REIT Set to Help Cure Cancer

NEW YORK (TheStreet) -- Alexandria Real Estate Equities (ARE) is an $8.2 billion (total cap) equity REIT focused on mission-critical lab and office space.

The driving force behind its life science sector is the highly sustainable revenue model that consists of multi-national pharmaceuticals, institutional research, biotech and life sciences products and services. Alexandria has a diversified portfolio, with more than 400 tenants -- about 50% of them are investment-grade.

Many of Alexandria's tenants are cutting-edge R&D firms that operate core, critical-mission assets, including companies that are developing successful treatments to major diseases; many are coming up with the next-generation treatments to cure cancer.

Since the company started in 1994 (IPO in 1997), Alexandria (headquartered in Pasadena) has become a venue for many scientific breakthroughs. Alexandria owns 173 high-quality properties (more than 16.7 million square feet) located in major cities such as Seattle, San Francisco, San Diego, Raleigh-Durham, suburban D.C. and Greater Boston. In addition, Alexandria owns properties in Canada and Asia.

At a two-day conference in New York this week, Alexandria will host an interactive platform for debate among the world's foremost visionaries to tackle the most critical global health care challenges, shaping the future of life science R&D.

Alexandria has become a catalyst for bringing together the world's foremost visionaries from industry, academia, medical centers, philanthropy, government and finance to explore how best to translate innovative discoveries into safe and effective therapies to treat cancer.

On Wednesday, I interviewed Alexandria's Founder and CEO Joel Marcus. In this exclusive video, Marcus provides details of Alexandria's strategically focused Life Science model and specifically the differentiated investment model that offers tremendous "sleep well at night" attributes.

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Alexandria has assets of around $7.09 billion and Wednesday shares were trading at $64.04 (market cap of $4.6 billion). With less than 23% secured debt, Alexandria has a conservatively positioned balance sheet (debt-to-market cap of 39.24%). Last year, Alexandria achieved an investment grade rating of BBB- (from S&P).

As the FAST Graph below illustrates, Alexandria possessed a very strong record of increasing funds from operations coming into the Great Recession of 2008. However, the recession brought on two years in a row where FFO, which is a close cousin to operating cash flows, fell as a result of weakness within the sector.

Consequently, the company was forced to cut its dividend, as evidenced by the pink line (dividends) on the graph. However, since the Great Recession, Alexandria has stabilized its funds from operations; now the company appears reasonably valued, as it is trading within its normal price to FFO ratio (of 14.1x), and slightly below its FFO's justified fair value. The 4.06% current yield is attractive in today's low interest-rate environment and should grow along with strengthening FFO.

Chart courtesy of FAST Graphs

I plan to report on the Alexandria Summit later this week and provide more news on Alexandria's innovative approach to critical health care that shapes the future.

At the time of publication, Thomas held no shares in stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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