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Alexandria (ARE) Q3 FFO Beats on Solid Rental Rate Growth

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Alexandria Real Estate Equities, Inc. ARE reported third-quarter 2021 funds from operations (FFO) as adjusted of $1.95 per share, up 6.6% from the year-ago quarter’s $1.83. The figure also surpassed the Zacks Consensus Estimate of $1.94.

This year-over-year improvement resulted from the marginal year-over-year top-line growth to $547.8 million. Results reflect decent internal growth. The company witnessed continued healthy leasing activity and rental rate growth during the quarter.

Though the company revised the 2021 outlook, it kept the mid-point of its FFO as adjusted per share guidance unchanged at $7.75.

In addition, management noted that the company’s tenant collections have been consistently high, with 99.6% of October 2021 billings collected as of Oct 25, 2021. Also, as of Sep 30, 2021, the tenant receivables balance was $7.7 million.

Behind the Headline Numbers

Reflecting robust demand for its high-quality office/laboratory space, Alexandria’s total leasing activity aggregated to 1.81 million rentable square feet (RSF) of space during the September-end quarter. Lease renewals and re-leasing of space amounted to 0.7 million RSF. Leasing of development and redevelopment space was 1,005,890 RSF.

The company registered rental rate growth of 35.3% during the reported quarter. On a cash basis, rental rate increased 19.3%.

On a year-over-year basis, same-property NOI was up 3%. It climbed 7.1% on a cash basis. Occupancy of operating properties in North America remained high at 94.4%.

As of third-quarter 2021, investment-grade or publicly-traded large-cap tenants accounted for 53% of the annual rental revenues in effect. Weighted-average remaining lease term of all tenants is 7.4 years. For the company’s top 20 tenants, it is 10.6 years.

During the July-September period, the company completed acquisitions in its key life-science cluster submarkets totaling 5.6 million SF, 4.9 million RSF of value-creation opportunities, and 0.7 million RSF of operating space, for a total price of $989.7 million.

During the reported quarter, the company placed into service development and redevelopment projects totaling 238,163 RSF, which are 100% leased across four submarkets.

Liquidity

Alexandria exited third-quarter 2021 with cash and cash equivalents of $325.9 million, up from the $323.9 million seen at the end of second-quarter 2021. The company had $4 billion of liquidity as of the end of the reported quarter. The net debt and preferred stock to adjusted EBITDA was 5.8x and the fixed-charge coverage ratio was 5.1x for third-quarter 2021 annualized. The company has no debt maturities prior to 2024 and its weighted-average remaining term of debt as of Sep 30, 2021 is 11.9 years.

Outlook

Alexandria also revised the 2021 outlook, guiding the FFO as adjusted per share in the range of $7.74-$7.76 compared with the $7.71-$7.79 estimated earlier, keeping the mid-point unchanged. The Zacks Consensus Estimate for the same is currently pinned at $7.78.

The company’s current-year guidance is backed by anticipations for occupancy in North America (as of Dec 31, 2021) in the band of 93.3-93.9%, rental rate increases for lease renewals, and re-leasing of space of 33-36%, and same-property NOI growth of 2-4%.

Alexandria currently carries a Zacks Rank #2 (Buy). 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 and EPS Surprise
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

We now look forward to the earnings releases of other REITs like AvalonBay Communities AVB, Duke Realty DRE scheduled for Oct 27, and Equinix, Inc. EQIX for Nov 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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