Barclays Boosts PT on Alexandria Real Estate (ARE) to $121 Following Q2 Results

August 22, 2016 3:21 PM EDT
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Price: $105.12 --0%

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    8 Buy, 3 Hold, 0 Sell

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Barclays is lifting its price target on Overweight-rated Alexandria Real Estate Equities (NYSE: ARE) from $113 up to $121 following recent quarterly results.

The firm commented today, We are updating our model to reflect 2Q16 results. Second-quarter FFO of $1.36 per share (+3.9% YOY) was $0.02 below our estimate but in line with consensus. Management narrowed its FY2016 FFO guidance range to $5.48-5.54 (from $5.46-$5.56), maintaining the same midpoint. SSNOI growth was solid in 2Q16 (+4.9% GAAP, +6.4% cash on a YOY basis). Management raised SSNOI guidance to 2.5-4.5% on a GAAP basis and 4.0-6.0% on a cash basis (from 2.0%-4.0% GAAP, 3.5%-5.5% cash). ARE also reported strong rental rate increases (+27.1% GAAP, +9.3% cash).

The company was active on the portfolio management front. It announced the acquisition of One Kendall Square for $725 million (a 664K square foot campus in Cambridge, MA). The transaction is expected to close over the next few months and achieve a 5.8% stabilized yield. In addition, ARE entered into a joint venture with TIAA to sell 45% interests in two San Diego properties for total proceeds of $256 million. The NOI contribution from the company's development pipeline continues to become more visible; it placed three additional projects (~406K square feet, $167 million estimated cost) into service in the quarter. After producing $14 million incremental NOI from development deliveries in 1H16, the company expects to generate an additional $51-56 million of NOI in 2H16 and a further $130-140 million of NOI in 2017-2018.

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