Alexandria Real Estate Equities (ARE) is the largest and longest-tenured owner/developer of specialized AAA commercial space focused exclusively on meeting the unique needs of the life sciences sector. For investors, this translates into a compelling combination of high cash flow, stable dividend income, and consistent earnings growth, advises Adam Johnson, editor of Bullseye Brief.
From fully-wired, high-tech workspaces to customized laboratories housing billions of cutting-edge equipment across corporate campuses, Alexandria owns 74M square feet (SF) in North America and has 6M additional SF under development. Future commitments already in planning total another 17M SF and provide significant runway for growth.
The company’s uniquely focused business model ensures a high-quality tenant base, resulting in higher occupancy, longer leases, stronger cash flow, and industry-leading capital appreciation. Notably, as of late 2023, occupancy was 96% and lease renewals were being signed at 6% increases, both of which provided ample support for the 4.5% dividend yield.
Ironically, shares recently traded at a 25% discount to long-term valuation on the assumption all commercial real estate is doomed by higher rates and work-from-home demographics. I disagree, and I think the current valuation anomaly will correct as stability returns to the market.
Buying Alexandria now provides a rare opportunity to acquire an investment-grade company at a near-distressed valuation.