Highlights
Second Quarter 2008:
- Second Quarter 2008 Funds from Operations (FFO) Per Share (Diluted) of $1.51, up 6%, Compared to Second Quarter 2007 FFO Per Share (Diluted) of $1.42
- Second Quarter 2008 Total Revenues up 17%, FFO Available to Common Stockholders up 15%, Compared to Second Quarter 2007
- Second Quarter 2008 Earnings Per Share From Continuing Operations (Diluted) of $0.67
- Second Quarter 2008 GAAP Same Property Revenues Less Operating Expenses up 3.7%
- Executed 37 Leases for 530,000 Rentable Square Feet in Second Quarter 2008; Approximately 1.1 Million Rentable Square Feet Leased in First Half 2008
- Second Quarter 2008 GAAP Rental Rate Increase of 19.4% on Renewed/Released Space
- Second Quarter 2008 Occupancy Increases to 95.0%
- Second Quarter 2008 Operating Margins at 74%
- Sold One Property Previously Classified as Held For Sale for $15 Million; Sold Seven Properties for $84 Million in First Half 2008
- In August 2008, Executed 100,000 Square Foot Lease Plus Option for an Additional 50,000 Square Feet with Pfizer Inc. at the Alexandria Center for Science and Technology at Mission Bay
PASADENA, Calif., Aug. 7 /PRNewswire-FirstCall/ -- Alexandria Real Estate
Equities, Inc. (NYSE: ARE) today announced operating and financial results for
the second quarter ended June 30, 2008.
For the second quarter of 2008, we reported total revenues of $110,054,000
and FFO available to common stockholders of $48,054,000, or $1.51 per share
(diluted), compared to total revenues of $93,769,000 and FFO available to
common stockholders of $41,607,000, or $1.42 per share (diluted), for the
second quarter of 2007. Comparing the second quarter of 2008 to the second
quarter of 2007, total revenues increased 17%, FFO available to common
stockholders increased 15% and FFO per share (diluted) increased 6%. For the
six months ended June 30, 2008, we reported total revenues of $220,013,000 and
FFO available to common stockholders of $95,030,000, or $2.98 per share
(diluted), before non-cash impairment charges, compared to total revenues of
$188,555,000 and FFO available to common stockholders of $81,952,000, or $2.80
per share (diluted), before a preferred stock redemption charge, for the six
months ended June 30, 2007. Comparing the six months ended June 30, 2008 to
the six months ended June 30, 2007, total revenues increased 17%, FFO
available to common stockholders and FFO per share (diluted) increased 16% and
6%, respectively, before non-cash impairment and preferred stock redemption
charges. In the first quarter of 2008, we incurred non-cash impairment
charges aggregating $6,635,000, or $0.21 per share (diluted), related to
assets 'held for sale' and certain investments, and in the first quarter of
2007 we recognized a preferred stock redemption charge of $2,799,000, or $0.10
per share (diluted).
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 and FFO available to
common stockholders after supplemental adjustments on both an aggregate and
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, 2008 and 2007 was
$27,003,000 and $22,654,000, respectively. Depreciation and amortization
expense for the six months ended June 30, 2008 and 2007 was $52,813,000 and
$46,172,000, respectively. Net income available to common stockholders for
the second quarter of 2008 was $21,303,000, or $0.67 per share (diluted),
compared to net income available to common stockholders of $21,334,000, or
$0.73 per share (diluted), for the second quarter of 2007. Net income
available to common stockholders for the second quarter of 2008 included a
gain of $182,000 on the sale of one property. Net income available to common
stockholders for the second quarter of 2007 included a gain of $2,340,000 on
the sale of one property. Excluding gains on sales of properties, net income
available to common stockholders for the second quarter of 2008 was
$21,121,000, or $0.66 per share (diluted), compared to net income available to
common stockholders of $18,994,000, or $0.65 per share (diluted), for the
second quarter of 2007. Net income available to common stockholders for the
six months ended June 30, 2008 was $56,063,000, or $1.76 per share (diluted),
compared to net income available to common stockholders of $36,442,000, or
$1.24 per share (diluted), for the six months ended June 30, 2007. Net income
available to common stockholders for the six months ended June 30, 2008
included aggregate gains of $20,395,000 on sales of seven properties and non-
cash impairment charges aggregating $6,635,000 related to one property 'held
for sale' as of June 30, 2008, a property sold during the second quarter of
2008 and certain investments. Net income available to common stockholders for
the six months ended June 30, 2007 included a gain on sales of two properties
of $3,461,000 and a preferred stock redemption charge of $2,799,000.
Excluding gains on sales of properties and non-cash impairment and preferred
stock redemption charges, net income available to common stockholders for the
six months ended June 30, 2008 was $42,303,000, or $1.33 per share (diluted),
compared to net income available to common stockholders of $35,780,000, or
$1.22 per share (diluted), for the six months ended June 30, 2007.
For the second quarter of 2008, we executed a total of 37 leases for
approximately 530,000 rentable square feet of space at 29 different properties
(excluding month-to-month leases). Of this total, approximately 343,000
rentable square feet related to new or renewal leases of previously leased
space and approximately 187,000 rentable square feet related to developed,
redeveloped or previously vacant space. Of the 187,000 rentable square feet,
approximately 124,000 rentable square feet were delivered from our development
or redevelopment programs, with the remaining approximately 63,000 rentable
square feet related to previously vacant space. Rental rates for these new or
renewal leases were on average approximately 19.4% higher (on a GAAP basis)
than rental rates for expiring leases.
For the six months ended June 30, 2008, we executed a total of 82 leases
for approximately 1,095,000 square feet of space at 48 different properties
(excluding month-to-month leases). Of this total, approximately 722,000
square feet were for new or renewal leases related to previously leased space
and approximately 373,000 square feet were for redeveloped, developed or
previously vacant space. Of the 373,000 square feet, approximately 182,000
square feet were delivered from our redevelopment or development programs,
with the remaining approximately 191,000 square feet for previously vacant
space. Rental rates for new or renewal leases were on average approximately
16.5% higher (on a GAAP basis) than rental rates for expiring leases.
During the second quarter of 2008, we sold one property located in the San
Diego market with approximately 49,437 rentable square feet for approximately
$15 million. During the six months ended June 30, 2008, we sold seven
properties, including five properties in the east bay area of the San
Francisco Bay market, aggregating approximately 409,000 rentable square feet.
The aggregate sales price for the properties sold in the six months ended June
30, 2008 was approximately $84 million.
In August 2008, we announced that Pfizer Inc. entered into a long-term
lease for approximately 100,000 square feet, with an option for an additional
50,000 square feet, at 455 Mission Bay Boulevard South, San Francisco,
California. Pfizer will locate its Biotherapeutics and Bioinnovation Center
at the Alexandria Center for Science and Technology at Mission Bay and joins
other prominent life science entities that comprise this world-class life
science cluster.
As of June 30, 2008, approximately 89% of our leases (on a rentable 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, 2008, approximately
8% of our leases (on a rentable square footage basis) required the tenants to
pay a majority of operating expenses. Additionally, as of June 30, 2008,
approximately 92% of our leases (on a rentable square footage basis) provided
for the recapture of certain capital expenditures and approximately 94% of our
leases (on a rentable square footage basis) contained effective annual rent
escalations that were 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, our updated guidance for FFO per share (diluted) and
earnings per share (diluted) is as follows:
2008
-----------
FFO per share (diluted) (1) $5.86 (1)
Earnings per share (diluted) (2) $3.02 (2)
Non.cash impairment charges
recognized in the first quarter of 2008 $0.21
(1) Includes non-cash impairment charges aggregating $6,635,000, or $0.21
per share (diluted), related to one property 'held for sale' as of
June 30, 2008, a property sold during the second quarter of 2008 and
certain investments. Our guidance for 2008 FFO per share (diluted)
after supplemental adjustments for the non-cash impairment charges is
$6.07.
(2) Includes non-cash impairment charges aggregating $6,635,000 and gains
on sales of property aggregating $20,395,000.
Alexandria Real Estate Equities, Inc., Landlord of Choice to the Life
Science Industry(R), is the largest owner and pre-eminent first-in-class
international real estate investment trust focused principally on science-
driven cluster formation through the ownership, operation, management,
redevelopment, selective development and acquisition of properties containing
technical environments, including office/laboratory space. Alexandria is the
leading provider of high-quality environmentally sustainable real estate,
technical infrastructure, services and capital to the broad and diverse life
science industry. Client tenants include institutional (universities and
independent not-for-profit institutions), pharmaceutical, biotechnology,
medical device, product, service, and translational entities, as well as
government agencies. Alexandria's operating platform is based on the
principle of 'clustering', with assets and operations located in key life
science markets. Our asset base approximates 13.3 million rentable square
feet consisting of 160 properties approximating 11.7 million rentable square
feet (including spaces undergoing active redevelopment) and properties
undergoing ground-up development approximating 1.6 million rentable square
feet. In addition, our asset base will enable us to grow to approximately
22.4 million square feet through future ground-up development approximating
9.1 million square feet of office/laboratory space.
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.
(Tables follow)
ALEXANDRIA REAL ESTATE EQUITIES, INC.
Financial Information
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Income statement data
Total revenues $ 110,054 $ 93,769 $ 220,013 $ 188,555
Expenses
Rental operations 27,588 22,169 55,917 45,446
General and
administrative 8,452 7,808 17,239 15,882
Interest 17,732 19,580 39,977 39,843
Depreciation and
amortization 27,002 22,134 52,675 45,054
Non-cash impairment
on investments - - 1,985 -
----------- ----------- ----------- -----------
80,774 71,691 167,793 146,225
Minority interest 948 902 1,899 1,809
----------- ----------- ----------- -----------
Income from
continuing operations 28,332 21,176 50,321 40,521
Income from discontinued
operations, net 89 2,872 15,788 5,311
----------- ----------- ----------- -----------
Net income 28,421 24,048 66,109 45,832
Dividends on
preferred stock 7,118 2,714 10,046 6,591
Preferred stock
redemption charge - - - 2,799
----------- ----------- ----------- -----------
Net income available to
common stockholders $ 21,303 $ 21,334 $ 56,063 $ 36,442
=========== =========== =========== ===========
Weighted average shares
of common stock
outstanding
Basic 31,615,359 29,045,354 31,580,974 28,972,732
=========== =========== =========== ===========
Diluted 31,887,477 29,362,514 31,856,468 29,337,440
=========== =========== =========== ===========
Earnings per share
- basic
Continuing operations
(net of preferred
stock dividends and
preferred stock
redemption charge) $ 0.67 $ 0.63 $ 1.28 $ 1.08
Discontinued
operations, net - 0.10 0.50 0.18
----------- ----------- ----------- -----------
Earnings per share
- basic $ 0.67 $ 0.73 $ 1.78 $ 1.26
=========== =========== =========== ===========
Earnings per share
- diluted
Continuing operations
(net of preferred
stock dividends
and preferred stock
redemption charge) $ 0.67 $ 0.63 $ 1.26 $ 1.06
Discontinued
operations, net - 0.10 0.50 0.18
----------- ----------- ----------- -----------
Earnings per share
- diluted $ 0.67 $ 0.73 $ 1.76 $ 1.24
=========== =========== =========== ===========
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 Investment
Trusts ('NAREIT') established the measurement tool of Funds From Operations
('FFO'). Since its introduction, FFO has become a widely used non-GAAP
financial measure among real estate investment trusts ('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.
We also present FFO after supplemental adjustments which excludes non-cash
impairment and preferred stock redemption charges. FFO after supplemental
adjustments differs from FFO established by NAREIT and may not be comparable
to that of other REITs. We believe FFO after supplemental adjustments
provides a meaningful supplemental financial measure.
Neither FFO nor FFO after supplemental adjustments should 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, and FFO after supplemental adjustments to funds from operations available
to common stockholders and funds from operations available to common
stockholders after supplemental adjustments for the three and six months ended
June 30, 2008 and 2007 (in thousands, except per share data):
Reconciliation of net income
available to common
stockholders to funds from Three Three Six Six
operations available to Months Months Months Months
common stockholders after Ended Ended Ended Ended
supplemental adjustments June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------- -------- -------- --------
Net income available
to common stockholders $ 21,303 $ 21,334 $ 56,063 $ 36,442
Add: Depreciation and
amortization (1) 27,003 22,654 52,813 46,172
Add: Minority interest 948 902 1,899 1,809
Subtract: Gain on sales
of property (2) (182) (2,340) (20,395) (3,461)
Subtract: FFO allocable
to minority interest (1,018) (943) (1,985) (1,809)
-------- -------- -------- --------
Funds from operations available
to common stockholders 48,054 41,607 88,395 79,153
Add: Preferred stock
redemption charge (3) - - - 2,799
Add: Non-cash impairment
charges (4) - - 6,635 -
-------- -------- -------- --------
Funds from operations available
to common stockholders after
supplemental adjustments $ 48,054 $ 41,607 $ 95,030 $ 81,952
======== ======== ======== ========
FFO per share (diluted)
after supplemental adjustments
Basic $ 1.52 $ 1.43 $ 3.01 $ 2.83
======== ======== ======== ========
Diluted $ 1.51 $ 1.42 $ 2.98 $ 2.80
======== ======== ======== ========
Reconciliation of earnings
per share (diluted) to
FFO per share (diluted) after
supplemental adjustments
Earnings per share (diluted) $ 0.67 $ 0.73 $ 1.76 $ 1.24
Depreciation and
amortization(1) 0.85 0.77 1.66 1.58
Minority interest 0.03 0.03 0.06 0.06
Gain on sales of property (2) (0.01) (0.08) (0.65) (0.12)
FFO allocable to
minority interest (0.03) (0.03) (0.06) (0.06)
-------- -------- -------- --------
FFO per share (diluted) 1.51 1.42 2.77 2.70
Preferred stock
redemption charge (3) - - - 0.10
Non-cash impairment charges (4) - - 0.21 -
-------- -------- -------- --------
FFO per share (diluted) after
supplemental adjustments $ 1.51 $ 1.42 $ 2.98 $ 2.80
======== ======== ======== ========
(1) Includes depreciation and amortization for assets 'held for sale'
reflected as discontinued operations (for the periods prior to when
such assets were classified as 'held for sale').
(2) Gain on sales of property relates to the disposition of one property
sold during the second quarter 2008, six properties sold during the
first quarter 2008, one property sold during the second quarter of
2007 and one property sold during the first quarter of 2007. Gain on
sales of property is included in the income statement in income from
discontinued operations, net.
(3) During the first quarter of 2007, we redeemed our 9.10% series B
cumulative redeemable preferred stock.
