EX-99.1 2 a08-27041_1ex99d1.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 THIRD QUARTER 2008

OPERATING AND FINANCIAL RESULTS

 

Highlights

 

Third Quarter 2008:

 

·                  Third Quarter 2008 Funds from Operations (FFO) Per Share (Diluted) of $1.53, up 6%, Compared to Third Quarter 2007 FFO Per Share (Diluted) of $1.45

·                  Third Quarter 2008 Total Revenues up 13%, FFO Available to Common Stockholders up 14%, Compared to Third Quarter 2007

·                  Third Quarter 2008 Earnings Per Share from Continuing Operations (Diluted) of $0.67

·                  Third Quarter 2008 GAAP Same Property Revenues Less Operating Expenses up 5.6%

·                  Executed 41 Leases for 618,000 Rentable Square Feet in Third Quarter 2008; Executed Leases for 1.7 Million Rentable Square Feet in Year-to-Date 2008, up 43% over 2007

·                  Third Quarter 2008 GAAP Rental Rate Increase of 8.2% on Renewed/Released Space; Year-to-Date 2008 GAAP Rental Rate Increase of 14.9% on Renewed/Released Space

·                  Completed Redevelopment of Multiple Spaces at Seven Properties Aggregating 116,000 Rentable Square Feet

·                  Leased 513,000 Square Feet of Redevelopment and Development Space Year-to-Date 2008

·                  Executed 106,000 Square Foot Lease with Gilead Sciences, Inc. in Seattle, Washington

·                  Executed 47,000 Square Foot Lease with Novartis Institutes for Biomedical Research, Inc. in Cambridge, Massachusetts

·                  Third Quarter 2008 Occupancy Increases to 95.6%

·                  Third Quarter 2008 Operating Margins Steady at 74%

 

PASADENA, CA. – October 30, 2008 – Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced operating and financial results for the third quarter ended September 30, 2008.

 

For the third quarter of 2008, we reported total revenues of $115,280,000 and FFO available to common stockholders of $48,832,000, or $1.53 per share (diluted), compared to total revenues of $102,107,000 and FFO available to common stockholders of $42,723,000, or $1.45 per share (diluted), for the third quarter of 2007.  Comparing the third quarter of 2008 to the third quarter of 2007, total revenues increased 13%, FFO available to common stockholders increased 14% and FFO per share (diluted) increased 6%.  For the nine months ended September 30, 2008, we reported total revenues of $335,293,000 and FFO available to common stockholders of $143,862,000, or $4.51 per share (diluted), before non-cash impairment charges, compared to total revenues of $290,662,000 and FFO available to common stockholders of $124,675,000, or $4.24 per share (diluted), before a preferred stock redemption charge, for the nine months ended September 30, 2007.  Comparing the nine months ended September 30, 2008 to the nine months ended September 30, 2007, total revenues increased 15%, FFO available to common stockholders and FFO per share (diluted) increased 15% and 6%, respectively, before non-cash impairment and preferred stock redemption charges.  In the first quarter of 2008, we incurred non-cash impairment charges aggregating $6,635,000, or $0.21 per share (diluted), related to assets “held for sale” and certain investments, and in the first quarter of 2007 we recognized a preferred stock redemption charge of $2,799,000, or $0.10 per share (diluted).

 

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

Page 2

 

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 September 30, 2008 and 2007 was $27,447,000 and $24,194,000, respectively. Depreciation and amortization expense for the nine months ended September 30, 2008 and 2007 was $80,260,000 and $70,366,000, respectively.  Net income available to common stockholders for the third quarter of 2008 was $21,510,000, or $0.67 per share (diluted), compared to net income available to common stockholders of $20,186,000, or $0.68 per share (diluted), for the third quarter of 2007.  Net income available to common stockholders for the third quarter of 2007 included a gain of $1,614,000 on the sale of one property and four land parcels.  Excluding gains on sales of properties, net income available to common stockholders for the third quarter of 2007 was $18,572,000, or $0.63 per share (diluted), for the third quarter of 2007.  Net income available to common stockholders for the nine months ended September 30, 2008 was $77,573,000, or $2.43 per share (diluted), compared to net income available to common stockholders of $56,628,000, or $1.93 per share (diluted), for the nine months ended September 30, 2007.  Net income available to common stockholders for the nine months ended September 30, 2008 included aggregate gains of $20,395,000 on sales of seven properties and non-cash impairment charges aggregating $6,635,000 related to assets “held for sale” and certain investments.  Net income available to common stockholders for the nine months ended September 30, 2007 included a gain on sales of three properties and four land parcels of $5,075,000 and a preferred stock redemption charge of $2,799,000.  Excluding gains on sales of properties and non-cash impairment and preferred stock redemption charges, net income available to common stockholders for the nine months ended September 30, 2008 was $63,813,000, or $2.00 per share (diluted), compared to net income available to common stockholders of $54,352,000, or $1.85 per share (diluted), for the nine months ended September 30, 2007.

 

For the third quarter of 2008, we executed a total of 41 leases for approximately 618,000 rentable square feet of space at 26 different properties (excluding month-to-month leases).  Of this total, approximately 211,000 rentable square feet related to new or renewal leases of previously leased space and approximately 407,000 rentable square feet related to developed, redeveloped or previously vacant space.  Of the 407,000 rentable square feet, approximately 310,000 rentable square feet were delivered from our development or redevelopment programs, with the remaining approximately 97,000 rentable square feet related to previously vacant space.  Rental rates for these new or renewal leases were on average approximately 8.2% higher (on a GAAP basis) than rental rates for expiring leases.

 

For the nine months ended September 30, 2008, we executed a total of 114 leases for approximately 1,696,000 square feet of space at 56 different properties (excluding month-to-month leases).  Of this total, approximately 916,000 square feet were for new or renewal leases related to previously leased space and approximately 780,000 square feet were for developed, redeveloped, or previously vacant space.  Of the 780,000 square feet, approximately 513,000 square feet were delivered from our redevelopment or development programs, with the remaining approximately 267,000 square feet for previously vacant space.  Rental rates for new or renewal leases were on average approximately 14.9% higher (on a GAAP basis) than rental rates for expiring leases.

 

In August 2008, we announced that Pfizer Inc. entered into a long-term lease for approximately 100,000 square feet, with an option for an additional 50,000 square feet.  Pfizer Inc. will locate its Biotherapeutics and Bioinnovation Center in The Alexandria Center for Science and Technology at Mission Bay, San Francisco, California.

 

In October 2008, we announced that Gilead Sciences, Inc. entered into a long-term lease for approximately 106,000 square feet in Seattle, Washington.

 

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

Page 3

 

As of September 30, 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 September 30, 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 September 30, 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 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)

 

$5.85(1)

 

Earnings per share (diluted) (2)

 

$3.10(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” as of September 30, 2008 and certain investments. Our guidance for 2008 FFO per share (diluted) after supplemental adjustments for the non-cash impairment charges is $6.06.

(2)

 

Includes non-cash impairment charges aggregating $6,635,000 and gains on sales of property aggregating $20,395,000.

 

Alexandria Real Estate Equities, Inc., Landlord of Choice to the Life Science Industry®, is the largest owner and pre-eminent 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 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 160 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.

 

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
September 30,

 

Nine Months Ended
September 30,

 

 

 

2008

 

2007

 

2008

 

2007

 

Income statement data

 

 

 

 

 

 

 

 

 

Total revenues

 

$

115,280

 

$

102,107

 

$

335,293

 

$

290,662

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

Rental operations

 

29,749

 

24,944

 

85,666

 

70,390

 

General and administrative

 

8,588

 

8,310

 

25,827

 

24,192

 

Interest

 

19,948

 

23,659

 

59,925

 

63,502

 

Depreciation and amortization

 

27,447

 

23,726

 

80,122

 

68,780

 

Non-cash impairment on investments

 

–

 

–

 

1,985

 

–

 

 

 

85,732

 

80,639

 

253,525

 

226,864

 

 

 

 

 

 

 

 

 

 

 

Minority interest

 

929

 

909

 

2,828

 

2,718

 

Income from continuing operations

 

28,619

 

20,559

 

78,940

 

61,080

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations, net

 

(19

)

2,341

 

15,769

 

7,652

 

 

 

 

 

 

 

 

 

 

 

Net income

 

28,600

 

22,900

 

94,709

 

68,732

 

 

 

 

 

 

 

 

 

 

 

Dividends on preferred stock

 

7,090

 

2,714

 

17,136

 

9,305

 

Preferred stock redemption charge

 

–

 

–

 

–

 

2,799

 

Net income available to common stockholders

 

$

21,510

 

$

20,186

 

$

77,573

 

$

56,628

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding

 

 

 

 

 

 

 

 

 

Basic

 

31,694,711

 

29,258,184

 

31,619,163

 

29,068,793

 

Diluted

 

31,959,890

 

29,507,316

 

31,906,627

 

29,406,687

 

 

 

 

 

 

 

 

 

 

 

Earnings per share – basic

 

 

 

 

 

 

 

 

 

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

 

$

0.68

 

$

0.61

 

$

1.95

 

$

1.69

 

Discontinued operations, net

 

–

 

0.08

 

0.50

 

0.26

 

Earnings per share – basic

 

$

0.68

 

$

0.69

 

$

2.45

 

$

1.95

 

 

 

 

 

 

 

 

 

 

 

Earnings per share – diluted

 

 

 

 

 

 

 

 

 

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

 

$

0.67

 

$

0.60

 

$

1.94

 

$

1.67

 

Discontinued operations, net

 

–

 

0.08

 

0.49

 

0.26

 

Earnings per share – diluted

 

$

0.67

 

$

0.68

 

$

2.43

 

$

1.93

 

 

(Continued on next page)

 

4


 

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 nor 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 tables present 1) a reconciliation of net income available to common stockholders, the most directly comparable GAAP financial measure to FFO, to funds from operations available to common stockholders after supplemental adjustments and 2) a reconciliation of earnings per share (diluted) to FFO per share (diluted) after supplemental adjustments, in each case, for the three and nine months ended September 30, 2008 and 2007 (in thousands, except per share data):

 

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

 

Three Months
Ended
September 30,
2008

 

Three Months
Ended
September 30,
2007

 

Nine Months
Ended
September 30,
2008

 

Nine Months
Ended
September 30,
2007

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

21,510

 

$

20,186

 

$

77,573

 

$

56,628

 

Add: Depreciation and amortization (1)

 

27,447

 

24,194

 

80,260

 

70,366

 

Add: Minority interest

 

929

 

909

 

2,828

 

2,718

 

Subtract: Gain on sales of property (2)

 

–

 

(1,614

)

(20,395

)

(5,075

)

Subtract: FFO allocable to minority interest

 

(1,054

)

(952

)

(3,039

)

(2,761

)

Funds from operations available to common stockholders

 

48,832

 

42,723

 

137,227

 

121,876

 

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

 

$

48,832

 

$

42,723

 

$

143,862

 

$

124,675

 

FFO per share (diluted) after supplemental adjustments

 

 

 

 

 

 

 

 

 

Basic

 

$

1.54

 

$

1.46

 

$

4.55

 

$

4.29

 

Diluted

 

$

1.53

 

$

1.45

 

$

4.51

 

$

4.24

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Earnings per share (diluted)

 

$

0.67

 

$

0.68

 

$

2.43

 

$

1.93

 

Depreciation and amortization (1)

 

0.86

 

0.82

 

2.52

 

2.39

 

Minority interest

 

0.03

 

0.03

 

0.09

 

0.09

 

Gain on sales of property (2)

 

–

 

(0.05

)

(0.64

)

(0.17

)

FFO allocable to minority interest

 

(0.03

)

(0.03

)

(0.10

)

(0.10

)

FFO per share (diluted)

 

1.53

 

1.45

 

4.30

 

4.14

 

Preferred stock redemption charge (3)

 

–

 

–

 

–

 

0.10

 

Non-cash impairment charges (4)

 

–

 

–

 

0.21

 

–

 

FFO per share (diluted) after supplemental adjustments

 

$

1.53

 

$

1.45

 

$

4.51

 

$

4.24

 

 

(1)

 

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

(2)

 

Gain on sales of property relates to the disposition of one property during the second quarter 2008, six properties during the first quarter 2008, four land parcels and one property during the third quarter 2007, one property during the second quarter 2007, and one property during the first quarter 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 of approximately $4,650,000 on two properties “held for sale”. One property was an industrial building located in a suburban submarket south of Boston and the other property was an office building located in the San Diego market. The non-cash impairment charges recognized in March 2008 on these two properties are classified in income from discontinued operations, net.

 

5


 

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

 

 

 

For the Three Months Ended

 

Operational data

 

9/30/2008

 

6/30/2008

 

3/31/2008

 

12/31/2007

 

9/30/2007

 

Rental income

 

$

85,829

 

$

83,176

 

$

82,156

 

$

81,695

 

$

76,970

 

Tenant recoveries

 

26,803

 

23,986

 

24,553

 

22,344

 

21,420

 

Other income

 

2,648

 

2,892

 

3,250

 

3,965

 

3,717

 

Total revenues (continuing operations) (a)

 

$

115,280

 

$

110,054

 

$

109,959

 

$

108,004

 

$

102,107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

1.53

 

$

1.51

 

$

1.48

 

$

1.46

 

$

1.45

 

Dividends per share on common stock

 

$

0.80

 

$

0.80

 

$

0.78

 

$

0.78

 

$

0.76

 

Dividend payout ratio (common stock) (c)

 

52.7%

 

53.5%

 

53.2%

 

53.9%

 

56.3%

 

Straight-line rent

 

$

3,274

 

$

3,437

 

$

3,015

 

$

4,615

 

$

4,335

 

Capitalized interest

 

$

17,646

(d)

$

18,437

 

$

17,262

 

$

16,609

 

$

15,035

 

Number of properties (e)

 

 

 

 

 

 

 

 

 

 

 

Acquired/added/completed during period

 

–

 

2

 

–

 

2

 

13

 

Sold/transferred (f)

 

–

 

(1

)

(7

)

(3

)

(1

)

At end of period

 

160

 

160

 

159

 

166

 

167

 

Rentable square feet (e)

 

 

 

 

 

 

 

 

 

 

 

Acquired/added/completed during period

 

–

 

60,000

 

–

 

404,986

 

988,030

 

Sold/transferred (f)

 

–

 

(49,437

)

(475,976

)

(92,927

)

(37,000

)

At end of period

 

11,692,188

 

11,692,188

 

11,681,625

 

12,157,601

 

11,845,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

 

 

 

Other data

 

9/30/2008

 

6/30/2008

 

3/31/2008

 

12/31/2007

 

9/30/2007

 

Number of shares of common stock outstanding

 

31,839,622

 

31,773,117

 

31,673,359

 

31,603,344

 

31,243,448

 

Closing price of common stock

 

$

112.50

 

$

97.34

 

$

92.72

 

$

101.67

 

$

96.26

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt to total market capitalization (g)

 

 

 

 

 

 

 

 

 

 

 

Total debt

 

$

2,804,551

 

$

2,693,333

 

$

2,625,852

 

$

2,787,904

 

$

2,502,832

 

Less minority interest share of debt

 

(42,384

)

(40,762

)

(39,838

)

(39,320

)

(22,102

)

Our share of total debt

 

2,762,167

 

2,652,571

 

2,586,014

 

2,748,584

 

2,480,730

 

Preferred stock

 

368,489

 

377,616

 

352,127

 

136,845

 

130,156

 

Common stock market capitalization

 

3,581,957

 

3,092,795

 

2,936,754

 

3,213,112

 

3,007,494

 

Total market capitalization

 

$

6,712,613

 

$

6,122,982

 

$

5,874,895

 

$

6,098,541

 

$

5,618,380

 

Debt to total market capitalization

 

41.1%

 

43.3%

 

44.0%

 

45.1%

 

44.2%

 

 

(a)

 

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

(b)

 

See page 5 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)

 

As of September 30, 2008, properties undergoing development and redevelopment and land held for development for which capitalization of interest is required pursuant to Statement of Financial Accounting Standards No. 34, “Capitalization of Interest Cost” (“SFAS 34”), approximated $1.4 billion. This amount is classified as properties undergoing development and redevelopment and land held for development on our balance sheet. As of September 30, 2008, the weighted average interest rate used in the calculation of capitalized interest required pursuant to SFAS 34 was approximately 5.50%. 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.

(e)

 

Includes properties “held for sale” during the applicable periods such assets were “held for sale.” As of September 30, 2008, one property with approximately 24,867 rentable square feet was classified as “held for sale.”

(f)

 

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

(g)

 

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.

 

6


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

September 30,

 

December 31,

 

 

 

2008

 

2007

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Rental properties, net

 

$

3,199,755

 

$

3,146,915

 

Properties undergoing development and redevelopment and land held for development

 

1,364,705

 

1,143,302

 

Cash and cash equivalents

 

15,391

 

8,030

 

Tenant security deposits and other restricted cash

 

68,040

 

51,911

 

Tenant receivables

 

6,849

 

6,759

 

Deferred rent

 

87,097

 

81,496

 

Investments

 

72,509

 

84,322

 

Other assets

 

118,794

 

119,359

 

Total assets

 

$

4,933,140

 

$

4,642,094

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Secured notes payable

 

$

1,078,551

 

$

1,212,904

 

Unsecured line of credit and unsecured term loan

 

1,266,000

 

1,115,000

 

Unsecured convertible notes

 

460,000

 

460,000

 

Accounts payable, accrued expenses and tenant security deposits

 

280,822

 

247,289

 

Dividends payable

 

31,939

 

27,575

 

Total liabilities

 

3,117,312

 

3,062,768

 

 

 

 

 

 

 

Minority interest

 

75,120

 

75,506

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Series C preferred stock

 

129,638

 

129,638

 

Series D convertible preferred stock

 

250,000

 

–

 

Common stock

 

318

 

316

 

Additional paid-in capital

 

1,377,280

 

1,365,773

 

Accumulated other comprehensive (loss) income

 

(16,528

)

8,093

 

Total stockholders’ equity

 

1,740,708

 

1,503,820

 

Total liabilities and stockholders’ equity

 

$

4,933,140

 

$

4,642,094

 

 

7


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Debt
September 30, 2008
(Dollars in thousands)
(Unaudited)

 

Principal Maturities / Rates

 

 

 

Secured Debt

 

Unsecured Debt

 

 

Year

 

Amount

 

Weighted
Average
Interest Rate

 

Amount

 

 

2008

 

$

2,143

 

             5.72%

(1)

 

$

–

 

 

2009

 

263,956

  (2)

             5.72

(3) (4)

 

–

 

 

2010

 

91,123

 

             5.91

(3)

 

516,000

  (5)

 

2011

 

181,911

 

             5.77

(3)

 

750,000

  (5)

 

2012

 

36,903

 

             5.96

(3)

 

460,000

  (6)

 

Thereafter

 

502,515

  (2)

             5.89

(3) (4)

 

–

 

 

Total

 

$

1,078,551

  (2)

 

 

 

$

1,726,000

 

 

 

 

 

 

 

 

 

 

 

 

Secured and Unsecured Debt Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance

 

Percentage
of
Balance

 

Weighted
Average
Interest Rate (7)

 

Weighted
Average
Maturity

 

 

Secured Debt

 

$

1,078,551

 

38.5

%

 

5.72

%

 

4.1 Years

 

 

Unsecured Debt

 

1,726,000

 

61.5

 

 

4.88

 

 

2.8 Years

 

 

Total Debt

 

$

2,804,551

 

100.0

%

 

5.21

%

 

3.3 Years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed and Floating Rate Debt Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance

 

Percentage
of
Balance

 

Weighted
Average
Interest Rate (7)

 

Weighted
Average
Maturity

 

 

Fixed Rate Debt

 

$

1,247,606

 

44.5

%

 

5.13

%

 

4.5 Years

 

 

Floating Rate Debt – Hedged

 

 

817,100

 

29.1

 

 

6.00

 

 

2.9 Years

 

 

Floating Rate Debt – Unhedged

 

739,845

 

26.4

 

 

4.45

 

 

1.8 Years

 

 

Total Debt

 

$

2,804,551

 

100.0

%

 

5.21

%

 

3.3 Years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

 

The weighted average interest rate is calculated based on outstanding debt as of September 30, 2008.

(2)

 

Includes minority interests’ share of scheduled principal maturities of approximately $42.4 million, of which approximately $20.4 million and $21.1 million mature in 2009 and thereafter, respectively.

(3)

 

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

(4)

 

Our borrowing capacity and financial covenants under our unsecured line of credit and unsecured term loan are not directly dependent or variable based upon our stock price. Interest on outstanding borrowings under our unsecured credit facility is based upon LIBOR plus 1.00% to 1.45% depending on our leverage or the higher of the Federal Funds rate plus 0.50% or Bank of America’s (“BofA”) prime rate plus 0.0% to 0.25% depending on our leverage. As of September 30, 2008, one-month LIBOR was 3.93%, the Federal Funds rate was 2.00%, and BofA’s prime rate was 5.00%. The Federal Funds Rate and BofA’s prime rate decreased to 1.50% and 4.50%, respectively, effective October 8, 2008. In October 2008, we elected prime based rates for a portion of our unhedged variable rate debt when the prime based rate was lower than the LIBOR based rate.

(5)

 

The unsecured line of credit matures in October 2010 and may be extended at our sole option for an additional one year period to October 2011. The unsecured term loan matures in October 2011 and may be extended at our sole option for an additional one year period to October 2012.

(6)

 

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.

(7)

 

Represents the weighted average contractual interest rate plus the impact of debt premiums/discounts and our interest rate swap agreements. The weighted average interest rate excludes bank fees and amortization of loan fees. See page 9 for further details of our interest rate swap agreements.

 

8


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Interest Rate Swap Agreements

September 30, 2008

(Dollars in thousands)

(Unaudited)

 

Transaction Dates

 

Effective
Dates

 

Termination
Dates

 

Interest Pay
Rates (1)

 

Notional
Amounts

 

Effective at
September 30,
 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 2006

 

June 29, 2007

 

October 31, 2008

 

4.920

 

 

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

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 2006

 

June 30, 2008

 

June 30, 2010

 

5.325

 

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 2006

 

June 30, 2008

 

June 30, 2010

 

5.325

 

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 2007

 

July 1, 2008

 

March 31, 2013

 

4.622

 

 

25,000

 

25,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 2007

 

July 1, 2008

 

March 31, 2013

 

4.625

 

 

25,000

 

25,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

In October 2008, we entered into three additional interest rate swap agreements with notional amounts totaling $275 million at fixed interest pay rates ranging from 2.750% to 3.119%.  The swap agreements are effective in October 2008 and September 2009 and have termination dates ranging from December 2009 to January 2011. 

 

9


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Properties

(Dollars in thousands)

(Unaudited)

 

 

 

September 30, 2008

 

June 30, 2008

 

 

 

Number of

 

Rentable Square Feet

 

Annualized

 

Occupancy

 

Occupancy

 

Markets

 

Properties

 

Operating

 

Redevelopment

 

Total

 

Base Rent (1)

 

Percentage (1) (2)

 

Percentage (3)

 

California – Los Angeles Metro

 

1

 

31,343

 

–

 

31,343

 

$

820

 

88.3

%

 

70.8

%

 

California – San Diego

 

34

 

1,501,769

 

208,293

 

1,710,062

 

43,669

 

94.2

 

 

94.1

 

 

California – San Francisco Bay

 

17

 

1,430,981

 

47,679

 

1,478,660

 

56,122

 

98.7

 

 

97.6

 

 

Eastern Massachusetts

 

38

 

3,122,518

 

310,776

 

3,433,294

 

114,403

 

97.1

 

 

97.0

 

 

International – Canada

 

4

 

342,394

 

–

 

342,394

 

9,093

 

100.0

 

 

100.0

 

 

New Jersey/Suburban Philadelphia

 

8

 

441,504

 

–

 

441,504

 

8,341

 

87.5

 

 

87.5

 

 

Southeast

 

13

 

612,330

 

75,090

 

687,420

 

11,633

 

94.5

 

 

94.2

 

 

Suburban Washington, D.C.

 

31

 

2,430,241

 

66,635

 

2,496,876

 

49,425

 

92.4

 

 

91.0

 

 

Washington – Seattle

 

13

 

1,045,768

 

–

 

1,045,768

 

32,004

 

99.0

 

 

98.7

 

 

Total Properties (Continuing Operations)

 

159

 

10,958,848

 

708,473

 

11,667,321

 

$

325,510

 

95.6

%

 

95.0

%

 

 

(1)

 

Excludes spaces at properties totaling approximately 708,473 rentable square feet undergoing a permanent change in use to office/laboratory space through redevelopment and one property with approximately 24,867 rentable square feet that is classified as “held for sale”.

(2)

 

Including spaces undergoing a permanent change in use to office/laboratory space through redevelopment, occupancy as of September 30, 2008 was 89.8%. See page 16 for additional information on our redevelopment program.

(3)

 

Excludes spaces at properties totaling approximately 789,939 rentable square feet undergoing a permanent change in use to office/laboratory space through redevelopment and one property with approximately 24,867 rentable square feet that is classified as “held for sale”. Including spaces undergoing a permanent change in use to office/laboratory space through redevelopment, occupancy as of June 30, 2008 was 88.6%. See page 16 for additional information on our redevelopment program.

 

10


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Same Property Comparisons

(Dollars in thousands)

(Unaudited)

 

 

 

GAAP Basis (1)

 

Cash Basis (1)

 

 

 

Quarter Ended

 

Quarter Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9/30/2008

 

9/30/2007

 

% Change

 

9/30/2008

 

9/30/2007

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue (2)

 

$

89,166

 

$

83,839

 

6.4

%

 

$

87,699

 

$

80,635

 

8.8

%

 

Operating expenses

 

23,428

 

21,611

 

8.4

 

 

23,428

 

21,611

 

8.4

 

 

Revenue less operating expenses

 

$

65,738

 

$

62,228

 

5.6

%

 

$

64,271

 

$

59,024

 

8.9

%

 

 

 

 

GAAP Basis (1)

 

Cash Basis (1)

 

 

 

Nine Months Ended

 

Nine Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9/30/2008

 

9/30/2007

 

% Change

 

9/30/2008

 

9/30/2007

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue (2)

 

$

246,875

 

$

236,504

 

4.4

%

 

$

242,709

 

$

226,314

 

7.2

%

 

Operating expenses

 

64,357

 

59,539

 

8.1

 

 

64,357

 

59,539

 

8.1

 

 

Revenue less operating expenses

 

$

182,518

 

$

176,965

 

3.1

%

 

$

178,352

 

$

166,775

 

6.9

%

 

 

NOTE:  This summary represents operating data for all properties that were fully operating for the entire periods presented for the quarter periods (the “Third Quarter Same Properties”) and for the Nine Month periods (the “Nine Months Same Properties”).  Same property occupancy for the quarters ended September 30, 2008 and 2007 was 96.0% and 95.1%, respectively.  Same Property Occupancy for the nine months ended September 30, 2008 and 2007 was 95.9% and 95.7%, 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 Third Quarter Same Properties and Nine Months Same Properties, as applicable (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 Third Quarter Same Properties and Nine Months 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 September 30, 2008 and 2007 for the Third Quarter Same Properties were $1,467,000 and $3,204,000, respectively. Straight-line rent adjustments for the nine months ended September 30, 2008 and 2007 for the Nine Months Same Properties were $4,166,000 and $10,190,000, 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 September 30, 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 September 30, 2008, approximately 8% of our leases (on a square footage basis) required the tenants to pay a majority of operating expenses.

 

11


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Leasing Activity

For the Quarter Ended September 30, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

TI’s/Lease

 

 

 

 

 

 

 

Rentable

 

 

 

 

 

Rental

 

Commissions

 

 

 

 

 

Number

 

Square

 

Expiring

 

New

 

Rate

 

Per

 

Lease

 

 

 

of Leases

 

Footage

 

Rates

 

Rates

 

Changes

 

Square Foot

 

Terms

 

Leasing Activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease Expirations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

40

 

335,341

 

$25.13

 

–

 

–

 

–

 

–

 

GAAP Basis

 

40

 

335,341

 

$24.52

 

–

 

–

 

–

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Renewed/Released Space Leased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

19

 

211,234

 

$26.57

 

$27.77

 

4.5%

 

$2.88

 

2.1 years

 

GAAP Basis

 

19

 

211,234

 

$25.73

 

$27.83

 

8.2%

 

$2.88

 

2.1 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Developed/Redeveloped/Vacant Space Leased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

22

 

407,025

 

–

 

$39.18

 

–

 

$13.04

 

8.7 years

 

GAAP Basis

 

22

 

407,025

 

–

 

$43.41

 

–

 

$13.04

 

8.7 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Month-to-Month Leases in Effect

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

12

 

83,719

 

$18.81

 

$18.85

 

–

 

–

 

–

 

GAAP Basis

 

12

 

83,719

 

$18.81

 

$18.85

 

–

 

–

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing Activity Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excluding Month-to-Month Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

41

 

618,259

 

–

 

$35.28

 

–

 

$9.57

 

6.3 years

 

GAAP Basis

 

41

 

618,259

 

–

 

$38.09

 

–

 

$9.57

 

6.3 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Including Month-to-Month Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

53

 

701,978

 

–

 

$33.32

 

–

 

–

 

–

 

GAAP Basis

 

53

 

701,978

 

–

 

$35.79

 

–

 

–

 

–

 

 

12


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Leasing Activity

For the Nine Months Ended September 30, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

TI’s/Lease

 

 

 

 

 

 

 

Rentable

 

 

 

 

 

Rental

 

Commissions

 

 

 

 

 

Number

 

Square

 

Expiring

 

New

 

Rate

 

Per

 

Lease

 

 

 

of Leases

 

Footage

 

Rates

 

Rates

 

Changes

 

Square Foot

 

Terms

 

Leasing Activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease Expirations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

90

 

1,261,916

 

$25.94

 

–

 

–

 

–

 

–

 

GAAP Basis

 

90

 

1,261,916

 

$24.60

 

–

 

–

 

–

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Renewed/Released Space Leased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

59

 

915,808

 

$25.87

 

$27.37

 

5.8%

 

$4.11

 

3.8 years

 

GAAP Basis

 

59

 

915,808

 

$24.32

 

$27.95

 

14.9%

 

$4.11

 

3.8 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Developed/Redeveloped/ Vacant Space Leased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

55

 

779,698

 

–

 

$35.46

 

–

 

$11.41

 

7.3 years

 

GAAP Basis

 

55

 

779,698

 

–

 

$38.46

 

–

 

$11.41

 

7.3 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Month-to-Month Leases in Effect

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

12

 

83,719

 

$18.81

 

$18.85

 

–

 

–

 

–

 

GAAP Basis

 

12

 

83,719

 

$18.81

 

$18.85

 

–

 

–

 

–

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing Activity Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excluding Month-to-Month Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

114

 

1,695,506

 

–

 

$31.09

 

–

 

$7.46

 

5.4 years

 

GAAP Basis

 

114

 

1,695,506

 

–

 

$32.78

 

–

 

$7.46

 

5.4 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Including Month-to-Month Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Basis

 

126

 

1,779,225

 

–

 

$30.51

 

–

 

–

 

–

 

GAAP Basis

 

126

 

1,779,225

 

–

 

$32.13

 

–

 

–

 

–

 

 

13


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Lease Expirations

September 30, 2008

 

 

 

 

 

 

 

 

 

Annualized Base Rent

 

 

 

 

 

Rentable Square

 

Percentage of

 

of Expiring Leases

 

Year of Lease

 

Number of

 

Footage of

 

Aggregate

 

(per rentable

 

Expiration

 

Leases Expiring

 

Expiring Leases

 

Leased Square Feet

 

square foot)

 

 

 

 

 

 

 

 

 

 

 

2008

 

26

(1)

 

282,354

(1)

 

2.7

%

 

$22.05

 

 

2009

 

73

 

 

844,481

 

 

8.1

 

 

25.61

 

 

2010

 

61

 

 

987,991

 

 

9.4

 

 

28.31

 

 

2011

 

68

 

 

1,766,910

 

 

16.9

 

 

28.03

 

 

2012

 

58

 

 

1,362,543

 

 

13.0

 

 

34.86

 

 

 

 

 

Rentable Square
Footage of Expiring Leases

 

Markets

 

 

2008

 

2009

 

 

 

 

 

 

 

California – Los Angeles Metro

 

4,006

 

4,354

 

California – San Diego

 

2,965

 

257,894

 

California – San Francisco Bay

 

11,895

 

100,648

 

Eastern Massachusetts

 

129,038

 

125,408

 

International – Canada

 

–

 

–

 

New Jersey/Suburban Philadelphia

 

–

 

21,000

 

Southeast

 

42,075

 

70,670

 

Suburban Washington, D.C.

 

71,582

 

230,135

 

Washington – Seattle

 

20,793

 

34,372

 

 

 

 

 

 

 

Total

 

282,354

(1)

844,481

 

 

(1)          Includes 12 month-to-month leases for approximately 84,000 rentable square feet. During the nine months ended September 30, 2008, we executed leases for 1.7 million rentable square feet with rental rate increases of 14.9% on renewal/released space.

 

14


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Additions and Dispositions

For the Quarter Ended September 30, 2008

(Dollars in thousands)

 

 

 

 

Acquisition

 

Month of

 

Rentable

 

 

Markets

 

Amount

 

Acquisition

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

Total Additions to Properties Under Redevelopment/Operating Properties:

 

N/A

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition

 

Month of

 

Developable

 

 

Markets

 

Amount

 

Acquisition

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

Additions to Land:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington – Seattle

 

$

11,788

 

August

 

160,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disposition

 

Month of

 

Rentable

 

 

Markets

 

Amount

 

Disposition

 

Square Feet

 

 

 

 

 

 

 

 

 

 

 

Dispositions:

 

N/A

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

 

15


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Square Footage Undergoing Redevelopment
September 30, 2008

 

 

 

 

 

 

 

 

 

Square Footage

 

 

 

 

 

Placed

 

Estimated

 

Estimated

 

Undergoing

 

 

 

 

 

in

 

In-Service

 

Investment

 

Redevelopment/

 

 

 

Markets/Submarkets

 

Redevelopment

 

Dates

 

Per Square Foot

 

Total Property

 

Status

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Diego

 

2006

 

2008

 

$80-100

 

23,070 / 29,660

 

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

 

2008/2009

 

$80-100

 

26,363 / 82,712

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Francisco Bay/Peninsula

 

2008

 

2009

 

$80-100

 

21,316 / 98,964

 

Design/Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Massachusetts/Cambridge

 

2006

 

2009

 

$120-175

 

76,890 / 177,101

 

Design/Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Massachusetts/Cambridge

 

2007

 

2009

 

$100-130

 

90,841 / 369,831

 

Design/Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Massachusetts/Suburban

 

2007

 

2009

 

$70-80

 

113,045 / 113,045

 

Design/Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Eastern Massachusetts/Suburban

 

2008

 

2010

 

$120-140

 

30,000 / 30,000

 

Design/Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Southeast/Florida

 

2006

 

2008

 

$80-100

 

42,712 / 44,855

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Southeast/North Carolina

 

2008

 

2010

 

$80-100

 

6,729 / 60,519

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Southeast/North Carolina

 

2008

 

2009

 

$90-110

 

9,256 / 38,861

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Southeast/Research Triangle Park

 

2007

 

2008

 

$100-120

 

16,393 / 77,395

 

Design/Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Suburban Washington, D.C./Gaithersburg

 

2007

 

2008

 

$40-50

 

15,504 / 44,464

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

Suburban Washington, D.C./Shady Grove

 

2007

 

2009

 

$70-80

 

51,131 / 123,501

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

708,473 / 1,605,144

 

 

 

 

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 September 30, 2008, our asset base contained embedded opportunities for future permanent change of use to office/laboratory space through redevelopment aggregating approximately 1,588,000 rentable square feet. See Summary of Embedded Future Development and Redevelopment Square Footage on page 18.

 

(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 2007.

 

16


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties Undergoing Ground-Up Development
September 30, 2008

 

Markets/Submarkets

 

Building
Descriptions

 

Construction
Start
Dates

 

Estimated
In-Service
Dates

 

Estimated
Investment
Per Square
Foot (1)

 

Rentable
Square
Feet

 

Development
Status

 

Leasing Status

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Francisco Bay/
Mission Bay

 

Multi-tenant Bldg.

 

2007

 

2010

 

$350

 

158,000

 

Construction

 

100% Leased or Committed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Francisco Bay/
So. San Francisco

 

Two Bldgs.,
Single or Multi-tenant

 

2006

 

2009

 

$350

 

162,000

 

Construction

 

16% Leased Plus 53% Committed or
Under Negotiation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California – San Francisco Bay/
So. San Francisco

 

Single Tenant Bldg.

 

2006

 

2009

 

$350

 

130,000

 

Construction

 

55% Leased with Option for Balance
Through 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International – China

 

Two Bldgs.

 

2007

 

2009

 

$40

 

280,000

 

Construction

 

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York – New York City – East Tower

 

Multi-tenant Bldg.

 

2007

 

2010/2011

 

$500

 

310,000

 

Construction

 

(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New York – New York City – West Tower

 

Multi-tenant Bldg.

 

2008

 

TBD

 

$500

 

410,000

 

Site Work

 

Pre-marketing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Washington – Seattle

 

Single Tenant
Bldg. with 5% Retail

 

2007

 

2010

 

TBD

 

115,000

 

Site Work

 

92% Leased with Option for Additional 3%;
5% Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Properties Undergoing Ground-Up Development (1)

 

 

 

 

 

 

 

1,565,000

 

 

 

 

 

 

 

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 $195 per rentable square foot. Amount excludes our investment per square foot in land.

(2)

 

The 90/10 joint venture has decided to reposition the project for lease to a single technology and/or manufacturing tenant.

(3)

 

Marketing; First lease for 5% awaiting tenant Board action and hiring of new CEO; In discussions with various commercial and institutional users aggregating more than 310,000 square feet; Working with City of New York to land significant commercial life science anchor tenant.

 

17


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Embedded Future Development and Redevelopment Square Footage
September 30, 2008

 

Markets

 

Total Embedded
Development
Square Footage (1)

 

Embedded Future
Redevelopment
Square Footage

 

Total

 

 

 

 

 

 

 

 

 

California – San Diego

 

443,000

 

178,000

 

621,000

 

 

 

 

 

 

 

 

 

California – San Francisco Bay/Mission Bay

 

2,386,000

 

–

 

2,386,000

 

 

 

 

 

 

 

 

 

California – San Francisco Bay/So. San Francisco

 

921,000

 

25,000

 

946,000

 

 

 

 

 

 

 

 

 

Eastern Massachusetts

 

2,275,000

 

563,000

 

2,838,000

 

 

 

 

 

 

 

 

 

International – Canada

 

827,000

 

–

 

827,000

 

 

 

 

 

 

 

 

 

Suburban Washington, D.C.

 

787,000

 

466,000

 

1,253,000

 

 

 

 

 

 

 

 

 

Washington – Seattle

 

1,077,000

 

135,000

 

1,212,000

 

 

 

 

 

 

 

 

 

Other

 

516,000

 

221,000

 

737,000

 

 

 

 

 

 

 

 

 

Total

 

9,232,000

 (2)

1,588,000

 

10,820,000

 

 

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 17. Commencement of construction will depend on numerous factors, including the successful completion of development/pre-construction activities and management’s assessment of overall economic, credit, and 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 Total Embedded Development Square Footage shown above.

(2)

 

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

 

18


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

 

Summary of Capital Costs
For the Nine Months Ended September 30, 2008

 

(In thousands)

 

Property-related capital expenditures (1)

 

$

1,145

 

 

 

 

 

Leasing costs (2)

 

$

1,058

 

 

 

 

 

Property-related costs (3)

 

$

306,111

 

 

(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.

 

19


 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Conference Call Information

For the Third Quarter Ended September 30, 2008

 

Alexandria Real Estate Equities, Inc. will be hosting a conference call to discuss its operating and financial results for the third quarter and nine months ended September 30, 2008:

 

 

Date:

 

October 30, 2008

 

 

 

 

 

 

 

Time:

 

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

 

 

 

 

 

 

 

Phone Number:

 

(719) 325-4841

 

 

 

 

 

 

 

Confirmation Code:

 

6794213

 

20