2014

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

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.

***********

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


Noncontrolling interests


46,643


45,120


44,247


43,413


42,558


Total equity


3,488,494


3,501,010


3,440,768


3,423,183


3,416,859


Total liabilities, noncontrolling interests, and equity


$          7,150,116


$          6,965,017


$          6,841,739


$          6,718,091


$          6,574,129


 

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


Year Ended




12/31/12


9/30/12


6/30/12


3/31/12


12/31/11


12/31/12


12/31/11


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

   stockholders – basic


$          21,000


$          10,646


$          17,616


$          18,368


$          26,960


$          67,630


$        101,973


      Depreciation and amortization


48,072


48,173


52,355


43,405


40,966


192,005


158,026


      Gain on sale of real estate



(1,562)


(2)




(1,564)



      Impairment of real estate


1,601


9,799





11,400


994


      Gain on sale of land parcel





(1,864)



(1,864)


(46)


      Amount attributable to noncontrolling interests/unvested stock awards:
















            Net income


1,336


1,188


1,122


946


1,412


4,592


5,063


            FFO


(1,109)


(1,148)


(1,133)


(1,156)


(1,539)


(4,561)


(6,402)


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

   stockholders – basic


70,900


67,096


69,958


59,699


67,799


267,638


259,608


      Assumed conversion of 8.00% Unsecured Senior Convertible Notes


5


5


6


5


5


21


21


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

   stockholders – diluted


70,905


67,101


69,964


59,704


67,804


267,659


259,629


      Realized gain on equity investment primarily related to one non-tenant life 

         science entity




(5,811)




(5,811)



      Impairment of land parcel


2,050






2,050



      Loss on early extinguishment of debt




1,602


623



2,225


6,485


      Preferred stock redemption charge





5,978



5,978



      Allocation to unvested restricted stock awards


(19)



35


(53)



(39)


(69)


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

   stockholders – diluted, as adjusted


$          72,936


$          67,101


$          65,790


$          66,252


$          67,804


$        272,062


$        266,045


















      Non-revenue-enhancing capital expenditures:
















       Building improvements


(329)


(935)


(594)


(210)


(675)


(2,068)


(2,531)


           Tenant improvements and leasing commissions


(3,170)


(1,844)


(2,148)


(2,019)


(6,083)


(9,181)


(10,600)


      Straight-line rent


(9,240)


(5,225)


(5,195)


(8,796)


(9,558)


(28,456)


(26,797)


      Straight-line rent on ground leases


471


201


1,207


1,406


1,221


3,285


4,704


      Capitalized income from development projects


45


50


72


478


537


645


3,973


      Amortization of acquired above and below market leases


(844)


(778)


(778)


(800)


(812)


(3,200)


(9,332)


      Amortization of loan fees


2,505


2,470


2,214


2,643


2,551


9,832


9,300


      Amortization of debt premiums/discounts


110


112