Alexandria Real Estate Equities, Inc. Reports First Quarter Ended March 31, 2013 Financial and Operating Results

FFO Per Share - Diluted, of $1.11, Up 3%, for the Three Months Ended 1Q13 Over 1Q12

AFFO Per Share - Diluted of $1.08, Up 6%, for the Three Months Ended 1Q13 Over 1Q12

EPS − Diluted of $0.36, Up 20%, for the Three Months Ended 1Q13 Over 1Q12

Total Revenues of $150.4 Million, Up 11%, for the Three Months Ended 1Q13 Over 1Q12

NOI from Continuing Operations of $105.2 Million, Up 10%, for the Three Months Ended 1Q13 Over 1Q12

Apr 29, 2013, 16:05 ET from Alexandria Real Estate Equities, Inc.

PASADENA, Calif., April 29, 2013 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced financial and operating results for the first quarter ended March 31, 2013.

First Quarter Ended March 31, 2013, Highlights

Results

  • Funds from operations ("FFO") attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, for the three months ended March 31, 2013, was $1.11 per share, up 3%, compared to FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, as adjusted, for the three months ended March 31, 2012, of $1.08 per share.
  • Adjusted funds from operations ("AFFO") attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, for the three months ended March 31, 2013, was $1.08 per share, up 6%, compared to AFFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, for the three months ended March 31, 2012, of $1.02 per share
  • Net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, for the three months ended March 31, 2013, was $0.36 per share, up 20%, compared to net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, for the three months ended March 31, 2012, of $0.30 per share

Core Operating Metrics

  • Total revenues were $150.4 Million, up 11%, for the three months ended March 31, 2013, compared to total revenues for the three months ended March 31, 2012, of $135.7 million
  • Net operating income ("NOI") was $105.2 million, up 10%, for the three months ended March 31, 2013, compared to NOI for the three months ended March 31, 2012, of $95.3 million
  • Investment-grade client tenants represented 46% of total annualized base rent ("ABR")
  • Investment-grade client tenants represented 78% of top 10 client tenants' ABR
  • Operating margins remained steady at 70% for the three months ended March 31, 2013
  • Annual rent escalations in 96% of leases
  • Same property net operating income increased by 8.8% and 0.4% on a cash and GAAP basis, respectively, for the three months ended March 31, 2013, compared to same property net operating income for the three months ended March 31, 2012
  • Solid leasing activity during the three months ended March 31, 2013
    • Executed 44 leases for 703,000 rentable square feet ("RSF"), including 457,000 RSF of development and redevelopment space
    • RSF of remaining expiring leases in 2013 are modest at 4.1% of total RSF
    • Rental rate increase of 5.9% and 12.7% on a cash and GAAP basis, respectively, on renewed/re-leased space
    • Key life science space leasing
      • ARIAD Pharmaceuticals, Inc. leased 244,000 RSF in the Greater Boston market
      • Onyx Pharmaceuticals, Inc. leased 107,250 RSF in the San Francisco Bay Area market
  • Occupancy of 94.2% for North America operating properties as of March 31, 2013, and occupancy of 91.8% for North America operating and redevelopment properties as of March 31, 2013, compared to occupancy of 94.6% for North America operating properties as of December 31, 2012, and occupancy of 91.6% for North America operating and redevelopment properties as of December 31, 2012

Value-Added Opportunities and External Growth

During the three months ended March 31, 2013, we executed leases aggregating 355,000 and 102,000 RSF, respectively, related to our development and redevelopment projects.

Our initial stabilized yield on a cash basis reflects cash rents at date of stabilization and does not reflect contractual rent escalations beyond the stabilization date.  Our cash rents related to our value-added projects are expected to increase over time and our average stabilized cash yields are expected, in general, to be greater than our initial stabilized yields.  Initial stabilized yield is calculated as the quotient of the estimated amounts of NOI and our investment in the property at stabilization ("Initial Stabilized Yield"). 

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. First Quarter Ended March 31, 2013, Financial and Operating Results (Tabular dollar amounts in thousands, except per square foot amounts) (Unaudited)

Development commencements

          The following table summarizes the commencement of key development projects: 

 

Investment

Initial

Commencement

Pre-Leased

at

Cost Per

Stabilized Yield

Key

Address/Market

Date

RSF

%

Completion

(1)

RSF

Cash

GAAP

Client Tenant

Development

75/125 Binney Street/Greater Boston

January 2013

386,275

63%

$        351,439

$      910

8.0%

8.2%

ARIAD Pharmaceuticals, Inc.

269 East Grand Avenue/San Francisco Bay Area

March 2013

107,250

100%

$          51,300

$      478

8.1%

9.3%

Onyx Pharmaceuticals, Inc.

(1)       See page 4 for additional details on current assumptions included in our guidance for funding the cost to complete the development of 75/125 Binney Street.

 

Balance Sheet Strategy and Significant Milestones

  • Balance sheet strategy continues to focus on our leverage of net debt to adjusted EBITDA of approximately 6.5x targeted by December 31, 2013, by funding our significant Class A development and redevelopment projects in top life science cluster locations with leverage-neutral sources of capital and with the continuing execution of our asset recycling program.  Our leverage will reflect periodic increases and decreases quarter to quarter as we execute and deliver our construction projects and execute our capital plan, including our asset sales program.  See "Sources and Uses" table on page 4 for additional information.  Our strategy to improve leverage includes:
    • Growth in annualized EBITDA from the fourth quarter 2012 to the fourth quarter 2013 due primarily to the completion of significant value-added projects; 93% leased
    • Asset recycling program to monetize non-strategic income-producing and non-income-producing assets will reduce outstanding debt and provide funds for reinvestment into Class A, CBD, and urban locations in close proximity to leading academic medical research centers
      • Sold $124.3 million of income-producing assets during the three months ended March 31, 2013; assets sold in first quarter of 2013 generated a weighted-average unlevered internal rate of return of 11% during our ownership period
      • Sales of $209 million to $259 million of non-income-producing assets targeted for remainder of the year ended December 31, 2013
        • $45 million of non-income-producing asset sales under negotiation
        • $60 million to $70 million projected partial sale of an interest in the ground-up development of 75/125 Binney Street
        • $104 million to $144 million to be identified in the near term
  • Minimizing the issuance of common equity to achieve net debt to adjusted EBITDA of approximately 6.5x targeted by December 31, 2013
  • Liquidity available under unsecured senior line of credit and from cash and cash equivalents was approximately $1.0 billion as of March 31, 2013
  • Unhedged variable rate debt as a percentage of total debt of less than 18% targeted by December 31, 2013

As of March of 2013, we have completed all significant sales of income-producing assets targeted for 2013.  The following table presents our completed real estate asset sales during the three months ended March 31, 2013:

Annualized

Sales

Gain/

Date

GAAP

Sales

Price

(Loss)

Unlevered

Description

Date of Purchase

Location

of Sale

RSF

NOI (1)

Price

per RSF

  on Sale (2)

IRR (3)

Sales completed in 1Q13

1124 Columbia Street

May 1996

Seattle - First Hill

January 2013

203,817

$         6,802

$   42,600

$           209

$              −

11.9%

 

25/35/45 West Watkins Mill Road

1201 Clopper Road

 

October 1996

May 1998

 

Suburban Washington, D.C. - Gaithersburg

 

 

February 2013

 

 

282,523

 

 

$         7,795

 

 

41,400

 

 

$           147

 

 

$            53

 

 

11.2

 

One Innovation Drive

377 Plantation Street

381 Plantation Street

January 1999

September 1998

March 1999

Greater Boston - Route 495/Worcester

February 2013

300,313

$         6,605

40,250

$           134

$          (392)

9.6

Total/weighted average

$ 124,250

11.0%

Sales completed in 2Q13

702 Electronic Drive

June 1998

Pennsylvania

April 2013

40,171

$           438

$     4,362

$           109

$           268

10.0%

Total/weighted average

$     4,362

10.0%

 

(1)       Annualized using actual year-to-date results as of the quarter ended prior to date of sale or March 31, 2013.

(2)       Excludes impairment charges aggregating $11.4 million recognized during the year ended December 31, 2012.

(3)       See definition of Unlevered IRR in Non-GAAP Measures section on page 12.

In addition to the asset sales completed in the table above, we have targeted the sale of non-income-producing assets ranging from $209 million to $259 million in 2013. See page 3 for additional information.

ALEXANDRIA REAL ESTATE EQUITIES, INC. First Quarter Ended March 31, 2013, Financial and Operating Results (Unaudited)

GUIDANCE

Earnings outlook

Based on our current view of existing market conditions and certain current assumptions, we have updated guidance for earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted and FFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted for the year ended December 31, 2013, as set forth in the table below.  The table below provides a reconciliation of FFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, a non-GAAP measure, to earnings per share, the most directly comparable GAAP measure and other key assumptions included in our guidance for the year ended December 31, 2013.

 

Guidance for the Year Ended December 31, 2013

Reported on April 29, 2013

Reported on February 7, 2013

Earnings per share attributable to Alexandria Real Estate

  Equities, Inc.'s common    stockholders – diluted

$1.43 to $1.59

$1.41 to $1.61

Depreciation and amortization

$2.95 to $3.11

$2.93 to $3.13

Loss on sale of real estate

$0.01

Other

$(0.01)

FFO per share attributable to Alexandria Real Estate

 Equities, Inc.'s common    stockholders – diluted

$4.46 to $4.62

$4.44 to $4.64

Key projection assumptions:

    Same property net operating income growth – cash basis

4% to 7%

4% to 7%

    Same property net operating income growth – GAAP basis

Up to 3%

0% to 3%

    Rental rate steps on lease renewals and re-leasing of space – cash basis

Up to 2%

Flat to slightly positive

    Rental rate steps on lease renewals and re-leasing of space – GAAP basis

Up 5% to 10%

Up 5% to 10%

    Occupancy percentage for all operating properties at December 31, 2013

93.9% to 94.3%

93.9% to 94.3%

    Straight-line rents

$24 to $26 million

$24 to $26 million

    Amortization of above and below market leases

$3 to $4 million

$3 to $4 million

    General and administrative expenses

$48 to $51 million

$48 to $51 million

    Capitalization of interest

$47 to $53 million

$47 to $53 million

    Interest expense, net

$74 to $84 million

$74 to $84 million

    Net debt to adjusted EBITDA for the annualized three months ended December 31, 2013

6.5x

6.5x

    Fixed charge coverage ratio for the annualized three months ended December 31, 2013

2.9x to 3.0x

2.9x to 3.0x

On a short-term basis, our unhedged variable rate debt as a percentage of total debt may range up to 30%. Our strategy is to have unhedged variable rate debt available for repayment as we issue unsecured senior notes payable, extend our maturity profile, transition variable rate debt to fixed rate debt, and enhance our long-term capital structure.  Our unhedged variable rate debt as a percentage of total debt is targeted to decrease to less than 18% by December 31, 2013.

Monetization of non-income-producing assets

Non-income-producing assets as a percentage of our gross investments in real estate is targeted to decrease to a range of 15% to 17% by December 31, 2013.  As of March 31, 2013, we had approximately $579 million and $141 million of construction in progress related to our five North American development and seven North American redevelopment projects, respectively.  The completion of these projects, along with recently delivered projects, certain future projects, and contributions from same properties, is expected to contribute significant increases in rental income, NOI, and cash flows.  Operating performance assumptions related to the completion of our North American development and redevelopment projects, including the timing of initial occupancy, stabilization dates, and Initial Stabilized Yields, are included on pages 5 and 6.  Certain key assumptions regarding our projections, including the impact of various development and redevelopment projects, are included in the tables above and on the following page.  

The completion of our development and redevelopment projects will result in increased interest expense and other direct project costs, because these project costs will no longer qualify for capitalization and these costs will be expensed as incurred.  Our projection assumptions for depreciation and amortization, general and administrative expenses, capitalization of interest, interest expense, net, and NOI growth are included in the tables on this page and are subject to a number of variables and uncertainties, including those discussed under the "Forward-looking Statements" section of Part I, the "Risk Factors" section of Item 1A, and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section under Item 7, of our annual report on Form 10-K for the year ended December 31, 2012.  To the extent our full year earnings guidance is updated during the year, we will provide additional disclosure supporting reasons for any significant changes to such guidance.  Further, we believe NOI is a key performance indicator and is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not immediately apparent from income from continuing operations. 

          Our guidance for 2013 includes the following targeted sales of non-income-producing assets (in millions):

2013 Non-Income-Producing Asset Sales

Identified

TBD

Total

2013 non-income-producing asset sales initially targeted for 4Q12 closing

    Book value of land subject to sale negotiations

$                        34

$                       −

$                     34

    Subtotal

34

34

2013 non-income-producing asset sales initially projected on December 5, 2012

      Book value of land subject to sale negotiations

11

11

      Projected proceeds from the partial sale of the 75/125 Binney Street project (1)

60 - 70

60 - 70

      Future non-income-producing asset sales expected to be identified in the next several months

104 - 144

104 - 144

      Subtotal

71 - 81

104 - 144

175 - 225

Total 2013 non-income-producing asset sales target

$              105 - 115

$            104 - 144

$            209 - 259

(1)       See further details regarding our guidance related to our projected unconsolidated joint venture on page 4.

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. First Quarter Ended March 31, 2013, Financial and Operating Results (Unaudited)

Sources and uses of capital

We expect that our principal liquidity needs for the year ended December 31, 2013, will be satisfied by the following multiple sources of capital as shown in the table below.  There can be no assurance that our sources and uses of capital will not be materially higher or lower than these expectations.  Our liquidity available under our unsecured senior line of credit and from cash and cash equivalents was approximately $1.0 billion as of March 31, 2013.

Reported on

April 29, 2013

Reported on

February 7, 2013

Sources and Uses of Capital for the Year Ended December 31, 2013 (in millions)

Completed

Projected

Total

Total

Sources of capital:

        Net cash provided by operating activities less dividends (1)

$                     34

$             96 - 116

$        130 - 150

$           130 - 150

        2013 asset sales initially targeted for 4Q12 closing

43

34

(2)

77

77

        2013 asset sales initially projected on December 5, 2012

                Non-income-producing

175 - 225

(2)

175 - 225

175 - 225

                Income-producing

82

0 - 13

82 - 95

75 - 125

        Secured construction loan borrowings

17

3 - 13

20 - 30

20 - 30

        Unsecured senior notes payable

350 - 450

350 - 450

350 - 450

        Issuances under "at the market" common stock offering program

125 - 175

125 - 175

125 - 175

Total sources of capital

$                   176

$        783 - 1,026

$     959 - 1,202

$        952 - 1,232

Uses of capital:

        Development, redevelopment, and construction (3)

$                   104

$           466 - 516

$        570 - 620

$           545 - 595

        Seller financing of asset sales (4)

39

39

39

        Acquisitions (5)

        Secured notes payable repayments

3

34

37

37

        Unsecured senior bank term loan repayment

125 - 175

125 - 175

125 - 175

        Paydown of unsecured senior line of credit

30

158 - 301

188 - 331

206 - 386

Total uses of capital

$                   176

$        783 - 1,026

$     959 - 1,202

$        952 - 1,232

(1)       See "Key Projection Assumptions" on the previous page.

(2)       See table at bottom of page 3 for further information.

(3)       Total construction spending for 2013 increased approximately $25 million at the mid-point of our guidance since last quarter primarily as a result of our estimated share of capital required for the commencement of two new ground-up development projects during the first quarter of 2013.  Our estimated construction spend for 2013 increased by approximately $13 million as a result of the commencement of our 100% pre-leased development at 269 East Grand Avenue.  The total estimated cost at completion for 75/125 Binney Street has not changed since our estimate as of December 31, 2012; however, the timing of construction and completion of our projected joint venture results in an increase in our estimated share of capital contributions to fund the completion of the project by approximately $10 million.  

(4)       Represents a $29.8 million note receivable with an interest rate of 3.25% and a maturity date of January 21, 2015, and a $9.0 million note receivable with an interest rate of 4.00% and a maturity date of March 1, 2019.

(5)       Our guidance has assumed no acquisitions, but we continuously and intensively review a pipeline of opportunistic acquisitions in our key core cluster markets that we would expect to fund on a leverage-neutral basis.

The key assumptions behind the sources and uses of capital in the table above are a favorable capital market environment and performance of our core operations in areas such as delivery of current and future development and redevelopment projects, leasing activity, and renewals.  Our expected sources and uses of capital are subject to a number of variables and uncertainties, including those discussed under the "Forward-looking statements" section of Part I, the "Risk Factors" section of Item 1A, and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section under Item 7, of our annual report on Form 10-K for the year ended December 31, 2012.  We expect to update our forecast of sources and uses of capital on a quarterly basis.

Projected unconsolidated joint venture

Our guidance for the year ended December 31, 2013, assumes a transfer of 50% of our ownership interest in the 75/125 Binney Street project to a new joint venture partner which will be accounted for as a sale of an interest in our investment in the ground-up development, with the resulting entity presented as an unconsolidated joint venture (the "Binney JV") in our financial statements.  This projected sale of an interest in our investment in the ground-up development is included in our total non-income-producing asset sales target for 2013. We expect the sale proceeds to range from $60 million to $70 million and to exceed our share of the remaining investment of $44 million through the completion of the project.   We also anticipate the unconsolidated Binney JV to obtain a secured construction loan to fund 60% to 70% of the total project costs.

                The following assumptions are included in our guidance for funding the cost to complete the 75/125 Binney Street project (in millions).

 

Cost to Complete (1)

Nine Months Ended December 31, 2013

Thereafter

Total

75/125 Binney Street project – remaining cost to complete

$                              91

$                            163

$                     254

Projected unconsolidated joint venture funding:

Binney JV partner capital/Binney JV construction loan

(47)

(163)

(210)

ARE investment in Binney JV project

$                              44

$                               −

$                       44

(2)

 

(1)       Represent the mid points of our guidance assumptions related to estimated funding amounts provided by joint venture partner capital, joint venture construction loan, and Alexandria. (2)       Represents our share of incremental investment into the Binney JV and is included in our guidance for 2013 development, redevelopment, and construction spending in a range from $570 million to $620 million. Binney JV partner capital and secured construction loan funding for 75/125 Binney Street related to our projected unconsolidated joint venture have been excluded from our construction spend forecast for 2013.

ALEXANDRIA REAL ESTATE EQUITIES, INC. All Active Development Projects in North America March 31, 2013 (Dollars in thousands, except per square foot amounts)  (Unaudited)

Project RSF (1)

Leased Status RSF (1)

% Leased/

Property/Market Submarket

CIP

Total

Leased

Negotiating

Marketing

Total

Negotiating

Client Tenants

All active development projects in North America

         Consolidated development projects in North America

225 Binney Street/Greater Boston – Cambridge

305,212

305,212

305,212

305,212

100%

Biogen Idec Inc.

499 Illinois Street/San Francisco Bay Area – Mission Bay

222,780

222,780

162,549

60,231

222,780

73%

TBA

269 East Grand Avenue/San Francisco Bay Area – South San Francisco

107,250

107,250

107,250

107,250

100%

Onyx Pharmaceuticals, Inc.

430 East 29th Street/Greater NYC – Manhattan

419,806

419,806

60,816

152,488

(2)

206,502

419,806

51%

Roche/TBA

         Projected unconsolidated joint venture

75/125 Binney Street/Greater Boston – Cambridge

386,275

386,275

244,123

142,152

(3)

386,275

63%

ARIAD Pharmaceuticals, Inc.

Consolidated development projects in North America

1,441,323

1,441,323

717,401

315,037

408,885

1,441,323

72%

         Unconsolidated joint venture

360 Longwood Avenue/Greater Boston – Longwood

413,536

413,536

154,100

259,436

413,536

37%

Dana-Farber Cancer Institute, Inc.

Total/weighted average

1,854,859

1,854,859

871,501

315,037

668,321

1,854,859

64%

 

Investment (1)

Projected

Cost

Initial Stabilized

Project

Initial

Cost To Complete

Sale

Total at

Per

Yield (1)

Start

Occupancy

Stabilization

Property/Market Submarket

CIP

2013

Thereafter

of Interest

Completion

RSF

Cash

GAAP

Date (1)

Date (1)

Date (1)

All active development projects in North America

         Consolidated development projects in North America

225 Binney Street/Greater Boston – Cambridge

$

118,595

$

61,678

$

$

$

180,273

$

591

7.5%

8.1%

4Q11

4Q13

4Q13

499 Illinois Street/San Francisco Bay Area – Mission Bay

$

116,110

$

14,298

$

22,801

$

$

153,209

$

688

6.4%

7.2%

2Q11

2Q14

2014

269 East Grand Avenue/San Francisco Bay Area – South San Francisco (4)

$

8,037

$

13,100

$

30,163

$

$

51,300

$

478

8.1%

9.3%

1Q13

4Q14

2014

430 East 29th Street/Greater NYC – Manhattan

$

239,086

$

113,879

$

110,280

$

$

463,245

$

1,103

6.6%

6.5%

4Q12

4Q13

2015

Projected unconsolidated joint venture

75/125 Binney Street/Greater Boston – Cambridge (5)

$

97,445

$

90,871

$

163,123

$

$

351,439

$

910

8.0%

8.2%

1Q13

1Q15

2015

       JV partner capital/JV construction loan

$

$

(47,025)

$

(163,123)

$

$

(210,148)

       Projected sale of interest

$

$

$

$

(65,000)

$

(65,000)

       ARE investment in 75/125 Binney Street project

$

97,445

$

43,846

$

$

(65,000)

$

 

76,291

Consolidated development projects in North America

$

579,273

$

246,801

$

163,244

$

(65,000)

$

924,318

         Unconsolidated joint venture

360 Longwood Avenue/Greater Boston – Longwood

$

148,596

$

67,744

$

133,660

$

$

350,000

$

846

8.3%

8.9%

2Q12

4Q14

2016

       JV partner capital/JV construction loan

$

(123,638)

$

(51,761)

$

(133,660)

$

$

(309,059)

       ARE investment in 360 Longwood Avenue

$

24,958

$

15,983

$

$

$

40,941

Total/weighted average

$

604,231

$

262,784

$

163,244

$

$                (65,000)

$

965,259

 

(1)       All project information, including rentable square feet; investment; Initial Stabilized Yields; and project start, occupancy and stabilization dates, relates to the discrete portion of each property undergoing active development or redevelopment.  A redevelopment project does not necessarily represent the entire property or the entire vacant portion of a property.  Our Initial Stabilized Yield on a cash basis reflects cash rents at date of stabilization and does not reflect contractual rent escalations beyond the stabilization date.  Our cash rents related to our value-added projects are expected to increase over time and our average stabilized cash yields are expected, in general, to be greater than our Initial Stabilized Yields.  Our estimates for initial cash and GAAP yields, and total costs at completion, represent our initial estimates at the commencement of the project.  We expect to update this information upon completion of the project, or sooner if there are significant changes to the expected project yields or costs.  As of March 31, 2013, 96% of our leases contained annual rent escalations that were either fixed or based on a consumer price index or another index (2)       Represents 131,000 rentable square feet subject to an executed letter of intent with the remainder subject to letters of intent or lease negotiations. (3)       ARIAD Pharmaceuticals, Inc. has potential additional expansion opportunities at 75 Binney Street through June 2014. (4)       Funding for 70% of the estimated total investment at completion for 269 East Grand Avenue is expected to be provided primarily by a secured construction loan. (5)       Represent the mid points of our guidance assumptions related to estimated funding amounts provided by joint venture partner capital, joint venture construction loan, and Alexandria.  See page 4 for additional information on our range of guidance for funding on this project.

ALEXANDRIA REAL ESTATE EQUITIES, INC. All Active Redevelopment Projects in North America March 31, 2013 (Dollars in thousands, except per square foot amounts)  (Unaudited)  

Project RSF (1)

Leased Status RSF (1)

In

% Leased/

Former

Use After

Property/Market − Submarket

Service

CIP

Total

Leased

Negotiating

Marketing

Total

Negotiating

Use

Conversion

Client Tenants

All active redevelopment projects in North America

400 Technology Square/

         Greater Boston – Cambridge

162,153

49,971

212,124

169,939

42,185

212,124

80%

Office

Laboratory

Ragon Institute of MGH, MIT and Harvard; Epizyme, Inc.; Warp Drive Bio, LLC; Aramco Services Company, Inc.

285 Bear Hill Road/Greater Boston – Route 128

26,270

26,270

26,270

26,270

100%

Office/

Manufacturing

Laboratory

Intelligent Medical Devices, Inc.

343 Oyster Point/

         San Francisco Bay Area – South San Francisco

53,980

53,980

42,445

11,535

53,980

79%

Office

Laboratory

Calithera BioSciences, Inc.; CytomX Therapeutics, Inc.

4757 Nexus Center Drive/

         San Diego – University Town Center

68,423

68,423

68,423

68,423

100%

Manufacturing/

Warehouse/

Office/R&D

Laboratory

Genomatica, Inc.

9800 Medical Center Drive/

         Suburban Washington, D.C. – Rockville

8,001

67,055

75,056

75,056

75,056

100%

Office/Laboratory

Laboratory

National Institutes of Health

1551 Eastlake Avenue/Seattle – Lake Union

77,821

39,661

117,482

77,821

39,661

117,482

66%

Office

Laboratory

Puget Sound Blood Center and Program

1616 Eastlake Avenue/Seattle – Lake Union

40,756

26,020

66,776

40,756

26,020

66,776

61%

Office

Laboratory

Infectious Disease Research Institute

Total/weighted average

288,731

331,380

620,111

500,710

119,401

620,111

81%

 

Investment (1)

Initial Stabilized

Project

Initial

March 31, 2013

To Complete

Total at

Cost Per

Yield (1)

Start

Occupancy

Stabilization

Property/Market − Submarket

In Service

CIP

2013

Thereafter

Completion

RSF

Cash

GAAP

    Date (1)

Date (1)

Date (1)

All active redevelopment projects in North America

400 Technology Square/

         Greater Boston – Cambridge

$                 99,980

$            32,212

$               9,176

$                3,320

$              144,688

$                   682

8.1%

8.9%

4Q11

4Q12

4Q13

285 Bear Hill Road/Greater Boston – Route 128

$                          −

$              4,654

$               4,542

$                       −

$                  9,196

$                   350

8.4%

8.8%

4Q11

3Q13

2013

343 Oyster Point/

         San Francisco Bay Area – South San Francisco

$                          −

$            10,912

$               5,560

$                   867

$                17,339

$                   321

9.6%

9.8%

1Q12

3Q13

2014

4757 Nexus Center Drive/

         San Diego – University Town Center

$                          −

$              5,879

$             23,747

$                5,203

$                34,829

$                   509

7.6%

7.8%

4Q12

4Q13

4Q13 (2)

9800 Medical Center Drive/

         Suburban Washington, D.C. – Rockville

$                   7,454

$            61,251

$             11,999

$                       −

$                80,704

(3)

5.4%

5.4%

3Q09

1Q13

2013

1551 Eastlake Avenue/Seattle – Lake Union

$                 40,711

$            16,841

$               6,458

$                       −

$                64,010

$                   545

6.7%

6.7%

4Q11

4Q11

4Q13

1616 Eastlake Avenue/Seattle – Lake Union

$                 22,589

$              9,721

$                  853

$                4,653

$                37,816

$                   566

8.4%

8.6%

4Q12

2Q13

2014

Total/weighted average

$               170,734

$          141,470

$             62,335

$              14,043

$              388,582

 

(1)       All project information, including rentable square feet; investment; Initial Stabilized Yields; and project start, occupancy and stabilization dates, relates to the discrete portion of each property undergoing active development or redevelopment.  A redevelopment project does not necessarily represent the entire property or the entire vacant portion of a property.  Our Initial Stabilized Yield on a cash basis reflects cash rents at date of stabilization and does not reflect contractual rent escalations beyond the stabilization date.  Our cash rents related to our value-added projects are expected to increase over time and our average stabilized cash yields are expected, in general, to be greater than our Initial Stabilized Yields.  Our estimates for initial cash and GAAP yields, and total costs at completion, represent our initial estimates at the commencement of the project.  We expect to update this information upon completion of the project, or sooner if there are significant changes to the expected project yields or costs.  As of March 31, 2013, 96% of our leases contained annual rent escalations that were either fixed or based on a consumer price index or another index.  (2)       We expect to deliver 54,102 rentable square feet, or 79% of the total project, to Genomatica, Inc. in the fourth quarter of 2013.  Genomatica, Inc. is contractually required to lease the remaining 14,411 rentable square feet 18 to 24 months following the delivery of the initial 54,102 rentable square foot space. (3)       Our multi-tenant four building property at 9800 Medical Center Drive contains an aggregate of 281,586 rentable square feet.  Our total cash investment in the entire four building property upon completion of the redevelopment will approximate $580 per square foot.   Our total expected cash investment for the four building property of approximately $580 per square foot includes our expected total investment at completion related to the 75,056 rentable square foot redevelopment of approximately $1,075 per square foot.

ALEXANDRIA REAL ESTATE EQUITIES, INC. First Quarter Ended March 31, 2013, Financial and Operating Results

EARNINGS CALL INFORMATION

We will host a conference call on Tuesday, April 30, 2013, at 3:00 p.m. Eastern Time ("ET")/12:00 p.m. noon Pacific Time ("PT") that is open to the general public to discuss our financial and operating results for the three months ended March 31, 2013.  To participate in this conference call, dial (888) 245-0988 or (913) 312-1513 and confirmation code 3766517, shortly before 3:00 p.m. ET/12:00 p.m. noon PT.  The audio web cast can be accessed at: www.are.com, in the "For Investors" section.  A replay of the call will be available for a limited time from 5:30 p.m. ET/2:30 p.m. PT on Tuesday, April 30, 2013.  The replay number is (888) 203-1112 or (719) 457-0820 and the confirmation code is 3766517.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the first quarter ended March 31, 2013, is available in the "For Investors" section of our website at www.are.com.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE: ARE), a self-administered and self-managed investment-grade REIT, is the largest and leading REIT focused principally on owning, operating, developing, redeveloping, and acquiring high-quality, sustainable real estate for the broad and diverse life science industry.  Founded in 1994, Alexandria was the first REIT to identify and pursue the laboratory niche and has since had the first-mover advantage in the core life science cluster locations including Greater Boston, San Francisco Bay Area, San Diego, New York City, Seattle, Suburban Washington, D.C., and Research Triangle Park.  Alexandria's high-credit client tenants span the life science industry, including renowned academic and medical institutions, multinational pharmaceutical companies, public and private biotechnology entities, United States government research agencies, medical device companies, industrial biotech companies, venture capital firms, and life science product and service companies.  As the recognized real estate partner of the life science industry, Alexandria has a superior track record in driving client tenant productivity, collaboration, and innovation through its best-in-class laboratory and office space adjacent to leading academic medical research centers, unparalleled life science real estate expertise and services, and longstanding and expansive network in the life science community.  We believe these advantages result in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.  For additional information on Alexandria Real Estate Equities, Inc., please visit www.are.com.

This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Such forward-looking statements include, without limitation, statements regarding our 2013 earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders − diluted, 2013 FFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders − diluted, and NOI for the year ended December 31, 2013, and our projected sources and uses of capital in 2013.  These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events.  These statements are subject to risks, uncertainties, assumptions and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements.  Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully complete and lease our existing space held for redevelopment and new properties acquired for that purpose and any properties undergoing development, our failure to successfully operate or lease acquired properties, decreased rental rates or increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by client tenants, general and local economic conditions, and other risks and uncertainties detailed in our filings with the SEC.  Accordingly, you are cautioned not to place undue reliance on such forward-looking statements.  All forward-looking statements are made as of the date of this press release, and we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.  For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.

ALEXANDRIA REAL ESTATE EQUITIES, INC. Condensed Consolidated Statements of Income (Dollars in thousands, except per share amounts) (Unaudited)

Three Months Ended

3/31/13

12/31/12

9/30/12

6/30/12

3/31/12

Revenues:

Rental

$       111,776

$       112,048

$       106,216

$       104,329

$       101,201

Tenant recoveries

35,611

35,721

34,006

31,881

31,882

Other income

2,993

3,785

2,628

9,383

2,628

Total revenues

150,380

151,554

142,850

145,593

135,711

Expenses:

Rental operations

45,224

46,176

44,203

42,102

40,453

General and administrative

11,648

12,635

12,470

12,298

10,357

Interest

18,020

17,941

17,092

17,922

16,226

Depreciation and amortization

46,065

47,515

46,584

50,741

41,786

     Impairment of land parcel

2,050

     Loss on early extinguishment of debt

1,602

623

Total expenses

120,957

126,317

120,349

124,665

109,445

Income from continuing operations

29,423

25,237

22,501

20,928

26,266

Income (loss) from discontinued operations

     Income from discontinued operations before impairment of real estate

814

5,171

5,603

4,713

4,645

Impairment of real estate

(1,601)

(9,799)

Income (loss) from discontinued operations, net

814

3,570

(4,196)

4,713

4,645

Gain on sale of land parcel

1,864

Net income

30,237

28,807

18,305

25,641

32,775

Net income attributable to noncontrolling interests

982

1,012

828

851

711

Dividends on preferred stock

6,471

6,471

6,471

6,903

7,483

Preferred stock redemption charge

5,978

Net income attributable to unvested restricted stock awards

342

324

360

271

235

Net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders

$         22,442

$         21,000

$         10,646

$         17,616

$         18,368

Earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic and diluted:

Continuing operations

$            0.35

$            0.27

$            0.24

$            0.21

$            0.22

Discontinued operations, net

0.01

0.06

(0.07)

0.08

0.08

Earnings per share – basic and diluted

$            0.36

$            0.33

$            0.17

$            0.29

$            0.30

Weighted average shares of common stock outstanding for calculating earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic

63,161,319

63,091,781

62,364,210

61,663,367

61,507,807

Dilutive effect of stock options

173

1,160

Weighted average shares of common stock outstanding for calculating earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted

63,161,319

63,091,781

62,364,210

61,663,540

61,508,967

ALEXANDRIA REAL ESTATE EQUITIES, INC. Condensed Consolidated Balance Sheets (Dollars in thousands) (Unaudited)

March 31,

December 31,

September 30,

June 30,

March 31,

2013

2012

2012

2012

2012

Assets

Investments in real estate, net

$          6,375,182

$          6,424,578

$          6,300,027

$          6,208,354

$          6,113,252

Cash and cash equivalents

87,001

140,971

94,904

80,937

77,361

Restricted cash

30,008

39,947

44,863

41,897

39,803

Tenant receivables

9,261

8,449

10,124

6,143

8,836

Deferred rent

170,100

170,396

160,914

155,295

150,515

Deferred leasing and financing costs, net

159,872

160,048

152,021

151,355

143,754

Investments

123,543

115,048

107,808

104,454

98,152

Other assets

135,952

90,679

94,356

93,304

86,418

Total assets

$          7,090,919

$          7,150,116

$          6,965,017

$          6,841,739

$          6,718,091

Liabilities, Noncontrolling Interests, and Equity

Secured notes payable

$             730,714

$             716,144

$             719,350

$             719,977

$             721,715

Unsecured senior notes payable

549,816

549,805

549,794

549,783

550,772

Unsecured senior line of credit

554,000

566,000

413,000

379,000

167,000

Unsecured senior bank term loans

1,350,000

1,350,000

1,350,000

1,350,000

1,350,000

Accounts payable, accrued expenses, and tenant security deposits

367,153

423,708

376,785

348,037

323,002

Dividends payable

43,955

41,401

39,468

38,357

36,962

Preferred stock redemption liability

129,638

Total liabilities

3,595,638

3,647,058

3,448,397

3,385,154

3,279,089

Commitments and contingencies

Redeemable noncontrolling interests

14,534

14,564

15,610

15,817

15,819

Alexandria Real Estate Equities, Inc.'s stockholders' equity:

Series D Convertible Preferred Stock

250,000

250,000

250,000

250,000

250,000

Series E Preferred Stock

130,000

130,000

130,000

130,000

130,000

Common stock

633

632

632

622

616

Additional paid-in capital

3,075,860

3,086,052

3,094,987

3,053,269

3,022,242

Accumulated other comprehensive loss

(22,890)

(24,833)

(19,729)

(37,370)

(23,088)

Alexandria Real Estate Equities, Inc.'s stockholders' equity

3,433,603

3,441,851

3,455,890

3,396,521

3,379,770

Noncontrolling interests

47,144

46,643

45,120

44,247

43,413

Total equity

3,480,747

3,488,494

3,501,010

3,440,768

3,423,183

Total liabilities, noncontrolling interests, and equity

$          7,090,919

$          7,150,116

$          6,965,017

$          6,841,739

$          6,718,091

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. Funds From Operations and Adjusted Funds From Operations (Dollars in thousands, except per share amounts) (Unaudited)

The following table presents a reconciliation of net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders − basic, the most directly comparable financial measure presented in accordance with GAAP, to FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders − diluted, FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, as adjusted, and AFFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, for the periods below:

Three Months Ended