Alexandria Raises Capital, Prices Senior Notes Offerings

Alexandria Real Estate Equities, Inc. (NYSE:ARE) recently announced the pricing of public offering of two different issues of unsecured senior notes. Specifically, a new issue of 2.75% senior notes with aggregate principal amount of $400 million have been priced at 99.842%. These notes are due in 2029.

Another offering of 4% senior notes, with aggregate principal amount of $200 million, have been priced at 110.38%. These securities will become part of the company's existing series of 4% senior notes due in 2050, of which notes worth $500 million were originally issued on Jul 15, 2019.

The 2.75% notes will have a yield to maturity (YTM) of 2.767%, while the 4% senior notes will offer YTM of 3.441% (including interest accrued since Jul 15, 2019 on the previously-issued notes).

The closing of the note offering is subject to satisfaction of customary closing norms and is anticipated to be around Sep 12, 2019.

Alexandria intends to use net proceeds from the offering to reduce outstanding balances under its unsecured senior bank term loan and repay borrowings under the company’s unsecured senior line of credit. Moreover, the company plans to utilize any excess amounts for general corporate purposes.

Alexandria’s efforts to tap the debt market amid low interest-rate environment are a strategic fit. Furthermore, since unsecured notes can be borrowed at lower rates, the new debt will result in lower funding cost.

Notably, by paying down its debt obligations, this offering is likely to provide financial flexibility to Alexandria. In addition, it reflects the company’s focus to address its financial obligations in an efficient way.

The note offering is also anticipated to boost Alexandria’s balance sheet and enhance its liquidity position. The company had $3.4 billion of liquidity as of the end of the second quarter. In fact, the previous issuance of $1.25-billion unsecured senior notes in July 2019 has helped Alexandria extend debt maturities. Further, upon completion of refinancing activities, the company’s pro forma weighted-average remaining term on its outstanding debt stood at 10.1 years, with no debt maturing until 2023.

Currently, Alexandria carries a Zacks Rank #2 (Buy). In the year-to-date period, shares of the company have jumped 30.1%, outperforming the industry’s growth of 24.7%.

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Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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