Alexandria Real Estate Equities, Inc. Reports Fourth Quarter and Year Ended December 31, 2015 Financial and Operating Results

PASADENA, Calif., Feb. 1, 2016 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE: ARE) today announced financial and operating results for the fourth quarter and year ended December 31, 2015.

Joel S. Marcus, chairman, chief executive officer, and founder of Alexandria Real Estate Equities, Inc., stated, "We concluded another very successful year where our best-in-class team delivered strong results and continued growth," including the following key highlights:

• Funds from operations ("FFO") per share – diluted, as adjusted, of $1.33, up 8.1% for 4Q15, compared to $1.23 for 4Q14; and $5.25, up 9.4%, for 2015, compared to $4.80 for 2014;
• In December 2015, we completed $453.1 million in sales of partial interest in three Class A assets at an average capitalization rate of 4.6%;
• $2.0 billion of liquidity as of 4Q15;
• 6.6x net debt to adjusted EBITDA – 4Q15 annualized; with goal of achieving less than 6.0x;
• 7.0x net debt to adjusted EBITDA – 4Q15 trailing 12 months;
• Executed leases for 1.0 million rentable square feet ("RSF") and 5.0 million RSF during 4Q15 and 2015, respectively; the highest annual leasing volume in the Company's 20-year history;
• Rental rate increases of 19.8% and 7.3% (cash basis) for 4Q15 lease renewals and re-leasing of space aggregating 0.5 million RSF (included in the 1.0 million RSF above);
• Highly leased value-creation pipeline:
  • 89% leased, 1.5 million RSF, targeted for completion in 2016 (weighted toward 4Q16), expected to generate $75 to $80 million of incremental annual net operating income ("NOI") upon stabilization
  • 67% leased, 1.9 million RSF, targeted for completion in 2017 and 2018, expected to generate $105 to $110 million of incremental annual NOI upon stabilization
• Same properties NOI growth of 1.3% and 2.0% (cash basis) for 4Q15, compared to 4Q14;
• Same properties NOI growth of 1.3% and 4.7% (cash basis) for 2015 compared to 2014;
• In November 2015, we completed an offering of $300.0 million of unsecured senior notes payable at a stated interest rate of 4.30% with a maturity of January 15, 2026;
• In 4Q15, proceeds from sales of equity investments and investment income from life science entities aggregated $27.5 million and $7.7 million, respectively;
• During 4Q15, we sold an aggregate of 832,982 shares of common stock under our ATM program for gross proceeds of $75.0 million, or $90.04 per share, and net proceeds of approximately $73.9 million; and
• Common stock dividend for 2015 of $3.05 per common share, up 17 cents, or 5.9%, over 2014; continuation of strategy to share growth in cash flows from operating activities with our stockholders while also importantly retaining capital for reinvestment.

Sales of partial interest in core Class A assets at 4.6% cash cap rate to TIAA-CREF

Refer to our "Dispositions" section on page 48 of our Supplemental Information package for additional information on our asset sales.

Results

• FFO attributable to Alexandria Real Estate Equities, Inc.'s ("Alexandria's") common stockholders – diluted, as adjusted:

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

Core operating metrics

• Total revenues:

• NOI, including our pro rata share of consolidated and unconsolidated real estate joint ventures:

• Total annualized base rent ("ABR"): 54% generated from investment-grade tenants
• Top 20 tenants generate 49.4% of total ABR:
  • 81% of ABR generated from investment-grade tenants
  • 8.3 years weighted average remaining lease term
• Executed leases for 1.0 million RSF during 4Q15, including:
  • 170,523 RSF to Vertex Pharmaceuticals Incorporated at 3115/3215 Merryfield Row in our Torrey Pines submarket
  • 71,010 RSF to Juno Therapeutics, Inc. at 400 Dexter Avenue North in our Lake Union submarket
  • 19.8% and 7.3% (cash basis) rental rate increases on lease renewals and re-leasing of space aggregating 480,963 RSF
• Executed leases for 5.0 million RSF during 2015, the highest annual leasing volume in the Company's 20-year history:
  • 19.6% and 9.9% (cash basis) rental rate increases on lease renewals and re-leasing of space aggregating 2,209,893 RSF
• Same property NOI growth:
  • 1.3% and 2.0% (cash basis) increase for 4Q15, compared to 4Q14
  • 1.3% and 4.7% (cash basis) increase for 2015, compared to 2014
• Occupancy for operating properties in North America of 97.2% as of 4Q15
• Operating margin at 69% for 4Q15
• Adjusted EBITDA margin at 65% for 4Q15

External growth: visible, multiyear, highly leased value creation pipeline

• Highly leased development and redevelopment projects:
  • 89% leased, 1.5 million RSF, targeted for completion in 2016 (weighted toward 4Q16), expected to generate $75 to $80 million of incremental annual NOI upon stabilization
  • 67% leased, 1.9 million RSF, targeted for completion in 2017 and 2018, expected to generate $105 to $110 million of incremental annual NOI upon stabilization
• 4Q15 commencements of development and redevelopment projects, include:
  • 61,755 RSF development project at 4796 Executive Drive in our University Town Center submarket; 100% leased to Otonomy, Inc.
  • 48,880 RSF redevelopment project at 10151 Barnes Canyon in our Sorrento Mesa submarket

Balance sheet

• $2.0 billion of liquidity as of 4Q15
• 6.6x net debt to adjusted EBITDA – 4Q15 annualized; with goal of achieving less than 6.0x
• 6.9x net debt to adjusted EBITDA – 4Q15 annualized, excluding $7.7 million of investment income for 4Q15
• 7.0x net debt to adjusted EBITDA – 4Q15 trailing 12 months
• 3.6x fixed charge coverage ratio – 4Q15 annualized
• In November 2015, we completed an offering of $300.0 million of unsecured senior notes payable at a stated interest rate of 4.30% with a maturity of January 15, 2026
• In 4Q15, proceeds from sales of equity investments and investment income from life science entities aggregated $27.5 million and $7.7 million, respectively
• During 4Q15, we sold an aggregate of 832,982 shares of common stock under our ATM program for gross proceeds of $75.0 million, or $90.04 per share, and net proceeds of approximately $73.9 million
• In October 2015, we closed a secured construction loan with commitments available for borrowing aggregating $350.0 million, bearing interest at a rate of LIBOR+1.50%, for our 98% leased development project at 50/60 Binney Street in our Cambridge submarket
• $10.9 billion total market capitalization as of 4Q15
• 15% of gross investments in real estate in value-creation pipeline as of 4Q15, with a target range from 10% to 15% as of 4Q16
• Limited debt maturities through 2018 and well-laddered maturity profile
• 12% unhedged variable-rate debt as a percentage of total debt as of 4Q15

LEED certifications

• 57% of our total ABR will be generated from LEED projects upon completion of our in-process projects
• During 2015, we received Gold certifications at 360 Longwood Avenue in our Longwood Medical Area submarket and 3033 Science Park Road in our Torrey Pines submarket

Guidance
December 31, 2015
(Dollars in thousands, except per share amounts)

The following updated guidance is based on our current view of existing market conditions and other 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 4.

Key sources and uses for 2016 have been updated to reflect a $100 million decrease in construction spending primarily due to the timing of construction spending related to projects expected to be placed into service in 2017 and 2018, as well as updates in the scope of several projects. The mid-point of construction of $850 million is projected to be funded by $375 million of internally generated sources (net cash provided by operating activities after dividends and debt from growth in EBITDA), $350 million of asset sales (minimum target), and $125 million of other capital, including sales of "available-for-sale" equity securities.

Earnings Call Information and About the Company
December 31, 2015

We will host a conference call on Tuesday, February 2, 2016, at 3:00 p.m. Eastern Time ("ET")/noon Pacific Time ("PT") that is open to the general public to discuss our financial and operating results for the fourth quarter and year ended December 31, 2015. To participate in this conference call, dial (877) 719-9789 or (719) 325-4799 and confirmation code 3794612 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, February 2, 2016. The replay number is (888) 203-1112 or (719) 457-0820, and the confirmation code is 3794612.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the fourth quarter and year ended December 31, 2015, is available in the "For Investors" section of our website at www.are.com or by following this link: http://www.are.com/fs/2015q4.pdf.

For any questions, please contact Joel S. Marcus, chairman, chief executive officer, and founder, at (626) 578-9693 or Dean A. Shigenaga, executive vice president and chief financial officer, at (626) 578-0777.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE: ARE) is a fully integrated, self-administered and self-managed urban office real estate investment trust ("REIT") uniquely focused on collaborative science and technology campuses in AAA innovation cluster locations with a total market capitalization of $10.9 billion as of December 31, 2015, and an asset base of 32.0 million square feet, including 20.1 million RSF of operating properties and development and redevelopment projects (under construction or pre-construction), as well as an additional 11.9 million square feet of future ground-up development projects. Alexandria pioneered this niche in 1994 and has since established a dominant market presence in key locations, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland, and Research Triangle Park.

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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, NOI, 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 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, 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, performance of our operations in areas such as current and future development and redevelopment projects being placed into service, 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.