Alexandria Equities Maintains Strong Balance Sheet and Liquidity

Alexandria Equities maintains a strong balance sheet and liquidity, according to executives on the first-quarter call. The firm has $4 billion in liquidity and no debt maturities until 2023. Plus, the REIT has a high concentration of life science tenants working to develop vaccines and treatments for the novel coronavirus, which will contribute to a strong performance moving forward.

Alexandria closed the first quarter with $8.1 billion invested in venture-backed life science companies. It was a record for the company. Biopharma has performed well against the broad market, according to Joel Marcus, founder and chairman, during the pandemic. “While most industries are adversely affected by acute changes in consumer demand, this is not the case for biopharma,” Marcus said on the earnings call. “As the need for new medicines is fundamental to our human condition. This discrepancy is one of the reasons why biopharma outperformed other sectors during the great financial crisis and the tech bubble crash of 2001.”

In the first quarter, Alexandria leased 700,000 square feet of space. Strong funding in the National Institute of Health and the FDA’s approval of 11 new products position the firm for strong leasing performance. Already, executed leases for the month of April are on par with activity in the first quarter, and the firm is currently in lease negotiations on its ground-up projects with 61% of new construction projects already pre-leased. “Rent rate increases were the highest during the past 10 years with 22.3% on a cash basis and 46.3% on a GAAP basis, led by a large lease in our flagship Tech Square campus in Cambridge. Our mark-to-market continues to be strong at 15.8% GAAP and 14.3% cash,” says Stephen A. Richardson, co-CEO.

However, the firm has received rent deferral requests, primarily among retail tenants, and it has made those requests on a case-by-case basis. In April, those deferrals totaled $600,000 with 98.4% of rent recovered, which Dean A. Shigenaga, co-president and CFO, called “outstanding.”

NOI remained strong during the quarter with same-property NOI growth of 2.4% and 6.1% on a cash basis. Alexandria’s stock outperformed other REITs, down 7% year-to-date. “Our business is not absolutely immune from this unusual and unprecedented environment. But is doing very well on a relative basis,” said Shigenaga.