Alexandria Real Estate Equities Inc (ARE) SEC Filing 10-K Annual report for the fiscal year ending Wednesday, December 31, 2008

Exhibit 99.1

ALEXANDRIA REAL ESTATE EQUITIES, INC.

REPORTS FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2008

OPERATING AND FINANCIAL RESULTS

Highlights

Fourth Quarter 2008:

·       Fourth Quarter 2008 Funds from Operations (FFO) Per Share (Diluted) of $1.55, up 6%, Compared to $1.46 for Fourth Quarter 2007

·       Fourth Quarter 2008 Earnings Per Share from Continuing Operations (Diluted) of $0.66, up 10%, Compared to $0.60 for Fourth Quarter 2007

·       GAAP Same Property Revenues Less Operating Expenses up 4.3%

·       Executed 34 Leases for Approximately 513,000 Rentable Square Feet

·       GAAP Rental Rate Increase of 13.9% on Renewed/Released Space

·       Extended Maturity to 2010 of $175 Million Secured Note Payable

·       Completed Redevelopment of Multiple Spaces at Seven Properties Aggregating Approximately 116,000 Rentable Square Feet

·       Executed Long Term Lease with a Large Cap Biopharma Company at Mission Bay in San Francisco, Ca.

·       Executed Long Term Lease with Pfizer, Inc. at Technology Square in Cambridge, Ma.

·       Occupancy at Approximately 95%

·       Sold One Property Previously Classified as “Held For Sale”

Year Ended December 31, 2008:

·       Total Return Performance of 399% from May 28, 1997 to December 31, 2008, Assuming Reinvestment of All Dividends

·       Positive GAAP Year-to-Year Lease Rolls for Ten Consecutive Years

·       Positive GAAP Same Property Growth Quarter-to-Quarter for 42 Consecutive Quarters

·       2008 FFO Per Share (Diluted) of $6.06, up 6%, After Supplemental Adjustments, Compared to $5.70 for 2007, After Supplemental Adjustments

·       2008 Earnings Per Share From Continuing Operations (Diluted) of $2.60, up 15%, Compared to $2.27 for 2007

·       GAAP Same Property Revenues Less Operating Expenses up 3.3%

·       Executed 141 Leases for Approximately 2,161,000 Rentable Square Feet, up 37% Over 2007

·       GAAP Rental Rate Increase of 15.0% on Renewed/Released Space

·       Extended Maturities of Two Secured Notes Payable Aggregating Approximately $256 Million

·       Completed Redevelopment of Multiple Spaces at 14 Properties Aggregating Approximately 335,000 Rentable Square Feet; 88% Leased

·       Leased Approximately 630,000 Rentable Square Feet of Redevelopment and Development Space

·       Operating Margins Steady at Approximately 75%

·       Sold Eight Properties for Approximately $86 Million; Subsequent to Year End, in January 2009, Sold Three Properties in the San Diego Market for Approximately $14 Million; Completed Sales from January 1, 2008 Through January 31, 2009 Aggregating Approximately $100 Million and 498,000 Rentable Square Feet

·       Received LEED® Certifications for Two Buildings in the Eastern Massachusetts and San Francisco Bay Markets

·       Closed 7.00% Series D Cumulative Convertible Preferred Stock Offering with Net Proceeds of Approximately $242 Million

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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS FOURTH QUARTER AND YEAR ENDED
DECEMBER 31, 2008 OPERATING AND FINANCIAL RESULTS

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PASADENA, CA. - February 9, 2009 – Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced operating and financial results for the fourth quarter and year ended December 31, 2008.

For the fourth quarter of 2008, we reported FFO available to common stockholders of $49,450,000, or $1.55 per share (diluted), compared to $46,324,000, or $1.46 per share (diluted), for the fourth quarter of 2007.  Comparing the fourth quarter of 2008 to the fourth quarter of 2007, FFO available to common stockholders and FFO per share (diluted) increased 7% and 6%, respectively.  For the year ended December 31, 2008, we reported FFO available to common stockholders of $193,310,000, or $6.06 per share (diluted), after supplemental adjustments, compared to $170,999,000, or $5.70 per share (diluted), after supplemental adjustments, for the year ended December 31, 2007.  Comparing the year ended December 31, 2008 to the year ended December 31, 2007, FFO available to common stockholders and FFO per share (diluted) increased 13% and 6%, respectively, after supplemental adjustments.  In 2008, we recognized additional rental income aggregating $11,268,000, or $0.35 per share (diluted), related to a modification of a lease for a property in South San Francisco, Ca. and a write-off of deferred rent.  In 2008, we also recognized non-cash impairment charges aggregating $13,251,000, or $0.42 per share (diluted), for other-than-temporary declines in the fair value of certain investments.  Additionally, in 2008, we incurred non-cash impairment charges aggregating $4,650,000, or $0.15 per share (diluted), related to two properties.  In 2007, we recognized a preferred stock redemption charge of $2,799,000, or $0.09 per share (diluted).

FFO is a non-GAAP measure widely used by publicly traded real estate investment trusts.  A reconciliation of GAAP net income available to common stockholders to FFO available to common stockholders on both an aggregate and per share (diluted) basis, is included in the financial information accompanying this press release.  The primary reconciling item between GAAP net income available to common stockholders and FFO available to common stockholders is depreciation and amortization expense. Depreciation and amortization expense for the three months ended December 31, 2008 and 2007 was $28,483,000 and $26,969,000, respectively. Depreciation and amortization expense for the year ended December 31, 2008 and 2007 was $108,743,000 and $97,335,000, respectively.  Net income available to common stockholders for the fourth quarter of 2008 was $21,071,000, or $0.66 per share (diluted), compared to $22,277,000, or $0.70 per share (diluted), for the fourth quarter of 2007.  Net income available to common stockholders for the year ended December 31, 2008 was $98,644,000, or $3.09 per share (diluted), compared to $78,905,000, or $2.63 per share (diluted), for the year ended December 31, 2007.  Net income available to common stockholders for the year ended December 31, 2008 included additional rental income aggregating $11,268,000 related to a modification of a lease and a write-off of deferred rent, non-cash impairment charges aggregating $17,901,000 and gains on sales of properties aggregating $20,401,000.  The non-cash impairment charges consisted of $4,650,000 related to two properties and $13,251,000 for other-than-temporary declines in the fair value of certain investments.  Net income available to common stockholders for the year ended December 31, 2007 included gains on sales of four properties and four land parcels aggregating $7,976,000 and a preferred stock redemption charge aggregating $2,799,000.  Excluding these items, net income available to common stockholders for the year ended December 31, 2008 was $84,876,000, or $2.66 per share (diluted), compared to net income available to common stockholders of $73,728,000, or $2.46 per share (diluted), for the year ended December 31, 2007.

For the fourth quarter of 2008, we executed a total of 34 leases for approximately 513,000 rentable square feet of space at 26 different properties (excluding month-to-month leases).  Of this total, approximately 373,000 rentable square feet related to new or renewal leases of previously leased space and approximately 140,000 rentable square feet related to developed, redeveloped or previously vacant space.  Of the 140,000 rentable square feet, approximately 96,000 rentable square feet were delivered from our development or redevelopment programs, with the remaining approximately 44,000 rentable square feet related to previously vacant space.  Rental rates for these new or renewal leases were on average approximately 13.9% higher (on a GAAP basis) than rental rates for expiring leases.

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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS FOURTH QUARTER AND YEAR ENDED
DECEMBER 31, 2008 OPERATING AND FINANCIAL RESULTS

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For the year ended December 31, 2008, we executed a total of 141 leases for approximately 2,161,000 rentable square feet of space at 65 different properties (excluding month-to-month leases).  Of this total, approximately 1,254,000 rentable square feet were for new or renewal leases related to previously leased space and approximately 907,000 rentable square feet were for redeveloped, developed or previously vacant space.  Of the 907,000 rentable square feet, approximately 630,000 rentable square feet were delivered from our redevelopment or development programs, with the remaining approximately 277,000 rentable square feet related to previously vacant space.  Rental rates for new or renewal leases were on average approximately 15.0% higher (on a GAAP basis) than rental rates for expiring leases.

During the fourth quarter of 2008, we sold one property located in the Eastern Massachusetts market with approximately 25,000 rentable square feet for approximately $2 million.  During the year ended December 31, 2008, we sold eight properties, including five properties in the east bay area of the San Francisco Bay market, aggregating approximately 434,000 rentable square feet.  The aggregate sales price for the properties sold during the year ended December 31, 2008 was approximately $86 million.  As of December 31, 2008, three properties approximating 64,000 rentable square feet were classified as “held for sale.”  In January 2009, we sold these three properties for an aggregate sales price of approximately $14 million.  The net proceeds from these sales were used to repay outstanding debt.

In December 2008, we announced that a multinational, large cap biopharmaceutical company entered into a long-term lease at The Alexandria Center for Science and Technology at Mission Bay, San Francisco, California.  We also announced that Pfizer, Inc. entered into a long-term lease at Technology Square in Cambridge, Massachusetts.

As of December 31, 2008, approximately 89% of our leases (on a rentable square footage basis) were 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, as of December 31, 2008, approximately 8% of our leases (on a rentable square footage basis) required the tenants to pay a majority of operating expenses.  Additionally, as of December 31, 2008, approximately 92% of our leases (on a rentable square footage basis) provided for the recapture of certain capital expenditures and approximately 94% of our leases (on a rentable square footage basis) contained effective annual rent escalations that were either fixed or indexed based on the consumer price index or another index.

Based on our current view of existing market conditions and certain current assumptions, our guidance for FFO per share (diluted) and earnings per share (diluted) is as follows:

(1)      Effective January 1, 2009, we will adopt FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”) and FASB Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”), both of which require retrospective application to prior periods.  Our guidance for 2009 includes the estimated additional non-cash interest we will recognize under FSP APB 14-1 which affects the accounting treatment for convertible debt instruments, such as our outstanding unsecured convertible notes.  In addition, our guidance for 2009 includes the estimated impact related to FSP EITF 03-6-1 which requires unvested share-based payment awards with nonforfeitable rights to receive dividends or dividend equivalents to be considered participating securities for the purposes of applying the two-class method of calculating earnings per share.  As a result, net income available to common stockholders, earnings per share, FFO and FFO per share will be adjusted for an allocation of net income to unvested stock awards.  We are still in the process of evaluating the overall impact of FSP APB 14-1 and FSP EITF 03-6-1, however, we believe that 2008 FFO per share (diluted) and earnings per share (diluted) as reported at $5.85 and $3.09, respectively, would have been approximately $5.62 and $2.89, respectively, after considering the estimated impact of FSP APB 14-1 and FSP EITF 03-6-1.   2008 FFO per share (diluted) included additional rental income related to a modification of a lease and a write-off of deferred rent aggregating $11,268,000 and non-cash impairment charges aggregating $17,901,000.  2008 earnings per share (diluted) included additional rental income related to a modification of a lease and a write-off of deferred rent aggregating $11,268,000, non-cash impairment charges aggregating $17,901,000 and gains on sales of property aggregating $20,401,000.

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ALEXANDRIA REAL ESTATE EQUITIES, INC. REPORTS FOURTH QUARTER AND YEAR ENDED
DECEMBER 31, 2008 OPERATING AND FINANCIAL RESULTS

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Alexandria Real Estate Equities, Inc., Landlord of Choice to the Life Science Industry®, is the largest owner and pre-eminent first-in-class real estate investment trust focused principally on science-driven cluster formation.  Alexandria is the leading provider of high-quality environmentally sustainable real estate, technical infrastructure and services to the broad and diverse life science industry.  Client tenants include institutional (universities and independent not-for-profit institutions), pharmaceutical, biopharmaceutical, medical device, product, service, and translational entities, as well as government agencies.  Alexandria’s operating platform is based on the principle of “clustering,” with assets and operations located in key life science markets.  Our asset base approximates 12.6 million rentable square feet consisting of 159 properties approximating 11.7 million rentable square feet (including spaces undergoing active redevelopment) and properties undergoing ground-up development approximating 875,000 rentable square feet.

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Such forward-looking statements include, without limitation, statements regarding our 2009 earnings per share (diluted), 2009 FFO per share (diluted) and our redevelopment and development pipelines.  Our actual results may differ materially from those projected in such forward-looking statements.  Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing and or equity) or refinance debt maturities, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully complete and lease our existing space held for redevelopment and new properties acquired for that purpose and any properties undergoing development, our failure to successfully operate or lease acquired properties, decreased rental rates or increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, general and local economic conditions and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission (“SEC”).  All forward-looking statements are made as of today, and we assume no obligation to update this information.  For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.

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ALEXANDRIA REAL ESTATE EQUITIES, INC.

Financial Information

(Dollars in thousands, except per share data)

(Unaudited)

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ALEXANDRIA REAL ESTATE EQUITIES, INC.

Financial Information

(Unaudited)

Funds from Operations

United States generally accepted accounting principles (“GAAP”) basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time.  In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) established the measurement tool of Funds From Operations (“FFO”).  Since its introduction, FFO has become a widely used non-GAAP financial measure among real estate investment trusts (“REITs”).  We believe that FFO is helpful to investors as an additional measure of the performance of an equity REIT.  We compute FFO in accordance with standards established by the Board of Governors of NAREIT in its April 2002 White Paper (the “White Paper”) and related implementation guidance, which may differ from the methodology for calculating FFO utilized by other equity REITs, and, accordingly, may not be comparable to such other REITs.  The White Paper defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales, plus real estate related 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 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.

The following tables present 1) a reconciliation of net income available to common stockholders, the most directly comparable GAAP financial measure to FFO, to FFO available to common stockholders and 2) a reconciliation of earnings per share (diluted) to FFO per share (diluted), in each case, for the three months and year ended December 31, 2008 and 2007 (in thousands, except per share data):

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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Quarterly Supplemental Financial Information
(Dollars in thousands, except per share data)
(Unaudited)

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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Annual Supplemental Financial Information
(Dollars in thousands, except per share data)
(Unaudited)

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ALEXANDRIA REAL ESTATE EQUITIES, INC.

Condensed Consolidated Balance Sheets

(In thousands)

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ALEXANDRIA REAL ESTATE EQUITIES, INC.
Summary of Debt
December 31, 2008
(Dollars in thousands)
(Unaudited)

Principal Maturities / Rates

Secured and Unsecured Debt Analysis

Fixed and Floating Rate Debt Analysis

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ALEXANDRIA REAL ESTATE EQUITIES, INC.

Summary of Interest Rate Swap Agreements

December 31, 2008

(Dollars in thousands)

(Unaudited)