Alexandria (ARE) Beats on Q3 FFO & Revenues, Revises View

Alexandria Real Estate Equities, Inc. ARE reported third-quarter 2022 adjusted funds from operations (FFO) per share of $2.13, surpassing the Zacks Consensus Estimate by a cent. The reported figure also compared favorably with the year-ago quarter’s $1.95.

Results reflect decent leasing activity and rental rate growth during the quarter. Year-over-year improvement in the top line was noticeable.

Total revenues of $659.9 million in the quarter outpaced the consensus estimate mark of $638.8 million. The figure increased 20.5% from the prior-year quarter’s $547.8 million.

Behind the Headlines

Reflecting robust demand for its high-quality office/laboratory space, Alexandria’s total leasing activity aggregated 1.7 million rentable square feet (RSF) of space during the third quarter. Lease renewals and re-leasing of space amounted to 1.1 million RSF. The leasing of development and redevelopment space was 0.3 million RSF.

Alexandria registered rental rate growth of 27.1% during the reported quarter. On a cash basis, the rental rate increased 22.6%.

On a year-over-year basis, same-property net operating income (NOI) was up 5.1%. It climbed 10.6% on a cash basis. Occupancy of operating properties in North America remained high at 94.3%.

During third-quarter 2022, investment-grade or publicly-traded large-cap tenants accounted for 49% of the annual rental revenues in effect. Weighted-average remaining lease term of all tenants is 7.2 years. For Alexandria’s top 20 tenants, it is 9.7 years.

As of Sep 30, 2022, the tenant receivables balance was $7.8 million.

During the reported quarter, Alexandria completed acquisitions in its key life-science cluster submarkets totaling 1.2 million RSF of value-creation opportunities for a total price of $316.7 million. Also, Alexandria placed into service development and redevelopment projects totaling 332,961 RSF across multiple submarkets that resulted in $30 million of incremental NOI.

During the three months ended Sep 30, 2022, ARE completed partial interest sale and dispositions worth $960.4 million.

Liquidity

Alexandria exited third-quarter 2022 with cash and cash equivalents of $533.8 million, up from $420.3 million as of Jun 30, 2022. It had $6.4 billion of liquidity at the end of the reported quarter.

The net debt and preferred stock to adjusted EBITDA was 5.4X, and the fixed-charge coverage was 4.9X in the third quarter on an annualized basis. As of the September-quarter end, ARE had no debt maturities before 2025, and its weighted-average remaining term was 13.2 years.

As of Sep 30, 2022, the company’s remaining aggregate amount available under its at-the-market (ATM) program for future sales of common stock was $246.6 million.

Revised 2022 Outlook

Alexandria narrowed its 2022 guidance for adjusted FFO per share.
It now projects the same to lie in the range of $8.40 to $8.42 from $8.38 to $8.44 estimated earlier. The mid-point was unchanged at $8.41. The Zacks Consensus Estimate for the FFO per share is currently pegged at $8.42.

ARE maintained the guidance for same-property NOI growth at 6-8% and rental rate increases for lease renewals and re-leasing of space at 30-35%. However, it lowered its guidance for occupancy in North America (as of Dec 31, 2022) in the band of 95.0-95.6% from 95.2-95.8% guided earlier.

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

Alexandria Real Estate Equities, Inc. Price, Consensus and EPS Surprise

Alexandria Real Estate Equities, Inc. price-consensus-eps-surprise-chart | Alexandria Real Estate Equities, Inc. Quote

Upcoming Earnings Releases

We now look forward to the earnings releases of other REITs like SBA Communications SBAC, slated to report on Oct 27. The same for Extra Space Storage EXR and Public Storage PSA is scheduled on Nov 1.

The Zacks Consensus Estimate for SBA Communications’ third-quarter 2022 FFO per share is pegged at $3.04, suggesting a year-over-year increase of 12.2%. SBAC currently carries a Zacks Rank #3.

The Zacks Consensus Estimate for Extra Space Storage’s third-quarter 2022 FFO per share stands at $2.18, indicating a year-over-year increase of 17.8%. EXR currently has a Zacks Rank #3.

The Zacks Consensus Estimate for Public Storage’s third-quarter 2022 FFO per share is pegged at $4.05, implying a year-over-year increase of 18.4%. PSA currently carries a Zacks Rank of 3.

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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