Form 8-K ALEXANDRIA REAL ESTATE For: Jan 28
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 2, 2015
ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
Maryland | 1-12993 | 95-4502084 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
385 East Colorado Boulevard, Suite 299 | ||
Pasadena, California | 91101 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (626) 578-0777
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4 (c))
Item 2.02. Results of Operations and Financial Condition.
On February 2, 2015, Alexandria Real Estate Equities, Inc. (the “Company”) issued a press release entitled “Alexandria Real Estate Equities, Inc. Reports Fourth Quarter and Year Ended December 31, 2014 Financial and Operating Results” which sets forth the Company’s results of operations and financial condition for the fourth quarter and year ended December 31, 2014. The press release referred to certain supplemental information that is available on the Company’s website at www.are.com. A copy of the press release and supplemental information are attached hereto as Exhibit 99.1.
The information contained in this Item 2.02, including the exhibit referenced herein, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. Such information shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1 Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the Fourth Quarter and Year Ended December 31, 2014.
Forward-looking Statements
This current report on Form 8-K contains 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. These statements include words such as “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “believes,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” or “will,” or the negative of these words or similar words. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in each such statement. A number of important factors could cause actual results to differ materially from those included within or contemplated by the forward-looking statements, including, but not limited to, the factors described in the Company’s filings with the Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q. The Company does not undertake any responsibility to update any of these factors or to announce publicly any revisions to any of the forward-looking statements contained in this or any other document, whether as a result of new information, future events, or otherwise.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ALEXANDRIA REAL ESTATE EQUITIES, INC. | ||||
February 2, 2015 | By: | /s/ Joel S. Marcus | ||
Joel S. Marcus | ||||
Chairman/Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
By: | /s/ Dean A. Shigenaga | |||
Dean A. Shigenaga | ||||
Chief Financial Officer | ||||
(Principal Financial Officer) | ||||
EXHIBIT INDEX
Exhibit Number | Exhibit Title | |
99.1 | Alexandria Real Estate Equities, Inc.’s Earnings Press Release and Supplemental Information for the Fourth Quarter and Year Ended December 31, 2014. | |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Table of Contents
Page | |
EARNINGS PRESS RELEASE | |
Fourth Quarter and Year Ended December 31, 2014, Financial and Operating Results | |
Guidance | |
Earnings Call Information and About the Company | |
Consolidated Statements of Income | |
Consolidated Balance Sheets | |
Funds From Operations and Adjusted Funds From Operations | |
SUPPLEMENTAL INFORMATION | |
Company Profile | |
Investor Information | |
Financial and Asset Base Highlights | |
Operating Information | |
Operating Metrics | |
Same Property Performance | |
Leasing Activity | |
Lease Expirations | |
Top 20 Client Tenants | |
Client Tenant Mix | |
Summary of Properties and Occupancy | |
Property Listing | |
Page | |
SUPPLEMENTAL INFORMATION (continued) | |
Value-Creation Projects, Acquisitions, and Dispositions | |
Investments in Real Estate | |
Overview of Value-Creation Pipeline in North America | |
Deliveries of Value-Creation Development Projects in North America | |
Current Value-Creation Projects in North America | |
Near-Term and Future Value-Creation Projects in North America | |
Unconsolidated Joint Ventures | |
Capital Allocation and Projected Construction Spending in 2015 | |
Capital Allocation and Actual Construction Spending in 2014 | |
Acquisitions | |
Real Estate Investments in Asia | |
Balance Sheet | |
Key Credit Metrics | |
Summary of Debt | |
Definitions and Reconciliations | |
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. Please see page 6 of the earnings press release for further information. |
This document is not an offer to sell or solicitation to buy securities of Alexandria Real Estate Equities, Inc. Any offers to sell or solicitations to buy our securities shall be made only by means of a prospectus approved for that purpose. Unless otherwise indicated, the “Company,” “Alexandria,” “ARE,” “we,” “us,” and “our” refer to Alexandria Real Estate Equities, Inc. and its consolidated subsidiaries. |
 | ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | i |
Alexandria Real Estate Equities, Inc.
Reports
Fourth Quarter and Year Ended December 31, 2014
Financial and Operating Results
Total Return of 44.7% in 2014
FFO Per Share – Diluted, as Adjusted, of $4.80 for 2014, up 9.1% over 2013
EPS – Diluted of $1.01 for 2014
Total Revenues of $726.9 million for 2014
NOI of $508.6 million for 2014
PASADENA, CA. – February 2, 2015 – Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced financial and operating results for the fourth quarter and year ended December 31, 2014.
“As we report our results for the fourth quarter and year ended December 31, 2014, we are very pleased with the execution of our strategic business plan resulting in our 2014 total return performance of 44.7%. In 2014, we celebrated the 20th anniversary of the founding of Alexandria. We began the year with confidence in our business, driven by continued strong performance in the core asset base, positive factors resulting in accelerating demand for our Class A science and technology properties in our urban innovation cluster campuses, a valuable near-term development pipeline primed to deliver continued growth, and a disciplined approach to allocation of capital. At the end of 2014, occupancy of our operating properties was 97%. Our growth for both cash rental rates from lease renewals/re-leasing of space and cash same property NOI were greater than 5% for 2014. Additionally, our current value-creation pipeline aggregating 2.3 million rentable square feet was 90% leased or under negotiation as of December 31, 2014.
Transitioning into 2015, we continue to remain focused on allocating our precious capital into markets with strong fundamentals, accelerating demand, and limited supply. With overlapping demand from both the science and technology sectors in markets such as Mission Bay/SoMA and Cambridge, as well as strong rental rate growth across many of our key urban markets, we remain confident in our ability to deliver consistent and solid growth in FFO per share and NAV in 2015,” said Joel S. Marcus, Chairman, Chief Executive Officer, and Founder of Alexandria Real Estate Equities, Inc.
Results
• | Funds from operations (“FFO”) attributable to Alexandria Real Estate Equities, Inc.’s (“Alexandria’s”) common stockholders – diluted, as adjusted: |
• | $1.23 per share for 4Q14, up 6.0%, compared to $1.16 per share for 4Q13 |
• | $4.80 per share for 2014, up 9.1%, compared to $4.40 per share for 2013 |
• | $87.9 million for 4Q14, up $5.4 million, or 6.5%, compared to $82.5 million for 4Q13 |
• | $341.6 million for 2014, up $42.4 million, or 14.2%, compared to $299.1 million for 2013 |
Results (continued)
• | Net (loss) income attributable to Alexandria’s common stockholders – diluted: |
• | $(16.2) million, or $(0.23) per share, for 4Q14 compared to |
$36.2 million, or $0.51 per share, for 4Q13
• | $72.1 million, or $1.01 per share, for 2014 compared to |
$108.8 million, or $1.60 per share, for 2013
• | Results for 4Q14 and 2014 include an aggregate $46.2 million net loss and $45.9 million net loss, respectively, or $0.65 per share for each period, related to impairments of real estate assets held for sale, loss on early extinguishment of debt, and a preferred stock redemption charge, offset slightly by gains on sales of real estate |
Core operating metrics
• | Total revenues: |
• | $188.7 million for 4Q14, up $19.9 million, or 11.8%, compared to |
$168.8 million for 4Q13
• | $726.9 million for 2014, up $95.7 million, or 15.2%, compared to |
$631.2 million for 2013
• | Net operating income (“NOI”), including our share of unconsolidated joint ventures: |
• | $132.7 million for 4Q14, up $13.8 million, or 11.6%, compared to |
$118.9 million for 4Q13
• | $508.6 million for 2014, up $66.5 million, or 15.0%, compared to |
$442.1 million for 2013
• | Same property NOI growth: |
• | Up 3.6% and 6.7% (cash basis) for 4Q14, compared to 4Q13 |
• | Up 4.5% and 5.5% (cash basis) for 2014, compared to 2013 |
• | Leasing activity during 4Q14: |
• | Executed leases for 581,660 rentable square feet (“RSF”) |
• | 10.1% and 2.4% (cash basis) rental rate growth on lease renewals and re-leasing of space |
• | Leasing activity during 2014: |
• | Executed leases for 2,768,833 RSF |
• | 13.3% and 5.4% (cash basis) rental rate growth on lease renewals and re-leasing of space |
• | Occupancy for properties in North America, as of 4Q14: |
• | 97.0% occupancy for operating properties, up 110 basis points (“bps”) from 4Q13 |
• | 96.1% occupancy for operating and redevelopment properties, up 60 bps from 4Q13 |
• | Operating margins solid at 70% for 4Q14 and 2014 |
• | Adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”) |
margins solid at 65% for 4Q14 and 2014
• | 56% of total annualized base rent (“ABR”) from investment-grade client tenants |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Recent transactions impacting net (loss) income attributable to
Alexandria’s common stockholders (in thousands, except per share amounts)
4Q14 | 4Q13 | 2014 | 2013 | |||||||||||||
Impairment of investments | $ | — | $ | (853 | ) | $ | — | $ | (853 | ) | ||||||
Acquisition-related expenses | — | (1,446 | ) | — | (1,446 | ) | ||||||||||
Impairment of real estate | (51,675 | ) | — | (51,675 | ) | — | ||||||||||
Loss on early extinguishment of debt | — | — | (525 | ) | (1,992 | ) | ||||||||||
Gain (loss) on sales of real estate – rental properties | 1,838 | — | 1,838 | (121 | ) | |||||||||||
Gain on sales of real estate – land parcels | 5,598 | 4,052 | 6,403 | 4,824 | ||||||||||||
Preferred stock redemption charge | (1,989 | ) | — | (1,989 | ) | — | ||||||||||
Total | $ | (46,228 | ) | $ | 1,753 | $ | (45,948 | ) | $ | 412 | ||||||
Per diluted share | $ | (0.65 | ) | $ | 0.02 | $ | (0.65 | ) | $ | 0.01 | ||||||
External growth: value-creation projects and acquisitions
Value-creation projects
• | Development and redevelopment value-creation projects were on average 90% leased or under negotiation |
• | 4Q14 key deliveries of value-creation projects: |
• | 61,941 RSF to Illumina, Inc., Medivation, Inc., and Clovis Oncology, Inc. at 499 Illinois Street in our Mission Bay submarket |
• | 42,047 RSF to Receptos, Inc. at 3033 Science Park Road in our Torrey Pines submarket |
• | 4Q14 key commencements of value-creation development projects: |
• | Expanded our value-creation development project at 5200 Illumina Way – Building 6 from 149,663 RSF (leased) to 295,837 RSF to reflect negotiations for the expansion of Building 6 by 146,174 RSF. |
• | Commenced a 61,547 RSF value-creation development project at 6040 George Watts Hill Drive, located in our Research Triangle Park submarket; and 100% pre-leased to Fuji Diosynth Biotechnologies U.S.A., Inc. |
• | During 4Q14, our value-creation pipeline increased by 416,230 developable SF related to our development opportunities at the following high-quality urban innovative cluster campus locations: 5200 Illumina Way, 10300 Campus Point, and Executive Drive in University Town Center, and Alexandria Center™ at Kendall Square – 50 Rogers Street (residential) in Cambridge. |
• | Non-income-producing assets (CIP and land) are expected to decrease from 16% of gross real estate at the end of 4Q14 to 13% by the end of 1Q15. |
Acquisitions
• | In November 2014, we acquired a property aggregating 133,731 RSF at 9625 Towne Centre Drive in our University Town Center submarket for $22.3 million. The property is 100% leased until August 31, 2015, after which we plan to commence conversion of this building into tech office through redevelopment. |
Acquisitions (continued)
• | In January 2015, we acquired 640 Memorial Drive in the Cambridge submarket for $176.5 million. This property is a 225,504 RSF Class A, LEED Gold Certified, office/laboratory building in Mid-Cambridge and near the MIT campus, 100% leased to two high-quality life science tenants pursuant to long-term leases. In connection with the acquisition, we assumed a secured note payable of $82.0 million with an interest rate of 3.93% and a maturity date in 2023. The property is subject to a long-term ground lease. We estimate initial unlevered stabilized yields of 7.5% and 6.4% (cash), respectively, and unlevered average cash yield of 6.8%. |
• | In January 2015, we executed an agreement to purchase the outstanding 10% noncontrolling interest in our flagship campus at Alexandria Technology Square® for $108.3 million. The purchase price will be paid in equal installments of $54 million each on April 1, 2015, and April 1, 2016. Alexandria has owned 90% of this 1.2 million RSF urban innovation campus since its purchase from MIT in 2006, and has since doubled its NOI from $30 million in 2006 to $64 million in 2014 with a current unlevered stabilized yield on our existing 90% interest of 8.1% and 7.3% (cash). We estimate initial unlevered stabilized yields of 6.1% and 5.4% (cash) on the purchase of the remaining 10% noncontrolling interest. We believe there is further upside in our projected returns as we are poised to capture significant rent growth from 81% of the leases contractually ending in the next five years. Additionally, we believe we can increase our 1.2 million RSF campus by an additional 100,000 RSF and further increase NOI. The campus is currently 99.5% occupied and subject to a long-term ground lease. After considering the $108.3 million purchase of the outstanding 10% noncontrolling interest in this flagship campus and the anticipated near and medium-term upside in NOI from rental rate growth and campus expansion, we estimate that we can enhance our unlevered yields on our aggregate investment in the campus over the next five years to 8.5% and 8.1% (cash). |
Balance sheet
• | $10.4 billion total market capitalization as of December 31, 2014 |
• | 5.6 years weighted average remaining maturity of outstanding debt as of December 31, 2014 |
• | 7.2x net debt to adjusted EBITDA – 4Q14 annualized, 2015 target range is 6.5x to 7.5x |
• | 3.3x fixed charge cover ratio – 4Q14 annualized, 2015 target range is 3.0x to 3.5x |
• | In December 2014, we purchased 513,500 outstanding shares of our 7.0% Series D cumulative convertible preferred stock (“7.0% Series D Convertible Preferred Stock”) at an aggregate price of $14.4 million, or $27.975 per share |
LEED statistics and other awards
• | As of December 31, 2014, 30 LEED certified projects aggregating 4.6 million RSF were complete and 25 additional LEED projects aggregating 4.4 million square feet were in process |
• | In November 2014, both our East and West towers at the Alexandria Center® for Life Science in New York City, at 430 and 450 East 29th Street in our Manhattan submarket, earned Platinum-level Wired Certification |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 2 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Dispositions
Our capital plan to fund our value-creation projects continues to include (i) cash provided by operating activities after dividends, (ii) unsecured debt funding supported by growth in EBITDA, and (iii) sales of land, high-value “core-like” operating assets, and non-core operating assets. In 4Q14 and January 2015, we completed $113.4 million in asset sales and had an additional $122.0 million of assets held for sale. The net proceeds from these sales will be invested into our highly-leased value-creation development projects. See the next page for key NAV considerations for dispositions and assets held for sale.
(Dollars in thousands) | Dispositions | |||||||||||||||||||||
Address / Market / Submarket | Classification at 9/30/14 | Square Feet | Annual NOI (1) | Sales Price/NBV (2) | Gain on Sale | 4Q14 Impairments | ||||||||||||||||
Dispositions in 4Q14 | ||||||||||||||||||||||
Various / San Francisco Bay Area / South San Francisco | Land | 370,307 | $ | 802 | $ | 31,000 | (3) | $ | — | $ | 24,700 | (3) | ||||||||||
124 Terry Avenue North / Seattle / Lake Union | Land | 200,000 | (51 | ) | 11,500 | 3,834 | — | |||||||||||||||
Non-Cluster | Land | 50,000 | — | 7,480 | 1,764 | — | ||||||||||||||||
751 | 49,980 | 5,598 | 24,700 | |||||||||||||||||||
Various / San Diego / Sorrento Valley & Sorrento Mesa | Rental Properties | 62,346 | (471 | ) | 7,447 | (4) | 1,838 | — | ||||||||||||||
Dispositions in 4Q14 | 280 | 57,427 | 7,436 | 24,700 | ||||||||||||||||||
Held for sale at 12/31/14 – dispositions in January 2015 | ||||||||||||||||||||||
661 University Avenue / Canada / Toronto | Rental Properties | N/A | (1,363 | ) | 54,104 | (5) | — | 16,621 | (5) | |||||||||||||
Pennsylvania | Rental Properties | 21,859 | 3 | 1,900 | — | 794 | ||||||||||||||||
Dispositions in January 2015 | (1,360 | ) | 56,004 | — | 17,415 | |||||||||||||||||
Dispositions in 4Q14 and January 2015 | (1,080 | ) | 113,431 | $ | 7,436 | 42,115 | ||||||||||||||||
Held for sale at 12/31/14 – pending sales | ||||||||||||||||||||||
500 Forbes Boulevard / San Francisco Bay Area / South San Francisco | Rental Properties | 155,685 | 5,539 | 107,848 | (6) | TBD | 9,560 | (6) | ||||||||||||||
Other | Rental Properties | 100,441 | 1,124 | 14,175 | TBD | — | ||||||||||||||||
Pending sales | 6,663 | 122,023 | 9,560 | |||||||||||||||||||
Total dispositions completed and remainder of assets held for sale | $ | 5,583 | $ | 235,454 | $ | 51,675 | ||||||||||||||||
(1) | Annualized using actual results for the quarter ended prior to date of sale or 4Q14 for assets held for sale at December 31, 2014. |
(2) | Represents sale price for assets sold or net book value for pending sales as of December 31, 2014, net of impairment charges recognized in 4Q14. |
(3) | During 4Q14, we sold nine non-contiguous land parcels with seven industrial buildings with occupancy of 98% located in the industrial park areas of South San Francisco near Associated Road, Rozzi Place and Eccles Avenue to a single buyer focused on operating, redeveloping and developing industrial properties. The sale price was approximately $31 million and reduced our developable square footage in aggregate by 370,307 SF. Additionally, in 4Q14 and prior to the sale, we recognized impairment charges on these land parcels aggregating $24.7 million to reduce their net book value to fair value less cost to sell. We acquired these parcels in 2006 and 2007 with the intention to create an amenity rich campus in South San Francisco. Our goal was to capture significant expansion and growth of major biotech companies prior to the financial crisis in 2008. A significant amount of the expansion plans by major biotech companies were approved by the city of South San Francisco. As we executed very successfully on our Class A campus totaling 407,369 RSF on long-term leases to the investment grade rated tenant, Amgen, Inc. and allocated capital to other high demand urban innovation campuses in Mission Bay and Cambridge, we will invest the sale proceeds immediately into highly-leased value-creation ground-up development projects. |
(4) | These properties were classified as held for sale/discontinued operations prior to October 2014, therefore the NOI and gain on sale are classified in “income from discontinued operations” in our consolidated statements of income. |
(5) | Represents land and land improvements subject to a ground lease with the Company as a lessee. Our annualized net operating loss of $1.4 million primarily represents ground rent expense. Prior to the sale, our land and land improvements were leased to a tenant and the tenant was completing the construction of a 780,540 RSF building. Rental payments from the tenant were anticipated to commence in the future upon completion and stabilization of the building. |
(6) | During 4Q14, we committed to the sale of an operating property with a 155,685 RSF building located in South San Francisco, classified it as “held for sale,” and accordingly, recognized an impairment charge of $9.6 million to reduce its net book value to our estimate of fair value less cost to sell of $107.8 million. The impairment is primarily related to the write-off of non-cash items related to improvements received from a prior tenant and an acquired below market lease. These non-cash items had a net book value of $17.7 million immediately prior to recognition of the impairment charge. The property was originally acquired in 2007 and is currently leased to an investment grade rated client tenant through 2019. We expect to complete the sale in 2015 at a low-cap rate and immediately invest the proceeds into highly-leased value-creation ground-up development projects. |
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Key NAV Considerations for Dispositions and Assets Held for Sale: Net Positive / Increase to NAV
Address / Market / Submarket | Comment | Date of Sale | Amount | NAV Consideration | ||||
661 University Avenue / Canada | Sale of land and land improvements that were classified in rental properties as of September 30, 2014. Our initial investment in this project occurred in 2007 pursuant to a ground leasehold interest. Approximately 75% of the impairment of $16.6 million recognized in 4Q14 was related to changes in the foreign exchange rate, taxes and closing costs. The annual net operating loss for the property for 2014 was $1.4 million related to ground rent expense. Prior to the sale, the improvements were leased to a tenant and the tenant was in the process of completing the construction of a 780,540 RSF building. Rental payments from the tenant were anticipated to commence in the future upon completion and stabilization of the building. We believe most net asset value models did not attribute any value to the land and land improvements due to the annual net operating loss of $1.4 million. Accordingly, we believe the sales proceeds of $54.1 million will increase most NAV models. | January 2015 | $54.1 million sale proceeds | Positive | ||||
Eliminate $1.4 million annual net operating loss | Positive | |||||||
$16.6 million impairment | Neutral | |||||||
Various / San Francisco Bay Area / South San Francisco | Impact will depend on valuation assumption prior to sale. Assuming land was valued at cost, the impairment charge would reduce NAV. | December 2014 | $31.0 million sale proceeds | Neutral | ||||
$24.7 million impairment | Negative | |||||||
500 Forbes Boulevard / San Francisco Bay Area / South San Francisco | Impairment consisted primarily of the write-off of non-cash items related to improvements received from a prior tenant and one acquired below market lease. These non-cash items had a net book value of $17.7 million immediately prior to recognition of the impairment charge. We believe that the value most NAV models had for this property was based upon its NOI divided by a market capitalization rate. As a result, we believe this non-cash impairment will not impact most NAV models. | TBD | $9.6 million impairment | Neutral | ||||
Net Positive / Increase to NAV | ||||||||
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ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Guidance
The following updated guidance is based on our current view of existing market conditions and other assumptions for the year ended December 31, 2015. There can be no assurance that actual amounts will be materially higher or lower than these expectations. See our discussion of “forward-looking statements” on the following page.
EPS and FFO Per Share Attributable to Alexandria’s Common Stockholders – Diluted | 2015 Guidance | |
Earnings per share | $1.60 to $1.80 | |
Add back: depreciation and amortization | 3.52 | |
Other | (0.02) | |
FFO per share | $5.10 to $5.30 | |
Key Assumptions (Dollars in thousands) | Low | High | ||||||
Occupancy percentage for operating properties in North America at December 31, 2015 | 96.9% | 97.4% | ||||||
Same property performance: | ||||||||
NOI increase | 0.5% | 2.5% | ||||||
NOI increase (cash basis) | 5.0% | 7.0% | ||||||
Lease renewals and re-leasing of space: | ||||||||
Rental rate increases | 14.0% | 17.0% | ||||||
Rental rate increases (cash basis) | 8.0% | 10.0% | ||||||
Straight-line rents | $ | 42,000 | $ | 47,000 | ||||
General and administrative expenses | $ | 55,000 | $ | 59,000 | ||||
Capitalization of interest | $ | 35,000 | $ | 45,000 | ||||
Interest expense | $ | 110,000 | $ | 120,000 | ||||
Key Credit Metrics | 2015 Guidance | |
Net debt to Adjusted EBITDA – 4Q15 annualized | 6.5x to 7.5x | |
Fixed charge coverage ratio – 4Q15 annualized | 3.0x to 3.5x | |
Non-income-producing assets as a percentage of gross real estate at December 31, 2015 | 10% to 15% | |
Sources and Uses of Capital (Dollars in thousands) | Low | High | ||||||
Sources of capital: | ||||||||
Net cash provided by operating activities after dividends | $ | 115,000 | $ | 135,000 | ||||
Incremental debt | 390,000 | 470,000 | ||||||
Remainder/asset sales (1) (2) | 340,000 | 440,000 | ||||||
Total sources of capital | $ | 845,000 | $ | 1,045,000 | ||||
Uses of capital: | ||||||||
Construction | $ | 645,000 | $ | 745,000 | ||||
Acquisitions (3) | 200,000 | 300,000 | ||||||
Total uses of capital | $ | 845,000 | $ | 1,045,000 | ||||
Incremental debt: | ||||||||
Issuance of unsecured senior and other notes payable (4) | $ | 535,000 | $ | 685,000 | ||||
Borrowings under: | ||||||||
Existing secured construction loans | 80,000 | 130,000 | ||||||
Repayments of: | ||||||||
Secured notes payable | (61,000 | ) | (137,000 | ) | ||||
2016 unsecured senior term loan | (150,000 | ) | (200,000 | ) | ||||
Unsecured senior line of credit | (14,000 | ) | (8,000 | ) | ||||
Incremental debt | $ | 390,000 | $ | 470,000 | ||||
(1) | Represents the amount of remaining capital to be sourced in 2015. We expect to identify real estate sales, including land and non-core/“core-like” operating assets, over the next several quarters to generate proceeds for reinvestment into high-value Class A pre-leased development projects. The proceeds from these sales will vary depending on the impact of the sales on our ratio of net debt to Adjusted EBITDA. For example, the sale of an income-producing property benefits leverage less than the sale of a non-income-producing land parcel. Additionally, we will continue to execute our strategy to deliver solid growth in funds from operations per share, as adjusted, and net asset value in 2015, including any impact of asset sales. |
(2) | Assets held for sale as of December 31, 2014, aggregated $178.0 million, including $56.0 million in sales completed in January 2015. |
(3) | Includes the acquisition of 640 Memorial Drive completed in January 2015 for $176.5 million and $54.1 million, representing half of the aggregate consideration of $108.3 million to purchase the outstanding 10% noncontrolling interest in our flagship campus at Alexandria Technology Square®, which is due on April 1, 2015. The other one-half of the $108.3 million will be paid on April 1, 2016 and therefore has been excluded from uses of capital for 2015. |
(4) | Includes a secured note payable of $82.0 million with an interest rate of 3.93% assumed in connection with the acquisition of 640 Memorial Drive in January 2015. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 5 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Earnings Call Information
We will host a conference call on Tuesday, February 3, 2015, 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, 2014. To participate in this conference call, dial (800) 723-6498 or (785) 830-7989 and confirmation code 1191912 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 3, 2015. The replay number is (888) 203-1112 or (719) 457-0820 and the confirmation code is 1191912.
Additionally, a copy of this Earnings Press Release and Supplemental Information for the fourth quarter and year ended December 31, 2014, is available in the “For Investors” section of our website at www.are.com or by following this link: http://www.are.com/fs/2014q4.pdf.
For any questions, please contact Joel S. Marcus, Chairman, Chief Executive Officer & Founder, at (626) 578-9693.
About the Company
Alexandria Real Estate Equities, Inc. (NYSE: ARE) is a fully integrated, self-administered, and self-managed real estate investment trust (“REIT”) uniquely focused on Class A collaborative science and technology campuses in urban innovation clusters including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle Park. Alexandria is the largest and leading owner, operator, and developer in its niche with a total market capitalization of $10.4 billion as of December 31, 2014, and an asset base of 31.5 million RSF, including 18.7 million RSF of operating and current value-creation projects, as well as an additional 12.8 million RSF in future ground-up development projects.
***********
This document includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2015 earnings per share attributable to Alexandria’s common stockholders – diluted, 2015 FFO per share attributable to Alexandria’s common stockholders – diluted, NOI, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as “forecast,” “guidance,” “projects,” “estimates,” “anticipates,” “believes,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” or “will,” or the negative of those words or similar words. These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events, or trends and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. There can be no assurance that actual results will not be materially higher or lower than these expectations. These statements are subject to risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully 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, a favorable capital market environment, performance of our core operations in areas such as delivery of current and future development and redevelopment projects, leasing activity, lease renewals, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission (“SEC”). Accordingly, you are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are made as of the date of this earnings press release, and unless otherwise stated, we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 6 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | 12/31/14 | 12/31/13 | ||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||
Rental | $ | 140,873 | $ | 137,718 | $ | 134,992 | $ | 130,570 | $ | 125,693 | $ | 544,153 | $ | 467,764 | ||||||||||||||
Tenant recoveries | 45,282 | 45,572 | 40,944 | 41,682 | 39,970 | 173,480 | 150,095 | |||||||||||||||||||||
Other income | 2,519 | 2,325 | 466 | 3,934 | 3,160 | 9,244 | 13,292 | |||||||||||||||||||||
Total revenues | 188,674 | 185,615 | 176,402 | 176,186 | 168,823 | 726,877 | 631,151 | |||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||
Rental operations | 56,881 | 57,423 | 52,353 | 52,507 | 49,892 | 219,164 | 189,039 | |||||||||||||||||||||
General and administrative | 13,861 | 12,609 | 13,836 | 13,224 | 12,751 | 53,530 | 48,520 | |||||||||||||||||||||
Interest | 22,188 | 20,555 | 17,433 | 19,123 | 17,783 | 79,299 | 67,952 | |||||||||||||||||||||
Depreciation and amortization | 57,973 | 58,388 | 57,314 | 50,421 | 48,084 | 224,096 | 189,123 | |||||||||||||||||||||
Impairment of real estate | 51,675 | (1) | — | — | — | — | 51,675 | — | ||||||||||||||||||||
Loss on early extinguishment of debt | — | 525 | — | — | — | 525 | 1,992 | |||||||||||||||||||||
Total expenses | 202,578 | 149,500 | 140,936 | 135,275 | 128,510 | 628,289 | 496,626 | |||||||||||||||||||||
Equity in earnings of unconsolidated joint ventures | 554 | — | — | — | — | 554 | — | |||||||||||||||||||||
(Loss) income from continuing operations | (13,350 | ) | 36,115 | 35,466 | 40,911 | 40,313 | 99,142 | 134,525 | ||||||||||||||||||||
Income (loss) from discontinued operations | 1,722 | (180 | ) | (147 | ) | (162 | ) | (143 | ) | 1,233 | 900 | |||||||||||||||||
Gain on sales of real estate – land parcels | 5,598 | (1) | 8 | 797 | — | 4,052 | 6,403 | 4,824 | ||||||||||||||||||||
Net (loss) income | (6,030 | ) | 35,943 | 36,116 | 40,749 | 44,222 | 106,778 | 140,249 | ||||||||||||||||||||
Dividends on preferred stock | (6,284 | ) | (6,471 | ) | (6,472 | ) | (6,471 | ) | (6,471 | ) | (25,698 | ) | (25,885 | ) | ||||||||||||||
Preferred stock redemption charge | (1,989 | ) | (2) | — | — | — | — | (1,989 | ) | — | ||||||||||||||||||
Net income attributable to noncontrolling interests | (1,362 | ) | (1,340 | ) | (1,307 | ) | (1,195 | ) | (1,110 | ) | (5,204 | ) | (4,032 | ) | ||||||||||||||
Net income attributable to unvested restricted stock awards | (489 | ) | (506 | ) | (405 | ) | (374 | ) | (394 | ) | (1,774 | ) | (1,581 | ) | ||||||||||||||
Net (loss) income attributable to Alexandria Real Estate Equities, Inc.’s common stockholders | $ | (16,154 | ) | (3) | $ | 27,626 | $ | 27,932 | $ | 32,709 | $ | 36,247 | $ | 72,113 | (4) | $ | 108,751 | |||||||||||
Earnings per share attributable to Alexandria’s common stockholders – basic and diluted: | ||||||||||||||||||||||||||||
Continuing operations | $ | (0.25 | ) | $ | 0.39 | $ | 0.39 | $ | 0.46 | $ | 0.51 | $ | 0.99 | $ | 1.59 | |||||||||||||
Discontinued operations | 0.02 | — | — | — | — | 0.02 | 0.01 | |||||||||||||||||||||
Earnings per share – basic and diluted | $ | (0.23 | ) | (3) | $ | 0.39 | $ | 0.39 | $ | 0.46 | $ | 0.51 | $ | 1.01 | (4) | $ | 1.60 | |||||||||||
Weighted average shares of common stock outstanding for calculating earnings per share attributable to Alexandria’s common stockholders – basic and diluted | 71,314 | 71,195 | 71,126 | 71,073 | 71,000 | 71,170 | 68,038 | |||||||||||||||||||||
Dividends declared per share of common stock | $ | 0.74 | $ | 0.72 | $ | 0.72 | $ | 0.70 | $ | 0.68 | $ | 2.88 | $ | 2.61 | ||||||||||||||
(1) | See further discussion of impairment of real estate and gains on sales of real estate in the “Dispositions” section on page 3. |
(2) | In December 2014, we purchased 513,500 outstanding shares of our 7.0% Series D Convertible Preferred Stock at a price of $14.4 million in aggregate, or $27.975 per share. |
(3) | Results for 4Q14 include an aggregate net loss of $46.2 million, or $0.65 per share, related to impairments of real estate and a preferred stock redemption charge, offset slightly by gains on sales of real estate. |
(4) | Results for 2014 include an aggregate net loss of $45.9 million, or $0.65 per share, related to impairments of real estate, loss on early extinguishment of debt, and a preferred stock redemption charge, offset slightly by gains on sales of real estate. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 7 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Consolidated Balance Sheets
(In thousands)
(Unaudited)
12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | ||||||||||||||||
Assets | ||||||||||||||||||||
Investments in real estate | $ | 7,226,016 | $ | 7,197,630 | $ | 7,030,117 | $ | 6,930,262 | $ | 6,776,914 | ||||||||||
Cash and cash equivalents | 86,011 | 67,023 | 61,701 | 74,970 | 57,696 | |||||||||||||||
Restricted cash | 26,884 | 24,245 | 24,519 | 30,454 | 27,709 | |||||||||||||||
Tenant receivables | 10,548 | 10,830 | 10,654 | 10,619 | 9,918 | |||||||||||||||
Deferred rent | 234,124 | 225,506 | 214,793 | 202,087 | 190,425 | |||||||||||||||
Deferred leasing and financing costs | 201,798 | 199,835 | 193,621 | 192,618 | 192,658 | |||||||||||||||
Investments | 236,389 | (1) | 177,577 | 174,802 | 169,322 | 140,288 | ||||||||||||||
Other assets | 114,266 | 117,668 | 105,442 | 145,707 | 134,156 | |||||||||||||||
Total assets | $ | 8,136,036 | $ | 8,020,314 | $ | 7,815,649 | $ | 7,756,039 | $ | 7,529,764 | ||||||||||
Liabilities, Noncontrolling Interests, and Equity | ||||||||||||||||||||
Secured notes payable | $ | 652,209 | $ | 636,825 | $ | 615,551 | $ | 597,511 | $ | 708,831 | ||||||||||
Unsecured senior notes payable | 1,747,370 | 1,747,290 | 1,048,310 | 1,048,270 | 1,048,230 | |||||||||||||||
Unsecured senior line of credit | 304,000 | 142,000 | 571,000 | 506,000 | 204,000 | |||||||||||||||
Unsecured senior bank term loans | 975,000 | 975,000 | 1,100,000 | 1,100,000 | 1,100,000 | |||||||||||||||
Accounts payable, accrued expenses, and tenant security deposits | 489,085 | 504,535 | 434,528 | 443,893 | 435,342 | |||||||||||||||
Dividends payable | 58,814 | 57,549 | 57,377 | 55,860 | 54,420 | |||||||||||||||
Total liabilities | 4,226,478 | 4,063,199 | 3,826,766 | 3,751,534 | 3,550,823 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Redeemable noncontrolling interests | 14,315 | 14,348 | 14,381 | 14,413 | 14,444 | |||||||||||||||
Alexandria Real Estate Equities, Inc.’s stockholders’ equity: | ||||||||||||||||||||
Series D cumulative convertible preferred stock | 237,163 | 250,000 | 250,000 | 250,000 | 250,000 | |||||||||||||||
Series E cumulative redeemable preferred stock | 130,000 | 130,000 | 130,000 | 130,000 | 130,000 | |||||||||||||||
Common stock | 715 | 714 | 713 | 712 | 712 | |||||||||||||||
Additional paid-in capital | 3,461,189 | 3,523,195 | 3,542,334 | 3,560,453 | 3,572,281 | |||||||||||||||
Accumulated other comprehensive loss | (628 | ) | (28,711 | ) | (16,245 | ) | (18,429 | ) | (36,204 | ) | ||||||||||
Alexandria’s stockholders’ equity | 3,828,439 | 3,875,198 | 3,906,802 | 3,922,736 | 3,916,789 | |||||||||||||||
Noncontrolling interests | 66,804 | 67,569 | 67,700 | 67,356 | 47,708 | |||||||||||||||
Total equity | 3,895,243 | 3,942,767 | 3,974,502 | 3,990,092 | 3,964,497 | |||||||||||||||
Total liabilities, noncontrolling interests, and equity | $ | 8,136,036 | $ | 8,020,314 | $ | 7,815,649 | $ | 7,756,039 | $ | 7,529,764 | ||||||||||
(1) | Includes unrealized gains on publicly traded investments aggregating $52.4 million as of December 31, 2014, classified in accumulated other comprehensive loss within our stockholders’ equity. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 8 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Funds From Operations and Adjusted Funds From Operations
(In thousands)
(Unaudited)
The following table presents a reconciliation of net (loss) income attributable to Alexandria’s common stockholders – basic, the most directly comparable financial measure presented in accordance with generally accepted accounting principles (“GAAP”), to FFO attributable to Alexandria’s common stockholders – basic and diluted, FFO attributable to Alexandria’s common stockholders – diluted, as adjusted, and AFFO attributable to Alexandria’s common stockholders – diluted. The table below includes our share of consolidated and unconsolidated joint venture amounts.
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | 12/31/14 | 12/31/13 | ||||||||||||||||||||||
Net (loss) income attributable to Alexandria’s common stockholders | $ | (16,154 | ) | $ | 27,626 | $ | 27,932 | $ | 32,709 | $ | 36,247 | $ | 72,113 | $ | 108,751 | |||||||||||||
Depreciation and amortization | 58,302 | 58,388 | 57,314 | 50,421 | 48,101 | 224,425 | 190,778 | |||||||||||||||||||||
Impairment of real estate – rental properties | 26,975 | — | — | — | — | 26,975 | — | |||||||||||||||||||||
(Gain) loss on sales of real estate – rental properties (1) | (1,838 | ) | — | — | — | — | (1,838 | ) | 121 | |||||||||||||||||||
Gain on sales of real estate – land parcels | (5,598 | ) | (8 | ) | (797 | ) | — | (4,052 | ) | (6,403 | ) | (4,824 | ) | |||||||||||||||
Amount attributable to noncontrolling interests/ unvested restricted stock awards: | ||||||||||||||||||||||||||||
Net income | 1,851 | 1,846 | 1,712 | 1,569 | 1,504 | 6,978 | 5,613 | |||||||||||||||||||||
FFO | (2,063 | ) | (2,278 | ) | (1,648 | ) | (1,629 | ) | (1,582 | ) | (7,668 | ) | (5,577 | ) | ||||||||||||||
FFO attributable to Alexandria’s common stockholders – basic | 61,475 | 85,574 | 84,513 | 83,070 | 80,218 | 314,582 | 294,862 | |||||||||||||||||||||
Assumed conversion of unsecured senior convertible notes | — | — | — | — | — | — | 15 | |||||||||||||||||||||
FFO attributable to Alexandria’s common stockholders – diluted | 61,475 | 85,574 | 84,513 | 83,070 | 80,218 | 314,582 | 294,877 | |||||||||||||||||||||
Impairment of investments | — | — | — | — | 853 | — | 853 | |||||||||||||||||||||
Acquisition-related expenses | — | — | — | — | 1,446 | — | 1,446 | |||||||||||||||||||||
Impairment of real estate – land parcels | 24,700 | — | — | — | — | 24,700 | — | |||||||||||||||||||||
Loss on early extinguishment of debt | — | 525 | — | — | — | 525 | 1,992 | |||||||||||||||||||||
Preferred stock redemption charge | 1,989 | — | — | — | — | 1,989 | — | |||||||||||||||||||||
Allocation to unvested restricted stock awards | (259 | ) | (4 | ) | — | — | (12 | ) | (226 | ) | (35 | ) | ||||||||||||||||
FFO attributable to Alexandria’s common stockholders – diluted, as adjusted | 87,905 | 86,095 | 84,513 | 83,070 | 82,505 | 341,570 | 299,133 | |||||||||||||||||||||
Non-revenue-enhancing capital expenditures: | ||||||||||||||||||||||||||||
Building improvements | (1,989 | ) | (2,405 | ) | (1,255 | ) | (1,780 | ) | (1,047 | ) | (7,429 | ) | (3,461 | ) | ||||||||||||||
Tenant improvements and leasing commissions | (5,499 | ) | (1,693 | ) | (3,934 | ) | (4,053 | ) | (8,291 | ) | (15,179 | ) | (15,902 | ) | ||||||||||||||
Straight-line rent revenue | (10,023 | ) | (10,892 | ) | (12,737 | ) | (11,882 | ) | (7,928 | ) | (45,534 | ) | (27,935 | ) | ||||||||||||||
Straight-line rent expense on ground leases | 657 | 723 | 697 | 711 | 445 | 2,788 | 1,896 | |||||||||||||||||||||
Capitalized income from development projects | — | — | — | — | 72 | — | 143 | |||||||||||||||||||||
Amortization of acquired above and below market leases | (654 | ) | (757 | ) | (618 | ) | (816 | ) | (826 | ) | (2,845 | ) | (3,316 | ) | ||||||||||||||
Amortization of loan fees | 2,822 | 2,786 | 2,743 | 2,561 | 2,636 | 10,912 | 9,936 | |||||||||||||||||||||
Amortization of debt premiums/discounts | 17 | (36 | ) | (69 | ) | 205 | 146 | 117 | 529 | |||||||||||||||||||
Stock compensation expense | 4,624 | 3,068 | 3,076 | 3,228 | 4,011 | 13,996 | 15,552 | |||||||||||||||||||||
Allocation to unvested restricted stock awards | 98 | 71 | 90 | 94 | 94 | 359 | 191 | |||||||||||||||||||||
AFFO attributable to Alexandria’s common stockholders – diluted | $ | 77,958 | $ | 76,960 | $ | 72,506 | $ | 71,338 | $ | 71,817 | $ | 298,755 | $ | 276,766 | ||||||||||||||
(1) | Classified in income (loss) from discontinued operations in the consolidated statements of income. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 9 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Funds From Operations Per Share and Adjusted Funds From Operations Per Share
(Unaudited)
The following table presents a reconciliation of (loss) earnings per share attributable to Alexandria’s common stockholders – basic, the most directly comparable financial measure presented in accordance with GAAP, to FFO per share attributable to Alexandria’s common stockholders – diluted, FFO per share attributable to Alexandria’s common stockholders – diluted, as adjusted, and AFFO per share attributable to Alexandria’s common stockholders – diluted. For the computation of the weighted average shares used to compute the per share information, refer to the “Definitions and Reconciliations” section in our supplemental information. The table below includes our share of consolidated and unconsolidated joint venture amounts.
Three Months Ended | Year Ended | |||||||||||||||||||||||||||
12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | 12/31/14 | 12/31/13 | ||||||||||||||||||||||
Earnings per share attributable to Alexandria’s common stockholders – basic and diluted | $ | (0.23 | ) | $ | 0.39 | $ | 0.39 | $ | 0.46 | $ | 0.51 | $ | 1.01 | $ | 1.60 | |||||||||||||
Depreciation and amortization | 0.82 | 0.81 | 0.81 | 0.71 | 0.68 | 3.16 | 2.80 | |||||||||||||||||||||
Impairment of real estate – rental properties | 0.38 | — | — | — | — | 0.38 | — | |||||||||||||||||||||
(Gain) loss on sales of real estate – rental properties | (0.03 | ) | — | — | — | — | (0.03 | ) | — | |||||||||||||||||||
Gain on sales of real estate – land parcels | (0.08 | ) | — | (0.01 | ) | — | (0.06 | ) | (0.09 | ) | (0.07 | ) | ||||||||||||||||
Amount attributable to noncontrolling interests/ unvested restricted stock awards | — | — | — | — | — | (0.01 | ) | — | ||||||||||||||||||||
FFO per share attributable to Alexandria’s common stockholders – basic and diluted | 0.86 | 1.20 | 1.19 | 1.17 | 1.13 | 4.42 | 4.33 | |||||||||||||||||||||
Impairment of investments | — | — | — | — | 0.01 | — | 0.01 | |||||||||||||||||||||
Acquisition-related expenses | — | — | — | — | 0.02 | — | 0.02 | |||||||||||||||||||||
Impairment of real estate – land parcels | 0.34 | — | — | — | — | 0.34 | — | |||||||||||||||||||||
Loss on early extinguishment of debt | — | 0.01 | — | — | — | 0.01 | 0.04 | |||||||||||||||||||||
Preferred stock redemption charge | 0.03 | — | — | — | — | 0.03 | — | |||||||||||||||||||||
FFO per share attributable to Alexandria’s common stockholders – diluted, as adjusted | 1.23 | 1.21 | 1.19 | 1.17 | 1.16 | 4.80 | 4.40 | |||||||||||||||||||||
Non-revenue-enhancing capital expenditures: | ||||||||||||||||||||||||||||
Building improvements | (0.03 | ) | (0.03 | ) | (0.02 | ) | (0.03 | ) | (0.01 | ) | (0.10 | ) | (0.05 | ) | ||||||||||||||
Tenant improvements and leasing commissions | (0.08 | ) | (0.02 | ) | (0.06 | ) | (0.06 | ) | (0.12 | ) | (0.21 | ) | (0.23 | ) | ||||||||||||||
Straight-line rent revenue | (0.14 | ) | (0.15 | ) | (0.18 | ) | (0.17 | ) | (0.11 | ) | (0.64 | ) | (0.41 | ) | ||||||||||||||
Straight-line rent expense on ground leases | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | 0.04 | 0.03 | |||||||||||||||||||||
Amortization of acquired above and below market leases | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.04 | ) | (0.05 | ) | ||||||||||||||
Amortization of loan fees | 0.05 | 0.03 | 0.04 | 0.04 | 0.03 | 0.14 | 0.14 | |||||||||||||||||||||
Stock compensation expense | 0.06 | 0.04 | 0.05 | 0.05 | 0.06 | 0.20 | 0.23 | |||||||||||||||||||||
Other | — | — | — | — | — | 0.01 | 0.01 | |||||||||||||||||||||
AFFO per share attributable to Alexandria’s common stockholders – diluted | $ | 1.09 | $ | 1.08 | $ | 1.02 | $ | 1.00 | $ | 1.01 | $ | 4.20 | $ | 4.07 | ||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 10 |
SUPPLEMENTAL
INFORMATION
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Company Profile
Alexandria Real Estate Equities, Inc. (NYSE: ARE), is the largest and leading REIT uniquely focused on collaborative science and technology campuses in urban innovation clusters, with a total market capitalization of $10.4 billion as of December 31, 2014, and an asset base of 31.5 million RSF, including 18.7 million RSF of operating and current value-creation projects, as well as an additional 12.8 million RSF in future ground-up development projects. Alexandria pioneered this niche in 1994 and has since established a dominant market presence in AAA locations including Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle Park. Alexandria is known for its high-quality and diverse client tenant base, with approximately 56% of total ABR generated from investment-grade client tenants (a REIT industry-leading percentage). Alexandria has a longstanding and proven track record of developing Class A assets clustered in urban science and technology campuses that provide its innovative client tenants with highly dynamic and collaborative ecosystems that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. 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.
Unique niche strategy
Alexandria’s primary business objective is to maximize stockholder value by providing its stockholders with the greatest possible total return and long-term asset value
based on a multifaceted platform of internal and external growth. The key elements of our strategy include:
• | A consistent focus on collaborative science and technology campuses in urban innovation clusters offering highly dynamic and collaborative ecosystems with creative amenities that enhance productivity and foster innovation; |
• | A unique and proven cluster model concentrating on best-in-class locations, Class A assets, high-quality client tenants, highly skilled scientific and entrepreneurial management talent, and significant and strategic investment risk capital; |
• | First-in-class facilities that complement the cutting-edge scientific and managerial talent, smart capital, technology, and world-renowned academic and medical institutions in our clusters, providing our client tenants with dynamic ecosystems to accelerate innovation, discovery, and commercialization; |
• | Utilizing our long-term relationships with real estate professionals, top-tier investors, research institutions, and world-class global network in order to develop, acquire, and lease real estate focused on innovative science and technology companies; |
• | Drawing upon our broad and meaningful science and technology industry relationships to attract new and leading client tenants; and |
• | Strong and flexible capital structure to enable solid future growth. |
Client tenant base
The impressive quality, diversity, breadth, and depth of our significant relationships with our client tenants provide Alexandria with solid and stable cash flows. Alexandria’s strong underwriting skills and long-term industry relationships positively distinguish Alexandria from all other publicly traded REITs and real estate companies. As of December 31, 2014, our client tenant base included the following:
• | Investment-grade client tenants represent 56% of total ABR |
• | Our ABR consisted of the following client tenant mix: |
• | 23.3% from public biotechnology companies |
• | 23.1% from life science product, service, and device companies |
• | 21.8% from multinational pharmaceutical companies |
• | 21.0% from institutions (academic/medical, non-profit, and U.S. government) |
• | 7.2% from private biotechnology companies |
• | 3.6% from traditional office, tech office, and digital health companies |
Executive/senior management
Alexandria’s executive and senior management team has unique experience and expertise in creating collaborative science and technology campuses in urban innovation clusters. From the development of high-quality, sustainable real estate, to the ongoing cultivation of collaborative ecosystems with unique amenities and events, the Alexandria team has a first-in-class reputation of excellence in its niche. Alexandria’s senior management team averages over 25 years of real estate experience, including over 12 years with Alexandria. Our sophisticated management team also includes regional market directors with leading reputations and longstanding relationships within the science and technology communities in their respective urban innovation clusters. We believe that our unparalleled expertise, experience, reputation, and key relationships with the science and technology industries provide Alexandria significant competitive advantages in attracting new business opportunities.
Executive management
Joel S. Marcus | Chairman, Chief Executive Officer & Founder | |
Dean A. Shigenaga | Chief Financial Officer, EVP & Treasurer | |
Thomas J. Andrews | EVP – Regional Market Director – Greater Boston | |
Jennifer J. Banks | General Counsel, EVP & Corporate Secretary | |
Peter M. Moglia | Chief Investment Officer | |
Stephen A. Richardson | Chief Operating Officer & Regional Market Director – San Francisco Bay Area | |
Daniel J. Ryan | EVP – Regional Market Director – San Diego & Strategic Operations | |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 12 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Investor Information
Corporate Headquarters | Trading Symbols | Information Requests | |||
385 East Colorado Boulevard, Suite 299 | New York Stock Exchange | Phone: | (626) 396-4828 | ||
Pasadena, California 91101 | Common stock: ARE | E-mail: | |||
Series E preferred stock: ARE–E | Web: | www.are.com | |||
Common stock data (at the end of the quarter unless otherwise noted) | |||||||||||||||||||
4Q14 | 3Q14 | 2Q14 | 1Q14 | 4Q13 | |||||||||||||||
Closing stock price | $ | 88.74 | $ | 73.75 | $ | 77.64 | $ | 72.56 | $ | 63.62 | |||||||||
Dividend per share – quarter/annualized | $ | 0.74/2.96 | $ | 0.72/2.88 | $ | 0.72/2.88 | $ | 0.70/2.80 | $ | 0.68/2.72 | |||||||||
Dividend payout ratio for the quarter | 60% | 60% | 61% | 60% | 59% | ||||||||||||||
Dividend yield – annualized | 3.3% | 3.9% | 3.7% | 3.9% | 4.3% | ||||||||||||||
Common shares outstanding (in thousands) | 71,464 | 71,372 | 71,318 | 71,246 | 71,172 | ||||||||||||||
Market value of outstanding common shares (in thousands) | $ | 6,341,704 | $ | 5,263,672 | $ | 5,537,136 | $ | 5,169,623 | $ | 4,527,975 | |||||||||
Total market capitalization (in thousands) | $ | 10,392,126 | $ | 9,147,179 | $ | 9,253,401 | $ | 8,799,376 | $ | 7,949,276 | |||||||||
Equity research coverage |
Alexandria is currently covered by the following research analysts. This list may not be complete and is subject to change as firms initiate or discontinue coverage of our company. Please note that any opinions, estimates, or forecasts regarding our historical or predicted performance made by these analysts are theirs alone and do not represent opinions, estimates, or forecasts of Alexandria or its management. Alexandria does not by its reference or distribution of the information below imply its endorsement of or concurrence with any opinions, estimates, or forecasts of these analysts. Interested persons may obtain copies of analysts’ reports on their own as we do not distribute these reports. Several of these firms may from time-to-time own our stock and/or hold other long or short positions in our stock, and may provide compensated services to us. |
Bank of America Merrill Lynch | Evercore ISI | J.P. Morgan Securities LLC | Robert W. Baird & Company | |||
Jamie Feldman / Jeffrey Spector | Sheila McGrath / Nathan Crossett | Anthony Paolone | David Rodgers / Mathew Spencer | |||
(646) 855-5808 / (646) 855-1363 | (212) 497-0882 / (212) 497-0870 | (212) 622-6682 | (216) 737-7341 / (414) 298-5053 | |||
Barclays Capital Inc. | Green Street Advisors, Inc. | Mizuho Securities USA Inc. | Standard & Poor’s | |||
Ross Smotrich | Michael Knott / Kevin Tyler | Richard Anderson / Jieren Huang | Cathy Seifert | |||
(212) 526-2306 | (949) 640-8780 / (949) 640-8780 | (212) 205-8445 / (201) 626-1085 | (212) 438-9545 | |||
Citigroup Global Markets Inc. | JMP Securities – JMP Group, Inc. | RBC Capital Markets | UBS Financial Services Inc. | |||
Michael Bilerman / Smedes Rose | Peter Martin / Aaron Hecht | Michael Carroll / Rich Moore | Ross Nussbaum / Nick Yulico | |||
(212) 816-1383 / (212) 816-6243 | (415) 835-8904 / (415) 835-3963 | (440) 715-2649 / (440) 715-2646 | (212) 713-2484 / (212) 713-3402 | |||
Cowen and Company, LLC | ||||||
James Sullivan / Tom Catherwood | ||||||
(646) 562-1380 / (646) 562-1382 | ||||||
Rating agencies |
Moody’s Investors Service | Rating | Standard & Poor’s | Rating | ||||
Philip Kibel / Merrie Frankel | Baa2 | George Skoufis / Jaime Gitler | BBB- | ||||
(212) 553-4569 / (212) 553-3652 | Stable Outlook | (212) 438-2608 / (212) 438-5049 | Positive Outlook | ||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 13 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Financial and Asset Base Highlights
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended (unless stated otherwise) | ||||||||||||||||||||
12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | ||||||||||||||||
Operating data | ||||||||||||||||||||
Total revenues | $ | 188,674 | $ | 185,615 | $ | 176,402 | $ | 176,186 | $ | 168,823 | ||||||||||
Operating margins | 70% | 69% | 70% | 70% | 70% | |||||||||||||||
Adjusted EBITDA – quarter annualized | $ | 493,432 | $ | 473,884 | $ | 452,568 | $ | 454,084 | $ | 449,456 | ||||||||||
Adjusted EBITDA – trailing 12 months | $ | 468,492 | $ | 457,498 | $ | 441,914 | $ | 428,699 | $ | 414,119 | ||||||||||
Adjusted EBITDA margins – quarter annualized | 65% | 64% | 64% | 65% | 67% | |||||||||||||||
General and administrative expense as a percentage of total assets – trailing 12 months | 0.7% | 0.7% | 0.7% | 0.6% | 0.6% | |||||||||||||||
General and administrative expense as a percentage of total revenues – trailing 12 months | 7.4% | 7.4% | 7.6% | 7.6% | 7.7% | |||||||||||||||
Capitalized interest | $ | 11,665 | $ | 12,125 | $ | 11,302 | $ | 12,013 | $ | 14,116 | ||||||||||
Weighted average interest rate for capitalization of interest during period | 3.69% | 3.73% | 3.41% | 3.88% | 4.09% | |||||||||||||||
Net (loss) income, FFO, and AFFO | ||||||||||||||||||||
Net (loss) income attributable to Alexandria’s common stockholders | $ | (16,154 | ) | (1) | $ | 27,626 | $ | 27,932 | $ | 32,709 | $ | 36,247 | ||||||||
FFO attributable to Alexandria’s common stockholders – diluted | $ | 61,475 | (2) | $ | 85,574 | $ | 84,513 | $ | 83,070 | $ | 80,218 | |||||||||
FFO attributable to Alexandria’s common stockholders – diluted, as adjusted | $ | 87,905 | $ | 86,095 | $ | 84,513 | $ | 83,070 | $ | 82,505 | ||||||||||
AFFO attributable to Alexandria’s common stockholders – diluted | $ | 77,958 | $ | 76,960 | $ | 72,506 | $ | 71,338 | $ | 71,817 | ||||||||||
Per share data | ||||||||||||||||||||
Earnings per share attributable to Alexandria’s common stockholders – basic and diluted | $ | (0.23 | ) | (1) | $ | 0.39 | $ | 0.39 | $ | 0.46 | $ | 0.51 | ||||||||
FFO per share attributable to Alexandria’s common stockholders – diluted | $ | 0.86 | (2) | $ | 1.20 | $ | 1.19 | $ | 1.17 | $ | 1.13 | |||||||||
FFO per share attributable to Alexandria’s common stockholders – diluted, as adjusted | $ | 1.23 | $ | 1.21 | $ | 1.19 | $ | 1.17 | $ | 1.16 | ||||||||||
AFFO per share attributable to Alexandria’s common stockholders – diluted | $ | 1.09 | $ | 1.08 | $ | 1.02 | $ | 1.00 | $ | 1.01 | ||||||||||
Leasing activity and same property performance | ||||||||||||||||||||
Leasing activity – rentable square feet | 581,660 | 871,416 | 752,364 | 563,394 | 1,344,687 | |||||||||||||||
Leasing activity – change in average new rental rates over expiring rates: | ||||||||||||||||||||
– Rental rate increases | 10.1% | 18.6% | 9.9% | 18.2% | 18.2% | |||||||||||||||
– Rental rate increases (cash basis) | 2.4% | 5.6% | 3.0% | 10.4% | 2.6% | |||||||||||||||
Same property – performance over comparable quarter from prior year: | ||||||||||||||||||||
– Same property NOI | 3.6% | 5.0% | 5.3% | 3.8% | 1.4% | |||||||||||||||
– Same property NOI (cash basis) | 6.7% | 5.9% | 5.7% | 4.3% | 4.6% | |||||||||||||||
(1) Results for 4Q14 include an aggregate net loss of $46.2 million, or $0.65 per share, related to impairments of real estate and a preferred stock redemption charge, slightly offset by gains on sales of real estate. See further discussion of impairments of real estate and gains on sales of real estate in the "Dispositions" section on page 3. (2) Includes an aggregate net loss of $24.7 million, or $0.34 per diluted share, related to impairment of real estate – land parcels and $2.0 million, or $0.03 per diluted share, related to a preferred stock redemption charge. | ||||||||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 14 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Financial and Asset Base Highlights (continued)
(Dollars in thousands, except per occupied RSF amounts)
(Unaudited)
Three Months Ended (unless stated otherwise) | ||||||||||||||||||||
12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | ||||||||||||||||
Asset base statistics – at end of period | ||||||||||||||||||||
Number of properties (including unconsolidated joint ventures) | 193 | 194 | 191 | 189 | 184 | |||||||||||||||
Rentable square feet (operating and current value-creation projects) | 18,729,282 | 18,458,379 | 17,881,108 | 17,715,931 | 17,461,030 | |||||||||||||||
Total square footage (including near-term and future developable square feet) | 31,538,470 | 31,617,818 | 31,378,329 | 31,239,652 | 30,934,751 | |||||||||||||||
ABR per occupied RSF | $ | 37.23 | $ | 37.23 | $ | 36.76 | $ | 36.18 | $ | 35.90 | ||||||||||
Occupancy of operating properties – North America | 97.0% | 97.3% | 96.9% | 96.6% | 95.9% | |||||||||||||||
Occupancy of operating and redevelopment properties – North America | 96.1% | 96.3% | 95.6% | 95.1% | 95.5% | |||||||||||||||
Selected balance sheet information – at end of period | ||||||||||||||||||||
Gross investments in real estate | $ | 8,346,261 | $ | 8,280,799 | $ | 8,069,927 | $ | 7,923,080 | $ | 7,729,020 | ||||||||||
Total assets | $ | 8,136,036 | $ | 8,020,314 | $ | 7,815,649 | $ | 7,756,039 | $ | 7,529,764 | ||||||||||
Gross assets | $ | 9,256,281 | $ | 9,103,483 | $ | 8,855,459 | $ | 8,748,857 | $ | 8,481,870 | ||||||||||
Total unsecured debt | $ | 3,026,370 | $ | 2,864,290 | $ | 2,719,310 | $ | 2,654,270 | $ | 2,352,230 | ||||||||||
Total debt | $ | 3,678,579 | $ | 3,501,115 | $ | 3,334,861 | $ | 3,251,781 | $ | 3,061,061 | ||||||||||
Net debt | $ | 3,565,684 | $ | 3,409,847 | $ | 3,248,641 | $ | 3,146,357 | $ | 2,975,656 | ||||||||||
Total liabilities | $ | 4,226,478 | $ | 4,063,199 | $ | 3,826,766 | $ | 3,751,534 | $ | 3,550,823 | ||||||||||
Common shares outstanding (in thousands) | 71,464 | 71,372 | 71,318 | 71,246 | 71,172 | |||||||||||||||
Total equity capitalization | $ | 6,713,547 | $ | 5,646,064 | $ | 5,918,540 | $ | 5,547,595 | $ | 4,888,215 | ||||||||||
Total market capitalization | $ | 10,392,126 | $ | 9,147,179 | $ | 9,253,401 | $ | 8,799,376 | $ | 7,949,276 | ||||||||||
Key credit metrics | ||||||||||||||||||||
Net debt to Adjusted EBITDA – quarter annualized | 7.2x | 7.2x | 7.2x | 6.9x | 6.6x | |||||||||||||||
Net debt to Adjusted EBITDA – trailing 12 months | 7.6x | 7.5x | 7.4x | 7.3x | 7.2x | |||||||||||||||
Fixed charge coverage ratio – quarter annualized | 3.3x | 3.3x | 3.5x | 3.3x | 3.2x | |||||||||||||||
Fixed charge coverage ratio – trailing 12 months | 3.3x | 3.3x | 3.2x | 3.0x | 2.9x | |||||||||||||||
Non-income-producing assets as a percentage of gross investments in real estate | 16% | 17% | 17% | 17% | 17% | |||||||||||||||
Unencumbered NOI as a percentage of total NOI | 84% | 84% | 84% | 83% | 69% | |||||||||||||||
Dividend payout ratio (common stock) | 60% | 60% | 61% | 60% | 59% | |||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 15 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Operating Metrics
(Unaudited)
Occupancy of Operating Properties North America (1) | Same Property NOI Growth | NOI – Key Driver in NAV Growth (In millions) | ||||
 |  |  | ||||
 | ||||||
Drivers of Cash NOI Growth (2) | Rental Rate Growth: Renewed/Re-leased Space | Operating Margin | ||||
 |  | |||||
Percentage of triple net leases | 95% | |||||
Percentage of leases containing annual rent escalations | 94% | |||||
Percentage of leases providing for the recapture of capital expenditures | 93% | |||||
| ||||||
(1) | As of period end. |
(2) | As of December 31, 2014. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 16 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Same Property Performance
(Dollars in thousands)
(Unaudited)
Same Property Financial Data | 4Q14 | 2014 | Same Property Statistical Data | 4Q14 | 2014 | |||||
Percentage change over comparable period from prior year: | Number of same properties | 161 | 149 | |||||||
NOI | 3.6% | 4.5% | Rentable square feet | 13,759,663 | 12,419,189 | |||||
NOI (cash basis) | 6.7% | 5.5% | Occupancy – current period average | 96.7% | 96.6% | |||||
Operating margin | 70% | 69% | Occupancy – same period prior year average | 93.8% | 93.5% | |||||
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||
2014 | 2013 | $ Change | % Change | 2014 | 2013 | $ Change | % Change | |||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||
Rental – same properties | $ | 124,763 | $ | 121,998 | $ | 2,765 | 2.3 | % | $ | 437,987 | $ | 421,615 | $ | 16,372 | 3.9 | % | ||||||||||||||
Rental – non-same properties | 16,110 | 3,695 | 12,415 | 336.0 | 106,166 | 46,149 | 60,017 | 130.1 | ||||||||||||||||||||||
Total rental | 140,873 | 125,693 | 15,180 | 12.1 | 544,153 | 467,764 | 76,389 | 16.3 | ||||||||||||||||||||||
Tenant recoveries – same properties | 42,112 | 39,332 | 2,780 | 7.1 | 148,694 | 138,682 | 10,012 | 7.2 | ||||||||||||||||||||||
Tenant recoveries – non-same properties | 3,170 | 638 | 2,532 | 396.9 | 24,786 | 11,413 | 13,373 | 117.2 | ||||||||||||||||||||||
Total tenant recoveries | 45,282 | 39,970 | 5,312 | 13.3 | 173,480 | 150,095 | 23,385 | 15.6 | ||||||||||||||||||||||
Other income – same properties | 78 | 44 | 34 | 77.3 | 398 | 156 | 242 | 155.1 | ||||||||||||||||||||||
Other income – non-same properties | 2,441 | 3,116 | (675 | ) | (21.7 | ) | 8,846 | 13,136 | (4,290 | ) | (32.7 | ) | ||||||||||||||||||
Total other income | 2,519 | 3,160 | (641 | ) | (20.3 | ) | 9,244 | 13,292 | (4,048 | ) | (30.5 | ) | ||||||||||||||||||
Total revenues – same properties | 166,953 | 161,374 | 5,579 | 3.5 | 587,079 | 560,453 | 26,626 | 4.8 | ||||||||||||||||||||||
Total revenues – non-same properties | 21,721 | 7,449 | 14,272 | 191.6 | 139,798 | 70,698 | 69,100 | 97.7 | ||||||||||||||||||||||
Total revenues | 188,674 | 168,823 | 19,851 | 11.8 | 726,877 | 631,151 | 95,726 | 15.2 | ||||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||||
Rental operations – same properties | 50,618 | 49,034 | 1,584 | 3.2 | 183,028 | 173,799 | 9,229 | 5.3 | ||||||||||||||||||||||
Rental operations – non-same properties | 6,263 | 858 | 5,405 | 630.0 | 36,136 | 15,240 | 20,896 | 137.1 | ||||||||||||||||||||||
Total rental operations | 56,881 | 49,892 | 6,989 | 14.0 | 219,164 | 189,039 | 30,125 | 15.9 | ||||||||||||||||||||||
Our share of NOI from unconsolidated joint ventures: | ||||||||||||||||||||||||||||||
Joint venture NOI – same properties | — | — | — | — | — | — | — | — | ||||||||||||||||||||||
Joint venture NOI – non-same properties | 918 | — | 918 | 100.0 | 918 | — | 918 | 100.0 | ||||||||||||||||||||||
Our share of NOI from unconsolidated joint ventures | 918 | — | 918 | 100.0 | 918 | — | 918 | 100.0 | ||||||||||||||||||||||
Net operating income: | ||||||||||||||||||||||||||||||
NOI – same properties | 116,335 | 112,340 | 3,995 | 3.6 | 404,051 | 386,654 | 17,397 | 4.5 | ||||||||||||||||||||||
NOI – non-same properties | 16,376 | 6,591 | 9,785 | 148.5 | 104,580 | 55,458 | 49,122 | 88.6 | ||||||||||||||||||||||
Total NOI | $ | 132,711 | $ | 118,931 | $ | 13,780 | 11.6 | % | $ | 508,631 | $ | 442,112 | $ | 66,519 | 15.0 | % | ||||||||||||||
NOI – same properties | $ | 116,335 | $ | 112,340 | $ | 3,995 | 3.6 | % | $ | 404,051 | $ | 386,654 | $ | 17,397 | 4.5 | % | ||||||||||||||
Less: straight-line rent adjustments | (3,490 | ) | (6,587 | ) | 3,097 | (47.0 | ) | (18,878 | ) | (21,451 | ) | 2,573 | (12.0 | ) | ||||||||||||||||
NOI (cash basis) – same properties | $ | 112,845 | $ | 105,753 | $ | 7,092 | 6.7 | % | $ | 385,173 | $ | 365,203 | $ | 19,970 | 5.5 | % | ||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 17 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Same Property Performance (continued)
(Unaudited)
The charts below provide two alternative calculations of same property performance in comparison to our historical same property performance. Our reported same property performance is based upon a pool of operating assets and completed developed and redeveloped assets to the extent that those assets were operating for the entirety of the comparable same property periods presented. The two alternative calculations presented below consist of (i) same property performance for the operating portfolio excluding assets that were recently developed or redeveloped and (ii) the same property performance for the operating portfolio including those assets that were either under current redevelopment or previously completed redevelopments. For 2011 and 2012, our same property performance was generally consistent in each of the three calculations. For 2014 and 2013, same property performance including redevelopment properties, as shown in the table, would have been meaningfully higher than our traditional method of reporting same property performance. Same property performance including redevelopment properties will, from time to time, have significant growth in NOI as a result of the completion of the conversion of non-laboratory space (with lower NOI) to office/laboratory space (with higher NOI) through redevelopment. We believe our traditional method of reporting same property performance is a more useful presentation since it excludes the potential significant increases in performance as a result of completion of significant redevelopment projects.
Percentage change in same property NOI over preceding period |
 |
Percentage change in same property NOI over preceding period – cash basis |
 |
NOI Included in All Comparative Periods | |||||||||||
Operating Properties | Recently Completed | Properties Under Active | |||||||||
Legend | Developments | Redevelopments | Development | Redevelopment | |||||||
 | Same property data as reported | Yes | Yes (1) | Yes (1) | No | No | |||||
Same property operating portfolio | Yes | No | No | No | No | ||||||
Same property data including redevelopments | Yes | No | Yes | No | Yes | ||||||
(1) | Recently delivered developments and redevelopments are included in the same property data for each of the year-over-year comparison periods only if the property was operating during both entire same property periods. For example, projects completed during 2012 are included in 2014 versus 2013 same property performance (as a percentage change over 2013). |
The following table reconciles same properties to total properties for 2014:
Development – current | Properties | |||
75/125 Binney Street | 1 | |||
430 East 29th Street | 1 | |||
5200 Illumina Way – Building 6 | 1 | |||
3013/3033 Science Park Road | 2 | |||
6040 George Watts Hill Drive | 1 | |||
360 Longwood Avenue (unconsolidated JV) | 1 | |||
1455/1515 Third Street (unconsolidated JV) | 2 | |||
9 | ||||
Development – deliveries since January 1, 2013 | Properties | |||
225 Binney Street | 1 | |||
269 East Grand Avenue | 1 | |||
499 Illinois Street | 1 | |||
3 | ||||
Redevelopment – current | Properties | |||
225 Second Avenue | 1 | |||
11055/11065 Roselle Street | 2 | |||
3 | ||||
Redevelopment – deliveries since January 1, 2013 | Properties | |||
400 Technology Square | 1 | |||
1551 Eastlake Avenue East | 1 | |||
285 Bear Hill Road | 1 | |||
343 Oyster Point Boulevard | 1 | |||
1616 Eastlake Avenue East | 1 | |||
9800 Medical Center Drive | 3 | |||
4757 Nexus Center Drive | 1 | |||
11075 Roselle Street | 1 | |||
10121 Barnes Canyon Road | 1 | |||
11 | ||||
Summary | Properties | ||
Development – current | 9 | ||
Development – deliveries | 3 | ||
Redevelopment – current | 3 | ||
Redevelopment – deliveries | 11 | ||
Development/redevelopment – Asia | 5 | ||
Acquisitions in North America since January 1, 2013: | |||
10151 Barnes Canyon Road | 1 | ||
407 Davis Drive | 1 | ||
150 Second Street | 1 | ||
3545 Cray Court | 1 | ||
4025/4031/4045 Sorrento Valley Boulevard | 3 | ||
9625 Towne Centre Drive | 1 | ||
Properties “held for sale” | 5 | ||
Total properties excluded from same properties | 44 | ||
Same properties | 149 | ||
Total properties as of December 31, 2014 | 193 | ||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 18 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Leasing Activity
(Unaudited)
Three Months Ended December 31, 2014 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||||||||
Including Straight-line Rent | Cash Basis | Including Straight-line Rent | Cash Basis | Including Straight-line Rent | Cash Basis | |||||||||||||||||||
Leasing activity: | ||||||||||||||||||||||||
Renewed/re-leased space (1) | ||||||||||||||||||||||||
Rental rate changes | 10.1% | 2.4% | 13.3% | 5.4% | 16.2% | 4.0% | ||||||||||||||||||
New rates | $ | 37.72 | $ | 37.96 | $ | 40.32 | $ | 40.73 | $ | 32.00 | $ | 31.04 | ||||||||||||
Expiring rates | $ | 34.26 | $ | 37.05 | $ | 35.60 | $ | 38.63 | $ | 27.53 | $ | 29.84 | ||||||||||||
Rentable square footage | 318,434 | 1,447,516 | 1,838,397 | |||||||||||||||||||||
Number of leases | 31 | 124 | 120 | |||||||||||||||||||||
TIs/lease commissions per square foot | $ | 17.27 | $ | 10.49 | $ | 8.65 | ||||||||||||||||||
Average lease terms | 4.3 years | 3.5 years | 5.2 years | |||||||||||||||||||||
Developed/redeveloped/previously vacant space leased | ||||||||||||||||||||||||
New rates | $ | 35.70 | $ | 33.76 | $ | 40.62 | $ | 36.50 | $ | 44.63 | $ | 41.86 | ||||||||||||
Rentable square footage | 263,226 | 1,321,317 | 1,806,659 | |||||||||||||||||||||
Number of leases | 20 | 66 | 92 | |||||||||||||||||||||
TIs/lease commissions per square foot | $ | 19.38 | $ | 14.96 | $ | 19.16 | ||||||||||||||||||
Average lease terms | 10.4 years | 11.5 years | 10.0 years | |||||||||||||||||||||
Leasing activity summary (totals): | ||||||||||||||||||||||||
New rates | $ | 36.81 | $ | 36.06 | $ | 40.46 | $ | 38.71 | $ | 38.26 | $ | 36.40 | ||||||||||||
Rentable square footage | 581,660 | 2,768,833 | (2) | 3,645,056 | ||||||||||||||||||||
Number of leases | 51 | 190 | 212 | |||||||||||||||||||||
TIs/lease commissions per square foot | $ | 18.22 | $ | 12.62 | $ | 13.86 | ||||||||||||||||||
Average lease terms | 7.0 years | 7.3 years | 7.6 years | |||||||||||||||||||||
Lease expirations (1) | ||||||||||||||||||||||||
Expiring rates | $ | 30.23 | $ | 32.40 | $ | 33.09 | $ | 35.79 | $ | 27.74 | $ | 30.16 | ||||||||||||
Rentable square footage | 453,980 | 1,733,614 | 2,127,190 | |||||||||||||||||||||
Number of leases | 42 | 151 | 151 | |||||||||||||||||||||
(1) | Excludes 20 month-to-month leases for 43,672 RSF and 13 month-to-month leases for 22,172 RSF at December 31, 2014 and 2013, respectively. |
(2) | During 2014, we granted tenant concessions/free rent averaging approximately 2.8 months with respect to the 2,768,833 RSF leased. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 19 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Lease Expirations
(Unaudited)
Year of Lease Expiration | Number of Leases Expiring | RSF of Expiring Leases | Percentage of Aggregate Total RSF | ABR of Expiring Leases (per RSF) | |||||||||||||||||
2015 | 79 | (1) | 1,202,148 | (1) | 7.5 | % | $ | 28.09 | |||||||||||||
2016 | 93 | 1,239,201 | 7.7 | % | $ | 32.38 | |||||||||||||||
2017 | 87 | 1,691,334 | 10.5 | % | $ | 28.51 | |||||||||||||||
2018 | 66 | 1,569,631 | 9.8 | % | $ | 40.57 | |||||||||||||||
2019 | 61 | 1,516,037 | 9.4 | % | $ | 36.11 | |||||||||||||||
2020 | 41 | 1,302,185 | 8.1 | % | $ | 35.37 | |||||||||||||||
2021 | 32 | 1,153,875 | 7.2 | % | $ | 38.47 | |||||||||||||||
2022 | 18 | 660,502 | 4.1 | % | $ | 29.39 | |||||||||||||||
2023 | 21 | 1,076,027 | 6.7 | % | $ | 35.33 | |||||||||||||||
2024 | 13 | 687,118 | 4.3 | % | $ | 45.58 | |||||||||||||||
Thereafter | 31 | 2,757,356 | 17.2 | % | $ | 45.25 | |||||||||||||||
2015 RSF of Expiring Leases | ABR of Expiring Leases (per RSF) | 2016 RSF of Expiring Leases | ABR of Expiring Leases (per RSF) | ||||||||||||||||||||||||||||||||||||
Leased | Negotiating/ Anticipating | Targeted for Redevelopment | Remaining Expiring Leases | Total (1) | Leased | Negotiating/ Anticipating | Targeted for Redevelopment | Remaining Expiring Leases | Total | ||||||||||||||||||||||||||||||
Market | |||||||||||||||||||||||||||||||||||||||
Greater Boston | 72,462 | 31,416 | — | 218,659 | 322,537 | $ | 35.29 | 1,995 | 84,416 | — | 287,207 | 373,618 | $ | 39.21 | |||||||||||||||||||||||||
San Francisco Bay Area | 90,980 | 14,053 | — | 76,051 | 181,084 | 37.11 | 10,992 | — | — | 128,110 | 139,102 | 32.10 | |||||||||||||||||||||||||||
New York City | 50 | — | — | 9,330 | 9,380 | N/A | — | — | — | 5,399 | 5,399 | N/A | |||||||||||||||||||||||||||
San Diego | 52,768 | — | 182,611 | (2) | 96,083 | 331,462 | 20.51 | — | — | — | 244,282 | 244,282 | 38.17 | ||||||||||||||||||||||||||
Seattle | — | 3,086 | — | 48,704 | 51,790 | 21.22 | 2,468 | 9,594 | — | 37,239 | 49,301 | 31.46 | |||||||||||||||||||||||||||
Maryland | 4,842 | 35,224 | — | 127,668 | 167,734 | 19.99 | — | 3,555 | — | 135,455 | 139,010 | 26.12 | |||||||||||||||||||||||||||
Research Triangle Park | — | 8,916 | — | 111,718 | 120,634 | 21.50 | — | — | — | 142,344 | 142,344 | 22.64 | |||||||||||||||||||||||||||
Canada | — | — | — | — | — | — | — | — | — | 67,479 | 67,479 | 26.94 | |||||||||||||||||||||||||||
Non-cluster markets | — | — | — | 12,604 | 12,604 | 23.16 | — | — | — | 3,854 | 3,854 | 20.53 | |||||||||||||||||||||||||||
Asia | — | — | — | 4,923 | 4,923 | 17.00 | — | 70,470 | — | 4,342 | 74,812 | 16.89 | |||||||||||||||||||||||||||
Total | 221,102 | 92,695 | 182,611 | 705,740 | 1,202,148 | $ | 28.09 | 15,455 | 168,035 | — | 1,055,711 | 1,239,201 | $ | 32.38 | |||||||||||||||||||||||||
Percentage of expiring leases | 18 | % | 8 | % | 15 | % | 59 | % | 100 | % | 1 | % | 14 | % | — | % | 85 | % | 100 | % | |||||||||||||||||||
(1) | Excludes 20 month-to-month leases for 43,672 RSF. |
(2) | Comprised of 48,880 RSF at 10151 Barnes Canyon Road and 133,731 RSF at 9625 Towne Centre Drive, which were acquired in 3Q13 and 4Q14, respectively, with the intent to redevelop into tech office space in 4Q15 and 3Q15, respectively, upon expiration of the leases that have been in place since the acquisition of each property. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 20 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Top 20 Client Tenants
(Dollars in thousands)
(Unaudited)
Remaining Lease Term in Years (1) | Aggregate RSF | ABR | Percentage of Aggregate ABR | Investment-Grade Ratings | |||||||||||||||||||
Client Tenant | Fitch | Moody’s | S&P | ||||||||||||||||||||
1 | Novartis AG | 2.7 | 699,071 | $ | 33,860 | 6.1 | % | AA | Aa3 | AA- | |||||||||||||
2 | Illumina, Inc. | 15.3 | 595,886 | 27,180 | 4.9 | — | — | BBB- | |||||||||||||||
3 | New York University | 15.8 | 207,777 | 19,778 | 3.6 | — | Aa3 | AA- | |||||||||||||||
4 | Roche | 5.7 | 343,472 | 16,490 | 3.0 | AA | A1 | AA | |||||||||||||||
5 | United States Government | 9.4 | 344,727 | 16,346 | 2.9 | AAA | Aaa | AA+ | |||||||||||||||
6 | Eli Lilly and Company | 8.9 | 257,119 | 15,257 | 2.8 | A | A2 | AA- | |||||||||||||||
7 | Amgen Inc. | 8.7 | 401,623 | 14,393 | 2.6 | BBB | Baa1 | A | |||||||||||||||
8 | FibroGen, Inc. | 8.9 | 234,249 | 14,210 | 2.6 | — | — | — | |||||||||||||||
9 | Biogen Idec Inc. | 13.4 | 313,872 | 13,707 | 2.5 | — | Baa1 | A- | |||||||||||||||
10 | Dana-Farber Cancer Institute, Inc. | 15.5 | 154,100 | 11,877 | 2.1 | — | A1 | — | |||||||||||||||
11 | The Regents of the University of California | 8.5 | 230,633 | 10,105 | 1.8 | AA | Aa2 | AA- | |||||||||||||||
12 | Bristol-Myers Squibb Company | 4.0 | 251,316 | 10,087 | 1.8 | A- | A2 | A+ | |||||||||||||||
13 | Celgene Corporation | 6.7 | 273,086 | 10,084 | 1.8 | — | Baa2 | BBB+ | |||||||||||||||
14 | The Scripps Research Institute | 3.1 | 218,031 | 10,027 | 1.8 | AA- | Aa3 | — | |||||||||||||||
15 | GlaxoSmithKline plc | 4.6 | 208,394 | 9,911 | 1.8 | A+ | A2 | A+ | |||||||||||||||
16 | Massachusetts Institute of Technology | 2.9 | 202,897 | 9,535 | 1.7 | — | Aaa | AAA | |||||||||||||||
17 | AstraZeneca PLC | 1.7 | 352,039 | 9,253 | 1.7 | A+ | A2 | AA- | |||||||||||||||
18 | Alnylam Pharmaceuticals, Inc. | 6.8 | 129,424 | 6,955 | 1.3 | — | — | — | |||||||||||||||
19 | Pfizer Inc. | 4.9 | 128,348 | 6,396 | 1.2 | A+ | A1 | AA | |||||||||||||||
20 | Gilead Sciences, Inc. | 5.5 | 109,969 | 5,824 | 1.0 | — | A3 | A- | |||||||||||||||
Total/weighted average | 8.3 | 5,656,033 | $ | 271,275 | 49.0 | % | |||||||||||||||||
(1) | Represents remaining lease term in years based on percentage of aggregate ABR in effect as of December 31, 2014. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 21 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Client Tenant Mix
(Unaudited)
 | ||
Investment-Grade Client Tenants: | ||
56% | ||
of ARE’s Total ABR | ||
(By ABR) | ||
Multinational Pharmaceutical | Institutions (Academic/Medical, Non-Profit, and U.S. Government) | Life Science Product, Service, and Device | Biotechnology: Public & Private | |||
• AstraZeneca PLC • Bayer AG • Bristol-Myers Squibb Company • Eisai Co., Ltd. • Eli Lilly and Company • GlaxoSmithKline plc • Merck & Co., Inc. • Novartis AG • Pfizer Inc. • Roche • Sanofi • Shire plc • UCB S.A. | • Dana-Farber Cancer Institute, Inc. • Duke University • Environmental Protection Agency • Fred Hutchinson Cancer Research Center • Massachusetts Institute of Technology • National Institutes of Health • New York University • Partners HealthCare System, Inc. • Sanford-Burnham Medical Research Institute • Stanford University • The Regents of the University of California • The Scripps Research Institute • UMass Memorial Health Care, Inc. • University of North Carolina Health Care System • United States Government • University of Washington | • Aramco Services Company • BASF Corporation • Canon U.S. Life Sciences, Inc. • Covance Inc. • DSM N.V. • Fluidigm Corporation • Foundation Medicine, Inc. • Google Inc. • Illumina, Inc. • Laboratory Corporation of America Holdings • Monsanto Company • Myriad Genetics, Inc. • Quest Diagnostics Incorporated • Sigma-Aldrich Corporation • Thermo Fisher Scientific Inc. | • Alnylam Pharmaceuticals, Inc. • Amgen Inc. • Biogen Idec Inc. • bluebird bio, Inc. • Celgene Corporation • Constellation Pharmaceuticals, Inc. • Epizyme, Inc. • FibroGen, Inc. • FORMA Therapeutics, Inc. • Gilead Sciences, Inc. • Medivation, Inc. • Nektar Therapeutics • Principia Biopharma Inc. • Proteostasis Therapeutics, Inc. • Quanticel Pharmaceuticals, Inc. • Receptos, Inc. • Warp Drive Bio, LLC | |||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 22 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Summary of Properties and Occupancy
(Unaudited)
Summary of properties
RSF | Number of Properties | ABR (Dollars in thousands) | |||||||||||||||||||||||
Market | Operating | Development | Redevelopment | Total | % Total | ||||||||||||||||||||
Greater Boston | 3,703,238 | 646,282 | 112,500 | 4,462,020 | 23 | % | 39 | $ | 163,029 | 29 | % | ||||||||||||||
San Francisco Bay Area | 2,712,598 | 422,980 | — | 3,135,578 | 17 | 27 | 115,013 | 21 | |||||||||||||||||
New York City | 635,608 | 177,221 | — | 812,829 | 4 | 4 | 50,098 | 9 | |||||||||||||||||
San Diego | 3,063,927 | 419,728 | 31,277 | 3,514,932 | 19 | 48 | 103,048 | 19 | |||||||||||||||||
Seattle | 746,260 | — | — | 746,260 | 4 | 10 | 29,881 | 5 | |||||||||||||||||
Maryland | 2,156,196 | — | — | 2,156,196 | 12 | 29 | 49,164 | 9 | |||||||||||||||||
Research Triangle Park | 1,025,786 | 61,547 | — | 1,087,333 | 6 | 16 | 21,371 | 4 | |||||||||||||||||
Canada | 322,967 | — | — | 322,967 | 2 | 4 | 8,946 | 2 | |||||||||||||||||
Non-cluster markets | 60,178 | — | — | 60,178 | — | 2 | 1,000 | — | |||||||||||||||||
North America | 14,426,758 | 1,727,758 | 143,777 | 16,298,293 | 87 | 179 | 541,550 | 98 | |||||||||||||||||
Asia | 1,242,702 | 129,762 | — | 1,372,464 | 7 | 9 | 6,433 | 1 | |||||||||||||||||
Subtotal | 15,669,460 | 1,857,520 | 143,777 | 17,670,757 | 94 | 188 | 547,983 | 99 | |||||||||||||||||
Properties “held for sale” (1) | 1,058,525 | — | — | 1,058,525 | 6 | 5 | 6,783 | 1 | |||||||||||||||||
Total | 16,727,985 | 1,857,520 | 143,777 | 18,729,282 | 100 | % | 193 | $ | 554,766 | 100 | % | ||||||||||||||
Summary of occupancy percentages
Operating Properties | Operating and Redevelopment Properties | |||||||||||||||||
Market | 12/31/14 | 9/30/14 | 12/31/13 | 12/31/14 | 9/30/14 | 12/31/13 | ||||||||||||
Greater Boston | 98.8 | % | 98.6 | % | 96.8 | % | 95.9 | % | 95.7 | % | 96.8 | % | ||||||
San Francisco Bay Area | 98.9 | 99.0 | 97.7 | 98.9 | 99.0 | 97.7 | ||||||||||||
New York City | 99.5 | 98.4 | 98.3 | 99.5 | 98.4 | 98.3 | ||||||||||||
San Diego | 96.5 | 97.1 | 96.5 | 95.5 | 96.1 | 94.5 | ||||||||||||
Seattle | 94.8 | 94.7 | 90.7 | 94.8 | 94.7 | 90.7 | ||||||||||||
Maryland | 92.5 | 93.8 | 92.0 | 92.5 | 93.8 | 92.0 | ||||||||||||
Research Triangle Park | 97.2 | 96.7 | 96.6 | 97.2 | 96.7 | 96.6 | ||||||||||||
Subtotal | 97.0 | 97.3 | 95.9 | 96.1 | 96.3 | 95.5 | ||||||||||||
Canada | 97.6 | 97.6 | 96.8 | 97.6 | 97.6 | 96.8 | ||||||||||||
Non-cluster markets | 93.9 | 93.9 | 91.7 | 93.9 | 93.9 | 91.7 | ||||||||||||
North America | 97.0 | % | 97.3 | % | 95.9 | % | 96.1 | % | 96.3 | % | 95.5 | % | ||||||
(1) | See page 3 for additional information regarding properties “held for sale” as of December 31, 2014. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 23 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Property Listing
(Unaudited, dollars in thousands)
RSF | Number of Properties | Occupancy Percentage | ||||||||||||||||||||||||
ABR | Operating | Operating and Redevelopment | ||||||||||||||||||||||||
Market / Submarket / Address | Operating | Development | Redevelopment | Total | ||||||||||||||||||||||
Greater Boston | ||||||||||||||||||||||||||
Cambridge/Inner Suburbs | ||||||||||||||||||||||||||
Alexandria Center™ at Kendall Square | 973,464 | 388,270 | — | 1,361,734 | 6 | $ | 44,400 | 99.1 | % | 99.1 | % | |||||||||||||||
75/125 and 225 Binney Street, 161 and 215 First Street, 150 Second Street, and 300 Third Street | ||||||||||||||||||||||||||
Alexandria Technology Square® | 1,181,635 | — | — | 1,181,635 | 7 | 67,206 | 99.5 | 99.5 | ||||||||||||||||||
100, 200, 300, 400, 500, 600, and 700 Technology Square | ||||||||||||||||||||||||||
480/500 Arsenal Street | 234,260 | — | — | 234,260 | 2 | 8,281 | 100.0 | 100.0 | ||||||||||||||||||
780/790 Memorial Drive | 99,350 | — | — | 99,350 | 2 | 6,476 | 96.0 | 96.0 | ||||||||||||||||||
167 Sidney Street/99 Erie Street | 54,549 | — | — | 54,549 | 2 | 2,712 | 100.0 | 100.0 | ||||||||||||||||||
79/96 Thirteenth Street Charlestown Navy Yard | 25,309 | — | — | 25,309 | 1 | 620 | 100.0 | 100.0 | ||||||||||||||||||
Cambridge/Inner Suburbs | 2,568,567 | 388,270 | — | 2,956,837 | 20 | 129,695 | 99.3 | 99.3 | ||||||||||||||||||
Longwood Medical Area | ||||||||||||||||||||||||||
360 Longwood Avenue (Unconsolidated JV – 27.5% ownership) | 155,524 | 258,012 | — | 413,536 | 1 | 12,009 | 100.0 | 100.0 | ||||||||||||||||||
Route 128 | ||||||||||||||||||||||||||
Alexandria Park at 128 | 343,882 | — | — | 343,882 | 8 | 8,658 | 92.2 | 92.2 | ||||||||||||||||||
3, 6, and 8 Preston Court; 29, 35, and 44 Hartwell Avenue; 35, 45, and 47 Wiggins Avenue; and 60 Westview Street | ||||||||||||||||||||||||||
19 Presidential Way | 128,325 | — | — | 128,325 | 1 | 3,398 | 100.0 | 100.0 | ||||||||||||||||||
100 Beaver Street | 82,330 | — | — | 82,330 | 1 | 2,303 | 100.0 | 100.0 | ||||||||||||||||||
285 Bear Hill Road | 26,270 | — | — | 26,270 | 1 | 801 | 100.0 | 100.0 | ||||||||||||||||||
225 Second Avenue (1) | — | — | 112,500 | 112,500 | 1 | — | N/A | — | ||||||||||||||||||
Route 128 | 580,807 | — | 112,500 | 693,307 | 12 | 15,160 | 95.4 | 79.9 | ||||||||||||||||||
Route 495/Worcester | ||||||||||||||||||||||||||
111/130 Forbes Boulevard | 155,846 | — | — | 155,846 | 2 | 1,415 | 100.0 | 100.0 | ||||||||||||||||||
20 Walkup Drive | 91,045 | — | — | 91,045 | 1 | 670 | 100.0 | 100.0 | ||||||||||||||||||
306 Belmont Street and 350 Plantation Street | 90,690 | — | — | 90,690 | 2 | 1,315 | 100.0 | 100.0 | ||||||||||||||||||
30 Bearfoot Road | 60,759 | — | — | 60,759 | 1 | 2,765 | 100.0 | 100.0 | ||||||||||||||||||
Route 495/Worcester | 398,340 | — | — | 398,340 | 6 | 6,165 | 100.0 | 100.0 | ||||||||||||||||||
Greater Boston | 3,703,238 | 646,282 | 112,500 | 4,462,020 | 39 | $ | 163,029 | 98.8 | % | 95.9 | % | |||||||||||||||
(1) Redevelopment property acquired in March 2014 to accommodate expansion requirement of existing tenant. | ||||||||||||||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 24 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Property Listing
(Unaudited, dollars in thousands)
RSF | Number of Properties | Occupancy Percentage | ||||||||||||||||||||||||
ABR | Operating | Operating and Redevelopment | ||||||||||||||||||||||||
Market / Submarket / Address | Operating | Development | Redevelopment | Total | ||||||||||||||||||||||
San Francisco Bay Area | ||||||||||||||||||||||||||
Mission Bay | ||||||||||||||||||||||||||
409/499 Illinois Street | 455,069 | — | — | 455,069 | 2 | $ | 26,368 | 100.0 | % | 100.0 | % | |||||||||||||||
455 Mission Bay Boulevard South | 210,398 | — | — | 210,398 | 1 | 9,682 | 100.0 | 100.0 | ||||||||||||||||||
1500 Owens Street | 158,267 | — | — | 158,267 | 1 | 7,106 | 100.0 | 100.0 | ||||||||||||||||||
1700 Owens Street | 157,340 | — | — | 157,340 | 1 | 9,365 | 98.2 | 98.2 | ||||||||||||||||||
1455/1515 Third Street (Unconsolidated JV – 51.0% ownership) | — | 422,980 | — | 422,980 | 2 | — | N/A | N/A | ||||||||||||||||||
Mission Bay | 981,074 | 422,980 | — | 1,404,054 | 7 | 52,521 | 99.7 | 99.7 | ||||||||||||||||||
South San Francisco | ||||||||||||||||||||||||||
Alexandria Technology Center – Gateway | 448,175 | — | — | 448,175 | 6 | 17,012 | 100.0 | 100.0 | ||||||||||||||||||
600, 630, 650, 681, 901, and 951 Gateway Boulevard | ||||||||||||||||||||||||||
249/259/269 East Grand Avenue | 407,369 | — | — | 407,369 | 3 | 16,489 | 100.0 | 100.0 | ||||||||||||||||||
400/450 East Jamie Court | 163,035 | — | — | 163,035 | 2 | 5,938 | 100.0 | 100.0 | ||||||||||||||||||
7000 Shoreline Court | 136,395 | — | — | 136,395 | 1 | 4,398 | 100.0 | 100.0 | ||||||||||||||||||
341/343 Oyster Point Boulevard | 107,960 | — | — | 107,960 | 2 | 3,313 | 100.0 | 100.0 | ||||||||||||||||||
South San Francisco | 1,262,934 | — | — | 1,262,934 | 14 | 47,150 | 100.0 | 100.0 | ||||||||||||||||||
Palo Alto/Stanford Research Park | ||||||||||||||||||||||||||
849/863 Mitten Road and 866 Malcolm Road | 103,611 | — | — | 103,611 | 1 | 2,458 | 97.9 | 97.9 | ||||||||||||||||||
2425 Garcia Avenue and 2400/2450 Bayshore Parkway | 98,446 | — | — | 98,446 | 1 | 3,869 | 100.0 | 100.0 | ||||||||||||||||||
3165 Porter Drive | 91,644 | — | — | 91,644 | 1 | 3,885 | 100.0 | 100.0 | ||||||||||||||||||
75/125 Shoreway Road | 82,815 | — | — | 82,815 | 1 | 1,542 | 71.0 | 71.0 | ||||||||||||||||||
3350 West Bayshore Road | 60,000 | — | — | 60,000 | 1 | 1,919 | 100.0 | 100.0 | ||||||||||||||||||
2625/2627/2631 Hanover Street | 32,074 | — | — | 32,074 | 1 | 1,669 | 100.0 | 100.0 | ||||||||||||||||||
Palo Alto/Stanford Research Park | 468,590 | — | — | 468,590 | 6 | 15,342 | 94.4 | 94.4 | ||||||||||||||||||
San Francisco Bay Area | 2,712,598 | 422,980 | — | 3,135,578 | 27 | $ | 115,013 | 98.9 | % | 98.9 | % | |||||||||||||||
New York City | ||||||||||||||||||||||||||
Manhattan | ||||||||||||||||||||||||||
Alexandria Center™ for Life Science | 550,453 | 177,221 | — | 727,674 | 2 | $ | 46,018 | 99.4 | % | 99.4 | % | |||||||||||||||
430 and 450 East 29th Street | ||||||||||||||||||||||||||
Pennsylvania | ||||||||||||||||||||||||||
102 Witmer Road | 50,000 | — | — | 50,000 | 1 | 3,345 | 100.0 | 100.0 | ||||||||||||||||||
701 Veterans Circle | 35,155 | — | — | 35,155 | 1 | 735 | 100.0 | 100.0 | ||||||||||||||||||
Pennsylvania | 85,155 | — | — | 85,155 | 2 | 4,080 | 100.0 | 100.0 | ||||||||||||||||||
New York City | 635,608 | 177,221 | — | 812,829 | 4 | $ | 50,098 | 99.5 | % | 99.5 | % | |||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 25 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Property Listing
(Unaudited, dollars in thousands)
RSF | Number of Properties | Occupancy Percentage | ||||||||||||||||||||||||
ABR | Operating | Operating and Redevelopment | ||||||||||||||||||||||||
Market / Submarket / Address | Operating | Development | Redevelopment | Total | ||||||||||||||||||||||
San Diego | ||||||||||||||||||||||||||
Torrey Pines | ||||||||||||||||||||||||||
ARE Nautilus | 241,191 | — | — | 241,191 | 4 | $ | 7,899 | 90.3 | % | 90.3 | % | |||||||||||||||
3530/3550 John Hopkins Court and 3535/3565 General Atomics Court | ||||||||||||||||||||||||||
ARE Sunrise | 211,740 | — | — | 211,740 | 3 | 7,999 | 100.0 | 100.0 | ||||||||||||||||||
10931, 10933, and 10975 North Torrey Pines Road and 3010 Science Park Road | ||||||||||||||||||||||||||
ARE Spectrum | 200,692 | 123,891 | — | 324,583 | 4 | 8,885 | 100.0 | 100.0 | ||||||||||||||||||
3115/3215 Merryfield Row and 3013/3033 Science Park Road | ||||||||||||||||||||||||||
11119 North Torrey Pines Road | 72,506 | — | — | 72,506 | 1 | 2,570 | 100.0 | 100.0 | ||||||||||||||||||
3545 Cray Court | 116,556 | — | — | 116,556 | 1 | 4,827 | 100.0 | 100.0 | ||||||||||||||||||
Torrey Pines | 842,685 | 123,891 | — | 966,576 | 13 | 32,180 | 97.2 | 97.2 | ||||||||||||||||||
University Town Center | ||||||||||||||||||||||||||
5200 Illumina Way | 497,078 | 295,837 | — | 792,915 | 6 | 21,431 | 100.0 | 100.0 | ||||||||||||||||||
10300 Campus Point Drive | 449,759 | — | — | 449,759 | 1 | 16,446 | 100.0 | 100.0 | ||||||||||||||||||
ARE Esplanade | 180,208 | — | — | 180,208 | 3 | 6,737 | 93.1 | 93.1 | ||||||||||||||||||
4755, 4757, and 4767 Nexus Center Drive | ||||||||||||||||||||||||||
ARE Towne Centre | 272,309 | — | — | 272,309 | 4 | 6,253 | 97.9 | 97.9 | ||||||||||||||||||
9363, 9373, 9393, and 9625 Towne Centre Drive (1) | ||||||||||||||||||||||||||
9880 Campus Point Drive | 71,510 | — | — | 71,510 | 1 | 2,774 | 100.0 | 100.0 | ||||||||||||||||||
University Town Center | 1,470,864 | 295,837 | — | 1,766,701 | 15 | 53,641 | 98.8 | 98.8 | ||||||||||||||||||
Sorrento Mesa | ||||||||||||||||||||||||||
5810/5820/6138/6150 Nancy Ridge Drive | 138,844 | — | — | 138,844 | 2 | 2,818 | 76.3 | 76.3 | ||||||||||||||||||
ARE Portola | 105,812 | — | — | 105,812 | 3 | 1,746 | 69.0 | 69.0 | ||||||||||||||||||
6175, 6225, and 6275 Nancy Ridge Drive | ||||||||||||||||||||||||||
10121/10151 Barnes Canyon Road (2) | 102,392 | — | — | 102,392 | 2 | 1,948 | 100.0 | 100.0 | ||||||||||||||||||
7330 Carroll Road | 66,244 | — | — | 66,244 | 1 | 2,452 | 100.0 | 100.0 | ||||||||||||||||||
5871 Oberlin Drive | 33,817 | — | — | 33,817 | 1 | 973 | 100.0 | 100.0 | ||||||||||||||||||
Sorrento Mesa | 447,109 | — | — | 447,109 | 9 | 9,937 | 85.3 | 85.3 | ||||||||||||||||||
Sorrento Valley | ||||||||||||||||||||||||||
11025/11035/11045/11055/11065/11075 Roselle Street | 90,378 | — | 31,277 | 121,655 | 6 | 2,253 | 100.0 | 74.3 | ||||||||||||||||||
3985/4025/4031/4045 Sorrento Valley Boulevard | 103,111 | — | — | 103,111 | 4 | 2,542 | 100.0 | 100.0 | ||||||||||||||||||
Sorrento Valley | 193,489 | — | 31,277 | 224,766 | 10 | 4,795 | 100.0 | 86.1 | ||||||||||||||||||
I-15 Corridor | ||||||||||||||||||||||||||
13112 Evening Creek Drive | 109,780 | — | — | 109,780 | 1 | 2,495 | 100.0 | 100.0 | ||||||||||||||||||
San Diego | 3,063,927 | 419,728 | 31,277 | 3,514,932 | 48 | $ | 103,048 | 96.5 | % | 95.5 | % | |||||||||||||||
(1) We acquired 9625 Towne Centre Drive in 4Q14 with an in-place lease. The property contains 133,731 RSF and will undergo conversion into tech office space through redevelopment in 3Q15 upon expiration of the existing lease. (2) We acquired these properties in 3Q13 with the intent to redevelop upon the expiration of the in-place leases. We completed the redevelopment of 53,512 RSF at 10121 Barnes Canyon Road in 3Q14 and delivered 100% of the project to a high-quality tenant, Outerwall Inc. The remaining 48,880 RSF will undergo conversion into tech office space through redevelopment beginning in 4Q15 upon expiration of the existing lease. | ||||||||||||||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 26 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Property Listing
(Unaudited, dollars in thousands)
RSF | Number of Properties | Occupancy Percentage | ||||||||||||||||||||||||
ABR | Operating | Operating and Redevelopment | ||||||||||||||||||||||||
Market / Submarket / Address | Operating | Development | Redevelopment | Total | ||||||||||||||||||||||
Seattle | ||||||||||||||||||||||||||
Lake Union | ||||||||||||||||||||||||||
1201/1208 Eastlake Avenue East | 203,369 | — | — | 203,369 | 2 | $ | 8,748 | 100.0 | % | 100.0 | % | |||||||||||||||
1616 Eastlake Avenue East | 168,708 | — | — | 168,708 | 1 | 6,273 | 84.2 | 84.2 | ||||||||||||||||||
1551 Eastlake Avenue East | 117,482 | — | — | 117,482 | 1 | 3,081 | 89.4 | 89.4 | ||||||||||||||||||
199 East Blaine Street | 115,084 | — | — | 115,084 | 1 | 6,163 | 100.0 | 100.0 | ||||||||||||||||||
219 Terry Avenue North | 30,705 | — | — | 30,705 | 1 | 1,519 | 100.0 | 100.0 | ||||||||||||||||||
1600 Fairview Avenue East | 27,991 | — | — | 27,991 | 1 | 1,147 | 100.0 | 100.0 | ||||||||||||||||||
Lake Union | 663,339 | — | — | 663,339 | 7 | 26,931 | 94.1 | 94.1 | ||||||||||||||||||
Elliott Bay | ||||||||||||||||||||||||||
3000/3018 Western Avenue | 47,746 | — | — | 47,746 | 1 | 1,839 | 100.0 | 100.0 | ||||||||||||||||||
410 West Harrison/410 Elliott Avenue West | 35,175 | — | — | 35,175 | 2 | 1,111 | 100.0 | 100.0 | ||||||||||||||||||
Elliot Bay | 82,921 | — | — | 82,921 | 3 | 2,950 | 100.0 | 100.0 | ||||||||||||||||||
Seattle | 746,260 | — | — | 746,260 | 10 | $ | 29,881 | 94.8 | % | 94.8 | % | |||||||||||||||
Maryland | ||||||||||||||||||||||||||
Rockville | ||||||||||||||||||||||||||
9800 Medical Center Drive | 282,436 | — | — | 282,436 | 4 | $ | 12,614 | 100.0 | % | 100.0 | % | |||||||||||||||
1330 Piccard Drive | 131,511 | — | — | 131,511 | 1 | 3,125 | 100.0 | 100.0 | ||||||||||||||||||
1500/1550 East Gude Drive | 90,489 | — | — | 90,489 | 2 | 1,681 | 100.0 | 100.0 | ||||||||||||||||||
14920/15010 Broschart Road | 86,703 | — | — | 86,703 | 2 | 1,950 | 100.0 | 100.0 | ||||||||||||||||||
1405 Research Boulevard | 71,669 | — | — | 71,669 | 1 | 2,091 | 100.0 | 100.0 | ||||||||||||||||||
5 Research Place | 63,852 | — | — | 63,852 | 1 | 2,373 | 100.0 | 100.0 | ||||||||||||||||||
9920 Medical Center Drive | 58,733 | — | — | 58,733 | 1 | 455 | 100.0 | 100.0 | ||||||||||||||||||
5 Research Court | 54,906 | — | — | 54,906 | 1 | — | — | — | ||||||||||||||||||
12301 Parklawn Drive | 49,185 | — | — | 49,185 | 1 | 1,169 | 100.0 | 100.0 | ||||||||||||||||||
Rockville | 889,484 | — | — | 889,484 | 14 | 25,458 | 93.8 | 93.8 | ||||||||||||||||||
Gaithersburg | ||||||||||||||||||||||||||
Alexandria Technology Center – Gaithersburg I | 377,401 | — | — | 377,401 | 4 | 6,921 | 86.0 | 86.0 | ||||||||||||||||||
9 West Watkins Mill Road and 910, 930, and 940 Clopper Road | ||||||||||||||||||||||||||
Alexandria Technology Center – Gaithersburg II | 237,137 | — | — | 237,137 | 5 | 5,326 | 95.8 | 95.8 | ||||||||||||||||||
708 Quince Orchard Road, 1300 Quince Orchard Boulevard, and 19, 20, and 22 Firstfield Road | ||||||||||||||||||||||||||
16020 Industrial Drive | 71,000 | — | — | 71,000 | 1 | 1,048 | 100.0 | 100.0 | ||||||||||||||||||
401 Professional Drive | 63,154 | — | — | 63,154 | 1 | 829 | 71.3 | 71.3 | ||||||||||||||||||
950 Wind River Lane | 50,000 | — | — | 50,000 | 1 | 1,082 | 100.0 | 100.0 | ||||||||||||||||||
620 Professional Drive | 27,950 | — | — | 27,950 | 1 | 1,191 | 100.0 | 100.0 | ||||||||||||||||||
Gaithersburg | 826,642 | — | — | 826,642 | 13 | 16,397 | 90.2 | 90.2 | ||||||||||||||||||
Beltsville | ||||||||||||||||||||||||||
8000/9000/10000 Virginia Manor Road | 191,884 | — | — | 191,884 | 1 | 2,171 | 86.6 | 86.6 | ||||||||||||||||||
Northern Virginia | ||||||||||||||||||||||||||
14225 Newbrook Drive | 248,186 | — | — | 248,186 | 1 | 5,138 | 100.0 | 100.0 | ||||||||||||||||||
Maryland | 2,156,196 | — | — | 2,156,196 | 29 | $ | 49,164 | 92.5 | % | 92.5 | % | |||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 27 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Property Listing
(Unaudited, dollars in thousands)
RSF | Number of Properties | Occupancy Percentage | ||||||||||||||||||||||||
ABR | Operating | Operating and Redevelopment | ||||||||||||||||||||||||
Market / Submarket / Address | Operating | Development | Redevelopment | Total | ||||||||||||||||||||||
Research Triangle Park | ||||||||||||||||||||||||||
Research Triangle Park | ||||||||||||||||||||||||||
Alexandria Technology Center – Alston | 186,870 | — | — | 186,870 | 3 | $ | 3,065 | 95.7 | % | 95.7 | % | |||||||||||||||
100, 800, and 801 Capitola Drive | ||||||||||||||||||||||||||
108/110/112/114 TW Alexander Drive | 158,417 | — | — | 158,417 | 1 | 4,547 | 100.0 | 100.0 | ||||||||||||||||||
Alexandria Innovation Center – Research Triangle Park | 135,677 | — | — | 135,677 | 3 | 2,856 | 99.7 | 99.7 | ||||||||||||||||||
7010, 7020, and 7030 Kit Creek Road | ||||||||||||||||||||||||||
6 Davis Drive | 100,000 | — | — | 100,000 | 1 | 1,062 | 100.0 | 100.0 | ||||||||||||||||||
7 Triangle Drive | 96,626 | — | — | 96,626 | 1 | 3,157 | 100.0 | 100.0 | ||||||||||||||||||
407 Davis Drive | 81,956 | — | — | 81,956 | 1 | 1,644 | 100.0 | 100.0 | ||||||||||||||||||
2525 East NC Highway 54 | 81,580 | — | — | 81,580 | 1 | 1,686 | 100.0 | 100.0 | ||||||||||||||||||
601 Keystone Park Drive | 77,395 | — | — | 77,395 | 1 | 1,341 | 100.0 | 100.0 | ||||||||||||||||||
5 Triangle Drive | 32,120 | — | — | 32,120 | 1 | 824 | 100.0 | 100.0 | ||||||||||||||||||
6101 Quadrangle Drive | 30,122 | — | — | 30,122 | 1 | 530 | 100.0 | 100.0 | ||||||||||||||||||
6040 George Watts Hill Drive | — | 61,547 | — | 61,547 | 1 | — | N/A | N/A | ||||||||||||||||||
Research Triangle Park | 980,763 | 61,547 | — | 1,042,310 | 15 | 20,712 | 99.1 | 99.1 | ||||||||||||||||||
Palm Beach | ||||||||||||||||||||||||||
555 Heritage Drive | 45,023 | — | — | 45,023 | 1 | 659 | 55.0 | 55.0 | ||||||||||||||||||
Research Triangle Park | 1,025,786 | 61,547 | — | 1,087,333 | 16 | $ | 21,371 | 97.2 | % | 97.2 | % | |||||||||||||||
Canada | 322,967 | — | — | 322,967 | 4 | $ | 8,946 | 97.6 | % | 97.6 | % | |||||||||||||||
Non-cluster markets | 60,178 | — | — | 60,178 | 2 | $ | 1,000 | 93.9 | % | 93.9 | % | |||||||||||||||
North America | 14,426,758 | 1,727,758 | 143,777 | 16,298,293 | 179 | $ | 541,550 | 97.0 | % | 96.1 | % | |||||||||||||||
Asia | 1,242,702 | 129,762 | — | 1,372,464 | 9 | $ | 6,433 | |||||||||||||||||||
Subtotal | 15,669,460 | 1,857,520 | 143,777 | 17,670,757 | 188 | $ | 547,983 | |||||||||||||||||||
Properties “held for sale” (1) | 1,058,525 | — | — | 1,058,525 | 5 | $ | 6,783 | |||||||||||||||||||
Total | 16,727,985 | 1,857,520 | 143,777 | 18,729,282 | 193 | $ | 554,766 | |||||||||||||||||||
(1) | See page 3 for additional information regarding properties “held for sale” as of December 31, 2014. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 28 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Investments in Real Estate
(Dollars in thousands, except per square foot amounts)
(Unaudited)
Investment in Real Estate | ||||||||||||||||||||||||||||
Consolidated | Pro Rata Share of Unconsolidated JV | Total | Square Feet | |||||||||||||||||||||||||
Unconsolidated JV | Per SF (1) | |||||||||||||||||||||||||||
Page | Amount | % | Consolidated | Total | ||||||||||||||||||||||||
Rental properties | $ | 6,988,313 | $ | 44,976 | $ | 7,033,289 | 84 | % | 16,572,461 | 155,524 | 16,727,985 | $ | 426 | |||||||||||||||
Current value-creation projects/ | ||||||||||||||||||||||||||||
Construction in progress (“CIP”): | ||||||||||||||||||||||||||||
Current development in North America | 500,894 | 112,561 | 613,455 | 1,046,766 | 680,992 | 1,727,758 | 473 | |||||||||||||||||||||
Current redevelopment in North America | 42,482 | — | 42,482 | 143,777 | — | 143,777 | 295 | |||||||||||||||||||||
Current development in Asia | 14,065 | — | 14,065 | 129,762 | — | 129,762 | 108 | |||||||||||||||||||||
557,441 | 112,561 | 670,002 | 8 | % | 1,320,305 | 680,992 | 2,001,297 | 436 | ||||||||||||||||||||
Rental properties and current value-creation projects | 7,545,754 | 157,537 | 7,703,291 | 17,892,766 | 836,516 | 18,729,282 | 428 | |||||||||||||||||||||
Near-term value-creation projects in North America (CIP): | ||||||||||||||||||||||||||||
50, 60, and 100 Binney Street | 321,907 | — | 321,907 | 4 | % | 957,309 | — | 957,309 | 336 | |||||||||||||||||||
Other projects | 107,471 | — | 107,471 | 1 | % | 1,758,483 | — | 1,758,483 | 61 | |||||||||||||||||||
429,378 | — | 429,378 | 2,715,792 | — | 2,715,792 | 158 | ||||||||||||||||||||||
Future value-creation projects: | ||||||||||||||||||||||||||||
North America | 175,175 | — | 175,175 | 2 | % | 3,673,689 | — | 3,673,689 | 48 | |||||||||||||||||||
Asia | 78,548 | — | 78,548 | 1 | % | 6,419,707 | — | 6,419,707 | 12 | |||||||||||||||||||
253,723 | — | 253,723 | 10,093,396 | — | 10,093,396 | 25 | ||||||||||||||||||||||
Near-term and future value-creation projects | 683,101 | — | 683,101 | 12,809,188 | — | 12,809,188 | 53 | |||||||||||||||||||||
Current, near-term, and future value-creation projects | 1,240,542 | 112,561 | 1,353,103 | 16 | % | 14,129,493 | 680,992 | 14,810,485 | 105 | |||||||||||||||||||
Gross investments in real estate | 8,228,855 | 157,537 | $ | 8,386,392 | 100 | % | 30,701,954 | 836,516 | 31,538,470 | $ | 276 | |||||||||||||||||
Equity method of accounting – unconsolidated JV | 117,406 | N/A | ||||||||||||||||||||||||||
Gross investments in real estate – including unconsol. JV | 8,346,261 | N/A | ||||||||||||||||||||||||||
Less: accumulated depreciation | (1,120,245 | ) | (290 | ) | ||||||||||||||||||||||||
Investments in real estate | $ | 7,226,016 | $ | 157,247 | ||||||||||||||||||||||||
(1) Items that include our pro rata share of unconsolidated joint ventures do not calculate directly from amounts shown on the face of this statement. The per square foot amount represents the total cost of our rental properties and value-creation projects, including our partners’ share, divided by the total rentable or developable square feet of the respective property. | ||||||||||||||||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 29 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Non-Income-Producing Assets (1)
(Unaudited)
 |  | |
(1) Represents non-income-producing assets as a percentage of gross investments in real estate, including our pro rata share of non-income-producing assets at our unconsolidated joint ventures. (2) Net reduction of 3% in non-income-producing assets consists of a decrease of 4% due to highly-leased deliveries partially offset by a 1% increase due to additions. | ||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 30 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Overview of Value-Creation Pipeline in North America
CIP Square Feet | Total Project | Year of NOI Contribution – Forecast | |||||||||||||||||||||||||
Square Feet | Leased/Negotiating % | 2015 | 2016 | 2017 and Beyond | |||||||||||||||||||||||
Market | Submarket | Address | |||||||||||||||||||||||||
Current value-creation development and redevelopment projects | |||||||||||||||||||||||||||
Greater Boston | Longwood Medical Area | 360 Longwood Avenue | 258,012 | 413,536 | (1) | 63% |  | ||||||||||||||||||||
Greater Boston | Cambridge | 75/125 Binney Street | 388,270 | 388,270 | 99% | | |||||||||||||||||||||
New York City | Manhattan | 430 East 29th Street | 177,221 | 418,638 | (1) | 91% | | ||||||||||||||||||||
San Diego | Torrey Pines | 3013/3033 Science Park Road | 123,891 | 165,938 | (1) | 81% | | ||||||||||||||||||||
Greater Boston | Route 128 | 225 Second Avenue | 112,500 | 112,500 | 100% |  | |||||||||||||||||||||
San Diego | Sorrento Valley | 11055/11065/11075 Roselle Street | 31,277 | 55,213 | (1) | 75% | | ||||||||||||||||||||
San Diego | University Town Center | 5200 Illumina Way – Building 6 | 295,837 | 295,837 | 100% |  | |||||||||||||||||||||
Research Triangle Park | Research Triangle Park | 6040 George Watts Hill Drive | 61,547 | 61,547 | 100% | | |||||||||||||||||||||
San Francisco Bay Area | Mission Bay | 1455/1515 Third Street | 422,980 | 422,980 | 100% |  | |||||||||||||||||||||
Total/weighted average | 1,871,535 | 2,334,459 | 90% | ||||||||||||||||||||||||
Total Project | |||||||||||||||||||||||||||
Near-term value-creation development projects (2) | Square Feet | Negotiating % | |||||||||||||||||||||||||
San Diego | University Town Center | 10300 Campus Point Drive – Building 2 | 143,086 | 75% | (3) | | |||||||||||||||||||||
Greater Boston | Cambridge | 50 Binney Street | 276,371 | 100% | (3) | | |||||||||||||||||||||
Greater Boston | Cambridge | 60 Binney Street | 264,150 | 100% | (3) | | |||||||||||||||||||||
San Diego | University Town Center | 5200 Illumina Way | 386,044 | —% | | ||||||||||||||||||||||
Seattle | Lake Union | 1165 Eastlake Avenue East | 106,000 | —% | | ||||||||||||||||||||||
Greater Boston | Cambridge | 100 Binney Street | 416,788 | 100% | (3) |  | |||||||||||||||||||||
San Francisco Bay Area | SoMa | 510 Townsend Street | 300,000 | 100% | (3) | | |||||||||||||||||||||
New York City | Manhattan | East 29th Street | 420,000 | (4) | —% | | |||||||||||||||||||||
San Diego | University Town Center | 10300 Campus Point Drive – Building 3 | 150,353 | —% | | ||||||||||||||||||||||
Seattle | Lake Union | 400 Dexter Avenue North | 253,000 | —% | | ||||||||||||||||||||||
Total/weighted average | 2,715,792 | 50% | |||||||||||||||||||||||||
(1) Portion of project was delivered in 2014, see pages 32, 33, 34, and 36 for RSF currently under construction. (2) See page 20 for RSF targeted for redevelopment. (3) Under negotiation or subject to letter of intent. (4) We hold a right to ground lease a parcel supporting the future ground-up development of approximately 420,000 SF at the Alexandria Center™ for Life Science pursuant to an option under our ground lease. We have begun discussions regarding this option and the potential to increase the site density beyond 420,000 SF. |  | Value-Creation Development Projects | |||||||||||||||||||||||||
 | Value-Creation Redevelopment Projects | ||||||||||||||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 31 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Deliveries of Value-Creation Development Projects in North America
(Dollars in thousands)
(Unaudited)
Property | 499 Illinois Street | 430 East 29th Street | 3013/3033 Science Park Road | 360 Longwood Avenue |
Project Type | Development | Development | Development | Unconsolidated JV Development |
Photograph/ Rendering |  |  |  |  |
Occupancy and % of Project Delivered (1) | Unlevered | |||||||||||||||||||||||||||||||||
Placed into Service in 4Q14 | RSF In Service | Total Project | Average Cash Yield | Initial Stabilized Yield (Cash Basis) | Initial Stabilized Yield | |||||||||||||||||||||||||||||
Leased/ Negotiating | Investment | |||||||||||||||||||||||||||||||||
Address/Market – Submarket | Date | RSF | Prior to 4Q14 | Total | ||||||||||||||||||||||||||||||
Development projects in North America | ||||||||||||||||||||||||||||||||||
499 Illinois Street/ San Francisco Bay Area – Mission Bay | Various | 61,941 | 157,633 | 219,574 | 100% | 100% | $ | 198,098 | 7.4 | % | (2) | 6.8 | % | (2) | 7.3 | % | (2) | |||||||||||||||||
430 East 29th Street/ New York City – Manhattan | November 2014 | 10,975 | 230,442 | 241,417 | 58% | 91% | $ | 463,245 | (3) | 7.1 | % | (4) | 6.6 | % | (4) | 6.5 | % | (4) | ||||||||||||||||
3013/3033 Science Park Road/ San Diego – Torrey Pines | End of December 2014 | 42,047 | — | 42,047 | 25% | 81% | $ | 104,791 | (3) | 7.7 | % | (4) | 7.2 | % | (4) | 7.1 | % | (4) | ||||||||||||||||
Unconsolidated joint venture development projects in North America | ||||||||||||||||||||||||||||||||||
360 Longwood Avenue/ Greater Boston – Longwood Medical Area | End of December 2014 | 1,424 | 154,100 | 155,524 | 38% | 63% | $ | 350,000 | (3) | 9.3 | % | (4) | 8.3 | % | (4) | 8.9 | % | (4) | ||||||||||||||||
(1) As of December 31, 2014. (2) Increased from previously disclosed estimated yields of 7.3% for average cash yield, 6.4% for initial stabilized yield (cash basis), and 7.2% for initial stabilized yield. (3) Represents 100% of investment at completion for the entire project. Only a portion of the project was placed into operations during 4Q14. See pages 33 and 34 for portion of development still in progress. (4) Consistent with previously disclosed yields. | ||||||||||||||||||||||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 32 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Current Value-Creation Development Projects in North America – Consolidated
(Dollars in thousands)
(Unaudited)
Leased Status | Project Start Date | Initial Occupancy Date | Stabilized Occupancy Date | ||||||||||||||||||||||||||||||
Project RSF | Leased | Negotiating | Total Leased/Negotiating | ||||||||||||||||||||||||||||||
Property/Market – Submarket | In Service | CIP | Total | RSF | % | RSF | % | RSF | % | ||||||||||||||||||||||||
Consolidated development projects in North America | |||||||||||||||||||||||||||||||||
75/125 Binney Street/ Greater Boston – Cambridge | — | 388,270 | 388,270 | 386,111 | 99 | % | — | — | % | 386,111 | 99 | % | 1Q13 | 1Q15 | 2015 | ||||||||||||||||||
430 East 29th Street/ New York City – Manhattan | 241,417 | 177,221 | 418,638 | 278,211 | 66 | % | 101,698 | 25 | % | 379,909 | 91 | % | 4Q12 | 4Q13 | 2015 | ||||||||||||||||||
5200 Illumina Way – Building 6/ San Diego – University Town Center | — | 295,837 | 295,837 | 149,663 | 51 | % | 146,174 | 49 | % | 295,837 | 100 | % | 3Q14 | 3Q16 | 2016 | ||||||||||||||||||
3013/3033 Science Park Road/ San Diego – Torrey Pines | 42,047 | 123,891 | 165,938 | 105,047 | 63 | % | 29,955 | 18 | % | 135,002 | 81 | % | 2Q14 | 4Q14 | 2016 | ||||||||||||||||||
6040 George Watts Hill Drive/ Research Triangle Park – Research Triangle Park | — | 61,547 | 61,547 | 61,547 | 100 | % | — | — | % | 61,547 | 100 | % | 4Q14 | 1Q16 | 2016 | ||||||||||||||||||
Consolidated development projects in North America | 283,464 | 1,046,766 | 1,330,230 | 980,579 | 74 | % | 277,827 | 21 | % | 1,258,406 | 95 | % | |||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||
Cost to Complete | Unlevered | |||||||||||||||||||||||||||||||||
December 31, 2014 | 2015 | Thereafter | Average Cash Yield | Initial Stabilized Yield (Cash Basis) | Initial Stabilized Yield | |||||||||||||||||||||||||||||
Property/Market – Submarket | Construction Financing | Internal Funding | Construction Financing | Internal Funding | Total at Completion | |||||||||||||||||||||||||||||
In Service | CIP | |||||||||||||||||||||||||||||||||
Consolidated development projects in North America | ||||||||||||||||||||||||||||||||||
75/125 Binney Street/ Greater Boston – Cambridge | $ | — | $ | 276,608 | $ | 56,511 | $ | — | $ | 18,320 | $ | — | $ | 351,439 | (1) | 9.1% | 8.0% | 8.2% | ||||||||||||||||
430 East 29th Street/ New York City – Manhattan | $ | 247,768 | $ | 177,688 | $ | — | $ | 37,789 | $ | — | $ | — | $ | 463,245 | 7.1% | 6.6% | 6.5% | |||||||||||||||||
5200 Illumina Way – Building 6/ San Diego – University Town Center | $ | — | $ | 10,088 | $ | — | $ | 35,332 | $ | — | $ | 24,480 | $ | 69,900 | 8.6% | 7.0% | 8.4% | |||||||||||||||||
3013/3033 Science Park Road/ San Diego – Torrey Pines | $ | 20,264 | $ | 32,891 | $ | — | $ | 15,595 | $ | — | $ | 36,041 | $ | 104,791 | 7.7% | 7.2% | 7.1% | |||||||||||||||||
6040 George Watts Hill Drive/ Research Triangle Park – Research Triangle Park | $ | — | $ | 3,619 | $ | — | $ | 21,773 | $ | — | $ | 408 | $ | 25,800 | 8.1% | 7.3% | 8.1% | |||||||||||||||||
Consolidated development projects in North America | $ | 268,032 | $ | 500,894 | $ | 56,511 | $ | 110,489 | $ | 18,320 | $ | 60,929 | $ | 1,015,175 | ||||||||||||||||||||
(1) | In 3Q13, we completed the preliminary design and budget for interior improvements for use by ARIAD Pharmaceuticals, Inc. (“ARIAD”). Based upon our lease with ARIAD, we expect an increase in both estimated NOI and estimated cost at completion, with no significant change in our estimated yields. In light of certain changes in ARIAD’s business, ARIAD is reassessing its plans to occupy the entire facility and may sublease a portion of this project. As a result, plans and drawings for the interior improvements for the project have not been approved by ARIAD in accordance with the timelines specified in the lease. We expect ARIAD to finalize the design and budget for all or a portion of the interior improvements in the future and will provide an update on our estimated cost at completion and targeted yields. Pursuant to the terms of the lease, we expect rent to commence in late March 2015. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 33 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Current Value-Creation Development Projects in North America – Unconsolidated Joint Ventures
(Dollars in thousands)
(Unaudited)
Leased Status | Project Start Date | Initial Occupancy Date | Stabilized Occupancy Date | ||||||||||||||||||||||||||||||
Project RSF | Leased | Negotiating | Total Leased/Negotiating | ||||||||||||||||||||||||||||||
Property/Market – Submarket | In Service | CIP | Total | RSF | % | RSF | % | RSF | % | ||||||||||||||||||||||||
Unconsolidated JV development projects | |||||||||||||||||||||||||||||||||
360 Longwood Avenue/ Greater Boston – Longwood Medical Area | 155,524 | 258,012 | 413,536 | 155,524 | 38 | % | 104,022 | 25 | % | 259,546 | 63 | % | 2Q12 | 3Q14 | 2016 | ||||||||||||||||||
1455/1515 Third Street/ San Francisco Bay Area – Mission Bay | — | 422,980 | 422,980 | 422,980 | 100 | % | — | — | % | 422,980 | 100 | % | 3Q14 | 3Q16-1Q17 | 2016/2017 | ||||||||||||||||||
Total | 155,524 | 680,992 | 836,516 | 578,504 | 69 | % | 104,022 | 13 | % | 682,526 | 82 | % | |||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||
Cost to Complete | Unlevered (1) | |||||||||||||||||||||||||||||||||
December 31, 2014 | 2015 | Thereafter | Average Cash Yield | Initial Stabilized Yield (Cash Basis) | Initial Stabilized Yield | |||||||||||||||||||||||||||||
Property/Market – Submarket | Construction Financing | Internal Funding | Construction Financing | Internal Funding | Total at Completion | |||||||||||||||||||||||||||||
In Service | CIP | |||||||||||||||||||||||||||||||||
Unconsolidated JV development projects (2) | ||||||||||||||||||||||||||||||||||
100% of JV: 360 Longwood Avenue/ Greater Boston – Longwood Medical Area | $ | 111,523 | $ | 184,844 | $ | 35,755 | $ | — | $ | 17,878 | $ | — | $ | 350,000 | ||||||||||||||||||||
100% of JV: 1455/1515 Third Street/ San Francisco Bay Area – Mission Bay (3) | $ | 21,150 | $ | 106,524 | $ | — | $ | 36,320 | $ | — | TBD | TBD | ||||||||||||||||||||||
ARE share of unconsolidated JV development projects (2) | ||||||||||||||||||||||||||||||||||
27.5% of JV: 360 Longwood Avenue/ Greater Boston – Longwood Medical Area | $ | 34,189 | $ | 56,667 | $ | 9,833 | $ | 1,513 | $ | 4,916 | $ | 1,847 | $ | 108,965 | 9.3% | 8.3% | 8.9% | |||||||||||||||||
51.0% of JV: 1455/1515 Third Street/ San Francisco Bay Area – Mission Bay (3) | $ | 10,787 | $ | 55,894 | $ | — | $ | 26,487 | $ | — | TBD | TBD | TBD | TBD | TBD | |||||||||||||||||||
Total ARE share of unconsolidated JV development projects | $ | 44,976 | $ | 112,561 | $ | 9,833 | $ | 28,000 | $ | 4,916 | TBD | TBD | ||||||||||||||||||||||
(1) | Our projected unlevered initial stabilized yield (cash basis) is based upon our share of the investment in real estate, including costs incurred directly by us outside of the JV. Development management fees earned from these development projects have been excluded from our estimate of unlevered yields. |
(2) | See page 43 for additional information regarding our unconsolidated JVs. |
(3) | The design and budget of this project are in process, and the estimated project cost with related yields are expected to be disclosed in the near future. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 34 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Current Value-Creation Development Projects in North America
Property | 75/125 Binney Street | 430 East 29th Street | 5200 Illumina Way – Building 6 | 3013/3033 Science Park Road |
Submarket/ Market | Cambridge/ Greater Boston | Manhattan/ New York City | University Town Center/ San Diego | Torrey Pines/ San Diego |
RSF (in progress) | 388,270 | 177,221 | 295,837 | 123,891 |
Project Type | Development | Development | Development | Development |
Client Tenants | ARIAD Pharmaceuticals, Inc. | Roche/New York University/Others | Illumina, Inc. | Receptos, Inc./ The Medicines Company |
Photograph/ Rendering |  | |  | |
Property | 6040 George Watts Hill Drive | 360 Longwood Avenue | 1455/1515 Third Street | |
Submarket/ Market | Research Triangle Park/ Research Triangle Park | Longwood Medical Area/ Greater Boston | Mission Bay/ San Francisco Bay Area | |
RSF (in progress) | 61,547 | 258,012 | 422,980 | |
Project Type | Development | Unconsolidated JV Development | Unconsolidated JV Development | |
Client Tenants | Fuji Diosynth Biotechnologies U.S.A., Inc. | Dana-Farber Cancer Institute, Inc. | Uber Technologies, Inc. (1) | |
Photograph/ Rendering |  | |  |  |
(1) | We are currently working closely with Uber Technologies, Inc. to revise the core and exterior architecture of the building design. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 35 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Current Value-Creation Redevelopment Projects in North America
(Dollars in thousands)
(Unaudited)
Leased Status | Project Start Date | Initial Occupancy Date | Stabilized Occupancy Date | ||||||||||||||||||||||||||||||
Project RSF | Leased | Negotiating | Total Leased/Negotiating | ||||||||||||||||||||||||||||||
Property/Market – Submarket | In Service | CIP | Total | RSF | % | RSF | % | RSF | % | ||||||||||||||||||||||||
Consolidated redevelopment projects in North America | |||||||||||||||||||||||||||||||||
225 Second Avenue/ Greater Boston – Route 128 (1) | — | 112,500 | 112,500 | 112,500 | 100 | % | — | — | % | 112,500 | 100 | % | 1Q14 | 2Q15 | 2015 | ||||||||||||||||||
11055/11065/11075 Roselle Street/ San Diego – Sorrento Valley (1) | 23,936 | 31,277 | 55,213 | 41,163 | (2) | 75 | % | — | — | % | 41,163 | 75 | % | 4Q13 | 2Q14 | 2015 | |||||||||||||||||
Consolidated redevelopment projects in North America | 23,936 | 143,777 | 167,713 | 153,663 | 92 | % | — | — | % | 153,663 | 92 | % | |||||||||||||||||||||
Investment | Unlevered | |||||||||||||||||||||||||
Property/Market – Submarket | December 31, 2014 | Cost to Complete | Total at Completion | Average Cash Yield | Initial Stabilized Yield (Cash Basis) | Initial Stabilized Yield | ||||||||||||||||||||
In Service | CIP | 2015 | Thereafter | |||||||||||||||||||||||
Consolidated redevelopment projects in North America | ||||||||||||||||||||||||||
225 Second Avenue/ Greater Boston – Route 128 | $ | — | $ | 34,885 | $ | 11,786 | $ | — | $ | 46,671 | 9.0% | 8.3% | 8.3% | |||||||||||||
11055/11065/11075 Roselle Street/ San Diego – Sorrento Valley | $ | 7,044 | $ | 7,597 | $ | 3,709 | $ | — | $ | 18,350 | 8.0% | 7.8% | 7.9% | |||||||||||||
Consolidated redevelopment projects in North America | $ | 7,044 | $ | 42,482 | $ | 15,495 | $ | — | $ | 65,021 | ||||||||||||||||
(1) | Acquired to accommodate expansion requirements of existing tenants. |
(2) | In 2Q14, we delivered 23,936 RSF to a life science company. We expect to deliver the remaining leased 17,227 RSF in 2Q15. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 36 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Near-Term and Future Value-Creation Development Projects in North America
(Dollars in thousands, except per square foot amounts)
(Unaudited)
Embedded Land (1) | Total | ||||||||||||||||||||||||
Property – Market | Book Value | Square Feet | Cost Per Square Foot | Square Feet | Book Value | Square Feet | Cost Per Square Foot | ||||||||||||||||||
Near-Term Value-Creation Development Projects – Land undergoing predevelopment activities (CIP) | |||||||||||||||||||||||||
Alexandria Center™ at Kendall Square (“ACKS”) – Greater Boston: | |||||||||||||||||||||||||
50, 60, and 100 Binney Street (2) | $ | 321,907 | 957,309 | $ | 336 | — | $ | 321,907 | 957,309 | $ | 336 | ||||||||||||||
510 Townsend Street – San Francisco Bay Area | 58,459 | 300,000 | 195 | — | 58,459 | 300,000 | 195 | ||||||||||||||||||
5200 Illumina Way – San Diego (3) | 8,793 | 386,044 | 23 | — | 8,793 | 386,044 | 23 | ||||||||||||||||||
10300 Campus Point – San Diego (3) | 5,746 | 293,439 | 20 | — | 5,746 | 293,439 | 20 | ||||||||||||||||||
1165 Eastlake Avenue East – Seattle (4) | 17,664 | 106,000 | 167 | — | 17,664 | 106,000 | 167 | ||||||||||||||||||
400 Dexter Avenue North – Seattle | 16,809 | 253,000 | 66 | — | 16,809 | 253,000 | 66 | ||||||||||||||||||
East 29th Street – New York City | — | — | — | 420,000 | (5) | — | 420,000 | — | |||||||||||||||||
Near-term value-creation development projects | $ | 429,378 | 2,295,792 | $ | 187 | 420,000 | 429,378 | 2,715,792 | 158 | ||||||||||||||||
Future Value-Creation Development Projects – Land held for development | |||||||||||||||||||||||||
Alexandria Technology Square® – Greater Boston | $ | 7,721 | 100,000 | $ | 77 | — | 7,721 | 100,000 | 77 | ||||||||||||||||
ACKS – Residential – Greater Boston (3) (6) | 28,140 | 288,515 | 98 | — | 28,140 | 288,515 | 98 | ||||||||||||||||||
Grand Avenue – San Francisco Bay Area (7) | 45,056 | 397,132 | 113 | — | 45,056 | 397,132 | 113 | ||||||||||||||||||
560 Eccles Avenue – San Francisco Bay Area (8) | 17,655 | 144,000 | 123 | — | 17,655 | 144,000 | 123 | ||||||||||||||||||
Executive Drive/Other – San Diego (3) | 4,533 | 65,000 | 70 | 279,000 | 4,533 | 344,000 | 13 | ||||||||||||||||||
1150/1166 Eastlake Avenue East – Seattle | 15,248 | 160,266 | 95 | — | 15,248 | 160,266 | 95 | ||||||||||||||||||
Other | 56,822 | 1,753,776 | 32 | 486,000 | 56,822 | 2,239,776 | 25 | ||||||||||||||||||
Future value-creation development projects | $ | 175,175 | 2,908,689 | $ | 60 | 765,000 | 175,175 | 3,673,689 | 48 | ||||||||||||||||
Total near-term and future value-creation development projects | 1,185,000 | $ | 604,553 | 6,389,481 | $ | 95 | |||||||||||||||||||
(1) | Embedded land generally represents adjacent land acquired in connection with the acquisition of operating properties. As a result, the real estate basis attributable to these land parcels is classified with the associated rental property. |
(2) | Includes infrastructure related costs consisting of: utility access and roads, installation of storm drain systems, infiltration systems, traffic lighting/signals, streets, and sidewalks related to 50, 60, and 100 Binney Street. In addition, we have commenced below-grade site work for 50 and 60 Binney Street related to the foundation and subterranean parking garage. |
(3) During 4Q14, we added approximately 416,230 RSF to our near-term and future value-creation development pipeline in our University Town Center and Cambridge/Inner Suburbs markets, reflecting our efforts to increase density at certain high-quality campus locations including 5200 Illumina Way, 10300 Campus Point, Executive Drive, and ACKS – Residential.
(4) | The cost per square foot for 1165 Eastlake Avenue East includes an existing structure that can substantially be incorporated into the development plans. |
(5) | We hold a right to ground lease a parcel supporting the future ground-up development of approximately 420,000 SF at the Alexandria Center™ for Life Science pursuant to an option under our ground lease. We have begun discussions regarding this option and the potential to increase the site density beyond 420,000 SF. |
(6) | Includes two residential sites at our Alexandria Center™ at Kendall Square project. We have commenced construction on one residential building aggregating approximately 105,000 gross square feet with an aggregate cost at completion of approximately $40 to $45 million. |
(7) | Represents two additional land parcels located adjacent to/surrounding the recently developed 249/259/269 East Grand Avenue campus leased to Amgen Inc. in South San Francisco. |
(8) | Represents an additional land parcel located nearby our 341/343 Oyster Point Boulevard properties and within walking distance of Roche’s campus in South San Francisco. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 37 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Near-Term Value-Creation Development Projects
Greater Boston
Operating/Development Project | Near-Term Value-Creation Project | |||||
Property | Alexandria Center™ at Kendall Square |
Submarket/Market | Cambridge/Greater Boston |
Aerial |  |
Background | Alexandria received final approval from the City of Cambridge to develop the Alexandria Center™ at Kendall Square, a fully integrated campus featuring four world-class office/laboratory and tech office buildings, high-quality amenities, and green space. Alexandria’s entitlement efforts resulted in an increase of 1.2 million developable square feet over the original entitlements in place at acquisition. |
Near-Term Opportunity | Our near-term development opportunity consists of 50, 60, and 100 Binney Street aggregating approximately 1.0 million RSF. We have commenced below-grade site work for 50 and 60 Binney Street related to the foundation and subterranean parking garage in order to reduce the time to deliver these buildings for occupancy. Subject to market conditions, we expect to commence vertical above-ground construction of 50 and 60 Binney Street in early 2015 and 100 Binney Street in mid-2015. 50, 60, and 100 Binney Street are subject to negotiations or letter of intent, each with a separate full building user. The timing of revenue recognition for 50 and 60 Binney may begin in late 2016 or in 2017, subject to final lease negotiations. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 38 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Near-Term Value-Creation Development Projects
San Francisco Bay Area
Operating/Development Project | Near-Term Value-Creation Project | |||||
Property | 510 Townsend Street |
Submarket/Market | SoMa/San Francisco Bay Area |
Aerial |  |
Background | Alexandria’s 510 Townsend Street project was acquired in April 2014 and represents an expansion of our successful Mission Bay science and technology campus into the SoMa submarket. The site is ideally located at the corner of Townsend and 6th Streets, placing it within close proximity to public transportation. The site is also adjacent to one of Interstate 280’s key arrival points into San Francisco and is only blocks away from Interstate 80 and the US 101 Freeway. Furthermore, with its highly strategic location at the intersection of Alexandria’s Mission Bay science and technology campus and the SoMa technology district, the 510 Townsend Street site, and this key cluster expansion, mirrors the convergence of life science, technology, and healthcare occurring with the digital health revolution. |
Current Development | In September 2014, Alexandria and Uber Technologies, Inc. (“Uber”) formed a JV and acquired key land parcels at 1455/1515 Third Street in our Mission Bay submarket of San Francisco, for the ground-up development of two Class A buildings aggregating 422,980 RSF. Alexandria holds a 51% interest in the JV. Additionally, Alexandria executed a 15-year lease with Uber for 100% of the project. The purchase price of the land parcels, including 423 parking structure spaces, foundation piles, plans, and permits, was $125.0 million, with 49% funded by Uber. The land parcels are fully entitled, including Proposition M office allocation approvals. The timing of revenue recognition for this lease may begin from 3Q16 to 1Q17, subject to the completion of the design and budget of the buildings. |
Near-Term Opportunity | Ground-up development of a office/laboratory or tech office building at 510 Townsend Street aggregating approximately 300,000 gross square feet for either single or multi-tenancy to strategically capture strong demand from high-quality science and digital health companies in our world-class urban campus in the heart of San Francisco. We are in the process of perfecting entitlements, negotiating with full building users, and subject to market conditions, we plan to commence construction as soon as possible in 2015. We expect to disclose the estimated investment and yields upon commencement of ground-up development. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 39 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Near-Term Value-Creation Development Projects
San Diego
Operating/Development Project | Near-Term Value-Creation Project | |||||
Property | 5200 Illumina Way |
Submarket/Market | University Town Center/San Diego |
Aerial |  |
Background | Alexandria owns and operates the headquarters campus of Illumina, Inc., the leading developer, manufacturer, and marketer of life science tools and integrated systems for large-scale analysis of genetic variation and function with a market capitalization of $23.3 billion as of September 30, 2014. We previously delivered two build-to-suit projects, buildings 4 and 5, to Illumina, Inc. in 4Q12 and 1Q13, respectively. |
Current Development | In 3Q14 we commenced development of 5200 Illumina Way – Building 6. We are currently in negotiations to amend the existing lease to expand the RSF of the building from 149,663 RSF to 295,837 RSF. Also in 4Q14, we added 214,067 RSF to the overall site, reflecting our efforts to increase density for additional buildings to 386,044 RSF on this urban innovation campus. |
Near-Term Opportunity | Ground-up development of additional office/laboratory buildings aggregating 386,044 RSF. Subject to market conditions, we expect to commence development of at least one additional building over the next one to three years as we expect expansion requirements from Illumina, Inc. We expect to disclose the estimated investment and yields upon commencement of ground-up development. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 40 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Near-Term Value-Creation Development Projects
San Diego
Operating | Near-Term Value-Creation Project | |||||
Property | 10300 Campus Point Drive |
Submarket/Market | University Town Center/San Diego |
Aerial |  |
Background | 10300 Campus Point Drive is Alexandria’s flagship 449,759 RSF, multi-tenant office/laboratory campus in University Town Center with additional developable square footage. Also in 4Q14, we added 153,439 RSF to our near-term development pipeline at this site, reflecting our efforts to increase density on this urban innovation campus. |
Near-Term Opportunity | Ground-up development of two buildings aggregating 293,439 RSF. We have an executed letter of intent with an existing tenant for an expansion into 75% of a new 143,086 RSF building. We expect to commence construction of this building in 2015. The timing of revenue recognition for the initial delivery of this project is expected to be late 2016, subject to lease negotiations as well as completion of the design and budget for the project. We also expect to disclose the estimated investment and yields upon commencement of ground-up development. Subject to market conditions and finalizing design and permits, we expect to be in a position to commence development of the third building aggregating 150,353 RSF over the next four to six quarters as we receive expansion requirements from existing tenants. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 41 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Near-Term and Future Value-Creation Development Projects
Seattle
Operating | Near-Term and Future Value-Creation Project | |||||
Property | 1165 Eastlake Avenue East | 400 Dexter Avenue North |
Submarket/Market | Lake Union/Seattle | Lake Union/Seattle |
Aerial |  | |
Background | Alexandria’s Eastlake Avenue East and Dexter Avenue assets are located in Lake Union, home to numerous highly renowned medical research institutions, including the Fred Hutchinson Cancer Research Center and the University of Washington, as well as the corporate headquarters for Amazon.com, Inc. | |
Near-Term Opportunity | 1165 Eastlake Avenue East | 400 Dexter Avenue North |
Ground-up development of a office/laboratory or tech office building for 106,000 RSF for single or multi-tenancy. Subject to market conditions, we expect to commence construction of this project over the next one to three years. We expect to disclose the estimated investment and yields upon commencement of ground-up development. | Ground-up development of a office/laboratory or tech office building for 253,000 RSF for single or multi-tenancy. Subject to market conditions, we expect to commence construction of this project over the next one to three years. We expect to disclose the estimated investment and yields upon commencement of ground-up development. | |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 42 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Unconsolidated Joint Ventures
(Dollars in thousands)
(Unaudited)
Income statement Year ended December 31, 2014 | ||||||||||||||||||||
360 Longwood Avenue | 1455/1515 Third Street | Total ARE Share | ||||||||||||||||||
100% | ARE’s 27.5% Share | (1) | 100% | ARE’s 51% Share | (1) | |||||||||||||||
Revenue | $ | 2,939 | $ | 1,015 | (2) | $ | 127 | $ | 65 | $ | 1,080 | |||||||||
Rental operations expense | (274 | ) | (80 | ) | (161 | ) | (82 | ) | (162 | ) | ||||||||||
Interest | (119 | ) | (35 | ) | — | — | (35 | ) | ||||||||||||
Depreciation and amortization | (627 | ) | (239 | ) | (176 | ) | (90 | ) | (329 | ) | ||||||||||
Net income (loss) | $ | 1,919 | $ | 661 | $ | (210 | ) | $ | (107 | ) | $ | 554 | ||||||||
Balance sheet As of December 31, 2014 | ||||||||||||||||||||
360 Longwood Avenue | 1455/1515 Third Street | Total ARE Share | ||||||||||||||||||
100% | ARE’s 27.5% Share | (1) | 100% | ARE’s 51% Share | (1) | |||||||||||||||
Rental properties | $ | 111,523 | $ | 34,189 | $ | 21,150 | $ | 10,787 | $ | 44,976 | ||||||||||
Construction in progress | 184,844 | 56,667 | 106,524 | 55,894 | 112,561 | |||||||||||||||
Gross investments in real estate | 296,367 | 90,856 | 127,674 | 66,681 | 157,537 | |||||||||||||||
Less: accumulated depreciation | (591 | ) | (200 | ) | (176 | ) | (90 | ) | (290 | ) | ||||||||||
Investments in real estate | 295,776 | 90,656 | 127,498 | 66,591 | 157,247 | |||||||||||||||
Other assets | 10,410 | 3,637 | 7,319 | 3,861 | 7,498 | |||||||||||||||
Total assets | $ | 306,186 | $ | 94,293 | $ | 134,817 | $ | 70,452 | $ | 164,745 | ||||||||||
Secured notes payable | $ | 159,881 | (3) | $ | 43,967 | $ | — | $ | — | $ | 43,967 | |||||||||
Other liabilities | 4,445 | 1,227 | 4,206 | 2,145 | 3,372 | |||||||||||||||
Total liabilities | 164,326 | 45,194 | 4,206 | 2,145 | 47,339 | |||||||||||||||
Equity | 141,860 | 49,099 | 130,611 | 68,307 | 117,406 | |||||||||||||||
Total liabilities and equity | $ | 306,186 | $ | 94,293 | $ | 134,817 | $ | 70,452 | $ | 164,745 | ||||||||||
RSF | RSF | |||||||||||||||||||
Rental properties | 155,524 | (4) | — | |||||||||||||||||
Active development (CIP) (5) | 258,012 | 422,980 | ||||||||||||||||||
Total | 413,536 | 422,980 | ||||||||||||||||||
(1) | Amounts include costs incurred directly by us outside of the JVs. We believe the pro rata basis in our investments in unconsolidated JVs is useful information for investors as it provides our proportional share of the investments in real estate from all properties, including our share of the assets and liabilities of our unconsolidated JVs. The pro rata basis allows investors to estimate the impact of real estate investments and debt financing at the JV level. |
(2) | Includes development fees earned. |
(3) | Secured construction loan with an aggregate commitment of $213.2 million, which bears interest at LIBOR+3.75%, with a floor of 5.25%. The maturity date of the loan is April 1, 2017, with two, one-year options to extend the stated maturity date to April 1, 2019, subject to certain conditions. |
(4) | Delivery of 154,100 RSF occurred in late September 2014. |
(5) | See page 34 for further detail of our unconsolidated JV development projects. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 43 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Capital Allocation and Projected Construction Spending in 2015
(Dollars in thousands, except per square foot amounts)
(Unaudited)
Capital Allocation Projected Construction and Acquisition Spending in 2015 (1) | |||
 | |||
(1) Based upon mid-point of 2015 guidance for construction spending of $695 million and actual acquisitions to date in January 2015 of $231 million. | |||
Projected Construction Spending | Year Ended December 31, 2015 | |||||||||||||
Current value-creation projects in North America: | ||||||||||||||
Development (Consolidated) | $ | 167,000 | ||||||||||||
Development (Unconsolidated JV) | 28,000 | |||||||||||||
Redevelopment | 15,495 | |||||||||||||
Developments/redevelopments recently transferred to rental properties | 17,505 | (1) | ||||||||||||
Generic laboratory infrastructure/building improvement projects | 50,000 | (2) | ||||||||||||
Current value-creation projects in North America | 278,000 | |||||||||||||
Near-term value-creation projects | 405,000 | (3) | ||||||||||||
Value-creation projects | 683,000 | |||||||||||||
Non-revenue-enhancing capital expenditures | 12,000 | |||||||||||||
Projected construction spending | $ | 695,000 | ||||||||||||
Guidance range for the year ended December 31, 2015 | $ | 645,000 | – | 745,000 | ||||||||||
(1) Represents spending for recently delivered projects, including 4757 Nexus Center Drive, 1616 Eastlake Avenue East, and 1551 Eastlake Avenue East, that may require additional construction prior to occupancy, generally ranging from 15,000 to 30,000 RSF of the project. (2) Includes, among others, 3535 General Atomics Court, 9373 Town Center Drive, 5810/5820 Nancy Ridge Drive, 8000 Virginia Manor Road, and 44 Hartwell Avenue. (3) See overview of our near-term value-creation projects on page 37. | ||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 44 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Capital Allocation and Actual Construction Spending in 2014
(Dollars in thousands, except per square foot amounts)
(Unaudited)
Capital Allocation Actual Construction and Acquisition Spending in 2014 (1) | ||
 | ||
(1) Based upon $523.8 million of construction spending and $290.0 million of acquisitions completed in 2014. See page 46 for further detail of 2014 acquisitions. | ||
Actual Construction Spending | Year Ended December 31, 2014 | |||
Development – North America | $ | 310,540 | ||
Redevelopment – North America | 65,143 | |||
Predevelopment | 80,522 | |||
Generic laboratory infrastructure/building improvement projects in North America (1) | 56,905 | |||
Development and redevelopment – Asia | 10,739 | |||
Total construction spending | $ | 523,849 | ||
(1) Includes revenue-enhancing projects, and non-revenue-enhancing capital expenditures amounts shown in the table below. | ||||
Non-revenue-enhancing Capital Expenditures, Tenant Improvements, and Leasing Costs (1) | Year Ended December 31, 2014 | Five Year Average Per RSF (2) | |||||||||||||
Amount | RSF | Per RSF | |||||||||||||
Non-revenue-enhancing capital expenditures | $ | 7,429 | 15,255,993 | $ | 0.49 | $ | 0.24 | ||||||||
Tenant improvements and leasing costs: | |||||||||||||||
Re-tenanted space | $ | 5,830 | 289,565 | $ | 20.13 | $ | 9.81 | ||||||||
Renewal space | 9,349 | 1,157,951 | 8.07 | 5.80 | |||||||||||
Total tenant improvements and leasing costs/weighted average | $ | 15,179 | 1,447,516 | $ | 10.49 | $ | 6.89 | ||||||||
(1) Excludes amounts that are recoverable from client tenants, revenue-enhancing, or related to properties that have undergone redevelopment. (2) Represents the average of the years ended December 31, 2010, through December 31, 2014. | |||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 45 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Acquisitions
(Dollars in thousands)
(Unaudited)
Unlevered | |||||||||||||||||||||||||||||||||
Date Acquired | Number of Properties | Purchase Price | Loan Assumption | Percentage | Average Cash Yield | Initial Stabilized Yield (Cash) | Initial Stabilized Yield | ||||||||||||||||||||||||||
Property/Market – Submarket | Type | SF | Leased | Negotiating | |||||||||||||||||||||||||||||
3545 Cray Court/ San Diego – Torrey Pines | Operating | 1/30/14 | 1 | $ | 64,000 | $ | 40,724 | (1) | 116,556 | 100% | —% | 7.2% | 7.0% | 7.2% | |||||||||||||||||||
4025/4031/4045 Sorrento Valley Boulevard/ San Diego – Sorrento Valley | Operating | 3/17/14 | 3 | 12,400 | 7,605 | (2) | 42,566 | 100% | —% | 8.2% | 7.8% | 8.2% | |||||||||||||||||||||
225 Second Avenue/ Greater Boston – Route 128 | Redevelopment | 3/27/14 | 1 | 16,330 | — | 112,500 | 100% | (3) | —% | 9.0% | 8.3% | 8.3% | |||||||||||||||||||||
510 Townsend Street/ San Francisco Bay Area – SoMa | Land | 4/18/14 | — | 50,000 | — | 300,000 | —% | 100% | TBD | TBD | TBD | ||||||||||||||||||||||
1455/1515 Third Street/ San Francisco Bay Area – Mission Bay (4) | Land | 9/4/14 | — | 125,000 | — | 422,980 | 100% | —% | TBD | TBD | TBD | ||||||||||||||||||||||
9625 Towne Centre Drive/ San Diego – University Town Center | Redevelopment | 11/5/14 | 1 | 22,250 | — | 133,731 | 100% | —% | TBD | (5) | TBD | (5) | TBD | (5) | |||||||||||||||||||
6040 George Watts Hill Drive/ Research Triangle Park – Research Triangle Park | Development | 12/10/14 | 1 | — | (6) | — | 61,547 | 100% | —% | 8.1% | 7.3% | 8.1% | |||||||||||||||||||||
Total | 7 | $ | 289,980 | $ | 48,329 | ||||||||||||||||||||||||||||
January 2015 | |||||||||||||||||||||||||||||||||
640 Memorial Drive/ Greater Boston – Cambridge (7) | Operating | 1/21/15 | 1 | $ | 176,500 | $ | 82,000 | (7) | 225,504 | 100% | —% | 6.8% | 6.4% | 7.5% | |||||||||||||||||||
Alexandria Technology Square® (10% noncontrolling interest)/ Greater Boston – Cambridge | Operating | 1/21/15 | (8) | 7 | $ | 108,250 | $ | — | 1,181,635 | 99.5% | —% | 6.1% | 5.4% | 6.1% | |||||||||||||||||||
(1) Secured note payable with a contractual rate of 4.66% and a maturity date of January 1, 2023. (2) Secured note payable with a contractual rate of 5.74% and a maturity date of April 15, 2016. (3) Acquired vacant. We subsequently leased 100% of the project to accommodate an expansion requirement of an existing tenant. (4) In 3Q14, Alexandria and Uber formed a JV and acquired key land parcels for the ground-up development of two Class A buildings. Alexandria holds a 51% interest in the JV and Uber holds a 49% interest. Additionally, Alexandria executed a 15-year lease with Uber. The purchase price of the land parcels, includes 423 parking structure spaces, foundation piles, plans, and permits, and was funded by pro rata contributions from Alexandria and Uber. The land parcels are fully entitled, and include Proposition M office allocation approvals. See page 34 for details of this development project. The design and budget of this project are in process, and the estimated project cost with related yields are expected to be disclosed in the near future. (5) We acquired 9625 Towne Centre Drive in 4Q14 with an in-place lease. The property contains 133,731 RSF and will undergo conversion into tech office space through redevelopment in 3Q15 upon expiration of the existing lease. We plan to provide the estimated project cost with related yields once property commences redevelopment. (6) Represents a 99-year ground lease executed in December 2014 for land owned by our future tenant, Fuji Diosynth Biotechnologies U.S.A., Inc. The 61,547 RSF value-creation development project is 100% pre-leased to this tenant, and we commenced development in 4Q14. Ground lease payments to Fuji Diosynth Biotechnologies U.S.A, Inc. commence upon delivery of the completed building and are included in the expected yields. (7) Secured note payable with a contractual rate of 3.93% and a maturity date in 2023. (8) In January 2015, we executed an agreement to purchase the outstanding 10% noncontrolling interest in our flagship campus at Alexandria Technology Square® for $108.3 million. The purchase price will be paid in equal installments of $54 million each on April 1, 2015, and April 1, 2016. | |||||||||||||||||||||||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 46 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Real Estate Investments in Asia
(Unaudited)
Number of Properties | ABR (in thousands) | Occupancy Percentage | Book Value (in thousands) | Square Feet | |||||||||||
Rental properties, net, in China | 2 | $ | 1,229 | 53.8 | % | $ | 82,220 | 632,078 | |||||||
Rental properties, net, in India | 7 | 5,204 | 55.7 | 73,801 | 610,624 | ||||||||||
Rental properties, net, in Asia | 9 | $ | 6,433 | 54.7 | % | (1) | 156,021 | 1,242,702 | |||||||
Construction in progress: current development projects in India | 14,065 | 129,762 | |||||||||||||
Land held for future development in India | 78,548 | 6,419,707 | |||||||||||||
Total investments in real estate, net, in Asia | $ | 248,634 | 7,792,171 | ||||||||||||
(1) | Decrease in occupancy from 3Q14 of 8.1% primarily due to the completion and delivery during 4Q14 of a development project in India, aggregating 175,000 RSF. We are marketing this space for lease. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 47 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Key Credit Metrics (1)
(Unaudited)
Net Debt to Adjusted EBITDA | High Quality Tenancy | Pre-Leased Deliveries Drive Decline in Non-Income-Producing Assets (2) | ||
 |  | |||
Investment-Grade Client Tenants: | ||||
56% | ||||
of ARE’s Total ABR | ||||
 | ||||
Fixed Charge Coverage Ratio | Adjusted EBITDA Margin (3) | Liquidity | ||
 | 65% |  | ||
Gross Assets (4) | ||||
$9.3 | ||||
Billion | ||||
| ||||
(1) These credit metrics, among others, represent certain metrics Moody’s and/or Standard & Poor's consider in their overall credit rating assignment. (2) Represents non-income-producing assets (CIP and land) as a percentage of gross investments in real estate. (3) 4Q14 annualized. (4) Represents total assets plus accumulated depreciation. | ||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 48 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Summary of Debt
(Dollars in thousands)
(Unaudited)
Fixed-rate/hedged and unhedged variable-rate debt
Fixed Rate/Hedged Variable Rate | Unhedged Variable Rate | Total Consolidated | Percentage of Total Debt | Weighted Average Interest Rate at End of Period (1) | Weighted Average Remaining Term (in years) | ||||||||||||||
Secured notes payable | $ | 403,981 | $ | 248,228 | $ | 652,209 | 17.7 | % | 4.59 | % | 2.7 | ||||||||
Unsecured senior notes payable | 1,747,370 | — | 1,747,370 | 47.5 | 3.98 | 8.3 | |||||||||||||
$1.5 billion unsecured senior line of credit | — | 304,000 | 304,000 | 8.3 | 1.27 | 4.0 | |||||||||||||
2016 Unsecured Senior Bank Term Loan | 350,000 | 25,000 | 375,000 | 10.2 | 1.42 | 1.6 | |||||||||||||
2019 Unsecured Senior Bank Term Loan | 600,000 | — | 600,000 | 16.3 | 1.67 | 4.0 | |||||||||||||
Total/weighted average | $ | 3,101,351 | $ | 577,228 | $ | 3,678,579 | 100.0 | % | 3.23 | % | 5.6 | ||||||||
Percentage of total debt | 84% | 16% | 100% | ||||||||||||||||
(1) | Represents the weighted average interest rate as of the end of the period plus the impact of debt premiums/discounts and our interest rate swap agreements. The weighted average interest rate excludes bank fees and amortization of loan fees. |
Debt maturities chart (In millions) | ||
 | ||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 49 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Summary of Debt (continued)
(Dollars in thousands)
(Unaudited)
Stated Rate | Weighted Average Interest Rate (1) | Maturity Date (2) | Principal Payments Remaining for the Period Ending December 31, | |||||||||||||||||||||||||||||||||
Debt | 2015 | 2016 | 2017 | 2018 | 2019 | Thereafter | Total | |||||||||||||||||||||||||||||
Secured notes payable | ||||||||||||||||||||||||||||||||||||
Maryland | 5.64 | % | 4.50 | % | 6/1/15 | $ | 5,777 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 5,777 | |||||||||||||||||
San Francisco Bay Area | L+1.50 | 1.66 | 7/1/15 | 46,792 | — | — | — | — | — | 46,792 | ||||||||||||||||||||||||||
Greater Boston, San Francisco Bay Area, and San Diego | 5.73 | 5.73 | 1/1/16 | 1,815 | 75,501 | — | — | — | — | 77,316 | ||||||||||||||||||||||||||
Greater Boston, San Diego, and New York City | 5.82 | 5.82 | 4/1/16 | 988 | 29,389 | — | — | — | — | 30,377 | ||||||||||||||||||||||||||
San Diego | 5.74 | 3.00 | 4/15/16 | 175 | 6,916 | — | — | — | — | 7,091 | ||||||||||||||||||||||||||
San Francisco Bay Area | L+1.40 | 1.56 | 6/1/16 | — | 19,343 | — | — | — | — | 19,343 | ||||||||||||||||||||||||||
San Francisco Bay Area | 6.35 | 6.35 | 8/1/16 | 2,652 | 126,715 | — | — | — | — | 129,367 | ||||||||||||||||||||||||||
Maryland | 2.15 | 2.15 | 1/20/17 | — | — | 76,000 | — | — | — | 76,000 | ||||||||||||||||||||||||||
Greater Boston | L+1.35 | 1.52 | 8/23/17 | — | — | 106,093 | — | — | — | 106,093 | ||||||||||||||||||||||||||
San Diego, Maryland, and Seattle | 7.75 | 7.75 | 4/1/20 | 1,570 | 1,696 | 1,832 | 1,979 | 2,138 | 104,352 | 113,567 | ||||||||||||||||||||||||||
San Diego | 4.66 | 4.66 | 1/1/23 | 1,403 | 1,464 | 1,540 | 1,614 | 1,692 | 31,674 | 39,387 | ||||||||||||||||||||||||||
San Francisco Bay Area | 6.50 | 6.50 | 6/1/37 | 18 | 19 | 20 | 22 | 23 | 728 | 830 | ||||||||||||||||||||||||||
Unamortized premiums | 214 | 55 | — | — | — | — | 269 | |||||||||||||||||||||||||||||
Secured notes payable average/subtotal | 4.63 | % | 4.59 | 61,404 | 261,098 | 185,485 | 3,615 | 3,853 | 136,754 | 652,209 | ||||||||||||||||||||||||||
2016 Unsecured Senior Bank Term Loan | L+1.20 | % | 1.42 | 7/31/16 | — | 375,000 | — | — | — | — | 375,000 | |||||||||||||||||||||||||
2019 Unsecured Senior Bank Term Loan | L+1.20 | % | 1.67 | 1/3/19 | — | — | — | — | 600,000 | — | 600,000 | |||||||||||||||||||||||||
$1.5 billion unsecured senior line of credit | L+1.10 | % | (3) | 1.27 | 1/3/19 | — | — | — | — | 304,000 | — | 304,000 | ||||||||||||||||||||||||
Unsecured senior notes payable | 2.75 | % | 2.79 | 1/15/20 | — | — | — | — | — | 400,000 | 400,000 | |||||||||||||||||||||||||
Unsecured senior notes payable | 4.60 | % | 4.61 | 4/1/22 | — | — | — | — | — | 550,000 | 550,000 | |||||||||||||||||||||||||
Unsecured senior notes payable | 3.90 | % | 3.94 | 6/15/23 | — | — | — | — | — | 500,000 | 500,000 | |||||||||||||||||||||||||
Unsecured senior notes payable | 4.50 | % | 4.51 | 7/30/29 | — | — | — | — | — | 300,000 | 300,000 | |||||||||||||||||||||||||
Unamortized discounts | (326 | ) | (337 | ) | (350 | ) | (362 | ) | (375 | ) | (880 | ) | (2,630 | ) | ||||||||||||||||||||||
Unsecured debt average/subtotal | 2.94 | (326 | ) | 374,663 | (350 | ) | (362 | ) | 903,625 | 1,749,120 | 3,026,370 | |||||||||||||||||||||||||
Average/total | 3.23 | % | $ | 61,078 | $ | 635,761 | $ | 185,135 | $ | 3,253 | $ | 907,478 | $ | 1,885,874 | $ | 3,678,579 | ||||||||||||||||||||
Balloon payments | $ | 52,532 | $ | 631,243 | $ | 182,093 | $ | — | $ | 904,000 | $ | 1,880,238 | $ | 3,650,106 | ||||||||||||||||||||||
Principal amortization | 8,546 | 4,518 | 3,042 | 3,253 | 3,478 | 5,636 | 28,473 | |||||||||||||||||||||||||||||
Total consolidated debt | $ | 61,078 | $ | 635,761 | $ | 185,135 | $ | 3,253 | $ | 907,478 | $ | 1,885,874 | $ | 3,678,579 | ||||||||||||||||||||||
Fixed-rate/hedged variable-rate debt | $ | 14,286 | $ | 591,418 | $ | 3,042 | $ | 3,253 | $ | 603,478 | $ | 1,885,874 | $ | 3,101,351 | ||||||||||||||||||||||
Unhedged variable-rate debt | 46,792 | 44,343 | 182,093 | — | 304,000 | — | 577,228 | |||||||||||||||||||||||||||||
Total consolidated debt | $ | 61,078 | $ | 635,761 | $ | 185,135 | $ | 3,253 | $ | 907,478 | $ | 1,885,874 | $ | 3,678,579 | ||||||||||||||||||||||
(1) | Represents the weighted average interest rate as of the end of the period plus the impact of debt premiums/discounts and our interest rate swap agreements. The weighted average interest rate excludes bank fees and amortization of loan fees. |
(2) | Includes any extension options that we control. |
(3) | In addition to the stated rate, the unsecured senior line of credit is subject to an annual facility fee of 0.20%, based on the aggregate commitments outstanding. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 50 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Summary of Debt (continued)
(Dollars in thousands)
(Unaudited)
Secured construction loans | ||||||||||||||||||||||
Address | Market | Stated Rate | Maturity Date | Outstanding Balance | Remaining Commitment | Total Aggregate Commitments | ||||||||||||||||
259 East Grand Avenue | San Francisco Bay Area | L+1.50% | 7/1/15 | (1) | $ | 46,792 | $ | 8,208 | $ | 55,000 | ||||||||||||
269 East Grand Avenue | San Francisco Bay Area | L+1.40% | 6/1/16 | (2) | 19,343 | 16,657 | 36,000 | |||||||||||||||
75/125 Binney Street | Greater Boston | L+1.35% | 8/23/17 | (3) | 106,093 | 144,307 | 250,400 | |||||||||||||||
$ | 172,228 | $ | 169,172 | $ | 341,400 | |||||||||||||||||
(1) | We have two, one-year options to extend the stated maturity date to July 1, 2017, subject to certain conditions. |
(2) | We have two, one-year options to extend the stated maturity date to June 1, 2018, subject to certain conditions. |
(3) | We have a one-year option to extend the stated maturity date to August 23, 2018, subject to certain conditions. |
Debt covenants | Unsecured Senior Notes Payable | Unsecured Senior Line of Credit and Unsecured Senior Bank Term Loans | ||||||
Debt Covenant Ratios | Requirement | Actual | Requirement | Actual | ||||
Total Debt to Total Assets | ≤ 60% | 40% | ≤ 60.0% | 35.9% | ||||
Secured Debt to Total Assets | ≤ 40% | 7% | ≤ 45.0% | 6.4% | ||||
Consolidated EBITDA to Interest Expense | ≥ 1.5x | 5.9x | ≥ 1.50x | 3.12x | ||||
Unencumbered Total Asset Value to Unsecured Debt | ≥ 150% | 247% | N/A | N/A | ||||
Unsecured Leverage Ratio | N/A | N/A | ≤ 60.0% | 38.9% | ||||
Unsecured Interest Coverage Ratio | N/A | N/A | ≥ 1.50x | 8.19x | ||||
Interest rate swap agreements | ||||||||||||||||||||||
Number of Contracts | Weighted Average Interest Pay Rate (1) | Fair Value as of 12/31/14 | Notional Amount in Effect as of | |||||||||||||||||||
Effective Date | Maturity Date | 12/31/14 | 12/31/15 | 12/31/16 | ||||||||||||||||||
December 31, 2013 | March 31, 2015 | 2 | 0.23% | $ | (43 | ) | $ | 250,000 | $ | — | $ | — | ||||||||||
March 31, 2014 | March 31, 2015 | 4 | 0.21% | (22 | ) | 200,000 | — | — | ||||||||||||||
December 31, 2014 | March 31, 2016 | 3 | 0.53% | (625 | ) | 500,000 | 500,000 | — | ||||||||||||||
March 31, 2016 | March 31, 2017 | 3 | 1.40% | (219 | ) | — | — | 500,000 | ||||||||||||||
Total | $ | (909 | ) | $ | 950,000 | $ | 500,000 | $ | 500,000 | |||||||||||||
(1) | In addition to the interest pay rate for each swap agreement, interest is also payable at an applicable margin for borrowings outstanding as of December 31, 2014. Borrowings under our unsecured senior bank term loans include an applicable margin of 1.20% and borrowings outstanding under our unsecured senior line of credit include an applicable margin of 1.10%. |
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 51 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Definitions and Reconciliations
(Unaudited)
This section contains additional information for sections throughout this supplemental information package as well as explanations of certain non-GAAP financial measures and the reasons why we use these supplemental measures of performance. Our computation of non-GAAP measures may not be comparable to similar measures reported by other companies. Additional detail can be found in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, as well as other documents filed with or furnished to the SEC from time to time.
Adjusted EBITDA
The following table reconciles net (loss) income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to EBITDA and Adjusted EBITDA:
Three Months Ended | Year Ended | ||||||||||||||||||||||||||
(In thousands) | 12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | 12/31/14 | 12/31/13 | ||||||||||||||||||||
Net (loss) income | $ | (6,030 | ) | $ | 35,943 | $ | 36,116 | $ | 40,749 | $ | 44,222 | $ | 106,778 | $ | 140,249 | ||||||||||||
Interest expense: | |||||||||||||||||||||||||||
Consolidated | 22,188 | 20,555 | 17,433 | 19,123 | 17,783 | 79,299 | 67,952 | ||||||||||||||||||||
Unconsolidated JVs | 35 | — | — | — | — | 35 | — | ||||||||||||||||||||
Total interest expense | 22,223 | 20,555 | 17,433 | 19,123 | 17,783 | 79,334 | 67,952 | ||||||||||||||||||||
Depreciation and amortization: | |||||||||||||||||||||||||||
Continuing operations | 57,973 | 58,388 | 57,314 | 50,421 | 48,084 | 224,096 | 189,123 | ||||||||||||||||||||
Discontinued operations | — | — | — | — | 17 | — | 1,655 | ||||||||||||||||||||
Unconsolidated JVs | 329 | — | — | — | — | 329 | — | ||||||||||||||||||||
Total depreciation and amortization | 58,302 | 58,388 | 57,314 | 50,421 | 48,101 | 224,425 | 190,778 | ||||||||||||||||||||
EBITDA | 74,495 | 114,886 | 110,863 | 110,293 | 110,106 | 410,537 | 398,979 | ||||||||||||||||||||
Stock compensation expense | 4,624 | 3,068 | 3,076 | 3,228 | 4,011 | 13,996 | 15,552 | ||||||||||||||||||||
Loss on early extinguishment of debt | — | 525 | — | — | — | 525 | 1,992 | ||||||||||||||||||||
(Gain) loss on sales of real estate – rental properties | (1,838 | ) | — | — | — | — | (1,838 | ) | 121 | ||||||||||||||||||
Gain on sales of real estate – land parcels | (5,598 | ) | (8 | ) | (797 | ) | — | (4,052 | ) | (6,403 | ) | (4,824 | ) | ||||||||||||||
Impairment of real estate | 51,675 | — | — | — | — | 51,675 | — | ||||||||||||||||||||
Impairment of investments | — | — | — | — | 853 | — | 853 | ||||||||||||||||||||
Deal costs | — | — | — | — | 1,446 | — | 1,446 | ||||||||||||||||||||
Adjusted EBITDA | $ | 123,358 | $ | 118,471 | $ | 113,142 | $ | 113,521 | $ | 112,364 | $ | 468,492 | $ | 414,119 | |||||||||||||
EBITDA represents earnings before interest, taxes, depreciation, and amortization, a non-GAAP financial measure, and is used by us and others as a supplemental measure of performance. We use adjusted EBITDA (“Adjusted EBITDA”) to assess the performance of our core operations, including our unconsolidated JVs, for financial and operational decision making, and as a supplemental or additional means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as EBITDA, excluding stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, impairments, and deal costs. We believe Adjusted EBITDA provides investors relevant and useful information because it permits investors to view income from our operations on an unleveraged basis before the effects of taxes, depreciation and amortization, stock compensation expense, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, impairments, and deal costs.
Adjusted EBITDA margins
Our total revenues exclude revenues from discontinued operations, and for the purposes of calculating the adjusted EBITDA margin ratio, we exclude adjusted EBITDA generated by our discontinued operations to improve the consistency and comparability from period to period.
The following table reconciles adjusted EBITDA to adjusted EBITDA – excluding discontinued operations:
Three Months Ended | Year Ended | ||||||||||||||||||||||||||
(Dollars in thousands) | 12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | 12/31/14 | 12/31/13 | ||||||||||||||||||||
Adjusted EBITDA | $ | 123,358 | $ | 118,471 | $ | 113,142 | $ | 113,521 | $ | 112,364 | $ | 468,492 | $ | 414,119 | |||||||||||||
Add back: operating loss (income) from discontinued operations | 116 | 180 | 147 | 162 | 126 | 605 | (2,676 | ) | |||||||||||||||||||
Adjusted EBITDA – excluding discontinued operations | $ | 123,474 | $ | 118,651 | $ | 113,289 | $ | 113,683 | $ | 112,490 | $ | 469,097 | $ | 411,443 | |||||||||||||
Total revenues | $ | 188,674 | $ | 185,615 | $ | 176,402 | $ | 176,186 | $ | 168,823 | $ | 726,877 | $ | 631,151 | |||||||||||||
Adjusted EBITDA margins | 65% | 64% | 64% | 65% | 67% | 65% | 65% | ||||||||||||||||||||
Adjusted funds from operations
Adjusted funds from operations (“AFFO”) is a non-GAAP financial measure that we use as a supplemental measure of our performance. AFFO excludes certain items that are not representative of our core operating results because such items are dependent upon historical costs or are subject to judgmental valuation inputs and the timing of our decisions.
AFFO is not intended to represent cash flow for the period, and is intended only to provide an additional measure of performance. We believe that net (loss) income attributable to Alexandria’s common stockholders is the most directly comparable GAAP financial measure to AFFO. We believe that AFFO is a widely recognized measure of the operations of equity REITs, and presenting AFFO will enable investors to assess our performance in comparison to other equity REITs. However, other equity REITs may use different methodologies for calculating AFFO and, accordingly, our AFFO may not be comparable to AFFO calculated by other equity REITs. AFFO should not be considered as an alternative to net (loss) 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.
Annualized base rent
Annualized base rent means the annualized fixed base rental amount in effect as of the end of the period, related to our operating rentable square feet (using rental revenue computed on a straight-line basis in accordance with GAAP).
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 52 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Definitions and Reconciliations (continued)
(Unaudited)
Average cash yield
See definition of initial stabilized yield (unlevered).
Cash interest
Cash interest is equal to interest expense calculated in accordance with GAAP, plus capitalized interest, less amortization of loan fees and debt premiums/discounts. See definition of fixed charge coverage ratio for a reconciliation of interest expense, the most directly comparable GAAP financial measure, to cash interest.
Construction in progress
A key component of our business model is our value-creation development and redevelopment projects. These projects are focused on providing high-quality, generic, and reusable science and technology space to meet the real estate requirements of and are reusable by a wide range of client tenants. We also have certain significant value-creation projects undergoing important and substantial predevelopment activities to bring these assets to their intended use. These critical activities add significant value and are required for the construction of buildings. Upon completion, each value-creation project is expected to generate significant revenues and cash flows. Our development and redevelopment projects are generally in locations that are highly desirable to high-quality science and technology entities, which we believe results in higher occupancy levels, longer lease terms, and higher rental income and returns. Development projects consist of the ground-up development of generic and reusable facilities. We generally will not commence new development projects for aboveground construction of Class A science and technology space without first securing pre-leasing for such space except when there is significant market demand for high-quality Class A facilities. Redevelopment projects consist of the permanent change in use of office, warehouse, and shell space into science and technology space.
Land undergoing predevelopment activities (CIP)
Land undergoing predevelopment activities is classified as construction in progress and is undergoing activities prior to commencement of construction of aboveground building improvements. If aboveground construction is not initiated at completion of predevelopment activities, the land parcel will be classified as land held for future development. Our objective with predevelopment is to reduce the time it takes to deliver projects to prospective client tenants.
We are required to capitalize project costs, including interest, property taxes, insurance, and other costs directly related and essential to the development or construction of a project during periods when activities necessary to prepare an asset for its intended use are in progress. Predevelopment costs generally include the following activities prior to commencement of vertical construction:
• | Traditional preconstruction costs including entitlement, design, construction drawings, Building Information Modeling (3-D virtual modeling), budgeting, sustainability and energy optimization reviews, permitting, and planning for all aspects of the project. |
• | Site and infrastructure construction costs including belowground site work, utility connections, land grading, drainage, egress and regress access points, foundation, and other costs to prepare the site for construction of aboveground building improvements. |
Land held for future development
All predevelopment efforts have been advanced to appropriate stages and no further predevelopment activities are ongoing and therefore, interest, property taxes, and other costs related to these assets are expensed as incurred.
Dividend payout ratio
Dividend payout ratio (common stock) is the ratio of the absolute dollar amount of dividends on our common stock (shares of common stock outstanding on the respective record date multiplied by the related dividend per share) to FFO attributable to Alexandria’s common stockholders on a diluted basis, as adjusted.
Dividend yield
Dividend yield for the quarter represents the annualized quarter dividend divided by the closing common stock price at the end of the quarter.
Fixed charge coverage ratio
The fixed charge coverage ratio is a supplemental measure of our ability to satisfy fixed financing obligations and preferred stock dividends. The following table presents a reconciliation of interest expense, the most directly comparable GAAP financial measure to cash interest and fixed charges:
Three Months Ended | |||||||||||||||||||
(Dollars in thousands) | 12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | ||||||||||||||
Adjusted EBITDA | $ | 123,358 | $ | 118,471 | $ | 113,142 | $ | 113,521 | $ | 112,364 | |||||||||
Interest expense | $ | 22,188 | $ | 20,555 | $ | 17,433 | $ | 19,123 | $ | 17,783 | |||||||||
Add: capitalized interest | 11,665 | 12,125 | 11,302 | 12,013 | 14,116 | ||||||||||||||
Less: amortization of loan fees | (2,822 | ) | (2,786 | ) | (2,743 | ) | (2,561 | ) | (2,636 | ) | |||||||||
Less: amortization of debt (discounts) premiums | (17 | ) | 36 | 69 | (205 | ) | (146 | ) | |||||||||||
Cash interest | 31,014 | 29,930 | 26,061 | 28,370 | 29,117 | ||||||||||||||
Dividends on preferred stock | 6,284 | 6,471 | 6,472 | 6,471 | 6,471 | ||||||||||||||
Fixed charges | $ | 37,298 | $ | 36,401 | $ | 32,533 | $ | 34,841 | $ | 35,588 | |||||||||
Fixed charge coverage ratio: | |||||||||||||||||||
– quarter annualized | 3.3x | 3.3x | 3.5x | 3.3x | 3.2x | ||||||||||||||
– trailing 12 months | 3.3x | 3.3x | 3.2x | 3.0x | 2.9x | ||||||||||||||
Funds from operations and funds from operations, as adjusted
FFO is a widely used non-GAAP financial measure among equity REITs. We believe that FFO is helpful to investors as an additional measure of the performance of an equity REIT. Moreover, we believe that FFO, as adjusted, is also helpful because it allows investors to compare our performance to the performance of other real estate companies on a consistent basis, without having to account for differences caused by investment and disposition decisions, financing decisions, terms of securities, capital structures, and capital market transactions. We compute FFO in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) in its April 2002 White Paper and related implementation guidance. Neither FFO nor FFO, as adjusted, should be considered as an alternative to net (loss) income (determined in accordance with GAAP) as an indication of financial performance, or to cash flows from operating activities (determined in accordance with GAAP) as a measure of liquidity, nor are they indicative of the availability of funds for our cash needs, including funds available to make distributions.
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 53 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Definitions and Reconciliations (continued)
(Unaudited)
Initial stabilized yield (unlevered)
Initial stabilized yield is calculated as the quotient of the estimated amounts of NOI and our investment in the property. Our initial stabilized yield excludes the impact of leverage. Our cash rents related to our value-creation projects are expected to increase over time and our average cash yields are expected, in general, to be greater than our initial stabilized yields on a cash basis. Our estimates for initial yields, initial yields on a cash basis, and total costs at completion, represent our initial estimates at the commencement of the project. We expect to update this information upon completion of the project, or sooner, if there are significant changes to the expected project yields or costs.
• | Initial stabilized yield: reflects rental income less straight-line rent, including contractual rent escalations and any rent concessions over the term(s) of the lease(s), calculated on a straight-line basis. |
• | Initial stabilized yield – cash basis: reflects cash rents at the stabilization date after initial rental concessions, if any, have elapsed. |
Average cash yield reflects cash rents, including contractual rent escalations after initial rental concessions have elapsed, calculated on a straight-line basis.
Net debt to Adjusted EBITDA
Net debt to Adjusted EBITDA is a non-GAAP financial measure that we believe is useful to investors as a supplemental measure in evaluating our balance sheet leverage. The following table reconciles net debt to Adjusted EBITDA:
(Dollars in thousands) | 12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | |||||||||||||||
Secured notes payable | $ | 652,209 | $ | 636,825 | $ | 615,551 | $ | 597,511 | $ | 708,831 | ||||||||||
Unsecured senior notes payable | 1,747,370 | 1,747,290 | 1,048,310 | 1,048,270 | 1,048,230 | |||||||||||||||
Unsecured senior line of credit | 304,000 | 142,000 | 571,000 | 506,000 | 204,000 | |||||||||||||||
Unsecured senior bank term loans | 975,000 | 975,000 | 1,100,000 | 1,100,000 | 1,100,000 | |||||||||||||||
Less: cash and cash equivalents | (86,011 | ) | (67,023 | ) | (61,701 | ) | (74,970 | ) | (57,696 | ) | ||||||||||
Less: restricted cash | (26,884 | ) | (24,245 | ) | (24,519 | ) | (30,454 | ) | (27,709 | ) | ||||||||||
Net debt | $ | 3,565,684 | $ | 3,409,847 | $ | 3,248,641 | $ | 3,146,357 | $ | 2,975,656 | ||||||||||
Adjusted EBITDA: | ||||||||||||||||||||
– quarter annualized | $ | 493,432 | $ | 473,884 | $ | 452,568 | $ | 454,084 | $ | 449,456 | ||||||||||
– trailing 12 months | $ | 468,492 | $ | 457,498 | $ | 441,914 | $ | 428,699 | $ | 414,119 | ||||||||||
Net debt to Adjusted EBITDA: | ||||||||||||||||||||
– quarter annualized | 7.2 | x | 7.2 | x | 7.2 | x | 6.9 | x | 6.6 | x | ||||||||||
– trailing 12 months | 7.6 | x | 7.5 | x | 7.4 | x | 7.3 | x | 7.2 | x | ||||||||||
NOI
The following table reconciles total NOI from continuing operations to income from continuing operations:
Three Months Ended | Year Ended | |||||||||||||||
(In thousands) | 12/31/14 | 12/31/13 | 12/31/14 | 12/31/13 | ||||||||||||
(Loss) income from continuing operations | $ | (13,350 | ) | $ | 40,313 | $ | 99,142 | $ | 134,525 | |||||||
Add back: | ||||||||||||||||
General and administrative | 13,861 | 12,751 | 53,530 | 48,520 | ||||||||||||
Interest | 22,223 | 17,783 | 79,334 | 67,952 | ||||||||||||
Depreciation and amortization | 58,302 | 48,084 | 224,425 | 189,123 | ||||||||||||
Impairment of real estate | 51,675 | — | 51,675 | — | ||||||||||||
Loss on early extinguishment of debt | — | — | 525 | 1,992 | ||||||||||||
146,061 | 78,618 | 409,489 | 307,587 | |||||||||||||
Total NOI from continuing operations | $ | 132,711 | $ | 118,931 | $ | 508,631 | $ | 442,112 | ||||||||
NOI is a non-GAAP financial measure equal to income from continuing operations, the most directly comparable GAAP financial measure, excluding loss on early extinguishment of debt, impairment of real estate, depreciation and amortization, interest expense, and general and administrative expense. We believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects primarily those income and expense items that are incurred at the property level. Therefore, we believe NOI is a useful measure for evaluating the operating performance of our real estate assets, including our pro rata share from our unconsolidated JVs. NOI on a cash basis is NOI, adjusted to exclude the effect of straight-line rent adjustments required by GAAP. We believe that NOI on a cash basis is helpful to investors as an additional measure of operating performance because it eliminates straight-line rent adjustments to rental revenue.
Further, we believe NOI is useful to investors as a performance measure, because when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not immediately apparent from income from continuing operations. NOI presented by us may not be comparable to NOI reported by other equity REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with income from continuing operations as presented in our consolidated statements of income. NOI should not be considered as an alternative to income from continuing operations as an indication of our performance, or as an alternative to cash flows as a measure of liquidity, or our ability to make distributions.
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 54 |
ALEXANDRIA REAL ESTATE EQUITIES, INC.
December 31, 2014
Definitions and Reconciliations (continued)
(Unaudited)
Same property comparisons
As a result of changes within our total property portfolio during the comparative periods presented, including assets acquired, properties placed into development and redevelopment, and projects delivered into operations from development and redevelopment, the consolidated total rental revenues, tenant recoveries, and rental operating expenses in our operating results can show significant changes from period to period. In order to supplement an evaluation of our results of operations over a given period, we analyze the operating performance for all properties, including any unconsolidated JVs, that were fully operating for the entirety of the comparative periods presented separately from properties acquired subsequent to the first day in the earliest comparable period presented, properties that underwent development or redevelopment at any time during the comparative periods, and corporate entities (legal entities performing general and administrative functions), which are excluded from same property results. Additionally, rental revenues from lease termination fees, if any, are excluded from the results of the same properties.
Stabilized occupancy date
The stabilized occupancy date represents the estimated date on which the project is expected to reach occupancy of 95% or greater.
Total market capitalization
Total market capitalization is equal to the sum of outstanding shares of series E cumulative convertible preferred stock and common stock multiplied by the related closing price of each class at the end of each period presented, the liquidation value of the series D cumulative convertible preferred stock, and total debt.
Unencumbered NOI as a percentage of total NOI from continuing operations
Unencumbered NOI as a percentage of total NOI from continuing operations is a non-GAAP financial measure that we believe is useful to investors as a performance measure of the results of operations of our unencumbered real estate assets, as it reflects primarily those income and expense items that are incurred at the unencumbered property level. We use unencumbered NOI as a percentage of total NOI from continuing operations in order to assess our compliance with our financial covenants under our debt obligations because the measure serves as a proxy for a financial measure under such debt obligations. Unencumbered NOI is derived from assets classified in continuing operations which are not subject to any mortgage, deed of trust, lien, or other security interest as of the period for which income is presented.
Three Months Ended | Year Ended | ||||||||||||||||||||||||||
(Dollars in thousands) | 12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | 12/31/14 | 12/31/13 | ||||||||||||||||||||
Unencumbered NOI | $ | 111,741 | $ | 108,155 | $ | 103,951 | $ | 103,096 | $ | 82,267 | $ | 426,943 | $ | 305,028 | |||||||||||||
Encumbered NOI | 20,970 | 20,037 | 20,098 | 20,583 | 36,664 | 81,688 | 137,084 | ||||||||||||||||||||
Total NOI from continuing operations | $ | 132,711 | $ | 128,192 | $ | 124,049 | $ | 123,679 | $ | 118,931 | $ | 508,631 | $ | 442,112 | |||||||||||||
Unencumbered NOI as a percentage of total NOI | 84% | 84% | 84% | 83% | 69% | 84% | 69% | ||||||||||||||||||||
Weighted average interest rate for capitalization of interest
The weighted average interest rate required for calculating capitalization of interest pursuant to GAAP represents a weighted average rate based on the rates applicable to borrowings outstanding during the period and includes the impact of our interest rate swap agreements, amortization of debt discounts/premiums, amortization of loan fees, and other bank fees. A separate calculation is performed to determine our weighted average interest rate for capitalization for each month. The rate will vary each month due to changes in variable interest rates, outstanding debt balances, the proportion of variable-rate debt to fixed-rate debt, the amount and terms of effective interest rate swap agreements, and the amount of loan fee amortization.
The following table presents the weighted average interest rate for capitalization of interest:
Three Months Ended | |||||||||
12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | |||||
Weighted average interest rate | 3.69% | 3.73% | 3.41% | 3.88% | 4.09% | ||||
Weighted average shares for calculating FFO, FFO, as adjusted, and AFFO per share
Weighted average shares of common stock outstanding for calculating FFO, FFO, as adjusted, and AFFO per share attributable to Alexandria’s common stockholders represent the weighted average of common shares outstanding during the period, calculated as follows:
Three Months Ended | Year Ended | |||||||||||||||||||
(In thousands) | 12/31/14 | 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | 12/31/14 | 12/31/13 | |||||||||||||
Weighted average shares – basic | 71,314 | 71,195 | 71,126 | 71,073 | 71,000 | 71,170 | 68,038 | |||||||||||||
Assumed conversion of 8.00% unsecured senior convertible notes | — | — | — | — | — | — | 5 | |||||||||||||
Weighted average shares – diluted | 71,314 | 71,195 | 71,126 | 71,073 | 71,000 | 71,170 | 68,043 | |||||||||||||
| ALEXANDRIA REAL ESTATE EQUITIES, INC ALL RIGHTS RESERVED © 2015 | 55 |
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