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Alexandria's (ARE) Q3 FFO In Line, Rental Rates Rise Y/Y

Alexandria Real Estate Equities, Inc. ARE delivered third-quarter 2020 funds from operations (FFO) as adjusted of $1.83 per share, up 4.6% from the year-ago quarter’s $1.75.  The reported figure is in line with the Zacks Consensus Estimate.

This improvement resulted from year-over-year top-line growth of 39.6% to $545 million. The company witnessed continued strong leasing activity and rental rate growth during the third quarter.

Alexandria also updated its full-year outlook in the wake of the coronavirus pandemic and the prevailing market conditions.

It also apprised of its accounts receivable balance as of Oct 23, with 99.7% of the October rent collected. Alexandria’s tenant receivables balance stands at $7.6 million as of Sep 30, 2020, marking the lowest since 2013.

Behind the Headline Numbers

Alexandria’s total leasing activity aggregated to 1.2 million rentable square feet (RSF) of space during the September-end quarter. Lease renewals and re-leasing of space amounted to 605,765 RSF.

On a year-over-year basis, same-property NOI was up 2.9%. It climbed 4.9% on a cash basis. Occupancy of operating properties in North America remained high at 97.7%. The company registered decent rental rate growth of 39.9% in the reported quarter. On a cash basis, rental rate increased 30.9%.

As of third-quarter 2020, investment-grade or publicly-traded large-cap tenants accounted for 54% of annual rental revenues in effect. Furthermore, 73% of the annual rental revenues are from Class A properties in AAA locations. Weighted-average remaining lease term of all tenants is 7.7 years. For the company’s top 20 tenants, it is 11 years.

During the July-September period, the company completed the acquisitions of 24 properties for a total of $1.3 billion. These acquisitions comprise 2.2 million RSF space of Alexandria Center for Life Science, and 1.5 million RSF of future value-creation opportunities.

Liquidity

Alexandria exited the third quarter with cash and cash equivalents of $446.3 million, up from the $189.7 million reported at the end of December 2019. The company had $3.9 billion of liquidity as of the end of the reported quarter. Also, it has minimal debt maturing until 2024.

Guidance

The company has revised its FFO per share guidance for 2020 to $7.29-$7.31 from $7.26-$7.34 in light of the pandemic and the turbulent market conditions. The Zacks Consensus Estimate for the same is currently pegged at $6.96.

The company’s current-year guidance is backed by expectations for occupancy in North America (as of Oct 26, 2020) in the band of 94.8-95.4%, rental rate increases for lease renewals, and re-leasing of space of 30.5-33.5%, and same-property NOI growth of 1-3%.

Alexandria Real Estate Equities, Inc. Price and EPS Surprise

Alexandria Real Estate Equities, Inc. Price and EPS Surprise

Alexandria Real Estate Equities, Inc. price-eps-surprise | Alexandria Real Estate Equities, Inc. Quote

Alexandria currently carries a Zacks Rank #3 (Hold). 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 Duke Realty Corporation DRE, AvalonBay Communities AVB and Mid-America Apartment Communities MAA, slated to report on Oct 28.

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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