Why has Alexandria Real Estate Equities (ARE) dropped 7.6% following its most recent earnings announcement?

Alexandria Real Estate Equities: Recent Performance and Outlook

It has been a month since the previous earnings announcement from Alexandria Real Estate Equities (ARE). During this period, the company's stock price has dropped approximately 7.6%, lagging behind the S&P 500 index.

Many investors are now questioning whether this downward momentum will persist as the next earnings report approaches, or if a turnaround is on the horizon. To better understand the current situation, let's review Alexandria's latest financial results and the factors influencing its performance, before considering recent analyst and investor reactions.

Q4 2025 Results: Earnings and Revenue Surpass Expectations, Occupancy Slips

In the fourth quarter of 2025, Alexandria Real Estate Equities posted adjusted funds from operations (AFFO) per share of $2.16, slightly exceeding the Zacks Consensus Estimate of $2.15. The company also reported total revenues of $754.4 million, outperforming the expected $738.3 million, driven by solid leasing activity.

Despite these beats, AFFO per share was lower than the $2.39 reported in the same quarter last year, and total revenues declined by 4.4% year-over-year. The company faced challenges such as reduced occupancy, declining rental rates, and increased interest expenses, all of which weighed on its results.

Key Operational Highlights

• Leasing activity for the quarter reached 1.2 million rentable square feet (RSF), reflecting continued demand for Alexandria's premium office and laboratory spaces.
• Lease renewals and re-leasing accounted for 821,289 RSF, while development and redevelopment leasing contributed 6,279 RSF.
• Rental rates declined by 9.9% overall, and by 5.2% on a cash basis.
• As of December 31, 2025, operating property occupancy in North America stood at 90.9%, a slight increase from the previous quarter but a 3.7% decrease compared to the prior year. This was just below the estimated 91.1%.
• Same-property net operating income (NOI) dropped 6% year-over-year, or 1.7% on a cash basis.
• Investment-grade or publicly traded large-cap tenants made up 53% of annual rental revenue, with an average remaining lease term of 7.5 years across all tenants and 9.7 years for the top 20 tenants.
• Tenant receivables totaled $6.7 million at year-end.
• During the quarter, Alexandria completed asset sales and partial interest dispositions totaling $1.47 billion, and brought one fully leased development project (139,979 RSF at 10075 Barnes Canyon Road) online, adding $10 million in annual NOI.
• Interest expenses increased 18% year-over-year to $65.7 million.

Financial Position and Liquidity

At the close of the fourth quarter, Alexandria held $549.1 million in cash and equivalents, down from $579.5 million at the end of September 2025. The company reported $5.3 billion in total liquidity.

Net debt and preferred stock to adjusted EBITDA stood at 5.7 times, while the fixed-charge coverage ratio was 3.7 times on an annualized basis. The average remaining term for the company's debt was 12.1 years, the longest among S&P 500 REITs.

2026 Guidance

• Alexandria projects AFFO per share for 2026 in the range of $6.25 to $6.55, with the Zacks Consensus Estimate at $6.42.
• Expected occupancy for North American operating properties is between 87.7% and 89.3%.
• Rental rate changes for renewals and re-leasing are forecasted to range from a 2% decline to a 6% increase.
• Same-property NOI is anticipated to fluctuate between a 9.5% decrease and a 7.5% increase.
• Dispositions and partial interest sales are estimated between $2.1 billion and $3.7 billion.

Recent Estimate Trends

Over the past month, analyst estimates for Alexandria have generally moved lower, reflecting a more cautious outlook.

VGM Score Overview

Alexandria currently holds a VGM Score of F, indicating weak growth and momentum prospects. The stock receives a C for value, placing it in the middle 20% for value-focused investors. Overall, the aggregate VGM Score remains at F, which is most relevant for those taking a broad investment approach.

Stock Outlook

Consensus estimates for Alexandria have been revised downward, suggesting a less optimistic view for the near term. The stock holds a Zacks Rank #3 (Hold), and is expected to deliver performance in line with the broader market over the coming months.

Industry Comparison: Prologis Performance

Alexandria is part of the Zacks REIT and Equity Trust - Other sector. Within this group, Prologis (PLD) has seen its shares rise 9% over the past month. Prologis reported $2.09 billion in revenue for the quarter ending December 2025, an 8% increase year-over-year, with earnings per share of $1.49, nearly unchanged from $1.50 a year earlier.

For the current quarter, Prologis is expected to earn $1.48 per share, a 4.2% increase from the prior year. The Zacks Consensus Estimate for Prologis has increased by 0.7% over the past 30 days. The stock also carries a Zacks Rank #3 (Hold) and a VGM Score of F.

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