Alexandria Real Estate Equities, Inc. Reports Third Quarter Ended September 30, 2015 Financial and Operating Results

Sales of Partial Interests in Core Assets at 4.5% and 4.8% Cash Cap Rates to High-Quality Institutional Investor

FFO Per Share, as Adjusted - Basic and Diluted, of $1.33 for 3Q15, up 9.9% over 3Q14

EPS - Diluted of $0.46 for 3Q15, up 17.9% over 3Q14

Total Revenues of $218.6 Million for 3Q15, up 17.8% over 3Q14

02 Nov, 2015, 16:10 ET from Alexandria Real Estate Equities, Inc.

PASADENA, Calif., Nov. 2, 2015 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced financial and operating results for the third quarter ended September 30, 2015.

Joel S. Marcus, chairman, chief executive officer and founder of Alexandria Real Estate Equities, Inc., stated, "Our best-in-class team delivered another strong quarter of financial and operating results," including the following key highlights:

  • Executed agreement for the sales of partial interests in Class A facilities to TIAA-CREF with closings in 4Q15:
    • 4.8% cash cap rate on sale of 49.9% interest in 1500 Owens Street located in our Mission Bay submarket for a sale price of $73.4 million;
    • 4.5% cash cap rate on sale of 70% interest in 225 Binney Street located in our Cambridge submarket for a sale price of $190 million;
  • Highly leased development and redevelopment projects:
    • 1.5 million rentable square feet ("RSF"), 89% leased, targeted for completion by 4Q16 (weighted toward 4Q16), will generate $75 to $80 million of incremental annual net operating income ("NOI") upon stabilization;
    • 1.8 million RSF, 71% leased, targeted for completion in 2017 and 2018, will generate $105 to $110 million of incremental annual NOI upon stabilization;
  • Funds from operations ("FFO") per share – diluted, as adjusted, for 3Q15 of $1.33, up 9.9%, compared to $1.21 for 3Q14;
  • Same property NOI growth of 1.1% and 4.8% (cash basis) for 3Q15, compared to 3Q14;
  • Executed leases for 1,021,756 RSF and 3,959,804 RSF during 3Q15 and YTD 3Q15, respectively, highest nine-month leasing volume in the Company's 20-year history;
  • Rental rate increases of 17.5% and 8.8% (cash basis) for 3Q15 lease renewals and re-leasing of space aggregating 456,602 RSF (included in the 1,021,756 RSF above); and
  • Common stock dividend for 3Q15 of $0.77 per common share, up 5 cents, or 7%, over 3Q14; continuation of strategy to share growth in cash flows from operating activities with our shareholders while also importantly retaining capital for reinvestment.

Sales of partial interest in two core real estate assets at 4.5% and 4.8% cash cap rates:

  • In July and October 2015, we executed agreements for the sales of partial interests in two Class A facilities to TIAA-CREF, with closings in 4Q15:

Property

Submarket

Interest To Be Sold

RSF

Sales

Price

Cash Cap Rate

225 Binney Street

Cambridge

70%

305,212

$

190,110

4.5%

1500 Owens Street

Mission Bay

49.9%

158,267

73,353

4.8%

463,479

$

263,463

4.6%

Refer to our dispositions section for information on additional asset sales expected in 4Q15.

Results

  • FFO attributable to Alexandria Real Estate Equities, Inc.'s ("Alexandria's") common stockholders – diluted, as adjusted:
    • $1.33 per share for 3Q15, up 9.9%, compared to $1.21 per share for 3Q14
    • $3.91 per share for YTD 3Q15, up 9.5%, compared to $3.57 per share for YTD 3Q14
    • $95.0 million for 3Q15, up $9.0 million, or 10.4%, compared to $86.1 million for 3Q14
    • $280.0 million for YTD 3Q15, up $26.3 million, or 10.4%, compared to $253.7 million for YTD 3Q14
    • Investment income of $5.4 million, or $0.08 per share, included gross investment gains of $8.7 million, primarily from the sale of two publicly traded securities.
  • Net income attributable to Alexandria's common stockholders – diluted:
    • $32.7 million, or $0.46 per share, for 3Q15, compared to $27.6 million, or $0.39 per share, for 3Q14
    • $81.7 million, or $1.14 per share, for YTD 3Q15, compared to $88.3 million, or $1.24 per share, for YTD 3Q14

Core operating metrics

  • Total revenues:
    • $218.6 million for 3Q15, up $33.0 million, or 17.8%, compared to $185.6 million for 3Q14
    • $619.5 million for YTD 3Q15, up $81.3 million, or 15.1%, compared to $538.2 million for YTD 3Q14
  • NOI, including our share of unconsolidated joint ventures:
    • $151.2 million for 3Q15, up $23.0 million, or 17.9%, compared to $128.2 million for 3Q14
    • $430.4 million for YTD 3Q15, up $54.5 million, or 14.5%, compared to $375.9 million for YTD 3Q14
  • Occupancy for operating properties in North America of 96.2% as of 3Q15
  • 53% of our total annualized base rent ("ABR") generated from investment-grade client tenants
  • Same property NOI growth:
    • 1.1% and 4.8% (cash basis) increase for 3Q15, compared to 3Q14
    • 1.2% and 5.6% (cash basis) increase for YTD 3Q15, compared to YTD 3Q14
  • Operating margins at 69% for 3Q15
  • Adjusted EBITDA margins at 65% for 3Q15
  • Executed leases for 1,021,756 RSF during 3Q15:
    • 253,108 RSF to bluebird bio, Inc., representing 99% of our 60 Binney Street development project under construction in our Cambridge submarket in Greater Boston
    • 150,000 RSF to Pinterest, Inc., representing 100% of phase one of the recently acquired near-term development project at 505 Brannan Street in our SoMa submarket in San Francisco
    • 78,916 RSF renewal with UMass Memorial Realty, Inc. at 306 Belmont Street in our Route 495/Worcester submarket in Greater Boston
    • 60,917 RSF renewal with Vertex Pharmaceuticals Incorporated at 245/275 Armand Frappier Boulevard in our Canadian submarket
    • 50,231 RSF leased and delivered to The Children's Hospital Corporation at 360 Longwood Avenue in our Longwood Medical Area submarket in Greater Boston
    • 17.5% and 8.8% (cash basis) rental rate increases on lease renewals and re-leasing of space aggregating 456,602 RSF
  • Executed leases for 3,959,804 RSF for YTD 3Q15, highest nine-month leasing volume in the Company's 20-year history
    • 19.6% and 10.6% (cash basis) rental rate increases on lease renewals and re-leasing of space aggregating 1,729,239 RSF

External growth: development and redevelopment projects under construction and acquisitions

Highly leased development and redevelopment projects under construction

  • Highly leased development and redevelopment projects:
    • 1.5 million RSF, 89% leased, targeted for completion by 4Q16 (weighted toward 4Q16), will generate $75 to $80 million of incremental annual NOI upon stabilization
    • 1.8 million RSF, 71% leased, targeted for completion in 2017 and 2018, will generate $105 to $110 million of incremental annual NOI upon stabilization
  • 3Q15 key development projects placed into service include:
    • 62,490 RSF, including 30,408 RSF to Eli Lilly and Company and 30,408 RSF to Galderma Laboratories, L.P. (a wholly-owned subsidiary of Nestle S.A.), at our 430 East 29th Street development in our Manhattan submarket in New York City
    • 50,231 RSF to The Children's Hospital Corporation at our 360 Longwood Avenue development in our Longwood Medical Area submarket in Greater Boston
  • 3Q15 commencements of development and redevelopment projects, including: 
    • 431,483 RSF development project at 100 Binney Street in our Cambridge submarket; 98% leased/negotiating, including 58% leased to Bristol-Myers Squibb Company
    • 304,326 RSF redevelopment project at 10290 Campus Point Drive in our University Town Center submarket, acquired in July 2015 for $105.0 million; 100% leased to Eli Lilly and Company
    • 300,000 RSF development project at 510 Townsend Street in our SoMa submarket; 100% leased to Stripe, Inc.
    • 162,156 RSF redevelopment project at 9625 Towne Centre Drive in our University Town Center submarket
    • 59,000 RSF redevelopment project at 11 Hurley Street, in our Cambridge submarket, acquired in September 2015 for $5.9 million; 100% under negotiation

Acquisitions

  • In July and September 2015, we acquired 10290 Campus Point Drive and 11 Hurley Street, respectively. We commenced conversion of these buildings into office/laboratory space through redevelopment in 3Q15.

Balance sheet

  • In October 2015, closed a secured construction loan with aggregate commitments available for borrowing aggregating $350.0 million, for our 98% leased development project at 50/60 Binney Street in our Cambridge submarket, which bears interest at a rate of LIBOR+150 bps
  • $855 million of liquidity as of 3Q15; $1.2 billion of liquidity as of 3Q15 on a pro forma basis for the available borrowings under the construction loan noted immediately above
  • $10.8 billion total market capitalization as of September 30, 2015
  • 13% of gross investments in real estate in value-creation pipeline (74% of pipeline undergoing construction) as of 3Q15, with a target range from 10% to 15% as of 4Q16
  • 7.4x net debt to adjusted EBITDA – 3Q15 annualized; with target of less than 7.0x by 4Q15
  • 3.5x fixed charge coverage ratio – 3Q15 annualized
  • Limited debt maturities through 2018; well-laddered maturity profile
  • Executed additional interest rate swap agreements in 3Q15, with an aggregate notional amount of $750 million, to increase notional hedged variable-rate debt to a minimum of $1.1 billion and $650 million during 2016 and 2017, respectively
  • 24% unhedged variable-rate debt as a percentage of total debt as of 3Q15, with a target of less than 15% by 4Q15

LEED statistics

  • 56% of our total ABR will be generated from LEED projects upon completion of our in-process projects

Other subsequent events

  • In October 2015, we repaid a $76 million secured note payable with an effective interest rate of 5.73%
  • In October 2015, we executed an agreement for the sale of 75/125 Shoreway Road in our Palo Alto/Stanford Research Park submarket in San Francisco to a high-quality institutional investor at a sales price of $38.5 million and a cash capitalization rate of 5.8%; with closing in 4Q15

Guidance September 30, 2015 (Dollars in thousands, except per share amounts)

The following updated guidance is based on our current view of existing market conditions and other assumptions for the year ending December 31, 2015. There can be no assurance that actual amounts will be materially higher or lower than these expectations. See our discussion of "forward-looking statements" on page 6.

Summary of Key Changes in Guidance

Description

FFO per share – diluted

+ $0.01

-- Midpoint of range increased by $0.01 to $5.25 and narrowed range from six cents to two cents. Projected FFO per share up $0.05 over initial 2015 guidance, representing aggregate growth of 9.4% over 2014 FFO per share.

Sources of capital:

Midpoint

Incremental debt

$

(36,000)

Remainder/asset sales

(70,000)

-- Reduction in projected asset sales resulting from reduction in 2015 projected construction spending, described below.

Net decrease in sources of capital

$

(106,000)

Uses of capital:

Construction

$

(90,000)

-- Reduction in projected construction spending for 2015 since initial guidance in December 2014 primarily due to conservative forecasting on the timing of lease-up and commencement of construction related to over 2.3 million RSF of development and redevelopment projects.

 

Other

(16,000)

Decrease in uses of capital

$

(106,000)

 

 

EPS and FFO Per Share Attributable to Alexandria's Common Stockholders – Diluted

Earnings per share

$1.46 to $1.48

Add: depreciation and amortization

3.68

Add: impairment of real estate

0.20

Other

(0.02)

FFO per share

$5.32 to $5.34

Less: investment income for 3Q15 (1)

(0.08)

FFO per share, as adjusted

$5.24 to $5.26

 

2015 Guidance

Key Assumptions

Low

High

Occupancy percentage for operating properties in

North America as of December 31, 2015

96.9%

97.4%

Same Property performance:

NOI increase

0.5%

2.5%

NOI increase (cash basis)

5.0%

7.0%

Lease renewals and re-leasing of space:

Rental rate increases

14.0%

17.0%

Rental rate increases (cash basis)

8.0%

10.0%

Straight-line rent revenue

$

47,000

$

52,000

General and administrative expenses

$

55,000

$

59,000

Capitalization of interest

$

35,000

$

45,000

Interest expense

$

106,000

$

116,000

 

Key Credit Metrics

Actual 3Q15

2015 Guidance

Net debt to Adjusted EBITDA – 4Q annualized

7.4x

less than 7.0x

Fixed-charge coverage ratio – 4Q annualized

3.5x

3.0x to 3.5x

Value-creation pipeline as a percentage of gross investments in real estate as of period end

13%

12% to 15%

 

YTD 3Q15

2015 Guidance

Key Sources and Uses of Capital

Completed

Low

High

Sources of capital:

Net cash provided by operating activities after dividends

$

95,000

$

115,000

$

135,000

Incremental debt (2)

553,000

154,000

84,000

Remainder/asset sales (see next page)

94,000

650,000

750,000

Total sources of capital

$

742,000

$

919,000

$

969,000

Uses of capital:

Construction

$

358,000

$

535,000

$

585,000

Acquisitions

384,000

384,000

384,000

Total uses of capital

$

742,000

$

919,000

$

969,000

Incremental debt:

Issuance of unsecured senior and other notes payable

$

82,000

$

370,000

$

450,000

Borrowings under existing secured construction loans

47,000

80,000

130,000

Repayments of secured notes payable

(12,000)

(61,000)

(137,000)

Activity on unsecured senior line of credit/other

436,000

(235,000)

(359,000)

Incremental debt

$

553,000

$

154,000

$

84,000

(1)

Investment income for the three months ended September 30, 2015, of $5.4 million, or $0.08 per share, included gross investment gains of $8.7 million, primarily from the sale of two publicly traded securities. 

(2)

2015 guidance range reflects a reduction in incremental debt from asset sales.

 

Dispositions and Other Sources of Capital for 2015

September 30, 2015

(Dollars in thousands)

 

Property – Market/Submarket

Number of Operating Properties

Square Feet

Interest Sold/Subject to Sale

NOI (1)

Cash NOI (1)

Cash Capitalization Rate

Actual/Estimated

Sales Price

Completed YTD 3Q15

661 University Avenue – Canada/Toronto

1

N/A

100%

$

(1,363)

$

(135)

    N/A

$

54,104

270 Third Street – Greater Boston/Cambridge

N/A

100%

    N/A

25,477

Other

2

196,859

100%

(595)

(595)

    N/A

14,335

Completed YTD 3Q15

$

(1,958)

$

(730)

    N/A

$

93,916

Under contract

225 Binney Street – Greater Boston/Cambridge (2)

1

305,212

70%

$

9,320

$

8,650

4.5%

$

190,110

1500 Owens Street – San Francisco/Mission Bay (3)

1

158,267

49.9%

4,169

3,524

4.8

73,353

75/125 Shoreway Road – San Francisco/Palo Alto/Stanford Research Park

1

82,874

100%

2,616

2,231

5.8

38,500

Under contract

$

16,105

$

14,405

4.8%

$

301,963

Dispositions completed and under contract

$

395,879

Projected remainder/asset sales (4)

Partial interest in core property/core-like properties (4)

TBD

TBD

70% to 100%

TBD

TBD

4.5% to 6.0%

305,000 (4)

Total dispositions completed and other sources of capital for 2015

$

650,000

to

$

750,000

 

(1)

Annualized NOI for the quarter ended prior to the date of sale. Cash NOI excludes straight-line rent. NOI and sales price related to sale of less than 100% of the property represents the proportional interest of the total property.

(2)

In July 2015, we executed an agreement to sell an interest in 225 Binney Street to a high-quality institutional investor.

(3)

In October 2015, we executed an agreement to sell an interest in 1500 Owens Street to a high-quality institutional investor. Due diligence is expected to be completed by the buyer on or around November 4, 2015.

(4)

We have several properties targeted for sale, including the sale of a partial interest in one high-value core property that by itself will meet the remainder/asset sales goal of $305 million. We also continue to pursue the sale of 500 Forbes Boulevard located in our South San Francisco submarket.

 

Key NAV Consideration September 30, 2015

Photo: http://photos.prnewswire.com/prnh/20151102/282713-INFO

Earnings Call Information and About the Company September 30, 2015

We will host a conference call on Tuesday, November 3, 2015, at 3:00 p.m. Eastern Time ("ET")/ noon Pacific Time ("PT") that is open to the general public to discuss our financial and operating results for the third quarter ended September 30, 2015. To participate in this conference call, dial (877) 795-3648 or (719) 325-4783 and confirmation code 7276381 shortly before 3:00 p.m. ET/noon PT. The audio webcast 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 6:00 p.m. ET/3:00 p.m. PT on Tuesday, November 3, 2015. The replay number is (888) 203-1112 or (719) 457-0820, and the confirmation code is 7276381.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the third quarter ended September 30, 2015, is available in the "For Investors" section of our website at www.are.com or by following this link: http://www.are.com/fs/2015q3.pdf.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE: ARE) is a fully integrated, self-administered and self-managed urban office real estate investment trust ("REIT") uniquely focused on collaborative science and technology campuses in AAA innovation cluster locations with a total market capitalization of $10.8 billion as of September 30, 2015, and an asset base of 31.5 million square feet, including 19.9 million RSF of operating properties and development and redevelopment projects under construction, as well as an additional 11.6 million square feet of near-term and future ground-up development projects. Alexandria pioneered this niche in 1994 and has since established a dominant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park.

This document 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 2015 earnings per share attributable to Alexandria's common stockholders – diluted, 2015 FFO per share attributable to Alexandria's common stockholders – diluted, NOI, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as "forecast," "guidance," "projects," "estimates," "anticipates," "believes," "expects," "intends," "may," "plans," "seeks," "should," or "will," or the negative of those words or similar words. 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. There can be no assurance that actual results will not be materially higher or lower than these expectations. 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 place into service 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, 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, a favorable capital market environment, performance of our operations in areas such as current and future development and redevelopment projects being placed into service, leasing activity, lease renewals, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission ("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 earnings press release, and unless otherwise stated, 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.

 

Consolidated Statements of Income

September 30, 2015

(In thousands, except per share amounts)

Three Months Ended

Nine Months Ended

9/30/15

6/30/15

3/31/15

12/31/14

9/30/14

9/30/15

9/30/14

Revenues:

Rental

$

155,311

$

151,805

$

143,608

$

140,873

$

137,718

$

450,724

$

403,280

Tenant recoveries

56,119

49,594

48,394

45,282

45,572

154,107

128,198

Other income

7,180

2,757

4,751

2,519

2,325

14,688

6,725

Total revenues

218,610

204,156

196,753

188,674

185,615

619,519

538,203

Expenses:

Rental operations

68,846

62,250

61,223

56,881

57,423

192,319

162,283

General and administrative

15,143

14,989

14,387

13,861

12,609

44,519

39,669

Interest

27,679

26,668

23,236

22,188

20,555

77,583

57,111

Depreciation and amortization

67,953

62,171

58,920

57,973

58,388

189,044

166,123

Impairment of real estate

14,510

51,675

14,510

Loss on early extinguishment of debt

189

525

189

525

Total expenses

179,621

166,267

172,276

202,578

149,500

518,164

425,711

Equity in earnings of unconsolidated joint ventures

710

541

574

554

1,825

Income (loss) from continuing operations

39,699

38,430

25,051

(13,350)

36,115

103,180

112,492

(Loss) income from discontinued operations

(43)

1,722

(180)

(43)

(489)

Gain on sales of real estate – land parcels

5,598

8

805

Net income (loss)

39,699

38,430

25,008

(6,030)

35,943

103,137

112,808

Dividends on preferred stock

(6,247)

(6,246)

(6,247)

(6,284)

(6,471)

(18,740)

(19,414)

Preferred stock redemption charge

(1,989)

Net income attributable to noncontrolling interests

(170)

(263)

(492)

(1,362)

(1,340)

(925)

(3,842)

Net income attributable to unvested restricted stock awards

(623)

(630)

(483)

(489)

(506)

(1,736)

(1,285)

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

$

32,659

$

31,291

$

17,786

$

(16,154)

$

27,626

$

81,736

$

88,267

Earnings per share attributable to Alexandria's common stockholders – basic and diluted:

Continuing operations

$

0.46

$

0.44

$

0.25

$

(0.25)

$

0.39

$

1.14

$

1.25

Discontinued operations

0.02

(0.01)

Earnings per share – basic and diluted

$

0.46

$

0.44

$

0.25

$

(0.23)

$

0.39

$

1.14

$

1.24

Weighted-average shares of common stock outstanding for calculating earnings per share attributable to Alexandria's common stockholders – basic and diluted

71,500

71,412

71,366

71,314

71,195

71,426

71,121

Dividends declared per share of common stock

$

0.77

$

0.77

$

0.74

$

0.74

$

0.72

$

2.28

$

2.14

 

 

Consolidated Balance Sheets

September 30, 2015

(In thousands)

9/30/15

6/30/15

3/31/15

12/31/14

9/30/14

Assets

Investments in real estate

$

7,654,209

$

7,442,875

$

7,388,059

$

7,226,016

$

7,197,630

Cash and cash equivalents

76,383

68,617

90,641

86,011

67,023

Restricted cash

36,993

44,191

56,704

26,884

24,245

Tenant receivables

10,124

9,279

10,627

10,548

10,830

Deferred rent

267,954

257,427

243,459

234,124

225,506

Deferred leasing and financing costs

222,343

210,709

199,576

201,798

199,835

Investments

330,570

(1)

360,614

283,062

236,389

177,577

Other assets

138,768

131,179

133,093

114,266

117,668

Total assets

$

8,737,344

$

8,524,891

$

8,405,221

$

8,136,036

$

8,020,314

Liabilities, Noncontrolling Interests and Equity

Secured notes payable

$

773,619

$

771,435

$

760,476

$

652,209

$

636,825

Unsecured senior notes payable

1,747,613

1,747,531

1,747,450

1,747,370

1,747,290

Unsecured senior line of credit

843,000

624,000

421,000

304,000

142,000

Unsecured senior bank term loans

950,000

950,000

975,000

975,000

975,000

Accounts payable, accrued expenses and tenant security deposits

586,594

531,612

645,619

489,085

504,535

Dividends payable

61,340

61,194

58,824

58,814

57,549

Total liabilities

4,962,166

4,685,772

4,608,369

4,226,478

4,063,199

Commitments and contingencies

Redeemable noncontrolling interests

14,218

14,248

14,282

14,315

14,348

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

Series D cumulative convertible preferred stock

237,163

237,163

237,163

237,163

250,000

Series E cumulative redeemable preferred stock

130,000

130,000

130,000

130,000

130,000

Common stock

718

717

716

715

714

Additional paid-in capital

3,356,043

3,371,016

3,383,456

3,461,189

3,523,195

Accumulated other comprehensive income (loss)

35,238

83,980

29,213

(628)

(28,711)

Alexandria's stockholders' equity

3,759,162

3,822,876

3,780,548

3,828,439

3,875,198

Noncontrolling interests

1,798

1,995

2,022

66,804

67,569

Total equity

3,760,960

3,824,871

3,782,570

3,895,243

3,942,767

Total liabilities, noncontrolling interests and equity

$

8,737,344

$

8,524,891

$

8,405,221

$

8,136,036

$

8,020,314

(1)

Includes unrealized gains on publicly traded investments aggregating $103.9 million as of September 30, 2015, classified in accumulated other comprehensive income (loss) within stockholders' equity.

 

Funds From Operations and Adjusted Funds From Operations September 30, 2015 (In thousands)

The following table presents a reconciliation of net income (loss) attributable to Alexandria's common stockholders – basic, the most directly comparable financial measure presented in accordance with generally accepted accounting principles ("GAAP"), to FFO attributable to Alexandria's common stockholders – basic and diluted, FFO attributable to Alexandria's common stockholders – diluted, as adjusted and adjusted funds from operations ("AFFO") attributable to Alexandria's common stockholders – diluted. The table below includes our share of consolidated and unconsolidated joint venture amounts.

Three Months Ended

Nine Months Ended

9/30/15

6/30/15

3/31/15

12/31/14

9/30/14

9/30/15

9/30/14

Net income (loss) attributable to Alexandria's common stockholders

$

32,659

$

31,291

$

17,786

$

(16,154)

$

27,626

$

81,736

$

88,267

Depreciation and amortization

68,398

62,523

59,202

58,302

58,388

190,123

166,123

Impairment of real estate – rental properties

14,510

26,975

14,510

Gain on sales of real estate – rental properties (1)

(1,838)

Gain on sales of real estate – land parcels

(5,598)

(8)

(805)

Amount attributable to noncontrolling interests/ unvested restricted stock awards:

Net income

793

893

975

1,851

1,846

2,661

5,127

FFO

(1,491)

(1,274)

(1,141)

(2,063)

(2,278)

(3,892)

(5,570)

FFO attributable to Alexandria's common stockholders - basic and diluted (2)

100,359

93,433

91,332

61,475

85,574

285,138

253,142

Investment income

(5,378)

(3)

(5,378)

Impairment of real estate – land parcels

24,700

Loss on early extinguishment of debt

189

525

189

525

Preferred stock redemption charge

1,989

Allocation to unvested restricted stock awards

67

(2)

(259)

(4)

53

(4)

FFO attributable to Alexandria's common stockholders - diluted, as adjusted

95,048

93,620

91,332

87,905

86,095

280,002

253,663

Non-revenue-enhancing capital expenditures:

Building improvements

(2,404)

(2,743)

(2,278)

(1,989)

(2,405)

(7,425)

(5,440)

Tenant improvements and leasing commissions

(5,499)

(6,429)

(5,775)

(5,499)

(1,693)

(17,703)

(9,680)

Straight-line rent revenue

(12,006)

(14,159)

(10,697)

(10,023)

(10,892)

(36,862)

(35,511)

Straight-line rent expense on ground leases

(1,245)

(4)

510

363

657

723

(372)

2,131

Amortization of acquired below-market leases

(3,182)

(5)

(1,006)

(933)

(654)

(757)

(5,121)

(2,191)

Amortization of loan fees

2,657

2,921

2,835

2,822

2,786

8,413

8,090

Amortization of debt (premiums) discounts

(100)

(100)

(82)

17

(36)

(282)

100

Stock compensation expense

5,178

4,054

3,690

4,624

3,068

12,922

9,372

Allocation to unvested restricted stock awards

207

152

118

98

71

476

261

AFFO attributable to Alexandria's common stockholders – diluted

$

78,654

$

76,820

$

78,573

$

77,958

$

76,960

$

234,048

$

220,795

 

(1)

Gain on sales of real estate – rental properties recognized during 4Q14 is classified in (loss) income from discontinued operations in the consolidated statements of income.

(2)

Calculated in accordance with standards established by the Board of Governors of the NAREIT in its April 2002 White Paper and related implementation guidance.

(3)

Investment income for the three months ended September 30, 2015, of $5.4 million, or $0.08 per share, included gross investment gains of $8.7 million, primarily from the sale of two publicly traded securities.

(4)

Increase in 3Q15 due to the timing of an annual cash payment for one ground lease. Straight-line rent expense related to ground leases is expected to decrease in 4Q15 to a quarterly run rate generally consistent with quarters prior to 3Q15.

(5)

Increase in 3Q15 is primarily related to a below-market lease assumed with the acquisition of 10290 Campus Point Drive in our University Town Center submarket in July 2015. This acquired lease expired in September 2015. We expect amortization of acquired below-market leases to decrease in 4Q15 to a quarterly run rate of approximately $1.0 million.

 

Funds From Operations Per Share and Adjusted Funds From Operations Per Share September 30, 2015 (In thousands, except per share amounts)

The following table presents a reconciliation of earnings per share attributable to Alexandria's common stockholders – basic, the most directly comparable financial measure presented in accordance with GAAP, to FFO per share attributable to Alexandria's common stockholders – diluted, FFO per share attributable to Alexandria's common stockholders – diluted, as adjusted and AFFO per share attributable to Alexandria's common stockholders – diluted. For the computation of the weighted-average shares used to compute the per share information, refer to the "Definitions and Reconciliations" section in our supplemental information. The table below includes our share of consolidated and unconsolidated joint venture amounts. Amounts allocable to unvested restricted stock awards of approximately one cent per share are not presented separately within the table below.

Three Months Ended

Nine Months Ended

9/30/15

6/30/15

3/31/15

12/31/14

9/30/14

9/30/15

9/30/14

Earnings per share attributable to Alexandria's common stockholders – basic and diluted

$

0.46

$

0.44

$

0.25

$

(0.23)

$

0.39

$

1.14

$

1.24

Depreciation and amortization

0.95

0.87

0.83

0.82

0.81

2.65

2.33

Impairment of real estate – rental properties

0.20

0.38

0.20

Gain on sales of real estate – rental properties

(0.03)

Gain on sales of real estate – land parcels

(0.08)

(0.01)

FFO per share attributable to Alexandria's common stockholders – basic and diluted (1)

1.41

1.31

1.28

0.86

1.20

3.99

3.56

Investment income (2)

(0.08)

(0.08)

Impairment of real estate – land parcels

0.34

Loss on early extinguishment of debt

0.01

0.01

Preferred stock redemption charge

0.03

FFO per share attributable to Alexandria's common stockholders – diluted, as adjusted

1.33

1.31

1.28

1.23

1.21

3.91

3.57

Non-revenue-enhancing capital expenditures:

Building improvements

(0.03)

(0.04)

(0.03)

(0.03)

(0.03)

(0.10)

(0.08)

Tenant improvements and leasing commissions

(0.08)

(0.09)

(0.08)

(0.08)

(0.02)

(0.25)

(0.14)

Straight-line rent revenue

(0.17)

(0.20)

(0.15)

(0.14)

(0.15)

(0.52)

(0.50)

Straight-line rent expense on ground leases

(0.02)

0.01

0.01

0.01

0.01

0.03

Amortization of acquired below-market leases

(0.04)

(0.01)

(0.01)

(0.01)

(0.01)

(0.06)

(0.02)

Amortization of loan fees

0.04

0.04

0.03

0.05

0.03

0.12

0.11

Stock compensation expense

0.07

0.06

0.05

0.06

0.04

0.18

0.13

AFFO per share attributable to Alexandria's common stockholders – diluted

$

1.10

$

1.08

$

1.10

$

1.09

$

1.08

$

3.28

$

3.10

Weighted-average shares of common stock outstanding for calculating FFO, FFO, as adjusted and AFFO per share attributable to Alexandria's common stockholders – basic and diluted

71,500

71,412

71,366

71,314

71,195

71,426

71,121

 

(1)

Calculated in accordance with standards established by the Board of Governors of the NAREIT in its April 2002 White Paper and related implementation guidance.

(2)

Investment income for the three months ended September 30, 2015, of $5.4 million, or $0.08 per share, included gross investment gains of $8.7 million, primarily from the sale of two publicly traded securities.

 

SOURCE Alexandria Real Estate Equities, Inc.



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