Alexandria Real Estate Equities, Inc. Reports Third Quarter Ended September 30, 2018, Financial and Operating Results: Strong Internal and External Growth, Operational Excellence and Growing Dividends

3Q18

YTD 3Q18

Total leasing activity – RSF

696,468

3,163,628

Lease renewals and re-leasing of space:

Rental rate increases

26.9%

Rental rate increases (cash basis)

16.9%

15.0%

RSF (included in total leasing activity above)

475,863

1,437,676

Property

Leased %

Target Delivery

Initial Stabilized

Initial Stabilized (Cash)

2018

78%

7.5%

7.0%

2019

89%

7.3%

6.7%

2,608,623 RSF

86%

7.3%

6.8%

(1)    Includes 3Q18 commencement of our redevelopment project aggregating 142,400 RSF at 681 Gateway 
        Boulevard in our South San Francisco submarket.

YTD

3Q18

3Q17

3Q18

3Q17

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

 In millions

$

210.2

$

51.3

$

394.1

$

108.6

 Per share

$

1.99

$

0.55

$

3.85

$

1.20

Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted:

 In millions

$

173.6

$

140.8

$

504.0

$

407.5

 Per share

$

1.66

$

1.51

$

4.92

$

4.49

See "Items Included in Net Income Attributable to Alexandria's Common Stockholders" below for additional information.

Items included in net income attributable to Alexandria's common stockholders:

YTD

(In millions, except per share 
     amounts)

3Q18

3Q17

3Q18

3Q17

3Q18

3Q17

3Q18

3Q17

Amount

Per Share –
Diluted

Amount

Per Share –
Diluted

Realized gain on non-real estate 
     investment

$

—

$

—

$

—

$

—

$

8.3

$

—

$

0.08

$

—

Unrealized gains on non-real 
     estate investments⁽¹⁾

117.2

—

1.11

—

194.5

—

1.90

—

Gain on sales of real estate

35.7

⁽²⁾

14.1

⁽²⁾

0.34

0.15

35.7

⁽²⁾

14.5

0.35

0.15

Impairment of:

Real estate

—

—

—

—

(6.3)

(0.2)

(0.06)

—

Non-real estate investments

—

—

—

—

—

(4.5)

—

(0.05)

Loss on early extinguishment of 
     debt

(1.1)

—

(0.01)

—

(1.1)

(0.7)

(0.01)

(0.01)

Gain on early extinguishment of 
     debt

0.8

⁽²⁾

—

0.01

—

0.8

—

0.01

—

Preferred stock redemption

     charge

—

—

—

—

—

(11.3)

—

(0.12)

Allocation to unvested restricted 
     stock awards

(2.4)

(0.2)

(0.02)

(3.4)

—

(0.03)

—

Total

$

$

13.9

$

1.43

$

0.15

$

228.5

$

$

2.23

$

(0.02)

Weighted-average shares of common stock 
     outstanding for calculation of earnings per share –
     diluted

105.4

93.3

102.4

90.8

(1)  See "Investments" on page 42 of our Supplemental Information for additional information

(2)  Included in equity in earnings of unconsolidated real estate joint ventures in our consolidated statements of 
       income

3Q18

Quarter

Trailing 12

4Q18

Annualized

Months

Goal

5.7x

6.1x

Less than 5.5x

Fixed-charge coverage ratio

4.1x

4.3x

Greater than 4.0x

Unhedged variable-rate debt as a percentage of 
     total debt

6%

N/A

Less than 5%

Current and future value-creation pipeline as a 
     percentage of gross investments in real estate 
     in North America

12%

N/A

Amended Agreement

Change

Line of Credit

Term Loan

Line of Credit

Term Loan

Aggregate
     commitments

$2.2 billion

$350.0 million

Up $550 million

No change

Maturity date

January 2024

January 2024

Extended by 27
months

Extended by 36
months

Interest rate

L+0.825%

L+0.90%

Down 17.5 bps⁽¹⁾

Down 20 bps⁽¹⁾

(1)

Includes interest rate reductions of 10 bps and 15 bps on our unsecured senior line of credit and
unsecured senior bank term loan, respectively, related to the upgrade of our corporate issuer credit rating
from Moody's Investors Service. See "Credit Rating Upgrade" on the previous page for additional
information.

Debt

Payment Date

Stated
Rate

Amount

(Loss) Gain
on Early
Extinguishment
of Debt

2019 Unsecured Senior Bank 
     Term Loan

September 2018

L+1.20%

$

200,000

$

Secured construction loan

July 2018

L+1.50%

$

150,000

$

(299)

Menlo Gateway, Phase I⁽¹⁾

August 2018

L+2.50%

$

133,137

$

761

⁽¹⁾

(1)

This loan for our unconsolidated real estate joint venture was refinanced with a new loan for
$145.0 million that bears an interest rate of 4.15%. Gain on early extinguishment of debt is included in
equity in earnings of unconsolidated real estate joint ventures in our consolidated statements of income.

(Dollars in thousands, except per share amounts)

3Q18

Shares issued

1,559,083

Average issue price per share

$

127.66

Net proceeds

$

195,504

Remaining availability

$

658,691

Property

Submarket/Market

Date of
Purchase

Number of
Properties

Operating
Occupancy

Square Footage

Unlevered Yields⁽¹⁾

Purchase
Price

Operating

Operating with
Future
Redevelopment

Active
Development/
Redevelopment

Future
Development

Initial
Stabilized

Initial
Stabilized
(Cash)

  219 East 42nd Street

New York City/
     New York City

7/10/18

1

100%

—

349,947

⁽²⁾

—

230,000

⁽²⁾

6.7%

⁽²⁾

$

203,000

  701 Dexter Avenue North

Lake Union/Seattle

7/20/18

—

N/A

—

—

—

217,000

33,500

  Other

Other

100%

45,626

—

—

—

N/A

N/A

20,500

2

45,626

349,947

—

447,000

257,000

October Acquisition:

  30-02 48th Avenue

New York City/
     New York City

10/9/18

1

100%

—

36,661

⁽³⁾

140,098

⁽³⁾

—

75,000

1H18 acquisitions

745,255

 Total

$

1,077,255

2018 guidance midpoint

$

1,080,000

(1)

We expect to provide total estimated costs and related yields in the future around the commencement of development and redevelopment.

(2)

Refer to the "New Class A Development and Redevelopment Properties: Summary of Pipeline" on page 38 of our Supplemental Information for additional information.

(3)

We acquired a 176,759 RSF building, of which 79% is undergoing conversion from existing office space to office/laboratory space through redevelopment and 21% is office space that is leased and occupied. Upon expiration of the in-place
leases, we have the opportunity to convert this office space to office/laboratory space through redevelopment.

At 100%

Our Share

Property/Submarket/Market

Date of
Sale

RSF

Sales
Price

Debt
Repaid

Sales Price
per RSF

Capitalization
Rate
(Cash Basis)

Sales
Price

Sales Price,
Net of Debt

Gain

Capitalization
Rate

360 Longwood Avenue/Longwood Medical Area/
     Greater Boston⁽¹⁾

9/26/18

210,709

$

349,500

$

95,000

$

1,659

5.1%

4.7%

$

96,113

$

69,988

$

35,678

Land Parcel/Northern Virginia/Maryland

7/2/18

N/A

N/A

N/A

N/A

N/A

N/A

6,000

6,000

—

(1)

We sold our remaining 27.5% ownership interest in this unconsolidated real estate joint venture.

(2)

During the second quarter of 2018, we entered into an agreement to sell this land parcel and recognized an impairment of $6.3 million to lower its carrying amount to estimated fair value less selling costs.

Guidance
September 30, 2018
(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, 2018. 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 of this Earnings Press Release for additional information.

Summary of Key Changes in Guidance

Guidance

Summary of Key Changes in Key Sources and Uses of Capital 
     Guidance

Guidance Midpoint

As of 10/29/18

As of 7/30/18

As of 10/29/18

As of 7/30/18

EPS, FFO per share, and FFO per share, as adjusted

See updates below⁽¹⁾

Real estate dispositions and common equity⁽²⁾

$

1,490

$

1,430

Rental rate increases

22.5% to 25.5%

17.0% to 20.0%

Acquisitions

$

1,080

$

1,010

Rental rate increases (cash basis)

11.5% to 14.5%

9.5% to 12.5%

Projected Earnings per Share and Funds From Operations per Share Attributable to Alexandria's 
     Common Stockholders – Diluted

As of 10/29/18

As of 7/30/18

Earnings per share ("EPS")

$4.34 to $4.36

$2.87 to $2.93

Depreciation and amortization

4.50

4.50

Gain on sales of real estate

(0.35)

—

Allocation to unvested restricted stock awards

(0.06)

(0.05)

Funds from operations per share

$8.43 to $8.45

$7.32 to $7.38

Unrealized gains on non-real estate investments⁽³⁾

(1.90)

(0.76)

Realized gain on non-real estate investment in 1Q18

(0.08)

(0.08)

Impairment of real estate – land parcels

0.06

0.06

Preferred stock redemption charge in October 2018

0.02

—

Allocation to unvested restricted stock awards

0.03

0.03

Other

0.03

—

Funds from operations per share, as adjusted

$6.59 to $6.61

$6.57 to $6.63

Midpoint

$6.60

$6.60

Key Assumptions

Low

High

Occupancy percentage in North America as of December 31, 2018

97.1%

97.7%

Lease renewals and re-leasing of space:

 Rental rate increases

22.5%

25.5%

 Rental rate increases (cash basis)

11.5%

14.5%

Same property performance:

 Net operating income increase

2.5%

4.5%

 Net operating income increase (cash basis)

9.0%

11.0%

Straight-line rent revenue

$

92

$

102

General and administrative expenses

$

85

$

90

Capitalization of interest

$

55

$

65

Interest expense

$

155

$

165

Guidance 
as of 10/29/18

Key Credit Metrics

Net debt to Adjusted EBITDA – 4Q18 annualized

Less than 5.5x

Net debt and preferred stock to Adjusted EBITDA – 4Q18 annualized

Less than 5.5x

Fixed-charge coverage ratio – 4Q18 annualized

Greater than 4.0x

Unhedged variable-rate debt as a percentage of total debt as of December 31, 2018

Less than 5%

Value-creation pipeline as a percentage of gross real estate as of December 31, 2018

8% to 12%

Key Sources and Uses of Capital

Range

Midpoint

Key Items
Remaining
After 9/30/18

Sources of capital:

 Net cash provided by operating activities after dividends

$

140

$

180

$

160

 Incremental debt

550

510

530

 Real estate dispositions and common equity

1,390

1,590

1,490

$

111

⁽⁴⁾

Total sources of capital

$

2,080

$

2,280

$

2,180

Uses of capital:

 Construction

$

1,050

$

1,150

$

1,100

$

305

 Acquisitions

1,030

1,130

1,080

⁽⁵⁾

Total uses of capital

$

2,080

$

2,280

$

2,180

Incremental debt (included above):

 Issuance of unsecured senior notes payable

$

900

$

900

$

900

 Repayments of secured notes payable

(160)

(165)

(163)

 Repayment of unsecured senior bank term loan

(200)

(200)

(200)

 $2.2 billion unsecured senior line of credit/other

10

(25)

(7)

Incremental debt

$

550

$

510

$

530

(1)

Guidance range for funds from operations ("FFO") per share, as adjusted, was reduced from six cents to two cents, with the midpoint unchanged at $6.60.

(2)

Our updated key sources and uses of capital guidance excludes the sale of a partial joint venture interest in a Class A property located in our Cambridge submarket with proceeds of approximately $400 million or greater that we expect to close over the next one to two quarters. We can provide no assurance this transaction will be completed.

(3)

Excludes future unrealized gains or losses that could be recognized in earnings from changes in fair value of equity investments after September 30, 2018. See page 42 of our Supplemental Information for additional information.

(4)

The following transactions have been completed through September 30, 2018: (a) real estate dispositions with net proceeds aggregating $76.0 million (See "Dispositions" on page 6 of this Earnings Press Release for additional information), (b) $806.5 million from our forward equity contracts, of which we have settled $200.2 million, and (c) sales of common stock under our ATM programs aggregating $496.3 million. We expect to receive proceeds of $606.3 million, to be further adjusted as provided in the forward equity sales agreements, upon settlement of the remaining forward equity sales agreements by April 2019. The proceeds of $606.3 million were calculated assuming the forward equity sales agreements will be settled entirely by the full physical delivery of shares of our common stock in exchange for cash proceeds. Although we expect to settle remaining forward equity sales agreements by the full physical delivery of shares of our common stock, we may elect cash settlement or net share settlement for all or a portion of our obligations under these agreements, either of which could result in no additional cash proceeds to us.

(5)

See "Acquisitions" on page 5 of this Earnings Press Release for additional information.

Consolidated Statements of Income
September 30, 2018
(In thousands, except per share amounts)

Three Months Ended

Nine Months Ended

9/30/18

6/30/18

3/31/18

12/31/17

9/30/17

9/30/18

9/30/17

Revenues:

 Rental

$

255,496

$

250,635

$

244,485

$

228,025

$

216,021

$

750,616

$

635,156

 Tenant recoveries

81,051

72,159

73,170

70,270

67,058

226,380

188,874

 Other income

5,276

2,240

2,484

496

2,291

10,000

5,276

Total revenues

341,823

325,034

320,139

298,791

285,370

986,996

829,306

Expenses:

 Rental operations

99,759

91,908

91,771

88,073

83,469

283,438

237,536

 General and administrative

22,660

22,939

22,421

18,910

17,636

68,020

56,099

 Interest

42,244

38,097

36,915

36,082

31,031

117,256

92,563

 Depreciation and amortization

119,600

118,852

114,219

107,714

107,788

352,671

309,069

 Impairment of real estate

—

6,311

—

—

—

6,311

203

 Loss on early extinguishment of debt

1,122

—

—

2,781

—

1,122

670

Total expenses

285,385

278,107

265,326

253,560

239,924

828,818

696,140

Equity in earnings of unconsolidated real estate joint ventures

40,718

1,090

1,144

376

14,100

42,952

15,050

Investment income⁽¹⁾

122,203

⁽¹⁾

12,530

85,561

—

—

220,294

—

Gain on sales of real estate – rental properties

—

—

—

—

—

—

270

Gain on sales of real estate – land parcels

—

—

—

—

—

—

111

Net income

219,359

60,547

141,518

45,607

59,546

421,424

148,597

Net income attributable to noncontrolling interests

(5,723)

(5,817)

(5,888)

(6,219)

(5,773)

(17,428)

(18,892)

Net income attributable to Alexandria Real Estate Equities, Inc.'s 
     stockholders

213,636

54,730

135,630

39,388

53,773

403,996

129,705

Dividends on preferred stock

(1,301)

(1,302)

(1,302)

(1,302)

(1,302)

(3,905)

(6,364)

Preferred stock redemption charge

—

—

—

—

—

—

(11,279)

Net income attributable to unvested restricted stock awards

(3,395)

(1,412)

(1,941)

(1,255)

(1,198)

(6,010)

(3,498)

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

$

208,940

$

52,016

$

132,387

$

36,831

$

51,273

$

394,081

$

108,564

Net income per share attributable to Alexandria Real Estate Equities, 
     Inc.'s common stockholders:

 Basic

$

2.01

$

0.51

$

1.33

$

0.39

$

0.55

$

3.86

$

1.20

 Diluted

$

1.99

$

0.51

$

1.32

$

0.38

$

0.55

$

3.85

$

1.20

Weighted-average shares of common stock outstanding:

 Basic

104,179

101,881

99,855

95,138

92,598

101,991

90,336

 Diluted

105,385

102,236

100,125

95,914

93,296

102,354

90,766

Dividends declared per share of common stock

$

0.93

$

0.93

$

0.90

$

0.90

$

0.86

$

2.76

$

2.55

(1)    See "Investments" on page 42 of our Supplemental Information for additional information.

Consolidated Balance Sheets
September 30, 2018
(In thousands)

9/30/18

6/30/18

3/31/18

12/31/17

9/30/17

Assets

Investments in real estate

$

11,587,312

$

11,190,771

$

10,671,227

$

10,298,019

$

10,046,521

Investments in unconsolidated real estate joint ventures

197,970

192,972

169,865

110,618

33,692

Cash and cash equivalents

204,181

287,029

221,645

254,381

118,562

Restricted cash

29,699

34,812

37,337

22,805

27,713

Tenant receivables

11,041

8,704

11,258

10,262

9,899

Deferred rent

511,680

490,428

467,112

434,731

402,353

Deferred leasing costs

238,295

232,964

226,803

221,430

208,265

Investments

957,356

790,753

724,310

523,254

485,262

Other assets

368,032

333,757

291,639

228,453

213,056

Total assets

$

14,105,566

$

13,562,190

$

12,821,196

$

12,103,953

$

11,545,323

Liabilities, Noncontrolling Interests, and Equity

Secured notes payable

$

632,792

$

776,260

$

775,689

$

771,061

$

1,153,890

Unsecured senior notes payable

4,290,906

4,289,521

3,396,912

3,395,804

2,801,290

Unsecured senior line of credit

413,000

—

490,000

50,000

314,000

Unsecured senior bank term loans

347,306

548,324

548,197

547,942

547,860

Accounts payable, accrued expenses, and tenant security deposits

907,094

849,274

783,986

763,832

740,070

Dividends payable

101,084

98,676

93,065

92,145

83,402

Total liabilities

6,692,182

6,562,055

6,087,849

5,620,784

5,640,512

Commitments and contingencies