<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MAY 27, 1998
ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 1-12993 95-4502084
(State of other jurisdiction of (Commission (I.R.S. Employer
incorporation File Number) Identification No.
135 NORTH LOS ROBLES AVENUE, SUITE 250 91101
PASADENA, CALIFORNIA
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (626) 578-0777
<PAGE>
ITEM 5. OTHER EVENTS
ACQUISITIONS
Between December 1, 1997 and May 11, 1998, Alexandria Real Estate Equities,
Inc. (the "Company") completed fourteen acquisitions, which are described
below. The properties ("Life Science Facilities") are for lease principally
to participants in the life science industry. The properties were purchased
from sellers which are unrelated to each other. Also described below is one
property to be acquired by the Company.
1201 Harbor Bay Parkway is a Life Science Facility located in Alameda,
California. The property was purchased for $6,550,000, which was based on
arm's length negotiations, funded through a draw on the Company's unsecured
line of credit. The property contains 61,100 rentable square feet. It is
presently 100% leased to two tenants. The property was purchased on December
1, 1997 from 1201 Harbor Bay Partnership, a California partnership, which is
not affiliated with the Company.
11025 Roselle Street is a Life Science Facility located in San Diego,
California. The property was purchased for $2,300,000, which was based on
arm's length negotiations, funded through a draw on the Company's unsecured
line of credit. The property contains 18,532 rentable square feet. It is
presently 59% leased. The property was purchased on December 12, 1997 from
First National Bank of Chicago, which is not affiliated with the Company.
Buildings 79 and 96 Charlestown Navy Yard is a Life Science Facility located
in Charlestown, Massachusetts. The property was purchased for $6,050,000,
which was based on arm's length negotiations, funded through a draw on the
Company's unsecured line of credit. The property contains an aggregate of
24,940 rentable square feet. It is presently 100% leased. The property was
purchased on January 13, 1998 from Building 79 Associates Limited Partnership
and Building 96 Associates Limited Partnership, which are not affiliated with
the Company.
8000/9000/10000 Virginia Manor Road is a Life Science Facility located in
Beltsville, Maryland. The property was purchased for $13,000,000, which was
based on arm's length negotiations, funded through a draw on the Company's
unsecured line of credit. The property contains 187,561 rentable square
feet. It is presently 87% leased. The property was purchased on January 30,
1998 from TR Muirkirk Corporation, which is not affiliated with the Company.
215 College Road is a Life Science Facility located in Paramus, New Jersey.
The property was purchased for $11,100,000, which was based on arm's length
negotiations, funded through a draw on the Company's unsecured line of
credit. The property contains 110,666 rentable square feet. It is presently
100% leased to three tenants. The property was purchased on February 3, 1998
from Century Associates, a New Jersey partnership, which is not affiliated
with the Company.
<PAGE>
3000/3018 Western and 3005 First Avenue are Life Science Facilities located
in Seattle, Washington. The properties were purchased for $21,850,000, which
was based on arm's length negotiations, funded through a draw on the
Company's unsecured line of credit. Prior to acquisition by the Company, the
properties were occupied by their owner. The properties contain 118,393
rentable square feet. They are presently 56% leased. The properties were
purchased on February 19, 1998 from Bristol-Myers Squibb Company, which is
not affiliated with the Company.
100 and 800/801 Capitola Drive are Life Science Facilities located in Durham,
North Carolina. The properties were purchased for $18,500,000, which was based
on arm's length negotiations. The purchase price was partially funded through
the assumption of a secured note payable to Citicorp USA, Inc. in the amount of
$12,641,000. The debt bears interest at 8.68% per annum, with monthly payments
of principal interest based on a 30 year amortization schedule. The loan
matures in December 2006. The remainder of the purchase price was funded
through a draw on the Company's unsecured line of credit. The properties
contain 186,777 rentable square feet. They are presently 82% leased. The
properties were purchased on March 3, 1998 from ATP Holdings, L.L.C., which is
not affiliated with the Company.
10150 Old Columbia Road is a Life Science Facility located in Columbia,
Maryland. The property was purchased for $6,375,000, which was based on arm's
length negotiations, funded through a draw on the Company's unsecured line of
credit. The property contains 75,500 rentable square feet. It is presently
100% leased. The property was purchased on March 4, 1998 from New England Life
Pension Properties: A Real Estate Limited Partnership and M.O.R. XVIII
Associates Limited Partnership, a Maryland limited partnership. New England
Life Pension Properties: A Real Estate Limited Partnership is an affiliate of
AEW Partners II, L.P. which owned 14.6% of the Company's common stock as of
December 31, 1997.
819-849 Mitten Road and 863 Mitten Road/866 Malcolm Road are properties located
in Burlingame, California. The properties were purchased for $17,000,000, which
was based on arm's length negotiations, funded through a draw on the Company's
unsecured line of credit. The properties contain 161,802 rentable square feet.
They are presently 93% leased. The properties were purchased on March 24, 1998
from SFO Office Associates, LLC, a California limited liability company, which
is not affiliated with the Company.
5100/5110 Campus Drive is a Life Science Facility located in Plymouth Meeting,
Pennsylvania. The property was purchased for $4,600,000, which was based on
arm's length negotiations, funded through a draw on the Company's unsecured line
of credit. The property contains 43,582 rentable square feet. It is presently
100% leased to four tenants. The property was purchased on March 30, 1998 from
Whitemarsh Business Associates, which is not affiliated with the Company.
<PAGE>
280 Pond Street is a Life Science Facility located in Randolph, Massachusetts.
The property was purchased for $3,600,000, which was based on arm's length
negotiations, funded through a draw on the Company's unsecured line of credit.
The property contains 24,867 rentable square feet. It is presently 100% leased.
The property was purchased on April 15, 1998 from Reservoir Associates, which is
not affiliated with the Company.
19 Firstfield Road is a Life Science Facility located in Gaithersburg, Maryland.
The property was purchased for $3,425,000, which was based on arm's length
negotiations, funded through a draw on the Company's unsecured line of credit.
The property contains 25,175 rentable square feet. It is presently 100% leased.
The property was purchased on April 29, 1998 from Equitable Life Assurance
Society of the United States, which is not affiliated with the Company.
6166 Nancy Ridge Drive is a Life Science Facility located in San Diego,
California. The property was purchased for $3,000,000, which was based on arm's
length negotiations, funded through a draw on the Company's unsecured line of
credit. Prior to acquisition by the Company, the property was occupied by its
owner. The property contains 29,333 rentable square feet. It is presently 100%
leased. The property was purchased on April 30, 1998 from Solomon Levy, who is
not affiliated with the Company.
150/154 Technology Parkway is a Life Science Facility located in Norcross,
Georgia. The property was purchased for $4,500,000, which was based on arm's
length negotiations, funded through a draw on the Company's unsecured line of
credit. Prior to acquisition by the Company, the property was occupied by its
owner. The property contains 37,080 rentable square feet. It is presently 100%
leased. The property was purchased on May 11, 1998 from Proceutics, Inc. and
Cytrx Corporation, which are not affiliated with the Company.
170 Williams Drive is a Life Science Facility located in Ramsey, New Jersey.
The Board of Directors of the Company approved the acquisition of this
property on May 15, 1998. The Company expects to acquire the property no
later than June 1998. The purchase price will be $5,069,000, which was based
on arm's length negotiations and which will be funded with a draw on the
Company's unsecured line of credit. The property contains 37,000 rentable
square feet. It is presently 100% leased. The property will be purchased
from Ramsey Associates, which is not affiliated with the Company.
FINANCINGS
In April 1998, the Company entered into a term loan with the managing agent
bank under the Company's unsecured line of credit (the "Credit Facility")
providing for borrowings of up to $20 million (the "Term Loan"). The Term
Loan matures on June 15, 1998 and otherwise contains terms substantially
similar to the Credit Facility. In May 1998, the Company received a
commitment from the managing agent bank under the Credit Facility to amend
and restate the facility to provide for borrowings of up to $250 million and
to lower the interest rate (the "Amended Credit Facility"). The Amended
Credit Facility will mature on May 31, 2000, will contain conditions to
borrowing, restrictive coventants and representations and warranties
customary in real estate investment trust financings. There can be no
assurance that the Company will be able to enter into the Amended Credit
Facility on terms satisfactory to the Company.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF PROPERTIES ACQUIRED (1)
1201 HARBOR BAY PARKWAY
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the year ended
December 31, 1996
Notes to Statement of Revenues and Certain Expenses
BUILDINGS 79 AND 96 CHARLESTOWN NAVY YARD
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the year ended
December 31, 1997
Notes to Statement of Revenues and Certain Expenses
8000/9000/10000 VIRGINIA MANOR ROAD
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the Year Ended
December 31, 1997
Notes to Statement of Revenues and Certain Expenses
215 COLLEGE ROAD
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the Year Ended
December 31, 1997
Notes to Statement of Revenues and Certain Expenses
- ----------------------
(1) Financial statements have not been included for 3000/3018 Western and 3005
First Avenue, 6166 Nancy Ridge Road, and 150/154 Technology Parkway because they
were owner-occupied prior to acquisition and as a result there are no historical
operating results as rental properties. Subsequent to acquisition by the
Company, triple-net leases were executed with tenants at 3000/3018 Western, 6166
Nancy Ridge Road, and 150/154 Technology Parkway for 100% of the rentable area
requiring the tenants to pay their pro rata share of substantially all expenses
associated with the properties. The Company is currently negotiating a
triple-net lease with a tenant for 100% of the rentable area at 3005 First
Avenue. The financial statement for 11025 Roselle Street has not been included
because it is not significant.
<PAGE>
100 AND 800/801 CAPITOLA DRIVE
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the Year Ended
December 31, 1997
Notes to Statement of Revenues and Certain Expenses
10150 OLD COLUMBIA ROAD
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the Year Ended
December 31, 1997
Notes to Statement of Revenues and Certain Expenses
819-849 MITTEN ROAD AND 863 MITTEN ROAD/866 MALCOLM ROAD
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the Year Ended
December 31, 1997
Notes to Statement of Revenues and Certain Expenses
5100/5110 CAMPUS DRIVE
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the Year Ended
December 31, 1997
Notes to Statement of Revenues and Certain Expenses
280 POND STREET
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the Year Ended
December 31, 1997
Notes to Statement of Revenues and Certain Expenses
19 FIRSTFIELD ROAD
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the Year Ended
December 31, 1997
Notes to Statement of Revenues and Certain Expenses
<PAGE>
170 WILLIAMS DRIVE
Statement of Revenues and Certain Expenses:
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the Year Ended
December 31, 1997
Notes to Statement of Revenues and Certain Expenses
(b) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(c) EXHIBITS
23.1 Consent of Ernst & Young LLP
<PAGE>
Report of Independent Auditors
To the Board of Directors
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
1201 Harbor Bay Parkway (the Property) for the year ended December 31, 1996.
This statement of revenue and certain expenses is the responsibility of the
management of the Property. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
November 7, 1997
<PAGE>
1201 Harbor Bay Parkway
Statement of Revenue and Certain Expenses
Year Ended December 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenue:
Rental $ 826
Tenant recoveries 152
---------
Total revenue 978
Certain expenses:
Utilities 20
Repairs and maintenance 34
Insurance 9
Taxes and license 88
Association fees 25
---------
Total certain expenses 176
---------
Excess of revenue over certain expenses $ 802
---------
---------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES.
<PAGE>
1201 Harbor Bay Parkway
Notes to Statement of Revenue and Certain Expenses
Year Ended December 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of 1201 Harbor Bay Parkway located in Alameda, California (the
Property) which was acquired by Alexandria Real Estate Equities, Inc., a
Maryland corporation (the Company), from a nonaffiliated third party. As of
December 31, 1996, the Property was 100% occupied and leased to two tenants
under terms of leases which provide for specified tenant reimbursements of
operating expenses. One lease is a triple net lease which requires the tenant to
pay their pro rata share of substantially all expenses associated with the
Property including operating and maintenance, utilities, taxes and insurance.
The other lease provides for the tenant to pay their pro rata share of increases
in operating expenses in excess of specified amounts.
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The Property is not a legal entity and the accompanying statement is not
representative of the actual operations for the period presented as certain
expenses that may not be comparable to the expenses expected to be incurred by
the Company in the future operations of the Property have been excluded.
Excluded expenses consist of interest, depreciation and amortization and
property general and administrative costs not directly comparable to the future
operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
related leases.
RISKS AND UNCERTAINTIES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE>
1201 Harbor Bay Parkway
Notes to Statement of Revenue and Certain Expenses (continued)
2. RENTAL PROPERTY
The future minimum lease payments to be received under noncancelable operating
leases as of December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997 $ 913,000
1998 831,000
1999 420,000
2000 420,000
2001 420,000
Thereafter 559,000
--------------
Total $ 3,563,000
--------------
--------------
</TABLE>
The above future minimum lease payments do not include specified payments for
tenant recoveries of operating expenses.
<PAGE>
Report of Independent Auditors
To the Board of Directors
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
Buildings 79 and 96 Charlestown Navy Yard (the Property) for the year ended
December 31, 1997. This statement of revenue and certain expenses is the
responsibility of the management of the Property. Our responsibility is to
express an opinion on the statement of revenue and certain expenses based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
January 6, 1998
<PAGE>
Buildings 79 and 96 Charlestown Navy Yard
Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenue:
Rental $ 710
Tenant recoveries 49
---------
Total revenue 759
Certain expenses:
Repairs and maintenance 4
Taxes and license 50
Ground rent 35
---------
Total certain expenses 89
---------
Excess of revenue over certain expenses $ 670
---------
---------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES.
<PAGE>
Buildings 79 and 96 Charlestown Navy Yard
Notes to Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of Buildings 79 and 96 Charlestown Navy Yard located in Charlestown,
Massachusetts (the Property) which was acquired by Alexandria Real Estate
Equities, Inc., a Maryland corporation (the Company), from a nonaffiliated third
party. As of December 31, 1997, the Property was 100% occupied and leased to one
tenant under a triple net lease which requires the tenant to pay substantially
all expenses associated with the Property including operating and maintenance,
utilities, taxes and insurance.
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The Property is not a legal entity and the accompanying statement is not
representative of the actual operations for the period presented as certain
expenses that may not be comparable to the expenses expected to be incurred by
the Company in the future operations of the Property have been excluded.
Excluded expenses consist of interest, depreciation and amortization and
property general and administrative costs not directly comparable to the future
operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the lease term.
RISKS AND UNCERTAINTIES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE>
Buildings 79 and 96 Charlestown Navy Yard
Notes to Statement of Revenue and Certain Expenses (continued)
2. RENTAL PROPERTY
The future minimum lease payments to be received under the noncancelable
operating lease as of December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998 $ 710,000
1999 710,000
2000 710,000
2001 59,000
--------------
Total $ 2,189,000
--------------
--------------
</TABLE>
The above future minimum lease payments do not include specified payments for
tenant recoveries of operating expenses.
3. GROUND RENT EXPENSE
The land underlying the two buildings at the Property is leased under two ground
leases. The leases expire on May 17, 2055 and September 22, 2053. As of
December 31, 1997, the future minimum annual ground rent payments are as
follows:
<TABLE>
<S> <C>
1998 $ 35,000
1999 35,000
2000 35,000
2001 35,000
2002 35,000
Thereafter 1,665,000
-------------
Total $ 1,840,000
-------------
-------------
</TABLE>
The ground lease also requires the payment of additional rent of 15% of the net
cash flow (as defined in the lease agreement) of the Property. This amount is
calculated on a lease-year basis. For the year ended December 31, 1997, there
was no additional ground rent.
<PAGE>
Report of Independent Auditors
To the Board of Directors
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
8000/9000/10000 Virginia Manor Road (the Property) for the year ended
December 31, 1997. This statement of revenue and certain expenses is the
responsibility of the management of the Property. Our responsibility is to
express an opinion on the statement of revenue and certain expenses based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
January 22, 1998
<PAGE>
8000/9000/10000 Virginia Manor Road
Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenue:
Rental $ 1,709
Tenant recoveries 329
Other 4
------------
Total revenue 2,042
------------
Certain Expenses:
Utilities 46
Repairs and maintenance 112
Insurance 7
Taxes and license 118
Ground rent 262
------------
Total certain expenses 545
------------
Excess of revenue over certain expenses $ 1,497
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES.
<PAGE>
8000/9000/10000 Virginia Manor Road
Notes to Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of 8000/9000/10000 Virginia Manor Road (the Property) located in
Maryland which was acquired by Alexandria Real Estate Equities, Inc., a Maryland
corporation (the Company), from a nonaffiliated third party. As of December 31,
1997, the Property was 90% occupied and leased under triple net leases which
require the tenants to pay their pro rata share of all expenses associated with
the Property including operating and maintenance, utilities, taxes and
insurance. At December 31, 1997, three of the Property's tenants accounted for
approximately 35% of the Property's aggregate annualized base rent.
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The Property is not a legal entity and the accompanying statement is not
representative of the actual operations for the period presented as certain
expenses that may not be comparable to the expenses expected to be incurred by
the Company in the future operations of the Property have been excluded.
Excluded expenses consist of interest, depreciation and amortization and
property general and administrative costs not directly comparable to the future
operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
related leases.
RISKS AND UNCERTAINTIES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE>
8000/9000/10000 Virginia Manor Road
Notes to Statement of Revenue and Certain Expenses (continued)
2. RENTAL PROPERTY
The future minimum lease payments to be received under noncancelable operating
leases as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 1,630,000
1999 1,392,000
2000 1,179,000
2001 434,000
2002 97,000
Thereafter 92,000
----------------
$ 4,824,000
----------------
----------------
</TABLE>
The above future minimum lease payments do not include specified payments for
tenant reimbursements of operating expenses.
3. GROUND RENT EXPENSE
The land underlying the building at the Property is leased under a ground lease.
The Property records ground rent expense on a straight-line basis over the lease
term. Upon acquisition by the Company, the expense recognized on a straight-line
basis will be greater than the expense recorded by the Property. The lease
expires on July 1, 2047 with two automatic 15 year extensions. As of
December 31, 1997, the future minimum annual ground rent payments are as
follows:
<TABLE>
<S> <C>
1998 $ 151,000
1999 151,000
2000 151,000
2001 157,000
2002 158,000
Thereafter 21,491,000
--------------
Total $ 22,259,000
--------------
--------------
</TABLE>
<PAGE>
Report of Independent Auditors
To the Board of Directors
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
215 College Road (the Property) for the year ended December 31, 1997. This
statement of revenue and certain expenses is the responsibility of the
management of the Property. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
February 13, 1998
<PAGE>
215 College Road
Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Rental revenue $ 317
Certain expenses -
-------
Excess of revenue over certain expenses $ 317
-------
-------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES.
<PAGE>
215 College Road
Notes to Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the master
lease revenue related to 215 College Road located in Paramus, New Jersey (the
Property). The Property and related buildings were acquired by Alexandria Real
Estate Equities, Inc., a Maryland corporation (the Company), from a
nonaffiliated third party. As of December 31, 1997, the Property was 100%
occupied and leased to one tenant under a master lease (which terminated in
January, 1998) which required the tenant to pay for all of the operating
expenses directly.
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The Property is not a legal entity and the accompanying statement is not
representative of the actual operations for the period presented as certain
expenses that may not be comparable to the expenses expected to be incurred by
the Company in the future operations of the Property have been excluded.
Excluded expenses consist of interest, and property general and administrative
costs not directly comparable to the future operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the term of the
lease.
RISKS AND UNCERTAINTIES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE>
215 College Road
Notes to Statement of Revenue and Certain Expenses (continued)
2. RENTAL PROPERTY
As of December 31, 1997, portions of the Property were subleased to two tenants.
In January 1998, the master lease terminated and the owner of the Property
became the owner of the building and improvements and entered into direct lease
agreements with the two prior sub-tenants. The future minimum lease payments to
be received under the new noncancelable operating leases with the prior
sub-tenants, as of December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998 $ 666,000
1999 666,000
2000 961,000
2001 961,000
2002 961,000
Thereafter 15,227,000
-----------
Total $19,442,000
-----------
-----------
</TABLE>
The new noncancelable operating leases require the tenants to pay their share of
substantially all of the operating expenses associated with the Property or an
excess over specified amounts. The above future minimum lease payments do not
include specified payments for tenant recoveries of operating expenses.
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
100 and 800/801 Capitola Drive (the "Property") for the year ended December 31,
1997. This statement of revenue and certain expenses is the responsibility of
the management of the Property. Our responsibility is to express an opinion on
the statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
January 22, 1998
<PAGE>
100 and 800/801 Capitola Drive
Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenue:
Rental $ 2,368
Tenant recoveries 213
Other income 23
---------
Total revenue 2,604
---------
Certain Expenses:
Utilities 214
Repairs and maintenance 300
Insurance 24
Taxes and license 156
---------
Total certain expenses 694
---------
Excess of revenue over certain expenses $ 1,910
---------
---------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES.
<PAGE>
100 and 800/801 Capitola Drive
Notes to Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of 100 and 800/801 Capitola Drive (the "Property") located in North
Carolina which was acquired by Alexandria Real Estate Equities, Inc., a Maryland
corporation (the "Company"), from a nonaffiliated third party. As of December
31, 1997, the Property was 94% occupied and leased to tenants. Of the leased
space, 43% was leased under triple-net leases requiring the tenants to pay their
pro rate share of substantially all expenses associated with the Property, while
the remainder of the leased space was leased under base year leases which
provide for the tenants to pay increases in operating expenses in excess of
specified amounts. At December 31, 1997, two of the Property's tenants accounted
for approximately 62% of the Property's aggregate annualized base rent.
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The Property is not a legal entity and the accompanying statement is not
representative of the actual operations for the period presented as certain
expenses that may not be comparable to the expenses expected to be incurred by
the Company in the future operations of the Property have been excluded.
Excluded expenses consist of interest, depreciation and amortization and
property general and administrative costs not directly comparable to the future
operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
related leases.
USE OF ESTIMATES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue
<PAGE>
and expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
100 and 800/801 Capitola Drive
Notes to Statement of Revenue and Certain Expenses (continued)
2. RENTAL PROPERTY
The future minimum lease payments to be received under noncancelable operating
leases as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 2,334,000
1999 2,245,000
2000 2,237,000
2001 1,046,000
2002 279,000
------------
$ 8,141,000
------------
------------
</TABLE>
The above future minimum lease payments do not include specified payments for
tenant reimbursements of operating expenses.
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
10150 Old Columbia Road (the Property) for the year ended December 31, 1997.
This statement of revenue and certain expenses is the responsibility of the
management of the Property. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
January 15, 1998
<PAGE>
10150 Old Columbia Road
Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Rental revenue $ 682
Certain Expenses:
Utilities 94
Repairs and maintenance 26
Insurance 2
Taxes and license 66
--------
Total certain expenses 188
--------
Excess of revenue over certain expenses $ 494
--------
--------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES.
<PAGE>
10150 Old Columbia Road
Notes to Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of 10150 Old Columbia Road located in Maryland (the Property) which
was acquired by Alexandria Real Estate Equities, Inc. , a Maryland corporation
(the Company), from a nonaffiliated third party. As of December 31, 1997, the
Property was 29% occupied by one tenant under a gross lease. Prior to purchase
of the Property by the Company, this tenant vacated the Property and the
Property was leased to another tenant (see Note 2).
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The Property is not a legal entity and the accompanying statement is not
representative of the actual operations for the period presented as certain
expenses that may not be comparable to the expenses expected to be incurred by
the Company in the future operations of the Property have been excluded.
Excluded expenses consist of interest, depreciation and amortization and
property general and administrative costs not directly comparable to the future
operations of the Property. In addition, ground rent expense has been excluded
because the Company purchased the interest in the land in connection with the
acquisition of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the term of the
lease.
USE OF ESTIMATES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE>
10150 Old Columbia Road
Notes to Statement of Revenue and Certain Expenses (continued)
2. RENTAL PROPERTY
The lease in effect at December 31, 1997 expires February 28, 1998 and will be
replaced by a new lease commencing March 4, 1998. The future minimum lease
payments to be received under the new noncancelable operating lease are as
follows:
<TABLE>
<S> <C>
1998 $ 818,000
1999 1,002,000
2000 1,027,000
2001 1,053,000
2002 1,079,000
Thereafter 6,018,000
------------
$ 10,997,000
------------
------------
</TABLE>
The new lease requires the tenant to pay substantially all expenses associated
with the Property including operating and maintenance, utilities, taxes and
insurance. The above future minimum lease payments do not include specified
payments for the tenant's reimbursement of operating expenses.
<PAGE>
Report of Independent Auditors
To the Board of Directors
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
819-849 Mitten Road and 863 Mitten Road/866 Malcolm Road (the Property) for the
year ended December 31, 1997. This statement of revenue and certain expenses is
the responsibility of the management of the Property. Our responsibility is to
express an opinion on the statement of revenue and certain expenses based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
January 20, 1998
<PAGE>
819-849 Mitten Road and 863 Mitten Road/866 Malcolm Road
Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenue:
Rental $ 2,113
Tenant recoveries 54
Other income 46
--------
Total revenue 2,213
Certain expenses:
Utilities 223
Repairs and maintenance 226
Taxes and license 88
Insurance 42
--------
Total certain expenses 579
--------
Excess of revenue over certain expenses $ 1,634
--------
--------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES.
<PAGE>
819-849 Mitten Road and 863 Mitten Road/866 Malcolm Road
Notes to Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of 819-849 Mitten Road and 863 Mitten Road/866 Malcolm Road located
in Burlingame, California (the Property), which was acquired by Alexandria Real
Estate Equities, Inc., a Maryland corporation (the Company), from a
nonaffiliated third party. As of December 31, 1997, the space was 99% occupied
and leased under leases which require tenants to pay their pro rate share of all
expenses above specified amounts associated with the Property including
operating and maintenance, utilities, taxes and insurance. At December 31,1997,
two of the Property's tenants accounted for approximately 27% of the Property's
aggregate annualized base rent.
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The Property is not a legal entity and the accompanying statement is not
representative of the actual operations for the period presented as certain
expenses that may not be comparable to the expenses expected to be incurred by
the Company in the future operations of the Property have been excluded.
Excluded expenses consist of interest, depreciation and amortization and
property general and administrative costs not directly comparable to the future
operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
related leases.
RISKS AND UNCERTAINTIES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE>
819-849 Mitten Road and 863 Mitten Road/866 Malcolm Road
Notes to Statement of Revenue and Certain Expenses (continued)
2. RENTAL PROPERTY
The future minimum lease payments to be received under noncancelable operating
leases as of December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998 $ 1,690,000
1999 1,480,000
2000 1,331,000
2001 1,173,000
2002 860,000
Thereafter 1,846,000
-----------
Total $ 8,380,000
-----------
-----------
</TABLE>
The above future minimum lease payments do not include specified payments for
tenant recoveries of operating expenses.
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
5100/5110 Campus Drive (the Property) for the year ended December 31, 1997. This
statement of revenue and certain expenses is the responsibility of the
management of the Property. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
March 9, 1998
<PAGE>
5100/5110 Campus Drive
Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenue:
Rental $ 464
Tenant recoveries 107
--------
Total revenue 571
--------
Certain Expenses:
Utilities 9
Repairs and maintenance 26
Insurance 18
Taxes and license 54
--------
Total certain expenses 107
--------
Excess of revenue over certain expenses $ 464
--------
--------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES.
<PAGE>
5100/5110 Campus Drive
Notes to Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of 5100/5110 Campus Drive located in Pennsylvania (the "Property")
which was acquired by Alexandria Real Estate Equities, Inc., a Maryland
corporation (the "Company"), from a nonaffiliated third party. As of
December 31, 1997, the space was 100% occupied and leased to three tenants under
triple net leases which require the tenants to pay their pro rata share of all
expenses associated with the Property including operating and maintenance,
utilities, taxes and insurance.
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The Property is not a legal entity and the accompanying statement is not
representative of the actual operations for the period presented as certain
expenses that may not be comparable to the expenses expected to be incurred by
the Company in the future operations of the Property have been excluded.
Excluded expenses consist of interest, depreciation and amortization and
property general and administrative costs not directly comparable to the future
operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
related leases.
RISKS AND UNCERTAINTIES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE>
5100/5110 Campus Drive
Notes to Statement of Revenue and Certain Expenses (continued)
2. RENTAL PROPERTY
The future minimum lease payments to be received under noncancelable operating
leases as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 513,000
1999 375,000
2000 64,000
------------
$ 952,000
------------
------------
</TABLE>
The above future minimum lease payments do not include specified payments for
the tenant's reimbursement of operating expenses.
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
280 Pond Street (the Property) for the year ended December 31, 1997. This
statement of revenue and certain expenses is the responsibility of the
management of the Property. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
April 13, 1998
<PAGE>
280 Pond Street
Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Rental revenue $ 293
Certain expenses -
----------
Excess of revenue over certain expenses $ 293
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES.
<PAGE>
280 Pond Street
Notes to Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of Pond Street located in Boston (the Property) which was acquired by
Alexandria Real Estate Equities, Inc., a Maryland corporation (the "Company"),
from a nonaffiliated third party. As of December 31, 1997, the Property was 100%
occupied and leased to one tenant, under a lease which requires the tenant to
pay all expenses associated with the Property.
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The Property is not a legal entity and the accompanying statement is not
representative of the actual operations for the period presented as certain
expenses that may not be comparable to the expenses expected to be incurred by
the Company in the future operations of the Property have been excluded.
Excluded expenses consist of interest, depreciation and amortization and
property general and administrative costs not directly comparable to the future
operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the term of the
lease.
USE OF ESTIMATES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE>
280 Pond Street
Notes to Statement of Revenue and Certain Expenses (continued)
2. RENTAL PROPERTY
The future minimum lease payments to be received under the operating lease as of
December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 385,000
1999 387,000
2000 411,000
2001 411,000
2002 377,000
--------------
$ 1,971,000
--------------
--------------
</TABLE>
The Property is leased to a tenant under a triple-net lease, which provides for
the tenant to pay for all operating costs and real estate taxes. All expenses
related to this property are paid directly by the tenant. Accordingly, the
statement includes the net lease income from the tenant. The lease further
provides that the tenant may cancel the lease subsequent to November 30, 2000,
subject to notice and payment of a termination fee.
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
19 Firstfield Road (the Property) for the year ended December 31, 1997. This
statement of revenue and certain expenses is the responsibility of the
management of the Property. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
March 15, 1998
<PAGE>
19 Firstfield Road
Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenue:
Rental $ 325
Tenant recoveries 36
----------
Total revenue 361
----------
Certain Expenses:
Repairs and maintenance 4
Insurance 2
Taxes and license 33
----------
Total certain expenses 39
----------
Excess of revenue over certain expenses $ 322
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES.
<PAGE>
19 Firstfield Road
Notes to Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of 19 Firstfield Road located in Maryland (the "Property") which was
acquired by Alexandria Real Estate Equities, Inc., a Maryland corporation (the
"Company"), from a nonaffiliated third party. As of December 31, 1997, the
Property was 100% occupied and leased to a single tenant under a triple net
lease which requires the tenant to pay substantially all expenses associated
with the Property including operating and maintenance, utilities, taxes and
insurance.
BASIS OF PRESENTATION
The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.
The Property is not a legal entity and the accompanying statement is not
representative of the actual operations for the period presented as certain
expenses that may not be comparable to the expenses expected to be incurred by
the Company in the future operations of the Property have been excluded.
Excluded expenses consist of interest, depreciation and amortization and
property general and administrative costs not directly comparable to the future
operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the term of the
lease.
RISKS AND UNCERTAINTIES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE>
19 Firstfield Road
Notes to Statement of Revenue and Certain Expenses (continued)
2. RENTAL PROPERTY
The future minimum lease payments to be received under the noncancelabe lease as
of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 404,000
1999 416,000
2000 356,000
--------------
$ 1,176,000
--------------
--------------
</TABLE>
The above future minimum lease payments do not include specified payments for
tenant reimbursements of operating expenses.
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders
Alexandria Real Estate Equities, Inc.
We have audited the accompanying statement of revenue and certain expenses of
170 Williams Drive (the Property) for the year ended December 31, 1997. This
statement of revenue and certain expenses is the responsibility of the
management of the Property. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
Property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the Property.
In our opinion, the statement of revenue and certain expenses presents fairly,
in all material respects, the revenue and certain expenses, as defined above, of
the Property for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Los Angeles, California
May 15, 1998
<PAGE>
170 Williams Drive
Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenue:
Rental $ 482
Tenant recoveries 93
----------
Total revenue 575
----------
Certain Expenses:
Insurance 5
Taxes and license 88
----------
Total certain expenses 93
----------
Excess of revenue over certain expenses $ 482
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES.
<PAGE>
170 Williams Drive
Notes to Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying statement of revenue and certain expenses includes the
operations of 170 Williams Drive located in New Jersey (the "Property") which
will be acquired by Alexandria Real Estate Equities, Inc., a Maryland
corporation (the "Company"), from a nonaffiliated third party. At December 31,
1997, the Property was 100% occupied and leased to a tenant under a triple net
lease which requires the tenant to pay substantially all expenses associated
with the Property including operating and maintenance, utilities, taxes and
insurance.
BASIS OF PRESENTATION
The Property is not a legal entity and the accompanying statement has been
prepared to comply with the rules and regulations of the Securities and Exchange
Commission.
The Property is not a legal entity and the accompanying statement is not
representative of the actual operations for the period presented as certain
expenses that may not be comparable to the expenses expected to be incurred by
the Company in the future operations of the Property have been excluded.
Excluded expenses consist of interest, depreciation and amortization and
property general and administrative costs not directly comparable to the future
operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the term of the
lease.
RISKS AND UNCERTAINTIES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE>
170 Williams Drive
Notes to Statement of Revenue and Certain Expenses (continued)
2. RENTAL PROPERTY
The future minimum lease payments to be received under the noncancelable
operating lease as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 536,000
1999 536,000
2000 536,000
2001 536,000
2002 536,000
Thereafter 447,000
--------------
$ 3,127,000
--------------
--------------
</TABLE>
The above future minimum lease payments do not include specified payments for
tenant reimbursements of operating expenses.
<PAGE>
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated balance sheet as of
March 31, 1998 is presented as if the acquisition of properties acquired
subsequent to March 31, 1998 (the "Second Quarter 1998 Acquisitions"), described
in Item 5, had been acquired on March 31, 1998. The following unaudited pro
forma condensed consolidated income statements for the three months ended March
31, 1998 and for the year ended December 31, 1997 are presented as if: (i) the
consummation of the initial public offering of common stock in May 1997 (the
"Offering") and related formation transactions in connection with the Offering,
including the acquisition of properties acquired during 1997 in connection with
the Offering (the "Acquisition LLC Properties") and (ii) the acquisition of the
properties described in Item 5 (the "Form 8-K Properties"), had occurred on
January 1, 1997.
The pro forma condensed consolidated financial statements are not necessarily
indicative of what the actual financial position or results of operations would
have been had the Company completed the transactions described above, nor do
they purport to represent the future financial position or results of operations
of the Company.
<PAGE>
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Rental properties - net $ 341,953 $ 19,594 (A) $ 361,547
Land under development 6,957 - 6,957
Cash and cash equivalents 1,465 - 1,465
Tenant security deposit funds and other restricted
cash 5,156 - 5,156
Secured note receivable 6,000 - 6,000
Tenant receivables and deferred rent 4,189 - 4,189
Loan fees and costs - net 1,590 - 1,590
Other assets 4,833 - 4,833
------------------------------------------------------
Total assets $ 372,143 $ 19,594 $ 391,737
------------------------------------------------------
------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable $ 60,204 $ - $ 60,204
Unsecured line of credit 132,500 19,594 (A) 152,094
Accounts payable, accrued expenses and tenant
security deposits 7,887 - 7,887
Dividends payable 4,562 - 4,562
------------------------------------------------------
Total liabilities 205,153 19,594 224,747
Stockholders' equity:
Common stock 114 - 114
Additional paid-in capital 169,173 - 169,173
Accumulated deficit (2,297) - (2,297)
------------------------------------------------------
Total stockholders' equity 166,990 - 166,990
------------------------------------------------------
Total liabilities and stockholders' equity $ 372,143 $ 19,594 $ 391,737
------------------------------------------------------
------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Income Statement
Three months ended March 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------------
ADJUSTMENTS
FOR FORM 8-K
HISTORICAL PROPERTIES PRO FORMA
-------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Rental revenue $ 9,140 $ 1,682 (B) $ 10,822
Tenant recoveries and other income 2,556 156 (B) 2,712
-------------------------------------------------------
Total revenues 11,696 1,838 13,534
Expenses:
Rental operations 2,504 373 (B) 2,877
General and administrative 751 - 751
Interest 2,085 1,397 (C) 3,482
Depreciation and amortization 1,721 452 (D) 2,173
-------------------------------------------------------
Total expenses 7,061 2,222 9,283
-------------------------------------------------------
Net income $ 4,635 $ (384) $ 4,251
-------------------------------------------------------
-------------------------------------------------------
Pro forma weighted average shares of
Common Stock outstanding (L) 11,404,631 11,404,631
--------------- ---------------
--------------- ---------------
Net income per pro forma share
of Common Stock $ 0.41 $ 0.37
--------------- ---------------
--------------- ---------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Alexandria Real Estate Equities, Inc.
Unaudited Pro Forma Condensed Consolidated Income Statement
Year ended December 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------------------------------------
OFFERING AND ADJUSTMENTS
RELATED FOR FORM 8-K
HISTORICAL TRANSACTIONS PROPERTIES PRO FORMA
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Rental revenue $ 25,622 $ 2,658 (E) $ 10,744 (B) $ 39,024
Tenant recoveries and
other income 9,224 100 (E) 1,095 (B) 10,918
499 (F)
------------------------------------------------------------------------------
Total revenues 34,846 3,257 11,839 49,942
Expenses:
Rental operations 8,766 91 (E) 2,497 (B) 11,354
General and administrative 2,476 186 (G) - 2,662
Interest 7,043 (2,225) (H) 9,049 (C) 13,867
Post retirement benefit 632 - - 632
Stock compensation 4,239 - - 4,239
Special bonus 353 - - 353
Acquisition LLC financing
costs 6,973 (6,973) (I) - -
Write-off of unamortized loan
costs 2,295 (2,147) (J) - 148
Depreciation and amortization 4,866 403 (K) 2,975 (D) 8,244
------------------------------------------------------------------------------
Total expenses 37,643 (10,665) 14,521 41,499
------------------------------------------------------------------------------
Net (loss) income $ (2,797) $ 13,922 $ (2,682) $ 8,443
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Pro forma shares of Common Stock
outstanding (L) 8,075,864 11,404,631
-------------- -------------
-------------- -------------
Net (loss) income per pro forma
share of Common Stock $ (0.35) $ 0.74
-------------- -------------
-------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Alexandria Real Estate Equities, Inc.
Adjustments to the Unaudited Pro Forma Condensed
Consolidated Financial Statements
1. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The adjustments to the Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of March 31, 1998 are as follows:
(A) Acquisition of the Second Quarter 1998 Acquisitions with the related draw
on the unsecured line of credit.
Purchase price of the Second Quarter 1998 Acquisitions are as follows:
<TABLE>
<CAPTION>
SECOND QUARTER 1998 ACQUISITIONS PURCHASE PRICE
-------------------------------- --------------
<S> <C>
280 Pond Street $ 3,600
19 Firstfield Road 3,425
6166 Nancy Ridge Drive 3,000
150/154 Technology Parkway 4,500
170 Williams Drive 5,069
--------
Total $ 19,594
--------
--------
</TABLE>
The above acquisitions closed in April and May 1998 except for 170 Williams
Drive, which is expected to close in the second quarter of 1998.
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME
STATEMENTS
The pro forma adjustments reflected in the Unaudited Pro Forma Condensed
Consolidated Income Statements for the three months ended March 31, 1998 and for
the year ended December 31, 1997 are as follows:
<PAGE>
(B) Actual preacquisition results for the Form 8-K Properties (in thousands):
PREACQUISITION PERIOD FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
BUILDINGS 79 & 96 8000/9000/10000
1201 HARBOR BAY 11025 ROSELLE CHARLESTOWN NAVY VIRGINIA MANOR
PARKWAY STREET YARD ROAD
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Acquisition Date December 1, 1997 December 12, 1997 January 13, 1998 January 30, 1998
Revenues:
Rental revenue $ - $ - $ 23 $ 135
Tenant recoveries
and other income - - 2 27
--------------------------------------------------------------------------
- - 25 162
--------------------------------------------------------------------------
Expenses:
Rental operations - - 3 43
--------------------------------------------------------------------------
Net Income $ - $ - $ 22 $ 119
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
<TABLE> 3000/3018 WESTERN
<CAPTION> AND 3005 FIRST
215 COLLEGE ROAD AVENUE CAPITOLA DRIVE COLUMBIA ROAD
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Acquisition Date February 3, 1998 February 19, 1998 March 3, 1998 March 4, 1998
Revenues:
Rental revenue $ 29 $ - $ 407 $ 116
Tenant recoveries
and other income - - 39 -
--------------------------------------------------------------------------
29 - 446 116
--------------------------------------------------------------------------
Expenses:
Rental operations - - 116 32
--------------------------------------------------------------------------
Net Income $ 29 $ - $ 330 $ 84
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
<PAGE>
(B) Actual preacquisition results for the Form 8-K Properties (in thousands)
(continued):
PREACQUISITION PERIOD FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
819-849 MITTEN
ROAD & 863
MITTEN
ROAD / 866 5100/5110 CAMPUS 19 FIRSTFIELD
MALCOLM ROAD DRIVE 280 POND STREET ROAD
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Acquisition Date March 24, 1998 March 30, 1998 April 15, 1998 April 29, 1998
Revenues:
Rental revenue $ 523 $ 122 $ 97 $ 98
Tenant recoveries
and other income 30 26 - 9
--------------------------------------------------------------------------
553 148 97 107
--------------------------------------------------------------------------
Expenses:
Rental operations 121 25 - 10
--------------------------------------------------------------------------
Net Income $ 432 $ 123 $ 97 $ 97
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
150/154
6166 NANCY RIDGE TECHNOLOGY 170 WILLIAMS
DRIVE PARKWAY DRIVE TOTAL
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Acquisition Date April 30, 1998 May 11, 1998 Pending
Revenues:
Rental revenue $ - $ - $ 132 $ 1,682
Tenant recoveries
and other income - - 23 156
--------------------------------------------------------------------------
- - 155 1,838
--------------------------------------------------------------------------
Expenses:
Rental operations - - 23 373
--------------------------------------------------------------------------
Net Income $ - $ - $ 132 $ 1,465
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
<PAGE>
(B) Actual preacquisition results for the Form 8-K Properties (in thousands)
(continued):
FOR THE YEAR ENDED DECEMBER 31, 1997
(Period January 1, 1997 to the date of acquisition if acquired during 1997)
<TABLE>
<CAPTION>
BUILDINGS 79 & 96 8000/9000/10000
1201 HARBOR BAY 11025 ROSELLE CHARLESTOWN NAVY VIRGINIA MANOR
PARKWAY STREET YARD ROAD
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Acquisition Date December 1, 1997 December 12, 1997 January 13, 1998 January 30, 1998
Revenues:
Rental revenue $ 757 $ 169 $ 710 $ 1,701
Tenant recoveries
and other income 140 - 50 333
------------------------------------------------------------------------------------------
897 169 760 2,034
------------------------------------------------------------------------------------------
Expenses:
Rental operations 161 - 89 546
------------------------------------------------------------------------------------------
Net Income $ 736 $ 169 $ 671 $ 1,488
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
3000/3018
WESTERN AND
215 COLLEGE 3005 FIRST 100 AND 800/801 10150 OLD
ROAD AVENUE CAPITOLA DRIVE COLUMBIA ROAD
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Acquisition Date February 3, 1998 February 19, 1998 March 3, 1998 March 4, 1998
Revenues:
Rental revenue $ 317 $ - $ 2,438 $ 682
Tenant recoveries
and other income - - 236 -
-----------------------------------------------------------------------------------
317 - 2,674 682
-----------------------------------------------------------------------------------
Expenses:
Rental operations - - 694 188
-----------------------------------------------------------------------------------
Net Income $ 317 $ - $ 1,980 $ 494
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
</TABLE>
<PAGE>
(B) Actual preacquisition results for the Form 8-K Properties (in thousands)
(continued):
FOR THE YEAR ENDED DECEMBER 31, 1997
(Period January 1, 1997 to the date of acquisition if acquired during 1997)
<TABLE>
<CAPTION>
819-849 MITTEN ROAD
& 863 MITTEN
ROAD / 866
MALCOLM 5100/5110 CAMPUS 19 FIRSTFIELD
ROAD DRIVE 280 POND STREET ROAD
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Acquisition Date March 24, 1998 March 30, 1998 April 15, 1998 April 29, 1998
Revenues:
Rental revenue $ 2,126 $ 514 $ 395 $ 399
Tenant recoveries
and other income 100 107 - 36
------------------------------------------------------------------------------------
2,226 621 395 435
------------------------------------------------------------------------------------
Expenses:
Rental operations 579 107 - 39
------------------------------------------------------------------------------------
Net Income $ 1,647 $ 514 $ 395 $ 396
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
6166 NANCY RIDGE 150/154 TECHNOLOGY 170 WILLIAMS
DRIVE PARKWAY DRIVE TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Acquisition Date April 30, 1998 May 11, 1998 Pending
Revenues:
Rental revenue $ - $ - $ 536 $ 10,744
Tenant recoveries
and other income - - 93 1,095
--------------------------------------------------------------------------------
- - 629 11,839
--------------------------------------------------------------------------------
Expenses:
Rental operations - - 94 2,497
--------------------------------------------------------------------------------
Net Income $ - $ - $ 535 $ 9,342
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
<PAGE>
Alexandria Real Estate Equities, Inc.
Adjustments to the Unaudited Pro Forma Condensed
Consolidated Financial Statements (continued)
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME
STATEMENTS
No pro forma adjustments have been made for 1201 Harbor Bay Parkway
and 11025 Roselle Street for the three months ended March 31, 1998
because these properties were owned by the Company for the entire
period and the results of operations are reflected in the historical
operations of the Company.
No pro forma adjustments have been made for the periods prior to
acquisition for 3000/3018 Western and 3005 First Avenue, 6166 Nancy
Ridge Road, and 150/154 Technology Parkway because these properties
were owner occupied prior to purchase and as a result there were no
operating results as rental properties.
(C) Increase in interest expense due to draws on the Company's unsecured
line of credit and assumed secured note payable to Citicorp USA, Inc.
in the amount of $12,641,000 associated with the purchase of 100 and
800/801 Capitola Drive. The note bears interest at 8.68% per annum
and matures in December 2006.
(D) Increase in depreciation expense to reflect a full period of
depreciation for the Form 8-K Properties utilizing a 40 year useful
life for buildings and a 10-year useful life for improvements.
(E) Represents the actual historical results of the Acquisition LLC
Properties from the beginning of the period through the date of
acquisition. The Company acquired the Acquisition LLC in connection
with the Offering.
<TABLE>
<CAPTION>
THE ACQUISITION LLC PROPERTIES
------------------------------------------
FOR THE PERIOD JANUARY 1, 1997
TO ACQUISITION DATE
------------------------------------------
HISTORICAL
14225 NEWBROOK 1550 EAST 1330 PICCARD ACQUISITION
DRIVE GUDE DRIVE LLC TOTAL
---------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental revenue $ - $ 34 $ - $ 2,624 $ 2,658
Tenant recoveries
and other income - 4 - 96 100
---------------------------------------------------------------------------
- 38 - 2,720 2,758
Expenses:
Rental properties - 4 - 87 91
---------------------------------------------------------------------------
Net income $ - $ 34 $ - $ 2,633 $ 2,667
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>
<PAGE>
Alexandria Real Estate Equities, Inc.
Adjustments to the Unaudited Pro Forma Condensed
Consolidated Financial Statements (continued)
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME
STATEMENTS
(F) Represents additional interest income from investing the proceeds of
the over-allotment option from the Offering at a rate of 5.4%.
(G) Increase in general and administrative expenses related to operations
as a public REIT consisting of increased salaries and bonuses
(including that of the chief financial officer), directors and
officers insurance, investor relations and public entity and listing
fees.
(H) Decrease in interest expense due to repayment of certain mortgage
loans in connection with the Offering, partially offset by new
mortgage debt incurred in connection with the Offering, and the
amortization of finance costs related to the new credit facility.
(I) In connection with the Offering, the Company acquired 100% of the
membership interests in the Acquisition LLC for $58,844,000, which
exceeded the purchase price paid by the Acquisition LLC Properties by
$6,973,000. This difference was accounted for as a financing cost and
is being eliminated on a pro forma basis due to its non-continuing
nature.
(J) In connection with the Offering, the Company repaid certain secured
notes payable having an aggregate principal balance of $72,698,000.
In connection with the repayment of these loans, the Company wrote off
$2,147,000 of unamortized loan costs. This charge is being eliminated
on a pro forma basis due to its non-continuing nature.
(K) Increase in depreciation expense to reflect a full period of
depreciation for the Acquisition LLC Properties utilizing a 40-year
useful life for buildings and a 10-year useful life for improvements.
(L) Pro forma shares of Common Stock outstanding on a historical net
income basis include all shares outstanding after giving effect to the
conversion of all series of preferred stock, the 1,765.923 to one
share stock split, the issuance of stock grants and exercise of the
substitute stock options in connection with the Offering.
Pro forma shares of Common Stock outstanding on a pro forma basis
include all historical pro forma shares outstanding after giving
effect to the Offering.
<PAGE>
(c) Exhibits.
<PAGE>
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.
Date: May 27, 1998 By: /s/ Peter J. Nelson
--------------------------------
Peter J. Nelson
Chief Financial Officer
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement dated
August 22, 1997 (Form S-8 No. 333-34223) pertaining to the 1997 Stock Award and
Incentive Plan of Alexandria Real Estate Equities, Inc. of our report dated
November 7, 1997 with respect to the statement of revenue and certain expenses
of 1201 Harbor Bay Parkway for the year ended December 31, 1996, and the
incorporation by reference therein of our report dated January 6, 1998 with
respect to the statement of revenue and certain expenses of Building 79 and 96
Charlestown Navy Yard for the year ended December 31, 1997, and the
incorporation by reference therein of our report dated January 22, 1998 with
respect to the statement of revenue and certain expenses of 8000/9000/10000
Virginia Manor Road for the year ended December 31, 1997, and the incorporation
by reference therein of our report dated February 13, 1998 with respect to the
statement of revenue and certain expenses of 215 College Road for the year ended
December 31, 1997, and the incorporation by reference therein of our report
dated January 22, 1998 with respect to the statement of revenue and certain
expenses of 100 and 800/801 Capitola Drive for the year ended December 31, 1997,
and the incorporation by reference therein of our report dated January 15, 1998
with respect to the statement of revenue and certain expenses of 10150 Old
Columbia Road for the year ended December 31, 1997, and the incorporation by
reference therein of our report dated January 20, 1998 with respect to the
statement of revenue and certain expenses of 819-849 Mitten Road and 863
Mitten Road/866 Malcolm Road for the year ended December 31, 1997, and the
incorporation by reference therein of our report dated March 9, 1998 with
respect to the statement of revenue and certain expenses of 5100/5110 Campus
Drive for the year ended December 31, 1997, and the incorporation by reference
therein of our report dated April 13, 1998 with respect to the statement of
revenue and certain expenses of 280 Pond Street for the year ended December 31,
1997, and the incorporation by reference therein of our report dated March 15,
1998 with respect to the statement of revenue and certain expenses of 19
Firstfield Road for the year ended December 31, 1997, and the incorporation by
reference therein of our report dated May 15, 1998 with respect to the statement
of revenue and certain expenses of 170 Williams Drive for the year ended
December 31, 1997, all of which are included in the Form 8-K of Alexandria Real
Estate Equities, Inc. dated May 27, 1998.
/s/ Ernst & Young LLP
Los Angeles, California
May 26, 1998
