Alexandria Real Estate Equities, Inc. Reports Second Quarter Ended June 30, 2014 Financial and Operating Results

PASADENA, Calif., July 28, 2014 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. ARE today announced financial and operating results for the second quarter ended June 30, 2014.

"We remain focused on our goal to provide stable and consistent FFO per-share and net asset value growth driven by strong core performance and healthy demand for our active and near-term value creation pipeline. Our performance thus far in 2014 has been solid and we anticipate solid results for the remainder of the year. We remain committed to our goal of funding our 2014 capital needs with EBITDA growth and sales of land parcels. Cash flows from operating activities after dividends and a significant increase in EBITDA is forecasted to provide significant capacity in 2015 to fund our growth, including construction, while maintaining our target net debt to adjusted EBITDA of 6.5x 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:
  • $1.19 per share for 2Q14, up 11.2%, compared to $1.07 per share for 2Q13
  • $2.36 per share for YTD 2Q14, up 8.3%, compared to $2.18 per share for YTD 2Q13
  • $84.5 million for 2Q14, up $12.9 million, or 18.1%, compared to $71.6 million for 2Q13
  • $167.6 million for YTD 2Q14, up $26.0 million, or 18.3%, compared to $141.6 million for YTD 2Q13
• Net income attributable to Alexandria's common stockholders – diluted:
  • $27.9 million, or $0.39 per share, for 2Q14 compared to $25.5 million, or $0.38 per share, for 2Q13
  • $60.6 million, or $0.85 per share, for YTD 2Q14 compared to $47.9 million, or $0.74 per share, for YTD 2Q13

Core operating metrics

• Total revenues:
  • $176.4 million for 2Q14, up $22.5 million, or 14.6%, compared to $153.9 million for 2Q13
  • $352.6 million for YTD 2Q14, up $48.6 million, or 16.0%, compared to $304.0 million for YTD 2Q13
• Net operating income ("NOI"):
  • $124.0 million for 2Q14, up $16.4 million, or 15.2%, compared to $107.7 million for 2Q13
  • $247.7 million for YTD 2Q14, up $35.2 million, or 16.6%, compared to $212.6 million for YTD 2Q13
• Same Property NOI growth:
  • Up 5.3% and 5.7% (cash basis) for 2Q14, compared to 2Q13
  • Up 4.5% and 5.0% (cash basis) for YTD 2Q14, compared to YTD 2Q13
• Leasing activity during 2Q14:
  • Executed 62 leases for 752,364 rentable square feet ("RSF")
  • 9.9% and 3.0% (cash basis) rental rate increases on 2Q14 lease renewals and re-leasing of space
• Leasing activity during YTD 2Q14:
  • Executed 107 leases for 1,315,757 RSF
  • 13.6% and 6.3% (cash basis) rental rate increases on YTD 2Q14 lease renewals and re-leasing of space
• Occupancy for properties in North America, as of 2Q14:
  • 96.9% occupancy for operating properties, up 230 basis points ("bps") from 2Q13
  • 95.6% occupancy for operating and redevelopment properties, up 270 bps from 2Q13
• Operating margins steady at 70% for 2Q14
• 52% of total annualized base rent ("ABR") from investment-grade client tenants

External growth: value-creation projects and acquisitions

Value-creation projects

• 79% of our development and redevelopment projects aggregating 1,934,431 RSF in North America are leased or under lease negotiations
• 2Q14 key deliveries from our value-creation projects included the following:
  • 72,216 RSF to Illumina, Inc. at 499 Illinois Street in our Mission Bay submarket
  • 37,943 RSF to several tenants at 430 East 29th Street, the Alexandria Center^TM for Life Science, in our Manhattan submarket
• Commenced development of 3013/3033 Science Park Road, a 165,938 RSF project in the Torrey Pines submarket of San Diego.  This development project is currently 63% leased/under negotiation, including 25% pre-leased to a publicly traded life science company.  Our ability to preserve the existing steel frame in a section of the project will allow us to reduce the time to deliver a portion of the project for initial occupancy in early 2015.
• Delivery of high value pre-leased development and redevelopment projects will drive significant increases in EBITDA, cash flows, net asset value, and per share earnings. Additionally, deliveries over the next few quarters will drive non-income-producing assets (CIP and land) to 12% of gross real estate by 1Q15.

Acquisitions

• In April 2014, we acquired a land parcel at 500 Townsend Street, supporting the ground-up development of approximately 300,000 gross square feet, in the SoMa submarket of the San Francisco Bay Area for a purchase price of $50.0 million.  We are in the process of perfecting entitlements, marketing for lease, and subject to market conditions, we plan to commence construction as soon as possible in 2015.

Dispositions of land parcels

• In May 2014, we completed the sale of a land parcel at 810 Dexter Avenue North in the Seattle market for a sales price of $19.0 million and a gain of $0.8 million.  The buyer is expected to reposition the property for multi-family residential use.
• In July 2014, we completed the sale of two land parcels in a non-cluster market for a sales price of $7.9 million and a gain of $0.2 million.  The buyer is expected to use the land for academic institution purposes.

Balance sheet

• In July 2014, we completed an offering of $700 million unsecured senior notes payable, consisting of the following:
  • $400 million of 2.75% unsecured senior notes payable due in 2020
  • $300 million of 4.50% unsecured senior notes payable due in 2029
  • Weighted average interest rate of 3.50% and maturity of 9.6 years
  • Weighted average remaining term of outstanding debt extended from 5.1 years to 6.3 years while prudently laddering debt maturities
  • Net proceeds of $694 million were used to reduce variable rate debt, including the partial repayment of $125 million of our 2016 Unsecured Senior Bank Term Loan and the reduction of $569 million of borrowings outstanding on our unsecured senior line of credit.
  • In connection with the partial repayment of $125 million of our 2016 Unsecured Senior Bank Term Loan, we recognized a loss on the early extinguishment of debt related to the write-off of unamortized loan fees totaling $0.5 million, or $0.01 per share.
• Certain statistics as of 2Q14 on a pro forma basis for the $700 million bond offering completed in July 2014:
  • Liquidity of $1.8 billion
  • Unhedged variable-rate debt as a percentage of total debt of 7%
• Cash flows from operating activities, after dividends, plus increases in EBITDA in 2015, are expected to provide significant capacity to fund $500 million to $600 million of growth, including construction, in 2015
• Unencumbered NOI as a percentage of total NOI of 84% for 2Q14

LEED statistics

• In May 2014, our 225 Binney Street property achieved LEED Gold certification.
• In June 2014, our 1201 Eastlake Avenue East property achieved LEED Silver Existing Building Operations and Maintenance ("EB O&M") certification.  This building is part of only a handful of labs in the entire world with LEED Silver EB O&M certification. 
• As of 2Q14, our asset base had 29 LEED certified projects with an additional 27 LEED certifications in process.

Guidance

The following guidance is based on our current view of existing market conditions and other assumptions for the year ended December 31, 2014.  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.

 

 

 

Earnings Call Information

We will host a conference call on Tuesday, July 29, 2014, at 3:00 p.m. Eastern Time ("ET")/12:00 p.m. noon Pacific Time ("PT") that is open to the general public to discuss our financial and operating results for the second quarter ended June 30, 2014.  To participate in this conference call, dial (877) 681-3378 or (719) 325-4849 and confirmation code 2573982 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 29, 2014.  The replay number is (888) 203-1112 or (719) 457-0820 and the confirmation code is 2573982.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the second quarter ended June 30, 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/2014q2.pdf. 

About the Company

Alexandria Real Estate Equities, Inc. ARE is a fully integrated, self-administered and self-managed REIT uniquely focused on Class A collaborative science and technology campuses in urban innovation clusters including Greater Boston, the San Francisco Bay Area, San Diego, New York City, Maryland, Seattle, and Research Triangle Park.  Alexandria is the largest and leading owner, operator, and developer in its niche with a total market capitalization of approximately $9.3 billion as of June 30, 2014, and an asset base of 31.4 million RSF, including 17.9 million RSF of operating and current value-creation projects, as well as an additional 13.5 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 2014 earnings per share attributable to Alexandria's common stockholders – diluted, 2014 FFO per share attributable to Alexandria's common stockholders – diluted, NOI, and our projected sources and uses of capital.  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 July 28, 2014, the date this document was first made available on our website, 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.

 

 

 

 

SOURCE Alexandria Real Estate Equities, Inc.