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Alexandria (ARE) Announces Pricing of $900M Senior Notes

Zacks Equity Research
Vanda (VNDA) shares have started gaining and might continue moving higher in the near term, as indicated by solid earnings estimate revisions.

Alexandria Real Estate Equities, Inc. ARE recently announced the pricing of $900 million of senior notes. The company will be using the proceeds for green projects and towards the general and corporate purposes.

Particularly, the company has priced the public offering in two tranches. The first tranche consists notes of $450 million with a rate of 4% and is slated to mature in 2024. The second tranche comprises notes of $450 million with a rate of 4.7% and is scheduled to mature in 2030. Subject to the satisfaction of certain customary closing conditions, the offering is likely to be settled on Jun 21, 2018.

The notes that are due in 2024, have been priced at 99.933% of the principal amount to yield 4.013%. Whereas the notes that are due in 2030, are priced at 99.916% of the principal amount and will be yielding 4.709% at maturity.

The notes, which are unconditionally guaranteed by Alexandria Real Estate Equities, L.P. — an indirect subsidiary of the Alexandria — are unsecured obligations of the company.

Alexandria plans to utilize the proceeds from notes due 2024 in green projects, which focus on the development, redevelopment and improvement of tenants. The projects have either received or are likely to get Gold or Platinum LEED certification.

The proceeds from the other offering will be used to pay for general as well as corporate purposes. This includes lowering unsecured senior debt obligations assumed by Alexandria.

Notably, the company’s growth initiatives, in the form of development and redevelopment of new Class A properties in AAA locations, is likely to get a boost from this offering. In fact, during first-quarter 2018, the company placed into service 91,155 rentable square feet (RSF) at its development project at 100 Binney Street in Cambridge submarket, which is fully leased to four high-quality biotechnology entities, and 27,315 RSF at its redevelopment project at 266 and 275 Second Avenue in Route 128 submarket leased to Visterra, Inc. During the aforementioned period, Alexandria also commenced development projects aggregating 651,951 RSF.

Shares of Alexandria have outperformed the industry it belongs to in the past 12 months. The stock has gained 6.6% against 3.3% decline experienced by its industry. Further, the company has seen the Zacks Consensus Estimate for 2018 funds from operations (FFO) per share being revised marginally upward in a month’s time.

Alexandria currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

A few better-ranked stocks from the same space are Arbor Realty Trust ABR, Terreno Realty Corporation TRNO and Extra Space Storage Inc. EXR. While Arbor Realty and Terreno Realty sport a Zacks Rank #1, Extra Space Storage carries a Zacks Rank #2 (Buy).

Arbor Realty Trust’s Zacks Consensus Estimates for 2018 FFO per share remained unchanged at $1.03 over the past month. Its shares have returned 15.3% in the past six months.

Terreno Realty’s Zacks Consensus Estimates for 2018 FFO per share have been revised upward by 1.6% to $1.28 over the past month. The stock has rallied 2.9% in six months’ time.

Extra Space Storage’s FFO per share estimates for 2018 have been revised upward marginally to $4.62 over the past month. The stock has gained 12.4% during the past six months.

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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