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Alexandria & Adaptive Boost Ties With New Lease for Seattle HQ

Zacks Equity Research

Alexandria Real Estate Equities, Inc. ARE recently announced signing of a 12-year, full-building headquarter lease at 1165 Eastlake Avenue East by Adaptive Biotechnologies Corporation. The move has helped enhance and extend Alexandria’s long-term strategic relationship with this commercial-stage biotechnology company.

The 100,000 rentable square feet (RSF) office/laboratory development is in the heart of its Lake Union life-science cluster in Seattle. This ground-up development project at 1165 Eastlake is likely to be delivered in 2020, and Adaptive is expected to start occupying the new space in 2021.

Adaptive has an existing facility at 1551 Eastlake Avenue East that is also owned and operated by Alexandria. Therefore, signing lease for the new headquarter at 1165 Eastlake Avenue East helps the company to expand in close proximity.

Notably, Alexandria has played a crucial role in creating and growing Seattle’s Lake Union life-science cluster. The company’s expansion efforts in The Eastlake Life Science Campus include 1150 Eastlake Avenue East. This adjacent 260,000 RSF office/laboratory development project is also witnessing solid demand from a variety of innovative entities.

The pre-construction of 1150 Eastlake will likely begin in 2020 and its initial occupancy is expected to take place in 2022. The strong demand will likely help the company achieve significant pre-leasing of the building prior to its initial occupancy.

Alexandria’s properties are located in markets, characterized by high barriers to entry and exit, and a limited supply of available space, enabling it to enjoy higher occupancy rate. The above-mentioned lease also reflects the solid demand for the company’s properties. Moreover, adequate financial flexibility and a decent liquidity position poise the company well to pursue strategic development and redevelopment projects.

Recently, Alexandria reported its second-quarter 2019 results. The company reported funds from operations (FFO), as adjusted of $1.73 per share, beating the Zacks Consensus Estimate by a whisker. The figure also improved from the year-ago quarter’s reported tally of $1.64.

Continued strong leasing activity and rental rate growth helped the company excel in the first half of the year. In addition, solid external growth and strategic capital allocation to highly leased value-creation pipeline are encouraging.

Shares of this Zacks Rank #2 (Buy) company have gained 27%, year to date, compared with the industry’s growth of 22.7%.

Other Stocks to Consider

Investors can also consider other similar-ranked stocks from the REIT industry like Extra Space Storage Inc. EXR, PS Business Parks, Inc. PSB and Prologis, Inc. PLD. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Extra Space Storage’s FFO per share estimates for the current year inched up 0.4% to $4.83 over the past month.

PS Business Parks’ Zacks Consensus Estimate for the ongoing year’s FFO per share moved up 1.8% to $6.83 in the past month.

Prologis’ Zacks Consensus Estimate for 2019 funds from operations (FFO) per share moved 1.2% north to $3.27 in a month’s time.

Note: Funds from operations (FFO) is a widely used metric to gauge the performance of REITs rather than net income as it indicates cash flow from their operations. FFO is obtained after adding depreciation and amortization to earnings and subtracting the gains on sales.

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