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Alexandria's (ARE) Q2 FFO Beats, Revenues Rise Y/Y, View Up

Zacks Equity Research
·4 min read

Alexandria Real Estate Equities, Inc. ARE reported second-quarter 2022 adjusted funds from operations (FFO) per share of $2.10, surpassing the Zacks Consensus Estimate of $2.06. The reported figure also compared favorably with the year-ago quarter’s $1.93.

Alexandria witnessed continued healthy leasing activity and rental rate growth during the quarter.

Total revenues in the quarter were $643.8 million, climbing 26.3% from the prior-year quarter’s $509.6 million.

Behind the Headlines

Reflecting robust demand for its high-quality office/laboratory space, Alexandria’s total leasing activity aggregated 2.3 million rentable square feet (RSF) of space during the second quarter. Lease renewals and re-leasing of space amounted to 1.1 million RSF. The leasing of development and redevelopment space was 0.9 million RSF.

Alexandria registered rental rate growth of 45.4% during the reported quarter. On a cash basis, the rental rate increased 33.9%.

On a year-over-year basis, same-property net operating income (NOI) was up 7.5%. It climbed 10.2% on a cash basis. Occupancy of operating properties in North America remained high at 94.6%.

During second-quarter 2022, investment-grade or publicly-traded large-cap tenants accounted for 50% of the annual rental revenues in effect. Weighted-average remaining lease term of all tenants is 7.1 years. For Alexandria’s top 20 tenants, it is 10.2 years.

As of Jun 30, 2022, the tenant receivables balance was $7.1 million.

During the second quarter, Alexandria completed acquisitions in its key life-science cluster submarkets totaling 1.1 million RSF of future development and redevelopment opportunities for a total price of $280.1 million. Also, Alexandria placed into service development and redevelopment projects totaling 375,394 RSF across multiple submarkets.

During the three months ended Jun 30, 2022, ARE completed partial interest sale and dispositions worth $548.7 million.

Liquidity

Alexandria exited second-quarter 2022 with cash and cash equivalents of $420.3 million, down from $775.1 million as of Mar 31, 2022. It had $5.5 billion of liquidity at the end of the reported quarter.

The net debt and preferred stock to adjusted EBITDA was 5.5X, and the fixed-charge coverage was 5.1X in the second quarter on an annualized basis. As of Jul 25, 2022, ARE had no debt maturities before 2025, and its weighted-average remaining term of debt as of Jun 30, 2022, was 13.6 years.

Raised 2022 Outlook

Alexandria raised its 2022 guidance for adjusted FFO per share by 3 cents at the mid-point, backed by strong same-property performance. It now projects adjusted FFO to lie in the range of $8.38 to $8.44, with the mid-point being $8.41. The Zacks Consensus Estimate for the same is currently pegged at $8.40.

ARE also increased the guidance range for same-property NOI growth from 5.9-7.9% to 6-8%. However, it maintained its guidance for occupancy in North America (as of Dec 31, 2022) in the band of 95.2-95.8% and rental rate increases for lease renewals, re-leasing of space of 30-35%.

Alexandria currently carries a Zacks Rank #3 (Hold). 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

Upcoming Earnings Releases

We now look forward to the earnings releases of other REITs like Equity Residential EQR and Highwoods Properties HIW, slated to report on Jul 26. The same for SBA Communications SBAC is scheduled on Aug 1.

The Zacks Consensus Estimate for Equity Residential’s second-quarter 2022 FFO per share is pegged at 85 cents, suggesting a year-over-year increase of nearly 9%. EQR currently carries a Zacks Rank #3.

The Zacks Consensus Estimate for Highwoods’ second-quarter 2022 FFO per share stands at 98 cents, indicating a year-over-year increase of 5.4%. HIW currently has a Zacks Rank #3.

The Zacks Consensus Estimate for SBA Communications’ second-quarter 2022 FFO per share is pegged at $2.98, implying a year-over-year increase of 12.9%. SBAC currently carries a Zacks Rank of 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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