Sign in

You're signed outSign in or to get full access.

AR

ALEXANDRIA REAL ESTATE EQUITIES, INC. (ARE)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 printed mixed results: total revenues of $762.0M (flat YoY, +0.5% QoQ), GAAP diluted EPS of $(0.64), and FFO per share (diluted, as adjusted) of $2.33 (+1.3% QoQ) .
  • Guidance was reset: GAAP EPS cut to $0.40–$0.60 (from $1.36–$1.56) and FFO per share (diluted) to $8.11–$8.31 (from $8.51–$8.71); FFO per share, as adjusted, held at $9.16–$9.36 (midpoint $9.26) .
  • Operationally, leasing totaled 769,815 RSF with cash rent spreads +6.1%; occupancy declined to 90.8% given earlier large lease rollovers, but ~1.7% of occupancy uplift is signed and expected to deliver in early 2026 .
  • Balance sheet remained strong (liquidity $4.6B; net debt + preferred to Adjusted EBITDA 5.9x; fixed-charge coverage 4.1x), and the dividend was maintained at $1.32, payout ~57% .
  • Stock catalysts: (1) largest life science lease in company history (466,598 RSF, build-to-suit at Campus Point); (2) lowered GAAP EPS/FFO guidance; (3) visible asset recycling toward year-end; (4) occupancy trajectory and resolution of 2026 expirations .

What Went Well and What Went Wrong

What Went Well

  • Executed the largest life science lease in ARE’s history (466,598 RSF, 16-year build-to-suit) at Campus Point, reinforcing brand strength and mega-campus strategy; management: “a seminal moment” and a high-credit tenant consolidating R&D in a world-class location .
  • Delivered 217,774 RSF at 90% occupancy in Q2, adding $15M of incremental annual NOI; expected additional $139M of incremental annual NOI by 4Q26 from projects 84% leased/negotiating .
  • Maintained margins: operating margin 71% and adjusted EBITDA margin 71%; G&A discipline drove trailing-12-month G&A to 6.3% of NOI, lowest in a decade .

What Went Wrong

  • Same-property NOI declined YoY: (5.4)% GAAP and +2.0% cash for Q2 vs Q2 2024, reflecting earlier 768K RSF lease expirations; management guiding continued pressure in 2H25 .
  • Occupancy fell to 90.8% (from 91.7% in Q1 and 94.6% in Q2 2024); year-end guidance maintained at 90.9%–92.5% but dependent on dispositions and leasing progress .
  • Guidance reset lower for GAAP EPS and FFO (diluted) amid asset recycling, impairments (~$129.6M real estate), and conservative leasing trajectory; cap interest expected steady to slightly higher in 2H25 .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Total Revenues ($USD Millions)$766.7 $758.2 $762.0
GAAP Diluted EPS ($)$0.25 $(0.07) $(0.64)
FFO per share – diluted, as adjusted ($)$2.36 $2.30 $2.33
Operating Margin (%)72% 70% 71%
Adjusted EBITDA Margin (%)72% 71% 71%
Occupancy – Operating Properties (North America, %)94.6% 91.7% 90.8%
Leasing KPIsQ2 2024Q1 2025Q2 2025
Total Leasing Activity (RSF)1,114,001 1,030,553 769,815
Lease Renewals & Re-leasing RSF589,650 884,408 483,409
Rental Rate Change (GAAP)7.4% 18.5% 5.5%
Rental Rate Change (Cash)3.9% 7.5% 6.1%
Tenant Collections (%)99.9% (Q2 collection status) 99.9% (Q1 status) 99.9% (Q2 status)
Balance Sheet / CreditQ2 2024Q1 2025Q2 2025
Liquidity ($USD Billions)—$5.3 $4.6
Net Debt + Preferred / Adj. EBITDA (Quarter Annualized, x)5.6x 5.9x 5.9x
Fixed-Charge Coverage (Quarter Annualized, x)4.6x 4.3x 4.1x
Dividend per Share ($)$1.30 $1.32 $1.32
Estimates vs Actual (S&P Global)Q2 2025
Revenue Consensus Mean ($)$752,251,210*
Revenue Actual ($)$762,040,000
Primary EPS Consensus Mean ($)0.62062*
Primary EPS Actual ($)0.48*

Values marked with an asterisk (*) were retrieved from S&P Global and may reflect S&P’s “Primary”/normalized definitions that differ from GAAP or REIT FFO metrics.

Guidance Changes

MetricPeriodPrevious Guidance (4/28/25)Current Guidance (7/21/25)Change
GAAP EPS (diluted)FY 2025$1.36–$1.56 $0.40–$0.60 Lowered
FFO per share (diluted)FY 2025$8.51–$8.71 $8.11–$8.31 Lowered
FFO per share, as adjustedFY 2025$9.16–$9.36 (midpoint $9.26) $9.16–$9.36 (midpoint $9.26) Maintained
Occupancy (North America, YE %)FY 202590.9%–92.5% 90.9%–92.5% Maintained
Same-Property NOI (GAAP, %)FY 2025(3.7)%–(1.7)% (3.7)%–(1.7)% Maintained
Same-Property NOI (Cash, %)FY 2025(1.2)%–0.8% (1.2)%–0.8% Maintained
Interest Expense ($M)FY 2025$185–$215 $185–$215 Maintained
Capitalization of Interest ($M)FY 2025$320–$350 $320–$350 Maintained
Net debt + preferred / Adj. EBITDA (4Q25 annualized)FY 2025≤5.2x ≤5.2x Maintained
Fixed-Charge Coverage (4Q25 annualized)FY 20254.0x–4.5x 4.0x–4.5x Maintained
Dispositions & Partial Interests ($M)FY 20251,450–2,450 (midpoint 1,950) 1,450–2,450 (midpoint 1,950) Maintained
Dividend per Share ($ quarterly)Q2 2025$1.32 (declared) $1.32 (declared) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Mega-campus strategy and brand trustQ4 2024: Occupancy 94.6% at YE; large 4Q dispositions; mega-campus focus reiterated . Q1 2025: “Alexandria brand is about trust”; 75% ARR from mega-campus; strong tenant relationships .Largest lease in history at Campus Point; continued pipeline deliveries and leasing traction .Strengthening
Competitive supply and leasingQ1 2025: Supply winding down; 2025 deliveries less pre-leased in Boston/SF; San Diego mostly pre-leased; leasing >1M RSF, cash spreads +7.5% .Q2 leasing 770K RSF; cash spreads +6.1%; TI/LC lower on renewals vs prior two quarters; first lease at 701 Dexter .Mixed (steady activity; moderation in volume)
Tariffs/macro and ratesQ1 2025: Tariffs expected minimal yield impact; macro caution; hope for rate cuts .Continued monitoring; CFO reiterates cap interest outlook; management hopeful on rates and agency stability .Neutral to cautious
Regulatory/legal (FDA/NIH/CMS)Q1 2025: Agency transitions; NIH restructuring; FDA reviews progressing; CMS stable .FDA outlook constructive; NIH funding concerns persist; institutions cautious; direct commentary continues .Uncertain but improving
Asset recycling and capital allocationQ1 2025: $609M completed/pending; land sales fund pipeline; buybacks opportunistic .$785.4M completed/pending; dispositions HEAVILY weighted to 4Q25; cap rates 7.5%–8.5% on non-core .Accelerating toward year-end
AI/technology tenantsQ1 2025: AI taking Mission Bay space; cross-use of lab/tech .Ongoing case-specific demand; prospects increasing; decisions elongated .Gradual tailwind

Management Commentary

  • Joel Marcus (Executive Chairman): “This 466,000 sq ft lease represents a seminal moment… and demonstrates the resilience of our sector, showing long-term commitment, long-term lease with a high credit tenant.”
  • Hallie Kuhn (SVP): “Leasing stats… reflect the importance of the diversity of our tenant base… private biotech represented 30%… biomedical institutions 22%… the broader picture for public biotech equities remains tough.”
  • Peter Moglia (CEO/CIO): “We leased ~770,000 sq ft with cash spreads of 6.1%… tenant improvements and leasing commissions on renewals were down 40% compared to previous two quarters… development/redevelopment leasing has started to gain traction.”
  • Marc Binda (CFO): “FFO per-share diluted as adjusted was $2.33 for Q2 2025, up 1.3% compared to the prior quarter… occupancy at 90.8%… G&A cost as a percentage of NOI was 6.3%, the lowest level in 10 years.”

Q&A Highlights

  • Campus Point build-to-suit: Analysts probed drivers; management emphasized R&D consolidation, campus amenities, and robust lab infrastructure as key differentiators .
  • Occupancy trajectory: Year-end occupancy guidance maintained; uplift expected from asset sales with vacancy and signed-not-yet-delivered leases; 2026 expirations under active planning .
  • Dispositions and cap rates: Non-core assets “in transition” driving higher cap rates (7.5%–8.5%); buyer pool includes residential developers, municipalities, private equity, and sovereigns .
  • Capitalized interest: ~$3B future pipeline with milestones through April 2026; selected projects may pause capitalization until tenant fit-out; cap interest likely steady to slightly higher in 2H25 .
  • Free rent trend: Peaked this quarter due to one lease; outlook TBD .

Estimates Context

  • Revenue beat vs S&P Global consensus: Consensus $752.3M* vs company-reported $762.0M, a beat (~$9.8M) .
  • EPS context: S&P “Primary EPS” consensus 0.6206* vs S&P “Primary EPS” actual 0.48*, while GAAP diluted EPS was $(0.64) reflecting impairments and investment losses .
  • Implication: Street may lower GAAP EPS and FFO (diluted) estimates to align with updated guidance, while FFO (as adjusted) midpoint remains intact at $9.26 (company) .
    Values marked with an asterisk (*) were retrieved from S&P Global and may reflect normalized definitions used by S&P for REITs.

Key Takeaways for Investors

  • Mega-campus moat intact: The 466,598 RSF build-to-suit validates demand for ARE’s premium, amenity-rich ecosystems and supports medium-term leasing/future development optionality, especially in San Diego .
  • Near-term earnings reset: GAAP EPS and FFO (diluted) guidance were lowered; monitor impairments, capitalization of interest, and asset sale timing—management targets leverage ≤5.2x by YE via dispositions and retained cash .
  • Occupancy trough and path: Q2 occupancy at 90.8% likely reflects full impact of known move-outs; signed-not-delivered leases (~1.7% boost) and targeted asset sales should help, but 2H same-property pressure persists .
  • Leasing health: Q2 leasing volume moderated yet achieved favorable spreads; development/redevelopment leasing has traction; watch 701 Dexter, 99 Coolidge progress, and Campus Point execution .
  • Dividend durability: Dividend maintained at $1.32 (57% payout in Q2), with strong collections and credit metrics underpinning cash flows; incremental liquidity preserved by pausing growth of the dividend .
  • Asset recycling cadence: Expect heavier 4Q dispositions with cap rates 7.5%–8.5% on non-core, improving portfolio quality and funding needs without common equity issuance .
  • Trading setup: Catalysts include execution on the Campus Point build-to-suit, visible 4Q disposition closings, and signs of occupancy stabilization; risks center on macro rates, NIH funding cadence, and elongated tenant decision cycles .

Citations:
Press release and supplemental (Q2 2025):
8-K and exhibits (Q2 2025):
Earnings call (Q2 2025):
Dividend press release (Q2 2025):
Prior quarter press release/call (Q1 2025):
S&P Global estimates: Revenue Consensus Mean $752,251,210*; Primary EPS Consensus Mean 0.62062*; Q2 2025 Primary EPS Actual 0.48*; Q1 2025 revenue consensus $754,296,910*; Q4 2024 revenue consensus $776,982,680*. Values retrieved from S&P Global.