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Alexandria Real Estate Equities, Inc. Reports Fourth Quarter and Year Ended December 31, 2013 Financial and Operating Results



 Alexandria Real Estate Equities, Inc. Reports Fourth Quarter and Year Ended
              December 31, 2013 Financial and Operating Results

EPS - Diluted of $0.51 for 4Q13

FFO Per Share - Diluted, as Adjusted, of $1.16 for 4Q13

Total Revenues of $168.8 Million for 4Q13

NOI of $118.9 Million for 4Q13

Strong Demand in Key Cluster Submarkets Drives Record Leasing Activity

PR Newswire

PASADENA, Calif., Feb. 3, 2014

PASADENA, Calif., Feb. 3, 2014 /PRNewswire/ -- Alexandria Real Estate
Equities, Inc. (NYSE: ARE) today announced financial and operating results for
the fourth quarter and year ended December 31, 2013.

"We are very pleased to announce our fourth quarter and year ended December
31, 2013, financial and operating results.  Our per share results for the
fourth quarter and year ended December 31, 2013, reflected 1) the strength of
our core operations, 2) completion of significant high value Class A
development projects in AAA locations in urban science and technology cluster
markets, and 3) the completion of many significant and important improvements
in our long-term capital structure.  Monetization of significant
non-income-producing land parcels (Alexandria Center™ for Science and
Technology located in Mission Bay, Alexandria Center™ at Kendall Square
located in Cambridge, and Alexandria Center™ for Life Science located in New
York City) through lease-up and development, and through selective sales has
generated significant long-term asset value.  In 2012 and 2013, we sold
certain non-strategic income-producing assets and land for approximately $275
million.  Proceeds from these sales, including the $55 million from the sale
of a land parcel in late 2013, were invested into high value/low cap rate
Class A development projects with an estimated value of approximately $450
million, representing an increase of almost $175 million above the value of
the properties sold.  We are also pleased with the successful execution of our
second 10-year unsecured bond offering in early 2013 at a rate of 3.90%.  The
capital generated from the sales of properties and issuance of long-term debt
and common stock resulted in short-term per share dilution, improved our
long-term capital structure and funded our Class A developments, among others,
at Alexandria Center™ at Kendall Square located in Cambridge.  We are
optimistic about our ability to deliver solid and stable per share earnings
growth and continue to increase long-term asset value in 2014 and beyond,"
said Joel S. Marcus, Chief Executive Officer, and Founder of Alexandria Real
Estate Equities, Inc.

Results

  o Net income attributable to Alexandria Real Estate Equities, Inc.'s
    ("Alexandria's") common stockholders – diluted:

       o $36.2 million, or $0.51 per share, for 4Q13 compared to $21.0
         million, or $0.33 per share, for 4Q12
       o $108.8 million, or $1.60 per share, for YE 2013 compared to $67.6
         million, or $1.09 per share, for YE 2012

  o Funds from operations ("FFO") attributable to Alexandria's common
    stockholders – diluted, as adjusted:

       o $82.5 million, or $1.16 per share, for 4Q13 compared to $72.9
         million, or $1.16 per share, for 4Q12
       o $299.1 million, or $4.40 per share, for YE 2013 compared to $272.1
         million, or $4.38 per share, for YE 2012

Core operating metrics

  o Total revenues:

       o $168.8 million for 4Q13, up 11.6%, compared to $151.3 million for
         4Q12
       o $631.2 million for YE 2013, up 9.9%, compared to $574.5 million for
         YE 2012

  o Net operating income ("NOI"):

       o $118.9 million for 4Q13, up 13.1%, compared to $105.1 million for
         4Q12
       o $442.1 million for YE 2013, up 10.0%, compared to $401.7 million for
         YE 2012

  o Same property NOI performance:

       o 4.6% and 1.4% increases on a cash and GAAP basis, respectively, for
         4Q13 compared to 4Q12
       o 5.4% and 1.8% increases on a cash and GAAP basis, respectively, for
         YE 2013 compared to YE 2012

  o Leasing activity at record levels for 4Q13:

       o Executed 64 leases for 1,344,687 rentable square feet ("RSF"),
         including 218,986 RSF of development and redevelopment space
       o Rental rate increases of 2.6% and 18.2% on a cash and GAAP basis,
         respectively, on renewed/re-leased space

  o Leasing activity at record levels for YE 2013:

       o Executed 212 leases for 3,645,056 RSF, including 1,174,306 RSF of
         development and redevelopment space
       o Rental rate increases of 4.0% and 16.2% on a cash and GAAP basis,
         respectively, on renewed/re-leased space

  o Occupancy for properties in North America, as of December 31, 2013:

       o 390 basis points ("bps") increase in overall occupancy of operating
         and redevelopment properties from YE 2012 to YE 2013
       o 95.9% for operating properties and 95.5% for operating and
         redevelopment properties, up 90 bps and 100 bps, respectively,
         compared to September 30, 2013

  o Operating margins steady at 70% for 4Q13 and YE 2013
  o 51% of total annualized base rent ("ABR") from investment-grade client
    tenants
  o Key leasing in 4Q13:

       o Quest Diagnostics Incorporated extended their lease for 248,186 RSF
         at 14225 Newbrook Drive in the Maryland market
       o The United States Government (NIH) extended their leases for 114,255
         RSF at 9800 Medical Center Drive and 5 Research Court in the Maryland
         market
       o Tandem Diabetes Care, Inc. extended their leases for 66,442 RSF at
         11025, 11035, and 11045 Roselle Street, and leased an additional
         41,163 RSF at 11065 and 11075 Roselle Street in the San Diego market
       o Google Inc. leased 63,430 RSF at 2400/2450 Bayshore Parkway in the
         San Francisco Bay Area market
       o Medivation, Inc. leased 51,632 RSF at 499 Illinois Street in the San
         Francisco Bay Area market

Other key 2013 highlights

  o Highest quarter and year of leasing activity in the Company's history
  o $612 million decrease in bank facility debt
  o 9.1% average cash yields (estimate) for developments commenced in 2013
  o 600 bps decrease in non-income-producing assets as a percentage of gross
    investments in real estate from YE 2012 to YE 2013
  o Seven new LEED Gold certifications

Value-creation projects and external growth

Value-creation development and redevelopment projects delivered in 4Q13

  o In December 2013, we delivered a significant portion of the second
    building of our flagship Alexandria Center™ for Life Science in Manhattan
    at 430 East 29th Street:

       o Delivered 189,011 RSF to high-quality tenants, including Roche and
         New York University
       o The estimated initial stabilized cash and GAAP yields for the
         development project are 6.6% and 6.5%, respectively, and the
         estimated average cash yield is 7.1%

  o In October 2013, we delivered our redevelopment project at 4757 Nexus
    Center Drive in the University Town Center submarket of San Diego:

       o Delivered 57,198 RSF, or 82%, of this project to Genomatica, Inc. 
         The tenant will take occupancy of the remaining 12,475 RSF in 18 to
         24 months
       o The estimated initial stabilized cash and GAAP yields for the entire
         redevelopment project are 8.1% and 8.0%, respectively, and the
         estimated average cash yield is 8.7%

Acquisitions

On November 12, 2013, we acquired three adjacent buildings aggregating 55,213
RSF at 11055, 11065, and 11075 Roselle Street in the Sorrento Valley submarket
of San Diego for a total purchase price of $8.3 million.  The buildings are
currently undergoing redevelopment and we pre-leased 75% of the space to
Tandem Diabetes Care, Inc.  The estimated initial stabilized yields for this
project are 7.8% and 7.9%, on a cash and GAAP basis, respectively.  The
estimated average cash yield for the project is 8.0%.

On November 27, 2013, we acquired 150 Second Street, a 123,210 RSF, newly
developed Class A property in the Cambridge submarket of Greater Boston for a
total purchase price of $94.5 million.  The building is 85% leased to two
publicly traded life science companies.  The estimated initial stabilized
yields for this property are 7.3% and 7.5%, on a cash and GAAP basis,
respectively.  The estimated average cash yield for the project is 8.2%.

In 4Q13 we recognized $1.4 million of expenses in connection with several
acquisitions, including costs for deals we ultimately did not acquire.  The
acquisitions completed in November 2013 and January 2014 were for an aggregate
purchase price of $166.8 million.  See subsequent events for additional
information.  The acquisition-related expenses have been classified in general
and administrative expenses. 

Dispositions

On December 19, 2013, we completed the sale of our final land parcel in the
Mission Bay submarket of the San Francisco Bay Area at 1600 Owens Street,
along with certain parking spaces, for an aggregate sales price of $55.2
million and a gain of $4.1 million.  Ownership of the parcel was strategically
important to Kaiser Foundation Health Plan, Inc. and we will earn a fee to
manage the construction of a 219,000 RSF medical office building.

Balance sheet

  o Liquidity of $1.65 billion, consisting of $1.30 billion available under
    our unsecured senior line of credit, $295.4 million available under our
    construction loan commitments, and $57.7 million in cash and cash
    equivalents as of December 31, 2013
  o Net debt to adjusted EBITDA of 6.6x for 4Q13 (annualized)
  o Fixed charge coverage ratio of 3.2x for 4Q13 (annualized)
  o Executed additional interest rate swap agreements to provide a minimum of
    hedged variable-rate debt of $750 million in 2014 and $500 million in each
    of 2015 and 2016.
  o Non-income-producing assets (CIP and land) at 17% of gross investments in
    real estate as of YE 2013, down from 23% as of YE 2012, due to deliveries
    of development and redevelopment projects and completed land sales
  o Extended the maturity date of a $76.0 million secured note payable from
    April 20, 2014, to January 20, 2017

LEED certifications

During 2013, we obtained LEED Gold Certifications at seven projects.  As of
December 31, 2013, our asset base had 25 LEED Certified projects, including
two LEED Platinum projects, 16 LEED Gold projects, and seven LEED Silver
projects.  Upon completion of an additional 21 in-process certifications, 50%
of the total RSF (continuing operations) will be LEED Certified.

Subsequent events

Acquisition of 3545 Cray Court

On January 30, 2014, we acquired 3545 Cray Court, a 116,556 RSF
laboratory/office property located in the Torrey Pines submarket of San Diego,
for a total purchase price of $64.0 million.  The property is currently 100%
occupied by The Scripps Research Institute.  The estimated initial stabilized
yields for this property are 7.0% and 7.2%, on a cash and GAAP basis,
respectively.  In connection with the acquisition, we assumed a $40.7 million
non-recourse secured note payable with a contractual interest rate of 4.66%
and a maturity date of January 2023.

Repayment of secured note payable

On January 31, 2014, we repaid our $208.7 million secured note payable related
to Alexandria Technology Square^®.  Our joint venture partner funded $20.9
million of the proceeds required to repay the secured note payable.

Guidance

Based on our current view of existing market conditions and other assumptions,
we have updated guidance for earnings per share – diluted and FFO per share –
diluted, both amounts attributable to Alexandria's common stockholders for the
year ended December 31, 2014.  The table below provides a reconciliation of
FFO per share – diluted, a non-GAAP measure, from earnings per share –
diluted, the most directly comparable GAAP measure, as well as other key
assumptions included in our guidance for the year ended December 31, 2014.  We
expect that our principal liquidity needs for the year ended December 31,
2014, 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.  The
key assumptions behind the sources and uses of capital 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, leasing
activity, and lease 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 under Part I and the "Risk
Factors" section under Item 1A of our annual report on Form 10-K for the year
ended December 31, 2012, in our subsequent quarterly reports on Form 10-Q, and
in our subsequent annual report on Form 10-K for the year ended December 31,
2013.  We expect to update our forecast of sources and uses of capital on a
quarterly basis.

 

                                                                 2014 Guidance
 EPS and FFO Per Share                                           Low – High
 Earnings per share attributable to Alexandria's common          $1.75 – $1.95
 stockholders – diluted
 Add back: depreciation and amortization                         2.87
 Other                                                           (0.02)
 FFO per share attributable to Alexandria's common stockholders  $4.60 – $4.80
 – diluted

 

Sources and Uses                             Key
of Capital                                   Assumptions
                  Low           High                        Low        High
(In thousands)                               (Dollars in
                                             thousands)
                                             Occupancy
                                             percentage for
Sources of                                   operating 
capital:                                      properties at
                                             December 31,
                                             2014:
    Unsecured                                     North
senior notes      $ 350,000     $  450,000   America          96.5%      97.0%
payable
    Secured loan
additions                                    Rental rate
(construction        100,000       223,000   steps on lease
     loans and                               renewals and
assumed debt)
^(1)
    Secured notes                              re-leasing
payable              (210,000)     (210,000) of space:
repayments ^(2)
    Activity on
our unsecured
senior line of       80,000        (53,000)      Cash basis   3%         5%
     credit and
senior unsecured
term loan
          Net
sources of debt      320,000       410,000       GAAP basis   8%         11%
capital
    Net cash
provided by
operating            100,000       120,000
activities
      after
dividends
Land
sales/strategic      145,000       245,000   Same property
joint venture                                NOI growth:
capital
Total sources of  $  565,000    $  775,000   Cash basis       4%         6%
capital
                                                 GAAP basis   2%         4%
Uses of capital:                             Straight-line  $ 42,000   $ 47,000
                                             rents
                                             General and
     Construction $  565,000    $  625,000   administrative $ 48,000   $ 52,000
                                             expenses
     Acquisitions    —             150,000   Capitalization $ 35,000   $ 45,000
                                             of interest
Total uses of     $  565,000    $  775,000   Interest       $ 77,000   $ 93,000
capital                                      expense, net

(1)   Includes the assumption of a non-recourse secured note payable of $40.7
million in connection with the acquisition of a property in January 2014.
(2)   Represents the principal amortization payments on all of our secured
notes payable, including one secured note payable related to Alexandria
Technology Square^® which was repaid on January 31, 2014.  This amount
excludes $20.9 million that was funded by our 10% joint venture partner.

Earnings Call Information

We will host a conference call on Tuesday, February 4, 2014, 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 fourth
quarter and year ended December 31, 2013.  To participate in this conference
call, dial 877-440-5807 or 719-325-4940 and confirmation code 6656527, shortly
before 3:00 p.m. ET/12:00 p.m. noon PT.  The audio webcast can be accessed at:
www.are.com, in the "For Investors" section.  A replay of the call will be
available for a limited time from 6:00 p.m. ET/3:00 p.m. PT on Tuesday,
February 4, 2014.  The replay number is 888-203-1112 or 719-457-0820 and the
confirmation code is 6656527.

Additionally, a copy of this Earnings Press Release and Supplemental
Information for the fourth quarter and year ended December 31, 2013, is
available in the "For Investors" section of our website at www.are.com or by
following this link: http://www.are.com/fs/2013q4.pdf.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE: ARE), a self-administered and
self-managed real estate investment trust ("REIT"), is the largest and leading
REIT focused principally on owning, operating, developing, redeveloping, and
acquiring high-quality, sustainable real estate for the broad and diverse life
science industry.  As of December 31, 2013, Alexandria's asset base consisted
of 30.9 million RSF, including 17.5 million RSF of operating and current
value-creation development/redevelopment assets, as well as an additional 13.4
million RSF in future ground-up development projects.  Founded by Jerry M.
Sudarsky and Joel S. Marcus in 1994, Alexandria pioneered the
laboratory/office niche and has become the leading life science real estate
brand and dominant market presence in the top life science clusters, including
Greater Boston, the San Francisco Bay Area, San Diego, Greater New York City,
Maryland, Seattle, and Research Triangle Park.  Alexandria manages its
properties through fully integrated regional and life science teams with
unparalleled real estate and life science expertise.  As the Landlord of
Choice to the Life Science Industry^®, Alexandria is known for its
high-quality and diverse client tenant base, which includes renowned academic
and medical institutions, multinational pharmaceutical companies, public and
private biotechnology entities, United States government research agencies,
medical device companies, industrial biotech companies, venture capital firms,
and life science product and service companies.  Alexandria has a proven and
superior track record developing Class A laboratory/office assets focused
primarily in key urban science center campus locations in AAA cluster
locations adjacent to leading academic medical research centers, offering
highly creative amenities that drive client tenant productivity and foster
innovation, and gathering its longstanding and expansive network in the life
science community.  We believe these advantages result in higher occupancy
levels, longer lease terms, higher rental income, higher returns, and greater
long-term asset value. For additional information on Alexandria, please visit
www.are.com.

***********

This document includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended.  Such forward-looking statements
include, without limitation, statements regarding our 2014 earnings per share
attributable to Alexandria's common stockholders – diluted, 2014 FFO per share
attributable to Alexandria's common stockholders – diluted, NOI, and our
projected sources and uses of capital for the year ended December 31, 2014. 
You can identify the forward-looking statements by their use of
forward-looking words, such as "believes," "expects," "may," "will," "should,"
"seeks," "intends," "plans," "estimates," "anticipates," or "projects," or the
negative of those words or similar words.  These forward-looking statements
are based on our current expectations, beliefs, projections, future plans and
strategies, anticipated events or trends and similar expressions concerning
matters that are not historical facts, as well as a number of assumptions
concerning future events.  These statements are subject to risks,
uncertainties, assumptions, and other important factors that could cause
actual results to differ materially from the results discussed in the
forward-looking statements.  Factors that might cause such a difference
include, without limitation, our failure to obtain capital (debt, construction
financing, and/or equity) or refinance debt maturities, increased interest
rates and operating costs, adverse economic or real estate developments in our
markets, our failure to successfully 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, increased vacancy rates or
failure to renew or replace expiring leases, defaults on, or non-renewal of,
leases by client tenants, general and local economic conditions, and other
risks and uncertainties detailed in our filings with the Securities and
Exchange Commission ("SEC").  Accordingly, you are cautioned not to place
undue reliance on such forward-looking statements.  All forward-looking
statements are made as of February 3, 2014, the date this document was first
made available on our website, and we assume no obligation to update this
information and expressly disclaim any obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise.  For more discussion relating to risks and uncertainties
that could cause actual results to differ materially from those anticipated in
our forward-looking statements, and risks to our business in general, please
refer to our SEC filings, including our most recent annual report on Form 10-K
and any subsequent quarterly reports on Form 10-Q.

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)
               Three Months Ended                                     Year Ended
               12/31/13   9/30/13    6/30/13    3/31/13    12/31/12   12/31/13   12/31/12
Revenues:
Rental         $ 125,693  $ 116,052  $ 114,493  $ 111,526  $ 111,798  $ 467,764  $ 422,793
Tenant         39,970     38,691     35,869     35,565     35,671     150,095    133,280
recoveries
Other income   3,160      3,572      3,568      2,992      3,785      13,292     18,424
Total revenues 168,823    158,315    153,930    150,083    151,254    631,151    574,497
Expenses:
Rental         49,892     47,684     46,277     45,186     46,132     189,039    172,756
operations
General and    12,751     11,666     12,455     11,648     12,633     48,520     47,747
administrative
Interest       17,783     16,171     15,978     18,020     17,941     67,952     69,184
Depreciation
and            48,084     48,866     46,344     45,829     47,280     189,123    185,687
amortization
Impairment of  —          —          —          —          2,050      —          2,050
land parcel
Loss on early
extinguishment —          1,432      560        —          —          1,992      2,225
of debt
Total expenses 128,510    125,819    121,614    120,683    126,036    496,626    479,649
Income from
continuing     40,313     32,496     32,316     29,400     25,218     134,525    94,848
operations
(Loss) income
from
discontinued
operations:
(Loss) income
from
discontinued
operations     (143)      (43)       249        837        5,190      900        20,216
before
impairment of
real estate
Impairment of  —          —          —          —          (1,601)    —          (11,400)
real estate
(Loss) income
from
discontinued   (143)      (43)       249        837        3,589      900        8,816
operations,
net
Gain on sale   4,052      —          772        —          —          4,824      1,864
of land parcel
Net income     44,222     32,453     33,337     30,237     28,807     140,249    105,528
Net income
attributable
to             1,110      960        980        982        1,012      4,032      3,402
noncontrolling
interests
Dividends on
preferred      6,471      6,472      6,471      6,471      6,471      25,885     27,328
stock
Preferred
stock          —          —          —          —          —          —          5,978
redemption
charge
Net income
attributable
to unvested    394        442        403        342        324        1,581      1,190
restricted
stock awards
Net income
attributable
to             $ 36,247   $ 24,579   $ 25,483   $ 22,442   $ 21,000   $ 108,751  $ 67,630
Alexandria's
common
stockholders
Earnings per
share
attributable
to
Alexandria's
common
stockholders –
basic and
diluted:
Continuing     $ 0.51     $ 0.35     $ 0.38     $ 0.35     $ 0.27     $ 1.59     $ 0.95
operations
Discontinued
operations,    —          —          —          0.01       0.06       0.01       0.14
net
Earnings per
share – basic  $ 0.51     $ 0.35     $ 0.38     $ 0.36     $ 0.33     $ 1.60     $ 1.09
and diluted
Weighted
average shares
of common
stock
outstanding
for
calculating
earnings per
share
attributable
to
Alexandria's
common
stockholders:
– Basic        71,000     70,900     66,973     63,161     63,092     68,038     62,160
– Diluted      71,000     70,900     66,973     63,161     63,092     68,038     62,160

 

 

Consolidated Balance Sheets

(In thousands)

(Unaudited)
                 12/31/13     9/30/13      6/30/13      3/31/13      12/31/12
Assets
Investments in   $ 6,776,914  $ 6,613,761  $ 6,453,379  $ 6,375,182  $ 6,424,578
real estate, net
Cash and cash    57,696       53,839       302,205      87,001       140,971
equivalents
Restricted cash  27,709       30,654       30,914       30,008       39,947
Tenant           9,918        8,671        7,577        9,261        8,449
receivables
Deferred rent    190,425      182,909      177,507      170,100      170,396
Deferred leasing
and financing    192,658      179,805      164,362      159,872      160,048
costs, net
Investments      140,288      129,163      122,605      123,543      115,048
Other assets     134,156      159,567      120,740      135,952      90,679
Total assets     $ 7,529,764  $ 7,358,369  $ 7,379,289  $ 7,090,919  $ 7,150,116
Liabilities,
Noncontrolling
Interests, and
Equity
Secured notes    $ 708,831    $ 708,653    $ 711,029    $ 730,714    $ 716,144
payable
Unsecured senior 1,048,230    1,048,190    1,048,395    549,816      549,805
notes payable
Unsecured senior 204,000      14,000       —            554,000      566,000
line of credit
Unsecured senior 1,100,000    1,100,000    1,200,000    1,350,000    1,350,000
bank term loans
Accounts
payable, accrued
expenses, and    435,342      452,139      368,249      367,153      423,708
tenant security
deposits
Dividends        54,420       54,413       52,141       43,955       41,401
payable
Total            3,550,823    3,377,395    3,379,814    3,595,638    3,647,058
liabilities
Commitments and
contingencies
Redeemable
noncontrolling   14,444       14,475       14,505       14,534       14,564
interests
Alexandria Real
Estate
Equities, Inc.'s
stockholders'
equity:
Series D
cumulative       250,000      250,000      250,000      250,000      250,000
convertible
preferred stock
Series E
cumulative       130,000      130,000      130,000      130,000      130,000
redeemable
preferred stock
Common stock     712          711          710          633          632
Additional       3,572,281    3,578,343    3,596,477    3,075,860    3,086,052
paid-in capital
Accumulated
other            (36,204)     (40,026)     (39,565)     (22,890)     (24,833)
comprehensive
loss
Alexandria's
stockholders'    3,916,789    3,919,028    3,937,622    3,433,603    3,441,851
equity
Noncontrolling   47,708       47,471       47,348       47,144       46,643
interests
Total equity     3,964,497    3,966,499    3,984,970    3,480,747    3,488,494
Total
liabilities,
noncontrolling   $ 7,529,764  $ 7,358,369  $ 7,379,289  $ 7,090,919  $ 7,150,116
interests, and
equity

 

Funds From Operations and Adjusted Funds From Operations

(In thousands, except per share amounts)

(Unaudited)
The following table presents a reconciliation of net income attributable to Alexandria's common
stockholders – basic, the most directly comparable financial measure presented in accordance
with GAAP, to FFO attributable to Alexandria's common stockholders – diluted, FFO attributable
to Alexandria's common stockholders – diluted, as adjusted, and AFFO attributable to
Alexandria's common stockholders – diluted.  For the computation of the weighted average shares
used to compute the per share information, refer to the "Definitions and Other Information"
section in our supplemental information.
                      Three Months Ended                                   Year Ended
                      12/31/13     9/30/13   6/30/13   3/31/13   12/31/12  12/31/13   12/31/12
Net income
attributable to       $ 36,247     $ 24,579  $ 25,483  $ 22,442  $ 21,000  $ 108,751  $ 67,630
Alexandria's common
stockholders – basic
Depreciation and      48,101       49,102    46,580    46,995    48,072    190,778    192,005
amortization
(Gain) loss on sale   —            —         (219)     340       —         121        (1,564)
of real estate
Impairment of real    —            —         —         —         1,601     —          11,400
estate
Gain on sale of land  (4,052)      —         (772)     —         —         (4,824)    (1,864)
parcel
Amount attributable
to noncontrolling
interests/unvested
restricted stock
awards:
Net income            1,504        1,402     1,383     1,324     1,336     5,613      4,592
FFO                   (1,582)      (1,494)   (1,437)   (1,064)   (1,109)   (5,577)    (4,561)
FFO attributable to
Alexandria's common   80,218       73,589    71,018    70,037    70,900    294,862    267,638
stockholders – basic
Assumed conversion of
8.00% unsecured       —            5         5         5         5         15         21
senior convertible
notes
FFO attributable to
Alexandria's common   80,218       73,594    71,023    70,042    70,905    294,877    267,659
stockholders –
diluted
Realized gain on
equity investment
primarily related to  —            —         —         —         —         —          (5,811)
one non-tenant life
science entity
Impairment of land    —            —         —         —         2,050     —          2,050
parcel
Impairment of         853      (1) —         —         —         —         853        —
investments
Acquisition-related   1,446    (2) —         —         —         —         1,446      —
expenses
Loss on early
extinguishment of     —            1,432     560       —         —         1,992      2,225
debt
Preferred stock       —            —         —         —         —         —          5,978
redemption charge
Allocation to
unvested restricted   (12)         (11)      (12)      —         (19)      (35)       (39)
stock awards
FFO attributable to
Alexandria's common   82,505       75,015    71,571    70,042    72,936    299,133    272,062
stockholders –
diluted, as adjusted
Non-revenue-enhancing
capital expenditures:
Maintenance building  (1,047)      (1,481)   (337)     (596)     (329)     (3,461)    (2,068)
improvements
Tenant improvements
and leasing           (8,291)  (3) (3,739)   (2,990)   (882)     (3,170)   (15,902)   (9,181)
commissions
Straight-line rent    (7,928)      (5,570)   (8,239)   (6,198)   (9,240)   (27,935)   (28,456)
revenue
Straight-line rent
expense on ground     445          374       539       538       471       1,896      3,285
leases
Capitalized income
from development      72           40        9         22        45        143        645
projects
Amortization of
acquired above and    (826)        (830)     (830)     (830)     (844)     (3,316)    (3,200)
below market leases
Amortization of loan  2,636        2,487     2,427     2,386     2,505     9,936      9,832
fees
Amortization of debt  146          153       115       115       110       529        511
premiums/discounts
Stock compensation    4,011        3,729     4,463     3,349     3,748     15,552     14,160
Allocation to
unvested restricted   94           28        50        19        63        191        127
stock awards
AFFO attributable to
Alexandria's common   $ 71,817     $ 70,206  $ 66,778  $ 67,965  $ 66,295  $ 276,766  $ 257,717
stockholders –
diluted
                      Three Months Ended                                   Year Ended
                      12/31/13     9/30/13   6/30/13   3/31/13   12/31/12  12/31/13   12/31/12
Net income per share
attributable to       $ 0.51       $ 0.35    $ 0.38    $ 0.36    $ 0.33    $ 1.60     $ 1.09
Alexandria's common
stockholders – basic
Depreciation and      0.68         0.69      0.69      0.74      0.76      2.80       3.10
amortization
Loss (gain) on sale   —            —         —         0.01      —         —          (0.03)
of real estate
Impairment of real    —            —         —         —         0.03      —          0.18
estate
Gain on sale of land  (0.06)       —         (0.01)    —         —         (0.07)     (0.03)
parcel
FFO per share
attributable to
Alexandria's common   1.13         1.04      1.06      1.11      1.12      4.33       4.31
stockholders – basic
and diluted
Realized gain on
equity investment
primarily related to  —            —         —         —         —         —          (0.09)
one non-tenant life
science entity
Impairments           0.01         —         —         —         0.04      0.01       0.04
Acquisition-related   0.02         —         —         —         —         0.02       —
expenses
Loss on early
extinguishment of     —            0.02      0.01      —         —         0.04       0.02
debt
Preferred stock       —            —         —         —         —         —          0.10
redemption charge
FFO per share
attributable to
Alexandria's common   1.16         1.06      1.07      1.11      1.16      4.40       4.38
stockholders –
diluted, as adjusted
Non-revenue-enhancing (0.13)       (0.07)    (0.05)    (0.02)    (0.06)    (0.28)     (0.18)
capital expenditures
Straight-line rent    (0.11)       (0.08)    (0.12)    (0.10)    (0.15)    (0.41)     (0.46)
revenue
Straight-line rent
expense on ground     0.01         0.01      0.01      0.01      0.01      0.03       0.05
leases
Amortization of
acquired above and    (0.01)       (0.01)    (0.01)    (0.01)    (0.01)    (0.05)     (0.05)
below market leases
Amortization of loan  0.03         0.03      0.03      0.04      0.04      0.14       0.16
fees
Stock compensation    0.06         0.05      0.07      0.05      0.06      0.23       0.23
Other                 —            —         —         —         —         0.01       0.02
AFFO per share
attributable to
Alexandria's          $ 1.01       $ 0.99    $ 1.00    $ 1.08    $ 1.05    $ 4.07     $ 4.15
common stockholders –
diluted

(1)   Represents an impairment recognized in 4Q13 related to our investment in
two private life science companies.
(2)   Represents costs classified in general and administrative expenses in
connection with several acquisitions, including costs for deals we ultimately
did not acquire.  The acquisitions completed in November 2013 and January 2014
were for an aggregate purchase price of $166.8 million.  See subsequent events
for additional information. 
(3)   Includes $3.7 million of leasing commissions for two lease renewals
aggregating 307,535 RSF, which extended the lease terms for 10 and 15 years,
respectively.

 

SOURCE Alexandria Real Estate Equities, Inc.

Website: http://www.are.com
Contact: Joel S. Marcus, Chairman, Chief Executive Officer & Founder,
Alexandria Real Estate Equities, Inc., (626) 578-9693
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