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Alexandria Real Estate sells off $700M in non-core properties

Pasadenia-based life science REIT ready to divest another $1B in assets this year

Alexandria Real Estate Equities CEO Peter Moglia
Alexandria Real Estate Equities CEO Peter Moglia (Biocom California)

Alexandria Real Estate Equities has peddled away more than $700 million in real estate unrelated to its life science campuses — and is poised to sell $1 billion more.

The Pasadena-based real estate investment trust, the nation’s largest developer of life science offices and research labs, sold $701 million in properties not tied to its mega-campuses during the second quarter, the Commercial Observer reported, based on the REIT’s second-quarter report.

Alexandria has another $178 million in non-core real estate sales set to close and $874 million in targeted sales in the second half of this year. The pending sales total $1.052 billion.

The sell-off follows a general slowdown in medical office attendance, including life science offices owned by Alexandria, according to one report.

A white paper by Land and Buildings this summer reported that attendance at medical offices was down by 50 percent compared to 2019. 

The report analyzed attendance across 435 Alexandria Real Estate buildings, which was down 50 to 60 percent in major markets compared to before the pandemic. 

Alexandria took issue with the study. Jenna Foger, a senior vice president for the REIT, said  critical research and development can’t be done from home. She said energy use by life science tenants, a key measure of life sciences R&D, hasn’t changed since before the pandemic.

“The scientific throughput occurring in our spaces at any point in time is not correlated with the volume of people flowing in and out of our buildings and campuses,” Foger said during an earnings call.

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The publicly traded REIT reported $714 million in revenues during the second quarter, an 11 percent increase over the same period last year. Funds from operations were at $382 million, more than 15 percent higher than last year.

Alexandria CEO Peter Moglia said the firm saw an increase in demand for life science offices and labs, “ranging from 15 percent to 20 percent in our top three markets, a sign that perhaps investors are seeing the light at the end of the tunnel when it comes to economic uncertainty.”

The REIT reported 1.3 million square feet in leasing volume in the second quarter, and 2.6 million square feet in the year’s first half, which it said was “in line with pre-COVID leasing volume.” 

It said occupancy at its North American properties was 93.6 percent, expected to rise to 95 percent by the end of the year. Rental rate growth on lease renewals rose 16.6 percent.

The real estate trust has around 800 tenants, including Amgen, Gilead, Vertex and Moderna, largely at seven mega campuses, including those in San Francisco and San Diego.

— Dana Bartholomew

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Alexandria Real Estate Equities
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life sciencesMedicalmega-campuses