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Here's Why You Should Hold Alexandria (ARE) Stock Right Now

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Alexandria Real Estate Equities, Inc. (ARE - Free Report) focuses on Class A properties concentrated in AAA innovation cluster locations, primarily for the life-science and technology entities. These locations are characterized by high barriers to entry, and a limited supply of available space. This highly dynamic setting adds to the productivity and efficiency of the tenants, which in turn, ensures steady rental revenues for the company.

As of fourth-quarter 2019, investment-grade or publicly-traded large-cap tenants accounted for 50% of annual rental revenues in effect. Furthermore, 76% of the annual rental revenues are from Class A properties in AAA locations. Weighted-average remaining lease term of all tenants is 8.1 years. For its top 20 tenants, it is 11.6 years.

High demand for Class A properties in AAA locations is boosting occupancy level The company is witnessing strong demand for space in key life-science markets. In fact, the company enjoys a solid 10-year historical occupancy rate of 96%. Such high level of occupancy is anticipated to continue in the upcoming quarters as well.

Moreover, during the October-December period in 2019, the company completed acquisitions of 23 properties for a total of $956.5 million. These acquisitions comprise 3.3 million RSF, including 2.1 million RSF of current and future value-creation opportunities.

Also, Alexandria has adequate financial flexibility to cushion and enhance its market position. The company had $2.4 billion of liquidity as of the end of fourth-quarter 2019. Its weighted average remaining term on outstanding debt is 10.4 years. The company has no consolidated debt maturities until 2023. Further, the company generates 95% unencumbered NOI, which is encouraging.

However, Alexandria has an active development and redevelopment pipeline. As of Dec 31, 2019, the company has 2.1 million RSF of Class A properties under construction. Moreover, it has 6.3 million RSF of near-term and intermediate-term development and redevelopment projects, and 3.8 million SF of future development projects.

Though this development pipeline is encouraging for long-term growth, it exposes the company to rising construction cost risks and lease-up concerns. Moreover, it has exposure to Canada and Asia through its subsidiaries, and is thus exposed to currency-fluctuation risks, while disruptions in global economy are concerns.

The market has been choppy reflecting uncertainty over the coronavirus outbreak. However, shares of this Zacks Rank # 3 (Hold) company have depreciated 18.3%, which is narrower than its industry’s decline of 29.1% year to date. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



 

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Highwoods Properties (HIW - Free Report) currently carries a Zacks Rank of 2 (Buy). The Zacks Consensus Estimate for the current-year FFO per share moved marginally upward to $3.63 over the past two months.

Plymouth Industrial REIT (PLYM - Free Report) carries a Zacks Rank of 2. The Zacks Consensus Estimate for the ongoing-year FFO per share moved 2% north to $2.08 over the past month.

Piedmont Office Realty Trust (PDM - Free Report) also carries a Zacks Rank of 2. The company’s FFO per share estimate for 2020 moved up 3.2% to $1.96 in two months’ time.

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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