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Shares of Alexandria Real Estate Equities, Inc. (ARE - Free Report) have gained 18.3% in the quarter-to-date period, outperforming the industry’s rally of 11.5%.
This CA-based urban office real estate investment trust (REIT), focusing on collaborative life science, agtech and technology campuses, posted better-than-anticipated second-quarter 2022 results. It reported adjusted funds from operations (FFO) per share of $2.10, surpassing the Zacks Consensus Estimate of $2.06. Total revenues in the quarter were $643.8 million, climbing 26.3% from the prior-year quarter’s $509.6 million.
Image Source: Zacks Investment Research
Despite the recent jump, shares of the company are still down 23.1% in the year-to-date period. Let’s try to decipher the main reasons for the latest surge in the stock price.
Alexandria has a significant market presence in Greater Boston, San Francisco Bay Area, New York City, San Diego, Seattle, Maryland and Research Triangle. The growing demand for its Class A properties in the AAA innovation cluster locations of North America is driving the occupancy level and aiding rental rate growth.
As of Jun 30, 2022, the occupancy of operating properties in North America remained high at 94.6%. The occupancy, excluding the vacancy at the recently acquired properties, was 98.4% as of the same date. Given the robust demand for its properties, ARE is expected to witness high levels of occupancy in the upcoming quarters which will support rent growth.
Alexandria has been experiencing strong internal growth. It witnessed total leasing activity of 2.3 million rentable square feet (RSF) of space during the June quarter based on strong demand for its high-quality office/laboratory space. The lease renewals and re-leasing of space totaled 1.1 million RSF. Also, it registered rental rate growth of 45.4% and 33.9% (cash basis) in the reported quarter, respectively, reflecting the second highest and highest rental rate growth in the company’s history. With solid demand for its properties, this upbeat trend is likely to continue.
Alexandria is focused on the acquisition, development and redevelopment of the new Class A properties in AAA locations. In the second quarter, the company 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.
Furthermore, Alexandria placed into service development and redevelopment projects totaling 375,394 RSF across multiple submarkets in the second quarter. As of Jun 30, 2022, the company had 5.9 million RSF of Class A properties undergoing construction. Moreover, it had 9.9 million RSF of near-term and intermediate-term development and redevelopment projects and 17.2 million SF of future development projects. In the second quarter, ARE started the construction of six value-creation projects totaling 917,599 RSF.
Solid dividend payouts remain the biggest enticement for REIT investors, and ARE is known for consistently raising its dividend rates. In May 2022, it announced a 2.6% sequential hike in its second-quarter 2022 cash dividend payment to $1.18 per share. Such efforts boost investors’ confidence in the stock.
Analysts seem bullish on this Zacks Rank #3 (Hold) stock. The recent estimate revision trend for 2022 FFO per share has marginally moved northward in the past week to $8.42.
Although Alexandria’s huge capital deployment for development and redevelopment activities seems encouraging, it raises operational risks and lease-up concerns. Also, higher interest rates may make borrowings costlier to purchase and develop real estate.
The Zacks Consensus Estimate for Prologis’ 2022 FFO per share has moved marginally upward in the past month to $5.17.
The Zacks Consensus Estimate for SBA Communication’s current-year FFO per share has moved 1.2% northward in the past month to $12.13.
The Zacks Consensus Estimate for Host Hotels & Resorts’ ongoing year’s FFO per share has been raised 6.1% over the past month to $1.73.
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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Key Factors Why Alexandria (ARE) Stock Jumped 18.3% QTD
Shares of Alexandria Real Estate Equities, Inc. (ARE - Free Report) have gained 18.3% in the quarter-to-date period, outperforming the industry’s rally of 11.5%.
This CA-based urban office real estate investment trust (REIT), focusing on collaborative life science, agtech and technology campuses, posted better-than-anticipated second-quarter 2022 results. It reported adjusted funds from operations (FFO) per share of $2.10, surpassing the Zacks Consensus Estimate of $2.06. Total revenues in the quarter were $643.8 million, climbing 26.3% from the prior-year quarter’s $509.6 million.
Image Source: Zacks Investment Research
Despite the recent jump, shares of the company are still down 23.1% in the year-to-date period. Let’s try to decipher the main reasons for the latest surge in the stock price.
Alexandria has a significant market presence in Greater Boston, San Francisco Bay Area, New York City, San Diego, Seattle, Maryland and Research Triangle. The growing demand for its Class A properties in the AAA innovation cluster locations of North America is driving the occupancy level and aiding rental rate growth.
As of Jun 30, 2022, the occupancy of operating properties in North America remained high at 94.6%. The occupancy, excluding the vacancy at the recently acquired properties, was 98.4% as of the same date. Given the robust demand for its properties, ARE is expected to witness high levels of occupancy in the upcoming quarters which will support rent growth.
Alexandria has been experiencing strong internal growth. It witnessed total leasing activity of 2.3 million rentable square feet (RSF) of space during the June quarter based on strong demand for its high-quality office/laboratory space. The lease renewals and re-leasing of space totaled 1.1 million RSF. Also, it registered rental rate growth of 45.4% and 33.9% (cash basis) in the reported quarter, respectively, reflecting the second highest and highest rental rate growth in the company’s history. With solid demand for its properties, this upbeat trend is likely to continue.
Alexandria is focused on the acquisition, development and redevelopment of the new Class A properties in AAA locations. In the second quarter, the company 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.
Furthermore, Alexandria placed into service development and redevelopment projects totaling 375,394 RSF across multiple submarkets in the second quarter. As of Jun 30, 2022, the company had 5.9 million RSF of Class A properties undergoing construction. Moreover, it had 9.9 million RSF of near-term and intermediate-term development and redevelopment projects and 17.2 million SF of future development projects. In the second quarter, ARE started the construction of six value-creation projects totaling 917,599 RSF.
Solid dividend payouts remain the biggest enticement for REIT investors, and ARE is known for consistently raising its dividend rates. In May 2022, it announced a 2.6% sequential hike in its second-quarter 2022 cash dividend payment to $1.18 per share. Such efforts boost investors’ confidence in the stock.
Analysts seem bullish on this Zacks Rank #3 (Hold) stock. The recent estimate revision trend for 2022 FFO per share has marginally moved northward in the past week to $8.42.
Although Alexandria’s huge capital deployment for development and redevelopment activities seems encouraging, it raises operational risks and lease-up concerns. Also, higher interest rates may make borrowings costlier to purchase and develop real estate.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Prologis (PLD - Free Report) , SBA Communications (SBAC - Free Report) and Host Hotels & Resorts (HST - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Prologis’ 2022 FFO per share has moved marginally upward in the past month to $5.17.
The Zacks Consensus Estimate for SBA Communication’s current-year FFO per share has moved 1.2% northward in the past month to $12.13.
The Zacks Consensus Estimate for Host Hotels & Resorts’ ongoing year’s FFO per share has been raised 6.1% over the past month to $1.73.
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.