Alexandria Real Estate Equities, Inc. Reports Second Quarter Ended June 30, 2012 Financial and Operating Results FFO Per Share - Diluted, as Adjusted of $1.07 and $2.14 for Three and Six Months Ended 2Q12

EPS − Diluted of $0.29 and $0.58 for Three and Six Months Ended 2Q12

Continued Solid Life Science Space Demand in Key Cluster Submarkets

PASADENA, Calif., July 30, 2012 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced financial and operating results for the second quarter ended June 30, 2012.

Second Quarter Ended June 30, 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 June 30, 2012, was $65.8 Million, or $1.07 Per Share;  FFO Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, as Adjusted, for the Six Months Ended June 30, 2012, was $132.0 Million, or $2.14 Per Share
  • Adjusted Funds From Operations ("AFFO") Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, for the Three Months Ended June 30, 2012, was $64.0 Million, or $1.04 Per Share;  AFFO Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, for the Six Months Ended June 30, 2012, was $126.4 Million, or $2.05 Per Share
  • Net Income Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, for the Three Months Ended June 30, 2012, was $17.6 Million, or $0.29 Per Share;  Net Income Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, for the Six Months Ended June 30, 2012, was $36.0 Million, or $0.58 Per Share
  • Results for the Three Months Ended June 30, 2012, Included $5.8 Million, or $0.09 Per Diluted Share, Related to a Realized Gain on Equity Investment Primarily Related to One Non-Tenant Life Science Entity and a Loss on Early Extinguishment of Debt of Approximately $1.6 Million, or $0.03 Per Diluted Share, Related to the Write-Off of a Portion of Unamortized Loan Fees in Connection with Refinancing Our $1.5 Billion Unsecured Senior Line of Credit
  • The Following Table Presents a Reconciliation of FFO Per Share Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted to FFO Per Share Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, as Adjusted, For the Three and Six Months Ended June 30, 2012:


June 30, 2012




Three Months Ended


Six Months Ended


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


$                        1.13


$                        2.11


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


(0.09)


(0.09)


Subtotal


1.04


2.02


    Loss on early extinguishment of debt  


0.03


0.03


    Preferred stock redemption charge



0.10


FFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – 
     diluted, as adjusted


$                        1.07


$                        2.14


Significant Balance Sheet Management Milestones

  • In June 2012, Closed a Secured Construction Loan with Aggregate Commitments of $55 Million for a 100% Pre-Leased Development Project in the San Francisco Bay Market
  • Established an "At The Market" Common Stock Offering Program Under Which We May Sell Up to $250 Million of Our Common Stock; and Raised $39.9 Million in Net Proceeds from Sales Under This Program
  • 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 Outstanding 8.375% Series C Preferred Stock
  • In March 2012, Completed 6.45% Series E Preferred Stock Offering with Net Proceeds of $124.9 Million
  • In February 2012, Completed Debut 4.60% Unsecured Senior Notes Offering with Net Proceeds of $544.6 Million; Net Proceeds From Offering Were Used to Repay Certain Outstanding Variable Rate Bank Debt
  • In January and April 2012, Retired All $84.8 Million of Our 3.70% Unsecured Senior Convertible Notes
  • In February 2012, Repaid All $250 Million of Our 2012 Unsecured Senior Bank Term Loan
  • In March 2012, Sold an Interest in a Land Parcel to Our Joint Venture Partner for $31.4 Million
  • Assets Under Contract for Sale and Completed Asset Sales Aggregating Sale Price of $55.4 Million, or 49%, of $112 Million Sales Target for 2012; Additional Assets Under Negotiation for Sale

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Second Quarter Ended June 30, 2012, Financial and Operating Results

(Unaudited)

Core Operating Metrics

  • Total Revenues for the Three Months Ended June 30, 2012, were $154.1 Million, Compared to Total Revenues for the Three Months Ended June 30, 2011, of $143.3 Million; Total Revenues for the Six Months Ended June 30, 2012, were $298.8 Million, Compared to Total Revenues for the Six Months Ended June 30, 2011, of $283.0 Million
  • Net Operating Income ("NOI") for the Three Months Ended June 30, 2012, was $109.6 Million, Compared to NOI for the Three Months Ended June 30, 2011, of $102.7 Million; NOI for the Six Months Ended June 30, 2012, was $211.0 Million, Compared to NOI for the Six Months Ended June 30, 2011, of $201.4 Million
  • Operating Margins at 71% for the Three Months Ended June 30, 2012
  • Cash and GAAP Same Property Revenues Less Operating Expenses Increase of 1.6% and Decrease of 0.2%, Respectively, for the Three Months Ended June 30, 2012
  • Cash and GAAP Same Property Revenues Less Operating Expenses Increase of 1.9% and Decrease of 0.1%, Respectively, for the Six Months Ended June 30, 2012
  • 48% of Annualized Base Rent From Investment-Grade Tenants
  • Continued Solid Life Science Space Demand in Key Cluster Submarkets
    • During the Three Months Ended June 30, 2012, Executed 44 Leases for 959,000 Rentable Square Feet, Including 169,000 Rentable Square Feet of Development and Redevelopment Space;  Rental Rate Decrease of 0.8% and Increase of 5.8% on a Cash and GAAP Basis, Respectively, on Renewed/Re-leased Space; Excluding One Lease for 71,000 Rentable Square Feet Related to One Tenant in the Gaithersburg Submarket in Suburban Washington, D.C., Rental Rates for Renewed/Re-Leased Space were, on Average 1.1% and 6.7% Higher than Rental Rates for Expiring Leases on a Cash and GAAP Basis, Respectively
      • Fourth Highest Quarter of Leasing Activity in Company History; Continuing Solid Life Science Demand in Alexandria's Key Cluster Submarkets
      • Key Life Science Space Leasing
        • Massachusetts Institute of Technology Renewed 87,000 Rentable Square Feet in the Greater Boston Market
        • United States Government National Institutes of Health Leased 75,000 Rentable Square Feet of Redevelopment Space in the Suburban Washington, D.C. Market
        • Three Tenants Leased 75,000 Rentable Square Feet, Including One Renewal for 24,000 Rentable Square Feet at 400/450 East Jamie Court in the San Francisco Bay Market; Property 78% Leased
        • Infectious Disease Research Institute Leased 55,000 Rentable Square Feet in the Seattle Market
        • United States Government Department of Veterans Affairs Leased 51,000 Rentable Square Feet in the San Francisco Bay Market
        • 1366 Technologies, Inc. Leased 41,000 Rentable Square Feet in the Greater Boston Market
        • Epizyme, Inc. Leased 32,000 Rentable Square Feet of Redevelopment Space in the Greater Boston Market
        • Life Technologies Corporation Renewed 29,000 Rentable Square Feet in the Greater Boston Market
    • During the Six Months Ended June 30, 2012, Executed 105 Leases for 1,871,000 Rentable Square Feet, Including 563,000 Rentable Square Feet of Development and Redevelopment Space; Rental Rate Decrease of 1.4% and Increase of 5.2% on a Cash and GAAP Basis, Respectively, on Renewed/Re-Leased Space; Excluding One Lease for 71,000 Rentable Square Feet Related to One Tenant in the Gaithersburg Submarket in Suburban Washington, D.C., Rental Rates for Renewed/Re-Leased Space were Flat for Expiring Leases on a Cash Basis and on Average 5.7% Higher than Rental Rates on a GAAP Basis
  • Occupancy Percentage for North America Operating Properties of 93.9% and Occupancy Percentage for North America Operating and Redevelopment Properties of 88.4%; Occupancy Percentage for Operating Properties of 92.9%, Including Asia Properties and Occupancy Percentage for Operating and Redevelopment Properties of 86.9%, Including Asia Properties

Value-Added Opportunities and External Growth

  • In June 2012, Completed Redevelopment of 100% Leased, 98,320 Rentable Square Feet Project Located in the San Diego Market
  • In April 2012, Completed Development of 100% Leased, 26,426 Rentable Square Feet Project Located in the Canada Market
  • In April 2012, Commenced Development of 37% Pre-Leased, 414,000 Rentable Square Feet Unconsolidated Joint Venture Project Located in the Greater Boston Market
  • In January 2012, Commenced Development of 100% Pre-Leased, 170,618 Rentable Square Feet Project Located in the San Francisco Bay Market

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Second Quarter Ended June 30, 2012, Financial and Operating Results

(Tabular dollar amounts in thousands)

(Unaudited)

Total revenues, net operating income, and operating margins

Total revenues for the three months ended June 30, 2012, were $154.1 million, compared to total revenues for the three months ended June 30, 2011, of $143.3 million.  Total revenues for the six months ended June 30, 2012, were $298.8 million, compared to total revenues for the six months ended June 30, 2011, of $283.0 million.  Other income for the three months ended June 30, 2012, included a realized gain of approximately $5.8 million on an equity investment primarily related to one non-tenant life science entity.  NOI for the three months ended June 30, 2012, was $109.6 million, compared to NOI for the three months ended June 30, 2011, of $102.7 million.  NOI for the six months ended June 30, 2012, was $211.0 million, compared to NOI for the six months ended June 30, 2011, of $201.4 million.  NOI before the realized gain of approximately $5.8 million for the three and six months ended June 30, 2012, was $103.8 million and $205.2 million, respectively.  Operating margins for the three months ended June 30, 2012, were 71%, compared to operating margins for the three months ended June 30, 2011, of 72%.  Operating margins for the six months ended June 30, 2012 and 2011 were 71%.

 



Three Months Ended


Six Months Ended


Total Revenues, NOI, and Operating Margins  


June 30, 2012


June 30, 2011


June 30, 2012


June 30, 2011


Rental revenues


$                   110,683


$                   109,248


$                   218,267


$                   215,300


Tenant recoveries


34,041


33,147


68,563


66,008


Other income


9,381


926


12,010


1,703


Total revenues


154,105


143,321


298,840


283,011












Rental operating expenses


44,506


40,595


87,888


81,630


Net operating income


$                   109,599


$                   102,726


$                   210,952


$                   201,381


Operating margins


71%


72%


71%


71%












General and administrative


$                     12,324


$                     10,764


$                     22,685


$                     20,258


Interest


17,922


16,567


34,149


34,377


Depreciation and amortization


52,316


40,173


95,682


76,716


Loss on early extinguishment of debt


1,602


1,248


2,225


3,743




84,164


68,752


154,741


135,094


Income from continuing operations


$                     25,435


$                     33,974


$                     56,211


$                     66,287


SIGNIFICANT BALANCE SHEET MILESTONES

Closed secured construction loan for development project in San Francisco Bay market

In June 2012, we closed a secured construction loan with aggregate commitments of $55 million.  The construction loan matures in June 2017, assuming we exercise our sole option to extend the stated maturity date of June 2015 by one year, twice.  The construction loan will be used to fund the majority of the cost to complete the development of a 100% pre-leased 170,618 rentable square feet life science laboratory building at 259 East Grand Avenue in the San Francisco Bay market.  The construction loan will bear 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 June 30, 2012, $55 million of commitments were available.

Debut 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.

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 will 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 2.40% in effect immediately prior to the modification.  In addition to the Applicable Margin, our unsecured senior line of credit is subject to an annual facility fee of 0.25%.  In connection with the modification of our unsecured senior line of credit in April 2012, we recognized a loss on early extinguishment of debt of approximately $1.6 million related to the write-off of a portion of unamortized loan fees.

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Second Quarter Ended June 30, 2012, Financial and Operating Results

(Tabular dollar amounts in thousands)

(Unaudited)

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 real estate investment trust ("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.

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, and paid $0.5234375 per share, representing accumulated and unpaid dividends to the redemption date on such shares.  We recognized a charge of approximately $6.0 million to net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders during the six months ended June 30, 2012, related to the write-off of original issuance costs of the Series C Preferred Stock.

Establishment of "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 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.  In June 2012, we sold an aggregate of 573,686 shares of common stock for gross proceeds of approximately $40.5 million at an average stock price of $70.64 and net proceeds of approximately $39.9 million.  As of June 30, 2012, approximately $209.5 million of our common stock remained available for issuance under the "at the market" common stock offering program.

Real estate asset sale

Real Estate Asset Sales


Date
of sale


Location


Rentable
Square Feet


Gain
on Sale


Disposition
Amount


5110 Campus Drive


May 2012


Pennsylvania


21,000


$                         2


$                   1,800

(1)

Land parcel


March 2012


Greater Boston


(2)


1,864


31,360

(2)

Assets held for sale at contract price










22,200

(3)

Projected additional dispositions










56,640

(4)

Total projected 2012 dispositions










$                112,000














(1)       Represents a sale in May 2012 to a tenant that occupied 28% of the property on the date of sale.


(2)       In March 2012, we sold one-half of our 55% interest in a land parcel supporting a 414,000 rentable square feet project for approximately $31 
           million (including closing costs), or approximately $275 per rentable square foot. See discussion below.


(3)       Amount represents aggregate contract sales prices for three assets held for sale. Includes one property sold in July 2012 to a tenant occupying
           100% of the property, at a price of approximately $8.0 million, or approximately $222 per square foot, resulting in a gain of approximately $1.4 
           million.  The remaining two properties aggregating 196,029 future developable square feet are targeted for sale at an aggregate price of
           approximately $14.2 million, or approximately $72 per developable square foot.  Net book values of the three properties totaled approximately $19.4
           million as of June 30, 2012.


(4)       Represents estimate of proceeds from future dispositions that have not met the criteria for classification as discontinued operations.


Sale of land parcel

In March 2012, we contributed our 55% ownership interest in a land parcel supporting a future 414,000 rentable square feet building 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 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 from discontinued operations in the income statement.  Accordingly, we classified the $1.9 million gain on sale of land below income from discontinued operations, net, in the condensed consolidated statements of income.  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 June 30, 2012, the outstanding balance on the construction loan was $51.1 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, with an initial occupancy date in the fourth quarter of 2014, and the project is 37% pre-leased to Dana-Farber Cancer Institute, Inc.  In addition, Dana-Farber Cancer Institute, Inc. has an option to an additional two floors approximating 99,000 rentable square feet, or 24% of the total rentable square feet of the project.  We expect to earn development and other fees of approximately $3.5 million through 2015, and recurring annual property management fees thereafter.  For the three and six months ended June 30, 2012, we recognized approximately $0.2 million of development fees.  These fees are classified in other income in the condensed consolidated statements of income.

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Second Quarter Ended June 30, 2012, Financial and Operating Results

(Unaudited)

VALUE-ADDED OPPORTUNITIES AND EXTERNAL GROWTH

Development and redevelopment

During the three and six months ended June 30, 2012, we executed leases aggregating 169,000 and 563,000 rentable square feet, respectively, related to our development and redevelopment projects.

In June 2012, we completed the redevelopment of 3530/3550 John Hopkins Court, a combined 98,320 rentable square feet multi-tenant campus located in the San Diego market, which is 100% leased to (1) Genomics Institute of the Novartis Research Foundation, a non-profit research institute, and (2) a leading industrial biotechnology company.  The stabilized yield on cost on a cash and GAAP basis for this project was approximately 8.9% and 9.1%, respectively.  Stabilized yield on cost is calculated as the quotient of net operating income and our investment in the property at stabilization ("Stabilized Yield").

In April 2012, we completed the development of a 26,426 rentable square feet building located in the Canada market, which is 100% leased to GlaxoSmithKline plc.  The Stabilized Yield on a cash and GAAP basis for this project was approximately 7.7% and 8.3%, respectively. 

In April 2012, we commenced ground-up development of 360 Longwood Avenue, our 414,000 rentable square feet unconsolidated joint venture development project located in the Longwood Medical Area of the Greater Boston Market, which is 37% pre-leased to the Dana-Farber Cancer Institute, Inc.  We expect to achieve an unlevered Stabilized Yield on a cash and GAAP basis in a range from 8.1% to 8.5% and 8.7% to 9.1%, respectively.  Funding for this project is primarily provided by capital from our joint venture partner and a $213.2 million non-recourse secured construction loan.  Additionally, our share of the future funding is expected to be less than the $22.3 million distribution we received in March 2012, upon admittance of the new partner and refinancing of the project.

In January 2012, we commenced a ground-up development of a 170,618 rentable square feet single tenant building at 259 East Grand Avenue in the San Francisco Bay market which is 100% pre-leased to Onyx Pharmaceuticals Inc.  We expect to achieve a Stabilized Yield on both a cash and GAAP basis for this property in a range from 7.8% to 8.2%.  Funding for this project will be primarily provided by the $55 million secured construction loan we closed in June 2012.

Acquisitions

In April 2012, we acquired 3013/3033 Science Park Road which consists of two life science laboratory buildings aggregating 176,500 rentable square feet, for approximately $13.7 million.  The property was 100% leased on a short-term basis through July 2012, and thereafter, we expect to redevelop approximately 105,000 rentable square feet.  The remaining square footage will be classified as future developable square feet.  We expect to provide an estimate of our Stabilized Yields in the future upon commencement of development/redevelopment activity.

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Second Quarter Ended June 30, 2012, Financial and Operating Results

(Unaudited)

GUIDANCE

Earnings outlook

Based on our current view of existing market conditions and certain current assumptions, we expect 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, 2012, will be as set forth in the table below.  All projected FFO measures set forth below are non-GAAP measures.  The table below provides a reconciliation of such FFO measures to earnings per share, the most directly comparable GAAP measure.

 

Guidance for the Year Ended December 31, 2012


Reported on July 30, 2012


Reported on May 1, 2012


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


$1.36 - $1.46

 


$1.36 - $1.46

 


    Depreciation and amortization


$2.93 - $2.99


$2.84 - $2.90


    Gain on sales of property


$ (0.03)


$ (0.03)


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


$4.32 - $4.36


$4.23 - $4.27


    Write-off of unamortized loan fees upon early retirement of the 2012 Unsecured Senior

       Bank Term Loan


$0.01


$0.01


    Write-off of unamortized loan fees upon modification of unsecured senior line of credit


$0.03


$0.03


    Preferred stock redemption charge


$0.10


$0.10


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


$(0.09)



    FFO per share attributable to Alexandria Real Estate Equities, Inc.'s
        common stockholders – diluted, as adjusted


$4.37 - $4.41


$4.37 - $4.41








Key net operating income projection assumptions






    Same property net operating income growth – cash basis


3% to 5%


3% to 5%


    Same property net operating income growth – GAAP basis


0% to 2%


0% to 2%


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


Slightly negative/positive


Slightly negative/positive


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


Up to 5%


Up to 5%


    Straight-line rents


$6.5 million/qtr


$6.5 million/qtr


    Amortization of above and below market leases


$0.8 million/qtr


$0.8 million/qtr


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


$5.8 million









Key expense and other projection assumptions






    General and administrative expenses in comparison to prior year


Up 12% to 14%


Up 12% to 14%


    Capitalization of interest


$56 to $62 million


$55.5 to $61.5 million


    Interest expense, net


$72 to $78 million


$73 to $79 million


 

 

ALEXANDRIA REAL ESTATE EQUITIES, INC.

Second Quarter Ended June 30, 2012, Financial and Operating Results

(Unaudited)

Net operating income, net income, and FFO for the three months ended December 31, 2012

As of June 30, 2012, we had approximately $290.3 million and $275.1 million of construction in progress related to our six North American development and 10 North American redevelopment projects, respectively. The completion of these projects, along with recently delivered projects, certain future projects, and contributions from same properties, are expected to contribute significant increases in rental income, net operating income, and cash flows.  Net operating income is projected to increase quarter to quarter, from $103.8 million for the three months ended June 30, 2012 (before the realized gain of $5.8 million on an equity investment primarily related to one non-tenant life science entity) to a range from $110.5 million to $112.5 million for the three months ended December 31, 2012.  Operating performance assumptions related to the completion of our North America development and redevelopment projects, including the timing of initial occupancy, stabilization dates, and stabilization yields, are included on page 8.  Certain key assumptions regarding our projections, including the impact of various development and redevelopment projects, are included in the tables on the preceding page and below. 

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 projections for general and administrative expenses, capitalization of interest, and interest expense, net, are included in the table on the preceding page and below.  Our projections of net operating income 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.  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.

 

Three Months Ended December 31, 2012 (in millions, except per share amounts)


Reported on July 30, 2012


Reported on May 1, 2012


Net operating income


$110.5 – $112.5


$111.0 – $113.0


General and administrative


$11.0 – $12.0


$11.0 – $12.0


Interest


$19.5 – $22.5


$20.0 – $23.0


Depreciation and amortization


$42.6 – $47.7


$42.6 – $47.7


Preferred stock dividends


$6.5


$6.5


Other


$1.0 – $1.4


$1.0 – $1.4


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


$26.9 – $30.9


$26.9 – $30.9


FFO


$71.1 – $73.0


$71.1 – $73.0


FFO per share – diluted


$1.15 – $1.17


$1.15 – $1.17


Sources and uses of capital

We expect that our principal liquidity needs for the year ended December 31, 2012, 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 $1.2 billion as of June 30, 2012.



Reported on

July 30, 2012


Reported on

May 1, 2012



Sources and Uses of Capital for the Year Ended December 31, 2012 (in millions)


Completed


Projected


Total


Total



Sources of capital











        Net cash provided by operating activities less dividends


$                     41


$                     40


$                  81

(1)

$                    76



        Asset and land sales


41


71

(2)

112


112



        Unsecured senior notes payable


550



550


550



        Borrowings on secured construction financing



24


24


24



        Series E Preferred Stock issuance


125



125


125



        Issuances under "at the market" common stock offering program


40


(3)

40




        Debt, equity, and joint venture capital


(12)

(4)

248

(5)

236


247



Total sources of capital


$                   785


$                   383


$             1,168


$                1,134














Uses of capital











        Development, redevelopment, and construction


$                   269


$                   377


$                646

(6)

$                   612



        Acquisitions


46



46


46



        Secured debt repayments


5


6


11

(7)

11



        2012 Unsecured Senior Bank Term Loan repayment


250



250


250



        3.70% Unsecured Senior Convertible Notes repurchase


85



85


85



        Series C Preferred Stock redemption


130



130


130



Total uses of capital


$                   785


$                   383


$             1,168


$                1,134














(1)       See tables of "Key net operating income projection assumptions" and "Key expense and other projection assumptions" on the preceding page.

(2)       Represents an estimate of sources of capital from asset and land sales, including assets "held for sale" at contract price of $22 million as of June 30, 2012.

(3)       See "Debt, equity, and joint venture capital."

(4)       Represents additional amounts used to pay down outstanding borrowings on our unsecured line of credit.

(5)       Represents an estimate of sources of capital primarily consisting of borrowings under our unsecured senior line of credit and proceeds from our "at the market" common
            stock offering program.

(6)       See "Investment to Complete" columns in the tables related to construction in progress (page 8) for additional details underlying this estimate.

(7)       Based upon contractually scheduled payments or maturity dates.