Alexandria Profits Doubled In Q4, Executives Say REIT Is Still Undervalued
After reporting soaring profits and revenues in the final quarter of 2020, the executives of Alexandria Real Estate Equities say the life sciences real estate investment trust is undervalued by investors.
The developer reported $435.9M in net income, more than double its profits from the fourth quarter of 2019. Alexandria also reported $246M in funds from operations, a 17% increase from Q4 2019, according to its fourth-quarter earnings released this week.
The surge in profits was partly caused by a $152.5M gain on the sale of real estate in the last three months of 2020, compared to a $500K gain in 2019. Alexandria's earnings per share of $3.26 beat analyst estimates of roughly 60 cents a share, according to Wall Street Journal market data.
Combined, Alexandria’s portfolio should have been valued significantly higher than its trading price on the New York Stock Exchange, which hovered around $170 a share Tuesday, Alexandria co-CEO and co-Chief Investment Officer Peter Moglia said. Alexandria's share price was up more than 3% to over $172 as of Thursday afternoon, after opening 2021 at roughly $178/share.
Moglia compared Alexandria to Blackstone and its BioMed Realty Trust portfolio, which it recapitalized last year for $14.6B.
“Blackstone has done well reforming and adding to [BioMed]'s original, somewhat older and tired asset base,” Moglia said. “But given Alexandria superior locations, assets and tenants, our asset base should command a premium valuation on the real estate alone.”
Moglia described the Blackstone deal’s value of $1,100 per SF against a “very simple back of the napkin” implied value of Alexandria’s portfolio of $767 per SF.
The REIT’s operating portfolio now tops 31M SF and Alexandria has an additional development pipeline of 17.8M SF, a 47% increase from 2019, executives said.
For all of 2020, Alexandria reported $923.8M in funds from operations, up from $783M in 2019. Its annual profit jumped from $351M in 2019 to $760.8M last year as it was able to benefit from the ongoing need for life sciences space. Alexandria's tenant base includes vaccine producers Pfizer and Moderna, three others in Phase 3 trials and two tenants with biomanufacturing contracts.
Alexandria announced in its earnings report plans to convert its $168M Seaport purchase behind the Boston Events and Convention Center into 1M SF of lab space. Executives spoke highly of its $1.5B Fenway acquisition, remaining tight-lipped about potential tenants.
Across Greater Boston, Alexandria’s portfolio includes 5.2M SF across 33 properties, which Executive Chairman Joel Marcus bragged about in his opening remarks to shareholders.
“And contrary to incorrect recent news reports, Alexandria is, in fact, the absolute leading largest and most dominant life science owner-operator and developer of office lab space in our Cambridge submarket,” Marcus said.
The company also announced a previously undisclosed $58M purchase of the 130K SF 840 Winter St. in Waltham. The deal hasn't been posted as of Thursday in South Middlesex County Records.
