Specialist
C-suite at a training company in REIT industry
Agenda
- Operating environment for Alexandria Real Estate Equities (NYSE: ARE) and other life science real estate-leaning REITs
- Market dynamics for the life science real estate space
- Alexandria Real Estate’s operating metrics, debt maturities and liquidity
- Performance outlook for the remainder of 2023, including potential asset acquisitions and dispositions
Questions
1.
Can you describe the evolution of Alexandria Real Estate's business in recent years? The company IPO'd in 1997 and has posted significant gains ever since – we're seeing roughly 1,160% returns relative to its 1997 IPO. Where is the company coming from and where do you think it's going?
2.
Can you talk us through the current operating environment for the life sciences real estate market for REITs? What are the key 2-3 trends impacting this segment the most today that investors are pursuing?
3.
Where have cap rates been for the life science real estate space over the last two years relative to today?
4.
From one perspective, life science real estate clearly seems to be the outlier in all of office, given the obvious dynamics of life science and the need for its physical presence. Then, when you factor the strength of Alexandria Real Estate's balance sheet management, its net debt is quite low and none of it seems to mature before 2025-26. From the start, what are 2-3 factors that explain why the market does not seem necessarily convinced by the company? Its stock performance has been on a rather
negative trend over the last year. How do we explain that downturn in its market performance?
5.
Since we're grasping for straws when trying to find a negative, how much of that negative market performance could we attribute to the wider market's perception of real estate performance? To your first point on the unbeatable attractiveness of treasury yields all weighing down on why or why not we're seeing depressed valuations or market performance for REITs – particularly those that champion the life science space – and across the board these appear to be immune to all the other pressures of all this, how much is this a factor in perception? What are the external vs internal
pressures, as you seem to be placing a lot of that negative performance on this?
6.
Given where Alexandria Real Estate's current dividend is – it's not necessarily the highest in the REIT space – and its strength in its balance sheet relative to its market performance, would you be surprised to see more aggressive increases to its dividend yield?
7.
Alexandria Real Estate peaked in daily trading volumes on 17 March 2023, where it reached about USD 6m, relative to its average, which is around USD 1.2m. Why do you think there was such a sell-off for the name, almost in complete concurrence with the banking events related to Silicon Valley Bank? Could you draw a parallel between why a life science real estates REIT had such a large sell-off when issues in the regional banking space started to rise, almost to the day?
8.
Given how expensive life science real estate properties are, could you talk us through the margins for Alexandria Real Estate and the wider life science real estate REIT space? How are margins in this space different relative to those of other forms of commercial real estate? I'm sure these expensive custom-made, high-tech- and high-sanitation-quality institutions have higher associated expenses as well.
9.
Can you talk us through Alexandria Real Estate's large land portfolio, and whether you'd expect the company to move on it in today's rate environment?
10.
Can you talk us through the competitive landscape for life science real estates REITs? It's widely known that Alexandria Real Estate is the market leader in the space, but we've discussed in a previous Interview [see US Office REITs – Industry Dynamics & Financing Challenges – 24 May 2023] how other REITs are beginning to put more of their energy and focus in building out a segment of LSRE within their portfolios – Boston Properties comes to mind. Given Alexandria Real Estate's current competitive positioning, can you grade the efforts of other players in trying to play catch-up and
building their own life science portfolios?
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