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Is it Wise to Hold Alexandria (ARE) Stock in Your Portfolio?
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Alexandria Real Estate Equities, Inc. (ARE - Free Report) , a Pasadena, CA-based urban office real estate investment trust (REIT) with a focus on collaborative life science, agtech and technology campuses, is well-poised to benefit from the rising demand for its premium properties at prime locations, strong internal and external growth, and a robust balance sheet position.
Growing demand for Alexandria’s Class A properties in AAA locations is driving the occupancy level and aiding rental rate growth. The occupancy of operating properties in North America remained high at 94.7% as of Mar 31, 2022. Excluding the vacancy at the recently acquired properties, the occupancy was 98.6% as of the same date. Based on the strong demand, this high level of occupancy is expected to continue in the forthcoming quarters and support rent growth.
The company is experiencing strong internal growth. It witnessed total leasing activity of 2.5 million rentable square feet (RSF) of space during the March-end quarter based on strong demand for its high-quality office/laboratory space. The company executed a long-term lease with Bristol Myers Squibb for 426,927 RSF in first-quarter 2022. It recorded a rental rate growth of 32.2% during the reported quarter. Given its solid operating platform, this upbeat momentum is likely to sustain.
Alexandria enjoys a robust balance-sheet position and financial flexibility. It had $5.7 billion of liquidity as of the March-end quarter and no debt maturities prior to 2025. Its weighted-average remaining term of debt as of Mar 31, 2022, was 13.8 years.
ARE is known for consistently raising its dividend rates. It recently announced a 2.6% sequential hike in its second-quarter 2022 cash dividend payment to $1.18 per share. Based on the company’s strong operating platform, robust financial position, and lower payout ratio compared with that of the industry, this dividend rate is likely to be sustainable in the near term.
However, Alexandria’s huge capital deployment for development and redevelopment activities raises a concern. As of Mar 31, 2022, the company had 5.4 million RSF of the Class A properties undergoing construction. This exposes the company to operational risks, and accruing tenants for these properties becomes challenging. Additionally, costs of construction have risen due to soaring fuel prices and a reduced supply of semiconductor materials. Material and equipment costs have risen owing to specific material problems, including steel, copper and aluminum, roofing materials, elevators, HVAC equipment, switchgear, transformers and emergency generators.
Shares of Alexandria have fallen 14.8% in the past three months compared with the industry’s decline of 3.8%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Prologis (PLD - Free Report) , Rexford Industrial Realty (REXR - Free Report) and Cedar Realty Trust .
The Zacks Consensus Estimate for Prologis’ 2022 funds from operations (FFO) per share has moved 1.8% upward in the past two months to $5.15. PLD presently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Rexford Industrial Realty’s ongoing year’s FFO per share has been raised 1.6% over the past two months to $1.93. REXR carries a Zacks Rank #2, currently.
The Zacks Consensus Estimate for Cedar Realty Trust’s current-year FFO per share has moved 3.6% northward in the past month to $2.59. CDR carries a Zacks Rank of 2 at present.
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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Is it Wise to Hold Alexandria (ARE) Stock in Your Portfolio?
Alexandria Real Estate Equities, Inc. (ARE - Free Report) , a Pasadena, CA-based urban office real estate investment trust (REIT) with a focus on collaborative life science, agtech and technology campuses, is well-poised to benefit from the rising demand for its premium properties at prime locations, strong internal and external growth, and a robust balance sheet position.
Growing demand for Alexandria’s Class A properties in AAA locations is driving the occupancy level and aiding rental rate growth. The occupancy of operating properties in North America remained high at 94.7% as of Mar 31, 2022. Excluding the vacancy at the recently acquired properties, the occupancy was 98.6% as of the same date. Based on the strong demand, this high level of occupancy is expected to continue in the forthcoming quarters and support rent growth.
The company is experiencing strong internal growth. It witnessed total leasing activity of 2.5 million rentable square feet (RSF) of space during the March-end quarter based on strong demand for its high-quality office/laboratory space. The company executed a long-term lease with Bristol Myers Squibb for 426,927 RSF in first-quarter 2022. It recorded a rental rate growth of 32.2% during the reported quarter. Given its solid operating platform, this upbeat momentum is likely to sustain.
Alexandria enjoys a robust balance-sheet position and financial flexibility. It had $5.7 billion of liquidity as of the March-end quarter and no debt maturities prior to 2025. Its weighted-average remaining term of debt as of Mar 31, 2022, was 13.8 years.
ARE is known for consistently raising its dividend rates. It recently announced a 2.6% sequential hike in its second-quarter 2022 cash dividend payment to $1.18 per share. Based on the company’s strong operating platform, robust financial position, and lower payout ratio compared with that of the industry, this dividend rate is likely to be sustainable in the near term.
Alexandria currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, Alexandria’s huge capital deployment for development and redevelopment activities raises a concern. As of Mar 31, 2022, the company had 5.4 million RSF of the Class A properties undergoing construction. This exposes the company to operational risks, and accruing tenants for these properties becomes challenging. Additionally, costs of construction have risen due to soaring fuel prices and a reduced supply of semiconductor materials. Material and equipment costs have risen owing to specific material problems, including steel, copper and aluminum, roofing materials, elevators, HVAC equipment, switchgear, transformers and emergency generators.
Shares of Alexandria have fallen 14.8% in the past three months compared with the industry’s decline of 3.8%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Prologis (PLD - Free Report) , Rexford Industrial Realty (REXR - Free Report) and Cedar Realty Trust .
The Zacks Consensus Estimate for Prologis’ 2022 funds from operations (FFO) per share has moved 1.8% upward in the past two months to $5.15. PLD presently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Rexford Industrial Realty’s ongoing year’s FFO per share has been raised 1.6% over the past two months to $1.93. REXR carries a Zacks Rank #2, currently.
The Zacks Consensus Estimate for Cedar Realty Trust’s current-year FFO per share has moved 3.6% northward in the past month to $2.59. CDR carries a Zacks Rank of 2 at present.
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.