Alexandria Real Estate Equities, Inc. Reports First Quarter Ended March 31, 2012 Financial and Operating Results
FFO Per Share − Diluted of $1.08 for 1Q12
EPS − Diluted of $0.30 for 1Q12
Debut Unsecured Senior Bond Offering Improves Capital Structure
Strong Demand in Key Cluster Submarkets Drives Solid Leasing Activity
PASADENA, Calif., May 1, 2012 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced financial and operating results for the first quarter ended March 31, 2012.
First Quarter Ended March 31, 2012 Highlights
Results
- Funds From Operations Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders Before Loss on Early Extinguishment of Debt and Preferred Stock Redemption Charge – Diluted for the Three Months Ended March 31, 2012, was $66.3 Million, or $1.08 Per Share
- Adjusted Funds from Operations Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted for the Three Months Ended March 31, 2012, was $62.5 million, or $1.02 Per Share
- Net Income Attributable to Alexandria Real Estate Equities, Inc.'s Common Stockholders – Diluted, for the Three Months Ended March 31, 2012, was $18.4 Million, or $0.30 Per Share
Significant Balance Sheet Management Milestones
- Completed Debut 4.6% Unsecured Senior Notes Offering with Aggregate Net Proceeds of $544.6 Million; Net Proceeds From Offering Were Used to Repay Certain Outstanding Variable Rate Bank Debt
- Completed 6.45% Series E Perpetual Preferred Stock Offering with Aggregate Net Proceeds of $124.9 Million; Net Proceeds From Offering Were Used to Redeem $129.6 Million of Outstanding 8.375% Series C Perpetual Preferred Stock in April 2012
- Lowered Interest Rate and Extended Maturity Date to April 2017 Pursuant to Amendment to $1.5 Billion Unsecured Senior Line of Credit in April 2012
- Assets Under Contract For Sale and Completed Asset Sales Aggregating Total Sale Price of $47.4 Million, or 42%, of $112 Million Sales Target for 2012
- Reduced Unhedged Variable Rate Debt to 5% of Total Debt
Core Operating Metrics
- Total Revenues for the Three Months Ended March 31, 2012, Were $145.0 Million, as Compared to Total Revenues for the Three Months Ended December 31, 2011, of $145.8 Million, and Total Revenues for the Three Months Ended March 31, 2011, of $139.9 Million
- Net Operating Income ("NOI") for the Three Months Ended March 31, 2012, was $101.6 Million, Compared to NOI for the Three Months Ended December 31, 2011, of $101.8 Million, and NOI for the Three Months Ended March 31, 2011, of $98.9 Million
- Operating Margins were Solid at 70%
- Solid Life Science Space Demand in Key Cluster Markets; Executed 63 Leases for 912,000 Rentable Square Feet, Including 394,000 Rentable Square Feet of Redevelopment and Development Space
- Fourth Highest Quarter of Leasing Activity in Company History
- Rental Rate Increase of 3.3% and Decrease of 2.8% on a GAAP and Cash Basis, Respectively, on Renewed/Re-leased Space; Excluding One Lease for 18,000 Rentable Square Feet Related to One Tenant in the Sorrento Valley Submarket in San Diego, Rental Rates for Renewed/Re-Leased Space Were on Average 7.6% and 1.1% Higher than Rental Rates for Expiring Leases on a GAAP and Cash Basis, Respectively
- Key Life Science Space Leasing
- Dana-Farber Cancer Institute, Inc. Leased 154,000 Rentable Square Feet of a Multi-Tenant Development in the Greater Boston Market
- Onyx Pharmaceuticals, Inc. Leased 171,000 Rentable Square Feet Build-to-Suit Development in the San Francisco Bay Market
- Hamner Institute Leased 100,000 Rentable Square Feet Building in the Research Triangle Park Market
- Illumina, Inc. Leased 23,000 Rentable Square Feet Development Expansion in the San Diego Market
- 46% of Annualized Base Rent From Investment Grade Tenants
- Cash and GAAP Same Property Revenues Less Operating Expenses Increase of 1.7% and Decrease of 0.7%, Respectively
- Occupancy Percentage for Operating Properties of 94.2% and Occupancy Percentage for Operating and Redevelopment Properties of 87.9%
Value-Added Opportunities and External Growth
- 100% Leased on Five of Seven Ground-Up Development Projects Aggregating 987,000 Rentable Square Feet, Including Commencement of 100% Pre-leased 171,000 Rentable Square Feet Single Tenant Ground-Up Development Project in the San Francisco Bay Market
- 63% Leased/Negotiating on 11 Redevelopment Projects Aggregating 910,000 Rentable Square Feet
Significant Announcements
- In April 2012, our Board of Directors Elected Maria C. Freire, Ph.D., as a Director of the Company
- On May 28, 2012, the Company Will Celebrate its 15th Anniversary as an NYSE Listed Company
ALEXANDRIA REAL ESTATE EQUITIES, INC.
First Quarter Ended March 31, 2012, Financial and Operating Results
(Unaudited)
RESULTS
Funds from operations ("FFO")
FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders before loss on early extinguishment of debt and preferred stock redemption charge – diluted, for the three months ended March 31, 2012, was $66.3 million, or $1.08 per share, compared to FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders before loss on early extinguishment of debt – diluted, for the three months ended December 31, 2011, of $67.8 million, or $1.10 per share, and FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders before loss on early extinguishment of debt – diluted, for the three months ended March 31, 2011, of $63.1 million, or $1.15 per share.
Three Months Ended |
||||||||
FFO (dollars in thousands, except per share amounts) |
March 31, 2012 |
December 31, 2011 |
March 31, 2011 |
|||||
FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted |
$ 59,704 |
$ 67,804 |
$ 60,636 |
|||||
Loss on early extinguishment of debt |
623 |
− |
2,495 |
|||||
Preferred stock redemption charge |
5,978 |
− |
− |
|||||
Impact of unvested restricted stock awards |
(53) |
− |
(21) |
|||||
FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, as adjusted |
$ 66,252 |
$ 67,804 |
$ 63,110 |
|||||
FFO per share – diluted |
$ 0.97 |
$ 1.10 |
$ 1.10 |
|||||
FFO per share – diluted, as adjusted |
$ 1.08 |
$ 1.10 |
$ 1.15 |
|||||
Common dividends declared |
$ 0.49 |
$ 0.49 |
$ 0.45 |
|||||
Dividend payout ratio |
46% |
45% |
40% |
Adjusted funds from operations ("AFFO")|
AFFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, for the three months ended March 31, 2012, was $62.5 million, or $1.02 per share, compared to AFFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, for the three months ended December 31, 2011, of $58.9 million, or $0.96 per share, and AFFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, for the three months ended March 31, 2011, of $58.8 million, or $1.07 per share.
Three Months Ended |
|||||||||
AFFO (in thousands, except per share amounts) |
March 31, |
December 31, |
March 31, |
||||||
AFFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted |
$ 2,452 |
$ 58,930 |
$ 58,808 |
||||||
AFFO per share – diluted |
$ 1.02 |
$ 0.96 |
$ 1.07 |
Earnings per share
Net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, for the three months ended March 31, 2012, was $18.4 million, or $0.30 per share, compared to net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, for the three months ended December 31, 2011, of $27.0 million, or $0.44 per share, and net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted, for the three months ended March 31, 2011, of $24.4 million, or $0.44 per share.
Three Months Ended |
|||||||||
Earnings Per Share (in thousands, except per share amounts) |
March 31, 2012 |
December 31, 2011 |
March 31, 2011 |
||||||
Net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders |
|||||||||
Basic |
$ 18,368 |
$ 26,960 |
$ 24,365 |
||||||
Diluted |
$ 18,368 |
$ 26,960 |
$ 24,365 |
||||||
Earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders |
|||||||||
Basic |
$ 0.30 |
$ 0.44 |
$ 0.44 |
||||||
Diluted |
$ 0.30 |
$ 0.44 |
$ 0.44 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
First Quarter Ended March 31, 2012, Financial and Operating Results
(Unaudited)
Items impacting comparability of results
During the three months ended March 31, 2012, we recognized a loss on early extinguishment of debt of approximately $0.6 million related to the write-off of unamortized loan fees, as a result of the early repayment of our unsecured senior bank term loan ("2012 Unsecured Senior Bank Term Loan"). We also recognized a gain on sale of a land parcel of approximately $1.9 million. See Sale of Land Parcel on the following page for further details. In addition, in March 2012, we elected to redeem all outstanding shares of our 8.375% Series C Preferred Stock ("Series C Preferred Stock"), and recognized a preferred stock redemption charge of approximately $6.0 million. See 6.45% Series E Preferred Stock Offering on the following page.
During the three months ended March 31, 2011, we recognized an aggregate loss on early extinguishment of debt of approximately $2.5 million related to the repurchase, in privately negotiated transactions, of approximately $96.1 million of certain of our 3.70% unsecured senior convertible notes ("3.70% Unsecured Senior Convertible Notes").
The following table highlights certain items noted above impacting comparability of results (in thousands):
Three Months Ended |
|||||||||
March 31, 2012 |
December 31, 2011 |
March 31, 2011 |
|||||||
Income from continuing operations before loss on early extinguishment of debt |
$ 31,563 |
$ 35,574 |
$ 34,970 |
||||||
Loss on early extinguishment of debt |
(623) |
− |
(2,495) |
||||||
Income from continuing operations |
30,940 |
35,574 |
32,475 |
||||||
(Loss) income from discontinued operations, net |
(29) |
(112) |
150 |
||||||
Gain on sale of land parcel |
1,864 |
− |
− |
||||||
Net income |
32,775 |
35,462 |
32,625 |
||||||
Net income attributable to noncontrolling interests |
711 |
1,142 |
929 |
||||||
Dividends on preferred stock |
7,483 |
7,090 |
7,089 |
||||||
Preferred stock redemption charge |
5,978 |
− |
− |
||||||
Net income attributable to unvested restricted stock awards |
235 |
270 |
242 |
||||||
Net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders |
$ 18,368 |
$ 26,960 |
$ 24,365 |
SIGNIFICANT BALANCE SHEET MANAGEMENT MILESTONES
Transaction |
|||||||||
Significant Balance Sheet Management Milestones (in thousands) |
Date |
Amount (1) |
|||||||
Debut 4.60% investment grade unsecured bond offering |
February 2012 |
$ 544,649 |
|||||||
Repurchase of 3.70% Unsecured Senior Convertible Notes |
January 2012 |
$ (83,801) |
|||||||
Repayment of 2012 Unsecured Senior Bank Term Loan |
February 2012 |
$ (250,000) |
|||||||
Amendment of $1.5 billion Unsecured Senior Line of Credit (2) |
April 2012 |
$ 1,500,000 |
|||||||
Issuance of 6.45% Series E Preferred Stock |
March 2012 |
$ 124,868 |
|||||||
Notice of redemption of 8.375% Series C Preferred Stock (3) |
March 2012 |
$ (129,638) |
|||||||
Sale of interest in land parcel to joint venture partner |
March 2012 |
$ 31,360 |
|||||||
(1) Net of discounts and offering costs. |
|||||||||
(2) Outstanding balance of Unsecured Senior Line of Credit as of March 31, 2012 was approximately $167 million. |
|||||||||
(3) Redemption of 8.375% Series C Preferred Stock occurred on April 13, 2012. |
Debut 4.60% investment grade unsecured bond offering
During the three months ended March 31, 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 outstanding variable rate bank debt, including $250 million of our 2012 Unsecured Senior Bank Term Loan, and approximately $294.6 million of outstanding borrowings under our unsecured senior line of credit.
Debt repayments
During the three months ended March 31, 2012, we retired substantially all of our 3.70% Unsecured Senior Convertible Notes and the entire $250 million outstanding balance on our 2012 Unsecured Senior Bank Term Loan. In conjunction 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, 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 this maturity date twice by an additional six months after each exercise. Borrowing under the unsecured senior line of credit will bear interest at London Interbank Offered Rate ("LIBOR") or the base rate specified in the amended 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 initially 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.
First Quarter Ended March 31, 2012, Financial and Operating Results
(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 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.
8.375% series C preferred stock redemption
In March 2012, we called for redemption all 5,185,500 outstanding shares of our 8.375% Series C Preferred Stock at a redemption price equal to $25.00 per share plus $0.5234375 per share representing accumulated and unpaid dividends to the redemption date on April 13, 2012. The preferred stock redemption liability included in the accompanying condensed consolidated balance sheet as of March 31, 2012, reflects the Series C Preferred Stock at its redemption amount of $129.6 million, excluding the portion relating to the accumulated and unpaid dividends. As a result of calling our Series C Preferred Stock for redemption in March 2012, we recognized a preferred stock redemption charge of approximately $6.0 million for costs related to the issuance and redemption of our Series C Preferred Stock. This amount represents the excess of the fair value of the consideration transferred to the holders over the carrying amount of the preferred stock. The accumulated and unpaid dividends relating to the Series C Preferred Stock as of March 31, 2012, have been included in dividends payable in the accompanying condensed consolidated balance sheet. The Series C Preferred Stock was redeemed on April 13, 2012.
Real estate asset sales
Disposition |
|||||||||
Real Estate Asset Sales – Actual/Projected (in thousands) |
Amount |
||||||||
Sale of land parcel in March 2012 |
$ 31,360 |
||||||||
Assets held for sale at contract price |
16,000 |
(1) |
|||||||
Projected additional dispositions |
64,640 |
||||||||
Total projected 2012 dispositions |
$ 112,000 |
||||||||
(1) Amounts represent aggregate contract sales price. Net assets of these properties were approximately $14.5 million as of March 31, 2012. |
Sale of land parcel
In March 2012, we contributed our 55% ownership interest in a land parcel aggregating 414,000 developable square feet in the Longwood Medical Area into a newly formed joint venture (the "Restated JV") with National Development, Charles River Realty Investors, and a newly admitted member, Clarion Partners, LLC, resulting in a reduction of our ownership interest from 55% to 27.5%. In connection with the sale of 27.5% 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. Our 27.5% share of the land was valued at approximately $31 million (including closing costs), or approximately $275 per developable square foot. Upon formation of the Restated JV, the existing $38.4 million non-recourse secured loan was refinanced with a seven-year (including two one-year extension options) non-recourse $213 million construction loan with initial loan proceeds of $50 million. We do not expect 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 is expected to commence early in the second quarter of 2012 and the project is 37% pre-leased to Dana-Farber Cancer Institute, Inc. In addition, we expect to earn development and other fees of approximately $3.5 million through 2015, and recurring annual property management fees thereafter.
Assets held for sale
As of March 31, 2012, we had three properties classified as "held for sale" at an aggregate contract price of $16 million with an aggregate net book value of approximately $14.5 million.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
First Quarter Ended March 31, 2012, Financial and Operating Results
(Unaudited)
Investment grade ratings and key credit metrics
In July 2011, we received investment grade ratings from two major rating agencies. Receipt of our investment grade ratings was a significant milestone for the Company that we believe will provide long-term value to our stockholders. Key strengths of our balance sheet and business which highlight our investment grade credit profile include, among others, balance sheet liquidity, diverse and credit worthy tenant base, well located properties proximate to leading research institutions, favorable lease terms, stable occupancy and cash flows, and demonstrated life science and real estate expertise. This significant milestone broadens our access to another key source of debt capital and allows us to continue to pursue our long-term capital, investment, and operating strategies. The issuance of investment grade unsecured senior notes payable has allowed us to begin the transition from bank debt financing to unsecured senior notes payable, from variable rate debt to fixed rate debt, and from short-term debt to long-term debt. While this transition of bank debt is in process, we will utilize interest rate swap agreements to reduce our interest rate risk. We expect to keep our unhedged variable rate debt at less than 20% of our total debt.
Three Months Ended |
|||||||||
Key Credit Metrics |
March 31, 2012 |
December 31, 2011 |
March 31, 2011 |
||||||
Net debt to Adjusted EBITDA |
7.1x |
7.1x |
7.0x |
||||||
Net debt to gross assets (1) |
36% |
37% |
39% |
||||||
Fixed charge coverage ratio |
2.6x |
2.7x |
2.7x |
||||||
Interest coverage ratio |
3.3x |
3.4x |
3.4x |
||||||
Unencumbered net operating income as a percentage of total NOI |
72% |
70% |
65% |
||||||
Liquidity – unsecured senior line of credit availability and unrestricted cash (1) |
$1.4 billion |
$1.2 billion |
$0.9 billion |
||||||
Non-income-producing assets as a percentage of gross real estate (1) |
25% |
24% |
26% |
||||||
Unhedged variable rate debt as a percentage of total debt (1) |
5% |
21% |
46% |
||||||
(1) At the end of the period. |
CORE OPERATING METRICS
Total revenues, net operating income, and operating margins
Total revenues for the three months ended March 31, 2012, were $145.0 million, as compared to total revenues for the three months ended December 31, 2011, of $145.8 million, and total revenues for the three months ended March 31, 2011, of $139.9 million. NOI for the three months ended March 31, 2012, was $101.6 million, compared to NOI for the three months ended December 31, 2011, of $101.8 million, and NOI for the three months ended March 31, 2011, of $98.9 million. The operating margins for the three months ended March 31, 2012, were 70%, compared to the operating margins for the three months ended December 31, 2011, of 70%, and the operating margins for the three months ended March 31, 2011, of 71%.
Three Months Ended |
|||||||||
Total Revenues, Net Operating Income, and Operating Margins (dollars in thousands) |
March 31, 2012 |
December 31, 2011 |
March 31, 2011 |
||||||
Rental revenues |
$ 107,785 |
$ 109,042 |
$ 106,253 |
||||||
Tenant recoveries |
34,552 |
35,153 |
32,890 |
||||||
Other income |
2,629 |
1,584 |
777 |
||||||
Total revenues |
144,966 |
145,779 |
139,920 |
||||||
Rental operating expenses |
43,410 |
43,959 |
41,061 |
||||||
Net operating income |
$ 101,556 |
$ 101,820 |
$ 98,859 |
||||||
Operating margins |
70% |
70% |
71% |
Strong demand in key cluster submarkets drives solid leasing activity
For the three months ended March 31, 2012, we executed a total of 63 leases for approximately 912,000 rentable square feet at 45 different properties (excluding month-to-month leases). Of this total, approximately 275,000 rentable square feet related to new or renewal leases of previously leased space (renewed/re-leased space) and approximately 637,000 rentable square feet related to developed, redeveloped, or previously vacant space. Of the 637,000 rentable square feet, approximately 394,000 rentable square feet related to our development or redevelopment programs, with the remaining approximately 243,000 rentable square feet related to previously vacant space. Rental rates for these new or renewal leases of previously leased space (renewed/re-leased space) were on average approximately 2.8% lower on a cash basis and approximately 3.3% higher on a U.S generally accepted accounting principles ("GAAP") basis than rental rates for the respective expiring leases.
Key life science space leasing:
- leased 154,000 rentable square feet of a multi-tenant development to Dana-Farber Cancer Institute, Inc. in the Greater Boston market
- leased 171,000 rentable square feet build-to-suit development to Onyx Pharmaceuticals, Inc. in the San Francisco Bay market
- leased 100,000 rentable square feet building to the Hamner Institute in the Research Triangle Park market
- leased 23,000 rentable square feet development expansion to Illumina, Inc. in the San Diego market
Three Months Ended |
|||||||||
Leasing Activity (rentable square feet) |
March 31, 2012 |
December 31, 2011 |
March 31, 2011 |
||||||
New or renewal of previously leased space |
274,529 |
650,163 |
333,411 |
||||||
Development/redevelopment space leased |
394,216 |
355,641 |
76,235 |
||||||
Previously vacant space leased |
243,181 |
136,251 |
141,976 |
||||||
Total leasing activity |
911,926 |
1,142,055 |
551,622 |
Three Months Ended |
|||||||||
Leasing Activity – New or Renewal of Previously Leased Space |
March 31, 2012 (1) |
December 31, 2011 |
March 31, 2011 |
||||||
Rental rate changes – cash basis |
(2.8%) |
(4.1%) |
0.8% |
||||||
Rental rate changes – GAAP basis |
3.3% |
7.6% |
1.6% |
||||||
(1) Importantly, excluding one lease for 18,000 rentable square feet related to one tenant in the Sorrento Valley submarket in San Diego, rental rates for renewed/re-leased space were on average 7.6% and 1.1% higher than rental rates for expiring leases on a GAAP and cash basis, respectively. |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
First Quarter Ended March 31, 2012, Financial and Operating Results
(Unaudited)
Strong demand in key cluster submarkets drives solid leasing activity (continued)
Lease Structure |
March 31, 2012 |
December 31, 2011 |
March 31, 2011 |
||||||
Percentage of triple net leases |
95% |
95% |
95% |
||||||
Percentage of leases containing annual rent escalations |
94% |
94% |
91% |
||||||
Percentage of leases providing for the recapture of capital expenditures |
92% |
92% |
92% |
Same property performance
Three Months Ended |
|||||||||
Percentage Change in Same Property NOI |
March 31, 2012 |
December 31, 2011 |
March 31, 2011 |
||||||
Cash basis |
1.7% |
3.1% |
5.8% |
||||||
GAAP basis |
(0.7%) |
(0.5%) |
0.3% |
Three Months Ended |
|||||||||
Same Property Information |
March 31, 2012 |
December 31, 2011 |
March 31, 2011 |
||||||
Number of properties |
141 |
135 |
132 |
||||||
Rentable square feet |
10,633,723 |
10,097,201 |
9,795,060 |
||||||
Occupancy at end of current period |
93.9% |
93.9% |
94.4% |
||||||
Occupancy at end of same period prior year |
94.0% |
93.9% |
94.1% |
Stable occupancy percentage
Occupancy Percentage |
March 31, 2012 |
December 31, 2011 |
March 31, 2011 |
||||||
Operating |
94.2% |
94.9% |
94.2% |
||||||
Operating and redevelopment |
87.9% |
88.5% |
88.6% |
Client tenant base
The quality, diversity, breadth, and depth of our significant relationships with our life science client tenants provide the Company with solid cash flows. As of March 31, 2012, our multinational pharmaceutical client tenants represented approximately 26% of our annualized base rent, led by Novartis AG, Eli Lilly and Company, Roche Holding Ltd, Bristol-Myers Squibb Company, GlaxoSmithKline plc, and Pfizer Inc.; public biotechnology companies represented approximately 17% and included Amgen Inc., Gilead Sciences, Inc., Biogen Idec Inc., and Celgene Corporation; revenue-producing life science product and service, medical device, and clean technology companies represented approximately 22%, led by Illumina, Inc., Quest Diagnostics Incorporated, Qiagen N.V., Laboratory Corporation of America Holdings, and Monsanto Company; non-profit, renowned medical and research institutions, and government agencies represented approximately 17% and included Massachusetts Institute of Technology, The Scripps Research Institute, The Regents of the University of California, Fred Hutchinson Cancer Research Center, University of Washington, Sanford-Burnham Medical Research Institute, and the United States Government; private biotechnology companies represented approximately 15% and included high-quality, leading-edge companies with blue-chip venture and institutional investors, including FibroGen, Inc., Achaogen Inc., and FORMA Therapeutics, Inc.; and the remaining approximately 3% consisted of traditional office tenants. Alexandria's strong life science underwriting skills, long-term life science industry relationships, and sophisticated management with both real estate and life science operating expertise positively distinguishes the Company from all other publicly traded real estate investment trusts ("REITs") and real estate companies.
VALUE-ADDED OPPORTUNITIES AND EXTERNAL GROWTH
Development and redevelopment
During the three months ended March 31, 2012, we executed leases aggregating 353,940 and 40,276 rentable square feet related to our development and redevelopment projects, respectively.
In January 2012, we commenced a 100% pre-leased ground-up development of a 170,618 rentable square feet single tenant building at 259 East Grand Avenue in the San Francisco Bay market. Stabilized yield on cost is calculated as the quotient of net operating income and our investment in the property at stabilization ("Stabilized Yield"). This project is 100% pre-leased to Onyx Pharmaceuticals Inc. and we expect to achieve a Stabilized Yield on both a cash and GAAP basis for this property in the range from 7.8% to 8.2%. Funding for this property is expected to be provided by a construction loan and borrowings under our unsecured senior line of credit. We expect to close the construction loan in the second quarter of 2012.
In March 2012, we executed a 154,000 rentable square foot lease with Dana-Farber Cancer Institute, Inc. for 37% of our 414,000 rentable square foot joint venture development project located in the Longwood Medical Area of the Greater Boston market. Funding for this project is expected to be primarily provided by capital from our recently admitted joint venture partner and a non-recourse construction loan. Additionally, our share of the funding is expected to be less than the $22.3 million distribution we received upon admittance of the new partner and refinancing of the project. See Sale of Land Parcel on page 4 for additional information.
Acquisitions
In February 2012, we acquired 6 Davis Drive, a 100,000 rentable square foot life science laboratory building located in the Research Triangle Park market, for approximately $20 million. The building is 100% leased to a non-profit research institute. The property also includes opportunities to develop at least three additional build-to-suit or multi-tenant buildings aggregating at least an additional 450,000 rentable square feet in an excellent location. We expect to achieve a Stabilized Yield on a cash and GAAP basis for the operating property of approximately 8.4% and 8.9%, respectively. These yields assume a purchase price allocation of $11.8 million to the 100,000 rentable square foot operating property and $8.3 million to the land for future additional buildings.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
First Quarter Ended March 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 our FFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted and earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted for the year ended December 31, 2012, will be as follows (amounts per share):
Guidance for the Year Ended December 31, 2012 |
Reported on May 1, 2012 |
Reported on February 22, 2012 |
|||
Earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted |
$1.36 - $1.46 |
$1.59 - $1.63 |
|||
Add: Depreciation and amortization |
$2.84 - $2.90 |
− (A) |
|||
Subtract: Gain on sales of property |
$ (0.03) |
− (A) |
|||
(Subtract) Add: Other |
− |
− (A) |
|||
FFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted |
$4.23 - $4.27 |
$4.36 - $4.40 |
|||
... 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 |
− |
|||
... Preferred stock redemption charge |
$0.10 |
− |
|||
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 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 |
|||
... General and administrative expenses in comparison to prior year |
Up 12% to 14% |
Up 5% to 8% |
|||
... Capitalization of interest |
$55.5 to $61.5 million |
$57 to $63 million |
|||
... Interest expense, net |
$73 to $79 million |
$75 to $81 million |
|||
... Write-off of unamortized loan fees upon early retirement of the 2012 Unsecured Senior Bank Term Loan |
$0.6 million |
$0.6 million |
|||
... Write-off of loan fees upon modification of unsecured senior line of credit |
$1.6 million |
– |
|||
... Preferred stock redemption charge |
$6 million |
– |
A) Ranges for depreciation and amortization, gain on sales of property, and other were not disclosed on February 22, 2012.
Projected interest expense, net and related capitalized interest for the year ended December 31, 2012 is expected to decrease from our prior guidance reported on February 22, 2012, by approximately $2.0 million and $1.5 million, respectively, primarily due to the amendment of our $1.5 billion unsecured senior line of credit, which among other changes, reduced the Applicable Margin for LIBOR borrowings under the unsecured senior line of credit to 1.2%, down from 2.4% in effect immediately prior to the amendment. We expect general and administrative expenses for the year ended December 31, 2012, to increase from 12% to 14% over the year ended December 31, 2011 compared to our prior guidance of up 5% to 8%. The increase is primarily due to the timing of hiring additional employees related to the growth in both the depth and breadth of our operations in multiple markets, and other compensation-related expenses. Since December 31, 2011, our number of employees has increased by approximately 6%. As a percentage of total revenues, we expect general and administrative expenses for the year ended December 31, 2012 to be consistent with the year ended December 31, 2011, at approximately 7% to 8% of total revenues.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
First Quarter Ended March 31, 2012, Financial and Operating Results
(Unaudited)
Net operating income, net income, and FFO for the three months ended December 31, 2012
As of March 31, 2012, we had seven ground-up development projects in process aggregating approximately 986,828 rentable square feet. We also had eleven projects undergoing conversion into laboratory space through redevelopment aggregating approximately 910,139 rentable square feet. These projects along with recently delivered projects, certain future projects, and contribution 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 significantly quarter to quarter to a range from $111 million to $113 million for the three months ended December 31, 2012. Operating performance assumptions related to the completion of our development and redevelopment projects, including the timing of initial occupancy, stabilization dates, and stabilization yields are included on page 16. Certain key assumptions regarding our projection, 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 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Forward-looking statements, and Item 1A. Risk Factors, of this annual report on Form 10-K. 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 May 1, 2012 |
Reported on February 22, 2012 |
|||
Net operating income |
$111.0 – $113.0 |
$111.0 - $113.0 |
|||
General and administrative |
$11.0 - $12.0 |
$10.0 - $11.0 |
|||
Interest |
$20.0 - $23.0 |
$21.0 - $24.0 |
|||
Depreciation and amortization |
$42.6 - $47.7 |
$42.6 - $47.7 |
|||
Preferred stock dividends |
$6.5 |
$7.1 |
|||
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 cash equivalents was approximately $1.4 billion as of March 31, 2012.
Reported on May 1, 2012 (1) |
Reported on |
|||||||||
Guidance for the Year Ended December 31, 2012 (in millions) |
Completed |
Projected |
Total |
Total |
||||||
Sources of capital |
||||||||||
Net cash provided by operating activities less dividends |
$ 12 |
$ 64 |
$ 76 |
(2) |
$ 76 |
|||||
Asset and land sales |
31 |
81 |
112 |
(3) |
112 |
|||||
Unsecured senior notes payable |
550 |
− |
550 |
500 |
||||||
Secured construction financing |
− |
24 |
24 |
24 |
||||||
Series E Preferred Stock issuance |
125 |
− |
125 |
– |
||||||
Debt, equity, and joint venture capital |
(84) |
(4) |
331 |
(5) |
247 |
(6) |
238 |
|||
Total sources of capital |
$ 634 |
$ 500 |
$ 1,134 |
$ 950 |
||||||
Uses of capital |
||||||||||
Development, redevelopment, and construction |
$ 130 |
$ 482 |
$ 612 |
(7) |
$ 584 |
|||||
Acquisitions |
36 |
10 |
46 |
20 |
||||||
Secured debt repayments |
3 |
8 |
11 |
(8) |
11 |
|||||
2012 Unsecured Senior Bank Term Loan repayment |
250 |
− |
250 |
(8) |
250 |
|||||
3.70% Unsecured Senior Convertible Notes repurchase |
85 |
− |
85 |
(8) |
85 |
|||||
Series C Preferred Stock Redemption |
130 |
− |
130 |
(8) |
– |
|||||
Total uses of capital |
$ 634 |
$ 500 |
$ 1,134 |
$ 950 |
||||||
(1) Includes actuals through March 31, 2012, and projections through December 31, 2012. |
||||||||||
(2) See table of "Key Assumptions" on the preceding page. |
||||||||||
(3) Represents an estimate of sources of capital from asset and land sales, including sale of land parcel for $31 million in March 2012, properties "held for sale" as of March 31, 2012, with a contract price of approximately $16 million, and projected additional dispositions of approximately $65 million. Also, see table of "Key assumptions" on the preceding page. |
||||||||||
(4) Represents additional amounts used to pay down outstanding borrowings on our unsecured senior line of credit. |
||||||||||
(5) Includes $129.6 million of borrowings under our $1.5 billion unsecured senior line of credit on April 13, 2012, related to the redemption of our 8.375% Series C Preferred Stock. (6) Represents an estimate of sources of capital from debt, equity, and joint ventures in order to fund our projected uses of capital. |
||||||||||
(7) See "Cost to Complete" columns in the tables related to construction in progress (page 16) for additional details underlying this estimate. |
||||||||||
(8) Based upon contractually scheduled payments or maturity dates. |
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 and 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 in Part I under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors," of our annual report on Form 10-K for the year ended December 31, 2011. We expect to update our forecast of sources and uses of capital on a quarterly basis.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
First Quarter Ended March 31, 2012, Financial and Operating Results
EARNINGS CALL INFORMATION
We will host a conference call on Wednesday, May 2, 2012, at 3:00 p.m. Eastern Time ("ET")/12:00 p.m. noon Pacific Time ("PT") that is open to the general public to discuss our financial and operating results for the three months ended March 31, 2012. To participate in this conference call, dial (800) 901-5241 or (617) 786-2963 and confirmation code 67381735, 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 5:00 p.m. ET/2:00 p.m. PT on Wednesday, May 2, 2012. The replay number is (888) 286-8010 or (617) 801-6888 and the confirmation code is 58254800.
Additionally, a copy of this Press Release and Supplemental Information for the three months ended March 31, 2012, are available in the For Investors section of our website at www.are.com.
About the Company
Alexandria Real Estate Equities, Inc., a self-administered and self-managed REIT, is the largest owner and preeminent REIT, and leading life science real estate company focused principally on science-driven cluster formation through the ownership, operation, management, selective acquisition, development, and redevelopment of properties containing life science laboratory space. Alexandria is the leading provider of high-quality, environmentally sustainable real estate, technical infrastructure, and services to the broad and diverse life science industry. Client tenants include institutional (universities and independent non-profit institutions), pharmaceutical, biotechnology, product and service entities, clean-technology, medical device, and government agencies. Our primary business objective is to maximize stockholder value by providing our stockholders with the greatest possible total return based on a multifaceted platform of internal and external growth. Our operating platform is based on the principle of "clustering," with assets and operations located adjacent to life science entities, driving growth and technological advances within each cluster.
***********
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 2012 earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders − diluted, 2012 FFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders − diluted, net operating income, and net income, for the year ended December 31, 2012, and our projected sources and uses of capital in 2012. Our actual results may differ materially from those projected in such 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 tenants, general and local economic conditions, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission ("SEC"). All forward-looking statements are made as of the date of this press release, and we assume no obligation to update this information. 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 and per square foot amounts)
(Unaudited)
Three Months Ended |
|||||||||||||||
3/31/12 |
12/31/11 |
9/30/11 |
6/30/11 |
3/31/11 |
|||||||||||
Revenues |
|||||||||||||||
Rental |
$ 107,785 |
$ 109,042 |
$ 106,614 |
$ 109,450 |
$ 106,253 |
||||||||||
Tenant recoveries |
34,552 |
35,153 |
35,104 |
33,175 |
32,890 |
||||||||||
Other income |
2,629 |
1,584 |
2,475 |
926 |
777 |
||||||||||
Total revenues |
144,966 |
145,779 |
144,193 |
143,551 |
139,920 |
||||||||||
Expenses |
|||||||||||||||
Rental operations |
43,410 |
43,959 |
42,986 |
40,621 |
41,061 |
||||||||||
General and administrative |
10,361 |
10,604 |
10,297 |
10,765 |
9,497 |
||||||||||
Interest |
16,227 |
14,757 |
14,273 |
16,567 |
17,810 |
||||||||||
Depreciation and amortization |
43,405 |
40,885 |
39,848 |
40,211 |
36,582 |
||||||||||
Total expenses |
113,403 |
110,205 |
107,404 |
108,164 |
104,950 |
||||||||||
Income from continuing operations before loss on early extinguishment of debt |
31,563 |
35,574 |
36,789 |
35,387 |
34,970 |
||||||||||
Loss on early extinguishment of debt |
(623) |
− |
(2,742) |
(1,248) |
(2,495) |
||||||||||
Income from continuing operations |
30,940 |
35,574 |
34,047 |
34,139 |
32,475 |
||||||||||
(Loss) income from discontinued operations, net |
(29) |
(112) |
(1,098) |
172 |
150 |
||||||||||
Gain on sale of land parcel |
1,864 |
− |
46 |
− |
− |
||||||||||
Net income |
32,775 |
35,462 |
32,995 |
34,311 |
32,625 |
||||||||||
Net income attributable to noncontrolling interests |
711 |
1,142 |
966 |
938 |
929 |
||||||||||
Dividends on preferred stock |
7,483 |
7,090 |
7,089 |
7,089 |
7,089 |
||||||||||
Preferred stock redemption charge |
5,978 |
− |
− |
− |
− |
||||||||||
Net income attributable to unvested restricted stock awards |
235 |
270 |
278 |
298 |
242 |
||||||||||
Net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders |
$ 18,368 |
$ 26,960 |
$ 24,662 |
$ 25,986 |
$ 24,365 |
||||||||||
Earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic |
|||||||||||||||
Continuing operations |
$ 0.30 |
$ 0.44 |
$ 0.42 |
$ 0.44 |
$ 0.44 |
||||||||||
Discontinued operations, net |
− |
− |
(0.02) |
− |
− |
||||||||||
Earnings per share – basic |
$ 0.30 |
$ 0.44 |
$ 0.40 |
$ 0.44 |
$ 0.44 |
||||||||||
Earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted |
|||||||||||||||
Continuing operations |
$ 0.30 |
$ 0.44 |
$ 0.42 |
$ 0.44 |
$ 0.44 |
||||||||||
Discontinued operations, net |
− |
− |
(0.02) |
− |
− |
||||||||||
Earnings per share – diluted |
$ 0.30 |
$ 0.44 |
$ 0.40 |
$ 0.44 |
$ 0.44 |
||||||||||
Net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic and diluted |
$ 18,368 |
$ 26,960 |
$ 24,662 |
$ 25,986 |
$ 24,365 |
||||||||||
Weighted average shares of common stock outstanding for calculating earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic |
61,507,807 |
61,427,495 |
61,295,659 |
58,500,055 |
54,948,345 |
||||||||||
Dilutive effect of stock options |
1,160 |
3,939 |
8,310 |
13,067 |
19,410 |
||||||||||
Weighted average shares of common stock outstanding for calculating earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted |
61,508,967 |
61,431,434 |
61,303,969 |
58,513,122 |
54,967,755 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
|||||||
2012 |
2011 |
2011 |
2011 |
2011 |
|||||||
Assets |
|||||||||||
Investments in real estate |
$6,892,429 |
$ 6,750,975 |
$ 6,635,872 |
$6,534,433 |
$6,145,499 |
||||||
Less: accumulated depreciation |
(779,177) |
(742,535) |
(710,580) |
(679,081) |
(647,034) |
||||||
Investments in real estate, net |
6,113,252 |
6,008,440 |
5,925,292 |
5,855,352 |
5,498,465 |
||||||
Cash and cash equivalents |
77,361 |
78,539 |
73,056 |
60,925 |
78,196 |
||||||
Restricted cash |
39,803 |
23,332 |
27,929 |
23,432 |
30,513 |
||||||
Tenant receivables |
8,836 |
7,480 |
6,599 |
4,487 |
7,018 |
||||||
Deferred rent |
150,515 |
142,097 |
132,954 |
125,867 |
123,091 |
||||||
Deferred leasing and financing costs, net |
143,754 |
135,550 |
134,366 |
130,147 |
111,315 |
||||||
Investments |
98,152 |
95,777 |
88,777 |
88,862 |
88,694 |
||||||
Other assets |
86,418 |
82,914 |
66,583 |
54,212 |
46,051 |
||||||
Total assets |
$6,718,091 |
$ 6,574,129 |
$ 6,455,556 |
$6,343,284 |
$5,983,343 |
||||||
Liabilities, Noncontrolling Interests, and Equity |
|||||||||||
Secured notes payable |
$ 721,715 |
$ 724,305 |
$ 760,882 |
$ 774,691 |
$ 787,945 |
||||||
Unsecured senior notes payable |
549,536 |
− |
− |
− |
− |
||||||
Unsecured senior line of credit |
167,000 |
370,000 |
814,000 |
575,000 |
679,000 |
||||||
Unsecured senior bank term loans |
1,350,000 |
1,600,000 |
1,000,000 |
1,000,000 |
1,000,000 |
||||||
Unsecured senior convertible notes |
1,236 |
84,959 |
84,484 |
203,638 |
202,521 |
||||||
Accounts payable, accrued expenses, and tenant security deposits |
323,002 |
325,393 |
330,044 |
300,030 |
283,013 |
||||||
Dividends payable |
36,962 |
36,579 |
35,287 |
34,068 |
31,172 |
||||||
Preferred stock redemption liability |
129,638 |
− |
− |
− |
− |
||||||
Total liabilities |
3,279,089 |
3,141,236 |
3,024,697 |
2,887,427 |
2,983,651 |
||||||
Redeemable noncontrolling interests |
15,819 |
16,034 |
15,931 |
15,899 |
15,915 |
||||||
Alexandria Real Estate Equities, Inc.'s stockholders' equity: |
|||||||||||
Series C Preferred Stock |
− |
129,638 |
129,638 |
129,638 |
129,638 |
||||||
Series D Convertible Preferred Stock |
250,000 |
250,000 |
250,000 |
250,000 |
250,000 |
||||||
Series E Preferred Stock |
130,000 |
− |
− |
− |
− |
||||||
Common stock |
616 |
616 |
614 |
614 |
551 |
||||||
Additional paid-in capital |
3,022,242 |
3,028,558 |
3,025,444 |
3,024,603 |
2,568,976 |
||||||
Retained earnings |
− |
− |
− |
− |
360 |
||||||
Accumulated other comprehensive loss |
(23,088) |
(34,511) |
(32,202) |
(6,272) |
(7,193) |
||||||
Alexandria Real Estate Equities, Inc.'s stockholders' equity |
3,379,770 |
3,374,301 |
3,373,494 |
3,398,583 |
2,942,332 |
||||||
Noncontrolling interests |
43,413 |
42,558 |
41,434 |
41,375 |
41,445 |
||||||
Total equity |
3,423,183 |
3,416,859 |
3,414,928 |
3,439,958 |
2,983,777 |
||||||
Total liabilities, noncontrolling interests, and equity |
$6,718,091 |
$ 6,574,129 |
$ 6,455,556 |
$6,343,284 |
$5,983,343 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Funds from Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Funds from operations
The following table presents a reconciliation of net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders, the most directly comparable financial measure calculated and presented in accordance with GAAP, to FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders for the periods below:
Three Months Ended (1) |
|||||||||||||||
3/31/12 |
12/31/11 |
9/30/11 |
6/30/11 |
3/31/11 |
|||||||||||
Net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders |
$ 18,368 |
$ 26,960 |
$ 24,662 |
$ 25,986 |
$ 24,365 |
||||||||||
Add: Depreciation and amortization |
43,405 |
40,966 |
39,990 |
40,363 |
36,707 |
||||||||||
Add: Net income attributable to noncontrolling interests |
711 |
1,142 |
966 |
938 |
929 |
||||||||||
Add: Net income attributable to unvested restricted stock awards |
235 |
270 |
278 |
298 |
242 |
||||||||||
Add: Impairment of real estate |
− |
− |
994 |
− |
− |
||||||||||
Subtract: Gain on sale of land parcel |
(1,864) |
− |
(46) |
− |
− |
||||||||||
Subtract: FFO attributable to noncontrolling interests |
(684) |
(939) |
(933) |
(1,033) |
(1,065) |
||||||||||
Subtract: FFO attributable to unvested restricted stock awards |
(472) |
(600) |
(647) |
(638) |
(547) |
||||||||||
FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic |
59,699 |
67,799 |
65,264 |
65,914 |
60,631 |
||||||||||
Effect of assumed conversion and dilutive securities: |
|||||||||||||||
Assumed conversion of 8.00% Unsecured Senior Convertible Notes |
5 |
5 |
4 |
7 |
5 |
||||||||||
FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted |
$ 59,704 |
$ 67,804 |
$ 65,268 |
$ 65,921 |
$ 60,636 |
||||||||||
Weighted average shares of common stock outstanding for calculating FFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic |
61,507,807 |
61,427,495 |
61,295,659 |
58,500,055 |
54,948,345 |
||||||||||
Effect of assumed conversion and dilutive securities: |
|||||||||||||||
Assumed conversion of 8.00% Unsecured Senior Convertible Notes |
6,087 |
6,087 |
6,047 |
6,047 |
6,047 |
||||||||||
Dilutive effect of stock options |
1,160 |
3,939 |
8,310 |
13,067 |
19,410 |
||||||||||
Weighted average shares of common stock outstanding for calculating FFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted |
61,515,054 |
61,437,521 |
61,310,016 |
58,519,169 |
54,973,802 |
||||||||||
FFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders |
|||||||||||||||
Basic |
$ 0.97 |
$ 1.10 |
$ 1.06 |
$ 1.13 |
$ 1.10 |
||||||||||
Diluted |
$ 0.97 |
$ 1.10 |
$ 1.06 |
$ 1.13 |
$ 1.10 |
||||||||||
(1) See FFO on page 2 for additional information on significant items impacting comparability of results. |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Adjusted Funds from Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Adjusted funds from operations
The following table presents a reconciliation of FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders to AFFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders:
Three Months Ended |
|||||||||||||||
3/31/12 |
12/31/11 |
9/30/11 |
6/30/11 |
3/31/11 |
|||||||||||
FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders − basic |
$ 59,699 |
$ 67,799 |
$ 65,264 |
$ 65,914 |
$ 60,631 |
||||||||||
Add/(deduct): |
|||||||||||||||
Non-incremental revenue generating capital expenditures |
|||||||||||||||
Building improvements |
(210) |
(675) |
(550) |
(698) |
(608) |
||||||||||
Tenant improvements and leasing commissions |
(2,019) |
(6,083) |
(2,119) |
(1,595) |
(803) |
||||||||||
Amortization of loan fees |
2,643 |
2,551 |
2,144 |
2,327 |
2,278 |
||||||||||
Amortization of debt premiums/discounts |
179 |
565 |
750 |
1,169 |
1,335 |
||||||||||
Amortization of acquired above and below market leases |
(800) |
(812) |
(940) |
(2,726) |
(4,854) |
||||||||||
Deferred rent/straight-line rent |
(8,796) |
(9,558) |
(7,647) |
(2,885) |
(6,707) |
||||||||||
Stock compensation |
3,293 |
3,306 |
3,344 |
2,749 |
2,356 |
||||||||||
Capitalized income from development projects |
478 |
537 |
930 |
1,078 |
1,428 |
||||||||||
Deferred rent/straight-line rent on ground leases |
1,406 |
1,221 |
1,143 |
1,099 |
1,241 |
||||||||||
Loss on early extinguishment of debt |
623 |
− |
2,742 |
1,248 |
2,495 |
||||||||||
Preferred stock redemption charge |
5,978 |
− |
− |
− |
− |
||||||||||
Allocation to unvested restricted stock awards |
(22) |
79 |
(7) |
(14) |
16 |
||||||||||
AFFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders - diluted |
$ 62,452 |
$ 58,930 |
$ 65,054 |
$ 67,666 |
$ 58,808 |
||||||||||
Weighted average shares of common stock outstanding for calculating AFFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic |
61,507,807 |
61,427,495 |
61,295,659 |
58,500,055 |
54,948,345 |
||||||||||
Add: Dilutive effect of stock options |
1,160 |
3,939 |
8,310 |
13,067 |
19,410 |
||||||||||
Weighted average shares of common stock outstanding for calculating AFFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted |
61,508,967 |
61,431,434 |
61,303,969 |
58,513,122 |
54,967,755 |
||||||||||
AFFO per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders |
|||||||||||||||
Basic |
$ 1.02 |
$ 0.96 |
$ 1.06 |
$ 1.16 |
$ 1.07 |
||||||||||
Diluted |
$ 1.02 |
$ 0.96 |
$ 1.06 |
$ 1.16 |
$ 1.07 |
||||||||||
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Financial and Asset Base Highlights
(Dollars in thousands, except per share and per square foot amounts)
(Unaudited)
Three Months Ended |
|||||||||||
Operating data |
3/31/12 |
12/31/11 |
9/30/11 |
6/30/11 |
3/31/11 |
||||||
Total revenues |
$ 144,966 |
$ 145,779 |
$ 144,193 |
$ 143,551 |
$ 139,920 |
||||||
Deferred rent/straight-line rent |
$ 8,796 |
$ 9,558 |
$ 7,647 |
$ 2,885 |
$ 6,707 |
||||||
Amortization of acquired above and below market leases |
$ 800 |
$ 812 |
$ 940 |
$ 2,726 |
$ 4,854 |
||||||
Operating margins |
70% |
70% |
70% |
72% |
71% |
||||||
General and administrative expense as a percentage of total revenues |
7.1% |
7.3% |
7.1% |
7.5% |
6.8% |
||||||
Adjusted EBITDA margin |
65% |
65% |
65% |
66% |
66% |
||||||
Adjusted EBITDA – quarter annualized |
$ 377,836 |
$ 377,964 |
$ 377,168 |
$ 380,968 |
$ 368,100 |
||||||
Adjusted EBITDA – trailing 12 months |
$ 378,484 |
$ 376,050 |
$ 370,998 |
$ 359,247 |
$ 345,055 |
||||||
Capitalized interest |
$ 15,266 |
$ 16,151 |
$ 16,666 |
$ 15,046 |
$ 13,193 |
||||||
Weighted average interest rate used for capitalization during period |
4.29% |
4.35% |
4.54% |
4.60% |
4.57% |
||||||
Non-cash amortization of discount on secured and unsecured notes |
$ 179 |
$ 565 |
$ 750 |
$ 1,169 |
$ 1,335 |
||||||
Loss on early extinguishment of debt |
$ 623 |
$ − |
$ 2,742 |
$ 1,248 |
$ 2,495 |
||||||
Preferred stock redemption charge |
$ 5,978 |
$ − |
$ − |
$ − |
$ − |
||||||
Gain on sale of land parcels |
$ 1,864 |
$ − |
$ 46 |
$ − |
$ − |
||||||
Net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted |
$ 18,368 |
$ 26,960 |
$ 24,662 |
$ 25,986 |
$ 24,365 |
||||||
Weighted average common shares outstanding – EPS – diluted |
61,508,967 |
61,431,434 |
61,303,969 |
58,513,122 |
54,967,755 |
||||||
Earnings per share – diluted |
$ 0.30 |
$ 0.44 |
$ 0.40 |
$ 0.44 |
$ 0.44 |
||||||
FFO attributable to Alexandria Real Estate, Inc.'s common stockholders – diluted |
$ 59,704 |
$ 67,804 |
$ 65,268 |
$ 65,921 |
$ 60,636 |
||||||
Weighted average common shares outstanding – FFO – diluted |
61,515,054 |
61,437,521 |
61,310,016 |
58,519,169 |
54,973,802 |
||||||
FFO per share – diluted |
$ 0.97 |
$ 1.10 |
$ 1.06 |
$ 1.13 |
$ 1.10 |
||||||
Asset base statistics |
3/31/12 |
12/31/11 |
9/30/11 |
6/30/11 |
3/31/11 |
||||||
Number of properties at end of period |
174 |
173 |
171 |
171 |
168 |
||||||
Rentable square feet at end of period |
15,538,237 |
15,302,774 |
14,868,018 |
14,144,763 |
13,699,649 |
||||||
Occupancy of operating properties at end of period |
94.2% |
94.9% |
94.6% |
93.8% |
94.2% |
||||||
Occupancy including redevelopment properties at end of period |
87.9% |
88.5% |
89.3% |
88.3% |
88.6% |
||||||
Annualized base rent per leased rentable square foot |
$ 34.17 |
$ 34.39 |
$ 34.39 |
$ 34.06 |
$ 33.90 |
||||||
Leasing activity – YTD rentable square feet |
911,926 |
3,407,476 |
2,265,421 |
1,280,084 |
551,622 |
||||||
Leasing activity – Qtr rentable square feet |
911,926 |
1,142,055 |
985,337 |
728,462 |
551,622 |
||||||
Leasing activity – YTD percentage change in rental rates – GAAP basis |
3.3% |
4.2% |
2.5% |
2.4% |
1.6% |
||||||
Leasing activity – Qtr percentage change in rental rates – GAAP basis |
3.3% |
7.6% |
2.8% |
3.1% |
1.6% |
||||||
Leasing activity – YTD percentage change in rental rates – cash basis |
(2.8%) |
(1.9%) |
(0.7%) |
1.0% |
0.8% |
||||||
Leasing activity – Qtr percentage change in rental rates – cash basis |
(2.8%) |
(4.1%) |
(3.0%) |
1.5% |
0.8% |
||||||
Same property – YTD percentage change in net operating income – GAAP basis |
(0.7%) |
(0.6%) |
0.2% |
0.5% |
0.3% |
||||||
Same property – Qtr percentage change in net operating income – GAAP basis |
(0.7%) |
(0.5%) |
(0.2%) |
1.7% |
0.3% |
||||||
Same property – YTD percentage change in net operating income – cash basis |
1.7% |
4.1% |
5.5% |
6.5% |
5.8% |
||||||
Same property – Qtr percentage change in net operating income – cash basis |
1.7% |
3.1% |
4.8% |
9.4% |
5.8% |
||||||
Balance sheet data / credit metrics |
3/31/12 |
12/31/11 |
9/30/11 |
6/30/11 |
3/31/11 |
||||||
Investments in real estate |
$ 6,892,429 |
$ 6,750,975 |
$ 6,635,872 |
$ 6,534,433 |
$ 6,145,499 |
||||||
Accumulated depreciation |
$ (779,177) |
$ (742,535) |
$ (710,580) |
$ (679,081) |
$ (647,034) |
||||||
Investments in real estate, net |
$ 6,113,252 |
$ 6,008,440 |
$ 5,925,292 |
$ 5,855,352 |
$ 5,498,465 |
||||||
Tangible non-real estate assets |
$ 272,791 |
$ 249,884 |
$ 237,277 |
$ 210,113 |
$ 237,805 |
||||||
Total assets |
$ 6,718,091 |
$ 6,574,129 |
$ 6,455,556 |
$ 6,343,284 |
$5,983,343 |
||||||
Gross assets (excluding cash and restricted cash) |
$ 7,380,104 |
$ 7,214,793 |
$ 7,065,151 |
$ 6,938,008 |
$ 6,521,668 |
||||||
Secured notes payable |
$ 721,715 |
$ 724,305 |
$ 760,882 |
$ 774,691 |
$ 787,945 |
||||||
Unsecured senior notes payable |
$ 549,536 |
$ − |
$ − |
$ − |
$ − |
||||||
Unsecured senior line of credit |
$ 167,000 |
$ 370,000 |
$ 814,000 |
$ 575,000 |
$ 679,000 |
||||||
Unsecured senior bank term loans |
$ 1,350,000 |
$ 1,600,000 |
$ 1,000,000 |
$ 1,000,000 |
$ 1,000,000 |
||||||
Unsecured senior convertible notes |
$ 1,236 |
$ 84,959 |
$ 84,484 |
$ 203,638 |
$ 202,521 |
||||||
Total unsecured debt |
$ 2,067,772 |
$ 2,054,959 |
$ 1,898,484 |
$ 1,778,638 |
$ 1,881,521 |
||||||
Total debt |
$ 2,789,487 |
$ 2,779,264 |
$ 2,659,366 |
$ 2,553,329 |
$ 2,669,466 |
||||||
Net debt |
$ 2,672,323 |
$ 2,677,393 |
$ 2,558,381 |
$ 2,468,972 |
$ 2,560,757 |
||||||
Total liabilities |
$ 3,279,089 |
$ 3,141,236 |
$ 3,024,697 |
$ 2,887,427 |
$2,983,651 |
||||||
Common shares outstanding |
61,634,645 |
61,560,472 |
61,463,839 |
61,380,268 |
55,049,730 |
||||||
Total market capitalization |
$ 7,673,553 |
$ 7,412,402 |
$ 6,815,380 |
$7,689,383 |
$ 7,344,422 |
||||||
Financial, debt, and other ratios |
3/31/12 |
12/31/11 |
9/30/11 |
6/30/11 |
3/31/11 |
||||||
Unencumbered net operating income as a percentage of total net operating income |
72% |
70% |
67% |
63% |
65% |
||||||
Unencumbered assets gross book value |
$5,904,420 |
$ 5,715,357 |
$ 5,496,616 |
$ 5,342,433 |
$ 4,933,395 |
||||||
Unencumbered assets gross book value as a percentage of gross assets |
79% |
78% |
77% |
76% |
74% |
||||||
Percentage outstanding on unsecured senior line of credit at end of period |
11% |
25% |
54% |
38% |
45% |
||||||
Net debt to gross assets (excluding cash and restricted cash) at end of period |
36% |
37% |
36% |
36% |
39% |
||||||
Secured debt as a percentage of gross assets at end of period |
10% |
10% |
11% |
11% |
12% |
||||||
Net debt to Adjusted EBITDA – quarter annualized |
7.1x |
7.1x |
6.8x |
6.5x |
7.0x |
||||||
Net debt to Adjusted EBITDA – trailing 12 months |
7.1x |
7.1x |
6.9x |
6.9x |
7.4x |
||||||
Scheduled debt principal payments |
$ 2,688 |
$ 2,620 |
$ 2,826 |
$ 2,886 |
$ 2,990 |
||||||
Fixed charge coverage ratio – quarter annualized |
2.6x |
2.7x |
2.7x |
2.7x |
2.7x |
||||||
Fixed charge coverage ratio – trailing 12 months |
2.7x |
2.7x |
2.7x |
2.6x |
2.4x |
||||||
Interest coverage ratio – quarter annualized |
3.3x |
3.4x |
3.4x |
3.4x |
3.4x |
||||||
Interest coverage ratio – trailing 12 months |
3.4x |
3.4x |
3.3x |
3.2x |
3.0x |
||||||
Dividends per share declared on common stock |
$ 0.49 |
$ 0.49 |
$ 0.47 |
$ 0.45 |
$ 0.45 |
||||||
Dividend payout ratio (common stock) |
46% |
45% |
43% |
41% |
40% |
Alexandria Real Estate Equities, Inc.
Summary of Real Estate and Non-Income-Producing Real Estate Assets as a Percentage of Gross Investment in Real Estate
March 31, 2012
(Tabular dollar amounts in thousands, except per square foot amounts)
(Unaudited)
Summary of real estate |
||||||||||||
March 31, 2012 |
December 31, 2011 |
|||||||||||
Book Value |
Square Feet |
Cost per Square Foot |
Book Value |
Square Feet |
Cost per Square Foot |
|||||||
Land (related to rental properties) |
$ 506,136 |
$ 510,630 |
||||||||||
Buildings and building improvements |
4,473,337 |
4,417,093 |
||||||||||
Other improvements |
185,653 |
185,036 |
||||||||||
Rental properties |
5,165,126 |
13,641,270 |
$ 379 |
5,112,759 |
13,567,997 |
$ 377 |
||||||
Less: accumulated depreciation |
(779,177) |
(742,535) |
||||||||||
Rental properties, net |
4,385,949 |
4,370,224 |
||||||||||
Construction in progress ("CIP")/current value-added projects: |
||||||||||||
... Active development |
231,164 |
986,828 |
234 |
198,644 |
818,020 |
243 |
||||||
... Active redevelopment |
297,031 |
910,139 |
326 |
281,555 |
919,857 |
306 |
||||||
... Projects in India and China |
114,207 |
751,000 |
152 |
106,775 |
817,000 |
131 |
||||||
... Generic infrastructure/building improvement projects |
124,716 |
− |
− |
92,338 |
− |
− |
||||||
767,118 |
2,647,967 |
290 |
679,312 |
2,554,877 |
266 |
|||||||
Land/future value-added projects |
||||||||||||
... Land held for future development |
387,309 |
11,662,000 |
33 |
341,678 |
10,939,000 |
31 |
||||||
... Land undergoing preconstruction activities (additional CIP) (1) |
547,006 |
2,244,000 |
244 |
574,884 |
2,668,000 |
215 |
||||||
934,315 |
13,906,000 |
67 |
916,562 |
13,607,000 |
67 |
|||||||
Investment in unconsolidated real estate entity |
25,870 |
414,000 |
62 |
42,342 |
414,000 |
102 |
||||||
Real estate, net |
6,113,252 |
30,609,237 |
$ 200 |
6,008,440 |
30,143,874 |
$199 |
||||||
Add: accumulated depreciation |
779,177 |
742,535 |
||||||||||
Gross investment in real estate (2) |
$ 6,892,429 |
30,609,237 |
$ 6,750,975 |
30,143,874 |
||||||||
(1) We generally will not commence ground-up development of any parcels undergoing preconstruction activities without first securing significant pre-leasing for such space. If vertical aboveground construction is not initiated at completion of preconstruction activities, the land parcel will be classified as land held for future development. The two largest projects included in preconstruction consist of our 1.6 million developable square feet at Alexandria Center™ at Kendall Square in East Cambridge, Massachusetts, and our 407,000 developable square foot site for the second tower at Alexandria Center™ for Life Science – New York City. |
||||||||||||
(2) In addition to assets included in our gross investment in real estate, we also hold options/rights for parcels supporting approximately 3.0 million developable square feet. These parcels consist of: (a) a parcel supporting the future ground-up development of approximately 385,000 rentable square feet in Alexandria Center™ for Life Science – New York City related to an option under our ground lease; (b) a right to acquire land parcels supporting ground-up development of 636,000 rentable square feet in Edinburgh, Scotland; and (c) an option to increase our land use rights by up to approximately 2.0 million additional developable square feet in China. |
Click here to view chart: "Non-income-producing real estate assets as a percentage of gross investment in real estate"
http://photos.prnewswire.com/prnh/20120501/NY98334
As of March 31, 2012, approximately 25% of our gross investment in real estate represents non-income-producing assets (land, preconstruction, development, redevelopment, projects in India and China, and investment in unconsolidated real estate entity). Our active development and redevelopment projects represent 8% of gross investment in real estate, a significant amount of which is pre-leased and expected to be delivered over the next three to seven quarters. Over the next few years, we may also identify certain land parcels for potential sale. Over time, our goal is to reduce non-income-producing assets to 15% or less of our gross investment in real estate.
Alexandria Real Estate Equities, Inc.
Construction in Progress
March 31, 2012
(Tabular dollar amounts in thousands)
(Unaudited)
Construction in progress
CIP |
RSF |
Investment |
Stabilized |
Project |
Initial |
||||||||||||||||||||||||
Negotiating/ |
RSF |
In |
In |
Cost to Complete |
Total at |
Yield |
Start |
Occupancy |
Stabilization |
||||||||||||||||||||
Market/Property |
Leased |
Committed |
In CIP |
Service |
Service |
CIP |
2012 |
Thereafter |
Completion |
Cash |
GAAP |
Date |
Date |
Date |
|||||||||||||||
Development projects |
|||||||||||||||||||||||||||||
Greater Boston – Cambridge/Inner Suburbs |
|||||||||||||||||||||||||||||
225 Binney Street |
100% |
−% |
303,143 |
− |
$ − |
$ 50,576 |
$ 46,531 |
$65,443 |
$ 162,550 |
7.5% |
8.1% |
4Q11 |
4Q13 |
4Q13 |
|||||||||||||||
San Francisco Bay – Mission Bay |
|||||||||||||||||||||||||||||
409/499 Illinois Street |
−% |
−% |
222,780 |
− |
$ − |
$104,285 |
$ 16,292 |
$ 27,523 |
$ 148,100 |
6.7% |
7.4% |
2Q11 |
2Q13 |
2Q14 |
|||||||||||||||
San Francisco Bay – South SF |
|||||||||||||||||||||||||||||
........ 259 East Grand Ave. |
100% |
−% |
170,618 |
− |
$ − |
$20,693 |
$37,488 |
$ 22,680 |
$80,861 |
7.8 – 8.2% |
7.8 – 8.2% |
1Q12 |
1Q13 |
3Q15 |
|||||||||||||||
San Diego – University Town Center |
|||||||||||||||||||||||||||||
4755 Nexus Center Drive |
100% |
−% |
45,255 |
− |
$ − |
$ 9,959 |
$ 12,382 |
$ − |
$22,341 |
7.0% |
7.7% |
1Q11 |
3Q12 |
3Q12 |
|||||||||||||||
5200 Illumina Way |
100% |
−% |
127,373 |
− |
$ − |
$ 27,162 |
$19,803 |
$2,335 |
$ 49,300 |
7.0% |
10.8% |
4Q10 |
4Q12 |
4Q12 |
|||||||||||||||
Canada |
100% |
−% |
26,426 |
− |
$ − |
$ 8,881 |
$ 567 |
$ − |
$ 9,448 |
7.6% |
8.2% |
4Q11 |
2Q12 |
2Q12 |
|||||||||||||||
Development Projects |
75% |
−% |
895,595 |
− |
$ − |
$221,556 |
$ 33,063 |
$117,981 |
$ 472,600 |
||||||||||||||||||||
Urban/central business district redevelopment projects |
|||||||||||||||||||||||||||||
Greater Boston – Cambridge/Inner Suburbs |
|||||||||||||||||||||||||||||
400 Technology Square |
39% |
−% |
212,123 |
− |
$ − |
$ 80,435 |
$37,035 |
$ 22,080 |
$139,550 |
8.1% |
9.1% |
4Q11 |
4Q12 |
4Q13 |
|||||||||||||||
San Diego – Torrey Pines |
|||||||||||||||||||||||||||||
3530/3550 John Hopkins Court |
100% |
−% |
98,320 |
− |
$ − |
$ 38,456 |
$ 11,944 |
$ − |
$ 50,400 |
8.6% |
9.0% |
2Q10 |
2Q12 |
3Q12 |
|||||||||||||||
San Diego – University Town Center |
|||||||||||||||||||||||||||||
10300 Campus Point Drive |
91% |
−% |
189,562 |
89,576 |
$ 40,387 |
$25,113 |
$53,897 |
$ 12,203 |
$ 131,600 |
7.6% |
7.7% |
4Q10 |
4Q11 |
3Q12 |
|||||||||||||||
Seattle – Lake Union |
|||||||||||||||||||||||||||||
1551 Eastlake Avenue |
−% |
23% |
51,455 |
66,028 |
$ 26,249 |
$ 29,029 |
$7,908 |
$ 824 |
$64,010 |
7.0% |
7.4% |
4Q11 |
4Q11 |
4Q13 |
|||||||||||||||
Total urban/central business district redevelopment projects |
64% |
2% |
551,460 |
155,604 |
$ 66,636 |
$ 173,033 |
$110,784 |
$ 35,107 |
$ 385,560 |
||||||||||||||||||||
San Francisco Bay – South SF |
|||||||||||||||||||||||||||||
400/450 East Jamie Court |
6% |
31% |
91,233 |
71,803 |
$ 46,867 |
$ 47,480 |
$6,212 |
$ 7,931 |
$ 108,490 |
4.2% |
4.3% |
4Q06 |
3Q11 |
4Q13 |
|||||||||||||||
Other – 400/450 East Jamie Court (1) |
$ 37,872 |
$ (37,872) |
|||||||||||||||||||||||||||
Suburban and other redevelopment projects |
11% |
46% |
358,679 |
31,624 |
$ 17,589 |
$147,405 |
$ 46,458 |
$22,993 |
$234,445 |
2Q07 – 1Q12 |
1Q12 – 3Q13 |
2Q12 – 2Q14 |
|||||||||||||||||
Other – suburban and other redevelopment projects (1) |
$23,407 |
$ (23,407) |
|||||||||||||||||||||||||||
Projects in India and China |
751,000 |
− |
$ - |
$114,207 |
$ 37,809 |
TBD |
$ 152,016 |
||||||||||||||||||||||
Generic infrastructure/ building improvement projects |
− |
− |
$− |
$ 124,716 |
$ 70,030 |
TBD |
$ 194,746 |
||||||||||||||||||||||
Subtotal |
2,647,967 |
259,031 |
$192,371 |
$767,118 |
$404,356 |
$184,012 |
$1,547,857 |
||||||||||||||||||||||
Preconstruction |
2,244,000 |
− |
$ − |
$ 547,006 |
$ 36,814 |
TBD |
$ 583,820 |
||||||||||||||||||||||
Future projected construction projects |
− |
− |
$ − |
$ − |
$ 40,598 |
TBD |
$40,598 |
||||||||||||||||||||||
Total |
4,891,967 |
259,031 |
$192,371 |
$1,314,124 |
$481,768 |
$184,012 |
$2,172,275 |
||||||||||||||||||||||
(1) As of the period ended, some portion of the real estate basis associated with the rentable square feet under redevelopment or development was classified as in-service as activities necessary to prepare the asset for its intended use were no longer in process. In the near future, we anticipate recommencing activities necessary to prepare the asset for its intended use upon execution of leasing and final decisions related to design of each space. |
Alexandria Real Estate Equities, Inc.
Definitions and Other Information
March 31, 2012
(Tabular dollar amounts in thousands)
(Unaudited)
This section contains additional information for sections throughout this supplemental information package as well as explanations of certain non-GAAP financial measures and the reasons why management uses these supplemental measures of performance. Additional detail can be found in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, as well as other documents filed with or furnished to the SEC from time to time.
Adjusted EBITDA and Adjusted EBITDA margin
EBITDA represents earnings before interest, taxes, depreciation, and amortization ("EBITDA"), a non-GAAP financial measure, and is used by management and others as a supplemental measure of performance. Management uses adjusted EBITDA ("Adjusted EBITDA") to assess the performance of our core operations, for financial and operational decision-making, and as a supplemental or additional means to evaluate period-to-period comparisons on a consistent basis. Adjusted EBITDA also serves as a proxy for a component of a financial covenant under certain of our debt obligations. Adjusted EBITDA is calculated as EBITDA excluding net stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of land parcels, and impairments. We believe Adjusted EBITDA provides investors relevant and useful information because it permits investors to view income from our operations on an unleveraged basis before the effects of taxes, non-cash depreciation and amortization, net stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of land parcels, and impairments. By excluding interest expense, EBITDA and Adjusted EBITDA allow investors to measure our performance independent of our capital structure and indebtedness and, therefore, allow for a more meaningful comparison of our performance to that of other companies, both in the real estate industry and in other industries. Management believes that excluding non-cash charges related to stock-based compensation facilitates a comparison of our operations across periods and among other equity REITs without the variances caused by different valuation methodologies, the volatility of the expense (which depends on market forces outside of management's control), and the assumptions and the variety of award types that a company can use. Management believes that adjusting for the effects of gains or losses on early extinguishment of debt, gains or losses on sales of land parcels, and impairments, provides useful information by excluding certain items that are not representative of our core operating results. These items are not related to core operations, dependent upon historical costs, and subject to judgmental valuation inputs and the timing of management decisions. EBITDA and Adjusted EBITDA have limitations as measures of our performance. EBITDA and Adjusted EBITDA do not reflect our historical cash expenditures or future cash requirements for capital expenditures or contractual commitments. While EBITDA and Adjusted EBITDA are relevant and widely used measures of performance, they do not represent net income or cash flow from operations as defined by GAAP, and they should not be considered as alternatives to those indicators in evaluating performance or liquidity. Further, our computation of EBITDA and Adjusted EBITDA may not be comparable to similar measures reported by other companies.
The following table reconciles net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to EBITDA and Adjusted EBITDA:
Three Months Ended |
|||||||||||||||
3/31/12 |
12/31/11 |
9/30/11 |
6/30/11 |
3/31/11 |
|||||||||||
Net income |
$ 32,775 |
$ 35,462 |
$ 32,995 |
$ 34,311 |
$ 32,625 |
||||||||||
Interest expense – continuing operations |
16,227 |
14,757 |
14,273 |
16,567 |
17,810 |
||||||||||
Interest expense – discontinued operations |
− |
− |
− |
4 |
32 |
||||||||||
Depreciation and amortization – continuing operations |
43,405 |
40,885 |
39,848 |
40,211 |
36,582 |
||||||||||
Depreciation and amortization – discontinued operations |
− |
81 |
142 |
152 |
125 |
||||||||||
EBITDA |
92,407 |
91,185 |
87,258 |
91,245 |
87,174 |
||||||||||
Stock compensation expense |
3,293 |
3,306 |
3,344 |
2,749 |
2,356 |
||||||||||
Loss on early extinguishment of debt |
623 |
− |
2,742 |
1,248 |
2,495 |
||||||||||
Gain on sale of land parcel |
(1,864) |
− |
(46) |
− |
− |
||||||||||
Impairment of real estate |
− |
− |
994 |
− |
− |
||||||||||
Adjusted EBITDA |
$ 94,459 |
$ 94,491 |
$ 94,292 |
$ 95,242 |
$ 92,025 |
||||||||||
Total revenues |
$ 144,966 |
$145,779 |
$144,193 |
$143,551 |
$139,920 |
||||||||||
Adjusted EBITDA margins |
65% |
65% |
65% |
66% |
66% |
Adjusted funds from operations
AFFO is a non-GAAP financial measure that management uses as a supplemental measure of our performance. We compute AFFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders by adding to or deducting from FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders (1) non-incremental revenue generating capital expenditures, tenant improvements, and leasing commissions (excludes redevelopment expenditures); (2) capitalized income from development projects; (3) gains or losses on early extinguishment of debt; (4) amortization of loan fees, debt premiums/discounts, and acquired above and below market leases; (5) effects of straight-line rent and straight-line rent on ground leases; (6) preferred stock redemption charges; and (7) non-cash compensation expense related to restricted stock awards.
We believe that AFFO is a useful supplemental performance measure because it further adjusts FFO to: (1) deduct certain expenditures which, although capitalized and included in depreciation expense, do not enhance the revenue or cash flows of our properties; (2) eliminate the effect of straight-lining our rental income and capitalizing income from development projects in order to reflect the actual amount of contractual rents due in the period presented; and (3) eliminate the effect of non-cash items that are not indicative of our core operations and do not actually reduce the amount of cash generated by our operations. Management believes that adjusting FFO to eliminate the effect of non-cash charges related to stock-based compensation facilitates a comparison of our operations across periods and among other equity REITs without the variances caused by different valuation methodologies, the volatility of the expense (which depends on market forces outside of management's control), and the assumptions and the variety of award types that a company can use. Management believes that adjusting FFO provides useful information by excluding certain items that are not representative of our core operating results because they are dependent upon historical costs or subject to judgmental valuation inputs and the timing of management decisions.
AFFO is not intended to represent cash flow for the period, and is only intended to provide an additional measure of performance. We believe that net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders is the most directly comparable GAAP financial measure to AFFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders. Management believes that AFFO is a widely recognized measure of the operations of equity REITs, and presenting AFFO will enable investors to assess our performance in comparison to other equity REITs. However, other equity REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to AFFO calculated by other equity REITs. AFFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.
Alexandria Real Estate Equities, Inc.
Definitions and Other Information
March 31, 2012
(Unaudited)
Annualized base rent
Annualized base rent means the annualized fixed base rental amount in effect as of March 31, 2012, related to our operating rentable square feet (using rental revenue computed on a straight-line basis in accordance with GAAP).
Capitalized interest
A key component of our business model is our value-added development and redevelopment programs. These programs are focused on providing high-quality generic life science laboratory space to meet the real estate requirements of and are reusable by various life science industry tenants. Upon completion, each value-added project is expected to generate significant revenues and cash flows. Our development and redevelopment projects are generally in locations that are highly desirable to life science entities which we believe results in higher occupancy levels, longer lease terms, and higher rental income and returns. Development projects consist of the ground-up development of generic life science laboratory facilities. Redevelopment projects consist of the permanent change in use of office, warehouse, and shell space into generic life science laboratory space, including the conversion of single-tenancy space to multi-tenancy space or vice versa. We also have certain significant value-added projects undergoing important and substantial preconstruction activities to bring these assets to their intended use. These critical activities add significant value and are required for the construction of buildings. The projects will provide high-quality facilities for the life science industry and will generate significant revenue and cash flows for the Company. In accordance with GAAP, we capitalize project costs clearly related to the construction, development, and redevelopment as a cost of the project. Indirect project costs such as construction administration, legal fees, and office costs that clearly relate to projects under construction, development, and redevelopment are also capitalized as a cost of the project. We capitalize project costs only during periods in which activities necessary to prepare an asset for its intended use are in progress. We also capitalize interest cost as a cost of the project only during the period for which activities necessary to prepare an asset for its intended use are ongoing, provided that expenditures for the asset have been made and interest cost is incurred. Additionally, should activities necessary to prepare an asset for its intended use cease, interest, taxes, insurance, and certain other direct project costs related to these assets would be expensed as incurred.
Cash interest
Cash interest is equal to interest expense calculated in accordance with GAAP, plus capitalized interest, less amortization of loan fees, and amortization of debt premiums/discounts.
Construction in progress/current value-added projects
Active development/active redevelopment projects
A key component of our business model is our value-added development and redevelopment programs. These programs are focused on providing high-quality, generic, and reusable life science laboratory space to meet the real estate requirements of a wide range of clients in the life science industry. Upon completion, each value-added project is expected to generate significant revenues and cash flows. Our development and redevelopment projects are generally in locations that are highly desirable to life science entities, which we believe results in higher occupancy levels, longer lease terms, and higher rental income and returns. Development projects consist of the ground-up development of generic and reusable life science laboratory facilities. We generally will not commence new development projects for aboveground vertical construction of new life science laboratory space without first securing significant pre-leasing for such space. Redevelopment projects consist of the permanent change in use of office, warehouse, and shell space into generic life science laboratory space, including the conversion of single-tenancy space to multi-tenancy space or vice versa.
Projects in India and China
Projects in India and China primarily represent development opportunities and projects focused primarily on life science laboratory space for our current client tenants and other life science relationship entities. These projects focus on real estate investments with targeted returns on investment greater than returns expected in the United States.
Generic infrastructure/building improvement projects
Generic infrastructure/building improvement projects include revenue-enhancing capital spending, non-revenue-enhancing capital expenditures, and tenant improvements.
Construction in progress/future value-added projects
Land undergoing preconstruction activity (additional CIP)
We continue to advance various important preconstruction activities for development sites, including Building Information Modeling (3-D virtual modeling), design development and construction drawings (required for each of the five new buildings), sustainability and energy optimization review, budgeting, planning for future site and infrastructure work, and other activities prior to commencement of vertical construction of aboveground shell and core improvements. We generally will not commence ground-up development of any parcels undergoing preconstruction activities without first securing significant pre-leasing for such space.
Dividend payout ratio
Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (shares of common stock outstanding on the respective record date multiplied by the related dividend per share) to FFO attributable to Alexandria Real Estate Equities, Inc.'s common stockholders on a diluted basis, as adjusted. The dividend payout ratio excludes loss on early extinguishment of debt, and preferred stock redemption charges, which affect comparability of periods.
Dividend yield
Dividend yield for the quarter represents the annualized quarter dividend divided by the closing common stock price at the end of the quarter.
Alexandria Real Estate Equities, Inc.
Definitions and Other Information
March 31, 2012
(Tabular dollar amounts in thousands, except for per share amounts)
(Unaudited)
Earnings per share
We use income from continuing operations attributable to Alexandria Real Estate Equities, Inc.'s common stockholders as the "control number" in determining whether potential common shares, including potential common shares issuable upon conversion of our 8.00% unsecured senior convertible notes ("8.00% Unsecured Senior Convertible Notes"), are dilutive or antidilutive to earnings per share. Pursuant to the presentation and disclosure literature on gains/losses on sales or disposals by REITs and earnings per share required by the SEC and the Financial Accounting Standards Board, 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 and included in the numerator for the computation of earnings per share for income from continuing operations.
We account for unvested restricted stock awards which contain nonforfeitable rights to dividends as participating securities and include these securities in the computation of earnings per share using the two-class method. Under the two-class method, we allocate net income after preferred stock dividends and amounts attributable to noncontrolling interests to (1) common stockholders and (2) unvested restricted stock awards based on their respective participation rights to dividends declared (or accumulated) and undistributed earnings. Diluted earnings per share is computed using the weighted average shares of common stock outstanding determined for the basic earnings per share computation plus the effect of any dilutive securities, including the dilutive effect of stock options using the treasury stock method.
The table below is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for income from continuing operations:
Three Months Ended March 31, |
|||||||||
Earnings per share |
2012 |
2011 |
|||||||
Income from continuing operations |
$ 30,940 |
$ 32,475 |
|||||||
Gain on sale of land parcel |
1,864 |
− |
|||||||
Net income attributable to noncontrolling interests |
(711) |
(929) |
|||||||
Dividends on preferred stock |
(7,483) |
(7,089) |
|||||||
Preferred stock redemption charge |
(5,978) |
− |
|||||||
Net income attributable to unvested restricted stock awards |
(235) |
(242) |
|||||||
Income from continuing operations attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic and diluted |
18,397 |
24,215 |
|||||||
(Loss) income from discontinued operations, net |
(29) |
150 |
|||||||
Net income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic and diluted |
$18,368 |
$ 24,365 |
|||||||
Weighted average shares of common stock outstanding − basic |
61,507,807 |
54,948,345 |
|||||||
... Dilutive effect of stock options |
1,160 |
19,410 |
|||||||
Weighted average shares of common stock outstanding – diluted |
61,508,967 |
54,967,755 |
|||||||
Earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic |
|||||||||
... Continuing operations |
$ 0.30 |
$ 0.44 |
|||||||
Discontinued operations, net |
− |
− |
|||||||
Earnings per share – basic |
$ 0.30 |
$ 0.44 |
|||||||
Earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – diluted |
|||||||||
Continuing operations |
$ 0.30 |
$ 0.44 |
|||||||
Discontinued operations, net |
− |
− |
|||||||
Earnings per share – diluted |
$ 0.30 |
$ 0.44 |
EBITDA
See Adjusted EBITDA and Adjusted EBITDA margin
Fixed charge coverage ratio
The fixed charge coverage ratio is useful to investors as a supplemental measure of the Company's ability to satisfy fixed financing obligations and dividends on preferred stock. Cash interest is equal to interest expense calculated in accordance with GAAP, plus capitalized interest, less amortization of loan fees, and amortization of debt premiums/discounts. The following table presents a reconciliation of interest expense, the most directly comparable GAAP financial measure to cash interest and fixed charges:
Three Months Ended |
||||||||||
3/31/12 |
12/31/11 |
9/30/11 |
6/30/11 |
3/31/11 |
||||||
Adjusted EBITDA |
$ 94,459 |
$ 94,491 |
$ 94,292 |
$ 95,242 |
$ 92,025 |
|||||
Interest expense – continuing operations |
16,227 |
14,757 |
14,273 |
16,567 |
17,810 |
|||||
Interest expense – discontinued operations |
− |
− |
− |
4 |
32 |
|||||
Add: capitalized interest |
15,266 |
16,151 |
16,666 |
15,046 |
13,193 |
|||||
Less: amortized loan fees |
(2,643)
|
(2,551)
|
(2,144)
|
(2,327)
|
(2,278)
|
|||||
Less: amortization of debt premium/discounts |
(179)
|
(565)
|
(750)
|
(1,169)
|
(1,335)
|
|||||
Cash interest |
28,671 |
27,792 |
28,045 |
28,121 |
27,422 |
|||||
Dividends on preferred stock |
7,483 |
7,090 |
7,089 |
7,089 |
7,089 |
|||||
Fixed charges |
$ 36,154 |
$ 34,882 |
$ 35,134 |
$ 35,210 |
$ 34,511 |
|||||
Fixed charge coverage ratio – quarter annualized |
2.6x |
2.7x |
2.7x |
2.7x |
2.7x |
|||||
Fixed charge coverage ratio – trailing 12 months |
2.7x |
2.7x |
2.7x |
2.6x |
2.4x |
Alexandria Real Estate Equities, Inc.
Definitions and Other Information
March 31, 2012
(Unaudited)
Funds from operations
GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") established the measurement tool of FFO. Since its introduction, FFO has become a widely used non-GAAP financial measure among REITs. We believe that FFO is helpful to investors as an additional measure of the performance of an equity REIT. We compute FFO in accordance with standards established by the Board of Governors of NAREIT in its April 2002 White Paper and related implementation guidance, which may differ from the methodology for calculating FFO utilized by other equity REITs, and, accordingly, may not be comparable to such other equity REITs. The White Paper defines FFO as net income (computed in accordance with GAAP), excluding gains from sales and real estate impairment losses, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as a measure of liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.
Future value-added projects
Land held for future development
All preconstruction efforts have been advanced to appropriate stages and no further preconstruction activities are ongoing and therefore, interest, property taxes, and other costs related to these assets are expensed as incurred. We generally will not commence new development projects for aboveground vertical construction of new life science laboratory space without first securing significant pre-leasing for such space.
Land undergoing preconstruction activities (additional CIP)
Preconstruction activities include Building Information Modeling (3-D virtual modeling), design development and construction drawings, sustainability and energy optimization review, budgeting, planning for future site and infrastructure work, and other activities prior to commencement of vertical construction of aboveground shell and core improvements. Our objective with preconstruction is to reduce the time it takes to deliver projects to prospective tenants. Project costs are capitalized as a cost of the project during periods when activities necessary to prepare an asset for its intended use are in progress. We generally will not commence ground-up development of any parcels undergoing preconstruction activities without first securing significant pre-leasing for such space. If vertical aboveground construction is not initiated at completion of preconstruction activities, the land parcel will be classified as land held for future development. The two largest projects included in preconstruction consist of our 1.6 million developable square feet at Alexandria Center™ at Kendall Square in East Cambridge, Massachusetts, and our 407,000 developable square foot site for the second tower at Alexandria Center™ for Life Science – New York City.
Investment in unconsolidated real estate entity
Our investment in unconsolidated real estate entity represents our equity investment in a real estate entity that owns a land parcel supporting the ground-up development of approximately 414,000 rentable square feet in the Longwood Medical Area of Boston.
In March 2012, we contributed our 55% ownership interest in a land parcel aggregating 414,000 developable square feet in the Longwood Medical Area into a newly formed joint venture (the "Restated JV") with National Development, Charles River Realty Investors, and a newly admitted member, Clarion Partners, LLC, resulting in a reduction of our ownership interest from 55% to 27.5%. In connection with the sale of 27.5% 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. Our 27.5% share of the land was valued at approximately $31 million (including closing costs), or approximately $275 per developable square foot. Upon formation of the Restated JV, the existing $38.4 million non-recourse secured loan was refinanced with a seven-year (including two one-year extension options) non-recourse $213 million construction loan with initial loan proceeds of $50 million. We do not expect 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 is expected to commence early in the second quarter of 2012 and the project is 37% pre-leased to Dana-Farber Cancer Institute, Inc. In addition, we expect to earn development and other fees of approximately $3.5 million through 2015, and recurring annual property management fees thereafter.
Future redevelopment
Our asset base also includes non-laboratory space (office, warehouse, and industrial space) identified for future conversion into life science laboratory space through redevelopment aggregating approximately 1.0 million rentable square feet. These spaces are currently classified in rental properties, net.
FFO per share
FFO per share – diluted is computed using the weighted average shares of common stock outstanding determined for the basic FFO per share computation plus the effect of any dilutive securities, including the dilutive effect of stock options using the treasury stock method. Additionally, we applied the if-converted method for our 8.00% Unsecured Senior Convertible Notes for FFO per share separately from the if-converted analysis for earnings per share. In applying the if-converted method, conversion is assumed for purposes of calculating FFO per share – diluted if the effect would be dilutive to FFO per share. If the assumed conversion pursuant to the if-converted method is dilutive, FFO per share – diluted would be calculated by adding back interest charges applicable to our 8.00% Unsecured Senior Convertible Notes to the numerator and our 8.00% Unsecured Senior Convertible Notes would be assumed to have been converted at the beginning of the period presented (or from the date of issuance, if occurring on a date later than the date that the period begins) and the resulting incremental shares associated with the assumed conversion would be included in the denominator. Furthermore, we assume that our 8.00% Unsecured Senior Convertible Notes are converted for the period prior to any retirement or actual conversion if the effect of such assumed retirement or conversion would be dilutive, and any shares of common stock issued upon actual retirement or conversion are included in the denominator for the period after the date of retirement or conversion. For purposes of calculating FFO per share – diluted, the if-converted method was dilutive to FFO per share – diluted for all periods presented.
Gross assets (excluding cash and restricted cash)
Gross assets (excluding cash and restricted cash) are equal to total assets plus accumulated depreciation, less cash, cash equivalents, and restricted cash.
Alexandria Real Estate Equities, Inc.
Definitions and Other Information
March 31, 2012
(Tabular dollar amounts in thousands)
(Unaudited)
Interest coverage ratio
Interest coverage ratio is the ratio of Adjusted EBITDA to cash interest. This ratio is useful to investors as an indicator of our ability to service our cash interest obligations. The following table summarizes the calculation of the interest coverage ratio:
Three Months Ended |
|||||||||||
3/31/12 |
12/31/11 |
9/30/11 |
6/30/11 |
3/31/11 |
|||||||
Adjusted EBITDA |
$ 94,459 |
$ 94,491 |
$ 94,292 |
$ 95,242 |
$ 92,025 |
||||||
Interest expense – continuing operations |
16,227 |
14,757 |
14,273 |
16,567 |
17,810 |
||||||
Interest expense – discontinued operations |
− |
− |
− |
4 |
32 |
||||||
Add: capitalized interest |
15,266 |
16,151 |
16,666 |
15,046 |
13,193 |
||||||
Less: amortized loan fees |
(2,643) |
(2,551) |
(2,144) |
(2,327) |
(2,278) |
||||||
Less: amortization of debt premium/discounts |
(179) |
(565) |
(750) |
(1,169) |
(1,335) |
||||||
Cash interest |
28,671 |
27,792 |
28,045 |
28,121 |
27,422 |
||||||
Interest coverage ratio – quarter annualized |
3.3x |
3.4x |
3.4x |
3.4x |
3.4x |
||||||
Interest coverage ratio – trailing 12 months |
3.4x |
3.4x |
3.3x |
3.2x |
3.0x |
Net debt
Net debt is equal to the sum of total debt less cash, cash equivalents, and restricted cash.
Net operating income
Net operating income is a non-GAAP financial measure equal to income from continuing operations, the most directly comparable GAAP financial measure, plus loss from early extinguishment of debt, depreciation and amortization, interest expense, and general and administrative expense. We believe net operating income provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Therefore, we believe net operating income is a useful measure for evaluating the operating performance of our real estate assets. Net operating income on a cash basis is net operating income on a GAAP basis, adjusted to exclude the effect of straight-line rent adjustments required by GAAP. We believe that net operating income on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent adjustments to rental revenue.
Further, we believe net operating income 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. Net operating income excludes certain components from income from continuing operations in order to provide results that are more closely related to the results of operations of our properties. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level rather than at the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. Net operating income presented by us may not be comparable to net operating income reported by other equity REITs that define net operating income differently. We believe that in order to facilitate a clear understanding of our operating results, net operating income should be examined in conjunction with income from continuing operations as presented in our condensed consolidated statements of income. Net operating income should not be considered as an alternative to income from continuing operations as an indication of our performance or as an alternative to cash flows as a measure of liquidity or our ability to make distributions.
Same property comparisons
As a result of changes within our total property portfolio, the financial data presented in the Summary of Same Property Comparisons shows significant changes in revenue and expenses from period to period. In order to supplement an evaluation of our results of operations over a given period, we analyze the operating performance for all properties that were fully operating for the entire periods presented for the quarter periods (herein referred to as "Same Properties") separate from properties acquired subsequent to the first day in the first period presented, properties undergoing active development and active redevelopment, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results (herein referred to as "Non-Same Properties"). Additionally, rental revenues from lease termination fees, if any, are excluded from the results of the Same Properties.
Tangible non-real estate assets
Tangible non-real estate assets include the following as of each date presented:
3/31/12 |
12/31/11 |
9/30/11 |
6/30/11 |
3/31/11 |
|||||||
Cash and cash equivalents |
$ 77,361 |
$ 78,539 |
$ 73,056 |
$ 60,925 |
$ 78,196 |
||||||
Restricted cash |
39,803 |
23,332 |
27,929 |
23,432 |
30,513 |
||||||
Tenant receivables |
8,836 |
7,480 |
6,599 |
4,487 |
7,018 |
||||||
Investments |
98,152 |
95,777 |
88,777 |
88,862 |
88,694 |
||||||
Other tangible non-real estate assets |
48,639 |
44,756 |
40,916 |
32,407 |
33,384 |
||||||
Total tangible non-real estate assets |
$ 272,791 |
$249,884 |
$ 237,277 |
$ 210,113 |
$ 237,805 |
Total market capitalization
Total market capitalization is equal to the sum of outstanding shares of Series E Preferred Stock and common stock multiplied by the related closing price at the end of each period presented, the liquidation value of the series D cumulative convertible preferred stock ("Series D Convertible Preferred Stock"), and total debt.
Alexandria Real Estate Equities, Inc.
Definitions and Other Information
March 31, 2012
(Tabular dollar amounts in thousands)
(Unaudited)
Unencumbered net operating income as a percentage of total net operating income
Unencumbered net operating income as a percentage of total net operating income is a non-GAAP financial measure that we believe is useful to investors as a performance measure of our results of operations of our unencumbered real estate assets, as it reflects only those income and expense items that are incurred at the unencumbered property level. Management uses unencumbered net operating income as a percentage of total net operating income in order to assess its compliance with its financial covenants under our debt obligations because the measure serves as a proxy for a financial measure under certain of our debt obligations. Unencumbered net operating income represents net operating income derived from assets which are not subject to any mortgage, deed of trust, lien, or other security interest.
3/31/12 |
12/31/11 |
9/30/11 |
6/30/11 |
3/31/11 |
|||||||
Unencumbered net operating income |
$ 73,037 |
$ 71,092 |
$ 68,276 |
$ 64,847 |
$64,320 |
||||||
Encumbered net operating income |
28,519 |
30,728 |
32,931 |
38,083 |
34,539 |
||||||
Total net operating income |
$101,556 |
$101,820 |
$101,207 |
$102,930 |
$ 98,859 |
||||||
Unencumbered net operating income as a percentage of total net operating income |
72% |
70% |
67% |
63% |
65% |
Weighted average interest rate for capitalization
The weighted average interest rate for calculating capitalization of interest required pursuant to GAAP represents a weighted average rate based on the rates applicable to borrowings outstanding during the period and includes the impact of our interest rate hedge agreements, amortization of debt discounts/premiums, amortization of loan fees, and other bank fees. A separate calculation is performed each month to determine our weighted average interest rate for capitalization for the month. The rate will vary each month due to changes in variable interest rates, outstanding debt balances, the proportion of variable rate debt to fixed rate debt, the amount and terms of effective interest rate hedge agreements, and the amount of loan fee amortization.
SOURCE Alexandria Real Estate Equities, Inc.
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