Alexandria Expands Leasing as Occupancy Pressure Persists
Adjusted funds from operations fell to $1.73 a share as lower occupancy weighed on property income.
Alexandria Real Estate Equities (ARE), the life-science real estate owner, increased quarterly leasing volume 60% sequentially to 1.039 million square feet as demand for existing space strengthened in the second quarter.
The leasing pickup came before tenants occupied enough space to reverse the property portfolio’s decline. Operating occupancy fell 80 basis points from the first quarter to 86.9%, while same-property net operating income dropped 10.6% from a year earlier as average occupancy declined to 87.1% from 92.6%.
Alexandria’s net loss attributable to common stockholders narrowed to $73.7 million, or $0.43 a share, from $109.6 million, or $0.64 a share, a year earlier. Adjusted funds from operations fell to $296.1 million from $396.4 million, with the per-share result declining from $2.33.
Renewals and re-leasing rose to about 641,000 square feet from roughly 381,000 in the first quarter, and leases for previously vacant space more than doubled to about 329,000 square feet. Renewal pricing remained negative, though rental-rate changes improved to negative 0.7% from negative 15.0% sequentially.
Executed leases awaiting occupancy covered 1.4 million square feet and would raise occupancy to 90.9% on a pro forma basis. Those leases are expected to generate about $69 million of annual rental revenue.
A 159,947-square-foot advanced-technology lease at 3000 Minuteman Road allowed Alexandria to reduce the property’s planned laboratory redevelopment, cutting the expected construction budget by about $80 million. Megacampus properties increased their share of annual rental revenue to 80% from 78% at the end of March.
The development pipeline added $57 million of incremental annual net operating income through the opening of a Bristol Myers Squibb facility, and Alexandria expects another $42 million by the fourth quarter. Non-income-producing assets declined to 16% of gross assets, reaching the upper end of the company’s year-end target range ahead of schedule.
Alexandria narrowed its 2026 adjusted FFO forecast to $6.35 to $6.45 a share while retaining the $6.40 midpoint. Leverage stood at 7.0 times adjusted EBITDA, above the company’s fourth-quarter target of 5.6 to 6.2 times, and the company expects improvement during the second half. A July amendment extended the maturity of its $5 billion unsecured credit facility to 2032 and lowered its borrowing spread, while the quarterly dividend remained $0.72 a share.