Alexandria Real Estate Equities, Inc. Reports First Quarter Ended March 31, 2016 Financial and Operating Results

Year of Delivery

RSF

Leased %

Incremental Annual NOI

2016

1,465,977

90%

$75 million to $80 million

2017-2018

2,036,828

72%

$120 million to $130 million

3,502,805

81%

$195 million to $210 million

Results

1Q16

1Q15

Change

FFO attributable to Alexandria's common stockholders – diluted, as adjusted:

In Millions

$

97.1

$

91.3

$

5.7

6.3

%

Per Share

$

1.34

$

1.28

$

0.06

4.7

%

Net (loss) income attributable to Alexandria's common stockholders – diluted:

In Millions

$

(3.8)

$

17.8

$

(21.6)

N/A

Per Share

$

(0.05)

$

0.25

$

(0.30)

N/A

Transactions impacting net (loss) income and EPS attributable to Alexandria's commonstockholders:

Amount

Per share - diluted

(in millions, except per share amounts)

1Q16

1Q15

1Q16

1Q15

Impairment of real estate - rental properties

$

—

$

14.5

$

—

$

0.20

Impairment of real estate - land parcels

29.0

—

0.40

—

Preferred stock redemption charge

3.0

—

0.04

—

Net income attributable to NCI

4.0

0.5

0.06

0.01

Total

$

36.0

$

15.0

$

0.50

$

0.21

Weighted average shares of common stock outstanding

72.6

71.4

(In millions)

1Q16

1Q15

Change

Total revenues

$

216.1

$

196.8

$

19.3

9.8%

NOI, including our pro rata share of consolidatedand unconsolidated real estate joint ventures

$

145.3

$

136.4

$

8.9

6.5%

Year of Delivery

RSF

Leased %

Incremental Annual NOI

2016

1,465,977

90%

$75 million to $80 million

2017-2018

2,036,828

72%

$120 million to $130 million

3,502,805

81%

$195 million to $210 million

(1)

Represents incremental annual NOI upon stabilization of our development and redevelopment projects, including our share of real estate joint venture development projects.  Excludes NOI related to spaces delivered and in service prior to March 31, 2016.

(1)

Includes projected construction and acquisitions for the year ending December 31, 2016. Refer to page 44 of our Supplemental Information for additional details.

(2)

Represents average pre-leased percentage at the time development commenced.

RSF/Acres

NOI (1)

Cash  NOI (1)

Actual/EstimatedSales Price

Assets held for sale in North America:

16020 Industrial Drive/Maryland/Gaithersburg

71,000 RSF

$

1,022

$

896  (2)

$

6,400

306 Belmont Street and 350 Plantation Street/Greater Boston/Route 495/Worcester

90,690 RSF

$

1,557

$

1,347  (3)

17,550

Assets held for sale in North America

23,950

Asia assets pending disposition: (4)

Operating properties

1,200,683 RSF

(5)

(5)

Land parcels

196 acres

(5)

(5)

$

136,950

(1)

Cash NOI excludes straight-line rent and amortization of acquired below-market leases. NOI amounts represent the annualized amounts for 1Q16.

(2)

Property consists of an R&D/Warehouse building acquired in 2005 with minimal capital improvements since acquisition. Buyer intends to make considerable investments in the building including demolition of some of the existing space and re-purposing of its use.

(3)

Non-core properties located outside of our urban innovation clusters.  These properties are Class B office buildings leased to non-credit tenants and represent our last investment in Worcester.  The internal rate of return over our hold period, including the expected disposition of the asset, is expected to be approximately 8.9%.

(4)

In March 2016, we recognized an impairment charge of $29.0 million for two land parcels in India that met the criteria for classification as held for sale in March 2016. As of March 31, 2016, we only had one binding sale agreement related to one land parcel. This land parcel was sold on May 2, 2016, at a sales price of $7.5 million with no gain or loss. On April 22, 2016, our Board of Directors approved the monetization of our real estate investments in Asia in order to invest capital into our highly leased value-creation pipeline. As a result of this decision, we recognized an aggregate impairment charge of $153.0 million to reduce our net book value to fair value less cost to sell for all of our remaining investments in Asia. In determining the carrying amount for evaluating the real estate for impairment, we considered the cumulative foreign currency translation losses of approximately $32.0 million for our land parcels located in India, and $18.8 million for our rental properties in our India and China submarkets, that will be reclassified to net income only when realized upon sale or disposition. We believe our real estate investments in Asia will be monetized in several separate transactions over the next 12 months.

(5)

See page 51 of our Supplemental Information for operating and balance sheet information related to our real estate investments in Asia.

Period Recognized

FFO Per

Share - Diluted

FFO Per Share - Diluted,

As Adjusted

Summary of Key Changes in Guidance

1Q16

April 2016

Total

Per Share

$

3,046

$

—

$

3,046

$

0.04

Included

Excluded

Impairment charge related to real estate in Asia:

Land parcels located in India

$

28,980

$

64,789

$

93,769

(1)

$

1.29

Included

Excluded

Rental properties

$

—

$

88,179

$

88,179

(1)

$

1.21

Excluded

Excluded

EPS and FFO per Share Attributable to Alexandria's Common Stockholders – Diluted (2)

Earnings per share

$(1.04) to $(0.94)

Add: depreciation and amortization

4.00

Add: impairment of real estate – rental properties

1.21

Other

(0.02)

FFO per share

Add: preferred stock redemption charge

0.04

Add: impairment of real estate – land parcels

1.29

Other

(0.02)

FFO per share, as adjusted

$5.46 to $5.56

2016 Guidance

Key Assumptions

Low

High

96.5%

97.1%

Lease renewals and re-leasing of space:

Rental rate increases

14.0%

17.0%

Rental rate increases (cash basis)

6.0%

9.0%

Same property performance:

NOI increase

2.0%

4.0%

NOI increase (cash basis)

3.5%

5.5%

Straight-line rent revenue

$

51,000

$

56,000

General and administrative expenses

$

59,000

$

64,000

Capitalization of interest

$

45,000

$

55,000

Interest expense

$

108,000

$

118,000

Key Credit Metrics

2016 Guidance

Net debt to Adjusted EBITDA – 4Q annualized

6.5x to 6.9x

Fixed charge coverage ratio – 4Q annualized

3.0x to 3.5x

Value-creation pipeline as a percentage of gross investments in real estate as of December 31, 2016

10% to 15%

2016 Guidance

Key Sources and Uses of Capital

Low

High

Mid-Point

Sources of capital for construction:

Net cash provided by operating activities after dividends

$

115,000

$

135,000

$

125,000

Debt funding from growth in EBITDA

260,000

240,000

250,000

Internally generated sources

375,000

375,000

375,000

Asset sales (minimum target)

300,000

400,000

350,000

Other capital/sales of available-for-sale equity securities

125,000

125,000

125,000

Total sources/projected construction uses

$

800,000

$

900,000

$

850,000

Sources of capital for acquisitions:

Debt funding from growth in EBITDA

$

45,000

$

45,000

$

45,000

Other capital

105,000

205,000

155,000

Total sources/projected acquisitions uses (3)

$

150,000

$

250,000

$

200,000

Incremental debt (included above):

Issuance of unsecured senior notes payable

$

400,000

$

550,000

$

475,000

Borrowings under secured construction loans

175,000

225,000

200,000

Repayments of secured notes payable

(190,000)

(290,000)

(240,000)

Unsecured senior line of credit/other

(80,000)

(200,000)

(140,000)

Incremental debt

$

305,000

$

285,000

$

295,000

(1)

See footnote 4 on page 5. Also, pursuant to standards established by NAREIT, impairments related to land parcels are included, and impairments related to depreciable properties are excluded, from NAREIT defined FFO.

(2)

In 2016, we expect to amend and extend the maturity date of our $1.5 billion unsecured senior line of credit. Our guidance for the year ending December 31, 2016, excludes the potential loss on early extinguishment of debt related to the write-off of any unamortized loan fees as a result of the amendment.

(3)

Includes acquisition price of 88 Bluxome Street in our Mission Bay/SoMa submarket of San Francisco that we expect to complete in 2H16. Also includes the purchase of the remaining noncontrolling interest outstanding at Alexandria Technology Square® for $54 million completed in April 2016.

Three Months Ended

3/31/16

12/31/15

9/30/15

6/30/15

3/31/15

Revenues:

Rental

$

158,276

$

158,100

$

155,311

$

151,805

$

143,608

Tenant recoveries

52,597

54,956

56,119

49,594

48,394

Other income

5,216

10,899

7,180

2,757

4,751

Total revenues

216,089

(1)

223,955

218,610

204,156

196,753

Expenses:

Rental operations

65,837

68,913

68,846

62,250

61,223

General and administrative

15,188

15,102

15,143

14,989

14,387

Interest

24,855

(2)

28,230

27,679

26,668

23,236

Depreciation and amortization

70,866

72,245

67,953

62,171

58,920

Impairment of real estate

28,980

(3)

8,740

—

—

14,510

(3)

Loss on early extinguishment of debt

—

—

—

189

—

Total expenses

205,726

193,230

179,621

166,267

172,276

Equity in (losses) earnings of unconsolidated real estate joint ventures

(397)

(174)

710

541

574

Gain on sales of real estate – rental properties

—

12,426

—

—

—

Income from continuing operations

9,966

42,977

39,699

38,430

25,051

Loss from discontinued operations

—

—

—

—

(43)

Net income

9,966

42,977

39,699

38,430

25,008

Net income attributable to noncontrolling interests

(4,030)

(4)

(972)

(170)

(263)

(492)

Net income attributable to Alexandria Real Estate Equities, Inc.

5,936

42,005

39,529

38,167

24,516

Dividends on preferred stock

(5,907)

(6,246)

(6,247)

(6,246)

(6,247)

Preferred stock redemption charge

(3,046)

—

—

—

—

Net income attributable to unvested restricted stock awards

(801)

(628)

(623)

(630)

(483)

Net (loss) income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders

$

(3,818)

(3)

$

35,131

$

32,659

$

31,291

$

17,786

Earnings per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic and diluted:

Continuing operations

$

(0.05)

(3)

$

0.49

$

0.46

$

0.44

$

0.25

(3)

Discontinued operations

—

—

—

—

—

Earnings per share – basic and diluted

$

(0.05)

$

0.49

$

0.46

$

0.44

$

0.25

Weighted-average shares of common stock outstanding for calculating earnings per share attributable to Alexandria's common stockholders – basic and diluted

72,584

71,833

71,500

71,412

71,366

Dividends declared per share of common stock

$

0.80

$

0.77

$

0.77

$

0.77

$

0.74

(1)

Decrease in total revenues from 4Q15 is primarily related to a $2.4 million reduction in tenant recoveries due to lower operating expenses and a $3.6 million decrease in investment gains.

(2)

Decrease in interest expense from 4Q15 is primarily related to a reduction of interest expense on our unsecured senior line of credit related to the $453.1 million in sales of partial interest in three Class A assets in December 2015, and an increase in capitalized interest driven by the increase in development activities related to our 3.5 million RSF highly leased value creation pipeline.

(3)

See footnote 4 on page 5.

(4)

Increase in net income attributable to noncontrolling interests is due to the sales described in footnote 2 above.

3/31/16

12/31/15

9/30/15

6/30/15

3/31/15

Assets

Investments in real estate

$

7,741,466

$

7,629,922

$

7,527,738

$

7,321,820

$

7,268,031

Investments in unconsolidated real estate joint ventures

127,165

127,212

126,471

121,055

120,028

Cash and cash equivalents

146,197

125,098

76,383

68,617

90,641

Restricted cash

14,885

28,872

36,993

44,191

56,704

Tenant receivables

9,979

10,485

10,124

9,279

10,627

Deferred rent

293,144

280,570

267,954

257,427

243,459

Deferred leasing costs (1)

192,418

192,081

184,798

169,466

159,007

Investments

316,163

353,465

330,570

360,614

283,062

Other assets (1)

130,115

133,312

151,669

145,073

147,979

Total assets

$

8,971,532

$

8,881,017

$

8,712,700

$

8,497,542

$

8,379,538

Liabilities, Noncontrolling Interests, and Equity

Secured notes payable (1)

$

816,578

$

809,818

$

767,874

$

763,844

$

753,483

Unsecured senior notes payable (1)

2,031,284

2,030,631

1,734,857

1,734,310

1,733,765

Unsecured senior line of credit

299,000

151,000

843,000

624,000

421,000

Unsecured senior bank term loans (1)

944,637

944,243

943,857

943,463

969,995

Accounts payable, accrued expenses, and tenant security deposits

628,467

589,356

586,594

531,612

645,619

Dividends payable

64,275

62,005

61,340

61,194

58,824

Total liabilities

4,784,241

4,587,053

4,937,522

4,658,423

4,582,686

Commitments and contingencies

Redeemable noncontrolling interests

14,218

14,218

14,218

14,248

14,282

Alexandria Real Estate Equities, Inc.'s stockholders' equity:

Series D cumulative convertible preferred stock

213,864

237,163

237,163

237,163

237,163

Series E cumulative redeemable preferred stock

130,000

130,000

130,000

130,000

130,000

Common stock

729

725

718

717

716

Additional paid-in capital

3,529,660

3,558,008

3,356,043

3,371,016

3,383,456

Accumulated other comprehensive (loss) income

(8,533)

49,191

35,238

83,980

29,213

Alexandria's stockholders' equity

3,865,720

3,975,087

3,759,162

3,822,876

3,780,548

Noncontrolling interests

307,353

304,659

1,798

1,995

2,022

Total equity

4,173,073

4,279,746

3,760,960

3,824,871

3,782,570

Total liabilities, noncontrolling interests, and equity

$

8,971,532

$

8,881,017

$

8,712,700

$

8,497,542

$

8,379,538

(1)

On January 1, 2016, we adopted an accounting standard update that requires debt issuance costs, excluding debt issuance costs associated with a line of credit, to be presented on the balance sheet as a direct deduction from the carrying amount of the related debt liability. Debt issuance costs associated with a line of credit will continue to be presented as an asset. As a result of adopting the accounting standard update, the unamortized deferred financing costs previously classified in deferred leasing and financing costs, aggregating $28.5 million as of March 31, 2016, were classified with the corresponding debt instrument appearing on the consolidated balance sheets and deferred financing costs related to our unsecured senior line of credit, aggregating $10.9 million as of March 31, 2016, were classified in other assets. This accounting standard update was also applied retroactively to all periods presented, as required by the accounting standard update.

Three Months Ended

3/31/16

12/31/15

9/30/15

6/30/15

3/31/15

Net (loss) income attributable to Alexandria's common stockholders

$

(3,818)

$

35,131

$

32,659

$

31,291

$

17,786

Depreciation and amortization

69,308

72,528

68,398

62,523

59,202

Impairment of real estate – rental properties

—

8,740

—

—

14,510

Gain on sales of real estate – rental properties

—

(12,426)

—

—

—

Allocation to unvested restricted stock awards

(80)

(522)

(698)

(381)

(166)

FFO attributable to Alexandria's common stockholders – basic and diluted (1)

65,410

103,451

100,359

93,433

91,332

Investment income

—

(7,731)

(2)

(5,378)

(2)

—

—

Impairment of real estate – land parcels

28,980

—

—

—

—

Loss on early extinguishment of debt

—

—

—

189

—

Preferred stock redemption charge

3,046

—

—

—

—

Allocation to unvested restricted stock awards

(358)

85

67

(2)

—

FFO attributable to Alexandria's common stockholders – diluted, as adjusted

97,078

95,805

95,048

93,620

91,332

Non-revenue-enhancing capital expenditures:

Building improvements

(2,318)

(2,025)

(2,404)

(2,743)

(2,278)

Tenant improvements and leasing commissions

(2,475)

(4,436)

(5,499)

(6,429)

(5,775)

Straight-line rent revenue

(12,492)

(13,517)

(12,006)

(14,159)

(10,697)

Straight-line rent expense on ground leases

592

862

(1,245)

510

363

Amortization of acquired below-market leases

(974)

(997)

(3,182)

(1,006)

(933)

Amortization of loan fees

2,792

2,689

2,657

2,921

2,835

Amortization of debt premiums

(86)

(90)

(100)

(100)

(82)

Stock compensation expense

5,439

4,590

5,178

4,054

3,690

Allocation to unvested restricted stock awards

106

141

207

152

118

AFFO attributable to Alexandria's common stockholders – diluted

$

87,662

$

83,022

$

78,654

$

76,820

$

78,573

(1)

Calculated in accordance with standards established by the Advisory Board of Governors of the National Association of Real Estate Investment Trusts (the "NAREIT Board of Governors") in its April 2002 White Paper and related implementation guidance.

(2)

Includes gross investment gains, primarily from the sale of two public securities in each of 4Q15 and 3Q15, of $12.7 million and $8.7 million, respectively.

Three Months Ended

3/31/16

12/31/15

9/30/15

6/30/15

3/31/15

EPS attributable to Alexandria's common stockholders – basic and diluted

$

(0.05)

$

0.49

$

0.46

$

0.44

$

0.25

Depreciation and amortization

0.95

1.00

0.95

0.87

0.83

Impairment of real estate – rental properties

—

0.12

—

—

0.20

Gain on sales of real estate – rental properties

—

(0.17)

—

—

—

FFO per share attributable to Alexandria's common stockholders – basic anddiluted (1)

0.90

1.44

1.40

1.31

1.28

Investment income

—

(0.11)

(0.08)

—

—

Impairment of real estate – land parcels

0.40

—

—

—

—

Preferred stock redemption charge

0.04

—

—

—

—

FFO per share attributable to Alexandria's common stockholders – diluted, as adjusted

1.34

1.33

1.33

1.31

1.28

Non-revenue-enhancing capital expenditures:

Building improvements

(0.03)

(0.03)

(0.03)

(0.04)

(0.03)

Tenant improvements and leasing commissions

(0.04)

(0.06)

(0.08)

(0.09)

(0.08)

Straight-line rent revenue

(0.17)

(0.19)

(0.17)

(0.20)

(0.15)

Straight-line rent expense on ground leases

0.01

0.01

(0.02)

0.01

0.01

Amortization of acquired below-market leases

(0.01)

(0.01)

(0.04)

(0.01)

(0.01)

Amortization of loan fees

0.04

0.04

0.04

0.04

0.03

Stock compensation expense

0.07

0.07

0.07

0.06

0.05

AFFO per share attributable to Alexandria's common stockholders – diluted

$

1.21

$

1.16

$

1.10

$

1.08

$

1.10

Weighted-average shares of common stock outstanding for calculating FFO, FFO, as adjusted, and AFFO per share attributable to Alexandria's common stockholders – basic and diluted

72,584

71,833

71,500

71,412

71,366

(1)

Calculated in accordance with standards established by the NAREIT Board of Governors in its April 2002 White Paper and related implementation guidance.