement benefit 632 - - 632
Acquisition LLC financing costs 6,973 (6,973) (G) - -
Write-off of unamortized loan costs 2,147 (2,147) (H) - -
Interest 5,789 (2,225) (J) 17 (J) 3,581
Depreciation and amortization 3,434 402 (K) 264 (K) 4,100
------------------------------------------------------------------------
Total expenses 31,588 (10,665) 507 21,430
------------------------------------------------------------------------
Net income (loss) $ (7,006) $ 13,922 $ 691 $ 7,607
------------------------------------------------------------------------
------------------------------------------------------------------------
Pro forma weighted average Shares of
Common Stock outstanding (O) 7,048,381 11,404,631
--------------- --------------
--------------- --------------
Net income (loss) per pro forma share
of Common Stock $ (0.99) $ 0.67
--------------- --------------
--------------- --------------
SEE ACCOMPANYING NOTES.
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Income Statement
Year ended December 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
------------------------------------------------------
PRO FORMA
IPO AND ADJUSTMENTS
RELATED FOR FORM 8-K
HISTORICAL TRANSACTIONS PROPERTIES PRO FORMA
------------------------------------------------------------------------
Revenues:
Rental revenue $ 12,941 $ 5,247 (C) $ 1,021 (L) $ 19,899
539 (D)
151 (E)
Tenant recoveries and other income 4,732 1,391 (C) 117 (L) 6,488
62 (D) (1,054) (N)
186 (F)
1,054 (M)
------------------------------------------------------------------------
Total revenues 17,673 8,630 84 26,387
Expenses:
Rental operations 4,356 1,917 (C) 310 (L) 6,781
62 (D)
136 (F)
General and administrative 1,972 928 (I) - 2,900
Post retirement benefit 438 - - 438
Interest 6,327 (2,491) (J) 23 (J) 3,859
Depreciation and amortization 2,405 1,116 (K) 393 (K) 3,914
------------------------------------------------------------------------
Total expenses 15,498 1,668 726 17,892
------------------------------------------------------------------------
Net income $ 2,175 $ 6,962 $ (642) $ 8,495
------------------------------------------------------------------------
------------------------------------------------------------------------
Pro forma shares of Common Stock outstanding (O) $ 3,642,131 $ 11,404,631
--------------- --------------
--------------- --------------
Net income per pro forma share of Common Stock $ 0.60 $ 0.74
--------------- --------------
--------------- --------------
SEE ACCOMPANYING NOTES.
Alexandria Real Estate Equities, Inc.
Adjustments to the Unaudited Pro Forma Condensed
Consolidated Financial Statements (continued)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The adjustments to the Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of September 30, 1997 are as follows:
(A) Acquisition of 1500 East Gude Drive and 3/3 1/2 Taft Court $ 6,500
(B) Draw on Company's line of credit to purchase $ 6,500
1500 East Gude Drive and 3/3 1/2 Taft Court
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME
STATEMENTS
The pro forma adjustments reflected in the Unaudited Pro Forma Condensed
Consolidated Income Statement for the nine months ended September 30, 1997 and
for the year ended December 31, 1996 are as follows:
(C) Represents the actual historical results for the 1996 Acquisitions
from the beginning of the period through the date of acquisition:
THE 1996 ACQUISITIONS
-----------------------------------------------------------------------------------
PERIOD JANUARY 1, 1996 TO THE DATE OF ACQUISITION
-----------------------------------------------------------------------------------
1102/1124 1413 300/401 25/35/45 WEST 1311/1401/1431
COLUMBIA RESEARCH PROFESSIONAL WATKINS MILL HARBOR BAY
STREET BOULEVARD DRIVE ROAD PARKWAY TOTAL
---------------------------------------------------------------------------------------------------
Acquisition date May 31, 1996 July 2, 1996 September 10, 1996 October 18, 1996 December 12, 1996
Revenues:
Rental revenue $ - $ 711 $ 1,096 $ 1,296 $ 2,144 $ 5,247
Tenant recoveries
and other
income - 595 350 300 146 1,391
---------------------------------------------------------------------------------------------------
1,306 1,446 1,596 2,290 6,638
Expenses:
Rental properties - 680 350 332 555 1,917
---------------------------------------------------------------------------------------------------
Net income $ - $ 626 $ 1,096 $ 1,264 $ 1,735 $ 4,721
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME
STATEMENTS (CONTINUED)
No pro forma adjustment has been made for the period prior to acquisition
for 1102/1124 Columbia Street because the property was owner occupied prior
to its purchase and as a result there are no historical operating results
as a rental property. There was no pro forma adjustment necessary for the
1996 Acquisitions for the nine months ended September 30, 1997 because
the revenue and expenses related to the properties are included in the
historical net income for the period.
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME
STATEMENTS (CONTINUED)
(D) Represents the actual historical results of the Acquisition LLC
Properties from the beginning of the period through the date of
acquisition. The Company acquired the Acquisition LLC Properties
in connection with the IPO.
THE ACQUISITION LLC PROPERTIES
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------------
14225 NEWBROOK 1550 EAST 1330 PICCARD
DRIVE GUDE DRIVE TOTAL
---------------------------------------------------------------------------
Acquisition date January 13, 1997 January 24, 1997 January 15, 1997
Revenues:
Rental revenue $ - $ 539 $ - $ 539
Tenant recoveries
and other income - 62 - 62
---------------------------------------------------------------------------
- 601 - 601
Expenses:
Rental properties - 62 - 62
---------------------------------------------------------------------------
Net income $ - $ 539 $ - $ 539
---------------------------------------------------------------------------
---------------------------------------------------------------------------
THE ACQUISITION LLC PROPERTIES
-------------------------------------------------------
FOR THE PERIOD JANUARY 1, 1997
TO ACQUISITION DATE
-------------------------------------------------------
HISTORICAL
14225 NEWBROOK 1550 EAST 1330 PICCARD ACQUISITION
DRIVE GUDE DRIVE DRIVE LLC TOTAL
---------------------------------------------------------------------------------------------
Revenues:
Rental revenue $ - $ 34 $ - $ 2,624 $ 2,658
Tenant recoveries
and other income - 4 - 96 100
---------------------------------------------------------------------------------------------
- 38 - 2,720 2,758
Expenses:
Rental properties - 4 - 87 91
---------------------------------------------------------------------------------------------
Net income $ - $ 34 $ - $ 2,633 $ 2,667
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME
STATEMENTS (CONTINUED)
No pro forma adjustments have been made for 14225 Newbrook Drive and
1330 Piccard Drive for the period prior to acquisition because these
properties were owner occupied prior to purchase and as a result
there are no historical operating results as rental properties.
(E) Increase in rental revenue to adjust the 1996 Acquisitions and the
Acquisition LLC Properties to straight-line rental revenue for the
pro forma period.
(F) Net increase in rental properties expenses (primarily due to
insurance) and tenant recoveries which are directly related to the
increase in pro forma expenses to be recovered in excess of historical
amounts.
(G) In connection with the IPO, the Company acquired 100% of the
membership interests in the Acquisition LLC for $58,857, which
exceeds the purchase price paid by the Acquisition LLC Properties
for the Acquisition LLC Properties by $6,973. This difference, which
has been accounted for as a financing cost, is being eliminated on a
pro forma basis due to its non-continuing nature.
(H) In connection with the IPO, the Company paid off secured notes with
a principal balance of $72,698. In connection with the retirement of
these loans, the Company wrote off $2,147 of unamortized loan costs.
This charge is being eliminated on a pro forma basis due to its
non-continuing nature.
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME
STATEMENTS (CONTINUED)
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------------------------
(I) Increase in general and
administrative expense related
to operations as a public REIT
consisting of increased salaries
and bonuses (including that of
the chief financial officer),
directors and officers insurance,
investor relations and public
entity and listing fees $ 187 $ 928
------------------------------
------------------------------
(J) Adjustment to interest expense due to repayment of certain mortgage
loans in connection with the Company's initial public offering,
partially offset by new mortgage debt incurred in connection with the
Offering, and new borrowings on the Company's unsecured line of credit
associated with the Form 8-K Properties.
(K) Increase in depreciation expense to reflect a full period of
depreciation for the 1996 Acquisitions, the Acquisition LLC
Properties and the Form 8-K Properties utilizing a 40-year useful life
for buildings and a 10-year useful life for improvements.
(L) Represents the actual historical results of the Form 8-K Properties
from the beginning of the period through the date of acquisition:
FOR THE YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------------------
708 QUINCE 940 CLOPPER 1401 RESEARCH 1500 E. GUDE DRIVE &
ORCHARD ROAD ROAD BLVD. 3/3 1/2 TAFT COURT TOTAL
------------------------------------------------------------------------------------------
Acquisition date August 26, 1997 August 26, 1997 September 4, 1997 November 14, 1997
Revenues:
Rental revenue $ - $ 291 $ 462 $ 268 $ 1,021
Tenant recoveries - 56 19 42 117
------------------------------------------------------------------------------------------
- 347 481 310 1,138
------------------------------------------------------------------------------------------
Expenses:
Rental operations - 107 53 150 310
------------------------------------------------------------------------------------------
Net income $ - $ 240 $ 428 $ 160 $ 828
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME
STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------------------------------------------------------------
708 QUINCE 940 CLOPPER 1401 RESEARCH 1500 E. GUDE DRIVE &
ORCHARD ROAD ROAD BLVD. 3/3 1/2 TAFT COURT TOTAL
------------------------------------------------------------------------------------------
Revenues:
Rental revenue $ - $ 235 $ 955 $ 488 $ 1,678
Tenant recoveries - 90 22 83 195
------------------------------------------------------------------------------------------
- 325 977 571 1,873
------------------------------------------------------------------------------------------
Expenses:
Rental operations - 86 41 99 226
------------------------------------------------------------------------------------------
Net income $ - $ 239 $ 936 $ 472 $ 1,647
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
The pro forma adjustments for 940 Clopper Road, 1401 Research Blvd.
and 1500 E. Gude Drive & 3/3 1/2 Taft Court reflect the historical
operations of the properties under their prior ownership. As such,
they reflect vacancies and/or the terms of prior leases that existed
prior to the purchase of the property by the Company.
No pro forma adjustment has been made for the period prior to
acquisition for the operations of 708 Quince Orchard Road because the
property was not occupied prior to its purchase by the Company.
However, the pro forma income statement has assumed the purchase of
the property and interest income has been reduced pursuant to note
(N).
(M) Represents additional interest income earned on excess proceeds from
the initial public offering (which has been eliminated pursuant to
note (N)).
(N) Represents the reduction of interest income due to the assumed use of
cash to purchase the Form 8-K Properties.
(O) Pro forma shares of Common Stock outstanding on a historical net
income basis include all shares outstanding after giving effect to the
conversion of all series of preferred stock, the 1,765.923 to one
share stock split, the issuance of stock grants and exercise of the
substitute stock options in connection with the IPO.
Pro forma shares of Common Stock outstanding on a pro forma basis
include all historical pro forma shares outstanding giving effect
to the IPO. Shares issued in the IPO for the acquisition of 1330
Piccard Drive and 14225 Newbrook Drive are assumed to be outstanding
from the beginning of the periods presented. However, no revenues
and expenses have been included for these properties for the period
prior to their acquisition by the Acquisition LLC.
(c) Exhibits.
EXHIBIT INDEX
Exhibit Number Exhibits
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23.1 Consent of Ernst & Young LLP
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ALEXANDRIA REAL ESTATE EQUITIES INC.
Date: January 29, 1998 By: /s/ Peter J. Nelson
-------------------------
Peter J. Nelson
Chief Financial Officer