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Alexandria (ARE) to Post Q4 Earnings: What's in the Cards?
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Alexandria Real Estate Equities Inc. (ARE - Free Report) is scheduled to release fourth-quarter and full-year 2023 results on Jan 29 after the closing bell. Its quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Pasadena, CA-based life science real estate investment trust (REIT), focusing on collaborative life science, agtech and technology campuses in AAA innovation cluster locations, delivered a surprise of 0.89% in terms of adjusted FFO per share. ARE’s performance in the quarter was mainly driven by decent leasing activity and rental rate growth.
Alexandria has a decent surprise history. Over the preceding four quarters, its adjusted FFO per share surpassed the Zacks Consensus Estimate on each occasion, the average beat being 1.26%. This is depicted in the graph below:
Alexandria Real Estate Equities, Inc. Price and EPS Surprise
With the demand for life-science assets booming due to the increasing need for drug research and innovation, in the fourth quarter, ARE is expected to have benefited from its emphasis on the development of Class A/A+ properties strategically located within AAA innovation cluster regions. These locations are highly appealing to life science, agtech and technology companies seeking tenancy.
Apart from the advantageous locations of the company’s properties, these locations are characterized by high barriers to entry for new landlords, high barriers to exit for tenants and a limited supply of available space. Moreover, Alexandria’s diverse and creditworthy tenant base, which includes many industry bellwethers, is anticipated to have led to impressive rent collections in the to-be-reported quarter.
As a result, ARE is expected to have witnessed healthy demand for its life science assets in the fourth quarter, driving healthy leasing and re-leasing activity and high occupancy levels. For the fourth quarter of 2023, we expect Alexandria’s same-store occupancy to be 94.3%. Rental income is expected to increase 8.7% on a year-over-year basis in the quarter.
In the fourth quarter, Alexandria inked a long-term full-building lease with Novo Nordisk (NVO - Free Report) , a leading global healthcare company. The lease was signed for 165,940 rentable square feet (RSF) for the building situated at 60 Sylvan Road, which is ARE’s active redevelopment project. This anchors the 1.5 million RSF Alexandria Center for Life Science – Waltham mega campus in Greater Boston – which includes 40, 50 and 60 Sylvan Road, 35 Gatehouse Drive and 840 Winter Street. The property is expected to be delivered to Novo Nordisk in 2025.
Additionally, this December, Alexandria signed a long-term lease for 99,557 RSF with CARGO Therapeutics (CRGX - Free Report) at 835 Industrial Road on the Alexandria Center for Life Science – San Carlos mega campus in the San Francisco Bay Area. CARGO is expected to take occupancy in the mission-critical life science space in early 2024.
The Zacks Consensus Estimate for Alexandria’s quarterly revenues currently stands at $738.89 million, suggesting an increase of 10.24% from the prior-year period’s reported figure.
However, ARE’s substantial active development and redevelopment pipeline, although encouraging for long-term growth, exposes it to the risk of rising construction costs and lease-up concerns amid a macroeconomic slowdown. As of Sep 30, 2023, the company had 5.6 million RSF of Class A/A+ properties undergoing construction. Moreover, it had 8.9 million RSF of near-term and intermediate-term development and redevelopment projects and 19.1 million SF of future development projects.
Moreover, a high interest rate environment is a concern for Alexandria. Elevated rates imply high borrowing costs for the company, affecting its ability to purchase or develop real estate. The company has a substantial debt burden, and its total debt as of Sep 30, 2023 was approximately $11.2 billion.
Alexandria’s activities in the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly adjusted FFO per share has remained unrevised at $2.29 over the past month. However, the figure suggests a 7.01% increase from the year-ago quarter’s tally.
For the full year 2023, Alexandria expected AFFO per share in the range of $8.97-$8.99. The company expected same-property NOI growth at 2-4% and rental rate increases for lease renewals and re-leasing of space at 28-33%. It guided occupancy in North America (as of Dec 31, 2023) in the band of 94.6-95.6%.
For the full year, the Zacks Consensus Estimate for AFFO per share has been unrevised at $8.97 over the past month. However, the figure indicates a 6.53 % increase from the year-ago reported figure. The Zacks Consensus Estimate for 2023 revenues is pegged at $2.86 billion, indicating an increase of 10.38% from the year-ago reported number.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Alexandria this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
Alexandria currently carries a Zacks Rank of 3 and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — Welltower Inc. (WELL - Free Report) and VICI Properties Inc. (VICI - Free Report) — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
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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Alexandria (ARE) to Post Q4 Earnings: What's in the Cards?
Alexandria Real Estate Equities Inc. (ARE - Free Report) is scheduled to release fourth-quarter and full-year 2023 results on Jan 29 after the closing bell. Its quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Pasadena, CA-based life science real estate investment trust (REIT), focusing on collaborative life science, agtech and technology campuses in AAA innovation cluster locations, delivered a surprise of 0.89% in terms of adjusted FFO per share. ARE’s performance in the quarter was mainly driven by decent leasing activity and rental rate growth.
Alexandria has a decent surprise history. Over the preceding four quarters, its adjusted FFO per share surpassed the Zacks Consensus Estimate on each occasion, the average beat being 1.26%. This is depicted in the graph below:
Alexandria Real Estate Equities, Inc. Price and EPS Surprise
Alexandria Real Estate Equities, Inc. price-eps-surprise | Alexandria Real Estate Equities, Inc. Quote
Factors at Play
With the demand for life-science assets booming due to the increasing need for drug research and innovation, in the fourth quarter, ARE is expected to have benefited from its emphasis on the development of Class A/A+ properties strategically located within AAA innovation cluster regions. These locations are highly appealing to life science, agtech and technology companies seeking tenancy.
Apart from the advantageous locations of the company’s properties, these locations are characterized by high barriers to entry for new landlords, high barriers to exit for tenants and a limited supply of available space. Moreover, Alexandria’s diverse and creditworthy tenant base, which includes many industry bellwethers, is anticipated to have led to impressive rent collections in the to-be-reported quarter.
As a result, ARE is expected to have witnessed healthy demand for its life science assets in the fourth quarter, driving healthy leasing and re-leasing activity and high occupancy levels. For the fourth quarter of 2023, we expect Alexandria’s same-store occupancy to be 94.3%. Rental income is expected to increase 8.7% on a year-over-year basis in the quarter.
In the fourth quarter, Alexandria inked a long-term full-building lease with Novo Nordisk (NVO - Free Report) , a leading global healthcare company. The lease was signed for 165,940 rentable square feet (RSF) for the building situated at 60 Sylvan Road, which is ARE’s active redevelopment project. This anchors the 1.5 million RSF Alexandria Center for Life Science – Waltham mega campus in Greater Boston – which includes 40, 50 and 60 Sylvan Road, 35 Gatehouse Drive and 840 Winter Street. The property is expected to be delivered to Novo Nordisk in 2025.
Additionally, this December, Alexandria signed a long-term lease for 99,557 RSF with CARGO Therapeutics (CRGX - Free Report) at 835 Industrial Road on the Alexandria Center for Life Science – San Carlos mega campus in the San Francisco Bay Area. CARGO is expected to take occupancy in the mission-critical life science space in early 2024.
The Zacks Consensus Estimate for Alexandria’s quarterly revenues currently stands at $738.89 million, suggesting an increase of 10.24% from the prior-year period’s reported figure.
However, ARE’s substantial active development and redevelopment pipeline, although encouraging for long-term growth, exposes it to the risk of rising construction costs and lease-up concerns amid a macroeconomic slowdown. As of Sep 30, 2023, the company had 5.6 million RSF of Class A/A+ properties undergoing construction. Moreover, it had 8.9 million RSF of near-term and intermediate-term development and redevelopment projects and 19.1 million SF of future development projects.
Moreover, a high interest rate environment is a concern for Alexandria. Elevated rates imply high borrowing costs for the company, affecting its ability to purchase or develop real estate. The company has a substantial debt burden, and its total debt as of Sep 30, 2023 was approximately $11.2 billion.
Alexandria’s activities in the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly adjusted FFO per share has remained unrevised at $2.29 over the past month. However, the figure suggests a 7.01% increase from the year-ago quarter’s tally.
For the full year 2023, Alexandria expected AFFO per share in the range of $8.97-$8.99. The company expected same-property NOI growth at 2-4% and rental rate increases for lease renewals and re-leasing of space at 28-33%. It guided occupancy in North America (as of Dec 31, 2023) in the band of 94.6-95.6%.
For the full year, the Zacks Consensus Estimate for AFFO per share has been unrevised at $8.97 over the past month. However, the figure indicates a 6.53 % increase from the year-ago reported figure. The Zacks Consensus Estimate for 2023 revenues is pegged at $2.86 billion, indicating an increase of 10.38% from the year-ago reported number.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Alexandria this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
Alexandria currently carries a Zacks Rank of 3 and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — Welltower Inc. (WELL - Free Report) and VICI Properties Inc. (VICI - Free Report) — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Welltower is slated to report quarterly numbers on Feb 13. WELL has an Earnings ESP of +0.80% and carries a Zacks Rank of 3 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.
VICI Properties, scheduled to report quarterly numbers on Feb 22, has an Earnings ESP of +2.16% and carries a Zacks Rank of 2.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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.