Alexandria Real Estate Equities, Inc. Reports Second Quarter Ended June 30, 2015 Financial and Operating Results

PASADENA, Calif., July 27, 2015 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. ARE today announced financial and operating results for the second quarter ended June 30, 2015.

Joel S. Marcus, Chairman, Chief Executive Officer, and Founder of Alexandria Real Estate Equities, Inc., said, "Congratulations to our first-in-class team on the solid execution of another strong quarter of financial and operating results, including the following key highlights:

• Executed agreement for the sale of a 70% interest in our Class A facility located at 225 Binney Street, Cambridge, MA, to TIAA-CREF for a sale price of $190.1 million at a cash cap rate of 4.5%; we expect to complete the sale in 4Q15;
• 2015 recipient of the NAREIT Investor CARE (Communication and Reporting Excellence) Gold Award by NAREIT as a best-in-class REIT that delivers transparency, quality, and efficient communications and reporting to the investment community;
• FFO per share diluted for 2Q15 of $1.31, up 10.1%, compared to $1.19 for 2Q14;
• Same property NOI growth of 0.5% and 4.7% (cash basis) for 2Q15, as compared to 2Q14;
• Rental rate increases of 14.5% and 7.0% (cash basis) for 2Q15 lease renewals and re-leasing of space aggregating 783,042 RSF;
• Executed 1.9 million RSF of leasing in 2Q15; strong demand and pricing power in our key cluster markets;
• Executed 1.1 million RSF (included in the 1.9 million RSF above) of leases related to Class A ground-up development space providing further visibility into key near-term multi-year growth drivers; further increasing proportion of total ABR in the future from Class A assets and high quality tenants; and
• Common stock dividend for 2Q15 of $0.77 per common share, up 5 cents, or 7%, over 2Q14; continuation of strategy to share growth in cash flows from operating activities with our shareholders while also retaining important capital for investment."

4.5% Cash cap rate on sale of 70% interest in core real estate asset

• In July 2015, we executed an agreement for the sale of a 70% interest in our Class A facility located at 225 Binney Street, Cambridge, MA, to TIAA-CREF for a sale price of $190.1 million at a cash cap rate of 4.5%; we expect to complete the sale in 4Q15

2015 Recipient of NAREIT Investor CARE Award

• 2015 recipient of the Investor CARE (Communication and Reporting Excellence) Gold Award by NAREIT as a best-in-class REIT that delivers transparency, quality, and efficient communications and reporting to the investment community

Results

• Funds from operations ("FFO") attributable to Alexandria Real Estate Equities, Inc.'s ("Alexandria's") common stockholders – basic and diluted:
  • $1.31 per share for 2Q15, up 10.1%, compared to $1.19 per share for 2Q14
  • $2.59 per share for YTD 2Q15, up 9.7%, compared to $2.36 per share for YTD 2Q14
  • $93.4 million for 2Q15, up $8.9 million, or 10.6%, compared to $84.5 million for 2Q14
  • $184.8 million for YTD 2Q15, up $17.2 million, or 10.3%, compared to $167.6 million for YTD 2Q14
• Net income attributable to Alexandria's common stockholders – diluted:
  • $31.3 million, or $0.44 per share, for 2Q15, compared to
    $27.9 million, or $0.39 per share, for 2Q14
  • $49.1 million, or $0.69 per share, for YTD 2Q15, compared to
    $60.6 million, or $0.85 per share, for YTD 2Q14

Core operating metrics

• Total revenues:
  • $204.2 million for 2Q15, up $27.8 million, or 15.7%, compared to $176.4 million for 2Q14
  • $400.9 million for YTD 2Q15, up $48.3 million, or 13.7%, compared to
    $352.6 million for YTD 2Q14
• Net operating income ("NOI"), including our share of unconsolidated joint ventures:
  • $142.8 million for 2Q15, up $18.8 million, or 15.1%, compared to $124.0 million for 2Q14
  • $279.2 million for YTD 2Q15, up $31.5 million, or 12.7%, compared to
    $247.7 million for YTD 2Q14
• Same property NOI growth:
  • 0.5% and 4.7% (cash basis) increase for 2Q15, as compared to 2Q14
  • 1.4% and 6.2% (cash basis) increase for YTD 2Q15, as compared to YTD 2Q14
• Executed leases for 1,915,379 rentable square feet ("RSF") during 2Q15, the highest quarterly leasing volume in the Company's history, including:
  • 304,326 RSF to Eli Lilly and Company, representing 100% of the recently acquired redevelopment project at 10290 Campus Point Drive in our University Town Center submarket in San Diego
  • 300,000 RSF to Stripe, Inc., representing 100% of 510 Townsend Street in our SoMa submarket in San Francisco
  • 208,394 RSF to Bristol-Myers Squibb Company, representing 48% of 100 Binney Street in our Cambridge submarket in Greater Boston
  • 90,423 RSF to Juno Therapeutics, Inc., representing 31% of 400 Dexter Avenue North in our Lake Union submarket in Seattle
  • 14.5% and 7.0% (cash basis) rental rate increases on lease renewals and re-leasing of space aggregating 783,042 RSF
• Executed leases for 2,938,048 RSF during YTD 2Q15
  • 20.3% and 11.2% (cash basis) rental rate increases on lease renewals and re-leasing of space aggregating 1,272,328 RSF
• Occupancy at 95.9% for properties in North America as of 2Q15
• Operating margins at 70% for 2Q15
• Adjusted EBITDA margins at 65% for 2Q15

External growth: value-creation projects and acquisitions
Value-creation projects

• Current development projects underway were on average 88% leased or under negotiation (71% leased and 17% under negotiation)
• Near-term value-creation projects with estimated commencement of construction in 2H15, aggregating 1,097,564 RSF, were on average 100% leased or under negotiation (80% leased and 20% under negotiation)
• 2Q15 key value-creation projects placed into service include:
  • 112,500 RSF to FORUM Pharmaceuticals Inc. at 225 Second Avenue in our Route 128 submarket in Greater Boston.
  • 51,997 RSF, including 48,990 RSF to the Dana-Farber Cancer Institute, Inc., at 360 Longwood Avenue in our Longwood Medical submarket in Greater Boston.
• 2Q15 commencements of development project:
  • 287,806 RSF development project at 400 Dexter Avenue North in our Lake Union submarket; 64% leased/negotiating (31% leased and 33% under negotiation)

Acquisitions

• In April 2015, we acquired 505 Brannan Street, a near-term development project in our SoMa submarket. The property is currently entitled for 135,000 RSF, and we are seeking entitlements for an additional 165,000 RSF. The purchase price of the land parcel was $34.0 million.
• Refer to "Subsequent events" for details on acquisition of 10290 Campus Point Drive in our University Town Center submarket.

Balance sheet

• $10.7 billion total market capitalization as of June 30, 2015
• 12% of gross investment in real estate in value-creation pipeline (50% of pipeline undergoing construction)
• 7.5x net debt to adjusted EBITDA – 2Q15 annualized; 2015 target range from 6.5x to 7.5x, with goal of <7.0x by 4Q15
• 3.4x fixed charge coverage ratio – 2Q15 annualized
• In June 2015, we completed a partial principal repayment of $25.0 million, extended the maturity date of the remaining $350 million unsecured senior bank term loan from 2016 to 2021 ("2021 Unsecured Senior Bank Term Loan"), and reduced pricing to LIBOR +1.10% from LIBOR +1.20%
• In June 2015, we exercised the first of two one-year extensions on a $47.2 million secured construction loan, which extended the maturity date from July 1, 2015, to July 1, 2016
• Limited debt maturities through 2018; well-laddered maturity profile
• Executed additional interest rate swap agreements in April, June, and July 2015, with an aggregate notional amount of $550 million, to increase notional hedged variable-rate debt to a minimum of $800 million and $350 million during 2016 and 2017, respectively.
• 22% unhedged variable-rate debt as a percentage of total debt as of June 30, 2015, with goal of <15% by 4Q15

LEED statistics

• 51 LEED projects, including 35 LEED certified projects aggregating 5.4 million RSF and 16 additional LEED projects in process aggregating 3.3 million square feet
• 55% of our total annualized base rent ("ABR") will be generated from LEED projects upon completion of our in-process projects

Subsequent events

• In July 2015, we commenced development of a 431,483 RSF value-creation project at 100 Binney Street in our Cambridge submarket; 98% leased/negotiating, including 48% leased to Bristol-Myers Squibb Company.
• In July 2015, we acquired 10290 Campus Point Drive, a property aggregating 304,326 RSF. This highly strategic acquisition is located adjacent to our uniquely positioned life science campus at the Alexandria Center^® for Life Science at Campus Pointe with high-quality on-site amenities in the heart of our University Town Center submarket. The acquired property is 100% leased to the previous owner through September 30, 2015. In June 2015, we leased the entire 304,326 RSF to Eli Lilly and Company for 15.5 years. In October 2015, we expect to commence conversion of the space into Class A office/laboratory space through redevelopment. Upon completion of this redevelopment project, Eli Lilly and Company will relocate its existing presence at 10300 Campus Point Drive of 125,409 RSF and the previously announced 106,173 RSF expansion, into our recently acquired 10290 Campus Point Drive. These changes resulted in a net increase of 72,744 RSF leased to Eli Lilly and Company at the campus. Our campus will ultimately contain an aggregate of 1,046,472 RSF, including 292,387 RSF of capacity for future ground-up development.

Guidance
(Dollars in thousands, except per share amounts)

The following updated guidance is based on our current view of existing market conditions and other assumptions for the year ending 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" below.

 

 

 

 

 

 

 

 

 

Key NAV Consideration

Photo - http://photos.prnewswire.com/prnh/20150727/245807-INFO

Earnings Call Information

We will host a conference call on Tuesday, July 28, 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 second quarter ended June 30, 2015.  To participate in this conference call, dial (877) 545-1403 or (719) 325-4748 and confirmation code 9589266 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, July 28, 2015.  The replay number is (888) 203-1112 or (719) 457-0820 and the confirmation code is 9589266.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the second quarter ended June 30, 2015, is available in the "For Investors" section of our website at www.are.com or by following this link: http://www.are.com/fs/2015q2.pdf.

About the Company

Alexandria Real Estate Equities, Inc. ARE is a fully integrated, self-administered, and self-managed office real estate investment trust ("REIT") uniquely focused on collaborative science and technology campuses in urban innovation clusters with a total market capitalization of $10.7 billion as of June 30, 2015, and an asset base of 31.1 million square feet, including 18.8 million RSF of operating and current value-creation projects, as well as an additional 12.3 million square feet of near-term and 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, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park.

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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 place into service 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 operations in areas such as current and future development and redevelopment projects being placed into service, 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.

 

 

 

 

 

 

Funds From Operations and Adjusted Funds From Operations
(In thousands)
(Unaudited)

The following table presents a reconciliation of net income (loss) 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 adjusted funds from operations ("AFFO") attributable to Alexandria's common stockholders – diluted.  The table below includes our share of consolidated and unconsolidated joint venture amounts.

 

 

Funds From Operations Per Share and Adjusted Funds From Operations Per Share 
(In thousands, except per share amounts) 
(Unaudited)

The following table presents a reconciliation of 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.

 

 

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SOURCE Alexandria Real Estate Equities, Inc.