Alexandria (ARE) Announces Lease Extension at Kendall Square
Alexandria Real Estate Equities, Inc. ARE recently clinched a renewal and 10-year lease extension with Takeda Pharmaceutical, a longstanding credit tenant, for 222,925 rentable square feet at 75/125 Binney Street at Kendall Square in the Cambridge submarket.
Being a significant early renewal, the lease extension will run through Mar 31, 2040. This move will ensure steady rental revenues from this property for the long term.
Takeda is an R&D-driven & patient-focused pharmaceutical company, providing highly innovative medicines across therapeutic areas. Its long-term commitment to the Alexandria Center at Kendall Square mega campus is demonstrated by its early renewal, which also emphasizes how crucial Alexandria's Labspace infrastructure is.
Cambridge's Kendall Square boasts a dense concentration of innovative and highly diversified life science companies, leading universities and renowned research institutions and a rich life science talent pool in the nation.
In 1999, Alexandria made its entry into the Cambridge submarket. Since then, ARE’s footprint has expanded to three premier mega campuses, Alexandria Technology Square, the Alexandria Center at One Kendall Square and the Alexandria Center at Kendall Square, totaling more than 5.4 million rentable square feet in operation. Known as "the most innovative square mile on the planet," Kendall Square in Cambridge is home to these mega campuses.
As of Dec 31, 2023, the Alexandria Center at Kendall Square mega campus had 2.8 million rentable square-foot of operating properties and approximately 216,000 rentable square-foot potential future development. This strategic location is positioned to meet the need for space for some of the most innovative life science companies in the world, like Takeda, as well as provide a path for future growth.
Under the terms of the lease extension at the LEED Gold certified research facility, Takeda and Alexandria will work together to improve the building's sustainability and environmental performance through a range of targeted initiatives, such as encouraging occupant health and wellness, prioritizing energy efficiency and reducing water usage.
After successfully completing the development of 75/125 Binney Street in 2015, Alexandria sold a 60% partial interest stake in the property to an institutional investor in 2019 for $438 million, or $1,880 per rentable square foot. The partial interest sale supported the company's goal to provide its stockholders with long-term value, representing $202.2 million in excess of book value and a 4.3% cash capitalization rate.
Alexandria caters to a diversified tenant base of high-quality companies ranging from multinational pharmaceutical companies, public and private biotechnology companies, manufacturers of complex medicines and top-tier investment-grade companies and institutions as well as technology entities.
As of Dec 31, 2023, investment-grade or publicly traded large-cap tenants accounted for 52% of the annual rental revenues in effect. The weighted average remaining lease term of all tenants was 7.4 years as of the end of the fourth quarter. For Alexandria’s top 20 tenants, it was 9.6 years. The lease term has remained steady over the recent quarters. Given the healthy demand for its premium assets, this upbeat trend is likely to continue in the upcoming period.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have gained 3.4% compared with the industry's upside of 2.7%.
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Stocks to Consider
Some better-ranked stocks from the REIT sector are Iron Mountain IRM and Lamar Advertising LAMR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for IRM’s 2024 funds from operations (FFO) per share is pegged at $4.38, suggesting year-over-year growth of 6.3%.
The Zacks Consensus Estimate for LAMR’s 2024 FFO per share stands at $7.74, indicating an increase of 3.6% from the year-ago quarter.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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