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Alexandria (ARE) & Bristol Myers Boost Tie-Up With New Lease

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Alexandria Real Estate Equities, Inc. (ARE - Free Report) announced the execution of a long-term lease with Bristol Myers Squibb for the development of a new 427,000 rentable square feet (RSF) core R&D facility at the Alexandria Point mega campus in the San Diego cluster market.

This lease marks the second-largest life science lease in Alexandria's history and boosts its long-term strategic relationship with Bristol Myers Squibb. Particularly, Alexandria has strategically partnered with Bristol Myers Squibb since 1998 and this involves more than 900,000 RSF across five of Alexandria's cluster markets, namely San Diego, Greater Boston, the San Francisco Bay Area, New York City and Seattle.

Alexandria Point, which is at the heart of the University Town Center submarket in San Diego, is the company's first leading-edge, highly sustainable amenity-rich mega campus.

Amid San Diego's major life science innovation drivers, ARE has grown its presence and its asset base in the San Diego cluster market, which now encompasses roughly 13 million RSF. This includes properties in operation or under construction as well as projects under near-term, intermediate-term or future development and redevelopment.

Alexandria’s properties are located in markets characterized by high barriers to entry and a limited supply of available space, enabling it to enjoy a higher occupancy rate. The above-mentioned lease also reflects solid demand for the company’s properties. Moreover, adequate financial flexibility and a decent liquidity position poise Alexandria well to pursue strategic development and redevelopment projects.

Alexandria’s better-than-anticipated fourth-quarter 2021 results reflected continued healthy leasing activity and rental rate growth. ARE enjoys a high occupancy level, given solid demand for its premium properties at major locations. Also, steady cash flows act as tailwinds.

However, the company has a huge development pipeline, which exposes it to the risks of rising construction costs and lease-up concerns. Additionally, the recent trend in estimate revisions for 2022 funds from operation (FFO) per share does not indicate a favorable outlook for the stock.

Shares of this Zacks Rank #4 (Sell) company have declined 8% in the past three months compared with the industry’s fall of 6.5%.

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You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Some key picks from the REIT sector include Prologis, Inc. (PLD - Free Report) , Iron Mountain Incorporated (IRM - Free Report) and Public Storage (PSA - Free Report) .

Prologis holds a Zacks Rank of 2 (Buy) at present. Prologis’ 2022 revenues are expected to increase 8.7% year over year.

The Zacks Consensus Estimate for PLD’s 2022 FFO per share has been revised 1.8% upward in the past month to $5.02.

The Zacks Consensus Estimate for Iron Mountain’s 2022 FFO per share has moved 5.5% north to $3.09 in the past week.

Iron Mountain's 2022 revenues are expected to increase 15.5% year over year. Currently, IRM carries a Zacks Rank of 2.

The Zacks Consensus Estimate for Public Storage’s 2022 FFO per share has moved 0.7% north to $14.86 over the past week.

Currently, Public Storage carries a Zacks Rank of 2. PSA's long-term growth rate is projected at 8.30%.

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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