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Alexandria (ARE) Q3 FFO Beats on Solid Rental Rate Growth

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Alexandria Real Estate Equities, Inc. (ARE - Free Report) reported third-quarter 2021 funds from operations (FFO) as adjusted of $1.95 per share, up 6.6% from the year-ago quarter’s $1.83. The figure also surpassed the Zacks Consensus Estimate of $1.94.

This year-over-year improvement resulted from the marginal year-over-year top-line growth to $547.8 million. Results reflect decent internal growth. The company witnessed continued healthy leasing activity and rental rate growth during the quarter.

Though the company revised the 2021 outlook, it kept the mid-point of its FFO as adjusted per share guidance unchanged at $7.75.

In addition, management noted that the company’s tenant collections have been consistently high, with 99.6% of October 2021 billings collected as of Oct 25, 2021. Also, as of Sep 30, 2021, the tenant receivables balance was $7.7 million.

Behind the Headline Numbers

Reflecting robust demand for its high-quality office/laboratory space, Alexandria’s total leasing activity aggregated to 1.81 million rentable square feet (RSF) of space during the September-end quarter. Lease renewals and re-leasing of space amounted to 0.7 million RSF. Leasing of development and redevelopment space was 1,005,890 RSF.

The company registered rental rate growth of 35.3% during the reported quarter. On a cash basis, rental rate increased 19.3%.

On a year-over-year basis, same-property NOI was up 3%. It climbed 7.1% on a cash basis. Occupancy of operating properties in North America remained high at 94.4%.

As of third-quarter 2021, investment-grade or publicly-traded large-cap tenants accounted for 53% of the annual rental revenues in effect. Weighted-average remaining lease term of all tenants is 7.4 years. For the company’s top 20 tenants, it is 10.6 years.

During the July-September period, the company completed acquisitions in its key life-science cluster submarkets totaling 5.6 million SF, 4.9 million RSF of value-creation opportunities, and 0.7 million RSF of operating space, for a total price of $989.7 million.

During the reported quarter, the company placed into service development and redevelopment projects totaling 238,163 RSF, which are 100% leased across four submarkets.


Alexandria exited third-quarter 2021 with cash and cash equivalents of $325.9 million, up from the $323.9 million seen at the end of second-quarter 2021. The company had $4 billion of liquidity as of the end of the reported quarter. The net debt and preferred stock to adjusted EBITDA was 5.8x and the fixed-charge coverage ratio was 5.1x for third-quarter 2021 annualized. The company has no debt maturities prior to 2024 and its weighted-average remaining term of debt as of Sep 30, 2021 is 11.9 years.


Alexandria also revised the 2021 outlook, guiding the FFO as adjusted per share in the range of $7.74-$7.76 compared with the $7.71-$7.79 estimated earlier, keeping the mid-point unchanged. The Zacks Consensus Estimate for the same is currently pinned at $7.78.

The company’s current-year guidance is backed by anticipations for occupancy in North America (as of Dec 31, 2021) in the band of 93.3-93.9%, rental rate increases for lease renewals, and re-leasing of space of 33-36%, and same-property NOI growth of 2-4%.

Alexandria currently carries a Zacks Rank #2 (Buy). 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 (AVB - Free Report) , Duke Realty (DRE - Free Report) scheduled for Oct 27, and Equinix, Inc. (EQIX - Free Report) for Nov 3.

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.