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Alexandria Expands in San Diego With Alexandria GradLabs

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Alexandria Real Estate Equities, Inc. ARE recently announced a new addition to its Campus Pointe complex in San Diego with the unveiling of Alexandria GradLabs. The 98,000-rentable-square-foot (RSF) development project at 9880 Campus Point Drive, currently under construction, will likely be delivered in 2020.

Specifically, the property will offer a highly flexible, amenity-rich and immediately occupiable life-science space to post-seed-stage life-science companies. This will enable these companies to accelerate growth in the dynamic San Diego life-science market.

Notably, Campus Pointe by Alexandria is a well-equipped campus in the University Town Center submarket. Further, with close proximity to future Mid-Coast Trolley station, the transit-oriented development project makes it a strategic location to add Alexandria GradLabs.

Hence, owing to its prime location and easy commuting options, Campus Pointe is expected to witness healthy leasing activity and occupancy. In fact, anchor tenants include Eli Lilly and Company, Celgene Corporation and UC San Diego.

As for Alexandria GradLabs, the company is witnessing robust demand for the property and has executed an initial lease at 9880 Campus Point Drive. Also, growth of the life-science industry in San Diego is fueling demand for cluster campuses in the region. Hence, this new proprietary offering is a strategic fit for the company.

Furthermore, the campus offers long-term growth opportunities with scope for accretive development and redevelopment, aggregating 697,000 RSF, to create mega campus spanning a 1.6 million RSF.

Alexandria has a significant footprint in San Diego with an operating asset base covering nearly 5 million RSF of space. Additionally, it has 1.1 million RSF under construction and pre-construction that is expected to be delivered through 2022. With this, the company is well poised to drive on the innovation trend and growing demand of life-science campuses.

However, a significant development and redevelopment pipeline escalates operational risks, and exposes the company to rising construction costs and lease-up concern. This is expected to impede its near-term bottom-line performance.

Alexandria currently carries a Zacks Rank #3 (Hold). Its shares have increased 9.15% over the past three months.

Key Picks

Better-ranked stocks from the REIT space are Terreno Realty Corporation TRNO, Hersha Hospitality Trust HT and Boston Properties, Inc. BXP. All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Terreno Realty’s funds from operations (FFO) per share estimates for first-quarter 2019 have been revised marginally upward to 35 cents in a week’s time. Further, it has a long-term growth rate of 8.40%.

Hersha Hospitality’ Zacks Consensus Estimate for first-quarter 2019 FFO per share remained unchanged at 22 cents in the last month. Also, it has a long-term growth rate of 4.70%.

Boston Properties’ FFO per share estimates for the ongoing quarter has been revised marginally north to $1.64in seven days’ time. Also, it has a long-term growth rate of 6.20%.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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