Alexandria (ARE) Q4 FFO Beats on Solid Rental Rate Growth
Alexandria Real Estate Equities, Inc. ARE reported adjusted funds from operations (FFO) of $1.97 per share for fourth-quarter 2021, up 7.1% from the year-ago quarter’s $1.84. The figure also surpassed the Zacks Consensus Estimate of $1.96.
This year-over-year improvement resulted from 24.4% year-over-year top-line growth to $576.9 million. Results reflect decent internal growth.
Alexandria witnessed continued healthy leasing activity and rental rate growth during the quarter.
For the full year, adjusted FFO per share came in at $7.76, higher than the prior-year tally of $7.30 and in line with the Zacks Consensus Estimate. This was backed by 12.1% growth in total revenues to $2.11 billion.
Alexandria also issued its 2022 outlook, expecting FFO per share in the range of $8.26-$8.46, with the mid-point at $8.36. In addition, as of Dec 31, 2021, the tenant receivables balance was $7.4 million.
Behind the Headlines
Reflecting robust demand for its high-quality office/laboratory space, Alexandria’s total leasing activity aggregated to 4.1 million rentable square feet (RSF) of space during the December quarter. Lease renewals and re-leasing of space amounted to 1.95 million RSF. Leasing of development and redevelopment space was 1,795,633 RSF.
Alexandria registered rental rate growth of 35.9% during the reported quarter. On a cash basis, rental rate increased 22.9%.
On a year-over-year basis, same-property NOI was up 5%. It climbed 7.5% on a cash basis. Occupancy of operating properties in North America remained high at 94%.
As of fourth-quarter 2021, investment-grade or publicly-traded large-cap tenants accounted for 51% of the annual rental revenues in effect. Weighted-average remaining lease term of all tenants is 7.5 years. For Alexandria’s top 20 tenants, it is 10.9 years.
During the fourth quarter, Alexandria completed acquisitions in its key life-science cluster submarkets totaling 4.1 million SF, comprising 3.9 million RSF of future development opportunities and 191,879 RSF of operating space for a total price of $1.5 billion, including the previously announced acquisition of One Rogers Street in Cambridge submarket for a purchase price of $849.4 million.
During the reported quarter, Alexandria placed into service development and redevelopment projects totaling 600,768 RSF, which are 100% leased across multiple submarkets.
Liquidity
Alexandria exited fourth-quarter 2021 with cash and cash equivalents of $361.3 million, up from $325.9 million seen at the end of third-quarter 2021. ARE had $5.4 billion of liquidity as of the end of the reported quarter. The net debt and preferred stock to adjusted EBITDA was 5.2Xand the fixed-charge coverage ratio was 5.3X for fourth-quarter 2021 annualized. ARE has no debt maturities before 2024 and its weighted-average remaining term of debt as of Dec 31, 2021, is 12.1 years.
Outlook
Alexandria also issued 2022 guidance, projecting the adjusted FFO per share in the range of $8.26-$8.46, with the mid-point being$8.36. The Zacks Consensus Estimate for the same is currently pinned at $8.36.
Alexandria’s current-year expectations are backed by anticipations for occupancy in North America (as of Dec 31, 2022) in the band of 95.2-95.8%, rental rate increases for lease renewals, re-leasing of space of 30-35% and same-property NOI growth of 5.5-7.5%.
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-eps-surprise-chart | Alexandria Real Estate Equities, Inc. Quote
We now look forward to the earnings releases of other REITs like AvalonBay Communities AVB, Mid-America Apartment Communities MAA and Essex Property ESS scheduled for this week.
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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