Alexandria's cash flow weakens as it shores up its balance sheet
Big pharma lab demand still real Alexandria handed Bristol Myers Squibb a 427,000-square-foot San Diego research hub. A global drugmaker taking that much purpose-built lab space shows large tenants still want Alexandria's campuses, supporting leasing and long-term rent.
Shows the demand side of the business is still working, a real support for the stock.
Earnings quality is deteriorating Q2 adjusted funds from operations (a REIT's main profit gauge) fell to $1.73 a share from $2.33, revenue dropped, same-property net operating income fell 10.6%, and occupancy slipped to 86.9%. Even with more leasing, the cash the buildings produce is shrinking.
The core profit and cash-flow decline is the main force weighing on the shares.
Debt load grows while credit access improves Alexandria priced $1 billion of 7.25% junior notes, adding interest cost, and leverage is 7.0x net debt to EBITDA, above its own 5.6x-6.2x target. It also replaced its credit line with a bigger $5 billion facility maturing to 2032, giving flexibility to sell assets and pay down debt.
Captures both the balance-sheet strain and the refinancing that buys time to fix it.
A value investor steps in Baron Real Estate Income Fund disclosed a new stake, saying life science real estate is stabilizing after years of weak demand and excess supply, and expecting growth to turn up as Alexandria sells properties and buys back its beaten-down shares.
Shows outside investors see the depressed price as an opportunity, a counterweight to the weak results.