EX-99.1 2 a08-11608_2ex99d1.htm EX-99.1

Exhibit 99.1

 

 

Contact:

Joel S. Marcus

 

Chairman/Chief Executive Officer

 

Alexandria Real Estate Equities, Inc.

 

(626) 578-9693

 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

REPORTS FIRST QUARTER 2008

OPERATING AND FINANCIAL RESULTS

 

Highlights

 

First Quarter 2008:

 

·              First Quarter 2008 Funds from Operations (FFO) Per Share (Diluted) of $1.48, up 7%, Before Non-Cash Impairment Charges, Compared to First Quarter 2007 FFO Per Share (Diluted) of $1.38, Before Preferred Stock Redemption Charge

·              First Quarter 2008 Total Revenues up 16%, FFO Available to Common Stockholders up 16%, Before Non-Cash Impairment and Preferred Stock Redemption Charges, Compared to First Quarter 2007

·              First Quarter 2008 Earnings Per Share (Diluted) of $1.09, up 110%, Compared to First Quarter 2007 Earnings Per Share (Diluted) of $0.52

·              First Quarter 2008 GAAP Same Property Revenues Less Operating Expenses up 3.6%

·              Executed 48 Leases for 570,000 Rentable Square Feet

·              First Quarter 2008 GAAP Rental Rate Increase of 14.1% on Renewed/Released Space

·              Completed Redevelopment of Multiple Spaces at Five Properties Aggregating 103,267 Rentable Square Feet

·              Sold Six Properties for $70 Million at a Gain of $20 Million

·              Closed 7.00% Series D Cumulative Convertible Preferred Stock Offering with Net Proceeds of $242 Million

·              Closed Refinancing of $76 Million Secured Loan

 

PASADENA, CA. – May 8, 2008 – Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced operating and financial results for the first quarter ended March 31, 2008.

 

For the first quarter of 2008, we reported total revenues of $109,959,000 and FFO available to common stockholders of $46,976,000, or $1.48 per share (diluted), before non-cash impairment charges, compared to total revenues of $94,786,000 and FFO available to common stockholders of $40,345,000, or $1.38 per share (diluted), before a preferred stock redemption charge, for the first quarter of 2007.  Comparing the first quarter of 2008 to the first quarter of 2007, total revenues increased 16%, FFO available to common stockholders and FFO per share (diluted) increased 16% and 7%, respectively, before non-cash impairment and preferred stock redemption charges.  Our results for the first quarter of 2008 included non-cash impairment charges aggregating $6,635,000, or $0.21 per share (diluted), related to two assets “held for sale” and certain investments, and our results for the first quarter of 2007 included a preferred stock redemption charge of $2,799,000, or $0.10 per share (diluted).

 

FFO is a non-GAAP measure widely used by publicly traded real estate investment trusts.  A reconciliation of GAAP net income available to common stockholders to FFO available to common stockholders and FFO available to common stockholders after supplemental adjustments on both an aggregate and per share (diluted) basis, is included in the financial information accompanying this press release.  The primary reconciling item between GAAP net income available to common stockholders and FFO available to common stockholders is depreciation and amortization expense. Depreciation and amortization expense for the three months ended March 31, 2008 and 2007 was $25,810,000 and $23,518,000, respectively. Net income available to common stockholders for the first quarter of 2008 was $34,760,000, or $1.09 per share (diluted), compared to net income available to common stockholders of $15,108,000, or $0.52 per share (diluted), for the first quarter of 2007.  Net income available to common stockholders for the first quarter of 2008 included aggregate gains of $20,213,000 on sales of six properties and non-cash impairment charges aggregating $6,635,000 related to two assets “held for sale” and certain investments.  Net income available to common stockholders for the first quarter of 2007 included a gain on sale of one property of $1,121,000 and a preferred stock redemption charge of $2,799,000.

 

(more)

 


 

ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS FIRST QUARTER 2008 RESULTS

Page 2

 

For the first quarter of 2008, we executed a total of 48 leases for approximately 570,000 rentable square feet of space at 31 different properties (excluding month-to-month leases).  Of this total, approximately 369,000 rentable square feet related to new or renewal leases of previously leased space and approximately 201,000 rentable square feet related to developed, redeveloped or previously vacant space.  Of the 201,000 rentable square feet, approximately 129,000 rentable square feet were delivered from our development or redevelopment programs, with the remaining approximately 72,000 rentable square feet related to previously vacant space.  Rental rates for these new or renewal leases were on average approximately 14.1% higher (on a GAAP basis) than rental rates for expiring leases.

 

During the first quarter of 2008, we sold one property located in the San Diego market with approximately 86,962 rentable square feet and five properties in the east bay area of the San Francisco Bay market aggregating approximately 272,730 rentable square feet. The aggregate sales price for the properties sold in the first quarter of 2008 was approximately $70 million.

 

As of March 31, 2008, approximately 89% of our leases (on a rentable square footage basis) were triple net leases, requiring tenants to pay substantially all real estate taxes and insurance, common area and other operating expenses, including increases thereto.  In addition, as of March 31, 2008, approximately 8% of our leases (on a rentable square footage basis) required the tenants to pay a majority of operating expenses.  Additionally, as of March 31, 2008, approximately 92% of our leases (on a rentable square footage basis) provided for the recapture of certain capital expenditures and approximately 94% of our leases (on a rentable square footage basis) contained effective annual rent escalations that were either fixed or indexed based on the consumer price index or another index.

 

Based on our current view of existing market conditions and certain current assumptions, our updated guidance for FFO per share (diluted) and earnings per share (diluted) is as follows:

 

 

 

2008

 

FFO per share (diluted) (1)

 

$5.86

(1)

 

Earnings per share (diluted) (2)

 

$3.00

(2)

 

Non–cash impairment charges recognized in the first quarter of 2008

 

$0.21

 

 

 

(1)          Includes non–cash impairment charges aggregating $6,635,000, or $0.21 per share (diluted), related to assets “held for sale” and certain investments. Our updated guidance for 2008 FFO per share (diluted) after supplemental adjustments for the non-cash impairment charges is $6.07.

(2)          Includes non–cash impairment charges aggregating $6,635,000 and gains on sales of property aggregating $20,213,000.

 

Alexandria Real Estate Equities, Inc., Landlord of Choice to the Life Science Industry®, is the largest owner and preeminent first-in-class international real estate investment trust focused principally on science-driven cluster formation through the ownership, operation, management, redevelopment, selective development and acquisition of properties containing technical environments, including office/laboratory space.  Alexandria is the leading provider of high-quality environmentally sustainable real estate, technical infrastructure, services and capital to the broad and diverse life science industry.  Client tenants include institutional (universities and independent not-for-profit institutions), pharmaceutical, biotechnology, medical device, product, service, and translational entities, as well as government agencies.  Alexandria’s operating platform is based on the principle of “clustering,” with assets and operations located in key life science markets.  Our asset base approximates 13.3 million rentable square feet consisting of 159 properties approximating 11.7 million rentable square feet (including spaces undergoing active redevelopment) and properties undergoing ground-up development approximating 1.6 million rentable square feet.  In addition, our asset base will enable us to grow to approximately 22.3 million square feet through future ground-up development approximating 9.0 million square feet of office/laboratory space.

 

This press release contains forward-looking statements, including earnings guidance, within the meaning of the federal securities laws.  Actual results may differ materially from those projected in the forward-looking statements.  Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our Annual Report on Form 10-K and our other periodic reports filed with the Securities and Exchange Commission.

 

(Tables follow)

 


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Financial Information

(Dollars in thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2008

 

2007

 

Income statement data

 

 

 

 

 

Total revenues

 

$

109,959

 

$

94,786

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

Rental operations

 

28,329

 

23,277

 

General and administrative

 

8,787

 

8,074

 

Interest

 

22,245

 

20,263

 

Depreciation and amortization

 

25,673

 

22,920

 

Non-cash impairment on investments

 

1,985

 

–

 

 

 

87,019

 

74,534

 

 

 

 

 

 

 

Minority interest

 

951

 

907

 

Income from continuing operations

 

21,989

 

19,345

 

 

 

 

 

 

 

Income from discontinued operations, net

 

15,699

 

2,439

 

 

 

 

 

 

 

Net income

 

37,688

 

21,784

 

 

 

 

 

 

 

Dividends on preferred stock

 

2,928

 

3,877

 

Preferred stock redemption charge

 

–

 

2,799

 

Net income available to common stockholders

 

$

34,760

 

$

15,108

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding

 

 

 

 

 

Basic

 

31,546,591

 

28,899,303

 

Diluted

 

31,801,945

 

29,299,733

 

 

 

 

 

 

 

Earnings per share – basic

 

 

 

 

 

Continuing operations (net of preferred stock dividends and preferred stock redemption charge)

 

$

0.60

 

$

0.44

 

Discontinued operations, net

 

0.50

 

0.08

 

Earnings per share – basic

 

$

1.10

 

$

0.52

 

 

 

 

 

 

 

Earnings per share – diluted

 

 

 

 

 

Continuing operations (net of preferred stock dividends and preferred stock redemption charge)

 

$

0.60

 

$

0.44

 

Discontinued operations, net

 

0.49

 

0.08

 

Earnings per share – diluted

 

$

1.09

 

$

0.52

 

 

(Continued on next page)

 

3


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Financial Information

(Unaudited)

Funds from Operations

Generally accepted accounting principles (“GAAP”) basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time.  In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) established the measurement tool of Funds From Operations (“FFO”).  Since its introduction, FFO has become a widely used non-GAAP financial measure among real estate investment trusts (“REITs”).  We believe that FFO is helpful to investors as an additional measure of the performance of an equity REIT.  We compute FFO in accordance with standards established by the Board of Governors of NAREIT in its April 2002 White Paper (the “White Paper”) and related implementation guidance, which may differ from the methodology for calculating FFO utilized by other equity REITs, and, accordingly, may not be comparable to such other REITs.  The White Paper defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

 

We also present FFO after supplemental adjustments which excludes non-cash impairment and preferred stock redemption charges.  FFO after supplemental adjustments differs from FFO established by NAREIT and may not be comparable to that of other REITs.  We believe FFO after supplemental adjustments provides a meaningful supplemental financial measure.

 

Neither FFO or FFO after supplemental adjustments should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.

 

The following table presents a reconciliation of net income available to common stockholders, the most directly comparable GAAP financial measure to FFO, and FFO after supplemental adjustments to funds from operations available to common stockholders and funds from operations available to common stockholders after supplemental adjustments for the three months ended March 31, 2008 and 2007 (in thousands, except per share data):

 

 

 

Three Months
Ended
March 31, 2008

 

Three Months
Ended
March 31, 2007

 

Reconciliation of net income available to common stockholders to funds from
operations available to common stockholders after supplemental adjustments

 

 

 

 

 

Net income available to common stockholders

 

$

34,760

 

$

15,108

 

Add: Depreciation and amortization (1)

 

25,810

 

23,518

 

Add: Minority interest

 

951

 

907

 

Subtract: Gain on sales of property (2)

 

(20,213

)

(1,121

)

Subtract: FFO allocable to minority interest

 

(967

)

(866

)

Funds from operations available to common stockholders

 

40,341

 

37,546

 

Add: Preferred stock redemption charge (3)

 

–

 

2,799

 

Add: Non-cash impairment charges (4)

 

6,635

 

–

 

Funds from operations available to common stockholders after supplemental adjustments

 

$

46,976

 

$

40,345

 

FFO per share (diluted) after supplemental adjustments

 

 

 

 

 

Basic

 

$

1.49

 

$

1.40

 

Diluted

 

$

1.48

 

$

1.38

 

Reconciliation of earnings per share (diluted) to FFO per share (diluted) after
supplemental adjustments

 

 

 

 

 

Earnings per share (diluted)

 

$

1.09

 

$

0.52

 

Depreciation and amortization (1)

 

0.82

 

0.80

 

Minority interest

 

0.03

 

0.03

 

Gain on sales of property (2)

 

(0.64

)

(0.04

)

FFO allocable to minority interest)

 

(0.03

)

(0.03

)

FFO per share (diluted)

 

$

1.27

 

$

1.28

 

Preferred stock redemption charge (3)

 

–

 

0.10

 

Non-cash impairment charges (4)

 

0.21

 

–

 

FFO per share (diluted) after supplemental adjustments

 

$

1.48

 

$

1.38

 

 

(1)          Includes depreciation and amortization for assets “held for sale” reflected as discontinued operations (for the periods prior to when such assets were designated as “held for sale”).

(2)          Gain on sales of property relates to the disposition of six properties sold during the first quarter 2008 and one property sold during the first quarter of 2007. Gain on sales of property is included in the income statement in income from discontinued operations, net.

(3)          During the first quarter of 2007, we redeemed our 9.10% series B cumulative redeemable preferred stock.  Accordingly, in compliance with FASB Emerging Issues Task Force D-42 (“EITF Topic D-42”), we recorded a charge of $2,799,000, or $0.10 per share (diluted), in the first quarter of 2007 for costs related to the redemption of our series B preferred stock.

(4)          In March 2008, we recognized aggregate non-cash impairment charges of approximately $1,985,000 for other-than-temporary declines in the fair value of certain investments and non-cash impairment charges on two properties “held for sale” of approximately $4,650,000 related to an industrial building located in a suburban submarket south of Boston and an office building located in the San Diego market. The non-cash impairment charges on two properties “held for sale” are classified in income from discontinued operations, net. 

 

4


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.
Quarterly Supplemental Financial Information
(Dollars in thousands, except per share data)
(Unaudited)

 

 

 

For the Three Months Ended

 

 

 

 

3/31/2008

 

12/31/2007

 

9/30/2007

 

6/30/2007

 

3/31/2007

 

 

Operational data

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

82,156

 

$

81,695

 

$

76,970

 

$

71,570

 

$

71,038

 

 

Tenant recoveries

 

24,553

 

22,344

 

21,420

 

18,800

 

20,010

 

 

Other income

 

3,250

 

3,965

 

3,717

 

3,399

 

3,738

 

 

Total revenues (continuing operations) (a)

 

$

109,959

 

$

108,004

 

$

102,107

 

$

93,769

 

$

94,786

 

 

Funds from operations per share (diluted) after supplemental adjustments (b)

 

$

1.48

 

$

1.46

 

$

1.45

 

$

1.42

 

$

1.38

 

 

Dividends per share on common stock

 

$

0.78

 

$

0.78

 

$

0.76

 

$

0.76

 

$

0.74

 

 

Dividend payout ratio (common stock) (c)

 

53.2%

 

53.9%

 

56.3%

 

53.8%

 

54.1%

 

 

Straight-line rent

 

$

3,015

 

$

4,615

 

$

4,335

 

$

2,617

(d)

$

4,188

 

 

Capitalized interest

 

$

17,262

(e)

$

16,609

 

$

15,035

 

$

13,548

 

$

10,844

 

 

Number of properties (f)

 

 

 

 

 

 

 

 

 

 

 

 

Acquired/added/completed during period

 

–

 

2

 

13

 

2

 

–

 

 

Sold/transferred (g)

 

(7

)

(3

)

(1

)

(4

)

(1

)

 

At end of period

 

159

 

166

 

167

 

155

 

157

 

 

Rentable square feet (f)

 

 

 

 

 

 

 

 

 

 

 

 

Acquired/added/completed during period

 

–

 

404,986

 

994,024

 

104,312

 

–

 

 

Sold/transferred (g)

 

(475,976

)

(92,927

)

(37,000

)

(375,112

)

(75,500

)

 

At end of period

 

11,691,497

 

12,167,473

 

11,855,414

 

10,898,390

 

11,169,190

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

Other data

 

3/31/2008

 

12/31/2007

 

9/30/2007

 

6/30/2007

 

3/31/2007

 

 

Number of shares of common stock outstanding

 

31,673,359

 

31,603,344

 

31,243,448

 

29,180,700

 

29,129,238

 

 

Closing price of common stock

 

$

92.72

 

$

101.67

 

$

96.26

 

$

96.82

 

$

100.37

 

 

Debt to total market capitalization (h)

 

 

 

 

 

 

 

 

 

 

 

 

Total debt

 

$

2,625,852

 

$

2,787,904

 

$

2,502,832

 

$

2,274,269

 

$

2,176,594

 

 

Less minority interest share of debt

 

(39,838

)

(39,320

)

(22,102

)

(22,089

)

(22,076

)

 

Our share of total debt

 

2,586,014

 

2,748,584

 

2,480,730

 

2,252,180

 

2,154,518

 

 

Preferred stock

 

352,127

 

136,845

 

130,156

 

132,593

 

140,579

 

 

Common stock market capitalization

 

2,936,754

 

3,213,112

 

3,007,494

 

2,825,275

 

2,923,702

 

 

Total market capitalization

 

$

5,874,895

 

$

6,098,541

 

$

5,618,380

 

$

5,210,048

 

$

5,218,799

 

 

Debt to total market capitalization

 

44.0%

 

45.1%

 

44.2%

 

43.2%

 

41.3%

 

(a)          The historical results above exclude the results of assets “held for sale” which have been reflected as discontinued operations.

(b)         See page 4 for a reconciliation of earnings per share (diluted) to FFO per share (diluted) and FFO per share (diluted) after supplemental adjustments.

(c)          Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (common stock shares outstanding on the respective record date multiplied by the related dividend per share) to funds from operations after supplemental adjustments for the respective quarter.

(d)         Includes a rental payment of approximately $1.4 million from one tenant, the U.S. Government, in the second quarter of 2007. Pursuant to Statement of Financial Accounting Standards No. 13, “Accounting for Leases,” rental payments due under this lease are recognized on a straight-line basis over the lease term.

(e)          As of March 31, 2008, assets for which capitalization of interest is required pursuant to Statement of Financial Accounting Standards No. 34, “Capitalization of Interest Cost” (“SFAS 34”), approximated $1.2 billion.  This amount is classified as properties undergoing development and redevelopment and land held for development on our balance sheet. As of March 31, 2008, the weighted average interest rate used in the calculation of capitalized interest required pursuant to SFAS 34 was approximately 5.69%. SFAS 34 requires the interest rate for capitalization to be based on applicable interest costs related to borrowings outstanding during the period, including the impact of interest rate swap agreements, debt premiums/discounts and amortization of loan fees.

(f)            Includes properties “held for sale” during the applicable periods such assets were “held for sale.” As of March 31, 2008, two properties aggregating approximately 74,304 rentable square feet were classified as “held for sale.”

(g)         During the first quarter of 2008, we sold six assets and transferred one property from operating assets to embedded future development opportunities. During the fourth quarter of 2007, we sold one asset and transferred two properties from operating assets to embedded future development opportunities. During the third quarter of 2007, we sold one asset located in the New Jersey/Suburban Philadelphia market and four land parcels to the Massachusetts Institute of Technology. During the second quarter of 2007, we sold one asset and transferred three properties from operating assets to embedded future development opportunities. During the first quarter of 2007, we sold one asset located in the Suburban Washington D.C. market.

(h)         Debt to total market capitalization is the ratio of our share of total debt (secured notes payable, unsecured line of credit and unsecured term loan and unsecured convertible notes) to total market capitalization. Total market capitalization is equal to outstanding shares of series C preferred stock and common stock multiplied by the related closing price at the end of each period presented, plus series D convertible preferred stock at liquidation value, plus our share of total debt.

 

5


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

March 31,

 

December 31,

 

 

 

2008

 

2007

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Rental properties, net

 

$

3,079,288

 

$

3,146,915

 

Properties undergoing development and redevelopment and land held for development

 

1,246,905

 

1,143,302

 

Cash and cash equivalents

 

7,654

 

8,030

 

Tenant security deposits and other restricted cash

 

65,612

 

51,911

 

Tenant receivables

 

8,853

 

6,759

 

Deferred rent

 

84,152

 

81,496

 

Investments

 

74,134

 

84,322

 

Other assets

 

118,447

 

119,359

 

Total assets

 

$

4,685,045

 

$

4,642,094

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Secured notes payable

 

$

1,115,852

 

$

1,212,904

 

Unsecured line of credit and unsecured term loan

 

1,050,000

 

1,115,000

 

Unsecured convertible notes

 

460,000

 

460,000

 

Accounts payable, accrued expenses and tenant security deposits

 

264,850

 

247,289

 

Dividends payable

 

27,772

 

27,575

 

Total liabilities

 

2,918,474

 

3,062,768

 

 

 

 

 

 

 

Minority interest

 

74,857

 

75,506

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Series C preferred stock

 

129,638

 

129,638

 

Series D convertible preferred stock

 

220,000

 

–

 

Common stock

 

317

 

316

 

Additional paid-in capital

 

1,374,451

 

1,365,773

 

Accumulated other comprehensive (loss) income

 

(32,692

)

8,093

 

Total stockholders’ equity

 

1,691,714

 

1,503,820

 

Total liabilities and stockholders’ equity

 

$

4,685,045

 

$

4,642,094

 

 

6


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Debt
March 31, 2008
(Dollars in thousands)
(Unaudited)

Principal Maturities / Rates

 

 

Secured Debt

 

Unsecured Debt

 

 

Year    

 

Amount

 

Weighted
Average
Interest Rate

 

Amount

 

2008

 

$

7,744

 

 

 

5.53%

(1)

 

$

–

 

 

2009

 

284,617

 

 

 

5.52

(2)

 

–

 

 

2010

 

92,482

 

 

 

5.94

(2)

 

300,000

 

(3)

2011

 

183,380

 

 

 

5.80

(2)

 

750,000

 

(3)

2012

 

38,489

 

 

 

5.99

(2)

 

460,000

 

(4)

Thereafter

 

509,140

 

 

 

5.92

(2)

 

–

 

 

Total

 

$

1,115,852

 

(5)

 

 

$

1,510,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured and Unsecured Debt Analysis

 

 

Balance

 

Percentage
of
Balance

 

Weighted
Average
Interest Rate (6)

 

Weighted
Average
Maturity

 

 

Secured Debt

 

$

1,115,852

 

 

  42.5%

 

 

5.53%

 

4.6 Years

 

 

Unsecured Debt

 

1,510,000

 

 

  57.5

 

 

4.85

 

3.4 Years

 

 

Total Debt

 

$

2,625,852

 

 

100.0%

 

 

5.14%

 

3.9 Years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed and Floating Rate Debt Analysis

 

 

Balance

 

Percentage
of
Balance

 

Weighted
Average
Interest Rate (6)

 

Weighted
Average
Maturity

 

 

Fixed Rate Debt

 

$

1,265,011

 

 

  48.2%

 

 

5.17%

 

5.0 Years

 

 

Floating Rate Debt – Hedged

 

817,100

 

 

  31.1

 

 

5.83

 

3.4 Years

 

 

Floating Rate Debt – Unhedged

 

543,741

 

 

  20.7

 

 

4.04

 

2.1 Years

 

 

Total Debt

 

$

2,625,852

 

 

100.0%

 

 

5.14%

 

3.9 Years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

The weighted average interest rate is calculated based on outstanding debt as of March 31, 2008.

(2)

 

The weighted average interest rate is calculated based on outstanding debt as of December 31st of the year immediately preceding the year presented.

(3)

 

The unsecured line of credit matures in October 2010 and may be extended at our sole option for an additional one year period. The unsecured term loan matures in October 2011 and may be extended at our sole option for an additional one year period.

(4)

 

On or after January 15, 2012, we have the right to redeem our 3.70% unsecured convertible notes, in whole or in part, at any time from time to time, for cash equal to 100% of the principal amounts of the notes to be redeemed plus any accrued and unpaid interest to, but excluding, the redemption date. Holders of the notes may require us to repurchase their notes, in whole or in part, on January 15, 2012, 2017 and 2022 for cash equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the repurchase date. Additional information regarding our unsecured convertible notes is contained in our Form 10-K filed with the Securities and Exchange Commission.

(5)

 

Includes minority interests’ share of scheduled principal maturities of approximately $39.8 million.

(6)

 

Represents the weighted average contractual interest rate plus the impact of debt premiums/discounts and our interest rate swap agreements. The weighted average interest rate excludes bank fees and amortization of loan fees. See page 8 for further details of our interest rate swap agreements.

 

 

7


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Interest Rate Swap Agreements

March 31, 2008

(Dollars in thousands)

(Unaudited)

 

Transaction Dates

 

Effective
Dates

 

Termination
Dates

 

Interest Pay
Rates (1)

 

Notional
Amounts

 

Effective at
March 31,
2008

 

 

 

 

 

 

 

 

 

 

 

 

 

December 2004

 

January 3, 2006

 

July 1, 2008

 

 

3.927%

 

$

50,000

 

$

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 2006

 

June 30, 2006

 

September 30, 2009

 

 

5.299

 

125,000

 

125,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 2003

 

December 29, 2006

 

October 31, 2008

 

 

5.090

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 2005

 

December 29, 2006

 

November 30, 2009

 

 

4.730

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 2005

 

December 29, 2006

 

November 30, 2009

 

 

4.740

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 2006

 

December 29, 2006

 

March 31, 2014

 

 

4.990

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 2006

 

January 2, 2007

 

January 3, 2011

 

 

5.003

 

28,500

 

28,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 2004

 

April 30, 2007

 

April 30, 2008

 

 

4.850

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 2005

 

June 29, 2007

 

June 30, 2008

 

 

4.400

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 2006

 

June 29, 2007

 

October 31, 2008

 

 

4.920

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 2007

 

October 31, 2007

 

June 30, 2008

 

 

4.458

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 2007

 

October 31, 2007

 

September 30, 2012

 

 

4.546

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 2007

 

October 31, 2007

 

September 30, 2013

 

 

4.642

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 2005

 

November 30, 2007

 

November 28, 2008

 

 

4.460

 

25,000

 

25,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 2005

 

January 2, 2008

 

December 31, 2010

 

 

4.768

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

February 2008

 

February  7, 2008

 

December 1, 2008

 

 

2.640

 

38,600

 

38,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 2005

 

June 30, 2008

 

June 30, 2009

 

 

4.509

 

50,000

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 2006

 

June 30, 2008

 

June 30, 2010

 

 

5.325

 

50,000

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 2006

 

June 30, 2008

 

June 30, 2010

 

 

5.325

 

50,000

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 2007

 

July 1, 2008

 

March 31, 2013

 

 

4.622

 

25,000

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 2007

 

July 1, 2008

 

March 31, 2013

 

 

4.625

 

25,000

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 2006

 

October 31, 2008

 

December 31, 2010

 

 

5.340

 

50,000

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 2006

 

October 31, 2008

 

December 31, 2010

 

 

5.347

 

50,000

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 2005

 

November 28, 2008

 

November 30, 2009

 

 

4.615

 

25,000

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 2006

 

November 30, 2009

 

March 31, 2014

 

 

5.015

 

75,000

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 2006

 

November 30, 2009

 

March 31, 2014

 

 

5.023

 

75,000

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 2006

 

December 31, 2010

 

October 31, 2012

 

 

5.015

 

100,000

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

$

817,100

 

 

(1)          The interest pay rates represent the interest rate we will pay for one month LIBOR under the respective interest rate swap agreement. These rates do not include any spread in addition to one month LIBOR that is due monthly as interest expense.

 

8


 

.ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Same Property Comparisons

(Dollars in thousands)

(Unaudited)

 

 

 

GAAP Basis (1)

 

Cash Basis (1)

 

 

 

Quarter Ended

 

Quarter Ended

 

 

 

3/31/2008

 

3/31/2007

 

% Change

 

3/31/2008

 

3/31/2007

 

% Change

 

Revenue (2)

 

$

82,957

 

$

79,427

 

4.4

%

 

$

80,953

 

$

75,679

 

7.0

%

 

Operating expenses

 

21,813

 

20,404

 

6.9

 

 

21,813

 

20,404

 

6.9

 

 

Revenue less operating expenses

 

$

61,144

 

$

59,023

 

3.6

%

 

$

59,140

 

$

55,275

 

7.0

%

 

 

NOTE:  This summary represents operating data for all properties that were fully operating for the entire periods presented for the quarter periods (the “First Quarter Same Properties”).  Same property occupancy for the quarters ended March 31, 2008 and 2007 was 95.3% and 94.3%, respectively.  Properties undergoing redevelopment are excluded from same property results.

 

(1)

Revenue less operating expenses computed in accordance with GAAP is total revenue associated with the First Quarter Same Properties (excluding lease termination fees, if any) less property operating expenses.  Under GAAP, rental revenue is recognized on a straight-line basis over the respective lease terms.  Revenue less operating expenses on a cash basis is total revenue associated with the First Quarter Same Properties (excluding lease termination fees, if any) less property operating expenses, adjusted to exclude the effect of straight-line rent adjustments required by GAAP.  Straight-line rent adjustments for the quarters ended March 31, 2008 and 2007 for the First Quarter Same Properties were $2,004,000 and $3,748,000, respectively.  We believe that revenue less operating expenses on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent adjustments to rental revenue.

 

 

(2)

Fees received from tenants in connection with termination of their leases, if any, are excluded from revenue in the Summary of Same Property Comparisons. As of March 31, 2008, approximately 89% of our leases (on a square footage basis) were triple net leases, requiring tenants to pay substantially all real estate taxes and insurance, common area and other operating expenses, including increases thereto. In addition, as of March 31, 2008, approximately 8% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses.

 

9


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Properties

(Dollars in thousands)

(Unaudited)

 

 

 

March 31, 2008

 

December 31, 2007

 

 

 

 

 

 

 

 

 

Number of

 

Rentable Square Feet

 

Annualized

 

Occupancy

 

Occupancy

 

 

 

Properties

 

Operating

 

Redevelopment

 

Total

 

Base Rent (1)

 

Percentage (1) (2)

 

Percentage (3)

 

Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California – Los Angeles Metro

 

1

 

31,343

 

–

 

31,343

 

$

696

 

70.8

%

 

70.8

%

 

California – San Diego

 

34

 

1,473,715

 

236,347

 

1,710,062

 

43,028

 

94.1

 

 

94.9

 

 

California – San Francisco Bay

 

17

 

1,457,444

 

21,216

 

1,478,660

 

55,964

 

96.9

 

 

95.8

 

 

Eastern Massachusetts

 

37

 

3,069,398

 

333,896

 

3,403,294

 

110,202

 

96.6

 

 

94.7

 

 

International – Canada

 

4

 

342,394

 

–

 

342,394

 

9,215

 

100.0

 

 

100.0

 

 

New Jersey/Suburban Philadelphia

 

8

 

441,504

 

–

 

441,504

 

9,176

 

96.6

 

 

96.6

 

 

Southeast

 

12

 

597,775

 

60,631

 

658,406

 

11,074

 

89.5

(4)

 

86.0

(4)

 

Suburban Washington D.C.

 

31

 

2,431,630

 

68,138

 

2,499,768

 

47,823

 

91.0

 

 

90.1

 

 

Washington – Seattle

 

13

 

1,040,471

 

11,291

 

1,051,762

 

31,127

 

97.3

 

 

97.2

 

 

Total Properties (Continuing Operations)

 

157

 

10,885,674

 

731,519

 

11,617,193

 

$

318,305

 

94.8

%

 

93.8

%

 

 

(1)

Excludes spaces at properties totaling approximately 731,519 rentable square feet undergoing a permanent change in use to office/laboratory space through redevelopment and two properties totaling approximately 74,304 rentable square feet that are classified as “held for sale.”

(2)

Including spaces undergoing a permanent change in use to office/laboratory space through redevelopment, occupancy as of March 31, 2008 was 88.8%. See page 14 for additional information on our redevelopment program.

(3)

Excludes spaces at properties totaling 774,519 rentable square feet undergoing a permanent change in use to office/laboratory space through redevelopment and two properties totaling approximately 136,399 rentable square feet that are classified as “held for sale.” Including spaces undergoing a permanent change in use to office/laboratory space through redevelopment, occupancy as of December 31, 2007 was 87.8%. See page 14 for additional information on our redevelopment program.

(4)

Substantially all of the vacant space is office or warehouse space.

 

10


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Leasing Activity

For the Quarter Ended March 31, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

TI’s/Lease

 

 

 

 

 

 

 

Rentable

 

 

 

 

 

Rental

 

Commissions

 

Average

 

 

 

Number

 

Square

 

Expiring

 

New

 

Rate

 

Per

 

Lease

 

 

 

of Leases

 

Footage

 

Rates

 

Rates

 

Changes

 

Square Foot

 

Terms

 

Leasing Activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease Expirations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

44

 

633,450

 

$25.96

 

–

 

–

 

–

 

–

 

GAAP Basis

 

44

 

633,450

 

$24.91

 

–

 

–

 

–

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Renewed/Released Space Leased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

21

 

369,312

 

$26.55

 

$28.58

 

7.6%

 

$5.81

 

3.3 years

 

GAAP Basis

 

21

 

369,312

 

$25.11

 

$28.64

 

14.1%

 

$5.81

 

3.3 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Developed/Redeveloped/Vacant Space Leased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

27

 

201,098

 

–

 

$31.65

 

–

 

$6.57

 

4.2 years

 

GAAP Basis

 

27

 

201,098

 

–

 

$31.89

 

–

 

$6.57

 

4.2 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Month-to-Month Leases in Effect

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

14

 

81,463

 

$20.19

 

$20.16

 

–

 

–

 

–

 

GAAP Basis

 

14

 

81,463

 

$19.97

 

$20.16

 

–

 

–

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing Activity Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excluding Month-to-Month Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

48

 

570,410

 

–

 

$29.66

 

–

 

$6.07

 

3.6 years

 

GAAP Basis

 

48

 

570,410

 

–

 

$29.79

 

–

 

$6.07

 

3.6 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Including Month-to-Month Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

62

 

651,873

 

–

 

$28.47

 

–

 

–

 

–

 

GAAP Basis

 

62

 

651,873

 

–

 

$28.58

 

–

 

–

 

–

 

 

11


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Lease Expirations

March 31, 2008

 

Year of Lease 
Expiration

 

Number of 
Leases Expiring

 

Rentable Square 
Footage of 
Expiring Leases

 

Percentage of
Aggregate 
Leased Square Feet

 

Annualized Base Rent
of Expiring Leases
(per rentable 
square foot)

 

 

 

 

 

 

 

 

 

 

 

 

2008

 

50

(1)

 

505,873

(1)

 

4.9

%

 

$23.

41

 

2009

 

66

 

 

846,012

 

 

8.2

 

 

25.

04

 

2010

 

53

 

 

979,355

 

 

9.5

 

 

28.

58

 

2011

 

64

 

 

1,706,734

 

 

16.5

 

 

27.

78

 

2012

 

60

 

 

1,410,349

 

 

13.7

 

 

34.

23

 

 

 

 

Rentable Square 
Footage of Expiring Leases

 

Markets

 

2008

 

2009

 

 

 

 

 

 

 

California – Los Angeles Metro

 

4,006

 

4,354

 

California – San Diego

 

78,503

 

203,464

 

California – San Francisco Bay

 

78,567

 

104,476

 

Eastern Massachusetts

 

187,026

 

126,242

 

International – Canada

 

–

 

–

 

New Jersey/Suburban Philadelphia

 

40,000

 

21,000

 

Southeast

 

22,440

 

87,015

 

Suburban Washington D.C.

 

74,688

 

265,525

 

Washington – Seattle

 

20,643

 

33,936

 

 

 

 

 

 

 

Total

 

505,873

(1)

846,012

 

 

(1)          Includes 14 month-to-month leases for approximately 81,000 rentable square feet.

 

12


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Additions and Dispositions of Properties

For the Quarter Ended March 31, 2008

(Dollars in thousands)

 

 

 

 

Acquisition

 

Month of

 

Rentable

 

 

Markets

 

Amount

 

Acquisition

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

Additions to Operating Properties:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition

 

Month of

 

Developable

 

 

Markets

 

Amount

 

Acquisition

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

Additions to Land:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disposition

 

Month of

 

Rentable

 

 

Markets

 

Amount

 

Disposition

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

Dispositions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Diego

 

$

23,250

 

January

 

86,962

 

 

California – San Francisco Bay

 

46,400

(1)

February/March

 

272,730

 

 

 

 

$

69,650

 

 

 

359,692

 

 

 

 

 

 

 

 

 

 

 

(1)      Represents sale of five properties in the east bay area of the San Francisco Bay market.

 

13


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Square Footage Undergoing Redevelopment
March 31, 2008

 

Markets/Submarkets

 

Placed
in
Redevelopment

 

Estimated
In-Service
Dates

 

Estimated Investment Per Square Foot

 

Square Footage
Undergoing
Redevelopment/
Total Property

 

Status

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Diego

 

2006

 

2008

 

$80-100

 

29,660 / 29,660

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Diego/Sorrento

 

2006

 

2008

 

$70-80

 

21,464 / 30,147

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Diego/Torrey Pines

 

2004

 

2009

 

$100-120

 

87,140 / 87,140

 

Construction (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Diego/Torrey Pines

 

2006

 

2009

 

$80-100

 

43,600 / 43,600

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Diego/Torrey Pines

 

2007

 

2009

 

$80-100

 

15,259 / 107,709

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Diego/Torrey Pines

 

2007

 

2009

 

$80-100

 

39,224 / 76,084

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Francisco Bay/Peninsula

 

2007

 

2008

 

$80-100

 

21,216 / 82,712

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Massachusetts/Cambridge

 

2006

 

2008/2009

 

$120-175

 

124,075 / 177,101

 

Design/Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Massachusetts/Cambridge

 

2007

 

2009

 

$100-130

 

73,776 / 369,831

 

Design/Demolition

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Massachusetts/Suburban

 

2007

 

2009

 

$100-120

 

23,000 / 38,000

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Massachusetts/Suburban

 

2007

 

2009

 

$70-80

 

113,045 / 113,045

 

Redesign/Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Southeast/Florida

 

2006

 

2008

 

$80-100

 

44,238 / 45,841

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Southeast/Research Triangle Park

 

2007

 

2008

 

$100-120

 

16,393 / 77,395

 

Design/Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Suburban Washington D.C./Gaithersburg

 

2008

 

2008

 

$40-50

 

15,504 / 44,464

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Suburban Washington D.C./Shady Grove

 

2007

 

2009

 

$70-80

 

52,634 / 125,004

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington – Seattle

 

2007

 

2008

 

$125-150

 

11,291 / 32,279

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

731,519 / 1,480,012

 

 

 

 

Our redevelopment program involves ongoing activities necessary for the permanent change of use of applicable redevelopment space to office/laboratory space. Spaces currently built out with laboratory improvements are generally not placed into our value-add redevelopment program. As required under GAAP, interest and other costs directly related and essential to the project are capitalized on redevelopment properties on the basis allocable only to that portion of space undergoing redevelopment. In addition to properties undergoing redevelopment, as of March 31, 2008, our asset base contained embedded opportunities for future permanent change of use to office/laboratory space through redevelopment aggregating approximately 1,699,000 rentable square feet. See Summary of Embedded Future Development and Redevelopment Square Footage on page 16.

 

(1)

This project also includes site work and a multi-story below and above ground parking structure to support both the existing building undergoing redevelopment and an additional building targeted for development in the future.  The entitlement process for this project was completed in early 2007.

 

14


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties Undergoing Ground-Up Development
March 31, 2008

 

 

 

 

 

Construction

 

Estimated

 

Estimated

 

Rentable

 

 

 

 

 

Building

 

Start

 

In-Service

 

Investment

 

Square

 

 

 

Markets/Submarkets

 

Descriptions

 

Dates

 

Dates

 

Per Square Foot (1)

 

Feet

 

Status

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Francisco Bay/Mission Bay

 

One Multi-tenant Bldg.

 

2007

 

2010

 

$350

 

158,000

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Francisco Bay/So. San Francisco

 

Two Bldgs., Single or Multi-tenant

 

2006

 

2009

 

$350

 

162,000

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Francisco Bay/So. San Francisco

 

One Single or Multi-tenant Bldg.

 

2006

 

2009

 

$350

 

135,000

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International – China

 

Two Bldgs., Single or Multi-tenant

 

2007

 

2009

 

$45

 

280,000

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York – New York City

 

Two Multi-tenant Bldgs.

 

2007

 

2010/2011

 

$500

 

725,000

(2)

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington – Seattle

 

One Single or Multi-tenant Bldg.

 

2007

 

2010

 

TBD

 

115,000

 

Site Work

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Properties Undergoing Ground-Up Development (1)

 

 

 

 

 

 

 

1,575,000

 

 

 

 

In accordance with Statement of Financial Accounting Standards No. 34, “Capitalization of Interest Cost” (“SFAS 34”) and Statement of Financial Accounting Standards No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects” (“SFAS 67”), we are required to capitalize direct construction, including pre-construction costs, interest, property taxes, insurance and other costs directly related and essential to the construction of a project while activities are ongoing to prepare an asset for its intended use. Pre-construction costs include costs related to the development of plans and the process of obtaining entitlements and permits from government authorities. Costs incurred after a project is substantially complete and ready for its intended use are expensed as incurred. Should development, redevelopment or construction activity cease, construction costs, including interest, would no longer be eligible for capitalization, under SFAS 34 and SFAS 67, and would be expensed as incurred.

 

(1)

Our aggregate construction costs to date approximate $121 per developable square foot.  Amount excludes our investment per square foot in land.

(2)

In addition, we have the right to develop an additional parcel with approximately 442,000 rentable square feet. This square footage is not included in the embedded developable square footage shown on page 16.

 

15


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Embedded Future Development and Redevelopment Square Footage
March 31, 2008

 

 

 

Embedded Future Development

 

 

 

 

 

Markets

 


Development/
Pre-construction
Square Footage (1)

 

Total Embedded
Development
Square Footage

 

Embedded Future
Redevelopment
Square Footage

 

Total

 

 

 

 

 

 

 

 

 

 

 

California – San Diego

 

298,000

 

443,000

 

228,000

 

671,000

 

 

 

 

 

 

 

 

 

 

 

California – San Francisco Bay/Mission Bay

 

2,386,000

 

2,386,000

 

–

 

2,386,000

 

 

 

 

 

 

 

 

 

 

 

California – San Francisco Bay/So. San Francisco

 

549,000

 

921,000

 

25,000

 

946,000

 

 

 

 

 

 

 

 

 

 

 

Eastern Massachusetts

 

2,050,000

 

2,275,000

 

589,000

 

2,864,000

 

 

 

 

 

 

 

 

 

 

 

International – Canada

 

763,000

 

827,000

 

–

 

827,000

 

 

 

 

 

 

 

 

 

 

 

Suburban Washington D.C.

 

425,000

 

787,000

 

472,000

 

1,259,000

 

 

 

 

 

 

 

 

 

 

 

Washington – Seattle

 

206,000

 

843,000

 

135,000

 

978,000

 

 

 

 

 

 

 

 

 

 

 

Other

 

176,000

 

516,000

 

250,000

 

766,000

 

 

 

 

 

 

 

 

 

 

 

Total

 

6,853,000

 

8,998,000

(2)

1,699,000

 

10,697,000

 

 

The embedded future development and redevelopment square footage shown above represents future ground-up development projects and future redevelopment (permanent change in use of applicable space to office/laboratory space) projects. A significant portion of our embedded future development square footage is in the development/pre-construction phase (entitlement, permitting, design, etc.). See discussion on SFAS 34 and SFAS 67 on page 15. Commencement of construction will depend on numerous factors, including the successful completion of development/pre-construction activities and management’s assessment of overall market conditions. As required under GAAP, direct construction, interest, property taxes, insurance and other costs directly related and essential to the development/pre-construction, or construction of a project, is mandated to be capitalized during pre-construction when activities are ongoing to bring these assets to their intended use.

 

(1)

Development/pre-construction square footage is included in Embedded Future Development -Total Embedded Development Square Footage shown above.

(2)

In addition, we have the right to develop an additional parcel with approximately 442,000 rentable square feet. This square footage is not included in the embedded developable square footage shown above.

 

16


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

 

Summary of Capital Costs
For the Quarter ended March 31, 2008

 

(In thousands)

 

Property-related capital expenditures (1)

 

$

500

 

 

 

 

 

Leasing costs (2)

 

$

238

 

 

 

 

 

Property-related costs (3)

 

$

116,541

 

 

(1)

Property-related capital expenditures include all major capital and recurring capital expenditures except capital expenditures that are recoverable from tenants, revenue-enhancing capital expenditures, or costs related to the redevelopment of a property. Major capital expenditures consist of roof replacements and HVAC systems which are typically identified and considered at the time the property is acquired. Capital expenditures fluctuate in any given period due to the nature, extent or timing of improvements required and the extent to which they are recoverable from tenants. Approximately 92% of our leases (based on rentable square feet) provide for the recapture of certain capital expenditures (such as HVAC systems maintenance and/or replacement, roof replacement and parking lot resurfacing). In addition, we implement an active preventative maintenance program at each of our properties to minimize capital expenditures.

 

 

(2)

Leasing costs consist of tenant improvements and leasing commissions related to leasing of acquired vacant space and second generation space.

 

 

(3)

Amount includes leasing costs related to development and redevelopment projects.

 

17


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Conference Call Information

For the First Quarter Ended March 31, 2008

 

Alexandria Real Estate Equities, Inc. will be hosting a conference call to discuss its operating and financial results for the first quarter ended March 31, 2008:

 

Date:

 

May 9, 2008

 

 

 

 

 

Time:

 

2:00 P.M. Eastern Daylight Time/11:00 A.M. Pacific Daylight Time

 

 

 

 

 

Phone Number:

 

(719) 325-4812

 

 

 

 

 

Confirmation Code:

 

6328049

 

18