Secured and unsecured senior debt

9 Months Ended

Sep. 30, 2012

Secured and unsecured senior debt

Secured and unsecured senior debt

5.Secured and unsecured senior debt

The following table summarizes our secured and unsecured senior debt and their respective principal maturities, as of September 30, 2012 (in thousands):

	Fixed Rate/Hedged Variable Rate		Unhedged Variable Rate		Total Consolidated		Percentage of Total		Weighted Average Interest Rate at End of Period (1)		Weighted Average Remaining Term (Years)
Secured notes payable (2)	$	640,815	$	78,535	$	719,350	23.7	%	5.76	%	3.2
Unsecured senior notes payable (2)	549,794		–		549,794		18.1		4.61		9.5
Unsecured senior line of credit (3)	50,000		363,000		413,000		13.6		1.46		4.6
2016 Unsecured Senior Bank Term Loan (4)	750,000		–		750,000		24.8		3.12		3.8
2017 Unsecured Senior Bank Term Loan (5)	600,000		–		600,000		19.8		3.84		4.3
Total debt	$	2,590,609	$	441,535	$	3,032,144	100.0	%	3.93	%	4.9
Percentage of total debt	85%		15%		100%

(1)Represents the contractual interest rate as of the end of the period plus the impact of debt premiums/discounts and our interest rate hedge agreements.  The weighted average interest rate excludes bank fees and amortization of loan fees.

(2)Represents amounts net of unamortized premiums/discounts.

(3)Total commitments available for borrowing aggregate $1.5 billion under our unsecured senior line of credit.  As of September 30, 2012, we had approximately $1.1 billion available for borrowings under our unsecured senior line of credit.  Weighted average remaining term assumes we exercise our sole option to extend the stated maturity date of April 30, 2016, by six months, twice, to April 30, 2017.

(4)Assumes we exercise our sole option to extend the stated maturity date of June 30, 2015, by one year, to June 30, 2016.

(5)Assumes we exercise our sole option to extend the stated maturity date of January 31, 2016, by one year, to January 31, 2017.

The following table summarizes fixed rate/hedged variable and unhedged variable rate debt and their respective principal maturities, as of September 30, 2012 (in thousands):

Debt		Stated Rate		Effective Interest Rate (1)		Maturity Date		2012			2013			2014			2015			2016			Thereafter			Total
Secured notes payable
San Diego		6.21	%	6.21	%	3/1/13		$	78		$	7,934		$	–		$	–		$	–		$	–		$	8,012
Suburban Washington, D.C.		6.36		6.36		9/1/13		135			26,093			–			–			–			–			26,228
San Francisco Bay		6.14		6.14		11/16/13		–			7,527			–			–			–			–			7,527
Greater Boston		5.26		5.59		4/1/14		929			3,839			208,683			–			–			–			213,451
Suburban Washington, D.C.		2.33		2.33		4/20/14		–			–			76,000			–			–			–			76,000
San Diego		6.05		4.88		7/1/14		22			142			6,458			–			–			–			6,622
San Diego		5.39		4.00		11/1/14		29			177			7,495			–			–			–			7,701
Seattle		6.00	(2)	6.00		11/18/14		60			240			240			–			–			–			540
Suburban Washington, D.C.		5.64		4.50		6/1/15		21			130			138			5,788			–			–			6,077
San Francisco Bay		LIBOR+1.50		1.74		7/1/15	(3)	–			–			–			1,995			–			–			1,995
Greater Boston, San Francisco Bay, and San Diego		5.73		5.73		1/1/16		393			1,616			1,713			1,816			75,501			–			81,039
Greater Boston, San Diego, and Greater NYC		5.82		5.82		4/1/16		208			878			931			988			29,389			–			32,394
San Francisco Bay		6.35		6.35		8/1/16		542			2,332			2,487			2,652			126,715			–			134,728
San Diego, Suburban Washington, D.C., and Seattle		7.75		7.75		4/1/20		320			1,345			1,453			1,570			1,696			110,301			116,685
San Francisco Bay		6.50		6.50		6/1/37		4			16			17			17			19			801			874
Average/Total		5.70	%	5.76				2,741			52,269			305,615			14,826			233,320			111,102			719,873
$1.5 billion unsecured senior line of credit		LIBOR+1.20%(4)		1.46		4/30/17	(5)	–			–			–			–			–			413,000			413,000
2016 Unsecured Senior Bank Term Loan		LIBOR+1.75%		3.12		6/30/16	(6)	–			–			–			–			750,000			–			750,000
2017 Unsecured Senior Bank Term Loan		LIBOR+1.50%		3.84		1/31/17	(7)	–			–			–			–			–			600,000			600,000
Unsecured senior notes payable (8)		4.60	%	4.61		4/1/22		–			–			250			–			–			550,000			550,250
Average/Subtotal				3.93				2,741			52,269			305,865			14,826			983,320			1,674,102			3,033,123
Unamortized discounts				–				(112		)	(464		)	(78		)	(12		)	(44		)	(269		)	(979		)
Average/Total				3.93	%			$	2,629		$	51,805		$	305,787		$	14,814		$	983,276		$	1,673,833		$	3,032,144
Balloon payments								$	–		$	41,165		$	297,330		$	7,723		$	980,029		$	1,666,791		$	2,993,038
Principal amortization								2,629			10,640			8,457			7,091			3,247			7,042			39,106
Total consolidated debt								$	2,629		$	51,805		$	305,787		$	14,814		$	983,276		$	1,673,833		$	3,032,144
Fixed rate/hedged variable rate debt								$	2,569		$	51,565		$	229,547		$	12,819		$	983,276		$	1,310,833		$	2,590,609
Unhedged variable rate debt								60			240			76,240			1,995			–			363,000			441,535
Total consolidated debt								$	2,629		$	51,805		$	305,787		$	14,814		$	983,276		$	1,673,833		$	3,032,144
(1)	Represents the contractual interest rate as of the end of the period plus the impact of debt premiums/discounts and our interest rate hedge agreements. The weighted average interest rate excludes bank fees and amortization of loan fees.
(2)	Represents a loan assumed with the acquisition of a property. The interest rate is based upon 10 year U.S. treasury bills plus 3%, with a floor of 6% and a ceiling of 8.5%.
(3)	We have an option to extend the stated maturity date of July 1, 2015, by one year, twice, to July 1, 2017.
(4)	In addition to the stated rate, we are subject to an annual facility fee of 0.25%.
(5)	Assumes we exercise our sole option to extend the stated maturity date of April 30, 2016, by six months, twice, to April 30, 2017.
(6)	Assumes we exercise our sole option to extend the stated maturity date of June 30, 2015, by one year, to June 30, 2016.
(7)	Assumes we exercise our sole option to extend the stated maturity date of January 31, 2016, by one year, to January 31, 2017.
(8)	Includes $550 million of our 4.60% unsecured senior notes payable due in April 2022, and $250,000 of our 8.00% unsecured senior convertible notes payable with a maturity date of April 15, 2014.

In June 2012, we closed a secured construction loan with aggregate commitments of $55.0 million.  The construction loan matures in July 2015, and we have an option to extend the stated maturity date of July 1, 2015, by one year, twice, to July 1, 2017.  The construction loan will be used to fund the majority of the cost to complete the development of a 100% pre-leased life science laboratory building with 170,618 rentable square feet at 259 East Grand Avenue in the San Francisco Bay market.  The construction loan bears interest at the London Interbank Offered Rate (“LIBOR”) or the base rate specified in the construction loan agreement, defined as the higher of either the prime rate being offered by our lender or the federal funds rate in effect on the day of borrowing (“Base Rate”), plus in either case a specified margin of 1.50% for LIBOR borrowings or 0.25% for Base Rate borrowings.  As of September 30, 2012, commitments of $53.0 million were available.

4.60% Unsecured senior notes payable

In February 2012, we completed a $550 million public offering of our unsecured senior notes payable at a stated interest rate of 4.60%.  The unsecured senior notes payable were priced at 99.915% of the principal amount with a yield to maturity of 4.61% and are due April 1, 2022.  The unsecured senior notes payable are unsecured obligations of the Company and are fully and unconditionally guaranteed by Alexandria Real Estate Equities, L.P., a 100% owned subsidiary of the Company.  The unsecured senior notes payable rank equally in right of payment with all other senior unsecured indebtedness.  However, the unsecured senior notes payable are effectively subordinated to existing and future mortgages and other secured indebtedness (to the extent of the value of the collateral securing such indebtedness) and to all existing and future preferred equity and liabilities, whether secured or unsecured, of the Company’s subsidiaries, other than Alexandria Real Estate Equities, L.P.  We used the net proceeds of this offering to prepay the outstanding principal balance of $250.0 million on our unsecured senior bank term loan (“2012 Unsecured Senior Bank Term Loan”) and to reduce the outstanding borrowings on our unsecured senior line of credit.

The requirements of the key financial covenants under our unsecured senior notes payable as of September 30, 2012, are as follows:

Covenant Ratios (1)	Requirement
Total Debt to Total Assets	Less than or equal to 60%
Consolidated EBITDA to Interest Expense	Greater than or equal to 1.5x
Unencumbered Total Asset Value to Unsecured Debt	Greater than or equal to 150%
Secured Debt to Total Assets	Less than or equal to 40%

(1) For a definition of the ratios used in the table above, refer to the Indenture dated February 29, 2012, which governs the unsecured senior notes payable, which was filed as an exhibit to our Current Report on Form 8-K filed with the SEC on February 29, 2012.

In addition, the terms of the Indenture, among other things, limit the ability of the Company, Alexandria Real Estate Equities, L.P., and the Company’s other subsidiaries to (1) consummate a merger, or consolidate or sell all or substantially all of the Company’s assets, and (2) incur certain secured or unsecured indebtedness.

Unsecured senior line of credit and unsecured senior bank term loans

In April 2012, we amended our $1.5 billion unsecured senior line of credit, with Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc., and Citigroup Global Markets Inc. as joint lead arrangers, and certain lenders, to extend the maturity date of our unsecured senior line of credit, provide an accordion option for up to an additional $500 million, and reduce the interest rate for outstanding borrowings. The maturity date of the unsecured senior line of credit was extended to April 2017, assuming we exercise our sole right to extend the maturity date twice by an additional six months after each exercise. Borrowings under the unsecured senior line of credit bear interest at LIBOR or the base rate specified in the amended unsecured senior line of credit and unsecured senior bank term loan agreements, plus in either case a specified margin (the “Applicable Margin”). The Applicable Margin for LIBOR borrowings under the unsecured senior line of credit was set at 1.20%, down from 2.40% in effect immediately prior to the modification. In addition to the Applicable Margin, our unsecured senior line of credit is subject to an annual facility fee of 0.25%.  In connection with the modification of our unsecured senior line of credit in April 2012, we recognized a loss on early extinguishment of debt of approximately $1.6 million related to the write-off of a portion of unamortized loan fees.

In April 2012, we amended our 2016 unsecured senior bank term loan (“2016 Unsecured Senior Bank Term Loan”) and 2017 unsecured senior bank term loan (“2017 Unsecured Senior Bank Term Loan”), conforming the financial covenants contained in our unsecured senior bank term loan agreements to those contained in our amended $1.5 billion unsecured senior line of credit.

In February 2012, we recognized a loss on early extinguishment of debt of approximately $0.6 million related to the write-off of unamortized loan fees as a result of the early repayment of $250.0 million of our 2012 Unsecured Senior Bank Term Loan.  In June 2011, we recognized a loss on early extinguishment of debt of approximately $1.2 million related to the write-off of unamortized loan fees as a result of the early repayment of $500 million of our 2012 Unsecured Senior Bank Term Loan.

The requirements of the key financial covenants under our unsecured senior line of credit and unsecured senior bank term loans as of September 30, 2012, are as follows:

Covenant Ratios (1)	Requirement
Leverage Ratio	Less than or equal to 60.0%
Fixed Charge Coverage Ratio	Greater than or equal to 1.50x
Secured Debt Ratio	Less than or equal to 40.0%
Unsecured Leverage Ratio	Less than or equal to 60.0%
Unsecured Interest Coverage Ratio	Greater than or equal to 1.75x

(1) For a definition of the ratios used in the table above, refer to the amended unsecured senior line of credit and unsecured senior bank term loan agreements, dated as of April 30, 2012, which are filed as exhibits to our Quarterly Report on Form 10-Q filed with the SEC on August 8, 2012.

In addition, the terms of the unsecured senior line of credit and unsecured senior bank term loan agreements, among other things, limit the ability of the Company, Alexandria Real Estate Equities, L.P., and the Company’s subsidiaries to (1) consummate a merger, or consolidate or sell all or substantially all of the Company’s assets, and (2) incur certain secured or unsecured indebtedness.

Unsecured senior convertible notes

The following tables summarize the balances, significant terms, and components of interest cost recognized (excluding amortization of loan fees and before the impact of capitalized interest) on our unsecured senior convertible notes (dollars in thousands):

	8.00% Unsecured Senior Convertible Notes						3.70% Unsecured Senior Convertible Notes
	September 30,			December 31,			September 30,		December 31,
	2012			2011			2012		2011
Principal amount	$	250		$	250		$	–	$	84,801
Unamortized discount	(10		)	(15		)	–		(77		)
Net carrying amount of liability component	$	240		$	235		$	–	$	84,724
Carrying amount of equity component	$	27		$	27		$	–	$	8,080
Number of shares on which the aggregate consideration to be delivered on conversion is determined	6,087			6,087			N/A		N/A		(1)
Issuance date	April 2009						N/A
Stated interest rate	8.00%						N/A
Effective interest rate at September 30, 2012	11.00%						N/A
Conversion rate per $1,000 principal value of unsecured senior convertible notes, as adjusted, as of September 30, 2012	24.3480						N/A

(1)Our 3.70% unsecured senior convertible notes (“3.70% Unsecured Senior Convertible Notes”) require that upon conversion, the entire principal amount is to be settled in cash, and any excess value above the principal amount, if applicable, is to be settled in shares of our common stock.  Based on the December 31, 2011, closing price of our common stock of $68.97, and the conversion price of our 3.70% Unsecured Senior Convertible Notes of $117.36 as of December 31, 2011, the if-converted value of the notes did not exceed the principal amount as of December 31, 2011, and accordingly, no shares of our common stock would have been issued if the notes had been settled on December 31, 2011.

	8.00% Unsecured Senior Convertible Notes				3.70% Unsecured Senior Convertible Notes
	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Contractual interest	$	5	$	5	$	–	$	1,132
Amortization of discount on liability component	1		2		–		673
Total interest cost	$	6	$	7	$	–	$	1,805

	Nine Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Contractual interest	$	15	$	15	$	142	$	5,228
Amortization of discount on liability component	4		4		78		3,056
Total interest cost	$	19	$	19	$	220	$	8,284

3.70% unsecured senior convertible notes

During the nine months ended September 30, 2011, we recognized an aggregate loss on early extinguishment of debt of approximately $5.2 million related to the repurchase, in privately negotiated transactions, of approximately $217.1 million of certain of our 3.70% Unsecured Senior Convertible Notes.

During January 2012, we repurchased approximately $83.8 million in principal amount of our 3.70% Unsecured Senior Convertible Notes at par, pursuant to options exercised by holders thereof under the indenture governing the notes.  During April 2012, we repurchased the remaining outstanding $1.0 million in principal amount of the notes.  We did not recognize a gain or loss as a result of either repurchase during the nine months ended September 30, 2012.

The following table outlines our interest expense for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Gross interest	$	33,857		$	30,939		$	99,097		$	93,591
Capitalized interest	(16,763		)	(16,666		)	(47,854		)	(44,905		)
Interest expense (1)	$	17,094		$	14,273		$	51,243		$	48,686

(1)Includes interest expense related to and classified in (loss) income from discontinued operations in the accompanying condensed consolidated statements of income.