<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission file number 1-12993
ALEXANDRIA REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 95-4502084
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
135 North Los Robles Avenue, Suite 250, Pasadena, California 91101
(Address of principal executive offices)
(626) 578-0777
(Registrant's telephone number, including area code)
N/A
- - - - - - - - - - - - - - - - - - - -
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of May 11, 2000, 14,293,022 shares of common stock, par value $.01 per
-- ----------
share, were outstanding.
<PAGE>
<TABLE>
<S><C>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)........................................... 3
Condensed Consolidated Balance Sheets of Alexandria Real Estate
Equities, Inc. and Subsidiaries as of March 31, 2000 and December
31, 1999.................................................................... 4
Condensed Consolidated Income Statements of Alexandria Real
Estate Equities, Inc. and Subsidiaries for the three months ended
March 31, 2000 and 1999..................................................... 5
Condensed Consolidated Statements of Cash Flows of Alexandria
Real Estate Equities, Inc. and Subsidiaries for the three months
ended March 31, 2000 and 1999............................................... 6
Notes to Condensed Consolidated Financial Statements........................ 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.......................................................10
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..................21
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS...........................................................22
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS...................................22
Item 3. DEFAULTS UPON SENIOR SECURITIES.............................................22
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................22
Item 5. OTHER INFORMATION...........................................................22
Item 6. EXHIBITS AND REPORTS ON FORM 8-K............................................22
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
3
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
-----------------------------------------
<S> <C> <C>
ASSETS
Rental properties, net $ 584,316 $ 554,706
Property under development 26,156 44,121
Cash and cash equivalents 1,968 3,446
Tenant security deposits and other restricted cash 4,844 4,681
Secured note receivable 6,000 6,000
Tenant receivables 2,889 3,432
Deferred rent 10,022 9,014
Other assets 25,080 17,718
-------------------------------------------
Total assets $ 661,275 $ 643,118
===========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable $ 158,874 $ 158,512
Unsecured line of credit 211,000 192,000
Accounts payable, accrued expenses and tenant
security deposits 21,791 23,349
Dividends payable 6,696 6,674
-------------------------------------------
Total liabilities 398,361 380,535
Stockholders' equity:
Series A preferred stock 38,588 38,588
Common stock 138 137
Additional paid-in capital 224,188 223,858
Retained earnings - -
-------------------------------------------
Total stockholders' equity 262,914 262,583
-------------------------------------------
Total liabilities and stockholders' equity $ 661,275 $ 643,118
===========================================
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Condensed Consolidated Income Statements
(Unaudited)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
-----------------------------
<S> <C> <C>
Revenues:
Rental $ 18,655 $ 15,748
Tenant recoveries 4,758 3,424
Interest and other income 549 367
-----------------------------
23,962 19,539
Expenses:
Rental operations 4,974 4,383
General and administrative 2,093 1,301
Interest 5,551 4,963
Depreciation and amortization 5,607 3,594
-----------------------------
18,225 14,241
-----------------------------
Net income $ 5,737 $ 5,298
=============================
Dividends on preferred stock $ 916 $ -
=============================
Net income available to common stockholders $ 4,821 $ 5,298
=============================
Net income per common share
-Basic $ 0.35 $ 0.41
=============================
-Diluted $ 0.35 $ 0.40
=============================
Weighted average shares of common stock outstanding:
-Basic 13,780,276 13,025,303
=============================
-Diluted 13,912,400 13,163,695
=============================
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
----------------------------
<S> <C> <C>
Net cash provided by operating activities $ 1,798 $ 14,003
INVESTING ACTIVITIES
Purchase of rental properties - (5,161)
Additions to rental properties (3,202) (4,177)
Property development costs (13,578) (3,524)
----------------------------
Net cash used in investing activities (16,780) (12,862)
FINANCING ACTIVITIES
Proceeds from secured notes payable 1,539 624
Net proceeds from issuance of common stock - 29,830
Repurchase of common stock - (3,420)
Proceeds from exercise of stock options 900 46
Net borrowings (principal reductions) on unsecured line of credit 19,000 (22,000)
Principal reductions on secured notes payable (1,098) (1,290)
Dividends paid on common stock (5,921) (5,035)
Dividends paid on preferred stock (916) -
----------------------------
Net cash provided by (used in) financing activities 13,504 (1,245)
Net decrease in cash and cash equivalents (1,478) (104)
Cash and cash equivalents at beginning of period 3,446 1,554
----------------------------
Cash and cash equivalents at end of period $ 1,968 $ 1,450
============================
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
Alexandria Real Estate Equities, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BACKGROUND AND BASIS OF PRESENTATION
BACKGROUND
Alexandria Real Estate Equities, Inc. is a real estate investment trust
("REIT") formed in 1994. We are engaged primarily in the ownership,
operation, management, acquisition, conversion, retrofit, expansion and
selective development and redevelopment of properties containing a
combination of office and laboratory space. We refer to these properties as
"Life Science Facilities." Our Life Science Facilities are designed and
improved for lease primarily to pharmaceutical, biotechnology, diagnostic,
device, contract research and personal care products companies, scientific
research institutions, related government agencies and technology
enterprises. As of March 31, 2000, our portfolio consisted of 61 properties
in nine states with approximately 4.3 million rentable square feet.
We have prepared the accompanying interim financial statements in accordance
with generally accepted accounting principles and in conformity with the
rules and regulations of the Securities and Exchange Commission. In our
opinion, the interim financial statements presented herein reflect all
adjustments of a normal and recurring nature that are necessary to fairly
present the interim financial statements. The results of operations for the
interim period are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000. These financial statements
should be read in conjunction with the financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 1999.
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Alexandria and its subsidiaries. All significant intercompany
balances and transactions have been eliminated.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
period presentation.
7
<PAGE>
2. RENTAL PROPERTIES
Rental properties consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------------------------------
<S> <C> <C>
Land $ 85,448 $ 81,446
Buildings and improvements 493,483 475,507
Tenant and other improvements 46,016 33,249
----------------------------------
624,947 590,202
Less accumulated depreciation (40,631) (35,496)
----------------------------------
$ 584,316 $ 554,706
===================================
</TABLE>
During the three months ended March 31, 2000, we completed the development of
three properties containing approximately 220,000 rentable square feet at an
aggregate cost, including land, of approximately $35.0 million.
3. UNSECURED LINE OF CREDIT
On February 11, 2000, we amended our unsecured line of credit to provide for
borrowings of up to $325 million. Prior to the amendment, borrowings under
the line of credit were limited to $250 million. Borrowings under the line of
credit bear interest at a floating rate based on our election of either a
LIBOR based rate or the higher of the bank's reference rate and the Federal
Funds rate plus 0.5%. For each LIBOR based advance, we must elect to fix the
rate for a period of one, two, three or six months.
The line of credit contains financial covenants, including, among other
things, maintenance of minimum market net worth, a total liabilities to gross
asset value ratio, and a fixed charge coverage ratio. In addition, the terms
of the line of credit restrict, among other things, certain investments,
indebtedness, distributions and mergers. Borrowings under the line of credit
are limited to an amount based on a pool of unencumbered assets. Accordingly,
as we acquire additional unencumbered properties, borrowings available under
the line of credit will increase, but may not exceed $325 million. As of
March 31, 2000, borrowings under the line of credit were limited to
approximately $253 million, and the borrowings outstanding on the line of
credit carried a weighted average interest rate of 7.71%.
The line of credit expires February 2003 and provides for an extension
(provided there is no default) of an additional one-year period, upon notice
by the company and consent of the participating banks.
4. STOCKHOLDERS' EQUITY
On March 21, 2000, we declared a cash dividend on our common stock
aggregating $5,931,000 ($ 0.43 per share) for the calendar quarter ended
March 31, 2000. We paid the dividend on April 14, 2000. On March 21, 2000, we
also declared a cash dividend on our Series A preferred stock aggregating
$916,000 ($ 0.59375 per share) for the period from January 16, 2000 through
April 15, 2000. We paid the dividend on April 14, 2000. The portion relating
to the period prior to March 31, 2000 ($765,000) has been included in accrued
liabilities in the accompanying balance sheet.
8
<PAGE>
5. NET INCOME PER SHARE
The following table shows the computation of net income per share of our
common stock outstanding (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED THREE MONTHS ENDED
MARCH 31, 2000 MARCH 31, 1999
----------------------------------------
<S> <C> <C>
Net income available to common stockholders $ 4,821 $ 5,298
========================================
Weighted average shares of common stock
outstanding - basic 13,780,276 13,025,303
Add: dilutive effect of stock options 132,124 138,392
----------------------------------------
Weighted average shares of common stock
outstanding - diluted 13,912,400 13,163,695
========================================
Net income per common share:
- Basic $ 0.35 $ 0.41
========================================
- Diluted $ 0.35 $ 0.40
========================================
</TABLE>
6. SUBSEQUENT EVENT
On April 13, 2000, we completed the private placement of 500,000 shares of
common stock. The shares were issued at a price of $29.39 per share,
resulting in aggregate proceeds of approximately $14.2 million, net of
offering costs.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain information and statements included in this Quarterly Report on Form
10-Q, including, without limitation, statements containing the words
"believes," "anticipates," "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 that involve known and unknown risks and
uncertainties. Given these uncertainties, prospective and current investors
are cautioned not to place undue reliance on such forward-looking statements.
Our actual results, performance or achievements, or industry results may be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements as a result of many
factors. We disclaim any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained in this or any other document. Readers of this Form 10-Q should
also read our other publicly filed documents for further discussion regarding
such factors. As used in this Form 10-Q, "we," "our," "ours" and "us" refer
to Alexandria Real Estate Equities, Inc. and its subsidiaries.
The following discussion should be read in conjunction with the financial
statements and notes appearing elsewhere in this report.
OVERVIEW
Since our formation in October 1994, we have devoted substantially all of our
resources to the ownership, operation, management, acquisition, conversion,
retrofit, expansion and selective development and redevelopment of high
quality, strategically located Life Science Facilities in our target markets.
Our primary source of revenue is rental income and tenant recoveries from
leases at the properties we own. Of the 61 properties we owned as of March
31, 2000, four were acquired in 1994, eight in 1996, nine in 1997, 29 in
1998, and six in 1999. In addition, we completed the development of two
properties in 1999 (together with the six properties acquired in 1999, the
"1999 Properties") and three properties in 2000 (the "2000 Properties"). As a
result of our acquisition and development activities, the financial data
presented in this report shows significant increases in total revenue and
expenses for the 2000 period compared to the 1999 period.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 ("FIRST QUARTER 2000") TO
THREE MONTHS ENDED MARCH 31, 1999 ("FIRST QUARTER 1999")
Rental revenue increased by $3.0 million, or 18%, to $18.7 million for First
Quarter 2000 compared to $15.7 million for First Quarter 1999. The increase
resulted primarily from rental revenue from the 1999 Properties. Rental
revenue from the properties acquired before January 1, 1999 (the "First
Quarter Same Properties") increased by $419,000, or 2.9%, primarily due to
increases in rental rates.
10
<PAGE>
Tenant recoveries increased by $1.4 million, or 39%, to $4.8 million for
First Quarter 2000 compared to $3.4 million for First Quarter 1999. A portion
of the increase resulted from tenant recoveries from the 1999 Properties.
Tenant recoveries for the First Quarter Same Properties increased by
$804,000, or 26%, primarily due to increases in recoverable operating
expenses and certain recoverable capitalized costs.
Interest and other income increased by $182,000, or 50%, to $549,000 for
First Quarter 2000 compared to $367,000 for First Quarter 1999, resulting
primarily from a gain on marketable securities of $179,000.
Rental operating expenses increased by $591,000, or 13%, to $5.0 million for
First Quarter 2000 compared to $4.4 million for First Quarter 1999. A portion
of the increase resulted from rental operating expenses from the 1999
Properties. Operating expenses for the First Quarter Same Properties
increased by $262,000, or 6.8%, primarily due to increases in property taxes
and utilities expense at certain properties, substantially all of which was
recoverable from the tenants at the respective properties.
The following is a comparison of property operating data computed under
generally accepted accounting principles ("GAAP Basis") and under generally
accepted accounting principles, adjusted to exclude the effect of straight
line rent adjustments required by GAAP ("Cash Basis") for the First Quarter
Same Properties (dollars in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999 CHANGE
------------------------------------------
<S> <C> <C> <C>
GAAP BASIS:
Revenue $ 19,162 $ 17,953 6.7%
Rental operating expenses 4,144 3,882 6.7%
------------------------------------------
Net operating income $ 15,018 $ 14,071 6.7%
==========================================
CASH BASIS (1):
Revenue $ 18,686 $ 17,384 7.5%
Rental operating expenses 4,144 3,882 6.7%
------------------------------------------
Net operating income $ 14,542 $ 13,502 7.7%
==========================================
</TABLE>
- ---------
(1) Revenue and operating expenses are computed in accordance with GAAP, except
that revenue excludes the effect of straight line rent adjustments.
11
<PAGE>
General and administrative expenses increased by $792,000, or 61%, to $2.1
million for First Quarter 2000 compared to $1.3 million for First Quarter
1999. The increase was primarily due to the continued increase in the scope
of our operations.
Interest expense increased by $588,000, or 12%, to $5.6 million for First
Quarter 2000 compared to $5.0 million for First Quarter 1999. The increase
resulted primarily from the indebtedness incurred to acquire the 1999
Properties.
Depreciation and amortization increased by $2.0 million, or 56%, to $5.6
million for First Quarter 2000 compared to $3.6 million for First Quarter
1999. The increase resulted primarily from depreciation associated with the
1999 Properties.
As a result of the foregoing, net income was $5.7 million for First Quarter
2000 compared to $5.3 million for First Quarter 1999.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Net cash provided by operating activities for First Quarter 2000 decreased by
$12.2 million, to $1.8 million compared to $14.0 million for First Quarter
1999. The decrease resulted primarily from increases in other assets and
depreciation expense.
Net cash used in investing activities increased by $3.9 million, to $16.8
million for First Quarter 2000 compared to $12.9 million for First Quarter
1999. The increase was primarily due to a higher level of property
development costs incurred during First Quarter 2000 compared to First
Quarter 1999.
Net cash provided by financing activities increased by $14.7 million, to
$13.5 million provided by financing activities for First Quarter 2000
compared to $1.2 million used in financing activities for First Quarter 1999.
Cash provided by financing activities for First Quarter 2000 consisted
primarily of net proceeds from our unsecured line of credit, secured debt and
exercise of stock options, partially offset by principal reductions on our
secured debt and distributions to stockholders. Cash used in financing
activities for First Quarter 1999 consisted of principal reductions on our
unsecured line of credit, net principal reductions on our secured debt and
distributions to stockholders, partially offset by net proceeds from the
issuance and repurchase of our common stock and exercise of stock options.
COMMITMENTS
As of March 31, 2000, we were committed under the terms of certain leases to
complete the construction of buildings and related improvements at a
remaining aggregate cost of $40.6 million.
12
<PAGE>
As of March 31, 2000, we were also committed to fund approximately $27.9
million for the construction of tenant improvements under the terms of
various leases and for certain investments in limited partnerships.
RESTRICTED CASH
As of March 31, 2000, we had $6.8 million in cash and cash equivalents,
including $4.8 million in restricted cash. Restricted cash consists of the
following (in thousands):
<TABLE>
<CAPTION>
AMOUNT
------------
<S> <C>
Funds held in trust as additional security required under
the terms of certain secured notes payable $ 3,134
Security deposit funds based on the terms of certain
lease agreements 1,710
------------
$ 4,844
============
</TABLE>
13
<PAGE>
SECURED DEBT
Secured debt as of March 31, 2000 consists of the following (dollars in
thousands):
<TABLE>
<CAPTION>
STATED
BALANCE AT INTEREST
COLLATERAL MARCH 31, 2000 RATE MATURITY DATE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One Innovation Drive,
Worcester, MA (1) $ 11,612 8.75% January 2006
100/800/801 Capitola Drive,
Durham, NC 12,406 8.68% December 2006
620 Memorial Drive,
Cambridge, MA (2) 19,762 9.125% October 2007
14225 Newbrook Drive, Chantilly, VA
and 3000/3018 Western Avenue,
Seattle, WA 35,907 7.22% May 2008
377 Plantation Street, Worcester, MA
and 6166 Nancy Ridge Road,
San Diego, CA 18,871 8.71% December 2009
1431 Harbor Bay Parkway,
Alameda, CA 6,592 7.165% January 2014
3535/3565 General Atomics
Court, San Diego, CA 16,926 9.00% December 2014
1102/1124 Columbia Street,
Seattle, WA 19,996 7.75% May 2016
381 Plantation Street,
(development project)
Worcester, MA 2,625 9.00% October 2000
1201 Clopper Road,
Gaithersburg, MD 14,177 LIBOR + 1.75% October 2001
-----------
$ 158,874
===========
</TABLE>
(1) The balance shown includes an unamortized premium of $697,000. The effective
rate of the loan is 7.25%.
(2) The balance shown includes an unamortized premium of $2,011,000.
The effective rate of the loan is 7.25%.
14
<PAGE>
The following is a summary of the scheduled principal payments for our secured
debt as of December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
- ----------------------------------------------------
<S> <C>
2000 $ 4,896
2001 17,831
2002 3,951
2003 4,272
2004 3,915
Thereafter 121,301
------------
Subtotal 156,166
Unamortized premium 2,708
------------
$ 158,874
============
</TABLE>
UNSECURED LINE OF CREDIT
On February 11, 2000, we amended our unsecured line of credit to provide for
borrowings of up to $325 million. Prior to the amendment, borrowings under
the line of credit were limited to $250 million. Borrowings under the line of
credit bear interest at a floating rate based on our election of either a
LIBOR based rate or the higher of the bank's reference rate and the Federal
Funds rate plus 0.5%. For each LIBOR based advance, we must elect to fix the
rate for a period of one, two, three or six months.
The line of credit contains financial covenants, including, among other
things, maintenance of minimum net worth, a total liabilities to gross asset
value ratio, and a fixed charge coverage ratio. In addition, the terms of the
line of credit restrict, among other things, certain investments,
indebtedness, distributions and mergers. Borrowings under the line of credit
are limited to an amount based on a pool of unencumbered assets. Accordingly,
as we acquire additional unencumbered properties, borrowings available under
the line of credit will increase, but may not exceed $325 million. As of
March 31, 2000, borrowings under the line of credit were limited to
approximately $253 million, and the borrowings outstanding on the line of
credit carried a weighted average interest rate of 7.71%.
The line of credit expires February 2003 and provides for an extension
(provided there is no default) of an additional one-year period, upon notice
by the company and consent of the participating banks.
In September 1998, we entered into an interest rate swap agreement with
FleetBoston Financial (the "Bank") to hedge our exposure to variable interest
rates associated with our line of credit. Interest paid is calculated at a
fixed interest rate of 5.43% through May 31, 2000 on a notional amount of $50
million, and interest received is calculated at one month LIBOR. The net
difference between the interest paid and the interest received under such
agreements is reflected in our financial statements as an adjustment to
interest expense.
15
<PAGE>
In October 1999, we entered into an additional interest rate swap agreement
with the Bank to further hedge our exposure to variable interest rates
associated with our line of credit. Interest paid is calculated at a fixed
interest rate of 6.5% through May 31, 2001 on a notional amount of $50
million and interest received is calculated at one month LIBOR.
In January 2000, we entered into a third interest rate swap agreement with
the Bank to further hedge our exposure to variable interest rates associated
with our line of credit. Interest paid is calculated at a fixed interest rate
of 6.5% from February 1, 2000 to March 31, 2000, 6.75% from April 1, 2000 to
July 31, 2000, 7.00% from August 1, 2000 to December 29, 2000 and 7.25% from
December 30, 2000 to December 31, 2001 in each case on a notional amount of
$50 million, and interest received is calculated at one month LIBOR.
In April 2000, we entered into a fourth swap agreement with Merrill Lynch
Capital Services, Inc. Interest paid will be calculated at a fixed interest
rate of 6.995% through January 2, 2003 on a notional amount of $50 million
and interest received will be calculated at one month LIBOR.
With respect to our swap agreements, we are exposed to losses in the event
the Bank or Merrill Lynch are unable to perform under the agreements, or in
the event one month LIBOR is less than the agreed-upon fixed interest rates.
The fair value of the swap agreements outstanding as of March 31, 2000 and
changes in their fair value as a result of changes in market interest rates
are not recognized in our financial statements.
OTHER RESOURCES AND LIQUIDITY REQUIREMENTS
We expect to continue meeting our short-term liquidity and capital
requirements generally by using our working capital and net cash provided by
operating activities. We believe that the net cash provided by operating
activities will continue to be sufficient to make distributions necessary to
enable us to continue qualifying as a real estate investment trust. We also
believe that net cash provided by operations will be sufficient to fund our
recurring non-revenue enhancing capital expenditures, tenant improvements and
leasing commissions.
We expect to meet certain long-term liquidity requirements, for purposes such
as property acquisitions, property development activities, scheduled debt
maturities, renovations, expansions and other non-recurring capital
improvements, through long-term secured and unsecured indebtedness, including
borrowings under our line of credit, and the issuance of additional debt
and/or equity securities.
16
<PAGE>
INFLATION
Approximately 80% of our leases (on a square footage basis) are triple net
leases, requiring tenants to pay substantially all real estate taxes and
insurance, common area and other operating expenses (including increases
thereto). In addition, approximately 88% of our leases (on a square footage
basis) contain effective annual rent escalations that are either fixed
(ranging from 2.5% to 4.0%) or indexed based on a CPI index. Accordingly, we
do not believe that our earnings or cash flow are subject to any significant
risk from inflation. An increase in inflation, however, could result in an
increase in our variable rate borrowing cost, including borrowings under our
unsecured line of credit.
FUNDS FROM OPERATIONS
We believe that funds from operations ("FFO") is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flows
from operating activities, financing activities and investing activities, it
provides investors with an understanding of our ability to incur and service
debt, to make capital expenditures and to make distributions. We compute FFO
in accordance with standards established by the Board of Governors of the
National Association of Real Estate Investment Trusts ("NAREIT") in its
October 1999 White Paper (the "White Paper"), which may differ from the
methodology for calculating FFO utilized by other equity REITs, and,
accordingly, may not be comparable to such other REITs. Further, FFO does not
represent amounts available for our discretionary use because a portion of
FFO is needed for capital replacement or expansion, debt service obligations,
or other commitments and uncertainties. The White Paper defines FFO as net
income (loss) (computed in accordance with GAAP), excluding gains (or losses)
from sales of property, plus depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures. FFO should
not be considered as an alternative to net income (determined in accordance
with GAAP) as an indication of our financial performance or to cash flows
from operating activities (determined in accordance with GAAP) as a measure
of our liquidity, nor is it indicative of funds available to fund our cash
needs, including our ability to make distributions.
17
<PAGE>
The following table presents our FFO for the three months ended March 31,
2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2000 MARCH 31, 1999
------------------------------------------------
<S> <C> <C>
Net income $ 5,737 $ 5,298
Add:
Depreciation and amortization 5,607 3,594
Subtract:
Dividends on preferred stock (916) -
----------- -----------
FFO $ 10,428 $ 8,892
=========== ===========
</TABLE>
PROPERTY AND LEASE INFORMATION
The following table is a summary of our property portfolio as of March 31, 2000
(dollars in thousands):
<TABLE>
<CAPTION>
NUMBER OF RENTABLE SQUARE ANNUALIZED BASE OCCUPANCY
PROPERTIES FEET RENT PERCENTAGE
------------------------------------------------------------
<S> <C> <C> <C> <C>
REGION:
Suburban Washington D.C. 18 1,630,328 $ 24,045 96.4% (1)
California - San Diego 9 469,192 11,634 97.4%
California - San Francisco Bay 7 457,796 9,405 91.5% (1)
Southeast 4 254,230 3,749 100%
New Jersey/Suburban Philadelphia 5 268,418 4,189 98.6%
Eastern Massachusetts 7 476,834 12,011 90.6%
Washington - Seattle 3 328,221 9,350 96.0%
------------------------------------------------------------
Subtotal 53 3,885,019 74,383 95.6%
Renovation/Repositioning Properties 8 381,265 1,462 10.6%
------------------------------------------------------------
Total 61 4,266,284 $ 75,845 88.0%
============================================================
</TABLE>
- ---------
(1) All, or substantially all, of the vacant space is office or warehouse
space.
18
<PAGE>
The following table shows certain information with respect to the lease
expirations of our properties as of March 31, 2000:
<TABLE>
<CAPTION>
SQUARE PERCENTAGE OF ANNUALIZED BASE
YEAR OF NUMBER OF FOOTAGE OF AGGREGATE RENT OF EXPIRING
LEASE EXPIRING EXPIRING PORTFOLIO LEASE LEASES (PER SQUARE
EXPIRATION LEASES LEASES SQUARE FOOT FOOT)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000(1) 47 442,139 11.8% $ 18.22
2001 27 371,446 9.9% $ 20.03
2002 23 400,887 10.7% $ 17.68
2003 17 367,030 9.8% $ 16.51
2004 18 390,152 10.4% $ 19.52
Thereafter 36 1,773,378 51.4% $ 19.50
</TABLE>
- ---------
(1) Represents leases expiring between April 1, 2000 and December 31,
2000.
19
<PAGE>
The following table is a summary of our lease activity for the three months
ended March 31, 2000 computed on a GAAP Basis and on a Cash Basis:
<TABLE>
<CAPTION>
RENTAL TI'S/LEASE AVERAGE
NUMBER SQUARE EXPIRING NEW RATE COMMISSIONS LEASE
OF LEASES FOOTAGE RATE RATE INCREASE PER FOOT TERM
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
LEASE ACTIVITY - EXPIRED LEASES
Lease Expirations
Cash Rent 28 249,239 $ 27.36 - - - -
GAAP Rent 28 249,239 $ 30.67 - - - -
Renewed / Released Space
Cash Rent 8 110,028 $ 28.63 $ 30.08 5.1% $ 20.79 6.2 Years
GAAP Rent 8 110,028 $ 28.65 $ 32.16 12.3% $ 20.79 6.2 Years
Month-to-Month Leases
Cash Rent 15 46,011 $ 10.84 $ 10.84 0.0% - -
GAAP Rent 15 46,011 $ 10.67 $ 10.84 1.6% - -
Total Leasing
Cash Rent 23 156,039 $ 23.38 $ 24.41 4.4% - -
GAAP Rent 23 156,039 $ 23.35 $ 25.88 10.8% - -
VACANT SPACE LEASED
Cash Rent 1 13,900 - $ 16.51 - $ 0.0 10.0 Years
GAAP Rent 1 13,900 - $ 18.76 - $ 0.0 10.0 Years
ALL LEASE ACTIVITY
Cash Rent 24 169,939 - $ 23.76 - - -
GAAP Rent 24 169,939 - $ 25.29 - - -
</TABLE>
20
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Market risk is the exposure to loss resulting from changes in interest rates,
foreign currency exchange rates, commodity prices and equity prices. The
primary market risk to which we are exposed is interest rate risk, which is
sensitive to many factors, including governmental monetary and tax policies,
domestic and international economic and political considerations and other
factors that are beyond our control.
In order to modify and manage the interest characteristics of our outstanding
debt and limit the effects of interest rates on our operations, we may
utilize a variety of financial instruments, including interest rate swaps,
caps, floors and other interest rate exchange contracts. The use of these
types of instruments to hedge our exposure to changes in interest rates
carries additional risks such as counter-party credit risk and legal
enforceability of hedging contracts.
Our future earnings, cash flows and fair values relating to financial
instruments are primarily dependent upon market rates of interest, such as
LIBOR. However, due to the purchase of our interest rate swap agreements, the
current effects of interest rate changes are reduced. Based on interest rates
at, and our swap agreements in effect on March 31, 2000, a 1% increase in
interest rates on our line of credit would decrease annual future earnings
and cash flows, after considering the effect of our interest rate swap
agreements, by approximately $610,000. A 1% decrease in interest rates on our
line of credit would increase annual future earnings and cash flows, after
considering the effect of our interest rate swap agreements, by approximately
$610,000. A 1% increase in interest rates on our secured debt and interest
rate swap agreements would decrease their fair value by approximately $7.6
million. A 1% decrease in interest rates on our secured debt and interest
rate swap agreements would increase their fair value by approximately $8.7
million. A 1% increase or decrease in interest rates on our secured note
receivable would not have a material impact on its fair value.
These amounts are determined by considering the impact of the hypothetical
interest rates on our borrowing cost and our interest rate swap agreements in
effect on March 31, 2000. These analyses do not consider the effects of
the reduced level of overall economic activity that could exist in such an
environment. Further, in the event of a change of such magnitude, we would
consider taking actions to further mitigate our exposure to the change.
However, due to the uncertainty of the specific actions that would be taken
and their possible effects, the sensitivity analysis assumes no changes in
our capital structure.
If we were to include the impact of our new interest rate swap agreement
effective April 2000 under the same conditions set forth above, a 1%
increase in interest rates on our line of credit would decrease annual future
earnings and cash flows, after considering the effect of our interest rate
swap agreements, by approximately $110,000. A 1% decrease in interest rates
on our line of credit would increase annual future earnings and cash flows,
after considering the effect of our interest rate swap agreements, by
approximately $110,000. A 1% increase in interest rates on our secured debt
and our interest rate swap agreements would decrease their fair value by
approximately $7.1 million. A 1% decrease in interest rates on our secured
debt and our interest rate swap agreements would increase their fair value by
approximately $8.2 million.
21
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To our knowledge, no litigation is pending against us, other than routine
actions and administrative proceedings, none of which, in the aggregate, are
expected to have a material adverse effect on our financial condition,
results of operations or cash flows, and substantially all of which are
expected to be covered by liability insurance.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.15 Employment Agreement between Alexandria Real Estate Equities, Inc. and
Laurie Allen, dated January 5, 2000
12.1 Computation of Consolidated Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
On February 10, 2000, we filed a Current Report on Form 8-K to report the
adoption of our Shareholder Rights Plan.
22
<PAGE>
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, thereunto duly authorized, on May 15, 2000.
ALEXANDRIA REAL ESTATE EQUITIES, INC.
/s/ Joel S. Marcus
--------------------------------------------------
Joel S. Marcus
Chief Executive Officer
(Principal Executive Officer)
/s/ Peter J. Nelson
--------------------------------------------------
Peter J. Nelson
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
23
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into as of this 5th day of January, 2000, effective as of the 5th day of
January, 2000 (the latter date shall be referred to as the "Effective Date"), by
and between ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation
("Corporation"), and Laurie A. Allen, an individual ("Officer") (hereinafter,
Corporation and Officer will be referred to collectively as the "Parties").
RECITAL
WHEREAS, Corporation desires to employ Officer as its Senior Vice
President - Business Development and Legal Affairs and Secretary, and Officer is
willing to accept such employment by Corporation, on the terms and subject to
the conditions set forth in this Agreement; and
WHEREAS, this Agreement shall be subject to the approval of the
Compensation Committee, which is expected no later than February 14, 2000.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties hereto agree as follows:
1. POSITION AND DUTIES; LOCATION.
During the Term (as defined below) of this Agreement, Officer agrees
to be employed by and to serve Corporation as its Senior Vice President -
Business Development and Legal Affairs and Secretary. Corporation agrees to
employ and retain Officer in such capacities. Officer shall devote her full
business time, energy, and skill to the affairs of Corporation. Notwithstanding
the foregoing, Officer shall be entitled to consult not more than fifteen (15)
hours per month for ARIAD Pharmaceuticals, Inc. Officer shall report to the
Chief Executive Officer of the Corporation or such other officer as the Chief
Executive Officer shall direct. Officer shall be based at Corporation's office
in Pasadena, California.
1
<PAGE>
2. TERM OF EMPLOYMENT.
The Term of this Agreement shall commence on the Effective
Date and shall continue until December 31, 2000 (the "Term"); PROVIDED, HOWEVER,
that on December 31, 2000, and on each anniversary thereof, the Term of this
Agreement shall automatically be extended for one (1) additional year unless,
not later than ninety (90) days prior to such date, either party shall have
given written notice to the other that it does not wish to extend the Term of
the Agreement. If Officer's employment hereunder shall terminate by reason of
the expiration of the Term (including any extensions thereof), the date of such
termination shall be referred to as the "Termination Date."
3. COMPENSATION, BENEFITS AND REIMBURSEMENT.
3.1. BASE SALARY. During the Term of this Agreement and subject to the
terms and conditions set forth herein, Corporation agrees to pay to Officer an
initial annual "Base Salary" of two hundred and fifteen thousand dollars
($215,000), or such other amount as may from time-to-time be determined by
Corporation. Unless otherwise agreed in writing by Officer and Corporation, the
Base Salary shall be payable in substantially equal semimonthly installments in
accordance with the standard policies of Corporation in existence from
time-to-time.
3.2. ADJUSTMENTS IN BASE SALARY. Officer's Base Salary shall be
reviewed for the possibility of upward adjustments no less frequently than on
each anniversary of the Effective Date during the Term of this Agreement.
3.3. RELOCATION REIMBURSEMENT. Officer shall be entitled to receive
reimbursement for relocating to Los Angeles, California, in an amount equal to
and no greater than $35,000, such reimbursement shall be earned, due and payable
on April 1, 2000.
3.4. DISCRETIONARY BONUS. If Officer is in good standing, as finally
determined by the Chief Executive Officer with the concurrence of the Board of
Directors ("Board"), Officer shall be eligible to receive a discretionary bonus
for each fiscal year of Corporation during the Term of this Agreement, with the
actual amount of any such bonus to be determined by the Chief Executive Officer
with the concurrence of the Board (or a committee of the Board) based upon an
evaluation of Officer's and Corporation's performance during such year and such
other factors and conditions as the Board (or a committee of the Board) deems
relevant.
2
<PAGE>
3.5. STOCK OPTIONS. Subject to the approval of the Board (or a
committee of the Board) and pursuant to the terms of a stock option agreement
issued under a stock option plan of the Corporation, Corporation shall grant to
Officer the right and option to purchase 70,000 shares of the authorized but
unissued Common Stock of Corporation on the terms and conditions set forth
therein. Nothing contained herein shall be construed to increase or decrease
Officer's compensation and/or benefits in existence at the time the options are
granted.
3.6. ADDITIONAL BENEFITS. Officer shall be entitled to the following
additional benefits under this Agreement:
(a) OFFICER BENEFITS. During the Term of this Agreement, Officer shall
be eligible to participate in Corporation's existing medical plan and 401(k)
plan and such existing stock incentive plans available to senior management of
the Corporation in accordance with the terms and conditions of such plans.
During the Term of this Agreement, Corporation shall pay one hundred percent
(100%) of Officer's medical premiums under Corporation's medical plan and any
other welfare benefit plans for which Officer qualifies that are in existence
from time to time.
(b) VACATION. During the Term of this Agreement, Officer shall be
entitled to up to four (4) weeks paid vacation annualized during each calendar
year during the Term of this Agreement. Limits on accrual of vacation not taken
during any calendar year shall be subject to and in accordance with
Corporation's existing policy.
(c) REIMBURSEMENT FOR EXPENSES. During the Term of this Agreement,
Corporation shall reimburse Officer for all reasonable out-of-pocket business
and/or entertainment expenses incurred by Officer for the purpose of and in
connection with the performance of her services pursuant to this Agreement and
in accordance with any existing travel and expense reimbursement policies of
Corporation. Officer shall be entitled to such reimbursement upon the
presentation by Officer to Corporation of vouchers or other statements itemizing
such expenses in reasonable detail consistent with Corporation's policies. In
addition, Officer shall be entitled to reimbursement for (i) dues and membership
fees in professional organizations and/or industry associations in which Officer
is currently a member or becomes a member, and (ii) appropriate industry
seminars and mandatory continuing education.
3
<PAGE>
(d) WITHHOLDING. Compensation and benefits paid to Officer under this
Agreement shall be subject to applicable federal, state and local wage
deductions and other deductions required by law.
4. TERMINATION OF THE AGREEMENT.
4.1. TERMINATION WITHOUT CAUSE. In the event that Corporation
terminates this Agreement without Cause (as defined below), Officer shall be
entitled to a severance payment equal to nine (9) months ("Severance Period") of
Officer's annualized Base Salary ("Severance Payment"). Such Severance Payment
shall be payable in monthly installments during the Severance Period, in
accordance with the provisions set forth in Paragraph 3.1 above. Officer shall
not be entitled to receive a Severance Payment hereunder if she voluntarily
terminates her employment or is terminated by reason of death or disability or
for Cause.
4.2. TERMINATION FOLLOWING A CHANGE IN CONTROL. In the event that
Corporation terminates this Agreement without Cause (as defined below) following
a Change in Control (as defined below), Corporation shall pay Officer the
Severance Payment, in accordance with Paragraph 4.1 above, and provide for
immediate and full vesting of any stock options granted to Officer under
Corporation's stock option plan. For purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred if:
(i) Any Person, as such term is used in section 3(a)(9) of the Securities
Exchange Act of 1934, as amended from time-to-time (the "Exchange Act"), as
modified and used in sections 13(d) and 14(d) thereof, (other than (A) the
Corporation or any of its subsidiaries, (B) a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation or any of its
affiliates, (C) an underwriter temporarily holding securities pursuant to an
offering of such securities, (D) a corporation owned, directly or indirectly, by
the stockholders of the Corporation in substantially the same proportions as
their ownership of stock of the Corporation, or (E) a person or group as used in
Rule 13d-1(b) under the Exchange Act) is or becomes the Beneficial Owner, as
such term is defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of securities of the Corporation (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Corporation or its affiliates other than in connection with the acquisition by
the Corporation or its affiliates of a business) representing twenty-five
percent (25%) or more of the combined voting power of the Corporation's then
outstanding securities; or
4
<PAGE>
(ii) The following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the date
hereof, constitute the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation, relating
to the election of directors of the Corporation) whose appointment or election
by the Board or nomination for election by the Corporation's stockholders was
approved or recommended by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved or
recommended; or
(iii) There is consummated a merger or consolidation of the Corporation
with any other corporation, other than (A) a merger or consolidation which would
result in the voting securities of the Corporation outstanding immediately prior
to such merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or any parent thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or any subsidiary of the Corporation, at least seventy-five percent
(75%) of the combined voting power of the securities of the Corporation or such
surviving entity or any parent thereof outstanding immediately after such merger
or consolidation, or (B) a merger or consolidation effected to implement a
recapitalization of the Corporation (or similar transaction) in which no Person
is or becomes the Beneficial Owner, directly or indirectly, of securities of the
Corporation (not including in the securities beneficially owned by such Person
any securities acquired directly from the Corporation or its affiliates other
than in connection with the acquisition by the Corporation or its affiliates of
a business) representing twenty-five percent (25%) or more of the combined
voting power of the Corporation's then outstanding securities; or
(iv) The stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation or there is consummated an
agreement for the sale or disposition by the Corporation of all or substantially
all of the Corporation's assets, other than a sale or disposition by the
Corporation of all or substantially all of the Corporation's assets to an
entity, at least seventy-five (75%) of the combined voting power of the voting
securities of which are owned by stockholders of the Corporation in
substantially the same proportions as their ownership of the Corporation
immediately prior to such sale.
5
<PAGE>
4.3. TERMINATION FOR CAUSE. Prior to the Termination Date, the
Corporation shall have the right to terminate this Agreement for Cause
immediately after written notice has been delivered to Officer, which notice
shall specify the reason for and the effective date of such Termination. For
purposes of this Agreement, "Cause" shall mean the following:
(i) Officer's Material breach, repudiation or failure to comply with or
perform (a) any of the terms of this Agreement, (b) any of Officer's
duties, or (c) any of Corporation's policies or procedures (including
without limitation any such policies or procedures relating to
conflicts of interests or standards of business conduct); or Officer's
deliberate interference with the compliance by any other employee of
Corporation with any of the foregoing; or
(ii) The conviction of Officer for, or pleading by Officer of no contest
(or similar plea) to, fraud, embezzlement, misappropriation of assets,
malicious mischief, or any felony, other than a crime for which
vicarious liability is imposed upon Officer solely by reason of
Officer's position with Corporation and not by reason of Officer's
conduct.
Before terminating the Agreement pursuant to this Paragraph 4.3(i),
Corporation first shall have given Officer written notice specifying the nature
of the breach, repudiation or failure to comply and thirty (30) days thereafter
in which to cure such Material breach, repudiation or failure to comply, and
Officer shall have failed to cure. For purposes of this Paragraph 4.3,
"Material" shall mean a breach, repudiation or failure that the Board determines
has resulted in material injury to Corporation.
4.4. OFFSET. Although Officer shall not be required to mitigate
damages under this Agreement by seeking other comparable employment or
otherwise, the amount of any payment or benefit provided for in this Agreement
shall be reduced by any compensation earned by or provided to Officer as the
result of employment by an employer other than Corporation prior to the
expiration of the Term of this Agreement.
6
<PAGE>
5. NONCOMPETITION.
During the Term of this Agreement, including the period, if
any, with respect to which Officer shall be entitled to Severance Payments,
Officer shall not engage in any activity that is or may be competitive with the
business of Corporation, directly or indirectly, whether or not for
compensation, including, but not limited to, providing services similar to those
provided by the Company; offering or soliciting or accepting an offer, to
provide such services or taking any action to form, or become employed by, a
firm or business to provide such services.
6. MISCELLANEOUS.
6.1. CONFIDENTIALITY. Without limiting the scope of the Agreement
Regarding Proprietary Information between the Parties, dated as of January 5,
2000 (the "Proprietary Information Agreement"), Officer agrees that all
confidential and proprietary information relating to the business of Corporation
shall be kept and treated as confidential both during and after the Term of this
Agreement, except as may be permitted in writing by the Board or as such
information is within the public domain or comes within the public domain
without any breach of this Agreement.
6.2. WAIVER. The waiver of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of the same or other provision hereof.
6.3. ENTIRE AGREEMENT; MODIFICATIONS. Except as otherwise provided
herein, this Agreement (together with the Proprietary Information Agreement and
any other agreements and plans referred to herein) represents the entire
understanding between the Parties with respect to the subject matter hereof, and
this Agreement supersedes any and all prior understandings, agreements, plans
and negotiations, whether written or oral, with respect to the subject matter
hereof, including without limitation any understandings, agreements or
obligations respecting any past or future compensation, bonuses, reimbursements
or other payments to Officer from Corporation. All modifications to this
Agreement must be in writing and signed by the party against whom enforcement of
such modification is sought.
7
<PAGE>
6.4. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by facsimile or first-class
mail, certified or registered with return receipt requested, and shall be deemed
to have been duly given three (3) days after mailing or twenty-four (24) hours
after transmission of a facsimile to the respective persons named below:
If to Corporation: Alexandria Real Estate Equities, Inc.
135 North Los Robles Avenue, Suite 250
Pasadena, CA 91101
Phone: (626) 578-0777
Facsimile: (626) 578-0770
Attn: Joel S. Marcus, CEO
If to Officer: Laurie A. Allen
357 Comstock Avenue
Los Angeles, CA 90024
Phone: (310) 441-9576
6.5. HEADINGS. The Paragraph headings herein are intended for
reference only and shall not determine the construction or interpretation of
this Agreement.
6.6. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without regard to its
principles of conflicts of laws.
6.7. ARBITRATION. Any dispute arising out of or relating to this
Agreement that cannot be settled by good faith negotiation between the Parties
shall be submitted to ENDISPUTE for final and binding arbitration pursuant to
ENDISPUTE's Arbitration Rules incorporated herein by reference, which
arbitration shall take place in Los Angeles, California and shall be the
exclusive remedy of the Parties hereto. The resulting arbitration shall be
deemed a final order of a court having jurisdiction over the subject matter,
shall not be appealable, and shall be enforceable in any court of competent
jurisdiction. Submission to arbitration shall not preclude the right of any
party hereto involved in a dispute regarding this Agreement (each a "Disputing
Party" and collectively, the "Disputing Parties") to institute proceedings at
law or in equity for injunctive or other relief pending the arbitration of a
matter subject to arbitration pursuant to this Agreement. Any documentation and
information submitted by any party in the
8
<PAGE>
arbitration proceeding shall be kept strictly confidential by the Parties and
the arbitrator.
In addition to any other relief or award granted by the arbitrator to
either Disputing Party, the arbitrator shall determine the extent to which each
Disputing Party has prevailed as to the material issues raised in the
arbitration, and, based upon such determination, shall apportion to each
Disputing Party its ratable share of (i) the Disputing Parties' reasonable
attorneys' fees and other costs reasonably incurred in the arbitration, (ii) the
expense of the arbitrator, and (iii) all other expenses of the arbitration. The
arbitrator shall make such determination and apportionment whether or not the
dispute proceeds to a final award.
6.8. SEVERABILITY. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, and all other provisions of this Agreement
shall be deemed valid and enforceable to the extent possible.
6.9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
6.10 INDEMNIFICATION. In addition to any rights to indemnification to
which Officer is entitled under the Corporation's Articles of Incorporation and
By-Laws, Corporation shall indemnify Officer at all times during and after the
Term of this Agreement to the maximum extent permitted under Section 2-418 of
the General Corporation Law of the State of Maryland or any successor provision
thereof and any other applicable state law, and shall pay Officer's expenses in
defending any civil or criminal action, suit, or proceeding in advance of the
final disposition of such action, suit, or proceeding, to the maximum extent
permitted under such applicable state laws.
9
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement.
CORPORATION:
ALEXANDRIA REAL ESTATE
EQUITIES, INC.
a Maryland corporation
By: /s/ JOEL S. MARCUS
-------------------------------------
Joel S. Marcus
Chief Executive Officer
Date: FEBRUARY 4, 2000
-----------------------------------
OFFICER:
/s/ LAURIE A. ALLEN
------------------------------------------
Laurie A. Allen
Date: FEBRUARY 4, 2000
------------------------------------
10
<PAGE>
EXHIBIT 12.1
ALEXANDRIA REAL ESTATE EQUITIES, INC.
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(in thousands, except ratios)
<TABLE>
<CAPTION>
For the
Three Months
Ended Year Ended December 31,
March 31, ---------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings (Loss): ........................... $5,737 $22,053 $19,403 $(2,797) $2,175 $ 866
Add Back:
Interest Expense.......................... 5,551 19,697 14,033 7,043 6,327 3,553
Write-off of Unamortized Loan Costs....... -- -- -- 2,295 -- --
Acquisition LLC Financing Costs........... -- -- -- 6,973 -- --
------- ------- ------- ------- ------ ------
Earnings Available for Fixed Charges.... 11,288 41,750 33,436 $13,514 $8,502 $4,419
------- ------- ------- ------- ------ ------
Combined Fixed Charges:
Interest Incurred......................... 7,379 23,792 16,264 $ 7,139 $6,327 $3,553
Write-off of Unamortized Loan Costs(a).... -- -- -- 2,295 -- --
Acquisition LLC Financing Costs(b)........ -- -- -- 6,973 -- --
Preferred Dividends....................... 916 2,036 -- 3,038 1,590 --
------- ------- ------- ------- ------ ------
Fixed Charges........................... 8,295 25,828 16,264 $19,445 $7,917 $3,553
------- ------- ------- ------- ------ ------
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends(c).............. 1.36 1.62 2.06 0.69 1.07 1.24
Excess of Fixed Charges Over Earnings....... $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
- ------------------------
(a) This amount represents unamortized loan costs associated with debt
retired in connection with the IPO.
(b) This amount represents the portion of the purchase price of the
membership interests in ARE Acquisitions, LLC (the "Acquisition LLC")
paid by the Company in excess of the cost incurred by the Acquisition
LLC to acquire the three Life Science Facilities owned by it.
(c) For purposes of calculating the consolidated ratio of earnings to
combined fixed charges and preferred stock dividends, earnings consist
of earnings before income taxes and fixed charges. Fixed charges consist
of interest incurred (including amortization of deferred financing costs
and capitalized interest), write-off of unamortized loan costs,
Acquisition LLC Financing Costs (see Note (b)), and preferred stock
dividends.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED INCOME STATEMENTS FOUND
IN THE COMPANY'S FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,812
<SECURITIES> 0
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0
38,588
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</TABLE>
