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Why Should You Add Alexandria (ARE) Stock to Your Portfolio?

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Alexandria Real Estate Equities, Inc.’s (ARE - Free Report) high-quality, niche assets — life science, technology and agtech properties — in strategic markets have enabled it to enjoy high demand and occupancy. Further, with an impressive investment-grade balance sheet, the company has ample financial flexibility to sail through the pandemic-induced volatility and uncertainties, and withstand any credit crisis.

Over the past month, the Zacks Consensus Estimate for its 2021 funds from operations (FFO) per share has moved 8.7% upward, reflecting analysts’ bullish expectations.

Moreover, shares of this Zacks Rank #2 (Buy) company have rallied 10.7% over the past year as against the industry's decline of 3.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Given its impressive operating fundamentals, there is room for further share-price appreciation.

Factors That Make Alexandria a Solid Pick

High-quality assets in desirable markets driving occupancy: The company focuses on Class A properties concentrated in key markets, including Greater Boston, San Francisco, New York City, San Diego, Seattle, Maryland and Research Triangle. These locations are characterized by high barriers to entry and a limited supply of available spaces. This is spurring significant demand for its premium spaces and boosting occupancy level. In fact, the company enjoys a solid 10-year historical occupancy rate of 96% at operating properties in North America. Such a high level of occupancy is anticipated to continue in the upcoming quarters as well.

Diverse and high-quality tenants contribute to steady revenues:  The company has a diverse tenant base, consisting of international pharmaceutical, biotech and institutional entities that are relatively independent from the business cycle. As of third-quarter 2020, investment-grade or publicly-traded large-cap tenants accounted for 54% of annual rental revenues in effect. Productive and efficient tenants ensure steady rental revenues for the company.

Continued strong internal growth: During third–quarter 2020, Alexandria continued to record solid internal growth. Its total leasing activity aggregated to 1.2 million rentable square feet (RSF) of space during the September-end quarter. Lease renewals and re-leasing of space amounted to 605,765 RSF. On a year-over-year basis, same-property net operating income (NOI) was up 2.9%. The company registered strong rental rate growth of 39.9% in the reported quarter. Given the healthy environment and demand for its properties, this favorable trend is likely to continue.

Adequate financial flexibility and sustainable dividends: In light of the pandemic, Alexandria has taken measures to enhance its liquidity and sail through these uncertain times. The company had $3.9 billion of liquidity as of the end of the third quarter with minimal debt maturing prior to 2024. Moreover, as of the third-quarter end, the company enjoyed investment-grade credit ratings and a stable outlook from S&P Global Ratings, Fitch and Moody’s, respectively.

With no near-term debt maturities, Alexandria has ample funds to reward its shareholders with dividends. Notably, in December 2020, the company announced a 3% sequential hike in the fourth-quarter cash dividend to $1.09. Earlier, in June, the company had announced a 3% sequential hike in second-quarter dividends to $1.06. Such capital-deployment activities make Alexandria an attractive choice for investors.

Other Stocks to Consider

Extra Space Storage Inc.’s (EXR - Free Report) Zacks Consensus Estimate for 2021 FFO per share has moved 7.3% upward to $5.43 over the past two months. The company currently carries a Zacks Rank of 2.

Arbor Realty Trust, Inc.’s (ABR - Free Report) FFO per share estimate for 2021 has moved 1.4% upward to$1.43 over the past two month. Further, it carries a Zacks Rank of 2 at present.

City Office REIT, Inc. (CIO - Free Report) FFO per share estimate for 2021 has moved 3.1% upward over the past 60 days. The company currently holds a Zacks Rank of 2.

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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