Alexandria Real Estate Equities ARE reported fourth-quarter 2017 adjusted FFO of $1.53 per share. The figure missed the Zacks Consensus Estimate by a penny. Nonetheless, adjusted FFO per share compares favorably with the prior-year quarter tally of $1.42.
The company witnessed a year-over-year jump in expenses related to rental operations and interest expenses.
Total revenues for the quarter increased 19.9% year over year to $298.8 million. However, the figure missed the Zacks Consensus Estimate of $299.8 million.
Alexandria Real Estate Equities, Inc. Price, Consensus and EPS Surprise
Alexandria Real Estate Equities, Inc. Price, Consensus and EPS Surprise | Alexandria Real Estate Equities, Inc. Quote
In Details
Alexandria’s total leasing activity aggregated around 1,379,699 rentable square feet (RSF) of space during the quarter. The company carried out lease renewals and re-leasing of space at rental rate increases of 24.8% and 10.4% (cash basis), respectively, in the reported quarter. In addition, key leases executed in the quarter included 520,988 RSF leased to Facebook and the 170,244 RSF renewal with Theravance Biopharma.
On a year-over-year basis, same-property net operating income (NOI) grew 4.5%. It climbed 12.5% on a cash basis. As of fourth-quarter 2017, occupancy for operating properties in North America expanded 70 basis points (bps) sequentially to 96.8%.
As of the fourth quarter, investment-grade tenants accounted for 55% of annual rental revenues in effect. Furthermore, 80% of the annual rental revenues are from Class A properties in AAA locations.
Liquidity
Alexandria exited the quarter with cash and cash equivalents of $ 254.4 million, up from $118.6 million recorded at the end of the prior quarter. The company ended the fourth quarter with $2 billion of liquidity.
Our Viewpoint
Urban office real estate investment trust (REIT) — Alexandria — disappointed shareholders with its performance in the fourth quarter. Notably, escalating expenses hindered revenue and occupancy growth enjoyed by the company for its Class A properties. We believe efforts to curb expenses might improve the company’s performance in the upcoming quarters.
Nonetheless, opportunistic acquisitions and significant development and redevelopment projects in place have created a high leased value-creation pipeline. Also, the company has adequate financial flexibility to enhance its market position and continue important buyouts.
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 inched up 0.4% in the past three months, versus 2.4% decline witnessed by the industry it belongs to.
We now look forward to the earnings releases of other REITs like CubeSmart CUBE, Diamondrock Hospitality Company DRH and Cousins Properties CUZ. CubeSmart is slated to report results on Feb 15, while Diamondrock and Cousins Properties are scheduled to release quarterly numbers on Feb 28 and Feb 7, respectively.
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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