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Alexandria (ARE) Receives Rating Affirmation From Moody's

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Alexandria Real Estate Equities, Inc. (ARE - Free Report) has received an affirmation on its credit ratings, including its issuer and senior unsecured debt ratings, of Baa1 from Moody's Investors Service. The rating agency maintained its outlook rating at stable. Shares of ARE witnessed a marginal gain in the Oct 5 trading session on the NYSE.

Recently, S&P Global Ratings reaffirmed the company’s strong credit rating of BBB+ with a positive outlook.

The reiteration of Alexandria’s credit ratings is a testament to its consistently solid operating and financial performance. The company boasted a significant liquidity of $6.3 billion as of Jun 30, 2023. Importantly, it has no debt maturities before 2025 and its weighted-average remaining term was 13.4 years as of the end of the second quarter of 2023. ARE’s solid balance sheet position and ample financial flexibility poise it well to bank on long-term growth opportunities.

Per Marc E. Binda, chief financial officer and treasurer of Alexandria, “We are very proud of our best-in-class team's disciplined and strategic efforts to build and enhance a fortress balance sheet that provides us flexibility to execute on our unique business model and enable our tenants' tireless work to advance innovation to improve human health.”

Alexandria owns Class A/A+ properties in North America's AAA innovation cluster locations, with significant market presence in Greater Boston, San Francisco Bay Area, New York City, San Diego, Seattle, Maryland and the Research Triangle. Its position as a preeminent player in the life science real estate industry, coupled with the strategic positioning of its properties in the key life science markets across the United States, enables it to enjoy robust scale.  

Amid the booming demand for life-science assets, the advantageous locations of its properties are resulting in high occupancy levels. In the six months ended Jun 30, 2023, Alexandria’s total leasing activity aggregated 2.5 million RSF of space, of which 82% was generated from existing tenants. Lease renewals and re-leasing of space amounted to nearly 2.2 million RSF. As of Jun 30, 2023, the occupancy of Alexandria’s operating properties in North America remained high at 93.6%.

The company has a well-diversified and high-quality tenant base ranging from multinational pharmaceutical, public and private biotechnology companies, manufacturers of complex medicines and top-tier investment-grade companies and institutions as well as technology entities. This assures stable rental revenues for the company over the long term.

Moreover, ARE is making concerted efforts to acquire, develop and redevelop new Class A/A+ properties in AAA locations to enhance its operating platform. It recently announced that it has expedited the delivery of 325 Binney Street, a 462,100 rentable square feet (RSF) Class A+ property presently under construction, to Moderna (MRNA - Free Report) .

Strategically located on the Alexandria Center® at One Kendall Square mega campus in Cambridge, Moderna’s new global headquarters and core R&D operations center is expected to be handed over in November 2023.

Alexandria is likely to deliver the mission-critical development project under budget. This will contribute significantly to its incremental annual net operating income beginning from the fourth quarter of 2023, which is encouraging.

However, persistent macroeconomic uncertainty and high interest rates pose near-term concerns. ARE may find it challenging to purchase or develop real estate with borrowed funds as the costs are likely to be on the higher side. Moreover, with high interest rates in place, the dividend payout might seem less attractive than the yields on fixed-income and money-market accounts.

Shares of this Zacks Rank #3 (Hold) company have lost 16.3% in the past three months compared with the industry’s decline of 11.8%.

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Stocks to Consider

Some better-ranked stocks from the real estate investment trust sector are Welltower (WELL - Free Report) and Americold Realty Trust (COLD - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Welltower’s 2023 funds from operations (FFO) per share has been raised marginally over the past week to $3.56.

The Zacks Consensus Estimate for Americold Realty Trust’s ongoing year’s FFO per share has been raised marginally over the past month to $1.26.

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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