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Alexandria Real Estate Equities Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 8, 2012 05:29PM

Alexandria Real Estate Equities Inc. (ARE) filed Quarterly Report for the period ended 2012-06-30. Alexandria Real Estate Equities Inc has a market cap of $4.57 billion; its shares were traded at around $73 with a P/E ratio of 16.9 and P/S ratio of 8. The dividend yield of Alexandria Real Estate Equities Inc stocks is 2.8%. Alexandria Real Estate Equities Inc had an annual average earning growth of 2% over the past 10 years.



Highlight of Business Operations:

In March 2012, we contributed our 55% ownership interest in a land parcel supporting a future 414,000 rentable square feet building in the Longwood Medical Area of the Greater Boston market to a newly formed joint venture (the “Restated JV”) with National Development and Charles River Realty Investors, and admitted as a 50% member, Clarion Partners, LLC, resulting in a reduction of our ownership interest from 55% to 27.5%. The transfer of one-half of our 55% ownership interest in this real estate venture to Clarion Partners, LLC, was accounted for as an in-substance partial sale of an interest in the underlying real estate. In connection with the sale of one-half of our 55% ownership interest in the land parcel, we received a special distribution of approximately $22.3 million, which included the recognition of a $1.9 million gain on sale of land and approximately $5.4 million from our share of loan refinancing proceeds. The land parcel we sold in March 2012 did not meet the criteria for discontinued operations since the parcel did not have any significant operations prior to disposition. Pursuant to the presentation and disclosure literature on gains/losses on sales or disposals by REITs required by the SEC, gains or losses on sales or disposals by a REIT that do not qualify as discontinued operations are classified below income from discontinued operations in the income statement. Accordingly, we classified the $1.9 million gain on sale of land below income from discontinued operations, net, in the condensed consolidated statements of income. Our 27.5% share of the land was sold at approximately $31 million (including closing costs), or approximately $275 per rentable square foot. Upon formation of the Restated JV, the existing $38.4 million secured loan was refinanced with a seven-year (including two one-year extension options) non-recourse $213 million secured construction loan with initial loan proceeds of $50 million. As of June 30, 2012, the outstanding balance on the construction loan was $51.1 million. We do not expect our share of capital contributions through the completion of the project to exceed the approximate $22.3 million in net proceeds received in this transaction. Construction of this $350 million project commenced in April 2012, with an initial occupancy date in the fourth quarter of 2014, and the project is 37% pre-leased to Dana-Farber Cancer Institute, Inc. In addition, Dana-Farber Cancer Institute, Inc. has an option to an additional two floors approximating 99,000 rentable square feet, or 24% of the total rentable square feet of the project. We expect to earn development and other fees of approximately $3.5 million through 2015, and recurring annual property management fees thereafter. For the three and six months ended June 30, 2012, we recognized approximately $0.2 million of development fees. These fees are classified in other income in the condensed consolidated statements of income.

General and administrative expenses for the three months ended June 30, 2012, increased by $1.5 million, or 14%, to $12.3 million, compared to $10.8 million for the three months ended June 30, 2011. The increase was primarily due to costs associated with the Amended and Restated Employment Agreement with our Chief Executive Officer, to provide the Company with a performance based compensation program. Additionally, the increase in general and administrative expenses was related to an increase in the number of employees related to the growth in both the depth and breadth of our operations in multiple markets. Since April 1, 2011, our number of employees has increased by approximately 21%. As a percentage of total revenues, general and administrative expenses were 8.0% and 7.5% for the three months ended June 30, 2012 and 2011.

General and administrative expenses for the six months ended June 30, 2012, increased by $2.4 million, or 12%, to $22.7 million, compared to $20.3 million for the six months ended June 30, 2011. The increase was primarily due to costs associated with the Amended and Restated Employment Agreement with our Chief Executive Officer, to provide the Company with a performance based compensation program. Additionally, the increase in general and administrative expenses was related to an increase in the number of employees related to the growth in both the depth and breadth of our operations in multiple markets. Since January 1, 2011, our number of employees has increased by approximately 23%. As a percentage of total revenues, general and administrative expenses were 7.6% and 7.2%, respectively, for the six months ended June 30, 2012 and 2011.

(3) Amount represents aggregate contract sales prices for three assets held for sale. Includes one property sold in July 2012 to a tenant occupying 100% of the property, at a price of approximately $8.0 million, or approximately $222 per square foot, resulting in a gain of approximately $1.4 million. The remaining two properties aggregating 196,029 future developable square feet are targeted for sale at an aggregate price of approximately $14.2 million, or approximately $72 per developable square foot. As of June 30, 2012, net book values of the three properties totaled approximately $19.4 million, compared to the contract price of the $22.2 million.

Amount represents aggregate contract sales prices for three assets held for sale. Includes one property sold in July 2012 to a tenant occupying 100% of the property, at a price of approximately $8.0 million, or approximately $222 per square foot, resulting in a gain of approximately $1.4 million. The remaining two properties aggregating 196,029 future developable square feet are targeted for sale at an aggregate price of approximately $14.2 million, or approximately $72 per developable square foot. As of June 30, 2012, net book values of the three properties totaled approximately $19.4 million, compared to the contract price of the $22.2 million.

Read the The complete Report



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