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Alexandria Real Estate Equities (ARE) Up 0.2% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Alexandria Real Estate Equities (ARE - Free Report) . Shares have added about 0.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Alexandria Real Estate Equities due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Alexandria Beats on Q1 FFO, Ups Adjusted FFO Mid-Point View

Alexandria reported first-quarter 2021 FFO as adjusted of $1.91 per share, up 4.95% from the year-ago quarter’s $1.82. The figure also surpassed the Zacks Consensus Estimate of $1.85.

This year-over-year improvement resulted from the 9.1% year-over-year top-line improvement to $479.8 million. Results reflect decent internal and external growth. The company witnessed continued healthy leasing activity and rental rate growth during the quarter.

Moreover, the company has revised the 2021 outlook, raising the mid-point of its adjusted FFO per share guidance by 3 cents to $7.73.

In addition, management noted that its tenant collections have been consistently high, with 99.4% of April 2021 billings collected as of Apr 26, 2021. Also, as of Mar 31, 2021, the tenant receivables balance was $7.6 million.

Behind the Headline Numbers

Alexandria’s total leasing activity aggregated to 1.68 million rentable square feet (RSF) of space during the March-end quarter. Lease renewals and re-leasing of space amounted to 521,825 RSF.

On a year-over-year basis, same-property NOI was up 4.4%. It climbed 6.1% on a cash basis. Occupancy of operating properties in North America remained high at 94.5%. The company registered decent rental rate growth of 36.2% during the reported quarter. On a cash basis, rental rate increased 17.4%.

As of first-quarter 2021, investment-grade or publicly-traded large-cap tenants accounted for 55% of annual rental revenues in effect. Weighted-average remaining lease term of all tenants is 7.6 years. For the company’s top 20 tenants, it is 10.9 years.

During the January-March period, the company completed the acquisitions of 25 properties for a total of $1.9 billion. These acquisitions comprise 3.1 million SF space in key submarkets, including 1.8 million RSF from its acquisition of Alexandria Center®for Life Science – Fenway. Particularly, the company acquired the Alexandria Center®for Life Science – Fenway, in the Fenway submarket, for $1.48 billion.

The company also kicked off the development and redevelopment of five projects, totaling 1.0 million RSF during the first quarter, which are currently 73% leased/negotiating.

Moreover, fully-leased development projects placed into service during the first quarter include 176,832 RSF leased to REGENXBIO Inc. at 9804 Medical Center Drive in the Rockville submarket, 100,086 RSF leased to Adaptive Biotechnologies Corporation at 1165 Eastlake Avenue East in the Lake Union submarket, and 99,557 RSF leased to Atreca, Inc. at the Alexandria Center® for Life Science – San Carlos in the Greater Stanford submarket.

Liquidity

Alexandria exited first-quarter 2021 with cash and cash equivalents of $492.2 million, down from the $568.5 million seen at the end of 2020. The company had $4.3 billion of liquidity as of the end of the reported quarter. Net debt and preferred stock to adjusted EBITDA was 5.8x and fixed-charge coverage ratio was 4.7x for first-quarter 2021 annualized.The company has no debt maturities prior to 2024 and its weighted-average remaining term of debt as of Mar 31, 2021 is 13 years.

Outlook

Alexandria also revised the 2021 outlook, guiding FFO per share in the range of $7.68-$7.78 compared with the $7.60-$7.80 estimated earlier, raising the mid-point by 3 cents to $7.73.

The company’s current-year guidance is backed by anticipations for occupancy in North America (as of Dec 31, 2021) in the band of 95.3-95.9% compared with the 95.6-96.2% guided earlier, rental rate increases for lease renewals, and re-leasing of space of 30-33% as against the prior guidance of 29-32%, and same-property NOI growth of 1.5-3.5% compared with the 1-3% guided earlier.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Alexandria Real Estate Equities has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Alexandria Real Estate Equities has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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