Alexandria Real Estate Equities, Inc. News
Alexandria Real Estate Equities, Inc. Reports First Quarter 2008 Operating and Financial Results
For the first quarter of 2008, we reported total revenues of
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
Net income available to common stockholders for the first quarter of 2008 was
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
As of
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(R), 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.
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.
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 =========== =========== 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
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
Reconciliation of net income available to common stockholders to funds from operations available Three Months Three Months to common stockholders after Ended Ended supplemental adjustments March 31, 2008 March 31, 2007 ————————- ————————- 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. ALEXANDRIA REAL ESTATE EQUITIES, INC. Quarterly Supplemental Financial Information (Dollars in thousands, except per share data) (Unaudited) For the Three Months Ended Operational data 3/31/2008 12/31/2007 9/30/2007 6/30/2007 3/31/2007 ————- ————— ————- ————- ————- 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 capitali- zation 2,936,754 3,213,112 3,007,494 2,825,275 2,923,702 ————— ————— ————- ————- ————- Total market capitali- zation $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. 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 =========== =========== ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Debt March 31, 2008 (Dollars in thousands) (Unaudited) Principal Maturities / Rates Secured Debt Unsecured Debt ————————————————— ————————- Weighted Average Year Amount 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 Weighted Percentage Average Weighted of Interest Average Balance Balance Rate(6) 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 Weighted Percentage Average Weighted of Interest Average Balance Balance Rate (6) 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. ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Interest Rate Swap Agreements March 31, 2008 (Dollars in thousands) (Unaudited) Interest Transaction Effective Termination Pay Notional Effective at Dates Dates Dates Rates (1) Amounts March 31, 2008 ————— —————- ——————- ————— ————— ———————- Dec-04 3-Jan-06 1-Jul-08 3.927% $50,000 $50,000 Jun-06 30-Jun-06 30-Sep-09 5.299 125,000 125,000 Dec-03 29-Dec-06 31-Oct-08 5.090 50,000 50,000 Dec-05 29-Dec-06 30-Nov-09 4.730 50,000 50,000 Dec-05 29-Dec-06 30-Nov-09 4.740 50,000 50,000 Dec-06 29-Dec-06 31-Mar-14 4.990 50,000 50,000 Dec-06 2-Jan-07 3-Jan-11 5.003 28,500 28,500 Apr-04 30-Apr-07 30-Apr-08 4.850 50,000 50,000 May-05 29-Jun-07 30-Jun-08 4.400 50,000 50,000 Dec-06 29-Jun-07 31-Oct-08 4.920 50,000 50,000 Oct-07 31-Oct-07 30-Jun-08 4.458 50,000 50,000 Oct-07 31-Oct-07 30-Sep-12 4.546 50,000 50,000 Oct-07 31-Oct-07 30-Sep-13 4.642 50,000 50,000 May-05 30-Nov-07 28-Nov-08 4.460 25,000 25,000 Dec-05 2-Jan-08 31-Dec-10 4.768 50,000 50,000 Feb-08 7-Feb-08 1-Dec-08 2.640 38,600 38,600 May-05 30-Jun-08 30-Jun-09 4.509 50,000 - Jun-06 30-Jun-08 30-Jun-10 5.325 50,000 - Jun-06 30-Jun-08 30-Jun-10 5.325 50,000 - Oct-07 1-Jul-08 31-Mar-13 4.622 25,000 - Oct-07 1-Jul-08 31-Mar-13 4.625 25,000 - Jun-06 31-Oct-08 31-Dec-10 5.340 50,000 - Jun-06 31-Oct-08 31-Dec-10 5.347 50,000 - May-05 28-Nov-08 30-Nov-09 4.615 25,000 - Dec-06 30-Nov-09 31-Mar-14 5.015 75,000 - Dec-06 30-Nov-09 31-Mar-14 5.023 75,000 - Dec-06 31-Dec-10 31-Oct-12 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. 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 4.40% $80,953 $75,679 7.00% Operating expenses 21,813 20,404 6.9 21,813 20,404 6.9 ————- ————- ———— ————- ————- ———— Revenue less operating expenses $61,144 $59,023 3.60% $59,140 $55,275 7.00% ========= ========= ======== ========= ========= ======== 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. ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Properties (Dollars in thousands) (Unaudited) March 31, 2008 ———————————————————————- Rentable Square Feet Number of —————————————————— Properties Operating Redevelopment Total ————— ————— ——————- ————— Markets California - Los Angeles Metro 1 31,343 - 31,343 California - San Diego 34 1,473,715 236,347 1,710,062 California - San Francisco Bay 17 1,457,444 21,216 1,478,660 Eastern Massachusetts 37 3,069,398 333,896 3,403,294 International - Canada 4 342,394 - 342,394 New Jersey/ Suburban Philadelphia 8 441,504 - 441,504 Southeast 12 597,775 60,631 658,406 Suburban Washington D.C. 31 2,431,630 68,138 2,499,768 Washington - Seattle 13 1,040,471 11,291 1,051,762 ————— ————— ——————- ————— Total Properties (Continuing Operations) 157 10,885,674 731,519 11,617,193 ========== ========== ============= ========== March 31, 2008 December 31, 2007 ——————————————- ————————- Annualized Occupancy Occupancy Base Rent(1) Percentage Percentage (1)(2) (3) ——————— ——————- ————————- California - Los Angeles Metro $696 70.80% 70.8% California - San Diego 43,028 94.1 94.9 California - San Francisco Bay 55,964 96.9 95.8 Eastern Massachusetts 110,202 96.6 94.7 International - Canada 9,215 100.0 100.0 New Jersey/ Suburban Philadelphia 9,176 96.6 96.6 Southeast 11,074 89.5(4) 86.0(4) Suburban Washington D.C. 47,823 91.0 90.1 Washington - Seattle 31,127 97.3 97.2 ——————— ——————- ————————- Total Properties (Continuing Operations) $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. ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Leasing Activity For the Quarter Ended March 31, 2008 Number Rentable of Square Expiring New Leases Footage Rates Rates ———— ————- ———— ————- 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 GAAP Basis 21 369,312 $25.11 $28.64 Developed/Redeveloped/ Vacant Space Leased Cash Basis 27 201,098 - $31.65 GAAP Basis 27 201,098 - $31.89 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 GAAP Basis 48 570,410 - $29.79 Including Month-to-Month Leases Cash Basis 62 651,873 - $28.47 GAAP Basis 62 651,873 - $28.58 TI's/Lease Rental Commissions Average Rate Per Lease Changes Square Foot Terms ————- ——————- —————- Leasing Activity Lease Expirations Cash Basis - - - GAAP Basis - - - Renewed/Released Space Leased Cash Basis 7.60% $5.81 3.3 years GAAP Basis 14.10% $5.81 3.3 years Developed/Redeveloped/ Vacant Space Leased Cash Basis - $6.57 4.2 years GAAP Basis - $6.57 4.2 years Month-to-Month Leases in Effect Cash Basis - - - GAAP Basis - - - Leasing Activity Summary Excluding Month-to-Month Leases Cash Basis - $6.07 3.6 years GAAP Basis - $6.07 3.6 years Including Month-to-Month Leases Cash Basis - - - GAAP Basis - - - ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Lease Expirations March 31, 2008 Annualized Rentable Base Rent Square Percentage of of Expiring Year of Number of Footage of Aggregate Leases Lease Leases Expiring Leased Square (per rentable Expiration Expiring Leases Feet 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. ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Additions and Dispositions of Properties For the Quarter Ended March 31, 2008 (Dollars in thousands) Rentable Acquisition Month of Square Markets Amount Acquisition Feet ————————————————- —————— —————- ————— Additions to Operating Properties: None Developable Acquisition Month of Square Markets Amount Acquisition Feet ————————————————- —————— —————- ————— Additions to Land: None Rentable Disposition Month of Square Markets Amount Disposition Feet ————————————————- —————— —————- ————— Dispositions: California - San Diego $23,250 January 86,962 California - San Francisco Bay February/ 46,400(1) March 272,730 —————— ————— $69,650 359,692 ============ ========== (1) Represents sale of five properties in the east bay area of the San Francisco Bay market. ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Square Footage Undergoing Redevelopment March 31, 2008 Estimated Square Footage Placed Estimated Invest- Undergoing in In- ment Redevelopment/ Markets/ Redeve- Service Per Square Total Submarkets lopment Dates Foot 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/ Design/ Cambridge 2006 2008/2009 $120-175 124,075/177,101 Construction Eastern Massachusetts/ Design/ Cambridge 2007 2009 $100-130 73,776/369,831 Demolition Eastern Massachusetts/ Suburban 2007 2009 $100-120 23,000/38,000 Construction Eastern Massachusetts/ Redesign/ Suburban 2007 2009 $70-80 113,045/113,045 Construction Southeast/ Florida 2006 2008 $80-100 44,238/45,841 Construction Southeast/ Research Triangle Design/ Park 2007 2008 $100-120 16,393/77,395 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. ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Properties Undergoing Ground-Up Development March 31, 2008 Estimated Constru-Estimated Investment ction In- Per Rentable Markets/ Building Start Service Square Square Submarkets Descriptions Dates Dates Foot (1) Feet Status ————————————————————————————————————— California - San Francisco Bay/Mission One Multi- Bay tenant Bldg. 2007 2010 $350 158,000 Construction California - San Francisco Two Bldgs., Bay/So. San Single or Francisco Multi-tenant 2006 2009 $350 162,000 Construction California - San Francisco One Single or Bay/So. San Multi-tenant Francisco Bldg. 2006 2009 $350 135,000 Construction Two Bldgs., International - Single or China Multi-tenant 2007 2009 $45 280,000 Construction New York - Two Multi- 2010/ New York City tenant Bldgs. 2007 2011 $500 725,000(2)Construction One Single or Washington - Multi-tenant Seattle 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. ALEXANDRIA REAL ESTATE EQUITIES, INC. Summary of Embedded Future Development and Redevelopment Square Footage March 31, 2008 Embedded Future Development ———————————————- Total Embedded Embedded Future Development/ Development Redevelopment Pre-construction Square Square Markets Square Footage(1) Footage 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. 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. 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
SOURCE Alexandria Real Estate Equities, Inc.
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