Alexandria Real Estate Equities, Inc. (ARE - Free Report) reported fourth-quarter 2019 funds from operations (FFO) as adjusted of $1.77 per share, up 5.4% from the year-ago quarter’s $1.68. However, the figure missed the Zacks Consensus Estimate of $1.78.
This year-over-year improvement resulted from top-line growth, which jumped 19.9% year over year to $408.1 million. Results reflect decent internal and external growth. The company witnessed continued strong leasing activity and rental rate growth during the quarter.
For full-year 2019, adjusted FFO per share came in at $6.96, higher than the prior-year tally of $6.60. Total revenues of $1.5 billion increased 15.4% year over year.
Behind the Headline Numbers
Alexandria’s total leasing activity aggregated to 1.75 million rentable square feet (RSF) of space during the December-end quarter. Lease renewals and re-leasing of space amounted to 571,650 RSF.
On a year-over-year basis, same-property NOI grew 2%. It climbed 4% on a cash basis. Occupancy of operating properties in North America remained high at 96.8%. The company registered decent rental rate growth of 37% in the reported quarter. On a cash basis, rental rate increased 21.7%.
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.
During the October-December period, 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.
Liquidity
Alexandria exited fourth-quarter 2019 with cash and cash equivalents of $189.7 million, down from the $410.7 million reported at the end of the previous quarter. The company had $2.4 billion of liquidity as of the end of the reported quarter.
Outlook
Alexandria issued its guidance for 2020 FFO per share in the range of $7.28-$7.48. The Zacks Consensus Estimate for the same is currently pinned at $7.38.
The company’s current-year guidance is backed by expectations for occupancy in North America (as of Dec 31, 2020) in the band of 95.4-96%, rental rate increases for lease renewals, and re-leasing of space of 28-31%, and same-property NOI growth of 1.5-3.5%.
Our Viewpoint
Alexandria’s adjusted FFO per share in the December-end quarter miss is disappointing to some extent. However, the company registered impressive top-line growth during this period, and continues to benefit from healthy leasing activity and rental rate growth. In addition, solid external growth and strategic capital allocation to highly leased value-creation pipeline look encouraging.
Notably, the company’s properties are located in markets, characterized by high barriers to entry, and a limited supply of available space, enabling it to enjoy higher occupancy rate. Adequate financial flexibility and a decent liquidity position poise the company well to pursue strategic development and redevelopment projects. Nevertheless, a significant development pipeline escalates operational risks and exposes it to rising construction costs.
Alexandria currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We now look forward to the earnings releases of other REITs like AvalonBay Communities, Inc. (AVB - Free Report) , Cousins Properties Incorporated (CUZ - Free Report) and The Macerich Company (MAC - Free Report) . While AvalonBay Communities and Cousins Properties are slated to report fourth-quarter earnings on Feb 5, Apartment Investment has its quarterly release scheduled for Feb 6.
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 Real Estate Equities, Inc. (ARE - Free Report) reported fourth-quarter 2019 funds from operations (FFO) as adjusted of $1.77 per share, up 5.4% from the year-ago quarter’s $1.68. However, the figure missed the Zacks Consensus Estimate of $1.78.
This year-over-year improvement resulted from top-line growth, which jumped 19.9% year over year to $408.1 million. Results reflect decent internal and external growth. The company witnessed continued strong leasing activity and rental rate growth during the quarter.
For full-year 2019, adjusted FFO per share came in at $6.96, higher than the prior-year tally of $6.60. Total revenues of $1.5 billion increased 15.4% year over year.
Behind the Headline Numbers
Alexandria’s total leasing activity aggregated to 1.75 million rentable square feet (RSF) of space during the December-end quarter. Lease renewals and re-leasing of space amounted to 571,650 RSF.
On a year-over-year basis, same-property NOI grew 2%. It climbed 4% on a cash basis. Occupancy of operating properties in North America remained high at 96.8%. The company registered decent rental rate growth of 37% in the reported quarter. On a cash basis, rental rate increased 21.7%.
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.
During the October-December period, 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.
Liquidity
Alexandria exited fourth-quarter 2019 with cash and cash equivalents of $189.7 million, down from the $410.7 million reported at the end of the previous quarter. The company had $2.4 billion of liquidity as of the end of the reported quarter.
Outlook
Alexandria issued its guidance for 2020 FFO per share in the range of $7.28-$7.48. The Zacks Consensus Estimate for the same is currently pinned at $7.38.
The company’s current-year guidance is backed by expectations for occupancy in North America (as of Dec 31, 2020) in the band of 95.4-96%, rental rate increases for lease renewals, and re-leasing of space of 28-31%, and same-property NOI growth of 1.5-3.5%.
Our Viewpoint
Alexandria’s adjusted FFO per share in the December-end quarter miss is disappointing to some extent. However, the company registered impressive top-line growth during this period, and continues to benefit from healthy leasing activity and rental rate growth. In addition, solid external growth and strategic capital allocation to highly leased value-creation pipeline look encouraging.
Notably, the company’s properties are located in markets, characterized by high barriers to entry, and a limited supply of available space, enabling it to enjoy higher occupancy rate. Adequate financial flexibility and a decent liquidity position poise the company well to pursue strategic development and redevelopment projects. Nevertheless, a significant development pipeline escalates operational risks and exposes it to rising construction costs.
Alexandria currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We now look forward to the earnings releases of other REITs like AvalonBay Communities, Inc. (AVB - Free Report) , Cousins Properties Incorporated (CUZ - Free Report) and The Macerich Company (MAC - Free Report) . While AvalonBay Communities and Cousins Properties are slated to report fourth-quarter earnings on Feb 5, Apartment Investment has its quarterly release scheduled for Feb 6.
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.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.7% per year. So be sure to give these hand-picked 7 your immediate attention.
See 7 handpicked stocks now >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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