Alexandria Real Estate Equities, Inc. Reports Fourth Quarter and Year Ended December 31, 2012 Financial and Operating Results

FFO Per Share - Diluted, as Adjusted, of $1.16 and $4.38 for Three Months and Year Ended 4Q12

EPS − Diluted of $0.33 and $1.09 for Three Months and Year Ended 4Q12

Total Revenues for the Three Months and Year Ended 4Q12 Up 11% and 7% Over Same Period in Prior Year

NOI from Continuing Operations for the Three Months Ended 4Q12 Up 10% Over 4Q11

Achieved Significant NOI Growth From Delivery of Development and Redevelopment Projects

07 Feb, 2013, 08:30 ET from Alexandria Real Estate Equities, Inc.

PASADENA, Calif., Feb. 7, 2013 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced financial and operating results for the fourth quarter and year ended December 31, 2012.

Fourth Quarter and Year Ended December 31, 2012, Highlights

Results

  • Funds From Operations ("FFO") Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, as Adjusted, for the Three Months Ended December 31, 2012, was $72.9 Million, or $1.16 Per Share;  FFO Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, as Adjusted, for the Year Ended December 31, 2012, was $272.1 Million, or $4.38 Per Share
  • Adjusted Funds From Operations ("AFFO") Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, for the Three Months Ended December 31, 2012, was $66.3 Million, or $1.05 Per Share;  AFFO Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, for the Year Ended December 31, 2012, was $257.7 Million, or $4.15 Per Share
  • Net Income Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, for the Three Months Ended December 31, 2012, was $21.0 Million, or $0.33 Per Share; Net Income Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, for the Three Months Ended December 31, 2012, was $24.7 Million, or $0.39 Per Share, Excluding Impairment of Land Parcel/Real Estate Aggregating $3.7 Million, or $0.06 Per Share; Net Income Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, for the Year Ended December 31, 2012, was $67.6 Million, or $1.09 Per Share; Net Income Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, for the Year Ended December 31, 2012, was $85.8 Million, or $1.38 Per Share, Excluding Impairment of Land Parcel/Real Estate, Loss on Early Extinguishment of Debt, Gain on Sale of Land Parcel/Real Estate, and Preferred Stock Redemption Charge Aggregating $18.2 Million, or $0.29 Per Share

Core Operating Metrics

  • Total Revenues for the Three Months Ended December 31, 2012, were $154.2 Million, Up 11%, Compared to Total Revenues for the Three Months Ended December 31, 2011, of $139.2 Million; Total Revenues for the Year Ended December 31, 2012, were $586.1 Million, Up 7%, Compared to Total Revenues for the Year Ended December 31, 2011, of $548.2 Million
  • Net Operating Income ("NOI") from Continuing and Discontinued Operations for the Three Months Ended December 31, 2012, was $111.1 Million, or $444.5 Million on an Annualized Basis, Up 9%, Compared to NOI from Continuing and Discontinued Operations for the Three Months Ended December 31, 2011, of $101.8 Million, or $407.2 Million on an Annualized Basis; NOI for the Three Months Ended December 31, 2012, was $107.5 Million, Up 10%, Compared to NOI for the Three Months Ended December 31, 2011, of $97.7 Million; NOI for the Year Ended December 31, 2012, was $411.6 Million, Up 6%, Compared to NOI for the Year Ended December 31, 2011, of $388.7 Million
  • 47% of Total Annualized Base Rent ("ABR") from Investment-Grade Client Tenants
  • Investment-Grade Client Tenants Represented 72% of Top 10 Client Tenants' ABR
  • Operating Margins at 70% for the Three Months Ended December 31, 2012
  • Cash and GAAP Same Property Net Operating Income Increases of 6.3% and 0.7%, Respectively, for the Three Months Ended December 31, 2012
  • Cash and GAAP Same Property Net Operating Income Increase of 3.5% and Decrease of 0.5%, Respectively, for the Year Ended December 31, 2012
  • Second Highest Year of Leasing Activity in Company History
  • During the Three Months Ended December 31, 2012, Executed 47 Leases for 678,000 Rentable Square Feet, Including 265,000 Rentable Square Feet of Development and Redevelopment Space; Rental Rate Decrease of 2.9% and Increase of 2.6% on a Cash and GAAP Basis, Respectively, on Renewed/Re-Leased Space; Excluding One Lease for 70,000 Rentable Square Feet in the Suburban Washington, D.C., Market, Rental Rates for Renewed/Re-Leased Space were, on Average, 1.3% Higher and 6.1% Higher than Rental Rates for Expiring Leases on a Cash and GAAP Basis, Respectively
  • During the Year Ended December 31, 2012, Executed 187 Leases for 3,281,000 Rentable Square Feet, Including 1,135,000 Rentable Square Feet of Development and Redevelopment Space; Rental Rate Decrease of 2.0% and Increase of 5.2% on a Cash and GAAP Basis, Respectively, on Renewed/Re-Leased Space; Excluding One Lease for 48,000 Rentable Square Feet in the Research Triangle Park Market and Two Leases for 141,000 Rentable Square Feet in the Suburban Washington, D.C., Market, Rental Rates for Renewed/Re-Leased Space were, on Average, 0.4% Higher and 7.1% Higher than Rental Rates for Expiring Leases on a Cash and GAAP Basis, Respectively
  • Occupancy Percentage for North America Operating Properties of 94.6%, Up from 94.2%, and Occupancy Percentage for North America Operating and Redevelopment Properties of 91.6% Up from 90.0%; Occupancy Percentage for All Operating Properties of 93.4%, Up from 93.0%, Including Asia Properties, and Occupancy Percentage for All Operating and Redevelopment Properties of 89.8%, Up from 88.3%, Including Asia Properties

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. Fourth Quarter and Year Ended December 31, 2012, Financial and Operating Results (Unaudited) 

Value-Added Opportunities and External Growth

Key Commencements - Development

  • In November 2012, Commenced Development of 430 East 29th Street, the West Tower of the Alexandria Center for Life Science – New York City, Located in the Greater NYC Market, a Building with 419,806 Rentable Square Feet; 14% Pre-Leased Plus an Additional 40% Subject to Letters of Intent
  • In April 2012, Commenced Development of 360 Longwood Avenue, Located in the Greater Boston Market, a 37% Pre-Leased Unconsolidated Joint Venture Project with 414,000 Rentable Square Feet

Key Commencements - Redevelopment

  • In October 2012, Commenced Conversion of Manufacturing Space into Laboratory Space Through Redevelopment of 4757 Nexus Center Drive, Located in the San Diego Market, a 100% Pre-Leased Project with 68,423 Rentable Square Feet
  • In October 2012, Commenced Conversion of Office Space into Laboratory Space Through Redevelopment of 1616 Eastlake Avenue, Located in the Seattle Market, a 61% Pre-Leased Project with 66,776 Rentable Square Feet

Key Deliveries - Development

  • In November 2012, Completed Development of 259 East Grand Avenue, Located in the San Francisco Bay Area Market, a 100% Leased Building with 170,618 Rentable Square Feet
  • In October 2012, Completed Development of 400/450 East Jamie Court, Located in the San Francisco Bay Area Market, an 80% Leased Project with 163,036 Total Rentable Square Feet
  • In October 2012, Completed Development of 5200 Illumina Way, Located in the San Diego Market, a 100% Leased Project with 127,373 Rentable Square Feet
  • In September 2012, Completed Development of 4755 Nexus Center Drive, Located in the San Diego Market, a 100% Leased Project with 45,255 Rentable Square Feet
  • In April 2012, Completed Development Located in the Canadian Market, a 100% Leased Project with 26,426 Rentable Square Feet

Key Deliveries - Redevelopment

  • In November/December 2012, Partially Completed Redevelopment of 100% Leased 140,532 Rentable Square Feet at 400 Technology Square, Located in the Greater Boston Market, a Building with 212,124 Total Rentable Square Feet
  • From November 2011 to September 2012, Completed Redevelopment of 10300 Campus Point Drive, Located in the San Diego Market, a 96% Leased Project with 279,138 Rentable Square Feet, including 189,562 Rentable Square Feet Completed in September 2012
  • In June 2012, Completed Redevelopment of 3530/3550 John Hopkins Court, Located in the San Diego Market, a 100% Leased Project with 98,320 Rentable Square Feet  

Balance Sheet Strategy and Significant Milestones

  • Our Balance Sheet Strategy Continues to Focus on Our Leverage Target of 6.5x Net Debt to Adjusted EBITDA by December 31, 2013, by Funding our Significant Development and Redevelopment Projects in 2013 with Leverage-Neutral Sources of Capital and by Continuing to Execute Our Asset Recycling Program
  • In 2012, Executed Capital Strategy and Proved Access to Diverse Sources of Capital Strategically Important to Our Long-Term Capital Structure; Successfully Accessed Every Long-Term Component of Our Targeted Sources of Capital, Including Proceeds from Our Asset Recycling Program, Unsecured Senior Line of Credit, 4.60% Unsecured Senior Notes Payable Offering, Secured Construction Loan, 6.45% Series E Preferred Stock Offering, and Selective "At The Market" Common Stock Offerings
  • Completed $75.1 Million of Asset Sales in 2012; Completed Additional $84.0 Million of Asset Sales in 2013
  • In June 2012, Established an "At The Market" Common Stock Offering Program and Raised $97.9 Million in Net Proceeds from Sales Under This Program in 2012
  • In June 2012, Closed a Secured Construction Loan with Aggregate Commitments of $55.0 Million for a Development Project at 259 East Grand Avenue Located in the San Francisco Bay Area Market
  • In April 2012, Amended Our $1.5 Billion Unsecured Senior Line of Credit to Reduce Its Interest Rate and Extend Its Maturity Date to April 2017, Assuming We Exercise Our Sole Right to Extend the Maturity Date Twice
  • In April 2012, Redeemed All $129.6 Million of Our Outstanding 8.375% Series C Preferred Stock
  • In March 2012, Completed a 6.45% Series E Preferred Stock Offering with Net Proceeds of $124.9 Million
  • In February 2012, Completed Our 4.60% Unsecured Senior Notes Payable Offering with Net Proceeds of $544.6 Million; Net Proceeds from the Offering Were Used to Repay Certain Outstanding Variable Rate Bank Debt, Including All $250 Million of Our 2012 Unsecured Senior Bank Term Loan
  • In January and April 2012, Retired All $84.8 Million of Our 3.70% Unsecured Senior Convertible Notes

Events Subsequent to Year End

  • In January 2013, Executed a Lease for 244,123 Rentable Square Feet at 75/125 Binney Street, Located in the Greater Boston Market and in the First Quarter of 2013 Expect to Commence Development of this 386,275 Rentable Square Feet, 63% Pre-Leased Project
  • In January 2013, Completed Sale of 1124 Columbia Street and Two Land Parcels, Located in the Seattle Market, a Building with 203,817 Rentable Square Feet, for a Sales Price of Approximately $42.6 Million, to a Buyer Expected to Renovate and Reposition the Property for Medical Office Use
  • In February 2013, Completed Sale of 25/35/45 West Watkins Mill Road, 1201 Clopper Road, and a Land  Parcel, Located in the Suburban Washington D.C., Market, Two Buildings with an Aggregate of 282,523 Rentable Square Feet, for a Sales Price of Approximately $41.4 Million, to a Buyer Expected to Renovate and Reposition these Properties; Recognized a Gain on Sale of Approximately $0.1 Million

ALEXANDRIA REAL ESTATE EQUITIES, INC. Fourth Quarter and Year Ended December 31, 2012, Financial and Operating Results (Unaudited) 

VALUE-ADDED OPPORTUNITIES AND EXTERNAL GROWTH

As of December 31, 2012, 96% of our leases contained annual rent escalations that were either fixed or based on a consumer price index or another index.  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.  We expect, on average, our contractual cash rents related to our value-added projects to increase over time.  Initial stabilized yield is calculated as the quotient of the estimated amounts of net operating income and our investment in the property at stabilization ("Initial Stabilized Yield").

During the three months and year ended December 31, 2012, we executed leases aggregating 265,000 and 1,135,000 rentable square feet, respectively, related to our development and redevelopment projects.

Development and redevelopment

The following table summarizes the commencement of key development and redevelopment projects (dollars in thousands, except per square foot amounts): 

Investment

Initial

Commencement

Rentable

Pre-Leased

at

Per

Stabilized Yield

Key

Address/Market

Date

Square Feet

%

Completion

RSF

Cash

GAAP

Client Tenant

Development

75/125 Binney Street, Greater Boston

1Q13

386,275

(1)

63% (1)

$        351,439

$      910

8.0%

8.2%

ARIAD Pharmaceuticals, Inc.

430 East 29th Street, Greater NYC

November 2012

419,806

14% (2)

$        463,245

$   1,103

6.6%

6.5%

Roche

360 Longwood Avenue, Greater Boston

April 2012

414,000

37% (3)

$        350,000

(4)

$      845

8.3%

8.9%

Dana-Farber Cancer Institute, Inc.

Redevelopment

4757 Nexus Center Drive, San Diego

October 2012

68,423

100%

$          34,829

$      509

7.6%

7.8%

Genomatica, Inc.

1616 Eastlake Avenue, Seattle

October 2012

66,776

61%

$          37,816

$      566

8.4%

8.6%

Infectious Disease Research

Institute

(1)  Represents a one-building project with two towers totaling 386,275 rentable square feet.  ARIAD Pharmaceuticals, Inc. leased 100% of the 216,926 rentable square feet at 125 Binney Street and 27,197 rentable square

       feet at 75 Binney Street, with additional potential expansion opportunities through June 30, 2014.  See page 10 for additional details on current assumptions included in our guidance for funding the cost to complete the

       development of 75/125 Binney Street.

(2)  We have an additional 40% of the 419,806 rentable square feet that are at the letter of intent stage.

(3)  Dana-Farber Cancer Institute, Inc. also has an option to lease an additional two floors of approximately 99,000 rentable square feet, or an additional 24% of the total rentable square feet of our unconsolidated joint venture

       development project through June 2014.

(4)  Represents the total venture cost at completion.  As of December 31, 2012, our equity investment was approximately $28.7 million related to our 27.5% ownership interest in the unconsolidated real estate entity.  Our

       expected remaining cash commitment to the venture of approximately $16.9 million is less than the $22.3 million received in March 2012 from an in-substance partial sale of our interest in the underlying real estate.

The following table summarizes the delivery of key development and redevelopment projects during the year ended December 31, 2012 (dollars in thousands, except per square foot amounts):

Portion Delivered

Total Project

Occupancy

Investment

Total Project Initial

Completion

Rentable

as of

at

Per

Stabilized Yield

Key

Address/Market

Date

Square Feet

12/31/2012

Completion

RSF

Cash

GAAP

Client Tenant(s)

Development

259 East Grand Avenue, San Francisco

   Bay Area

November 2012

170,618

100%

$          74,090

$      434

8.7%

(1)

8.6%

(1)

Onyx Pharmaceuticals, Inc.

400/450 East Jamie Court, San

   Francisco Bay Area

October 2012

163,036

80%

$        112,106

$      688

4.9%

(2)

4.9%

(2)

Stem CentRx, Inc.

5200 Illumina Way, San Diego

October 2012

127,373

100%

$          46,978

$      369

7.0%

11.2%

Illumina, Inc.

4755 Nexus Center Drive, San Diego

September 2012

45,255

100%

$          23,084

$      510

6.8%

7.5%

Optimer Pharmaceuticals, Inc.

Canada

April 2012

26,426

100%

$           8,883

$      336

7.7%

8.3%

GlaxoSmithKline plc

Redevelopment

400 Technology Square, Greater Boston

November –

December 2012

140,532 (3)

100%

$        144,688

$   1,030

8.1%

8.9%

Ragon Institute of MGH, MIT

and Harvard; Epizyme, Inc.;

Aramco Services Company, Inc.

10300 Campus Point Drive, San Diego

November 2011

September 2012

279,138 (4)

96%

$        131,649

$      472

7.9%

7.7%

The Regents of the University of

California; Celgene Corporation

3530/3550 John Hopkins Court, San Diego

June 2012

98,320

100%

$          50,898

$      518

8.9%

9.1%

Genomics Institute of the

Novartis Research Foundation;

Verenium Corporation

(1)  The Initial Stabilized Yield on a cash and GAAP basis for this project was approximately 8.7% and 8.6%, respectively, or approximately 0.7% and 0.6% higher than the mid-point of our previous Initial Stabilized Yield estimates

       of 8.0%, on a cash and GAAP basis, respectively.

(2)  The Initial Stabilized Yield on a cash and GAAP basis for this project was approximately 4.9% and 4.9%, respectively, or approximately 0.7% and 0.6% higher than our previous Initial Stabilized Yield estimate of 4.2% and 4.3%,

       on a cash and GAAP basis, respectively.

(3)  In November and December 2012, we partially completed the redevelopment of 140,532 rentable square feet at 400 Technology Square, a building with 212,124 total rentable square feet.

(4)  Includes 189,562 rentable square feet delivered in September 2012, and 89,576 rentable square feet delivered in November 2011.

Acquisitions

In April 2012, we acquired 3013/3033 Science Park Road located in the San Diego market, which consists of two buildings aggregating 176,500 rentable square feet of non-laboratory space, for approximately $13.7 million.  The property was 100% leased on a short-term basis to a non-life science tenant and thereafter, we expect to redevelop the property.  We expect to provide an estimate of our Initial Stabilized Yields in the future upon commencement of development/redevelopment activity.

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. Fourth Quarter and Year Ended December 31, 2012, Financial and Operating Results (Tabular dollar amounts in thousands, except per square foot amounts) (Unaudited) 

BALANCE SHEET STRATEGY AND SIGNIFICANT MILESTONES

Our balance sheet strategy continues to focus on our leverage target of achieving net debt to adjusted EBITDA of 6.5x by December 31, 2013, by funding our significant development and redevelopment projects in 2013 with leverage-neutral sources of capital and by continuing to execute our asset recycling program.  During 2012, we executed our capital strategy and proved that we have access to diverse sources of capital that we believe is strategically important to our long-term capital structure.  These sources of capital included 1) real estate asset dispositions, 2) secured construction project financing, 3) unsecured line of credit, 4) unsecured note payable, 5) joint venture capital, 6) preferred stock, and 7) common stock through our "at the market" common stock offering program.

Real estate asset sales

We continue the disciplined execution of our asset recycling program to monetize non-strategic operating and non-income-producing assets as a source of capital while minimizing the issuance of common equity.  We target the following asset types for sale and redeploy the capital to fund active development and redevelopment projects with significant pre-leasing:

  • Older buildings: elimination of potential capital expenditures and leasing risk;
  • Non-strategic assets: disposition of properties not proximate to academic medical research centers in core life science cluster locations;
  • Assets with alternative uses for buyer: transformation into non-laboratory space, such as medical office buildings, hospitals, and residential spaces;
  • Suburban locations: reinvestment in higher value, Class-A assets in urban "brain trust" life science cluster locations; or
  • Excess land: reduction of non-income-producing land holdings in certain clusters, while maintaining specific land parcels for future growth.

A portion of our projected 2013 asset sales is under negotiation and we expect to identify the remainder of the assets for disposition in the first half of 2013 in order to seek to achieve our target dispositions.

The following table presents our completed real estate asset sales:

Rentable/

Sales

Occupancy

Annualized

Date

Developable

Price

at Date

GAAP

Sales

Gain

Description

Location

of Sale

Square Feet

per SF

of Sale

NOI (1)

Price

on Sale

Sales completed in 2012

1201/1209 Mercer Street (2)

Seattle

September 2012

76,029

$         73

0%

$              45

$      5,570

$        54

801 Dexter Avenue North (2)

Seattle

August 2012

120,000

$         72

0%

$            (96)

8,600

$        55

200 Lawrence Drive/210 Welsh Pool Road

Pennsylvania

July 2012

210,866

$         94

100%

$         2,193

19,750

(3)

$      103

155 Fortune Boulevard (4)

Route 495/Worcester

July 2012

36,000

$       222

100%

$            804

8,000

$   1,350

5110 Campus Drive (4)

Pennsylvania

May 2012

21,000

$         86

71%

$              77

1,800

$          2

Land parcel

Greater Boston

March 2012

(5)

$       275

N/A

            N/A

31,360

$   1,864

Sales completed in 2012

75,080

Sales completed in 1Q13

1124 Columbia Street

Seattle

January 2013

203,817

$       209

81% (6)

$         6,802

42,600

$         −

25/35/45 West Watkins Mill Road/1201

   Clopper Road (7)

Suburban Washington

D.C.

February 2013

282,523

$       147

(8)

100%

$         7,795

41,400

$        53

Sales completed in 2013

84,000

Total

$   159,080

(1)  Annualized using actual year-to-date results as of the quarter end prior to date of sale or December 31, 2012.

(2)  Properties sold to residential developers.

(3)  Sales price reflects the near-term lease expiration of a client tenant occupying 38,513 rentable square feet, or 18% of the total rentable square feet, on the date of sale.  In connection with the sale, we received a secured

       note receivable for $6.1 million with a maturity date in 2018.

(4)  Properties were sold to client tenants. 

(5)  In March 2012, we completed an in-substance partial sale of our interest in underlying real estate supporting a project with 414,000 rentable square feet for approximately $31.4 million, or approximately $275 per rentable square foot.

(6)  The property is expected to become 74% vacant in 2013 and the current buyer is expected to significantly renovate the property into medical office use.  The sales price of 1124 Columbia Street includes a $29.8 million secured

       note receivable due in 2015 with an option to extend the maturity date by one year.  As of December 31, 2012, this property is classified in discontinued operations.

(7)  These properties met the classification for discontinued operations in January 2013 and were classified as operating properties as of December 31, 2012.  We completed the sale on February 1, 2013, and recognized a $0.1

       million gain upon the closing of the transaction.

(8)  These properties are expected to become 17% vacant in 2013, with significant additional vacancy in subsequent years, and the buyer is expected to significantly renovate the property at 1201 Clopper Road.

Impairment of real estate assets

During the three months ended September 30, 2012, we committed to sell four operating properties comprised of 1124 Columbia Street in the Seattle market and One Innovation Drive, 377 Plantation Street, and 381 Plantation Street in the suburban Greater Boston market, aggregating 504,130 rentable square feet, rather than to hold them on a long-term basis.  At the time of our commitment to dispose of these assets, these four properties were on average 94% occupied and generated approximately $12.8 million in annual operating income.  Upon our commitment to sell, we wrote down the value of these assets to our estimate of fair value, based on the anticipated sales price, less cost to sell.  As a result, we recognized an impairment charge of approximately $9.8 million.  In December 2012, we entered into an agreement with a third party to sell 1124 Columbia Street, at a price of $42.6 million which was below our reduced carrying value as of September 30, 2012.  As a result we recognized an additional impairment charge of $1.6 million to write down the carrying value to our revised estimated fair value less cost to sell.  In January 2013, we completed the sale of this property and no gain or loss on sale was recognized.

During the three months ended December 31, 2012, we committed to sell a land parcel with 50,000 developable square feet rather than hold it on a long-term basis for future development.  Upon our decision to sell, we wrote down the value of the land parcel to our estimate of fair value, based on the anticipated sales price, less cost to sell.  As a result, we recognized an impairment charge of approximately $2.1 million.

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. Fourth Quarter and Year Ended December 31, 2012, Financial and Operating Results (Unaudited) 

Sale of land parcel

In March 2012, we completed an in-substance partial sale of our interest in a joint venture that owned a land parcel supporting a future building with 414,000 rentable square feet in the Longwood Medical Area of the Greater Boston market to a newly formed joint venture (the "Restated JV") with National Development and Charles River Realty Investors, and admitted as a 50% member Clarion Partners, LLC, resulting in a reduction of our ownership interest from 55% to 27.5%.  The transfer of one-half of our 55% ownership interest in this real estate venture to Clarion Partners, LLC, was accounted for as an in-substance partial sale of an interest in the underlying real estate.  In connection with the sale of one-half of our 55% ownership interest in the land parcel, we received a special distribution of approximately $22.3 million, which included the recognition of a $1.9 million gain on sale of land and approximately $5.4 million from our share of loan refinancing proceeds.  The land parcel we sold in March 2012 did not meet the criteria for classification as discontinued operations since the parcel did not have any significant operations prior to disposition.  Pursuant to the presentation and disclosure literature on gains/losses on sales or disposals by REITs required by the Securities and Exchange Commission ("SEC"), gains or losses on sales or disposals by a REIT that do not qualify as discontinued operations are classified below income (loss)  from discontinued operations in the income statement.  Accordingly, we classified the $1.9 million gain on sale of land below income (loss) from discontinued operations, net, in the condensed consolidated statements of income, and included the gain in income from continuing operations attributable to Alexandria Real Estate Equities, Inc.'s common stockholders in the "control number," or numerator for computation of earnings per share.  Our 27.5% share of the land was sold at approximately $31 million (including closing costs), or approximately $275 per rentable square foot.  Upon formation of the Restated JV, the existing $38.4 million secured loan was refinanced with a seven-year (including two one-year extension options) non-recourse $213 million secured construction loan with initial loan proceeds of $50 million.  As of December 31, 2012, the outstanding balance on the construction loan was $61.0 million.  We do not expect our share of capital contributions through the completion of the project to exceed the approximate $22.3 million in net proceeds received in this transaction.  Construction of this $350 million project commenced in April 2012.  The initial occupancy date for this project is expected to be in the fourth quarter of 2014.  The project is 37% pre-leased to Dana-Farber Cancer Institute, Inc.  In addition, Dana-Farber Cancer Institute, Inc. has an option to lease an additional two floors approximating 99,000 rentable square feet, or 24% of the total rentable square feet of the project.  In addition to our economic share of the joint venture, we also expect to earn development and other fees of approximately $3.5 million through 2015, and recurring annual property management fees thereafter, from this project.

"At the market" common stock offering program

In June 2012, we established an "at the market" common stock offering program under which we may sell, from time to time, up to an aggregate of $250.0 million of our common stock through our sales agents, BNY Mellon Capital Markets, LLC and Credit Suisse Securities (USA) LLC, during a three-year period.  During the year ended December 31, 2012, we sold an aggregate of 1,366,977 shares of common stock for gross proceeds of approximately $100.0 million at an average stock price of $73.15 and net proceeds of approximately $97.9 million, including commissions and other expenses of approximately $2.1 million.  Net proceeds from the sales were used to pay down the outstanding balance on our senior unsecured line of credit or other borrowings, and for general corporate purposes.  As of December 31, 2012, approximately $150.0 million of our common stock remained available for issuance under the "at the market" common stock offering program.

Secured construction loan for development project in San Francisco Bay Area market

In June 2012, we closed a secured construction loan with aggregate commitments of $55.0 million.  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 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 December 31, 2012, commitments of $38.1 million were available under this loan.

Amendment of $1.5 billion unsecured senior line of credit

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 stated 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 agreement, 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 the 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% based on the aggregate commitments outstanding.  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 for the three months ended June 30, 2012.

8.375% series C preferred stock redemption

In April 2012, we redeemed all 5,185,500 outstanding shares of our Series C Preferred Stock at a price equal to $25.00 per share, or approximately $129.6 million in aggregate, and paid $0.5234375 per share, representing accumulated and unpaid dividends to the redemption date on such shares.  We announced the redemption and recognized a preferred stock redemption charge of approximately $6.0 million to net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders in March 2012, related to the write-off of original issuance costs of the Series C Preferred Stock.

6.45% series E preferred stock offering

In March 2012, we completed a public offering of 5,200,000 shares of our 6.45% series E cumulative redeemable preferred stock ("Series E Preferred Stock").  The shares were issued at a price of $25.00 per share, resulting in net proceeds of approximately $124.9 million (after deducting underwriters' discounts and other offering costs).  The proceeds were initially used to reduce the outstanding borrowings under our unsecured senior line of credit.  We then borrowed funds under our unsecured senior line of credit to redeem our 8.375% series C cumulative redeemable preferred stock ("Series C Preferred Stock") in April 2012.  The dividends on our Series E Preferred Stock are cumulative and accrue from the date of original issuance.  We pay dividends quarterly in arrears at an annual rate of 6.45%, or $1.6125 per share.  Our Series E Preferred Stock has no stated maturity date, is not subject to any sinking fund or mandatory redemption provisions, and is not redeemable before March 15, 2017, except to preserve our status as a REIT.  On and after March 15, 2017, we may, at our option, redeem the Series E Preferred Stock, in whole or in part, at any time for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends on the Series E Preferred Stock up to, but excluding, the redemption date.  In addition, upon the occurrence of a change of control, we may, at our option, redeem the Series E Preferred Stock, in whole or in part within 120 days after the first date on which such change of control occurred, by paying $25.00 per share, plus any accrued and unpaid dividends up to, but excluding, the date of redemption.  Investors in our Series E Preferred Stock generally have no voting rights. 

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. Fourth Quarter and Year Ended December 31, 2012, Financial and Operating Results (Unaudited) 

4.60% unsecured senior notes payable offering

In February 2012, we completed the issuance of our 4.60% unsecured senior notes payable due in February 2022.  Net proceeds of approximately $544.6 million were used to repay certain outstanding variable rate bank debt, including the entire $250 million of our 2012 unsecured senior bank term loan ("2012 Unsecured Senior Bank Term Loan"), and approximately $294.6 million of outstanding borrowings under our unsecured senior line of credit.  In connection with the retirement of our 2012 Unsecured Senior Bank Term Loan, we recognized a loss on early extinguishment of debt of approximately $0.6 million related to the write-off of unamortized loan fees for the three months ended March 31, 2012.

Retirement of 3.70% unsecured senior convertible notes

In January 2012, we repurchased approximately $83.8 million in principal amount of our 3.70% unsecured senior convertible notes ("3.70% Unsecured Senior Convertible Notes") at par, pursuant to options exercised by holders thereof under the indenture governing the notes.  In April 2012, we repurchased the remaining outstanding $1.0 million in principal amount of the notes.  In aggregate, we repurchased approximately $84.8 million in principal amount of the notes and we did not recognize a gain or loss as a result during the year ended December 31, 2012.

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. Fourth Quarter and Year Ended December 31, 2012, Financial and Operating Results (Unaudited)

GUIDANCE

Earnings outlook

Based on our current view of existing market conditions and certain current assumptions, we expect that our 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, will be 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 February 7, 2013

Reported on December 5, 2012

    Earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common

       stockholders – diluted

$1.41 to $1.61

$1.39 to $1.59

    Depreciation and amortization

$2.93 to $3.13

$2.91 to $3.11

    FFO per share attributable to Alexandria Real Estate Equities, Inc.'s common

       stockholders – diluted

$4.44 to $4.64

$4.40 to $4.60

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

0% to 3%

0% to 3%

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

Flat to slightly positive

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 at the end of 2013

93.9% to 94.3%

93.6% to 94.0%

   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

   G&A 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

As of December 31, 2012, we had approximately $431.6 million and $199.7 million of construction in progress related to our three North American development and eight 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, net operating income, 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 page 9 and 10.  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 net operating income 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, 2011, and the "Risk Factors" section of Item 1A of our quarterly report on Form 10-Q for the period ended September 30, 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 net operating income is a key performance indicator and is useful to investors as a performance measure because, when compared across periods, net operating income 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.

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. Fourth Quarter and Year Ended December 31, 2012, 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 equivalents was approximately $1.1 billion as of December 31, 2012.

Reported on

February 7, 2013

Reported on

December 5, 2012

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

$                      −

$           130 - 150

$        130 - 150

(1)

$           130 - 150

        2013 asset sales initially targeted for 4Q12 closing

43

34

77

        2013 asset sales initially projected on December 5, 2012 (2)

                Non-income-producing

             175 - 225

(3)

          175 - 225

(3)

            175 - 225

                Income-producing

41

                34 - 84

           75 - 125

              75 - 125  

        Secured construction loan borrowing

                20 - 30

             20 - 30

                20 - 30

        Unsecured senior notes

             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

$                     84

$        868 - 1,148

$     952 - 1,232

$        875 - 1,155

Uses of capital:

        Development, redevelopment, and construction

$                      −

$           545 - 595

$        545 - 595

(4)

$           545 - 595

        Seller financing of asset sales

39

39

        Acquisitions

(5)

        Secured notes payable repayments (6)

37

37

52

        Unsecured senior bank term loan repayment

             125 - 175

          125 - 175

            125 - 175

        Paydown of unsecured senior line of credit

45

             161 - 341

          206 - 386

            153 - 333

Total uses of capital

$                     84

$        868 - 1,148

$     952 - 1,232

$        875 - 1,155

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

(2)  A portion of our projected 2013 asset sales is under negotiation and we expect to identify the remainder of the assets for disposition in the first half of 2013 in order to achieve our

       targeted dispositions.

(3)  Our guidance has assumed transfer of 50% of our ownership interest in the 75/125 Binney Street project to be accounted for as an in-substance partial sale of an interest in a land

       parcel, with the resulting entity presented as an unconsolidated joint venture (the "Binney JV") in our financial statements.  This sale of a land parcel is included in our total projected

       asset sales for 2013.

(4)  See "Investment to Complete" columns in the "Development and Redevelopment Projects in North America" table on the following page for additional details underlying this estimate.  

       Our guidance for 2013 development, redevelopment, and construction spending of $545 to $595 million includes our estimated share of incremental capital required to complete the

       75/125 Binney Street Project.  See page 10 for additional details on the 75/125 Binney Street Project. 

(5)  Our guidance has assumed no acquisitions, but we review opportunistic acquisitions that we expect to fund on a leverage-neutral basis.

(6)  The reduction in projected secured notes payable of $15 million is related to two loans that were repaid in 2012 prior to their contractual maturity dates in 2013.

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, 2011, and the "Risk Factors" section of Item 1A of our quarterly report on Form 10-Q for the period ended September 30, 2012.  We expect to update our forecast of sources and uses of capital on a quarterly basis.

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. Development and Redevelopment Projects in North America December 31, 2012 (Tabular dollar amounts in thousands) (Unaudited)

Project RSF (1)

Leased Status RSF (1)

Market − Submarket/

In

% Leased/

Property

Service

CIP

Total

Leased

Negotiating

Marketing

Total

Negotiating

Client Tenants

Development projects in North America

Greater Boston – Cambridge

225 Binney Street

305,212

305,212

305,212

305,212

100%

Biogen Idec Inc.

San Francisco Bay Area – Mission Bay

499 Illinois Street

222,780

222,780

222,780

222,780

N/A

Greater NYC – Manhattan

430 East 29th Street

419,806

419,806

60,816

167,244

(2)

191,746

419,806

54%

Roche

Development projects in North America

947,798

947,798

366,028

167,244

414,526

947,798

56%

Redevelopment projects in North America

Greater Boston – Cambridge

400 Technology Square

140,532

71,592

212,124

169,939

42,185

212,124

80%

Ragon Institute of MGH, MIT and Harvard;

Epizyme, Inc.; Warp Drive Bio, LLC; Aramco

Services Company, Inc.

San Diego – University Town Center

4757 Nexus Center Drive

68,423

68,423

68,423

68,423

100%

Genomatica, Inc.

Seattle – Lake Union

1551 Eastlake Avenue

74,914

42,569

117,483

74,914

42,569

117,483

64%

Puget Sound Blood Center and Program

1616 Eastlake Avenue

66,776

66,776

40,706

26,070

66,776

61%

Infectious Disease Research Institute

Suburban and other redevelopment projects

45,287

182,264

227,551

146,613

59,532

21,406

227,551

91%

Redevelopment projects in North America

260,733

431,624

692,357

500,595

59,532

132,230

692,357

81%

Total development and redevelopment projects in North America

260,733

1,379,422

1,640,155

866,623

226,776

546,756

1,640,155

67%

 

Investment (1)

Initial Stabilized

Initial

Market − Submarket/

December 31, 2012

To Complete

Total at

Per

Yield (1) (3)

Project Start

Occupancy

Stabilization

Property

In Service

CIP

2013

Thereafter

Completion (3)

RSF

Cash

GAAP

Date (1)

Date (1)

Date (1)

Development projects in North America

Greater Boston – Cambridge

225 Binney Street

$               −

$    104,422

$       75,851

$              −

$        180,273

$         591

7.5%

8.1%

4Q11

4Q13

4Q13

San Francisco Bay Area – Mission Bay

499 Illinois Street

$               −

$    113,196

$       17,119

$     22,894

$        153,209

$         688

6.4%

7.2%

2Q11

2Q14

1Q15

Greater NYC – Manhattan

430 East 29th Street

$               −

$    213,960

$     134,057

$   115,228

$        463,245

$      1,103

6.6%

6.5%

4Q12

4Q13

2016

Development projects in North America

$               −

$    431,578

$     227,027

$   138,122

$        796,727

$         841

Redevelopment projects in North America

Greater Boston – Cambridge

400 Technology Square

$      85,732

$      43,966

$      14,990

$              −

$        144,688

$         682

8.1%

8.9%

4Q11

4Q12

4Q13

San Diego – University Town Center

4757 Nexus Center Drive

$               −

$        3,966

$      24,167

$       6,696

$          34,829

$         509

7.6%

7.8%

4Q12

4Q13

      4Q13 (5)

Seattle – Lake Union

1551 Eastlake Avenue

$      41,787

$      17,520

$        4,703

$              −

$          64,010

$         545

6.7%

6.7%

4Q11

4Q11

4Q13

1616 Eastlake Avenue

$               −

$      29,033

$        4,115

$       4,668

$          37,816

$         566

8.4%

8.6%

4Q12

2Q13

2014

Suburban and other redevelopment projects

$      42,320

$    105,259

$      37,391

$              −

$        184,970

$         813

Redevelopment projects in North America

$    169,839

$    199,744

$      85,366

$     11,364

$        466,313

$         674

Total development and redevelopment projects in North America

$    169,839

$    631,322

$    312,393

$   149,486

$     1,263,040

$         770

Refer to the following page for all footnotes to the table above

 

 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Development and Redevelopment Projects in North America December 31, 2012

(Tabular dollar amounts in thousands)

 (Unaudited)

Development project commencements in the first quarter of 2013 in North America

Project RSF (1)

Leased Status RSF (1)

Market − Submarket/

In

% Leased/

Property

Service

CIP

Total

Leased

Negotiating

Marketing

Total

Negotiating

Client Tenants

Greater Boston – Cambridge

75/125 Binney Street

386,275

(5)

386,275

244,123

142,152

(6)

386,275

63%

(6)

ARIAD Pharmaceuticals, Inc.

 

Investment

Initial Stabilized

Initial

Market − Submarket/

December 31, 2012

To Complete

Total at

Paer

Yield (1) (3)

Project Start

Occupancy

Stabilization

Property

In Service

CIP (4)

2013

Thereafter

Subtotal

Completion (3)

RSF

Cash

GAAP

Date (1)

Date (1)

Date (1)

Greater Boston – Cambridge

75/125 Binney Street

$           −

87,452

$     101,087

(7)

$   162,900

$   263,987

$        351,439

$         910

8.0%

8.2%

1Q13

1Q15

2016

The following table presents the current assumptions included in our guidance for funding of the cost to complete the 75/125 Binney Street project:

Cost to Complete (7)

2013

Thereafter

Total

ARE investment

$              40,000 - 50,000

$                                −

$            40,000 - 50,000

Binney JV partner capital contribution                                                     

                20,000 - 25,000

              20,000 - 25,000

Secured construction loan

                30,000 - 40,000

          160,000 - 165,000

          190,000 - 205,000

$            90,000 - 115,000

$         160,000 - 165,000  

$         250,000 - 280,000

 

(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.  For example, the redevelopment project at 1616 Eastlake Avenue represents the conversion of two floors from office to laboratory/office aggregating 66,776 rentable square feet.  The remaining rentable square feet of 101,714 at this property not undergoing active redevelopment was 74.8% occupied at December 31, 2012, and is included in our operating statistics.

(2)

Represents rentable square feet subject to letters of intent.

(3)

As of December 31, 2012, 96% of our leases contained annual rent escalations that were either fixed or based on a consumer price index or another index.  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.  We expect, on average, our contractual cash rents related to our value-added projects to increase over time.  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.

(4)

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 no later than 18 to 24 months following the delivery of the initial 54,102 rentable square foot space.

(5)

As of December 31, 2012, this project was classified in land undergoing preconstruction activities (additional CIP) in North America.  This project will be transferred into active development upon commencement of vertical construction during the three months ended March 31, 2013.

(6)

ARIAD Pharmaceuticals, Inc. has potential additional expansion opportunities through June 2014.

(7)

Our guidance has assumed transfer of 50% of our ownership interest in the 75/125 Binney Street project to be accounted for as an in-substance partial sale of an interest in a land parcel, with the resulting entity presented as an unconsolidated joint venture (the "Binney JV") in our financial statements.  This sale of a land parcel is included in our total projected asset sales for 2013.  The total remaining cost to complete for the 75/125 Binney Street project is expected to aggregate approximately $264 million through 2016, of which $101 million is expected to be invested in 2013.  The projected sources of funding for the $264 million cost to complete for this project include a secured construction loan of approximately $190 million to $205 million, Binney JV partner capital contribution of approximately $75 million to $80 million, (approximately $20 million to $25 million to be used towards construction) and our investment in the project of approximately $40 million to $50 million.  Our guidance for 2013 development, redevelopment, and construction spending of $545 to $595 million, shown on page 8, includes our estimated investment in the project of approximately $40 million to $50 million into the Binney JV.

 

ALEXANDRIA REAL ESTATE EQUITIES, INC. Fourth Quarter and Year Ended December 31, 2012, Financial and Operating Results

EARNINGS CALL INFORMATION

We will host a conference call on Thursday, February 7, 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 and year ended December 31, 2012.  To participate in this conference call, dial (866) 638-3013 or (630) 691-2761 and confirmation code 34214742, 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 Thursday, February 7, 2013.  The replay number is (888) 843-7419 or (630) 652-3042 and the confirmation code is 34214742.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the fourth quarter and year ended December 31, 2012, are 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 REIT, is the largest and leading investment-grade 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 every core life science cluster location 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 and innovation through its best-in-class laboratory and office space, collaborative locations adjacent to leading academic and medical institutions, unparalleled life science real estate expertise and services, and longstanding and expansive network in the life science community, which we believe 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.

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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 net operating income 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

Year Ended

12/31/12

9/30/12

6/30/12

3/31/12

12/31/11

12/31/12

12/31/11

Revenues:

Rental

$       114,205

$       108,367

$       106,463

$       103,417

$       104,634

$       432,452

$       414,164

Tenant recoveries

36,180

34,448

32,172

32,386

33,031

135,186

128,299

Other income

3,785

2,640

9,381

2,629

1,584

18,435

5,762

Total revenues

154,170

145,455

148,016

138,432

139,249

586,073

548,225

Expenses:

Rental operations

46,639

44,614

42,359

40,911

41,553

174,523

159,567

General and administrative

12,643

12,485

12,309

10,358

10,601

47,795

41,127

Interest

17,941

17,094

17,922

16,227

14,757

69,184

63,378

Depreciation and amortization

48,072

47,176

51,276

42,326

39,762

188,850

153,087

    Impairment of land parcel

2,050

2,050

    Loss on early extinguishment of debt

1,602

623

2,225

6,485

Total expenses

127,345

121,369

125,468

110,445

106,673

484,627

423,644

Income from continuing operations

26,825

24,086

22,548

27,987

32,576

101,446

124,581

Income (loss) from discontinued operations

Income from discontinued operations before

   impairment of real estate

3,583

4,018

 

3,093

2,924

2,886

13,618

11,760

Impairment of real estate

(1,601)

(9,799)

(11,400)

(994)

Income (loss) from discontinued operations, net

1,982

(5,781)

3,093

2,924

2,886

2,218

10,766

Gain on sale of land parcel

1,864

1,864

46

Net income

28,807

18,305

25,641

32,775

35,462

105,528

135,393

Net income attributable to noncontrolling interests

1,012

828

851

711

1,142

3,402

3,975

Dividends on preferred stock

6,471

6,471

6,903

7,483

7,090

27,328

28,357

Preferred stock redemption charge

5,978

5,978

Net income attributable to unvested restricted stock

   awards

324

360

271

235

270

1,190

1,088

Net income attributable to Alexandria Real Estate 

   Equities, Inc.'s common stockholders

$         21,000

$         10,646

$         17,616

$         18,368

$         26,960

$         67,630

$       101,973

Earnings per share attributable to Alexandria Real Estate

         Equities, Inc.'s common stockholders – basic and

         diluted:

Continuing operations

$            0.30

$            0.26

$            0.24

$            0.25

$            0.39

$            1.05

$            1.55

Discontinued operations, net

0.03

(0.09)

0.05

0.05

0.05

0.04

0.18

Earnings per share – basic and diluted

$            0.33

$            0.17

$            0.29

$            0.30

$            0.44

$            1.09

$            1.73

Weighted average shares of common stock outstanding

   for calculating earnings per share attributable to

   Alexandria Real Estate Equities, Inc.'s common

   stockholders – basic

63,091,781

62,364,210

61,663,367

61,507,807

61,427,495

62,159,913

59,066,812

Dilutive effect of stock options

173

1,160

3,939

331

10,798

Weighted average shares of common stock outstanding

   for calculating earnings per share attributable to

   Alexandria Real Estate Equities, Inc.'s common

   stockholders – diluted

63,091,781

62,364,210

61,663,540

61,508,967

61,431,434

62,160,244

59,077,610

 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Condensed Consolidated Balance Sheets

(Dollars in thousands)

(Unaudited)

December 31,

September 30,

June 30,

March 31,

December 31,

2012

2012

2012

2012

2011

Assets

Investments in real estate, net

$          6,424,578

$          6,300,027

$          6,208,354

$          6,113,252

$          6,008,440

Cash and cash equivalents

140,971

94,904

80,937

77,361

78,539

Restricted cash

39,947

44,863

41,897

39,803

23,332

Tenant receivables

8,449

10,124

6,143

8,836

7,480

Deferred rent

170,396

160,914

155,295

150,515

142,097

Deferred leasing and financing costs, net

160,048

152,021

151,355

143,754

135,550

Investments

115,048

107,808

104,454

98,152

95,777

Other assets

90,679

94,356

93,304

86,418

82,914

Total assets

$          7,150,116

$          6,965,017

$          6,841,739

$          6,718,091

$          6,574,129

Liabilities, Noncontrolling Interests, and Equity

Secured notes payable

$             716,144

$             719,350

$             719,977

$             721,715

$             724,305

Unsecured senior notes payable

549,805

549,794

549,783

550,772

84,959

Unsecured senior line of credit

566,000

413,000

379,000

167,000

370,000

Unsecured senior bank term loans

1,350,000

1,350,000

1,350,000

1,350,000

1,600,000

Accounts payable, accrued expenses, and tenant security deposits

423,708

376,785

348,037

323,002

325,393

Dividends payable

41,401

39,468

38,357

36,962

36,579

Preferred stock redemption liability

129,638

Total liabilities

3,647,058

3,448,397

3,385,154

3,279,089

3,141,236

Commitments and contingencies

Redeemable noncontrolling interests

14,564

15,610

15,817

15,819

16,034

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

Series C Preferred Stock

129,638

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

Common stock

632

632

622

616

616

Additional paid-in capital

3,086,052

3,094,987

3,053,269

3,022,242

3,028,558

Accumulated other comprehensive loss

(24,833)

(19,729)

(37,370)

(23,088)

(34,511)

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

3,441,851

3,455,890

3,396,521

3,379,770

3,374,301