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Alexandria (ARE) Q1 FFO & Revenues Top Estimates on High NOI

Zacks Equity Research

Alexandria Real Estate Equities, Inc. ARE reported first-quarter 2019 funds from operations (FFO), as adjusted of $1.71 per share, beating the Zacks Consensus Estimate of $1.68. The figure also improved from the year-ago quarter’s reported tally of $1.68. 

Further, quarterly revenues of $358.8 million outpaced the Zacks Consensus Estimate of $348.1 million. Revenues jumped 12.1% year over year.

Results reflect decent internal and external growth. Particularly, the company witnessed impressive rental rate growth of 24.3% on a cash basis in the first quarter. This indicates the highest quarterly cash rental rate growth over the past 10 years.

Behind the Headline Numbers

Alexandria’s total leasing activity aggregated to 1,248,972 rentable square feet (RSF) of space during the March-end quarter.

On a year-over-year basis, same-property NOI grew 2.3%. It climbed 10.2% on a cash basis. Occupancy of operating properties in North America remained high at 97.2%.

As of first-quarter 2019, investment-grade or large-cap tenants accounted for 50% of annual rental revenues in effect. Furthermore, 77% of the annual rental revenues are from Class A properties in AAA locations.

Notably, during the January-March quarter, the company acquired 10 properties, for $383 million, in key submarkets.

Liquidity

Alexandria exited first-quarter 2019 with cash and cash equivalents of $261.4 million, up from $234.2 million reported at the end of the previous quarter. The company had $2.7 billion of liquidity as of the end of the reported quarter.

Outlook

Alexandria revised its guidance for adjusted FFO per share for 2019 to $6.90-$7 from the prior outlook of $6.85-$7.05. The Zacks Consensus Estimate for the same is currently pinned at $6.96 and lies within the range.

The company’s 2019 guidance is backed by expectations for occupancy in North America (as of Dec 31, 2019) in the band of 97.7- 98.3%, rental rate increases for lease renewals, and re-leasing of space of 26-29%, and same-property NOI growth of 1-3%.

Our Viewpoint

Alexandria’s Q1 FFO per share and revenue beat is encouraging.

Further, in February 2019, the company received a credit rating upgrade from S&P Global Ratings to BBB+/Stable from BBB/Positive. Moreover, the company hiked dividends for first-quarter 2019.

Alexandria Real Estate Equities, Inc. Price and EPS Surprise
 


Alexandria Real Estate Equities, Inc. Price and EPS Surprise | Alexandria Real Estate Equities, Inc. Quote

Alexandria currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Cousins Properties Incorporated CUZ reported FFO per share of 20 cents in the January-March quarter, in line with the Zacks Consensus Estimate. The figure came in higher than the prior-year reported tally of 15 cents. 

Duke Realty Corporation’s DRE first-quarter 2019 core FFO per share of 33 cents surpassed the Zacks Consensus Estimate of 32 cents. Moreover, the figure came in ahead of the year-ago quarter’s reported tally of 30 cents.

Ventas, Inc. VTR delivered first-quarter normalized FFO of 99 cents, beating the Zacks Consensus Estimate of 96 cents. The reported figure, however, came in lower than the prior year’s $1.05.

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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