Alexandria Real Estate Equities Inc.ARE

Morningstar Rating

Stock Research and Analysis

by David Rodziewicz

Alexandria Real Estate Equities is a real estate investment trust that supplies research and office space to the life science industry. The company has a roster of large, well-capitalized tenants, leased in strategically positioned properties scattered across the United States and Canada. Read more

Bulls Say

Alexandria's roster of well-established tenants should help to stabilize its portfolio, as these companies are typically better capitalized than speculative startup firms.

On average, 10% of leases expire in 2009 and 2010. Alexandria's tenant base should remain fairly constant over the next couple of years as a majority of their tenants typically choose renewal.

The demand for new drugs and innovative medical technology should create long-term tail winds for life science space, Alexandria's specialty.

We think Alexandria will have the capacity to raise its dividend in the long run--although it might be few years before management chooses to do so. Read more

Bears Say

Although Alexandria's disclosure is adequate, we would prefer to see greater portfolio-level granularity.

If the economic recession is longer or deeper than expected, poorly capitalized biotechs in Alexandria's core market could see high levels of bankruptcy, increasing the supply of life science space, which would weigh on occupancy and rents.

If long-term interest rates rise, in addition to already-increased credit spreads, this firm's cost of capital would increase, pressuring asset values and reducing cash flow. Read more

Strategy

Alexandria has differentiated itself by expanding internationally and focusing on large multinational tenants. Like other REITs in the life science arena, tenant leases typically exceed 10 years in duration, include annual rent escalators, and are triple net, allowing the company to pass operating expenses to tenants. Read more

Management

Alexandria earns a C for stewardship, in our opinion. Chairman and CEO Joel S. Marcus started with the company in 1994 and has a tenure in the life science industry dating back to the early 1980s. Marcus owns nearly 1.5% of shares outstanding, creating an incentive to act in shareholders' best interest. Read more

Profile

Alexandria Real Estate Equities is a California-based real estate investment trust specializing in research and office space for the life science industry. The company has amassed a portfolio of nearly 160 properties totaling approximately 13 million square feet since its inception in 1994. Read more

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