-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CwCKMYfes0ZF1clHccvHwx8XXkCBzeOAYZBO0H3uulOhPn7wNKjs1bMgyhg/3vnS cM7+R3VbeNW6BjzvNvLP1Q== 0000912057-00-024637.txt : 20000516 0000912057-00-024637.hdr.sgml : 20000516 ACCESSION NUMBER: 0000912057-00-024637 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALEXANDRIA REAL ESTATE EQUITIES INC CENTRAL INDEX KEY: 0001035443 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 954502084 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12993 FILM NUMBER: 633697 BUSINESS ADDRESS: STREET 1: 135 NORTH LOS ROBLES AVE STREET 2: SUITE 250 CITY: PASADENA STATE: CA ZIP: 91101 BUSINESS PHONE: 8185780777 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------ ------------ Commission file number 1-12993 ALEXANDRIA REAL ESTATE EQUITIES, INC. (Exact name of registrant as specified in its charter) Maryland 95-4502084 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 135 North Los Robles Avenue, Suite 250, Pasadena, California 91101 (Address of principal executive offices) (626) 578-0777 (Registrant's telephone number, including area code) N/A - - - - - - - - - - - - - - - - - - - - (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of May 11, 2000, 14,293,022 shares of common stock, par value $.01 per -- ---------- share, were outstanding. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS (UNAUDITED)........................................... 3 Condensed Consolidated Balance Sheets of Alexandria Real Estate Equities, Inc. and Subsidiaries as of March 31, 2000 and December 31, 1999.................................................................... 4 Condensed Consolidated Income Statements of Alexandria Real Estate Equities, Inc. and Subsidiaries for the three months ended March 31, 2000 and 1999..................................................... 5 Condensed Consolidated Statements of Cash Flows of Alexandria Real Estate Equities, Inc. and Subsidiaries for the three months ended March 31, 2000 and 1999............................................... 6 Notes to Condensed Consolidated Financial Statements........................ 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................................................10 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..................21 PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS...........................................................22 Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS...................................22 Item 3. DEFAULTS UPON SENIOR SECURITIES.............................................22 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................22 Item 5. OTHER INFORMATION...........................................................22 Item 6. EXHIBITS AND REPORTS ON FORM 8-K............................................22
2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) 3 Alexandria Real Estate Equities, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
MARCH 31, DECEMBER 31, 2000 1999 ----------------------------------------- ASSETS Rental properties, net $ 584,316 $ 554,706 Property under development 26,156 44,121 Cash and cash equivalents 1,968 3,446 Tenant security deposits and other restricted cash 4,844 4,681 Secured note receivable 6,000 6,000 Tenant receivables 2,889 3,432 Deferred rent 10,022 9,014 Other assets 25,080 17,718 ------------------------------------------- Total assets $ 661,275 $ 643,118 =========================================== LIABILITIES AND STOCKHOLDERS' EQUITY Secured notes payable $ 158,874 $ 158,512 Unsecured line of credit 211,000 192,000 Accounts payable, accrued expenses and tenant security deposits 21,791 23,349 Dividends payable 6,696 6,674 ------------------------------------------- Total liabilities 398,361 380,535 Stockholders' equity: Series A preferred stock 38,588 38,588 Common stock 138 137 Additional paid-in capital 224,188 223,858 Retained earnings - - ------------------------------------------- Total stockholders' equity 262,914 262,583 ------------------------------------------- Total liabilities and stockholders' equity $ 661,275 $ 643,118 ===========================================
SEE ACCOMPANYING NOTES. 4 Alexandria Real Estate Equities, Inc. and Subsidiaries Condensed Consolidated Income Statements (Unaudited) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, 2000 1999 ----------------------------- Revenues: Rental $ 18,655 $ 15,748 Tenant recoveries 4,758 3,424 Interest and other income 549 367 ----------------------------- 23,962 19,539 Expenses: Rental operations 4,974 4,383 General and administrative 2,093 1,301 Interest 5,551 4,963 Depreciation and amortization 5,607 3,594 ----------------------------- 18,225 14,241 ----------------------------- Net income $ 5,737 $ 5,298 ============================= Dividends on preferred stock $ 916 $ - ============================= Net income available to common stockholders $ 4,821 $ 5,298 ============================= Net income per common share -Basic $ 0.35 $ 0.41 ============================= -Diluted $ 0.35 $ 0.40 ============================= Weighted average shares of common stock outstanding: -Basic 13,780,276 13,025,303 ============================= -Diluted 13,912,400 13,163,695 =============================
SEE ACCOMPANYING NOTES. 5 Alexandria Real Estate Equities, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, 2000 1999 ---------------------------- Net cash provided by operating activities $ 1,798 $ 14,003 INVESTING ACTIVITIES Purchase of rental properties - (5,161) Additions to rental properties (3,202) (4,177) Property development costs (13,578) (3,524) ---------------------------- Net cash used in investing activities (16,780) (12,862) FINANCING ACTIVITIES Proceeds from secured notes payable 1,539 624 Net proceeds from issuance of common stock - 29,830 Repurchase of common stock - (3,420) Proceeds from exercise of stock options 900 46 Net borrowings (principal reductions) on unsecured line of credit 19,000 (22,000) Principal reductions on secured notes payable (1,098) (1,290) Dividends paid on common stock (5,921) (5,035) Dividends paid on preferred stock (916) - ---------------------------- Net cash provided by (used in) financing activities 13,504 (1,245) Net decrease in cash and cash equivalents (1,478) (104) Cash and cash equivalents at beginning of period 3,446 1,554 ---------------------------- Cash and cash equivalents at end of period $ 1,968 $ 1,450 ============================
SEE ACCOMPANYING NOTES. 6 Alexandria Real Estate Equities, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) 1. BACKGROUND AND BASIS OF PRESENTATION BACKGROUND Alexandria Real Estate Equities, Inc. is a real estate investment trust ("REIT") formed in 1994. We are engaged primarily in the ownership, operation, management, acquisition, conversion, retrofit, expansion and selective development and redevelopment of properties containing a combination of office and laboratory space. We refer to these properties as "Life Science Facilities." Our Life Science Facilities are designed and improved for lease primarily to pharmaceutical, biotechnology, diagnostic, device, contract research and personal care products companies, scientific research institutions, related government agencies and technology enterprises. As of March 31, 2000, our portfolio consisted of 61 properties in nine states with approximately 4.3 million rentable square feet. We have prepared the accompanying interim financial statements in accordance with generally accepted accounting principles and in conformity with the rules and regulations of the Securities and Exchange Commission. In our opinion, the interim financial statements presented herein reflect all adjustments of a normal and recurring nature that are necessary to fairly present the interim financial statements. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. These financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 1999. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements include the accounts of Alexandria and its subsidiaries. All significant intercompany balances and transactions have been eliminated. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the current period presentation. 7 2. RENTAL PROPERTIES Rental properties consist of the following (in thousands):
MARCH 31, DECEMBER 31, 2000 1999 ---------------------------------- Land $ 85,448 $ 81,446 Buildings and improvements 493,483 475,507 Tenant and other improvements 46,016 33,249 ---------------------------------- 624,947 590,202 Less accumulated depreciation (40,631) (35,496) ---------------------------------- $ 584,316 $ 554,706 ===================================
During the three months ended March 31, 2000, we completed the development of three properties containing approximately 220,000 rentable square feet at an aggregate cost, including land, of approximately $35.0 million. 3. UNSECURED LINE OF CREDIT On February 11, 2000, we amended our unsecured line of credit to provide for borrowings of up to $325 million. Prior to the amendment, borrowings under the line of credit were limited to $250 million. Borrowings under the line of credit bear interest at a floating rate based on our election of either a LIBOR based rate or the higher of the bank's reference rate and the Federal Funds rate plus 0.5%. For each LIBOR based advance, we must elect to fix the rate for a period of one, two, three or six months. The line of credit contains financial covenants, including, among other things, maintenance of minimum market net worth, a total liabilities to gross asset value ratio, and a fixed charge coverage ratio. In addition, the terms of the line of credit restrict, among other things, certain investments, indebtedness, distributions and mergers. Borrowings under the line of credit are limited to an amount based on a pool of unencumbered assets. Accordingly, as we acquire additional unencumbered properties, borrowings available under the line of credit will increase, but may not exceed $325 million. As of March 31, 2000, borrowings under the line of credit were limited to approximately $253 million, and the borrowings outstanding on the line of credit carried a weighted average interest rate of 7.71%. The line of credit expires February 2003 and provides for an extension (provided there is no default) of an additional one-year period, upon notice by the company and consent of the participating banks. 4. STOCKHOLDERS' EQUITY On March 21, 2000, we declared a cash dividend on our common stock aggregating $5,931,000 ($ 0.43 per share) for the calendar quarter ended March 31, 2000. We paid the dividend on April 14, 2000. On March 21, 2000, we also declared a cash dividend on our Series A preferred stock aggregating $916,000 ($ 0.59375 per share) for the period from January 16, 2000 through April 15, 2000. We paid the dividend on April 14, 2000. The portion relating to the period prior to March 31, 2000 ($765,000) has been included in accrued liabilities in the accompanying balance sheet. 8 5. NET INCOME PER SHARE The following table shows the computation of net income per share of our common stock outstanding (dollars in thousands, except per share amounts):
THREE MONTHS ENDED THREE MONTHS ENDED MARCH 31, 2000 MARCH 31, 1999 ---------------------------------------- Net income available to common stockholders $ 4,821 $ 5,298 ======================================== Weighted average shares of common stock outstanding - basic 13,780,276 13,025,303 Add: dilutive effect of stock options 132,124 138,392 ---------------------------------------- Weighted average shares of common stock outstanding - diluted 13,912,400 13,163,695 ======================================== Net income per common share: - Basic $ 0.35 $ 0.41 ======================================== - Diluted $ 0.35 $ 0.40 ========================================
6. SUBSEQUENT EVENT On April 13, 2000, we completed the private placement of 500,000 shares of common stock. The shares were issued at a price of $29.39 per share, resulting in aggregate proceeds of approximately $14.2 million, net of offering costs. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain information and statements included in this Quarterly Report on Form 10-Q, including, without limitation, statements containing the words "believes," "anticipates," "expects" and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve known and unknown risks and uncertainties. Given these uncertainties, prospective and current investors are cautioned not to place undue reliance on such forward-looking statements. Our actual results, performance or achievements, or industry results may be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements as a result of many factors. We disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained in this or any other document. Readers of this Form 10-Q should also read our other publicly filed documents for further discussion regarding such factors. As used in this Form 10-Q, "we," "our," "ours" and "us" refer to Alexandria Real Estate Equities, Inc. and its subsidiaries. The following discussion should be read in conjunction with the financial statements and notes appearing elsewhere in this report. OVERVIEW Since our formation in October 1994, we have devoted substantially all of our resources to the ownership, operation, management, acquisition, conversion, retrofit, expansion and selective development and redevelopment of high quality, strategically located Life Science Facilities in our target markets. Our primary source of revenue is rental income and tenant recoveries from leases at the properties we own. Of the 61 properties we owned as of March 31, 2000, four were acquired in 1994, eight in 1996, nine in 1997, 29 in 1998, and six in 1999. In addition, we completed the development of two properties in 1999 (together with the six properties acquired in 1999, the "1999 Properties") and three properties in 2000 (the "2000 Properties"). As a result of our acquisition and development activities, the financial data presented in this report shows significant increases in total revenue and expenses for the 2000 period compared to the 1999 period. RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 ("FIRST QUARTER 2000") TO THREE MONTHS ENDED MARCH 31, 1999 ("FIRST QUARTER 1999") Rental revenue increased by $3.0 million, or 18%, to $18.7 million for First Quarter 2000 compared to $15.7 million for First Quarter 1999. The increase resulted primarily from rental revenue from the 1999 Properties. Rental revenue from the properties acquired before January 1, 1999 (the "First Quarter Same Properties") increased by $419,000, or 2.9%, primarily due to increases in rental rates. 10 Tenant recoveries increased by $1.4 million, or 39%, to $4.8 million for First Quarter 2000 compared to $3.4 million for First Quarter 1999. A portion of the increase resulted from tenant recoveries from the 1999 Properties. Tenant recoveries for the First Quarter Same Properties increased by $804,000, or 26%, primarily due to increases in recoverable operating expenses and certain recoverable capitalized costs. Interest and other income increased by $182,000, or 50%, to $549,000 for First Quarter 2000 compared to $367,000 for First Quarter 1999, resulting primarily from a gain on marketable securities of $179,000. Rental operating expenses increased by $591,000, or 13%, to $5.0 million for First Quarter 2000 compared to $4.4 million for First Quarter 1999. A portion of the increase resulted from rental operating expenses from the 1999 Properties. Operating expenses for the First Quarter Same Properties increased by $262,000, or 6.8%, primarily due to increases in property taxes and utilities expense at certain properties, substantially all of which was recoverable from the tenants at the respective properties. The following is a comparison of property operating data computed under generally accepted accounting principles ("GAAP Basis") and under generally accepted accounting principles, adjusted to exclude the effect of straight line rent adjustments required by GAAP ("Cash Basis") for the First Quarter Same Properties (dollars in thousands):
FOR THE THREE MONTHS ENDED MARCH 31, -------------------------- 2000 1999 CHANGE ------------------------------------------ GAAP BASIS: Revenue $ 19,162 $ 17,953 6.7% Rental operating expenses 4,144 3,882 6.7% ------------------------------------------ Net operating income $ 15,018 $ 14,071 6.7% ========================================== CASH BASIS (1): Revenue $ 18,686 $ 17,384 7.5% Rental operating expenses 4,144 3,882 6.7% ------------------------------------------ Net operating income $ 14,542 $ 13,502 7.7% ==========================================
- --------- (1) Revenue and operating expenses are computed in accordance with GAAP, except that revenue excludes the effect of straight line rent adjustments. 11 General and administrative expenses increased by $792,000, or 61%, to $2.1 million for First Quarter 2000 compared to $1.3 million for First Quarter 1999. The increase was primarily due to the continued increase in the scope of our operations. Interest expense increased by $588,000, or 12%, to $5.6 million for First Quarter 2000 compared to $5.0 million for First Quarter 1999. The increase resulted primarily from the indebtedness incurred to acquire the 1999 Properties. Depreciation and amortization increased by $2.0 million, or 56%, to $5.6 million for First Quarter 2000 compared to $3.6 million for First Quarter 1999. The increase resulted primarily from depreciation associated with the 1999 Properties. As a result of the foregoing, net income was $5.7 million for First Quarter 2000 compared to $5.3 million for First Quarter 1999. LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS Net cash provided by operating activities for First Quarter 2000 decreased by $12.2 million, to $1.8 million compared to $14.0 million for First Quarter 1999. The decrease resulted primarily from increases in other assets and depreciation expense. Net cash used in investing activities increased by $3.9 million, to $16.8 million for First Quarter 2000 compared to $12.9 million for First Quarter 1999. The increase was primarily due to a higher level of property development costs incurred during First Quarter 2000 compared to First Quarter 1999. Net cash provided by financing activities increased by $14.7 million, to $13.5 million provided by financing activities for First Quarter 2000 compared to $1.2 million used in financing activities for First Quarter 1999. Cash provided by financing activities for First Quarter 2000 consisted primarily of net proceeds from our unsecured line of credit, secured debt and exercise of stock options, partially offset by principal reductions on our secured debt and distributions to stockholders. Cash used in financing activities for First Quarter 1999 consisted of principal reductions on our unsecured line of credit, net principal reductions on our secured debt and distributions to stockholders, partially offset by net proceeds from the issuance and repurchase of our common stock and exercise of stock options. COMMITMENTS As of March 31, 2000, we were committed under the terms of certain leases to complete the construction of buildings and related improvements at a remaining aggregate cost of $40.6 million. 12 As of March 31, 2000, we were also committed to fund approximately $27.9 million for the construction of tenant improvements under the terms of various leases and for certain investments in limited partnerships. RESTRICTED CASH As of March 31, 2000, we had $6.8 million in cash and cash equivalents, including $4.8 million in restricted cash. Restricted cash consists of the following (in thousands):
AMOUNT ------------ Funds held in trust as additional security required under the terms of certain secured notes payable $ 3,134 Security deposit funds based on the terms of certain lease agreements 1,710 ------------ $ 4,844 ============
13 SECURED DEBT Secured debt as of March 31, 2000 consists of the following (dollars in thousands):
STATED BALANCE AT INTEREST COLLATERAL MARCH 31, 2000 RATE MATURITY DATE - ---------------------------------------------------------------------------------------------------------- One Innovation Drive, Worcester, MA (1) $ 11,612 8.75% January 2006 100/800/801 Capitola Drive, Durham, NC 12,406 8.68% December 2006 620 Memorial Drive, Cambridge, MA (2) 19,762 9.125% October 2007 14225 Newbrook Drive, Chantilly, VA and 3000/3018 Western Avenue, Seattle, WA 35,907 7.22% May 2008 377 Plantation Street, Worcester, MA and 6166 Nancy Ridge Road, San Diego, CA 18,871 8.71% December 2009 1431 Harbor Bay Parkway, Alameda, CA 6,592 7.165% January 2014 3535/3565 General Atomics Court, San Diego, CA 16,926 9.00% December 2014 1102/1124 Columbia Street, Seattle, WA 19,996 7.75% May 2016 381 Plantation Street, (development project) Worcester, MA 2,625 9.00% October 2000 1201 Clopper Road, Gaithersburg, MD 14,177 LIBOR + 1.75% October 2001 ----------- $ 158,874 ===========
(1) The balance shown includes an unamortized premium of $697,000. The effective rate of the loan is 7.25%. (2) The balance shown includes an unamortized premium of $2,011,000. The effective rate of the loan is 7.25%. 14 The following is a summary of the scheduled principal payments for our secured debt as of December 31, 1999 (in thousands):
YEAR AMOUNT - ---------------------------------------------------- 2000 $ 4,896 2001 17,831 2002 3,951 2003 4,272 2004 3,915 Thereafter 121,301 ------------ Subtotal 156,166 Unamortized premium 2,708 ------------ $ 158,874 ============
UNSECURED LINE OF CREDIT On February 11, 2000, we amended our unsecured line of credit to provide for borrowings of up to $325 million. Prior to the amendment, borrowings under the line of credit were limited to $250 million. Borrowings under the line of credit bear interest at a floating rate based on our election of either a LIBOR based rate or the higher of the bank's reference rate and the Federal Funds rate plus 0.5%. For each LIBOR based advance, we must elect to fix the rate for a period of one, two, three or six months. The line of credit contains financial covenants, including, among other things, maintenance of minimum net worth, a total liabilities to gross asset value ratio, and a fixed charge coverage ratio. In addition, the terms of the line of credit restrict, among other things, certain investments, indebtedness, distributions and mergers. Borrowings under the line of credit are limited to an amount based on a pool of unencumbered assets. Accordingly, as we acquire additional unencumbered properties, borrowings available under the line of credit will increase, but may not exceed $325 million. As of March 31, 2000, borrowings under the line of credit were limited to approximately $253 million, and the borrowings outstanding on the line of credit carried a weighted average interest rate of 7.71%. The line of credit expires February 2003 and provides for an extension (provided there is no default) of an additional one-year period, upon notice by the company and consent of the participating banks. In September 1998, we entered into an interest rate swap agreement with FleetBoston Financial (the "Bank") to hedge our exposure to variable interest rates associated with our line of credit. Interest paid is calculated at a fixed interest rate of 5.43% through May 31, 2000 on a notional amount of $50 million, and interest received is calculated at one month LIBOR. The net difference between the interest paid and the interest received under such agreements is reflected in our financial statements as an adjustment to interest expense. 15 In October 1999, we entered into an additional interest rate swap agreement with the Bank to further hedge our exposure to variable interest rates associated with our line of credit. Interest paid is calculated at a fixed interest rate of 6.5% through May 31, 2001 on a notional amount of $50 million and interest received is calculated at one month LIBOR. In January 2000, we entered into a third interest rate swap agreement with the Bank to further hedge our exposure to variable interest rates associated with our line of credit. Interest paid is calculated at a fixed interest rate of 6.5% from February 1, 2000 to March 31, 2000, 6.75% from April 1, 2000 to July 31, 2000, 7.00% from August 1, 2000 to December 29, 2000 and 7.25% from December 30, 2000 to December 31, 2001 in each case on a notional amount of $50 million, and interest received is calculated at one month LIBOR. In April 2000, we entered into a fourth swap agreement with Merrill Lynch Capital Services, Inc. Interest paid will be calculated at a fixed interest rate of 6.995% through January 2, 2003 on a notional amount of $50 million and interest received will be calculated at one month LIBOR. With respect to our swap agreements, we are exposed to losses in the event the Bank or Merrill Lynch are unable to perform under the agreements, or in the event one month LIBOR is less than the agreed-upon fixed interest rates. The fair value of the swap agreements outstanding as of March 31, 2000 and changes in their fair value as a result of changes in market interest rates are not recognized in our financial statements. OTHER RESOURCES AND LIQUIDITY REQUIREMENTS We expect to continue meeting our short-term liquidity and capital requirements generally by using our working capital and net cash provided by operating activities. We believe that the net cash provided by operating activities will continue to be sufficient to make distributions necessary to enable us to continue qualifying as a real estate investment trust. We also believe that net cash provided by operations will be sufficient to fund our recurring non-revenue enhancing capital expenditures, tenant improvements and leasing commissions. We expect to meet certain long-term liquidity requirements, for purposes such as property acquisitions, property development activities, scheduled debt maturities, renovations, expansions and other non-recurring capital improvements, through long-term secured and unsecured indebtedness, including borrowings under our line of credit, and the issuance of additional debt and/or equity securities. 16 INFLATION Approximately 80% of our leases (on a square footage basis) are triple net leases, requiring tenants to pay substantially all real estate taxes and insurance, common area and other operating expenses (including increases thereto). In addition, approximately 88% of our leases (on a square footage basis) contain effective annual rent escalations that are either fixed (ranging from 2.5% to 4.0%) or indexed based on a CPI index. Accordingly, we do not believe that our earnings or cash flow are subject to any significant risk from inflation. An increase in inflation, however, could result in an increase in our variable rate borrowing cost, including borrowings under our unsecured line of credit. FUNDS FROM OPERATIONS We believe that funds from operations ("FFO") is helpful to investors as a measure of the performance of an equity REIT because, along with cash flows from operating activities, financing activities and investing activities, it provides investors with an understanding of our ability to incur and service debt, to make capital expenditures and to make distributions. We compute FFO in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") in its October 1999 White Paper (the "White Paper"), which may differ from the methodology for calculating FFO utilized by other equity REITs, and, accordingly, may not be comparable to such other REITs. Further, FFO does not represent amounts available for our discretionary use because a portion of FFO is needed for capital replacement or expansion, debt service obligations, or other commitments and uncertainties. The White Paper defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our financial performance or to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. 17 The following table presents our FFO for the three months ended March 31, 2000 and 1999 (in thousands):
THREE MONTHS ENDED THREE MONTHS ENDED MARCH 31, 2000 MARCH 31, 1999 ------------------------------------------------ Net income $ 5,737 $ 5,298 Add: Depreciation and amortization 5,607 3,594 Subtract: Dividends on preferred stock (916) - ----------- ----------- FFO $ 10,428 $ 8,892 =========== ===========
PROPERTY AND LEASE INFORMATION The following table is a summary of our property portfolio as of March 31, 2000 (dollars in thousands):
NUMBER OF RENTABLE SQUARE ANNUALIZED BASE OCCUPANCY PROPERTIES FEET RENT PERCENTAGE ------------------------------------------------------------ REGION: Suburban Washington D.C. 18 1,630,328 $ 24,045 96.4% (1) California - San Diego 9 469,192 11,634 97.4% California - San Francisco Bay 7 457,796 9,405 91.5% (1) Southeast 4 254,230 3,749 100% New Jersey/Suburban Philadelphia 5 268,418 4,189 98.6% Eastern Massachusetts 7 476,834 12,011 90.6% Washington - Seattle 3 328,221 9,350 96.0% ------------------------------------------------------------ Subtotal 53 3,885,019 74,383 95.6% Renovation/Repositioning Properties 8 381,265 1,462 10.6% ------------------------------------------------------------ Total 61 4,266,284 $ 75,845 88.0% ============================================================
- --------- (1) All, or substantially all, of the vacant space is office or warehouse space. 18 The following table shows certain information with respect to the lease expirations of our properties as of March 31, 2000:
SQUARE PERCENTAGE OF ANNUALIZED BASE YEAR OF NUMBER OF FOOTAGE OF AGGREGATE RENT OF EXPIRING LEASE EXPIRING EXPIRING PORTFOLIO LEASE LEASES (PER SQUARE EXPIRATION LEASES LEASES SQUARE FOOT FOOT) ---------------------------------------------------------------------------------------- 2000(1) 47 442,139 11.8% $ 18.22 2001 27 371,446 9.9% $ 20.03 2002 23 400,887 10.7% $ 17.68 2003 17 367,030 9.8% $ 16.51 2004 18 390,152 10.4% $ 19.52 Thereafter 36 1,773,378 51.4% $ 19.50
- --------- (1) Represents leases expiring between April 1, 2000 and December 31, 2000. 19 The following table is a summary of our lease activity for the three months ended March 31, 2000 computed on a GAAP Basis and on a Cash Basis:
RENTAL TI'S/LEASE AVERAGE NUMBER SQUARE EXPIRING NEW RATE COMMISSIONS LEASE OF LEASES FOOTAGE RATE RATE INCREASE PER FOOT TERM --------------------------------------------------------------------------------------------------- LEASE ACTIVITY - EXPIRED LEASES Lease Expirations Cash Rent 28 249,239 $ 27.36 - - - - GAAP Rent 28 249,239 $ 30.67 - - - - Renewed / Released Space Cash Rent 8 110,028 $ 28.63 $ 30.08 5.1% $ 20.79 6.2 Years GAAP Rent 8 110,028 $ 28.65 $ 32.16 12.3% $ 20.79 6.2 Years Month-to-Month Leases Cash Rent 15 46,011 $ 10.84 $ 10.84 0.0% - - GAAP Rent 15 46,011 $ 10.67 $ 10.84 1.6% - - Total Leasing Cash Rent 23 156,039 $ 23.38 $ 24.41 4.4% - - GAAP Rent 23 156,039 $ 23.35 $ 25.88 10.8% - - VACANT SPACE LEASED Cash Rent 1 13,900 - $ 16.51 - $ 0.0 10.0 Years GAAP Rent 1 13,900 - $ 18.76 - $ 0.0 10.0 Years ALL LEASE ACTIVITY Cash Rent 24 169,939 - $ 23.76 - - - GAAP Rent 24 169,939 - $ 25.29 - - -
20 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. The primary market risk to which we are exposed is interest rate risk, which is sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control. In order to modify and manage the interest characteristics of our outstanding debt and limit the effects of interest rates on our operations, we may utilize a variety of financial instruments, including interest rate swaps, caps, floors and other interest rate exchange contracts. The use of these types of instruments to hedge our exposure to changes in interest rates carries additional risks such as counter-party credit risk and legal enforceability of hedging contracts. Our future earnings, cash flows and fair values relating to financial instruments are primarily dependent upon market rates of interest, such as LIBOR. However, due to the purchase of our interest rate swap agreements, the current effects of interest rate changes are reduced. Based on interest rates at, and our swap agreements in effect on March 31, 2000, a 1% increase in interest rates on our line of credit would decrease annual future earnings and cash flows, after considering the effect of our interest rate swap agreements, by approximately $610,000. A 1% decrease in interest rates on our line of credit would increase annual future earnings and cash flows, after considering the effect of our interest rate swap agreements, by approximately $610,000. A 1% increase in interest rates on our secured debt and interest rate swap agreements would decrease their fair value by approximately $7.6 million. A 1% decrease in interest rates on our secured debt and interest rate swap agreements would increase their fair value by approximately $8.7 million. A 1% increase or decrease in interest rates on our secured note receivable would not have a material impact on its fair value. These amounts are determined by considering the impact of the hypothetical interest rates on our borrowing cost and our interest rate swap agreements in effect on March 31, 2000. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, we would consider taking actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our capital structure. If we were to include the impact of our new interest rate swap agreement effective April 2000 under the same conditions set forth above, a 1% increase in interest rates on our line of credit would decrease annual future earnings and cash flows, after considering the effect of our interest rate swap agreements, by approximately $110,000. A 1% decrease in interest rates on our line of credit would increase annual future earnings and cash flows, after considering the effect of our interest rate swap agreements, by approximately $110,000. A 1% increase in interest rates on our secured debt and our interest rate swap agreements would decrease their fair value by approximately $7.1 million. A 1% decrease in interest rates on our secured debt and our interest rate swap agreements would increase their fair value by approximately $8.2 million. 21 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS To our knowledge, no litigation is pending against us, other than routine actions and administrative proceedings, none of which, in the aggregate, are expected to have a material adverse effect on our financial condition, results of operations or cash flows, and substantially all of which are expected to be covered by liability insurance. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.15 Employment Agreement between Alexandria Real Estate Equities, Inc. and Laurie Allen, dated January 5, 2000 12.1 Computation of Consolidated Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends 27.1 Financial Data Schedule (b) Reports on Form 8-K. On February 10, 2000, we filed a Current Report on Form 8-K to report the adoption of our Shareholder Rights Plan. 22 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, thereunto duly authorized, on May 15, 2000. ALEXANDRIA REAL ESTATE EQUITIES, INC. /s/ Joel S. Marcus -------------------------------------------------- Joel S. Marcus Chief Executive Officer (Principal Executive Officer) /s/ Peter J. Nelson -------------------------------------------------- Peter J. Nelson Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 23 EX-10.15 2 EXHIBIT 10.15 EXECUTIVE EMPLOYMENT AGREEMENT THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of this 5th day of January, 2000, effective as of the 5th day of January, 2000 (the latter date shall be referred to as the "Effective Date"), by and between ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation ("Corporation"), and Laurie A. Allen, an individual ("Officer") (hereinafter, Corporation and Officer will be referred to collectively as the "Parties"). RECITAL WHEREAS, Corporation desires to employ Officer as its Senior Vice President - Business Development and Legal Affairs and Secretary, and Officer is willing to accept such employment by Corporation, on the terms and subject to the conditions set forth in this Agreement; and WHEREAS, this Agreement shall be subject to the approval of the Compensation Committee, which is expected no later than February 14, 2000. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows: 1. POSITION AND DUTIES; LOCATION. During the Term (as defined below) of this Agreement, Officer agrees to be employed by and to serve Corporation as its Senior Vice President - Business Development and Legal Affairs and Secretary. Corporation agrees to employ and retain Officer in such capacities. Officer shall devote her full business time, energy, and skill to the affairs of Corporation. Notwithstanding the foregoing, Officer shall be entitled to consult not more than fifteen (15) hours per month for ARIAD Pharmaceuticals, Inc. Officer shall report to the Chief Executive Officer of the Corporation or such other officer as the Chief Executive Officer shall direct. Officer shall be based at Corporation's office in Pasadena, California. 1 2. TERM OF EMPLOYMENT. The Term of this Agreement shall commence on the Effective Date and shall continue until December 31, 2000 (the "Term"); PROVIDED, HOWEVER, that on December 31, 2000, and on each anniversary thereof, the Term of this Agreement shall automatically be extended for one (1) additional year unless, not later than ninety (90) days prior to such date, either party shall have given written notice to the other that it does not wish to extend the Term of the Agreement. If Officer's employment hereunder shall terminate by reason of the expiration of the Term (including any extensions thereof), the date of such termination shall be referred to as the "Termination Date." 3. COMPENSATION, BENEFITS AND REIMBURSEMENT. 3.1. BASE SALARY. During the Term of this Agreement and subject to the terms and conditions set forth herein, Corporation agrees to pay to Officer an initial annual "Base Salary" of two hundred and fifteen thousand dollars ($215,000), or such other amount as may from time-to-time be determined by Corporation. Unless otherwise agreed in writing by Officer and Corporation, the Base Salary shall be payable in substantially equal semimonthly installments in accordance with the standard policies of Corporation in existence from time-to-time. 3.2. ADJUSTMENTS IN BASE SALARY. Officer's Base Salary shall be reviewed for the possibility of upward adjustments no less frequently than on each anniversary of the Effective Date during the Term of this Agreement. 3.3. RELOCATION REIMBURSEMENT. Officer shall be entitled to receive reimbursement for relocating to Los Angeles, California, in an amount equal to and no greater than $35,000, such reimbursement shall be earned, due and payable on April 1, 2000. 3.4. DISCRETIONARY BONUS. If Officer is in good standing, as finally determined by the Chief Executive Officer with the concurrence of the Board of Directors ("Board"), Officer shall be eligible to receive a discretionary bonus for each fiscal year of Corporation during the Term of this Agreement, with the actual amount of any such bonus to be determined by the Chief Executive Officer with the concurrence of the Board (or a committee of the Board) based upon an evaluation of Officer's and Corporation's performance during such year and such other factors and conditions as the Board (or a committee of the Board) deems relevant. 2 3.5. STOCK OPTIONS. Subject to the approval of the Board (or a committee of the Board) and pursuant to the terms of a stock option agreement issued under a stock option plan of the Corporation, Corporation shall grant to Officer the right and option to purchase 70,000 shares of the authorized but unissued Common Stock of Corporation on the terms and conditions set forth therein. Nothing contained herein shall be construed to increase or decrease Officer's compensation and/or benefits in existence at the time the options are granted. 3.6. ADDITIONAL BENEFITS. Officer shall be entitled to the following additional benefits under this Agreement: (a) OFFICER BENEFITS. During the Term of this Agreement, Officer shall be eligible to participate in Corporation's existing medical plan and 401(k) plan and such existing stock incentive plans available to senior management of the Corporation in accordance with the terms and conditions of such plans. During the Term of this Agreement, Corporation shall pay one hundred percent (100%) of Officer's medical premiums under Corporation's medical plan and any other welfare benefit plans for which Officer qualifies that are in existence from time to time. (b) VACATION. During the Term of this Agreement, Officer shall be entitled to up to four (4) weeks paid vacation annualized during each calendar year during the Term of this Agreement. Limits on accrual of vacation not taken during any calendar year shall be subject to and in accordance with Corporation's existing policy. (c) REIMBURSEMENT FOR EXPENSES. During the Term of this Agreement, Corporation shall reimburse Officer for all reasonable out-of-pocket business and/or entertainment expenses incurred by Officer for the purpose of and in connection with the performance of her services pursuant to this Agreement and in accordance with any existing travel and expense reimbursement policies of Corporation. Officer shall be entitled to such reimbursement upon the presentation by Officer to Corporation of vouchers or other statements itemizing such expenses in reasonable detail consistent with Corporation's policies. In addition, Officer shall be entitled to reimbursement for (i) dues and membership fees in professional organizations and/or industry associations in which Officer is currently a member or becomes a member, and (ii) appropriate industry seminars and mandatory continuing education. 3 (d) WITHHOLDING. Compensation and benefits paid to Officer under this Agreement shall be subject to applicable federal, state and local wage deductions and other deductions required by law. 4. TERMINATION OF THE AGREEMENT. 4.1. TERMINATION WITHOUT CAUSE. In the event that Corporation terminates this Agreement without Cause (as defined below), Officer shall be entitled to a severance payment equal to nine (9) months ("Severance Period") of Officer's annualized Base Salary ("Severance Payment"). Such Severance Payment shall be payable in monthly installments during the Severance Period, in accordance with the provisions set forth in Paragraph 3.1 above. Officer shall not be entitled to receive a Severance Payment hereunder if she voluntarily terminates her employment or is terminated by reason of death or disability or for Cause. 4.2. TERMINATION FOLLOWING A CHANGE IN CONTROL. In the event that Corporation terminates this Agreement without Cause (as defined below) following a Change in Control (as defined below), Corporation shall pay Officer the Severance Payment, in accordance with Paragraph 4.1 above, and provide for immediate and full vesting of any stock options granted to Officer under Corporation's stock option plan. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred if: (i) Any Person, as such term is used in section 3(a)(9) of the Securities Exchange Act of 1934, as amended from time-to-time (the "Exchange Act"), as modified and used in sections 13(d) and 14(d) thereof, (other than (A) the Corporation or any of its subsidiaries, (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any of its affiliates, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, (D) a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, or (E) a person or group as used in Rule 13d-1(b) under the Exchange Act) is or becomes the Beneficial Owner, as such term is defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Corporation (not including in the securities beneficially owned by such Person any securities acquired directly from the Corporation or its affiliates other than in connection with the acquisition by the Corporation or its affiliates of a business) representing twenty-five percent (25%) or more of the combined voting power of the Corporation's then outstanding securities; or 4 (ii) The following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Corporation) whose appointment or election by the Board or nomination for election by the Corporation's stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or (iii) There is consummated a merger or consolidation of the Corporation with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any subsidiary of the Corporation, at least seventy-five percent (75%) of the combined voting power of the securities of the Corporation or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation (not including in the securities beneficially owned by such Person any securities acquired directly from the Corporation or its affiliates other than in connection with the acquisition by the Corporation or its affiliates of a business) representing twenty-five percent (25%) or more of the combined voting power of the Corporation's then outstanding securities; or (iv) The stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation or there is consummated an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets, other than a sale or disposition by the Corporation of all or substantially all of the Corporation's assets to an entity, at least seventy-five (75%) of the combined voting power of the voting securities of which are owned by stockholders of the Corporation in substantially the same proportions as their ownership of the Corporation immediately prior to such sale. 5 4.3. TERMINATION FOR CAUSE. Prior to the Termination Date, the Corporation shall have the right to terminate this Agreement for Cause immediately after written notice has been delivered to Officer, which notice shall specify the reason for and the effective date of such Termination. For purposes of this Agreement, "Cause" shall mean the following: (i) Officer's Material breach, repudiation or failure to comply with or perform (a) any of the terms of this Agreement, (b) any of Officer's duties, or (c) any of Corporation's policies or procedures (including without limitation any such policies or procedures relating to conflicts of interests or standards of business conduct); or Officer's deliberate interference with the compliance by any other employee of Corporation with any of the foregoing; or (ii) The conviction of Officer for, or pleading by Officer of no contest (or similar plea) to, fraud, embezzlement, misappropriation of assets, malicious mischief, or any felony, other than a crime for which vicarious liability is imposed upon Officer solely by reason of Officer's position with Corporation and not by reason of Officer's conduct. Before terminating the Agreement pursuant to this Paragraph 4.3(i), Corporation first shall have given Officer written notice specifying the nature of the breach, repudiation or failure to comply and thirty (30) days thereafter in which to cure such Material breach, repudiation or failure to comply, and Officer shall have failed to cure. For purposes of this Paragraph 4.3, "Material" shall mean a breach, repudiation or failure that the Board determines has resulted in material injury to Corporation. 4.4. OFFSET. Although Officer shall not be required to mitigate damages under this Agreement by seeking other comparable employment or otherwise, the amount of any payment or benefit provided for in this Agreement shall be reduced by any compensation earned by or provided to Officer as the result of employment by an employer other than Corporation prior to the expiration of the Term of this Agreement. 6 5. NONCOMPETITION. During the Term of this Agreement, including the period, if any, with respect to which Officer shall be entitled to Severance Payments, Officer shall not engage in any activity that is or may be competitive with the business of Corporation, directly or indirectly, whether or not for compensation, including, but not limited to, providing services similar to those provided by the Company; offering or soliciting or accepting an offer, to provide such services or taking any action to form, or become employed by, a firm or business to provide such services. 6. MISCELLANEOUS. 6.1. CONFIDENTIALITY. Without limiting the scope of the Agreement Regarding Proprietary Information between the Parties, dated as of January 5, 2000 (the "Proprietary Information Agreement"), Officer agrees that all confidential and proprietary information relating to the business of Corporation shall be kept and treated as confidential both during and after the Term of this Agreement, except as may be permitted in writing by the Board or as such information is within the public domain or comes within the public domain without any breach of this Agreement. 6.2. WAIVER. The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof. 6.3. ENTIRE AGREEMENT; MODIFICATIONS. Except as otherwise provided herein, this Agreement (together with the Proprietary Information Agreement and any other agreements and plans referred to herein) represents the entire understanding between the Parties with respect to the subject matter hereof, and this Agreement supersedes any and all prior understandings, agreements, plans and negotiations, whether written or oral, with respect to the subject matter hereof, including without limitation any understandings, agreements or obligations respecting any past or future compensation, bonuses, reimbursements or other payments to Officer from Corporation. All modifications to this Agreement must be in writing and signed by the party against whom enforcement of such modification is sought. 7 6.4. NOTICES. All notices and other communications under this Agreement shall be in writing and shall be given by facsimile or first-class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three (3) days after mailing or twenty-four (24) hours after transmission of a facsimile to the respective persons named below: If to Corporation: Alexandria Real Estate Equities, Inc. 135 North Los Robles Avenue, Suite 250 Pasadena, CA 91101 Phone: (626) 578-0777 Facsimile: (626) 578-0770 Attn: Joel S. Marcus, CEO If to Officer: Laurie A. Allen 357 Comstock Avenue Los Angeles, CA 90024 Phone: (310) 441-9576 6.5. HEADINGS. The Paragraph headings herein are intended for reference only and shall not determine the construction or interpretation of this Agreement. 6.6. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to its principles of conflicts of laws. 6.7. ARBITRATION. Any dispute arising out of or relating to this Agreement that cannot be settled by good faith negotiation between the Parties shall be submitted to ENDISPUTE for final and binding arbitration pursuant to ENDISPUTE's Arbitration Rules incorporated herein by reference, which arbitration shall take place in Los Angeles, California and shall be the exclusive remedy of the Parties hereto. The resulting arbitration shall be deemed a final order of a court having jurisdiction over the subject matter, shall not be appealable, and shall be enforceable in any court of competent jurisdiction. Submission to arbitration shall not preclude the right of any party hereto involved in a dispute regarding this Agreement (each a "Disputing Party" and collectively, the "Disputing Parties") to institute proceedings at law or in equity for injunctive or other relief pending the arbitration of a matter subject to arbitration pursuant to this Agreement. Any documentation and information submitted by any party in the 8 arbitration proceeding shall be kept strictly confidential by the Parties and the arbitrator. In addition to any other relief or award granted by the arbitrator to either Disputing Party, the arbitrator shall determine the extent to which each Disputing Party has prevailed as to the material issues raised in the arbitration, and, based upon such determination, shall apportion to each Disputing Party its ratable share of (i) the Disputing Parties' reasonable attorneys' fees and other costs reasonably incurred in the arbitration, (ii) the expense of the arbitrator, and (iii) all other expenses of the arbitration. The arbitrator shall make such determination and apportionment whether or not the dispute proceeds to a final award. 6.8. SEVERABILITY. Should a court or other body of competent jurisdiction determine that any provision of this Agreement is excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, and all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible. 6.9. COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement. 6.10 INDEMNIFICATION. In addition to any rights to indemnification to which Officer is entitled under the Corporation's Articles of Incorporation and By-Laws, Corporation shall indemnify Officer at all times during and after the Term of this Agreement to the maximum extent permitted under Section 2-418 of the General Corporation Law of the State of Maryland or any successor provision thereof and any other applicable state law, and shall pay Officer's expenses in defending any civil or criminal action, suit, or proceeding in advance of the final disposition of such action, suit, or proceeding, to the maximum extent permitted under such applicable state laws. 9 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement. CORPORATION: ALEXANDRIA REAL ESTATE EQUITIES, INC. a Maryland corporation By: /s/ JOEL S. MARCUS ------------------------------------- Joel S. Marcus Chief Executive Officer Date: FEBRUARY 4, 2000 ----------------------------------- OFFICER: /s/ LAURIE A. ALLEN ------------------------------------------ Laurie A. Allen Date: FEBRUARY 4, 2000 ------------------------------------ 10 EX-12.1 3 EXHIBIT 12.1 EXHIBIT 12.1 ALEXANDRIA REAL ESTATE EQUITIES, INC. COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (in thousands, except ratios)
For the Three Months Ended Year Ended December 31, March 31, --------------------------------------------------- 2000 1999 1998 1997 1996 1995 ------------ ------- ------- ------- ------- ------- Earnings (Loss): ........................... $5,737 $22,053 $19,403 $(2,797) $2,175 $ 866 Add Back: Interest Expense.......................... 5,551 19,697 14,033 7,043 6,327 3,553 Write-off of Unamortized Loan Costs....... -- -- -- 2,295 -- -- Acquisition LLC Financing Costs........... -- -- -- 6,973 -- -- ------- ------- ------- ------- ------ ------ Earnings Available for Fixed Charges.... 11,288 41,750 33,436 $13,514 $8,502 $4,419 ------- ------- ------- ------- ------ ------ Combined Fixed Charges: Interest Incurred......................... 7,379 23,792 16,264 $ 7,139 $6,327 $3,553 Write-off of Unamortized Loan Costs(a).... -- -- -- 2,295 -- -- Acquisition LLC Financing Costs(b)........ -- -- -- 6,973 -- -- Preferred Dividends....................... 916 2,036 -- 3,038 1,590 -- ------- ------- ------- ------- ------ ------ Fixed Charges........................... 8,295 25,828 16,264 $19,445 $7,917 $3,553 ------- ------- ------- ------- ------ ------ Ratio of Earnings to Fixed Charges and Preferred Stock Dividends(c).............. 1.36 1.62 2.06 0.69 1.07 1.24 Excess of Fixed Charges Over Earnings....... $ -- $ -- $ -- $ -- $ -- $ --
- ------------------------ (a) This amount represents unamortized loan costs associated with debt retired in connection with the IPO. (b) This amount represents the portion of the purchase price of the membership interests in ARE Acquisitions, LLC (the "Acquisition LLC") paid by the Company in excess of the cost incurred by the Acquisition LLC to acquire the three Life Science Facilities owned by it. (c) For purposes of calculating the consolidated ratio of earnings to combined fixed charges and preferred stock dividends, earnings consist of earnings before income taxes and fixed charges. Fixed charges consist of interest incurred (including amortization of deferred financing costs and capitalized interest), write-off of unamortized loan costs, Acquisition LLC Financing Costs (see Note (b)), and preferred stock dividends. EX-27.1 4 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED INCOME STATEMENTS FOUND IN THE COMPANY'S FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 6,812 0 8,889 0 0 0 651,103 40,631 661,275 0 369,874 0 38,588 137 224,188 661,275 0 23,962 0 4,974 7,700 0 5,551 5,737 0 5,737 0 0 0 5,737 0.35 0.35
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