Alexandria Real Estate Equities, Inc. Reports Third Quarter Ended September 30, 2016 Financial and Operating Results - Alexandria Real Estate (NYSE:ARE)

Solid 3Q16 Operating Results and Solid Internal and External Growth

PASADENA, Calif., Oct. 31, 2016 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. ARE announced financial and operating results for the third quarter ended September 30, 2016.

Key highlights:

Solid internal growth

Total revenues of $230.4 million, up 5.4%, for 3Q16, compared to $218.6 million for 3Q15;
Executed leases for 683,307 rentable square feet ("RSF") during 3Q16, solid leasing activity in light of minimal contractual lease expirations at the beginning of 2016 and a highly leased value-creation pipeline;
Rental rate increases of 28.2% and 16.2% (cash basis) during 3Q16 for lease renewals and re-leasing of space aggregating 592,776 RSF (included in the 683,307 RSF above);
Same property net operating income growth of 5.3% and 6.1% (cash basis) for 3Q16, compared to 3Q15; and
54% of total annualized base rent from investment-grade tenants as of 3Q16.

Solid external growth; disciplined allocation of capital to visible, multiyear, highly leased value-creation pipeline

Deliveries of Class A properties in urban innovation clusters from our value-creation pipeline will increase net operating income by 35% over 2015:

Delivery Date	RSF	Leased %	Incremental Annual Net Operating Income
1H16	413,535	92%	$14 million
3Q16	590,260	98%	$41 million
4Q16	466,473	78%	$10 million to $15 million
2017-2018	1,987,948	73%	$130 million to $140 million
	3,458,216	81%	$195 million to $210 million

3Q16 key development and redevelopment projects placed into service:
- 274,734 RSF, 97% leased to Sanofi and 255,743 RSF, 99% leased to bluebird bio, Inc. at 50 and 60 Binney Street, respectively; improvement of initial stabilized cash yield to 7.7% from 7.3% as initially disclosed.
- 59,783 RSF to Editas Medicine, Inc. at 11 Hurley Street; improvement of initial stabilized cash yield to 8.8% from 7.9% as initially disclosed.
- Improvement of our initial yields on the deliveries above primarily due to significant reduction in total project costs.

Increased common stock dividend

Common stock dividend for 3Q16 of $0.80 per common share, up 3 cents, or 4%, over 3Q15; continuation of our strategy to share growth in cash flows from operating activities with our stockholders, while also retaining a significant portion for reinvestment.

Per share results						YTD
Per share results						YTD
	3Q16		3Q15		Change	3Q16		3Q15		Change
Net income (loss) attributable to Alexandria's common stockholders – diluted:
In Millions	$	5.5	$	32.7	N/A	$	(126.0)	$	81.7	N/A
Per Share	$	0.07	$	0.46	N/A	$	(1.69)	$	1.14	N/A

FFO attributable to Alexandria's common stockholders – diluted, as adjusted:
In Millions	$	107.6	$	95.0	13.2%	$	305.8	$	280.0	9.2%
Per Share	$	1.39	$	1.33	4.5%	$	4.09	$	3.92	4.3%

Key items impacting net income (loss) attributable to Alexandria's common stockholders:
									YTD
(In millions, except per share amounts)	3Q16		3Q15		3Q16		3Q15		3Q16		3Q15		3Q16		3Q15
(In millions, except per share amounts)	Amount				Per Share – Diluted				Amount				Per Share – Diluted
Impairment of:
Real estate – Asia	$	7.3	$	—	$	0.09	$	—	$	190.4	$	14.5	$	2.56	$	0.20
Real estate – North America	0.8		—		0.01		—		2.8		—		0.04		—
Non-real estate investment	3.1		—		0.04		—		3.1		—		0.04		—
Loss on early extinguishment of debt	3.2		—		0.04		—		3.2		0.2		0.04		—
Preferred stock redemption charge	13.1		—		0.17		—		25.6		—		0.34		—
Total	$	27.5	$	—	$	0.35	$	—	$	225.1	$	14.7	$	3.02	$	0.20
Weighted average shares of common stock outstanding – diluted	77.4		71.5						74.5		71.4

Core operating metrics

Percentage of annualized base rent from investment-grade tenants as of 3Q16:
- All tenants: 54%
- Top 20 tenants: 78%
Percentage of annualized base rent from Class A properties as of 3Q16: 77%
Solid leasing activity, in light of minimal contractual lease expirations at the beginning of 2016 and a highly leased value-creation pipeline:

	3Q16	YTD 3Q16
Total leasing activity – RSF	683,307	1,888,691
Lease renewals and re-leasing of space:
Rental rate increases	28.2%	28.4%
Rental rate increases (cash basis)	16.2%	13.2%
RSF	592,776	1,458,386

Same property net operating income growth:
- 5.3% and 6.1% (cash basis) for 3Q16, compared to 3Q15
- 5.0% and 6.1% (cash basis) for YTD 3Q16, compared to YTD 3Q15
Occupancy for operating properties in North America at 97.1% as of 3Q16
Operating margin at 69% for 3Q16
Adjusted EBITDA margin at 67% for 3Q16

Third Quarter Ended September 30, 2016, Financial and Operating Results
September 30, 2016

External growth

Disciplined allocation of capital to visible, multiyear, highly leased value-creation pipeline

See page 1 of this earnings press release for key highlights.

Timely funded strategic acquisition

In June 2016, we entered into a definitive agreement to acquire One Kendall Square, a 644,771 RSF, 98.5% occupied, seven-building collaborative science and technology campus in our East Cambridge urban innovation cluster submarket. The purchase price is $725 million, including the assumption of a $203 million secured note payable. We expect to obtain approval by the lender for the loan assumption and complete this acquisition in 4Q16. The acquisition is expected to be funded by our forward equity sales agreements through the issuance of 7.5 million shares of our common stock. See below for additional information.
This acquisition provides us with a significant opportunity to increase cash flows:
- $47/RSF average below-market in-place annual rents (mix of office gross rents and lab triple net rents);
- 55% contractual lease expirations through 2019;
- Conversion of significant portion of campus office space into office/laboratory space through redevelopment; and
- Entitled land parcel for near-term ground-up development of an additional building aggregating 172,500 square feet.

Balance sheet

Improvement in balance sheet leverage and liquidity

$13.0 billion total market capitalization as of 3Q16;
$1.9 billion of liquidity as of 3Q16;
Net debt to adjusted EBITDA
- 3Q16 annualized: 6.8x; 3Q16 trailing 12 months: 7.1x
- 4Q16 annualized target range: 5.9x to 6.3x
- Goal: less than 6.0x;
3.6x fixed-charge coverage ratio for 3Q16 annualized and trailing 12 months;
4Q16 annualized target range: 3.5x to 4.0x;
Repurchased 1.1 million shares of our 7.00% Series D cumulative convertible preferred stock at an aggregate price of $39.3 million, or $36.31 per share, and recognized a preferred stock redemption charge of $13.1 million in 3Q16;
Executed an offering, subject to forward equity sales agreements, to sell an aggregate of 7.5 million shares of common stock, including 975,000 shares sold pursuant to the exercise in full of the underwriters' option to purchase additional shares of our common stock, at a public offering price of $101.00 per share, subject to customary contractual price adjustments. Net proceeds, after issuance costs and underwriters' discount, of $724.0 million, will be further adjusted as provided in the forward equity sales agreements. We expect to settle the forward sales agreements and receive proceeds from the common stock offering after the closing of One Kendall Square. Proceeds from this offering will be used to fund the acquisition of One Kendall Square located in East Cambridge, lower net debt to adjusted EBITDA by 0.3x, and fund construction.
Raised $323.7 million from (i) dispositions completed and under contract for $217.5 million, and (ii) commitment from our joint venture partner to fund construction primarily in 2016 aggregating $106.3 million related to the completed sale of a partial interest in 10290 Campus Point Drive. See page 4 of this earnings press release for additional information.
Amended our unsecured senior line of credit and recognized a loss on early extinguishment of debt of $2.4 million related to the write-off of unamortized loan fees. Key changes are summarized below:

	Amended Agreement		Prior Agreement
Commitments		$1.65 billion		$1.5 billion
Interest rate		LIBOR+1.00%		LIBOR+1.10%
Maturity date		October 29, 2021		January 3, 2019

Completed a partial principal repayment of $200 million of our 2019 Unsecured Senior Bank Term Loan, reducing the total outstanding balance from $600 million to $400 million, and recognized a loss on early extinguishment of debt of $869 thousand related to the write-off of unamortized loan fees during 3Q16;
Executed two forward interest rate swap agreements, with notional aggregating $200 million at a fixed pay rate of 0.95%, that are effective on March 29, 2018;
Limited debt maturities through 2018 and well-laddered maturity profile;
Current and future value-creation pipeline was 12% of gross investments in real estate in North America as of 3Q16, with 4Q16 target range from 10% to 12%; and
14% unhedged variable-rate debt as a percentage of total debt as of 3Q16.

LEED certifications

57% of total annualized base rent expected from Leadership in Energy and Environmental Design ("LEED") certified projects upon completion of in-process projects.

Subsequent events in October 2016

Acquired Torrey Ridge Science Center, a 294,993 RSF, three-building collaborative life science campus located in the heart of our Torrey Pines submarket of San Diego, for a purchase price of $182.5 million. The campus is 87.1% occupied, and we expect to achieve an initial stabilized yield (cash basis) of 6.8% at stabilization in 1H18 upon completion of near-term renewals/re-leasing of acquired below-market leases and the conversion of 75,953 RSF existing shell and office space into office/laboratory space.
Repurchased 1.5 million shares of our 7.00% Series D cumulative convertible preferred stock at an aggregate price of $52.8 million, or $36.07 per share. As of October 31, 2016, the par value of our 7.00% Series D cumulative convertible preferred stock outstanding was $125.2 million.
Filed an "at the market" common stock offering program, which allows us to sell up to an aggregate of $600.0 million of our common stock. Under this program, we sold an aggregate of 1.4 million shares of common stock for gross proceeds of $150.0 million, or $104.28 per share, and net proceeds of approximately $147.7 million.

Incremental Annual Net Operating Income from Development and Redevelopment Projects
September 30, 2016

(1)	Represents incremental annual net operating income upon stabilization of our development and redevelopment projects, including our share of real estate joint venture projects. RSF and percentage leased represent 100% of each property.

Dispositions
September 30, 2016
(Dollars in thousands)

			Net Operating Income					Net Operating Income (Cash)				Classification
Property/Market/Submarket	Date of Sale	RSF/Acres	Net Operating Income				⁽¹⁾	Net Operating Income (Cash)			⁽¹⁾	Construction Funding			Asset Sales
Dispositions completed and under contract:
16020 Industrial Drive/Maryland/Gaithersburg	4/21/16	71,000 RSF	$	1,022				$	896			$	—		$	6,400
Land parcels in North America (Gaithersburg/Non-cluster)	Various	5.9 acres	N/A					N/A				—				8,700
Operating properties and land parcels in India	Various	566,355 RSF / 137 acres	1,749					1,777				—				52,357	⁽²⁾
												—				67,457
Two joint ventures – 45% partial interest sales:
10290 Campus Point Drive	6/29/16	304,326 RSF										106,263		⁽⁴⁾		—
10300 Campus Point Drive	4Q16	449,759 RSF	$		15,832	⁽³⁾		$		14,665	⁽³⁾	—				150,008	⁽⁴⁾
												106,263				217,465

Projected dispositions:
306 Belmont Street and 350 Plantation Street/Greater Boston/ Route 495/Worcester	4Q16	90,690 RSF	$	1,558				$	1,348			—				17,550	⁽⁵⁾
Operating properties and land parcels/Asia	TBD	634,328 RSF / 59 acres	N/A					N/A				—				53,600	⁽⁶⁾
Other	TBD	TBD	TBD					TBD				—				71,200	⁽⁷⁾
												—				142,350
												$	106,263		$	359,815

(1)	Represents annualized amounts for the quarter ended prior to the date of sale, or 3Q16 annualized for pending asset sales. Cash net operating income excludes straight-line rent and amortization of acquired below-market leases.
(2)	Refer to page 45 of our Supplemental Information for additional information.
(3)	Represents 45% partial interest share of the anticipated initial stabilized net operating income and cash net operating income upon completion of the redevelopment of 10290 Campus Point Drive, and net operating income and cash net operating income for 3Q16, annualized for 10300 Campus Point Drive.
(4)	Aggregate proceeds of $256.3 million, including gross proceeds of $68.6 million received as of 3Q16, additional future proceeds of $37.7 million to be received primarily in 4Q16 for the construction funding of 10290 Campus Point Drive, and $150.0 million that we expect to receive primarily in 4Q16 for the sale of a partial interest in 10300 Campus Point Drive.
(5)	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 remaining investments 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%.
(6)	Represents 634,328 RSF of operating properties located in China plus land parcels aggregating 59 acres located in India. Sales are expected to be completed in multiple transactions over several quarters.
(7)	Represents the midpoint of a range of values for two assets we are evaluating for sale in Maryland and Canada.

Acquisitions
September 30, 2016
(Dollars in thousands)


		Closing Date		Square Footage					Occupancy	Unlevered Yields
Property/Market/Submarket	Type	Closing Date	Number of Properties	Operating	Future Value- Creation		Purchase Price		Occupancy		Initial Stabilized Cash Basis			Initial Stabilized
Completed acquisitions:
Torrey Ridge Science Center/San Diego/Torrey Pines	Operating	10/3/2016	3	294,993	—		$	182,500	87.1%			6.8%	⁽¹⁾	7.1%	⁽¹⁾

Pending acquisitions:
One Kendall Square/Greater Boston/Cambridge ⁽²⁾	Operating/Development	4Q16	7	644,771	172,500		725,000		98.5%			6.2%	⁽³⁾	6.4%	⁽³⁾
88 Bluxome Street/San Francisco/Mission Bay/SoMa	Development	TBD ⁽⁴⁾	1	—	1,070,925	⁽⁴⁾	140,000		N/A			TBD		TBD
			11	939,764	1,243,425		$	1,047,500

(1)	At stabilization in 1H18 upon completion of near-term renewals/re-leasing of acquired below-market leases and the conversion of 75,953 RSF of existing shell and office space into office/laboratory space.
(2)	In June 2016, we entered into a definitive agreement to acquire One Kendall Square, a 644,771 RSF, seven-building collaborative science and technology campus in our East Cambridge urban innovation cluster submarket. The acquisition includes an entitled land parcel supporting the near-term ground-up development of an additional building aggregating 172,500 square feet. The purchase price was $725.0 million, which includes the assumption of a $203.0 million secured note payable. We expect to obtain approval by the lender for the loan assumption and complete this acquisition in 4Q16. In July 2016, we executed an offering, subject to forward equity sales agreements, to sell an aggregate of 7.5 million shares of common stock, including 975,000 shares sold pursuant to the exercise in full of the underwriters' option to purchase additional shares of our common stock, at a public offering price of $101.00 per share, subject to customary contractual price adjustments. Net proceeds, after issuance costs and underwriters' discount, of $724.0 million, will be further adjusted as provided in the forward equity sales agreements. We expect to settle the forward sales agreements and receive proceeds from the common stock offering after the closing of One Kendall Square. Proceeds from this offering will be used to fund this acquisition, lower net debt to adjusted EBITDA by 0.3x, and fund construction.
(3)	At stabilization upon completion of the ground-up development and near-term lease renewals/re-leasing of space.
(4)	We have an executed agreement for the acquisition of 88 Bluxome Street in our Mission Bay/SoMa submarket of San Francisco and are working on entitlements for this site. Furthermore, the closing date of this acquisition may be deferred to 1Q17. Square footage represents estimated total anticipated RSF upon completion of entitlements for construction of two office buildings in separate phases. Upon completion of the acquisition, the seller may lease the property for a term of one year or more depending on certain factors.

Guidance
September 30, 2016
(Dollars in millions, except per share amounts)

The following updated guidance is based on our current view of existing market conditions and assumptions for the year ending December 31, 2016. There can be no assurance that actual amounts will be materially higher or lower than these expectations. See our discussion of "forward-looking statements" on page 8.

Summary of Key Changes in Guidance	As of 8/1/16	As of 10/31/16	Summary of Key Changes in Guidance (continued)	As of 8/1/16	As of 10/31/16
Net loss per share, FFO per share, and FFO per share, as adjusted	See below	See below	Key credit metrics	See below	See below
Rental rate increases up 2%	19.0% to 22.0%	21.0% to 24.0%	Same property net operating income increase up 0.5%	2.5% to 4.5%	3.0% to 5.0%
Rental rate increases (cash basis) up 1%	7.0% to 10.0%	8.0% to 11.0%	Same property net operating income increase (cash basis) up 0.5%	4.0% to 6.0%	4.5% to 6.5%

Net Loss per Share and FFO per Share Attributable to Alexandria's Common Stockholders – Diluted
	As of 8/1/16	As of 10/31/16 ⁽¹⁾
Net loss per share	$(1.19) to $(1.13)	$(1.54) to $(1.52)
Add: depreciation and amortization	4.00		4.00
Add: impairment of real estate – rental properties	1.15		1.23
Other	(0.02)		(0.02)
FFO per share	$3.94 to $4.00	$3.67 to $3.69
Less: investment income	(0.06)		(0.06)	⁽²⁾
Add: impairment of real estate – land parcels and non-real estate investments	1.25		1.31
Add: loss on early extinguishment of debt	0.04		0.04
Add: preferred stock redemption charge	0.33		0.56	⁽³⁾
Other	(0.02)		(0.02)
FFO per share, as adjusted	$5.48 to $5.54	$5.50 to $5.52

Key Assumptions	Low		High
Occupancy percentage in North America as of December 31, 2016	96.5%		97.1%

Lease renewals and re-leasing of space:
Rental rate increases	21.0%		24.0%
Rental rate increases (cash basis)	8.0%		11.0%
Same property performance:
Net operating income increase	3.0%		5.0%
Net operating income increase (cash basis)	4.5%		6.5%

Straight-line rent revenue	$	51	$	56
General and administrative expenses	$	59	$	64
Capitalization of interest	$	45	$	55
Interest expense	$	100	$	110

Key Credit Metrics	As of 8/1/16	As of 10/31/16
Net debt to Adjusted EBITDA – 4Q annualized	6.2x to 6.6x	5.9x to 6.3x
Fixed-charge coverage ratio – 4Q annualized	3.0x to 3.5x	3.5x to 4.0x
Value-creation pipeline percentage of gross real estate as of 12/31/16	10% to 13%	10% to 12%

								Key Items Remaining After 10/31/16
Key Sources and Uses of Capital	Low		High		Mid-Point
Sources of capital:
Net cash provided by operating activities after dividends	$	115	$	135	$	125
Incremental debt	424		304		364
Dispositions (see page 4)	300		400		350			$	142
Common equity/sales of available-for-sale equity securities	1,358		1,458		1,408		⁽⁴⁾	$	168
Total sources of capital	$	2,197	$	2,297	$	2,247
Uses of capital:
Acquisitions (see page 5)	$	1,085	$	1,135	$	1,110	⁽⁵⁾	$	140
Improvement in leverage	175		175		175		⁽⁶⁾
Construction	785		835		810
7.00% Series D preferred stock repurchases	152		152		152		⁽³⁾
Total uses of capital	$	2,197	$	2,297	$	2,247
Incremental debt (included above):
Issuance of unsecured senior notes payable	$	350	$	350	$	350
Assumption of secured note payable	203		203		203		⁽⁵⁾
Borrowings – secured construction loans	250		300		275
Repayments of secured notes payable	(266)		(366)		(316)			$	(76)
Repayment of unsecured senior term loan	(200)		(200)		(200)
$1.65 billion unsecured senior line of credit/other	87		17		52
Incremental debt	$	424	$	304	$	364

(1)	Excludes severance and other costs that may be incurred related to our exit of our investment in Asia. See page 45 of our Supplemental Information for additional information on our real estate investments in Asia.
(2)	Represents non-real estate investment income of $4.4 million in 2Q16 related to one investment.
(3)	Includes the repurchase of 1.5 million outstanding shares of our 7.00% Series D cumulative preferred stock in October 2016.
(4)	Includes net proceeds of $724.0 million upon future settlement of forward equity sales agreements executed in July 2016 to sell an aggregate of 7.5 million shares of our common stock, and net proceeds of $367.8 million and $147.7 million from sales of common stock under our ATM program during 1H16 and in October 2016, respectively.
(5)	Includes the pending acquisition of One Kendall Square for $725.0 million, including the assumption of a $203.0 million secured note payable. The closing of the acquisition is expected shortly after obtaining approval for the assumption of the secured loan.
(6)	We expect to use $175 million of the proceeds from our forward equity sales agreements (see footnote 4) to reduce our projected net debt to adjusted EBITDA – 4Q16 annualized by 0.3x.

Earnings Call Information and About the Company
September 30, 2016

We will host a conference call on Tuesday, November 1, 2016, at 3:00 p.m. Eastern Time ("ET")/noon Pacific Time ("PT"), which is open to the general public to discuss our financial and operating results for the third quarter ended September 30, 2016. To participate in this conference call, dial (877) 419-6593 or (719) 325-4800 and confirmation code 6303272 shortly before 3:00 p.m. ET/noon PT. The audio webcast can be accessed at www.are.com, in the "For Investors" section. A replay of the call will be available for a limited time from 6:00 p.m. ET/3:00 p.m. PT on Tuesday, November 1, 2016. The replay number is (888) 203-1112 or (719) 457-0820, and the confirmation code is 6303272.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the third quarter ended September 30, 2016, is available in the "For Investors" section of our website at www.are.com or by following this link: http://www.are.com/fs/2016q3.pdf.

About the Company

Alexandria Real Estate Equities, Inc. ARE is a fully integrated, self-administered, and self-managed urban office real estate investment trust ("REIT") uniquely focused on world-class collaborative science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $13.0 billion and an asset base in North America of 24.5 million square feet as of September 30, 2016. The asset base in North America includes 18.8 million RSF of operating properties and development and redevelopment projects (under construction or pre-construction) and 5.7 million square feet of future ground-up development projects. Alexandria pioneered this niche in 1994 and has since established a significant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park.

***********

This document 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 2016 earnings per share attributable to Alexandria's common stockholders – diluted, 2016 FFO per share attributable to Alexandria's common stockholders – diluted, net operating income, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as "forecast," "guidance," "projects," "estimates," "anticipates," "believes," "expects," "intends," "may," "plans," "seeks," "should," or "will," or the negative of those words or similar words. These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. There can be no assurance that actual results will not be materially higher or lower than these expectations. These statements are subject to risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from the results discussed in the 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 place into service and lease any properties undergoing development or redevelopment and our existing space held for future development or redevelopment (including new properties acquired for that purpose), our failure to successfully operate or lease acquired properties, decreased rental rates, 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, a favorable capital market environment, leasing activity, lease renewals, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission ("SEC"). Accordingly, you are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are made as of the date of this earnings press release, and unless otherwise stated, we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. 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.

Consolidated Statements of Income
September 30, 2016
(In thousands, except per share amounts)

	Three Months Ended											Nine Months Ended
	9/30/16			6/30/16		3/31/16		12/31/15		9/30/15		9/30/16			9/30/15
Revenues:
Rental	$	166,591		$	161,638	$	158,276	$	158,100	$	155,311	$	486,505		$	450,724
Tenant recoveries	58,681			54,107		52,597		54,956		56,119		165,385			154,107
Other income	5,107			10,331		5,216		10,899		7,180		20,654			14,688
Total revenues	230,379			226,076		216,089		223,955		218,610		672,544			619,519

Expenses:
Rental operations	72,002			67,325		65,837		68,913		68,846		205,164			192,319
General and administrative	15,854			15,384		15,188		15,102		15,143		46,426			44,519
Interest	25,850			25,025		24,855		28,230		27,679		75,730			77,583
Depreciation and amortization	77,133			70,169		70,866		72,245		67,953		218,168			189,044
Impairment of real estate	8,114			156,143		28,980		8,740		—		193,237			14,510
Loss on early extinguishment of debt	3,230			—		—		—		—		3,230			189
Total expenses	202,183			334,046		205,726		193,230		179,621		741,955			518,164

Equity in earnings (losses) of unconsolidated real estate joint ventures	273			(146)		(397)		(174)		710		(270)			1,825
Gain on sales of real estate – rental properties	—			—		—		12,426		—		—			—
Income (loss) from continuing operations	28,469			(108,116)		9,966		42,977		39,699		(69,681)			103,180
Loss from discontinued operations	—			—		—		—		—		—			(43)
Gain on sales of real estate – land parcels	90			—		—		—		—		90			—
Net income (loss)	28,559			(108,116)		9,966		42,977		39,699		(69,591)			103,137
Net income attributable to noncontrolling interests	(4,084)			(3,500)		(4,030)		(972)		(170)		(11,614)			(925)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.	24,475			(111,616)		5,936		42,005		39,529		(81,205)			102,212
Dividends on preferred stock	(5,007)			(5,474)		(5,907)		(6,246)		(6,247)		(16,388)			(18,740)
Preferred stock redemption charge	(13,095)			(9,473)		(3,046)		—		—		(25,614)			—
Net income attributable to unvested restricted stock awards	(921)			(1,085)		(801)		(628)		(623)		(2,807)			(1,736)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc. common stockholders	$	5,452		$	(127,648)	$	(3,818)	$	35,131	$	32,659	$	(126,014)		$	81,736

Net income (loss) attributable to Alexandria Real Estate Equities, Inc. common stockholders – basic and diluted	$	0.07		$	(1.72)	$	(0.05)	$	0.49	$	0.46	$	(1.69)		$	1.14

Weighted-average shares of common stock outstanding:
Basic	76,651			74,319		72,584		71,833		71,500		74,526			71,426
Diluted	77,402		⁽¹⁾	74,319		72,584		71,833		71,500		74,526		⁽¹⁾	71,426

Dividends declared per share of common stock	$	0.80		$	0.80	$	0.80	$	0.77	$	0.77	$	2.40		$	2.28

(1)	Shares reflect the dilutive impact of our outstanding forward equity sales agreements. See page 2 of our Earnings Press Release for additional information on forward equity sales agreements, and page 55 of our Supplemental Information for the definition of weighted-average shares – diluted.

Consolidated Balance Sheets
September 30, 2016
(In thousands)

	9/30/16			6/30/16		3/31/16		12/31/15		9/30/15
Assets
Investments in real estate	$	7,939,179		$	7,774,608	$	7,741,466	$	7,629,922	$	7,527,738
Investments in unconsolidated real estate joint ventures	133,580			132,433		127,165		127,212		126,471
Cash and cash equivalents	157,928			256,000		146,197		125,098		76,383
Restricted cash	16,406			13,131		14,885		28,872		36,993
Tenant receivables	9,635			9,196		9,979		10,485		10,124
Deferred rent	318,286			303,379		293,144		280,570		267,954
Deferred leasing costs	191,765			191,619		192,418		192,081		184,798
Investments	320,989			360,050		316,163		353,465		330,570
Other assets	206,133		⁽¹⁾	104,414		130,115		133,312		151,669
Total assets	$	9,293,901		$	9,144,830	$	8,971,532	$	8,881,017	$	8,712,700

Liabilities, Noncontrolling Interests, and Equity
Secured notes payable	$	789,450		$	722,794	$	816,578	$	809,818	$	767,874
Unsecured senior notes payable	2,377,482			2,376,713		2,031,284		2,030,631		1,734,857
Unsecured senior line of credit	416,000			72,000		299,000		151,000		843,000
Unsecured senior bank term loans	746,162			945,030		944,637		944,243		943,857
Accounts payable, accrued expenses, and tenant security deposits	605,181			593,628		628,467		589,356		586,594
Dividends payable	66,705			67,188		64,275		62,005		61,340
Total liabilities	5,000,980			4,777,353		4,784,241		4,587,053		4,937,522

Commitments and contingencies

Redeemable noncontrolling interests	9,012			9,218		14,218		14,218		14,218

Alexandria Real Estate Equities, Inc.'s stockholders' equity:
7.00% Series D cumulative convertible preferred stock	161,792			188,864		213,864		237,163		237,163
6.45% Series E cumulative redeemable preferred stock	130,000			130,000		130,000		130,000		130,000
Common stock	768			766		729		725		718
Additional paid-in capital	3,649,263			3,693,807		3,529,660		3,558,008		3,356,043
Accumulated other comprehensive (loss) income	(31,745)			8,272		(8,533)		49,191		35,238
Alexandria's stockholders' equity	3,910,078			4,021,709		3,865,720		3,975,087		3,759,162
Noncontrolling interests	373,831			336,550		307,353		304,659		1,798
Total equity	4,283,909			4,358,259		4,173,073		4,279,746		3,760,960
Total liabilities, noncontrolling interests, and equity	$	9,293,901		$	9,144,830	$	8,971,532	$	8,881,017	$	8,712,700

(1)	Includes $60.0 million deposit for the acquisition of One Kendall Square.

Funds From Operations and Funds From Operations Per Share
September 30, 2016
(In thousands, except per share amounts)

The following tables present a reconciliation of net income (loss) attributable to Alexandria's common stockholders – basic, the most directly comparable financial measure presented in accordance with generally accepted accounting principles ("GAAP"), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to FFO attributable to Alexandria's common stockholders – diluted, and FFO attributable to Alexandria's common stockholders – diluted, as adjusted, and the related per share amounts. Amounts allocable to unvested restricted stock awards are not material and are not presented separately within the earnings per share reconciliation below. Per share amounts may not add due to rounding.

	Three Months Ended										Nine Months Ended
	9/30/16		6/30/16		3/31/16		12/31/15		9/30/15		9/30/16		9/30/15
Net income (loss) attributable to Alexandria's common stockholders	$	5,452	$	(127,648)	$	(3,818)	$	35,131	$	32,659	$	(126,014)	$	81,736
Depreciation and amortization	77,133		70,169		70,866		72,245		67,953		218,168		189,044
Noncontrolling share of depreciation and amortization from consolidated JVs	(2,224)		(2,226)		(2,301)		(372)		—		(6,751)		—
Our share of depreciation and amortization from unconsolidated JVs	658		651		743		655		445		2,052		1,079
Impairment of real estate – rental properties	6,293		88,395		—		8,740		—		94,688		14,510
Gain on sales of real estate – rental properties	—		—		—		(12,426)		—		—		—
Gain on sales of real estate – land parcels	(90)		—		—		—		—		(90)		—
Allocation to unvested restricted stock awards	(438)		—		(80)		(522)		(698)		(14)		(1,231)
FFO attributable to Alexandria's common stockholders – diluted ⁽¹⁾	86,784		29,341		65,410		103,451		100,359		182,039		285,138
Non-real estate investment income	—		(4,361)		—		(7,731)		(5,378)		(4,361)		(5,378)
Impairments of real estate – land parcels and non-real estate investments	4,886		67,162		28,980		—		—		101,028		—
Loss on early extinguishment of debt	3,230		—		—		—		—		3,230		189
Preferred stock redemption charge	13,095		9,473		3,046		—		—		25,614		—
Allocation to unvested restricted stock awards	(359)		(530)		(358)		85		67		(1,736)		53
FFO attributable to Alexandria's common stockholders – diluted, as adjusted	$	107,636	$	101,085	$	97,078	$	95,805	$	95,048	$	305,814	$	280,002

	Three Months Ended											Nine Months Ended
	9/30/16			6/30/16		3/31/16		12/31/15		9/30/15		9/30/16			9/30/15
Net income (loss) attributable to Alexandria's common stockholders	$	0.07		$	(1.72)	$	(0.05)	$	0.49	$	0.46	$	(1.69)		$	1.14
Depreciation and amortization	0.97			0.92		0.95		1.00		0.95		2.85			2.65
Impairment of real estate – rental properties	0.08			1.19		—		0.12		—		1.27			0.20
Gain on sales of real estate – rental properties	—			—		—		(0.17)		—		—			—
FFO per share attributable to Alexandria's common stockholders – diluted	1.12			0.39		0.90		1.44		1.40		2.43			3.99
Non-real estate investment income	—			(0.06)		—		(0.11)		(0.08)		(0.06)			(0.08)
Impairments of real estate – land parcels and non-real estate investments	0.06			0.90		0.40		—		—		1.34			—
Loss on early extinguishment of debt	0.04			—		—		—		—		0.04			—
Preferred stock redemption charge	0.17			0.13		0.04		—		—		0.34			—
FFO per share attributable to Alexandria's common stockholders – diluted, as adjusted	$	1.39		$	1.36	$	1.34	$	1.33	$	1.33	$	4.09		$	3.92

Weighted average shares of common stock outstanding for calculating FFO per share and FFO, as adjusted, per share – diluted	77,402		⁽²⁾	74,319		72,584		71,833		71,500		74,778		⁽²⁾	71,426

(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)	Shares reflect the dilutive impact of our forward equity sales agreements. See page 2 of our Earnings Press Release for additional information on forward equity sales agreements and page 55 of our Supplemental Information for the definition of weighted-average shares – diluted.

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SOURCE Alexandria Real Estate Equities, Inc.

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