Alexandria Real Estate Equities, Inc. Reports Second Quarter 2006 Results
- Company Reports Funds from Operations Per Share (Diluted) of $1.26, up 5%
Over Second Quarter 2005, and Earnings Per Share (Diluted) of $0.57 -
Highlights
* Second Quarter 2006 Funds from Operations (FFO) Per Share (Diluted) of
$1.26 up 5%
* Second Quarter 2006 Total Revenues up 23%, FFO Available to Common
Stockholders up 15%
* Second Quarter 2006 Earnings Per Share (Diluted) of $0.57
* Executed 26 Leases for 247,000 Square Feet
* Second Quarter 2006 GAAP Rental Rate Increase of 17.6%
* Second Quarter 2006 GAAP Same Property Revenues Less Operating Expenses
up 2.0% Over Second Quarter 2005
* Added Three Properties aggregating 251,000 Square Feet
* Added One Land Parcel with 144,000 Developable Square Feet
* Closed Sale of Three Properties aggregating 268,000 Square Feet
* Completed Ground-Up Development of Two Properties aggregating 136,000
Square Feet
* Completed Redevelopment of Multiple Spaces at Three Properties
aggregating 66,000 Square Feet
* In July 2006, Added a Seven Building Campus aggregating 1.2 Million
Square Feet with Massachusetts Institute of Technology ("MIT") retaining a
10% Interest
* In July 2006, Closed $146 Million Fixed Rate Loan
PASADENA, Calif., Aug. 7 -- Alexandria Real Estate
Equities, Inc. (NYSE: ARE) today announced operating and financial results
for the second quarter 2006.
For the second quarter of 2006, we reported total revenues of
$70,484,000 and FFO available to common stockholders of $29,227,000, or
$1.26 per share (diluted), compared to total revenues of $57,277,000 and
FFO available to common stockholders of $25,501,000, or $1.20 per share
(diluted), for the second quarter of 2005. Comparing the second quarter of
2006 to the second quarter of 2005, total revenues increased 23%, FFO
available to common stockholders increased 15% and FFO per share (diluted)
increased 5%. For the six months ended June 30, 2006, we reported total
revenues of $139,075,000 and FFO available to common stockholders of
$57,381,000, or $2.49 per share (diluted), compared to total revenues of
$112,332,000 and FFO available to common stockholders of $49,109,000, or
$2.39 per share (diluted) for the six months ended June 30, 2005. Comparing
the six months ended June 30, 2006 to the six months ended June 30, 2005,
total revenues increase 24%, FFO available to common stockholders increased
17% and FFO per share (diluted) increased 4%.
FFO is a non-GAAP measure widely used by publicly-traded real estate
investment trusts. A reconciliation of GAAP net income available to common
stockholders to FFO available to common stockholders, on both an aggregate
and a per share diluted basis, is included in the financial information
accompanying this press release. The primary reconciling item between GAAP
net income available to common stockholders and FFO available to common
stockholders is depreciation and amortization expense. Depreciation and
amortization expense for the three months ended June 30, 2006 and 2005 was
$16,169,000 and $13,251,000, respectively. Depreciation and amortization
expense for the six months ended June 30, 2006 and 2005 was $31,612,000 and
$25,892,000, respectively. Net income available to common stockholders for
the second quarter of 2006 was $13,139,000, or $0.57 per share (diluted),
compared to net income available to common stockholders of $12,250,000, or
$0.58 per share (diluted) for the second quarter of 2005. Net income
available to common stockholders for the six months ended June 30, 2006 was
$25,872,000, or $1.12 per share (diluted), compared to net income available
to common stockholders of $23,217,000, or $1.13 per share (diluted) for the
six months ended June 30, 2005.
For the second quarter 2006, we executed a total of 26 leases for
approximately 247,000 square feet of space at 21 different properties
(excluding month-to-month leases). Of this total, approximately 140,000
square feet were for new or renewal leases related to previously leased
space and approximately 107,000 square feet were for redeveloped, developed
or previously vacant space. Of the 107,000 square feet, approximately
24,000 square feet were delivered from our redevelopment or development
programs, with the remaining approximately 83,000 square feet for
previously vacant space. Rental rates for these new or renewal leases were
on average approximately 17.6% higher (on a GAAP basis) than rental rates
for expiring leases. For the six months ended June 30, 2006, we executed a
total of 52 leases for approximately 743,000 square feet of space at 37
different properties (excluding month-to-month leases). Of this total,
approximately 319,000 square feet were for new or renewal leases related to
previously leased space and approximately 424,000 square feet were for
redeveloped, developed or previously vacant space. Of the 424,000 square
feet, approximately 311,000 square feet were delivered from our
redevelopment or development programs, with the remaining approximately
113,000 square feet for previously vacant space. Rental rates for new or
renewal leases were on average approximately 10.8% higher (on a GAAP basis)
than rental rates for expiring leases.
During the second quarter of 2006, we added three properties
aggregating approximately 251,000 square feet. We paid approximately $36
million cash for the properties. Also during the second quarter of 2006, we
added one land parcel with approximately 144,000 developable square feet.
We paid approximately $10.5 million cash for the land parcel.
In August 2006, we announced the closing of our previously reported
purchase of an equity interest in the leasehold interest in 10.4 acres
commonly known as Technology Square at MIT ("Tech Square") in Cambridge,
Massachusetts. The contract price for a 100% equity interest in Tech Square
was $600 million. However, MIT retained a 10% interest. We assumed existing
financing on the project approximating $225 million with an interest rate
of 5.26%. Tech Square consists of a seven building campus (including a
1,593 space covered car parking garage and a 49 space surface parking lot)
containing approximately 1.2 million square feet.
As of June 30, 2006, approximately 86% of our leases (on a square
footage basis) were triple net leases, requiring tenants to pay
substantially all real estate taxes and insurance, common area and other
operating expenses, including increases thereto. In addition, as of June
30, 2006, approximately 5% of our leases (on a square footage basis)
required the tenants to pay a majority of operating expenses. Additionally,
as of June 30, 2006, approximately 89% of our leases (on a square footage
basis) provided for the recapture of certain capital expenditures and
approximately 90% of our leases (on a square footage basis) contained
effective annual rent escalations that are either fixed or indexed based on
the consumer price index or another index.
Based on our current view of existing market conditions and certain
current assumptions, we have updated our prior guidance for 2006 FFO per
share (diluted) and earnings per share (diluted) as follows:
2006
----
FFO per share (diluted) $5.16
Earnings per share (diluted) $2.25
Alexandria Real Estate Equities, Inc. is a publicly-traded real estate
investment trust focused principally on the ownership, operation,
management, acquisition and selective redevelopment and development for our
Life Science Real Estate Niche(SM). Our properties are designed and
improved for lease primarily to institutional (universities and independent
not-for-profit institutions), pharmaceutical, biotechnology, medical
device, life science product, service, biodefense and translational
research entities, as well as government agencies. Our asset base currently
consists of 149 properties comprising approximately 10.5 million square
feet plus an imbedded pipeline for the ground-up development of
approximately 6.0 million additional square feet.
This press release contains forward-looking statements, including
earnings guidance, within the meaning of the federal securities laws.
Actual results may differ materially from those projected in the
forward-looking statements. Additional information concerning factors that
could cause actual results to differ materially from those in the
forward-looking statements is contained in our Annual Report on Form 10-K
and our other periodic reports filed with the Securities and Exchange
Commission.
Contact: Joel S. Marcus
Chief Executive Officer
Alexandria Real Estate Equities, Inc.
(626) 578-9693
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
------------- ----------- ---------- ---------
Income statement data
Total revenues $70,484 $57,277 $139,075 $112,332
Net income available to
common stockholders $13,139 $12,250 $25,872 $23,217
============= =========== ========== ==========
Weighted average shares of
common stock outstanding
Basic 22,856,380 20,936,265 22,590,811 20,206,497
============= =========== ========== ==========
Diluted 23,250,681 21,275,364 23,010,992 20,536,039
============= =========== ========== ==========
Earnings per share - basic
Continuing operations
(net of preferred stock
dividends) $0.56 $0.56 $1.12 $1.09
Discontinued operations,
net 0.01 0.03 0.03 0.06
------------ ----------- --------- ---------
Earnings per share -
basic $0.57 $0.59 $1.15 $1.15
============= =========== ========== ==========
Earnings per share -
diluted
Continuing operations
(net of preferred stock
dividends) $0.56 $0.55 $1.09 $1.07
Discontinued operations,
net 0.01 0.03 0.03 0.06
------------ ----------- ---------- ----------
Earnings per share -
diluted $0.57 $0.58 $1.12 $1.13
============= =========== ========== ==========
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Financial Information
(Unaudited)
Funds from Operations
Generally accepted accounting principles ("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
Investments Trusts ("NAREIT") established the measurement tool of Funds
From Operations ("FFO"). Since its introduction, FFO has become a widely
used non-GAAP financial measure by 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 (the "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 REITs. The White Paper defines FFO as net
income (loss) (computed in accordance with GAAP), excluding gains (or
losses) from sales, plus real estate related depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint ventures.
While FFO is a relevant and widely used measure of operating performance
for REITs, it 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.
The following table presents a reconciliation of net income available to
common stockholders, the most directly comparable GAAP financial measure to
FFO, to funds from operations available to common stockholders for the three
and six months ended June 30, 2006 and 2005 (in thousands, except per share
data):
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
-------- -------- -------- --------
Reconciliation of net income
available to common stockholders
to funds from operations available
to common stockholders
Net income available to common
stockholders $13,139 $12,250 $25,872 $23,217
Add: depreciation and
amortization (1) 16,169 13,251 31,612 25,892
Add: minority interest 370 - 740 -
Subtract: Gain on sales of
property (2) (59) - (59) -
Subtract: FFO allocable to
minority interest (392) - (784) -
------- ------- ------- -------
Funds from operations available to
common stockholders $29,227 $25,501 $57,381 $49,109
======= ======= ======= =======
FFO per share
Basic $1.28 $1.22 $2.54 $2.43
======= ======= ======= =======
Diluted $1.26 $1.20 $2.49 $2.39
======= ======= ======= =======
Reconciliation of earnings per
share (diluted) to FFO per
share (diluted)
Earnings per share (diluted) $0.57 $0.58 $1.12 $1.13
Depreciation and amortization (1) 0.69 0.62 1.37 1.26
Minority interest 0.02 - 0.03 -
Gain on sales of property (2) - - - -
FFO allocable to minority
interest (0.02) - (0.03) -
------- ------- ------- -------
FFO per share (diluted) $1.26 $1.20 $2.49 $2.39
======= ======= ======= =======
(1) Includes depreciation and amortization on assets "held for sale"
reflected as discontinued operations (for the periods prior to when
such assets were designated as "held for sale").
(2) Gain on sales of property relates to the disposition of one property
in the New Jersey/Suburban Philadelphia market and two properties in
the Suburban Washington D.C. market during the second quarter of
2006. Gain on sales of property is included in the income statement
in income from discontinued operations, net.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Supplemental Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
Quarterly Supplemental Financial Information
For the Three Months Ended
6/30/2006 3/31/2006
------------ -----------
Operational data
Breakdown of revenues from
continuing operations (a)
Rental income $54,739 $52,546
Tenant recoveries 13,265 14,047
Other income 2,480 1,998
---------- -----------
Total $70,484 $68,591
========== ===========
Funds from operations per share-
diluted (b) $1.26 $1.24
Dividends per share on common stock $0.70 $0.70
Dividend payout ratio (common stock)
(c) 63.7% 57.0%
Straight-line rent $3,674 $2,977
As of
6/30/2006 3/31/2006
--------- ---------
Other data
Number of shares of common stock
outstanding at end of period 26,387,076 22,555,587
Number of properties (d)
Acquired/added/completed during
period 5 6
Sold/reconstructed during period (3) -
Owned at end of period 141 139
Rentable square feet (d)
Acquired/added/completed during
period 386,776 380,043
Sold/reconstructed during period (268,099) -
Owned at end of period 9,283,125 9,164,448
Debt to total market capitalization
(e)
Total debt $1,305,103 $1,544,430
Preferred stock 193,866 193,917
Common stock 2,340,006 2,150,224
---------- ----------
Total market capitalization $3,838,975 $3,888,571
---------- ----------
Debt to total market capitalization 34.0% 39.7%
(a) The historical results above exclude the results of assets
"held for sale" which have been reflected as discontinued operations.
(b) See page 5 for a reconciliation of earnings per share (diluted) to
FFO per share (diluted).
(c) Dividend payout ratio (common stock) is the ratio of the absolute
dollar amount of dividends on our common stock (common stock shares
outstanding on the respective record date multiplied by the related
dividend per share) to funds from operations for the respective
quarter.
(d) Includes assets "held for sale" during the applicable periods such
assets were "held for sale".
(e) Debt to total market capitalization is the ratio of total debt
(secured notes payable and unsecured line of credit and unsecured
term loan) to total market capitalization. Total market
capitalization is equal to outstanding shares of preferred stock and
common stock multiplied by the related closing prices at the end of
each period presented, plus total debt.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Supplemental Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
Quarterly Supplemental Financial Information
For the Three Months Ended
12/31/2005 9/30/2005 6/30/2005
---------- --------- ---------
Operational data
Breakdown of revenues from
continuing operations (a)
Rental income $50,231 $47,523 $45,020
Tenant recoveries 13,052 13,153 11,188
Other income 1,658 1,350 1,069
---------- --------- ---------
Total $64,941 $62,026 $57,277
========== ========= =========
Funds from operations per share-
diluted (b) $1.22 $1.21 $1.20
Dividends per share on common stock $0.70 $0.68 $0.68
Dividend payout ratio (common stock)
(c) 57.2% 59.0% 56.8%
Straight-line rent $1,492 $3,020 $3,305
As of
12/31/2005 9/30/2005 6/30/2005
---------- --------- ---------
Other data
Number of shares of common stock
outstanding at end of period 22,441,294 22,437,761 21,204,620
Number of properties (d)
Acquired/added/completed during
period 6 5 5
Sold/reconstructed during period - (1) -
Owned at end of period 133 127 123
Rentable square feet (d)
Acquired/added/completed during
period 415,978 301,458 333,788
Sold/reconstructed during period - (16,500) -
Owned at end of period 8,784,405 8,368,427 8,083,469
Debt to total market
capitalization (e)
Total debt $1,406,666 $1,271,698 $1,301,934
Preferred stock 192,419 196,420 197,474
Common stock 1,806,524 1,855,378 1,557,479
---------- --------- ---------
Total market capitalization $3,405,609 $3,323,496 $3,056,887
---------- --------- ---------
Debt to total market capitalization 41.3% 38.3% 42.6%
(a) The historical results above exclude the results of assets
"held for sale" which have been reflected as discontinued operations.
(b) See page 5 for a reconciliation of earnings per share (diluted) to
FFO per share (diluted).
(c) Dividend payout ratio (common stock) is the ratio of the absolute
dollar amount of dividends on our common stock (common stock shares
outstanding on the respective record date multiplied by the related
dividend per share) to funds from operations for the respective
quarter.
(d) Includes assets "held for sale" during the applicable periods such
assets were "held for sale".
(e) Debt to total market capitalization is the ratio of total debt
(secured notes payable and unsecured line of credit and unsecured
term loan) to total market capitalization. Total market
capitalization is equal to outstanding shares of preferred stock and
common stock multiplied by the related closing prices at the end of
each period presented, plus total debt.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
2006 2005
------------- --------------
(Unaudited)
Assets
Rental properties, net $1,967,859 $1,788,818
Properties under development
and development land 342,229 329,338
Cash and cash equivalents 3,647 3,911
Tenant security deposits and
other restricted cash 24,307 21,013
Tenant receivables 3,656 4,764
Deferred rent 58,342 54,573
Investments 77,719 82,010
Other assets 98,880 78,023
------------ --------------
Total assets $2,576,639 $2,362,450
============ ==============
Liabilities and Stockholders' Equity
Secured notes payable $768,103 $666,666
Unsecured line of credit and
unsecured term loan 537,000 740,000
Accounts payable, accrued expenses
and tenant security deposits 91,826 86,391
Dividends payable 22,297 19,478
------------ --------------
Total liabilities 1,419,226 1,512,535
============ ==============
Minority interest 20,176 20,115
Stockholders' equity:
Series B preferred stock 57,500 57,500
Series C preferred stock 129,638 129,638
Common stock 264 224
Additional paid-in capital 909,739 607,405
Accumulated other
comprehensive income 40,096 35,033
------------ --------------
Total stockholders' equity 1,137,237 829,800
------------ --------------
Total liabilities and
stockholders' equity $2,576,639 $2,362,450
============ ==============
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Debt
June 30, 2006
(Dollars in thousands)
(Unaudited)
Principal Maturities / Rates
Floating Rate
Debt - Unhedged 222,268 17.0% 6.80% 2.1 Years
--------- ------- ------------- ----------
Total Debt $1,305,103 100.0% 6.11% 3.9 Years
========== ======= ============= ==========
(1) The weighted average interest rate related to our secured debt is
calculated based on the outstanding debt as of July 1, 2006, and as
of January 1st for each year thereafter.
(2) The weighted average interest rates related to our unsecured line of
credit and unsecured term loan are calculated based on borrowings
outstanding as of June 30, 2006.
(3) The unsecured line of credit matures in December 2007 and may be
extended at our sole option for an additional one-year period.
(4) The unsecured term loan matures in December 2009.
(5) The weighted average interest rates include the effect of our
interest rate swap agreements. See further detail of our interest
rate agreements on page 9.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Interest Rate Swap Agreements (1)
June 30, 2006
(Dollars in thousands)
(Unaudited)
Interest
Effective Pay
Transaction Effective Notional at June Rates Termination
Dates Dates Amounts 30, 2006 (2) Dates
------------- ----------- --------- ---------- -------- -----------
December 2003 December 30, December 29,
2005 $50,000 $50,000 4.150% 2006
December 2003 December 29, October 31,
2006 50,000 - 5.090% 2008
March 2004 December 31, December 31,
2004 25,000 25,000 2.956% 2006
March 2004 December 31, December 31,
2004 25,000 25,000 2.956% 2006
April 2004 April 28, April 30,
2006 50,000 50,000 4.230% 2007
April 2004 April 30, April 30,
2007 50,000 - 4.850% 2008
June 2004 June 30, June 30,
2005 50,000 50,000 4.343% 2007
December 2004 December 31, January 2,
2004 50,000 50,000 3.590% 2008
December 2004 January 3, July 1,
2006 50,000 50,000 3.927% 2008
May 2005 December 30, November 30,
2005 25,000 25,000 4.120% 2006
May 2005 June 30, June 29,
2006 50,000 50,000 4.270% 2007
May 2005 November 30, November 30,
2006 25,000 - 4.330% 2007
May 2005 June 29, June 30,
2007 50,000 - 4.400% 2008
May 2005 November 30, November 28,
2007 25,000 - 4.460% 2008
May 2005 June 30, June 30,
2008 50,000 - 4.509% 2009
May 2005 November 28, November 30,
2008 25,000 - 4.615% 2009
December 2005 December 29, November 30,
2006 50,000 - 4.730% 2009
December 2005 December 29, November 30,
2006 50,000 - 4.740% 2009
December 2005 January 2, December 31,
2008 50,000 - 4.768% 2010
June 2006 June 30, September 30,
2006 125,000 125,000 5.299% 2009
June 2006 October 31, December 31,
2008 50,000 - 5.340% 2010
June 2006 October 31, December 31,
2008 50,000 - 5.347% 2010
June 2006 June 30, June 30,
2008 50,000 - 5.325% 2010
June 2006 June 30, June 30,
2008 50,000 - 5.325% 2010
--------
Total Notional Amount in Effect
at June 30, 2006 $500,000
========
(1) For all interest rate swap agreements, interest is received based on
one month LIBOR.
(2) The interest pay rates represent the interest rate we will pay for
one month LIBOR under the respective interest rate swap agreement.
These rates do not include any spread in addition to one month LIBOR
that is due monthly as interest expense under our unsecured line of
credit and unsecured term loan.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Same Property Comparisons
(Dollars in thousands)
(Unaudited)
NOTE: This summary represents operating data for all properties that were
owned and fully operating for the entire periods presented (the "Second
Quarter Same Properties") for the Quarter periods and (the "Six Months
Same Properties") for the Six Month periods. Same Property Occupancy for
the quarters ended June 30, 2006 and 2005 was 94.5% and 94.2%,
respectively. Same Property Occupancy for the six months ended
June 30, 2006 and 2005 was 94.7% and 94.2%, respectively. Properties
under redevelopment are excluded from same property results. If the
portion of redevelopment properties not under active redevelopment were
included in the Same Property results, the percentage change in GAAP Basis
and Cash Basis revenue less operating expenses associated with the Second
Quarter Same Properties, as applicable, (excluding lease termination
fees, if any) less property operating expenses for the quarters ended
June 30, 2006 and 2005 would have been 3.7% and 6.7%, respectively. If
the portion of redevelopment properties not under active redevelopment
were included in the Same Property results, the percentage change in GAAP
Basis and Cash Basis revenue less operating expenses associated with the
Six Months Same Properties, as applicable, (excluding lease termination
fees, if any) less property operating expenses for the six months ended
June 30, 2006 and 2005 would have been 4.6% and 7.9%, respectively.
(1) Revenue less operating expenses computed under GAAP is total revenue
associated with the Second Quarter Same Properties and Six Months
Same Properties, as applicable, (excluding lease termination fees,
if any) less property operating expenses. Under GAAP, rental
revenue is recognized on a straight-line basis over the respective
lease terms. Revenue less operating expenses on a cash basis is
total revenue associated with the Second Quarter Same Properties and
Six Months Same Properties, as applicable (excluding lease
termination fees, if any) less property operating expenses, adjusted
to exclude the effect of straight-line rent adjustments required by
GAAP. Straight-line rent adjustments for the quarters ended June
30, 2006 and 2005 for the Second Quarter Same Properties were
$1,519,000 and $2,455,000, respectively. Straight-line rent
adjustments for the six months ended June 30, 2006 and 2005 for the
Six Months Same Properties were $2,260,000 and $4,043,000,
respectively. We believe that revenue less operating expenses 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.
(2) Fees received from tenants in connection with termination of their
leases, if any, are excluded from revenue in the Same Property
Comparisons.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties
(Dollars in thousands)
June 30, 2006
--------------------------------------------
Rentable Square Feet
Number of --------------------------------
Properties Operating Redevelopment Total
--------------------------------------------
Markets
California - Los Angeles Metro 1 31,343 - 31,343
California - San Diego 27 1,151,606 158,650 1,310,256
California - San Francisco Bay 20 1,352,687 102,633 1,455,320
Eastern Massachusetts 28 1,709,065 83,758 1,792,823
New Jersey/Suburban Philadelphia 7 378,337 15,012 393,349
Southeast 11 539,203 45,841 585,044
Suburban Washington D.C. 32 2,514,927 60,443 2,575,370
Washington - Seattle 12 830,539 12,719 843,258
International - Canada 3 296,362 - 296,362
------ ---------- -------- ---------
Total Properties - Continuing
Operations 141 8,804,069 479,056 9,283,125
------ ---------- -------- ---------
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties
(Dollars in thousands)
June 30, 2006 March 31, 2006
------------------------ --------------
Annualized Occupancy Occupancy
Base Rent(1) Percentage(1) Percentage(2)
------------------------ --------------
Markets
California - Los Angeles Metro $ 692 82.5% 100.0%
California - San Diego 30,118 94.0% 93.3%
California - San Francisco Bay 38,589 92.7%(3) 97.0%
Eastern Massachusetts 45,810 96.3% 95.7%
New Jersey/Suburban Philadelphia 6,545 100.0% 98.2%
Southeast 9,168 80.8%(4) 82.4%(4)
Suburban Washington D.C. 52,127 93.1% 95.7%
Washington - Seattle 24,513 88.5% 90.0%
International - Canada 6,463 100.0% 100.0%
---------- ----------- ------------
Total Properties - Continuing
Operations $214,025 93.1%(5) 94.5%(6)
========== =========== ============
(1) Excludes spaces at properties totaling 479,056 square feet undergoing
a permanent change in use to office/laboratory space through
redevelopment.
(2) Excludes three properties totaling 268,099 square feet that are
classified as "held for sale" as of March 31, 2006 and spaces at
properties totaling 540,875 square feet undergoing a permanent change
in use to office/laboratory space through redevelopment.
(3) The decrease in occupancy from March 31, 2006 to June 30, 2006 is
primarily due to a property with approximately 83,000 total rentable
square feet (with approximately 63,000 square feet of vacancy)
acquired in the second quarter of 2006. This property is an operating
property, may be redeveloped in the future and is included in our
Summary of Imbedded Future Development and Redevelopment Square
Footage on page 17.
(4) Substantially all of the vacant space is office or warehouse space.
(5) Including spaces undergoing a permanent change in use to
office/laboratory space through redevelopment, occupancy as of June
30, 2006 was 88.3%. See page 16 for additional information on our
redevelopment program.
(6) Including spaces undergoing a permanent change in use to
office/laboratory space through redevelopment, occupancy as of March
31, 2006 was 88.7%. See page 16 for additional information on our
redevelopment program.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Leasing Activity
For the Quarter Ended June 30, 2006
TI's/Lease
Commissions
Number Rental Per Average
of Square Expiring New Rate Square Lease
Leases Footage Rates Rates Changes Foot Terms
----------------------------------------------------------
Leasing Activity
Lease Expirations
Cash Basis 41 297,851 $25.59 - - - -
GAAP Basis 41 297,851 $24.28 - - - -
Renewed/Releasable
Space Leased
Cash Basis 12 139,981 $23.55 $24.70 4.9% $4.98 4.5 years
GAAP Basis 12 139,981 $21.93 $25.80 17.6% $4.98 4.5 years
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Lease Expirations
June 30, 2006
Square Percentage of Annualized Base
Year of Number Footage of Aggregate Rent of
Lease of Leases Expiring Leased Expiring Leases
Expiration Expiring Leases Square Feet (per square foot)
----------- ---------- ---------- -------------- ------------------
Square Footage of Expiring Leases
Markets 2006 2007
----------------------------- ------------- -----------------
California - Los Angeles Metro - 3,653
California - San Diego 191,656 132,362
California - San Francisco Bay 42,504 179,186
Eastern Massachusetts 133,662 107,443
New Jersey/Suburban Philadelphia - 21,000
Southeast 105,158 28,857
Suburban Washington D.C. 69,464 466,202
Washington - Seattle 45,918 19,542
International - Canada - -
----------- ------------
Total 588,362(1) 958,245
=========== ============
(1) Includes month-to-month leases for approximately 50,000 square feet.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Additions to and Dispositions of Properties
For The Quarter Ended June 30, 2006
(Dollars in thousands)
Acquisition Month of Rentable
Markets Amount Acquisition Square Feet
------------------------ ----------- ------------ ------------
Additions to Operating
Properties/Properties
Under Redevelopment
California - San Francisco
Bay (1) $13,950 April 82,712
California - San Francisco
Bay (2) 9,540 April 70,328
Eastern Massachusetts 12,335 May 97,566
------- -------
Additions to Operating
Properties 35,825 250,606
None N/A N/A N/A
------- -------
Additions to Properties
Under Redevelopment - -
------- -------
Total Additions to Operating
Properties/Properties
Under Redevelopment $35,825 250,606
======== =======
Acquisition Month of Developable
Markets Amount Acquisition Square Footage
------------------------ ----------- ------------ --------------
Additions of Land:
California - San Francisco
Bay $10,500 June 144,000
----------- --------------
Total Additions of Land $10,500 144,000
=========== ==============
New Jersey/Suburban
Philadelphia $14,512 April 107,874
Suburban Washington D.C. 27,300 June 160,225
------- -------
Total Dispositions $41,812 268,099
======= =======
(1) This property is intended to be redeveloped in the future and is
included in our Imbedded Future Development and Redevelopment Square
Footage on page 17.
(2) In addition to the existing rentable square feet of 70,328, this
property also has an additional 96,000 of developable square footage.
This additional 96,000 of future developable square footage is
included in our Imbedded Future Development and Redevelopment Square
Footage on page 17.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Properties Under Ground-Up Development, Square Footage Under
Redevelopment and Square Footage Under Development/Pre-Construction
June 30, 2006
Seattle 4Q06 50,000 (2)
------------
Total 325,000
------------
Square Footage Under
Redevelopment (4)
San Diego 4Q06 71,510
San Diego 3Q07 87,140
San Francisco Bay 3Q06 14,233
San Francisco Bay 3Q06 30,000
San Francisco Bay 3Q07 58,400
Eastern Massachusetts 1Q07 21,517
Eastern Massachusetts 2Q07 26,589
Eastern Massachusetts 1Q08 35,652
New Jersey/Suburban
Philadelphia 3Q06 15,012
Southeast 1Q08 45,841
Suburban Washington D.C. 3Q06 60,443
Seattle 4Q07 12,719
---------
Total 479,056
---------
Square Footage Under
Development/Pre-Construction (5)
Square Footage Under
Development/Pre-Construction 4,950,000
---------
Grand Total 5,754,000
=========
In accordance with Statement of Financial Accounting Standards No. 34,
"Capitalization of Interest Cost" ("SFAS 34") and Statement of Financial
Accounting Standards No. 67, "Accounting for Costs and Initial Rental
Operations of Real Estate Projects" ("SFAS 67"), we are required to
capitalize direct construction, including pre-construction costs,
interest, property taxes, insurance and other costs directly related and
essential to the acquisition, development, redevelopment or construction
of a project. Pursuant to SFAS 34 and SFAS 67, capitalization of
construction, development and redevelopment costs, including interest,
is required while activities are ongoing to prepare an asset for its
intended use. Pre-construction costs includes costs related to the
development of plans and the process of obtaining entitlements and
permits from government authorities. Costs incurred after a project is
substantially complete and ready for its intended use are expensed as
incurred. Should development, redevelopment or construction activity
cease, construction costs including interest, would no longer be
eligible for capitalization, under SFAS 34 and SFAS 67, and would be
expensed as incurred. Interest mandated to be capitalized on ground-up
development, active redevelopment and other construction projects,
including development/pre-construction on certain land parcels, for the
three months ended June 30, 2006, was approximately $8.8 million.
(1) The current construction cost of ground-up developments is expected to
average between $250 and $350 per developable square foot. Our
aggregate construction costs to date approximate $246 per developable
square foot.
(2) This development project is 100% leased.
(3) This development project is partially leased and the balance of space
is under negotiation.
(4) Our redevelopment program involves ongoing activities necessary for
the permanent change of use of applicable redevelopment space to
office/laboratory space. Spaces currently built out with laboratory
improvements are generally not placed into our value-add redevelopment
program. For properties undergoing redevelopment, only the portion of
the asset undergoing active redevelopment is excluded from operating
properties and related statistics (e.g. occupancy information, same
property performance, etc.). As required under GAAP, interest is
capitalized on redevelopment properties on the basis allocable only to
that portion of space actively undergoing redevelopment. The current
construction cost of properties under redevelopment will average
between $75 and $100 per square foot. In addition to properties under
active redevelopment, as of June 30, 2006 our asset base contains
imbedded opportunities for future permanent change of use to
office/laboratory space through redevelopment aggregating
approximately 1.1 million rentable square feet. See Summary of
Imbedded Future Development and Redevelopment Square Footage on
page 17
(5) See Summary of Imbedded Future Development and Redevelopment Square
Footage on page 17.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Imbedded Future Development and Redevelopment Square Footage
June 30, 2006
Imbedded Future Development and Redevelopment
------------------------------------------
Development Redevelopment
Markets Square Footage Square Footage Total
--------------------- ---------------- -------------- -----
San Francisco Bay 3,662,000 (1) 138,000 3,800,000
San Diego 467,000 (2) 143,000 610,000
Suburban Washington D.C. 886,000 (3) 397,000 1,283,000
Eastern Massachusetts 225,000 179,000 404,000
Washington - Seattle 386,000 (4) 120,000 506,000
Other 384,000 (5) 157,000 541,000
------------- ---------- --------
Total Imbedded Future
Development and
Redevelopment
Square Footage 6,010,000 1,134,000 7,144,000
============= ========== =========
The imbedded future development and redevelopment square footage
shown above represents future ground-up development projects and
future redevelopment (permanent change in use of applicable space to
office/laboratory space) projects. A significant portion of our
imbedded future development square footage is in the
development/pre-construction phase (entitlement, permitting, design,
etc.). See discussion on SFAS 34 and SFAS 67 on page 16. The exact
date of physical construction will depend on successful completion
of development/pre-construction activities and management's
assessment of overall market conditions. As required under GAAP,
direct construction, interest, property taxes, insurance and other
costs directly related and essential to the development/pre-
construction, or construction of a project, is mandated to be
capitalized during pre-construction when activities are ongoing to
bring these assets to their intended use.
(1) Approximately 3.6 million developable square feet located in the
San Francisco Bay market is in development/pre-construction.
(2) Approximately 350,000 developable square feet located in the San
Diego market is in development/pre-construction.
(3) Approximately 590,000 developable square feet located in the
Suburban Washington D.C. market is in development/pre-
construction.
(4) Approximately 360,000 developable square feet located in the
Seattle market is in development/pre-construction.
(5) Approximately 50,000 developable square feet is in
development/pre-construction.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Capital Costs
For the Six Months Ended June 30, 2006
(In thousands)
Property-related capital expenditures (1) $ 625
Leasing costs (2) $ 194
Property-related redevelopment costs (3) $ 44,097
Property-related development costs (3) $ 65,844
(1) Property-related capital expenditures include all major capital and
recurring capital expenditures except capital expenditures that are
recoverable from tenants, revenue-enhancing capital expenditures, or
costs related to the redevelopment of a property. Major capital
expenditures consist of roof replacements and HVAC systems which are
typically identified and considered at the time the property is
acquired. Capital expenditures fluctuate in any given period due to
the nature, extent or timing of improvements required and the extent
to which they are recoverable from tenants. Approximately 89% of
our leases (based on rentable square feet) provide for the recapture
of certain capital expenditures (such as HVAC systems maintenance
and/or replacement, roof replacement and parking lot resurfacing). In
addition, we implement an active preventative maintenance program at
each of our properties to minimize capital expenditures.
(2) Leasing costs consist of tenant improvements and leasing commissions
related to leasing of acquired vacant space and second generation
space.
(3) Amount includes leasing costs related to development and redevelopment
projects.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Conference Call Information
For the Second Quarter Ended June 30, 2006
Alexandria Real Estate Equities, Inc. will be hosting a conference call
to discuss its operating and financial results for the second quarter and
six months ended June 30, 2006:
Date: August 8, 2006
