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Here's Why You Should Retain Alexandria (ARE) Stock for Now
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Alexandria Real Estate Equities, Inc.’s (ARE - Free Report) portfolio of high-quality, niche assets — life science, technology and agtech properties — in strategic markets is well-poised to benefit from raised demand. Its focus on acquisitions and a solid balance-sheet strength augur well.
Alexandria’s Class A properties are situated in the AAA innovation cluster locations of North America, with significant market presence in Greater Boston, San Francisco Bay Area, New York City, San Diego, Seattle, Maryland and Research Triangle. The advantageous locations of its properties have been driving demand, resulting in high occupancy levels.
Alexandria has also been experiencing healthy leasing activity on solid demand for its high-quality office/laboratory space. This has been aiding the company’s rental rate growth. Rental rate growth for the second quarter were 45.4% and 33.9% (cash basis).
A tenant base of more than 1,000 high-quality companies ensures steady rental revenues for ARE.
In order to enhance its operating platform, Alexandria has been focusing on the acquisition, development and redevelopment of new Class A properties in AAA locations.
In the second quarter, the company completed acquisitions in its key life science cluster submarkets totaling 1.1 million rentable square feet (RSF) of future development and redevelopment opportunities for $280.1 million.
An encouraging development pipeline, with 5.9 million RSF of Class A properties undergoing construction as of Jun 30, 2022, bodes well for the company’s long-term growth.
Alexandria maintains a robust balance-sheet position with ample liquidity. It exited second-quarter 2022 with $5.5 billion of liquidity. It has no debt maturities prior to 2025.
The company enjoys investment-grade credit ratings of Baa1/Stable and BBB+/Positive from Moody’s and S&P Global Ratings, respectively, rendering it favorable access to the debt market. With a strong financial footing and enough financial flexibility, it is well-placed to capitalize on long-term growth opportunities.
ARE is known for consistently raising its dividend rates. In May 2022, it 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 the industry, the dividend rate is likely to be sustainable in the near term.
The Zacks Rank #3 (Hold) stock has gained 13.3% in the past three months, outperforming the industry’s rally of 8.2%.
Image Source: Zacks Investment Research
However, Alexandria’s huge capital deployment for development and redevelopment activities exposes the company to the risks associated with rising construction costs and lease-up concerns.
Supply-chain challenges and the shortage of skilled labor have been adding to Alexandria’s woes. The labor agreements are set for renewal. Given the rising cost of living, wage negotiations are likely to be on the higher side.
Moreover, higher interest rates might increase the company's borrowing costs, affecting its ability to purchase or develop real estate.
The Zacks Consensus Estimate for Prologis’ current-year FFO per share has moved marginally north in the past two months to $5.17.
The Zacks Consensus Estimate for Extra Space Storage’s ongoing year’s FFO per share has been raised 1.9% over the past month to $8.46.
The Zacks Consensus Estimate for Host Hotels & Resorts’ 2022 FFO per share has moved 2.3% upward in the past week to $1.79.
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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Here's Why You Should Retain Alexandria (ARE) Stock for Now
Alexandria Real Estate Equities, Inc.’s (ARE - Free Report) portfolio of high-quality, niche assets — life science, technology and agtech properties — in strategic markets is well-poised to benefit from raised demand. Its focus on acquisitions and a solid balance-sheet strength augur well.
Alexandria’s Class A properties are situated in the AAA innovation cluster locations of North America, with significant market presence in Greater Boston, San Francisco Bay Area, New York City, San Diego, Seattle, Maryland and Research Triangle. The advantageous locations of its properties have been driving demand, resulting in high occupancy levels.
Alexandria has also been experiencing healthy leasing activity on solid demand for its high-quality office/laboratory space. This has been aiding the company’s rental rate growth. Rental rate growth for the second quarter were 45.4% and 33.9% (cash basis).
A tenant base of more than 1,000 high-quality companies ensures steady rental revenues for ARE.
In order to enhance its operating platform, Alexandria has been focusing on the acquisition, development and redevelopment of new Class A properties in AAA locations.
In the second quarter, the company completed acquisitions in its key life science cluster submarkets totaling 1.1 million rentable square feet (RSF) of future development and redevelopment opportunities for $280.1 million.
An encouraging development pipeline, with 5.9 million RSF of Class A properties undergoing construction as of Jun 30, 2022, bodes well for the company’s long-term growth.
Alexandria maintains a robust balance-sheet position with ample liquidity. It exited second-quarter 2022 with $5.5 billion of liquidity. It has no debt maturities prior to 2025.
The company enjoys investment-grade credit ratings of Baa1/Stable and BBB+/Positive from Moody’s and S&P Global Ratings, respectively, rendering it favorable access to the debt market. With a strong financial footing and enough financial flexibility, it is well-placed to capitalize on long-term growth opportunities.
ARE is known for consistently raising its dividend rates. In May 2022, it 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 the industry, the dividend rate is likely to be sustainable in the near term.
The Zacks Rank #3 (Hold) stock has gained 13.3% in the past three months, outperforming the industry’s rally of 8.2%.
Image Source: Zacks Investment Research
However, Alexandria’s huge capital deployment for development and redevelopment activities exposes the company to the risks associated with rising construction costs and lease-up concerns.
Supply-chain challenges and the shortage of skilled labor have been adding to Alexandria’s woes. The labor agreements are set for renewal. Given the rising cost of living, wage negotiations are likely to be on the higher side.
Moreover, higher interest rates might increase the company's borrowing costs, affecting its ability to purchase or develop real estate.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Prologis (PLD - Free Report) , Extra Space Storage (EXR - Free Report) and Host Hotels & Resorts (HST - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
The Zacks Consensus Estimate for Prologis’ current-year FFO per share has moved marginally north in the past two months to $5.17.
The Zacks Consensus Estimate for Extra Space Storage’s ongoing year’s FFO per share has been raised 1.9% over the past month to $8.46.
The Zacks Consensus Estimate for Host Hotels & Resorts’ 2022 FFO per share has moved 2.3% upward in the past week to $1.79.
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.