Alexandria (ARE) Tops Q4 FFO on Rent Growth, Issues Upbeat View
Shares of Alexandria Real Estate Equities, Inc. ARE were up more than 2% in after-hours trading following better-than-expected fourth-quarter numbers and an upbeat 2023 outlook.
ARE reported fourth-quarter 2022 adjusted funds from operations (FFO) per share of $2.14, surpassing the Zacks Consensus Estimate by a cent. The reported figure also compared favorably with the year-ago quarter’s $1.97.
Total revenues of $670.3 million in the quarter outpaced the consensus estimate of $654.7 million. The figure increased 16.2% from the prior-year quarter’s $576.9 million. Results reflect decent leasing activity and rental rate growth during the quarter.
For the full-year 2022, adjusted FFO per share came in at $8.42, higher than the prior-year tally of $7.76 and also ahead of the Zacks Consensus Estimate of $8.41. This was backed by 22.5% growth in total revenues to $2.59 billion.
Alexandria’s upbeat 2023 outlook includes an FFO per share projection in the range of $8.86-$9.06, with the midpoint at $8.96. The Zacks Consensus Estimate for the same is currently pegged at $8.92.
Behind the Headlines
Reflecting robust demand for its high-quality office/laboratory space, Alexandria’s total leasing activity aggregated 2.0 million rentable square feet (RSF) of space in the fourth quarter. Lease renewals and re-leasing of space amounted to 1.5 million RSF.
Alexandria registered rental rate growth of 26.0% during the reported quarter. On a cash basis, the rental rate increased 19.6%.
On a year-over-year basis, same-property net operating income (NOI) was up 4.7%. It climbed 10.9% on a cash basis. The occupancy of operating properties in North America came in at 94.8%, up from 94.3% in the prior quarter.
In the fourth quarter of 2022, investment-grade or publicly-traded large-cap tenants accounted for 48% of the annual rental revenues in effect. The weighted-average remaining lease term of all tenants is 7.1 years. For Alexandria’s top 20 tenants, it is 9.4 years. As of Dec 31, 2022, the tenant receivable balance was $7.6 million.
During the reported quarter, Alexandria completed acquisitions totaling 0.62 million RSF of value-creation opportunities for a total price of $380.86 million. Also, Alexandria placed into service development and redevelopment projects totaling 497,755 RSF across multiple submarkets, which resulted in $28 million of incremental NOI.
Alexandria exited 2022 with cash and cash equivalents of $825.2 million, up from $533.8 million as of Sep 30, 2022. It had $5.3 billion of liquidity at the end of the reported quarter.
The net debt and preferred stock to adjusted EBITDA of 5.1X marks the lowest ratio in the company’s history, while the fixed-charge coverage was 5.0X in the fourth quarter on an annualized basis. As of the 2022 year-end, ARE had no debt maturities before 2025, and its weighted-average remaining term was 13.2 years.
As of Dec 31, 2022, the company’s remaining aggregate amount available under its at-the-market program for future sales of common stock was $141.9 million.
Alexandria’s 2023 FFO per share guidance in the range of $8.86-$9.06, with the midpoint at $8.96, is backed by same-property NOI growth at 2-4% and rental rate increases for lease renewals and re-leasing of space at 27-32%. It guides occupancy in North America (as of Dec 31, 2023) in the band of 94.8-95.8%.
Alexandria currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alexandria Real Estate Equities, Inc. Price, Consensus and EPS Surprise
Alexandria Real Estate Equities, Inc. price-consensus-eps-surprise-chart | Alexandria Real Estate Equities, Inc. Quote
Upcoming Earnings Releases
We now look forward to the earnings releases of other REITs like Mid-America Apartment Communities, Inc. MAA, Simon Property Group, Inc. SPG and Highwoods Properties, Inc. HIW. While Mid-America Apartment Communities is slated to report on Feb 1 and Simon Property Group on Feb 6, Highwoods Properties is scheduled to come up with its results on Feb 7.
The Zacks Consensus Estimate for Mid-America Apartment Communities’ fourth-quarter 2022 FFO per share is pegged at $2.28, suggesting a year-over-year increase of 20.0%. MAA currently carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for Simon Property Group’s fourth-quarter 2022 FFO per share stands at $3.14, indicating a year-over-year increase of 1.62%. SPG currently has a Zacks Rank #3.
The Zacks Consensus Estimate for Highwoods Properties’ fourth-quarter 2022 FFO per share is pegged at 96 cents, implying a year-over-year decrease of 1.03%. HIW currently carries a Zacks Rank of 3.
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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