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Alexandria Gets Approval for Mercer Mega Block Development

Zacks Equity Research

Alexandria Real Estate Equities, Inc. ARE recently received the City of Seattle’s approval to develop a multi-use innovation campus at the Mercer Mega Block, spanning nearly 800,000 rentable square feet (RSF) of space. Through this development, the company has bagged one of the last large land parcels, aggregating around 3 acres, remaining in the Seattle’s South Lake Union tech hub.

This premier campus will consist of two 13-story office/laboratory towers, a 30,000-RSF community center and an on-site affordable housing property. The life-science campus will offer a remarkable platform for growing innovation by bringing together scientists and technologists under the same roof.

The company plans to offer modern amenities as well as dining and ground-floor retail options to vitalize the neighborhood. Further, the projects also incorporate upgradation of the 8th-Avenue pedestrian-only walkway, thereby offering a vibrant gathering space in Seattle's urban cluster.

As part of its philanthropic activities, Alexandria will also make a $5-million contribution to deal with homelessness issue in Seattle.

The project to transform the Mercer Mega Block into a life-science collaboration and innovation destination will cement Seattle’s position as a global center for life-science innovation. Encouragingly, in the past few years, the city has emerged as a leader in cell therapy and immunology. Hence, Alexandria’s endeavor to create a commercial life-science cluster in Seattle is a strategic fit and will strengthen its foothold in the region.

In fact, the company has a notable footprint in the Seattle market, with around 1.5 million RSF of office/laboratory space. Furthermore, a value-creation development pipeline totaling roughly 850,000 RSF, along with the Mercer Mega Block campus, will strategically expand its Seattle asset ownership to more than 3 million RSF.

A tight-supply condition and encouragingly low vacancy rates for Class A space in Lake Union will enable the company to witness strong demand for life-science space and boost occupancy levels. In fact, Alexandria’s properties are home to a high-quality and diverse tenant roster, which in turn, ensures steady rental revenues for the company.

In fact, as of second-quarter 2019, investment-grade or publicly-traded large-cap tenants accounted for 53% of annual rental revenues in effect. Furthermore, 77% of the annual rental revenues are from Class A properties in AAA locations.

Nonetheless, it has a significant development and redevelopment pipeline. This exposes the company to risk of rising construction costs and lease-up concerns.

The company carries a Zacks Rank #2 (Buy), currently. Over the past three months, its shares have rallied 2.9%, outperforming the industry’s growth of 0.7%. 

Other Key Picks

Americold Realty Trust COLD currently sports a Zacks Rank of 1 (Strong Buy). The Zacks Consensus Estimate for 2019 funds from operations (FFO) remained unchanged at $1.23, over the past 30 days. Moreover, its shares have surged 42.8%, year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arbor Realty Trust’s ABR current-year FFO estimates moved north to $1.27 in a month’s time. Also, the company’s shares have gained 27.7% in the year-to-date period. At present, it flaunts a Zacks Rank of 1.

City Office REIT’s CIO ongoing-year FFO estimate has been revised upward, over the past two months to $1.18. Additionally, the stock has appreciated 37.4%, so far this year. It currently carries a Zacks Rank of 2.

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