Alexandria Real Estate Equities, Inc. Reports Fourth Quarter and Year Ended December 31, 2016 Financial and Operating Results - Alexandria Real Estate (NYSE:ARE)

Solid 4Q16 and 2016 Internal and External Growth

PASADENA, Calif., Jan. 30, 2017 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. ARE announced financial and operating results for the fourth quarter and year ended December 31, 2016.

Key highlights:

Solid internal growth

Total revenues of $249.2 million, up 11.3%, for 4Q16, compared to $224.0 million for 4Q15 and total revenues of $921.7 million, up 9.3%, for 2016, compared to $843.5 million for 2015;
Solid leasing activity in light of minimal contractual lease expirations at the beginning of 2016 and a highly leased value-creation pipeline:

	4Q16	2016
Total leasing activity – RSF	1,501,376	3,390,067
Lease renewals and re-leasing of space:
Rental rate increases	25.8%	27.6%
Rental rate increases (cash basis)	9.5%	12.0%
RSF	671,222	2,129,608

Same property net operating income growth:
- 3.2% and 4.9% (cash basis) for 4Q16, compared to 4Q15
- 4.7% and 6.0% (cash basis) for 2016, compared to 2015

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

Deliveries of Class A properties in urban innovation clusters from our value-creation pipeline is expected to significantly increase net operating income:

Delivery Date	RSF	Percentage Leased	Incremental Annual Net Operating Income
YTD 3Q16	1,003,795	99%	$55 million
4Q16	890,133	89%	$37 million
2017	1,405,117	80%	$95 million to $105 million

4Q16 key development, redevelopment, and other projects placed into service:
- 422,980 RSF, 100% leased to Uber Technologies, Inc. at 1455 and 1515 Third Street;
- 305,006 RSF, 100% leased to Eli Lilly and Company at 10290 Campus Point Drive;
- 61,755 RSF, 100% leased to Otonomy, Inc. at 4796 Executive Drive; and
Executed a 293,855 RSF 15-year build-to-suit lease with Merck & Co., Inc. at 213 East Grand Avenue in our South San Francisco submarket; we anticipate commencing development 2Q17.

Increased common stock dividend

Common stock dividend for 2016 of $3.23 per common share, up 18 cents, or 6%, over 2015; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment.

Operating results	4Q16		4Q15		Change	2016		2015		Change
Net (loss) income attributable to Alexandria's common stockholders – diluted:
In Millions	$	(25.1)	$	35.1	N/A	$	(151.1)	$	116.9	N/A
Per Share	$	(0.31)	$	0.49	N/A	$	(1.99)	$	1.63	N/A

Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted:
In Millions	$	115.5	$	95.8	20.6%	$	421.3	$	375.8	12.1%
Per Share	$	1.42	$	1.33	6.8%	$	5.51	$	5.25	5.0%

Items included in net (loss) income attributable to Alexandria's common stockholders: (amounts are shown after deducting any amounts attributable to noncontrolling interests)

(In millions, except per share amounts)	Amount				Per Share – Diluted				Amount				Per Share – Diluted
(In millions, except per share amounts)	4Q16		4Q15		4Q16		4Q15		2016		2015		2016		2015
Gain on sales of real estate – rental properties and land parcels	$	3.7	$	12.4	$	0.05	$	0.17	$	3.8	$	12.4	$	0.05	$	0.17
Impairment of:
Real estate – rental properties	(3.5)		(8.7)		(0.04)		(0.12)		(98.2)		(23.3)		(1.29)		(0.33)
Real estate – land parcels and non- real estate investments	(12.5)		—		(0.16)		—		(113.5)		—		(1.49)		—
Loss on early extinguishment of debt	—		—		—		—		(3.2)		(0.2)		(0.04)		—
Preferred stock redemption charge	(35.7)		—		(0.44)		—		(61.3)		—		(0.81)		—
Total	$	(48.0)	$	3.7	$	(0.59)	$	0.05	$	(272.4)	$	(11.1)	$	(3.58)	$	(0.16)
Weighted-average shares of common stock outstanding – diluted	80.8		71.8						76.1		71.5

Core operating metrics and internal growth

Percentage of annual rental revenue from investment-grade tenants as of 4Q16: 49%
Percentage of annual rental revenue from Class A properties in AAA locations as of 4Q16: 79%
Occupancy for operating properties in North America at 96.6% as of 4Q16
Operating margin at 71% for 4Q16
Adjusted EBITDA margin at 67% for 4Q16
See "Solid internal growth" in the Key Highlights section (left side of page) of this Earnings Press Release for information on our leasing activity and same property net operating income growth.

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.

Strategic acquisitions

In November 2016, we acquired the remaining 49% interest in our real estate joint venture with Uber Technologies, Inc. for $90.1 million. The real estate joint venture owned land parcels located at 1455 and 1515 Third Street and a parking garage structure in our Mission Bay/SoMa submarket of San Francisco.
- The former real estate joint venture was expected to complete the development of two new Class A properties in 2018, pursuant to leases with Uber.
- As a result of the acquisition of the remaining 49% ownership interest, we own a 100% fee simple interest in both land parcels and the parking garage and are no longer obligated to fund the development of the two Class A properties.
- In connection with the acquisition of the remaining interest in the land and parking garage, we leased these assets to Uber for 75 years, beginning in November 2016. Uber will develop and own 100% of the two Class A properties on the land parcels.
- The $90.1 million purchase price includes $56.8 million payable in 2017.
- Initial stabilized yields on our total project investment of $155.0 million (including our investment in our initial 51% interest) are 14.4% and 7.0% (cash basis). Cash rents commence in February 2017.
In November 2016, we acquired One Kendall Square, a 644,771 RSF, nine-building collaborative life science and technology campus located in the east side of our Cambridge submarket of Greater Boston, for a purchase price of $725.0 million, including the assumption of a $203.0 million secured note payable. The campus is 97.3% occupied, and we expect to achieve an initial stabilized yield (cash basis) of 6.2% upon completion of near-term renewals and re-leasing of space (see below). This acquisition provides us with a significant opportunity to increase cash flows through the following:
- $47/RSF average in-place annual rents (mix of office gross rents and lab triple net rents), significantly below-market;
- 55% contractual lease expirations through 2019;
- Conversion 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.
In October 2016, we 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 of existing shell and office space into office/laboratory space.

Strategic dispositions

During 4Q16, we completed the dispositions of our remaining operating properties and land parcels in India for an aggregate sales price of approximately $53.4 million. As of December 31, 2016, we had no remaining investments in real estate in India.

Balance sheet management

Improvement in balance sheet leverage and liquidity

$14.2 billion total market capitalization as of 4Q16;
$2.2 billion of liquidity as of 4Q16;
Net debt to Adjusted EBITDA:
- 4Q16 annualized: 6.1x; 4Q16 trailing 12 months: 6.6x;
- 4Q17 annualized target range: 5.5x to 6.0x;
Fixed-charge coverage ratio:
- 4Q16 annualized: 3.8x; 4Q16 trailing 12 months: 3.6x;
- 4Q17 annualized target: greater than 4.0x;
Repurchased 3.0 million shares of our 7.00% Series D cumulative convertible preferred stock at an aggregate price of $108.2 million, or $36.12 per share, and recognized a preferred stock redemption charge of $35.7 million in 4Q16;
In October 2016, we 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. During 4Q16, we sold an aggregate of 3.4 million shares of common stock for gross proceeds of $354.2 million, or $105.73 per share, and net proceeds of approximately $348.4 million;
In December 2016, we sold an aggregate of 7.5 million shares of our common stock to settle our forward equity sales agreements executed in July 2016. Net proceeds, after issuance costs and underwriters' discount, of $715.9 million were used to fund the acquisition of One Kendall Square, located in East Cambridge, to lower net debt to Adjusted EBITDA by 0.3x, and fund construction;
Raised $380.9 million in 2016 from (i) completed dispositions aggregating $274.6 million and (ii) funding from our joint venture partner aggregating $106.3 million, primarily in 2016, related to the sale of a partial interest in 10290 Campus Point Drive. See page 4 of this earnings press release for additional information;
Current and future value-creation pipeline was 10% of gross investments in real estate in North America as of 4Q16, with a 4Q17 target of less than 10%; and
4% unhedged variable-rate debt as a percentage of total debt as of 4Q16.

Sustainability and health and wellness

51% of annual rental revenue expected from Leadership in Energy and Environmental Design ("LEED") certified projects upon completion of in-process projects.
In November 2016, we became the first REIT to be named a first-in-class Fitwel Champion to promote health and wellness in the workplace and to earn Fitwel building certifications.

Subsequent events in January 2017

Acquired land parcels aggregating 2.6 acres at 88 Bluxome Street in our Mission Bay/SoMa submarket of San Francisco for a purchase price of $130.0 million. We are currently obtaining entitlements for the development of this site and anticipate an aggregate of 1,070,925 RSF to be available for construction of two buildings in separate phases. We have leased the property back to the seller until we obtain entitlements.
Executed lease extensions with Novartis AG aggregating 302,626 RSF at 100 and 200 Technology Square in our Cambridge submarket of Greater Boston.

Incremental Annual Net Operating Income from Development and Redevelopment of New Class A Properties
December 31, 2016

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

Dispositions in 2016
December 31, 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 1Q16 to 3Q16:
16020 Industrial Drive/Maryland/Gaithersburg	4/21/2016	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
Land parcels in India	Various	28 acres	N/A				N/A				—				12,767	⁽²⁾
											—				27,867
Two joint ventures – 45% partial interest sales:
10290 Campus Point Drive/San Diego/University Town Center	6/29/16	305,006 RSF	$	15,832	⁽³⁾		$	14,665	⁽³⁾		106,263		⁽⁴⁾		—
10300 Campus Point Drive/San Diego/University Town Center	12/15/16	449,759 RSF	$	15,832	⁽³⁾		$	14,665	⁽³⁾		—				150,008	⁽⁴⁾

Dispositions completed in 4Q16:
306 Belmont Street and 350 Plantation Street/Greater Boston/ Route 495/Worcester	12/9/16	90,690 RSF	$	1,558			$	1,348			—				17,550
560 Eccles Avenue/San Francisco/South San Francisco	12/21/16	3.3 acres	N/A				N/A				—				12,000
7990 Enterprise Street/Canada	12/15/16	66,000 RSF	965				957				—				13,836
Operating properties and land parcels in India	4Q16	566,355 RSF / 168 acres	363				391				—				53,364	⁽²⁾
											—				96,750
											$	106,263		$	274,625


(1)	Represents annualized amounts for the quarter ended prior to the date of sale. Cash net operating income excludes straight-line rent and amortization of acquired below-market leases.
(2)	Represents the completion of the sale of all of our investments in real estate in India. During 2016, we recognized impairments of real estate related to the dispositions of assets in Asia aggregating $194.3 million. Refer to page 43 of our Supplemental Information for additional information.
(3)	Represents a 45% partial interest share of net operating income and cash net operating income: (i) anticipated upon stabilization of the redevelopment of 10290 Campus Point Drive and (ii) realized for 10300 Campus Point Drive during 3Q16.
(4)	Aggregate proceeds of $256.3 million, including gross proceeds of $68.6 million received as of 3Q16, $153.0 million received during 4Q16, and additional future proceeds of $34.7 million to be received primarily in 1Q17.

Acquisitions in 2016
December 31, 2016
(Dollars in thousands)

		Date of Purchase		Square Footage					Occupancy	Unlevered Yields
Property/Market/Submarket	Type	Date of Purchase	Number of Properties	Operating	Future Value-Creation	Purchase Price			Occupancy	Initial Stabilized Cash Basis		Initial Stabilized
Torrey Ridge Science Center/San Diego/Torrey Pines	Operating	10/3/16	3	294,993	—	$	182,500		87.1%	6.8%	⁽¹⁾	7.1%	⁽¹⁾
One Kendall Square/Greater Boston/Cambridge ⁽²⁾	Operating/ Development	11/7/16	9	644,771	172,500	725,000			97.3%	6.2%	⁽³⁾	6.4%	⁽³⁾
1455 and 1515 Third Street/San Francisco/Mission Bay/SoMa (acquisition of remaining 49% interest)	Operating	11/10/16	2	422,980	—	90,100		⁽⁴⁾	100.0%	N/A	⁽⁵⁾	N/A	⁽⁵⁾
			14	1,362,744	172,500	$	997,600

(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)	Refer to pages 5-7 of our Earnings Press Release and Supplemental Information for the Second Quarter Ended June 30, 2016, for additional discussion on our acquisition of One Kendall Square.
(3)	Upon stabilization at completion of the ground-up development of our entitled land parcel.
(4)	The purchase price includes $56.8 million payable in 2017.
(5)	See page 2 of our Earnings Press Release for discussion of our overall project investment and yields after our acquisition of the 49% noncontrolling interest.

Guidance
December 31, 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, 2017. 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 7.

Earnings per Share and Funds From Operations per Share Attributable to Alexandria's Common Stockholders – Diluted
Earnings per share	$1.49 to $1.69
Depreciation and amortization ⁽¹⁾		4.45
Allocation to unvested restricted stock awards		(0.04)
Funds from operations per share	$5.90 to $6.10

Key Assumptions	Low		High
Occupancy percentage in North America as of December 31, 2017	96.6%		97.2%

Lease renewals and re-leasing of space:
Rental rate increases	18.5%		21.5%
Rental rate increases (cash basis)	6.5%		9.5%
Same property performance:
Net operating income increase	1.5%		3.5%
Net operating income increase (cash basis)	5.5%		7.5%

Straight-line rent revenue ⁽⁴⁾	$	107	$	112
General and administrative expenses ⁽⁵⁾	$	68	$	73
Capitalization of interest	$	42	$	52
Interest expense	$	131	$	141

Key Credit Metrics		2017 Guidance
Net debt to Adjusted EBITDA – 4Q17 annualized		5.5x to 6.0x
Net debt and preferred stock to Adjusted EBITDA – 4Q17 annualized		5.5x to 6.0x
Fixed-charge coverage ratio – 4Q17 annualized		Greater than 4.0x
Value-creation pipeline percentage of gross real estate as of December 31, 2017		Less than 10%

Key Sources and Uses of Capital	Range				Midpoint
Sources of capital:
Net cash provided by operating activities after dividends	$	115	$	135	$	125
Incremental debt	460		440		450
Real estate dispositions and common equity ⁽²⁾	450		720		585
Total sources of capital	$	1,025	$	1,295	$	1,160
Uses of capital:
Construction	$	815	$	915	$	865
Acquisitions ⁽³⁾	150		250		200
7.00% Series D preferred stock repurchases	60		130		95
Total uses of capital	$	1,025	$	1,295	$	1,160
Incremental debt (included above):
Issuance of unsecured senior notes payable	$	375	$	475	$	425
Borrowings – secured construction loans	200		250		225
Repayments of secured notes payable	(5)		(10)		(8)
Repayment of unsecured senior term loan	(200)		(200)		(200)
$1.65 billion unsecured senior line of credit/other	90		(75)		8
Incremental debt	$	460	$	440	$	450

(1)	Includes depreciation related to the final purchase price allocations for the acquisitions of Torrey Ridge Science Center and One Kendall Square that closed in 4Q16.
(2)	Includes our share of the proceeds from the anticipated sale of a condo interest in 203,090 RSF of our unconsolidated real estate joint venture development project at 360 Longwood Avenue, aggregating approximately $65.7 million, pursuant to the exercise of a purchase option by the anchor tenant. The sale is expected to close in mid-2017.
(3)	Includes the acquisition of 88 Bluxome Street in our Mission Bay/SoMa submarket of San Francisco for $130.0 million, which closed in January 2017, and $56.8 million related to 1455 and 1515 Third Street in our Mission Bay/SoMa submarket (see page 5).
(4)	Straight-line rent revenue includes free rent and rent escalations. For competitive reasons, we do not provide disclosure of free rent included in straight-line rent revenue on expected deliveries in anticipation of future negotiations with potential tenants. During 4Q16, approximately 84% of straight-line rent revenue related to initial free rent concessions granted on value-creation projects recently placed into service. Initial free rent concessions granted on value-creation projects recently placed into service as a percentage of straight-line rent revenue for the year ending December 31, 2017 is expected to be consistent with 4Q16.
(5)	General and administrative expenses as a percentage of total assets and total revenues for the year ending December 31, 2017, are expected to be consistent with 2016.

Earnings Call Information and About the Company
December 31, 2016

We will host a conference call on Tuesday, January 31, 2017, 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 fourth quarter and year ended December 31, 2016. To participate in this conference call, dial (866) 524-3160 or (412) 317-6760 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the Alexandria Real Estate Equities, Inc. call. 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 5:00 p.m. ET/2:00 p.m. PT on Tuesday, January 31, 2017. The replay number is (877) 344-7529 or (412) 317-0088, and the confirmation code is 10096814.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the fourth quarter and year ended December 31, 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/2016q4.pdf.

About the Company

Alexandria Real Estate Equities, Inc. ARE is an urban office real estate investment trust ("REIT") uniquely focused on collaborative life science and technology campuses in AAA innovation cluster locations, with a total market capitalization of $14.2 billion and an asset base in North America of 25.2 million square feet as of December 31, 2016. The asset base in North America includes 19.9 million RSF of operating properties and development and redevelopment of new Class A properties (under construction or pre-construction), and 5.3 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. Alexandria has a longstanding and proven track record of developing Class A properties clustered in urban life science and technology campuses that provide its innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity and success. We believe these advantages result in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For additional information on Alexandria, please visit www.are.com.

***********

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 2017 earnings per share attributable to Alexandria's common stockholders – diluted, 2017 funds from operations 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, adverse general and local economic conditions, an unfavorable capital market environment, decreased leasing activity or 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
December 31, 2016
(In thousands, except per share amounts)

	Three Months Ended										Year Ended
	12/31/16		9/30/16		6/30/16		3/31/16		12/31/15		12/31/16		12/31/15
Revenues:
Rental	$	187,315	$	166,591	$	161,638	$	158,276	$	158,100	$	673,820	$	608,824
Tenant recoveries	58,270		58,681		54,107		52,597		54,956		223,655		209,063
Other income	3,577		5,107		10,331		5,216		10,899		24,231		25,587
Total revenues	249,162		230,379		226,076		216,089		223,955		921,706		843,474

Expenses:
Rental operations	73,244		72,002		67,325		65,837		68,913		278,408		261,232
General and administrative	17,458		15,854		15,384		15,188		15,102		63,884		59,621
Interest	31,223		25,850		25,025		24,855		28,230		106,953		105,813
Depreciation and amortization	95,222		77,133		70,169		70,866		72,245		313,390		261,289
Impairment of real estate	16,024		8,114		156,143		28,980		8,740		209,261		23,250
Loss on early extinguishment of debt	—		3,230		—		—		—		3,230		189
Total expenses	233,171		202,183		334,046		205,726		193,230		975,126		711,394

Equity in earnings (losses) of unconsolidated real estate joint ventures	86		273		(146)		(397)		(174)		(184)		1,651
Gain on sales of real estate – rental properties	3,715		—		—		—		12,426		3,715		12,426
Income (loss) from continuing operations	19,792		28,469		(108,116)		9,966		42,977		(49,889)		146,157
Loss from discontinued operations	—		—		—		—		—		—		(43)
Gain on sales of real estate – land parcels	—		90		—		—		—		90		—
Net income (loss)	19,792		28,559		(108,116)		9,966		42,977		(49,799)		146,114
Net income attributable to noncontrolling interests	(4,488)		(4,084)		(3,500)		(4,030)		(972)		(16,102)		(1,897)

Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s stockholders	15,304		24,475		(111,616)		5,936		42,005		(65,901)		144,217
Dividends on preferred stock	(3,835)		(5,007)		(5,474)		(5,907)		(6,246)		(20,223)		(24,986)
Preferred stock redemption charge	(35,653)		(13,095)		(9,473)		(3,046)		—		(61,267)		—
Net income attributable to unvested restricted stock awards	(943)		(921)		(1,085)		(801)		(628)		(3,750)		(2,364)

Net (loss) income attributable to Alexandria Real Estate Equities, Inc.'s common stockholders	$	(25,127)	$	5,452	$	(127,648)	$	(3,818)	$	35,131	$	(151,141)	$	116,867

Net (loss) income per share attributable to Alexandria Real Estate Equities, Inc.'s common stockholders – basic and diluted	$	(0.31)	$	0.07	$	(1.72)	$	(0.05)	$	0.49	$	(1.99)	$	1.63

Weighted-average shares of common stock outstanding:
Basic	80,800		76,651		74,319		72,584		71,833		76,103		71,529
Diluted	80,800		77,402		74,319		72,584		71,833		76,103		71,529

Dividends declared per share of common stock	$	0.83	$	0.80	$	0.80	$	0.80	$	0.77	$	3.23	$	3.05

Consolidated Balance Sheets
December 31, 2016
(In thousands)

	12/31/16			9/30/16		6/30/16		3/31/16		12/31/15
Assets
Investments in real estate	$	9,077,972		$	7,939,179	$	7,774,608	$	7,741,466	$	7,629,922
Investments in unconsolidated real estate joint ventures	50,221		⁽¹⁾	133,580		132,433		127,165		127,212
Cash and cash equivalents	125,032			157,928		256,000		146,197		125,098
Restricted cash	16,334			16,406		13,131		14,885		28,872
Tenant receivables	9,744			9,635		9,196		9,979		10,485
Deferred rent	335,974			318,286		303,379		293,144		280,570
Deferred leasing costs	195,937			191,765		191,619		192,418		192,081
Investments	342,477			320,989		360,050		316,163		353,465
Other assets	201,197			206,133		104,414		130,115		133,312
Total assets	$	10,354,888		$	9,293,901	$	9,144,830	$	8,971,532	$	8,881,017

Liabilities, Noncontrolling Interests, and Equity
Secured notes payable	$	1,011,292		$	789,450	$	722,794	$	816,578	$	809,818
Unsecured senior notes payable	2,378,262			2,377,482		2,376,713		2,031,284		2,030,631
Unsecured senior line of credit	28,000			416,000		72,000		299,000		151,000
Unsecured senior bank term loans	746,471			746,162		945,030		944,637		944,243
Accounts payable, accrued expenses, and tenant security deposits	731,671		⁽¹⁾	605,181		593,628		628,467		589,356
Dividends payable	76,914			66,705		67,188		64,275		62,005
Total liabilities	4,972,610			5,000,980		4,777,353		4,784,241		4,587,053

Commitments and contingencies

Redeemable noncontrolling interests	11,307			9,012		9,218		14,218		14,218

Alexandria Real Estate Equities, Inc.'s stockholders' equity:
7.00% Series D cumulative convertible preferred stock	86,914			161,792		188,864		213,864		237,163
6.45% Series E cumulative redeemable preferred stock	130,000			130,000		130,000		130,000		130,000
Common stock	877			768		766		729		725
Additional paid-in capital	4,672,650			3,649,263		3,693,807		3,529,660		3,558,008
Accumulated other comprehensive income (loss)	5,355			(31,745)		8,272		(8,533)		49,191
Alexandria's stockholders' equity	4,895,796			3,910,078		4,021,709		3,865,720		3,975,087
Noncontrolling interests	475,175			373,831		336,550		307,353		304,659
Total equity	5,370,971			4,283,909		4,358,259		4,173,073		4,279,746
Total liabilities, noncontrolling interests, and equity	$	10,354,888		$	9,293,901	$	9,144,830	$	8,971,532	$	8,881,017


(1)	See page 2 of our Earnings Press Release for additional information on our acquisition of the remaining 49% interest in our real estate joint venture with Uber.

Funds From Operations and Funds From Operations Per Share
December 31, 2016
(In thousands, except per share amounts)

The following tables present a reconciliation of net (loss) income 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 funds from operations attributable to Alexandria's common stockholders – diluted, and funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted, for the periods below:

	Three Months Ended										Year Ended
	12/31/16		9/30/16		6/30/16		3/31/16		12/31/15		12/31/16			12/31/15
Net (loss) income attributable to Alexandria's common stockholders	$	(25,127)	$	5,452	$	(127,648)	$	(3,818)	$	35,131	$	(151,141)		$	116,867
Depreciation and amortization	95,222		77,133		70,169		70,866		72,245		313,390			261,289
Noncontrolling share of depreciation and amortization from consolidated real estate JVs	(2,598)		(2,224)		(2,226)		(2,301)		(372)		(9,349)			(372)
Our share of depreciation and amortization from unconsolidated real estate JVs	655		658		651		743		655		2,707			1,734
Gain on sales of real estate – rental properties	(3,715)		—		—		—		(12,426)		(3,715)			(12,426)
Gain on sales of real estate – land parcels	—		(90)		—		—		—		(90)			—
Impairment of real estate – rental properties	3,506		6,293		88,395		—		8,740		98,194		⁽¹⁾	23,250
Allocation to unvested restricted stock awards	—		(438)		—		(80)		(522)		—			(1,758)

Funds from operations attributable to Alexandria's common stockholders – basic and diluted ⁽²⁾	67,943		86,784		29,341		65,410		103,451		249,996			388,584
Non-real estate investment income	—		—		(4,361)		—		(7,731)		(4,361)			(13,109)
Impairments of land parcels and non-real estate investments	12,511		4,886		67,162		28,980		—		113,539		⁽¹⁾	—
Loss on early extinguishment of debt	—		3,230		—		—		—		3,230			189
Preferred stock redemption charge	35,653		13,095		9,473		3,046		—		61,267			—
Allocation to unvested restricted stock awards	(605)		(359)		(530)		(358)		85		(2,356)			110

Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted	$	115,502	$	107,636	$	101,085	$	97,078	$	95,805	$	421,315		$	375,774


(1)	Includes impairment of real estate aggregating $209.3 million and impairment of non-real estate investment aggregating approximately $3.1 million, net of amounts attributable to noncontrolling interests.
(2)	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.

Funds From Operations and Funds From Operations Per Share (continued)
December 31, 2016
(In thousands)

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

	Three Months Ended												Year Ended
	12/31/16			9/30/16			6/30/16		3/31/16		12/31/15		12/31/16			12/31/15
Net (loss) income per share attributable to Alexandria's common stockholders	$	(0.31)		$	0.07		$	(1.72)	$	(0.05)	$	0.49	$	(1.99)		$	1.63
Depreciation and amortization	1.15			0.97			0.92		0.95		1.00		4.02			3.64
Gain on sales of real estate – rental properties	(0.05)			—			—		—		(0.17)		(0.05)			(0.17)
Impairment of real estate – rental properties	0.05			0.08			1.19		—		0.12		1.29			0.33

Funds from operations per share attributable to Alexandria's common stockholders – basic and diluted ⁽¹⁾	0.84			1.12			0.39		0.90		1.44		3.27			5.43
Non-real estate investment income	—			—			(0.06)		—		(0.11)		(0.06)			(0.18)
Impairments of land parcels and non-real estate investments	0.15			0.06			0.90		0.40		—		1.47			—
Loss on early extinguishment of debt	—			0.04			—		—		—		0.04			—
Preferred stock redemption charge	0.43			0.17			0.13		0.04		—		0.79			—

Funds from operations per share attributable to Alexandria's common stockholders – diluted, as adjusted	$	1.42		$	1.39		$	1.36	$	1.34	$	1.33	$	5.51		$	5.25

Weighted-average shares of common stock outstanding for calculating funds from operations per share and funds from operations, as adjusted, per share – diluted	81,280		⁽²⁾	77,402		⁽²⁾	74,319		72,584		71,833		76,412		⁽²⁾	71,529


(1)	Calculated in accordance with standards established by the NAREIT Board of Governors in its April 2002 White Paper and related implementation guidance.
(2)	Includes weighted average shares related to our forward equity sales agreements. See page 2 of our Earnings Press Release for additional information on our forward equity sales agreements and page 54 of our Supplemental Information for the definition of weighted-average shares of common stock outstanding – diluted.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/alexandria-real-estate-equities-inc-reports-fourth-quarter-and-year-ended-december-31-2016-financial-and-operating-results-300398874.html

SOURCE Alexandria Real Estate Equities, Inc.

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