Alexandria Real Estate(US:ARE)2024-04-23 23:45Financial Data and Key Metrics Changes - The company reported a 9.7% increase in total revenues and an 11.5% increase in NOI for Q1 2024 compared to Q1 2023, driven by solid same-property performance and execution of development strategies [27][28] - FFO per share diluted as adjusted was $2.35, up 7.3% year-over-year, exceeding consensus estimates [27][28] - Collections remained high at 99.9%, with adjusted EBITDA margins at 72% [28][29] Business Line Data and Key Metrics Changes - The company achieved 7.6% year-over-year NOI growth and 7.3% year-over-year FFO growth, alongside a 5% increase in dividends [8] - Leasing volume for the quarter was strong at 1.1 million square feet, consistent with pre-pandemic levels, with GAAP and cash rental rate increases of 33% and 19% respectively [29][30] - Same property NOI growth for Q1 2024 was solid at 1% and 4.2% on a cash basis [28][30] Market Data and Key Metrics Changes - In Greater Boston, unleased competitive supply decreased significantly from 7% to 1.6% of market inventory due to new deliveries [22][24] - Direct vacancy in Greater Boston increased to 12.98%, while San Francisco and San Diego also saw increases in direct vacancy rates [24] - The company expects 2024 to be the peak year for new deliveries, with a subsequent decrease in 2025 [22][24] Company Strategy and Development Direction - The company is focused on leasing for the 2025 pipeline and redevelopment space, with a strong emphasis on maintaining high occupancy rates [9][20] - The company plans to recycle approximately $1.4 billion of capital in 2024, with $275 million of noncore assets sold or pending [9][26] - The company aims to grow its operating base by 78% over time through significant construction and pre-construction activities [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the life sciences sector's recovery, citing strong venture capital activity and a robust pipeline of new therapies [12][60] - The management noted that the current macroeconomic environment remains challenging, with high interest rates and inflation impacting operations [6][60] - The company anticipates a strong demand recovery in 2025, driven by ongoing investments in the life sciences sector [60][64] Other Important Information - The company has a strong balance sheet with low leverage at 5.2 times net debt to adjusted EBITDA and significant liquidity of $6 billion [35][36] - The company reiterated its full-year 2024 guidance for FFO per share diluted as adjusted at $9.47, representing a 5.6% growth over 2023 [28][39] Q&A Session Summary Question: Follow-up on asset recycling - Management clarified that there is no pause in asset recycling activity, with ongoing brisk sales expected in the latter half of the year [41][43] Question: Competitive supply and leasing environment - Management indicated that new supply is not competing effectively with their offerings, as their brand and operational excellence attract tenants [75][76] Question: Development yields and interest rates - Management discussed the importance of considering long-term internal rates of return when evaluating development opportunities, despite current high interest rates [80]