Alexandria Real Estate Equities, Inc. (ARE – Free Report) reported second-quarter 2017 adjusted funds from operations (FFO) of $1.50 per share. The figure came in line with the Zacks Consensus Estimate. This compares favorably with the prior-year quarter tally of $1.36.
Results reflect robust growth in rental rate and strong leasing metrics, driven by higher internal and external growth.
Total revenue for the quarter jumped 20.8% year over year to $273 million. In addition, the figure handily surpassed the Zacks Consensus Estimate of $253 million.
Alexandria Real Estate Equities, Inc. Price, Consensus and EPS Surprise
Note: The EPS numbers presented in the above chart represent funds from operations (“FFO”) per share.
Behind the Headline Numbers
Alexandria executed total leasing activity of around 1.1 million RSF during the quarter. The company carried out leases at a rental rate increase of 23.2% and 9.4% (cash basis) in the reported quarter. This included 63,648 RSF leased to Takeda Pharmaceutical Company Ltd., and 109,780 RSF lease renewed with Laboratory Corporation of America.
On a year-over-year basis, same-property net operating income (NOI) inched up 1.8% and it climbed 7% on a cash basis.
As of Jun 30, 2017, annual rental revenue growth rate from investment-grade tenants was 51%. Furthermore, 79% of the annual rental revenue growth rate can be attributed to Class A properties in AAA locations.
Alexandria exited second-quarter 2017 with cash and cash equivalents of $124.8 million, significantly down from $151.2 million recorded at the end of the prior quarter. The company ended the reported quarter with $1.1 billion of liquidity.
Alexandria enjoys high occupancy, stemmed by high demand for its Class A properties in premium locations. Additionally, robust cash flow and a solid balance sheet are its strengths. Further, earlier this July, the company announced the creation of the Alexandria Center for AgTech – RTP. This is the initial phase of a premier multi-tenant mega campus in the Research Triangle Park, NC. Moreover, the company has adequate financial flexibility to enhance its market position.
The company follows the strategy of recycling capital from high-value assets, and the sale of non-core operating assets and non-strategic land parcels to finance pre-leased value-creation development and redevelopment projects. The near-term dilution effect of such moves on earnings is unavoidable. Further, the company’s exposures in the Asian and Canadian markets result in currency fluctuation risk. Hike in interest rates also remain a key concern for Alexandria.
Alexandria currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The stock has climbed 9.1% year to date, outperforming 4.9% growth recorded by the industry it belongs to.
Q2 Earnings Schedule of Other REITs
We now look forward to the earnings releases of other REITs like Condor Hospitality Trust, Inc. (CDOR – Free Report) , Piedmont Office Realty Trust, Inc. (PDM – Free Report) and CyrusOneInc (CONE – Free Report) . While Condor Hospitality Trust is scheduled to announce results on Aug 7, Piedmont and CyrusOne are slated to report Q2 numbers on Aug 2.
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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