Alexandria's Q2 AFFO Beats Estimates, Occupancy Declines

Alexandria Real Estate Equities, Inc. ARE reported second-quarter 2025 adjusted funds from operations (AFFO) per share of $2.33, beating the Zacks Consensus Estimate of $2.29. This compares unfavorably to the AFFO of $2.36 reported in the prior year.

Results reflect decent leasing activity and rental rate growth. However, lower occupancy and higher interest expenses year over year undermined the results to some extent.

Total revenues of $762 million surpassed the consensus estimate of $750.7 million. However, the figure decreased marginally year over year.

ARE: Behind the Headlines

Alexandria’s total leasing activity aggregated 769,815 rentable square feet (RSF) of space in the second quarter, reflecting healthy demand for its high-quality office/laboratory space. Of this, lease renewals and re-leasing of space amounted to 483,409 RSF, while leasing of development and redevelopment space totaled 131,768 RSF.

The company registered rental rate growth of 5.5% during the quarter. On a cash basis, the rental rate increased 6.1%. The occupancy of operating properties in North America was 90.8% as of June 30, 2025, down 0.9% from the prior quarter and 3.8% from the year-ago quarter. Our estimate for the same was 91%.

On a year-over-year basis, same-property net operating income (NOI) decreased 5.4%. It improved 2% on a cash basis. The change in same-property NOI was due to lease expirations totaling 768,080 RSF at six properties across four submarkets. Same-property NOI changes, excluding the impact of these lease expirations, were a 2.1% decrease and a 6.5% increase on a cash basis.

In the reported quarter, investment-grade or publicly traded large-cap tenants accounted for 53% of the annual rental revenues in effect. The weighted average remaining lease term of all tenants is 7.4 years. For Alexandria’s top 20 tenants, it is 9.4 years. As of June 30, 2025, the tenant receivable balance was $6.3 million.

As of June 30, 2025, Alexandria’s share of completed and pending dispositions and sales of partial interests totaled $785.4 million. During the second quarter, ARE placed into service development and redevelopment projects aggregating 217,774 RSF, which are 90% occupied across three submarkets, delivering $15 million of incremental annual NOI.

However, interest expenses jumped 20.8% year over year to $55.3 million.

In July, ARE secured the largest life science lease in its 31 years of history by signing a 16-year expansion lease agreement with a longtime multi-national pharmaceutical tenant. The lease for this build-to-suit research hub spans more than 466,598 RSF of space located at Campus Point by Alexandria Megacampus in the University Town Center submarket of San Diego.

ARE’s Liquidity

The company exited the second quarter with cash and cash equivalents of $520.5 million, up from $476.4 million as of March 31, 2025. It had $4.6 billion of liquidity at the end of the reported quarter.

The net debt and preferred stock to adjusted EBITDA was 5.9X, and the fixed-charge coverage was 4.1X on an annualized basis. Its weighted average remaining term of debt was 12 years.

ARE’s Zacks Rank

Alexandria currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Alexandria Real Estate Equities, Inc. Price, Consensus and EPS Surprise

Alexandria Real Estate Equities, Inc. price-consensus-eps-surprise-chart | Alexandria Real Estate Equities, Inc. Quote

Upcoming Earnings Releases

We now look forward to the earnings releases of other REITs like Welltower WELL and Highwoods Properties HIW, slated to report on July 28 and July 29, respectively.

The Zacks Consensus Estimate for Welltower’s second-quarter 2025 FFO per share stands at $1.22, which indicates 16.2% growth year over year. WELL currently has a Zacks Rank #3 (Hold).

The Zacks Consensus Estimate for Highwoods Properties’ second-quarter 2025 FFO per share is pegged at 85 cents, which implies a 13.3% year-over-year decrease. HIW currently carries a Zacks Rank #3.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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