New York, September 18, 2018 -- Moody's Investors Service ("Moody's") upgraded the ratings
of Alexandria Real Estate Equities, Inc. (Alexandria,
'the REIT'), including its long-term issuer and senior unsecured
ratings to Baa1 from Baa2. The rating outlook is stable.
The following ratings were upgraded:
..Issuer: Alexandria Real Estate Equities, Inc.
....Issuer Rating (Local Currency),
Upgraded to Baa1 from Baa2
....Senior Unsecured Shelf (Local Currency),
Upgraded to (P)Baa1 from (P)Baa2
....Pref. Stock Shelf (Local Currency),
Upgraded to (P)Baa2 from (P)Baa3
....Pref. Stock Preferred Stock (Local
Currency), Upgraded to Baa2 from Baa3
....Senior Unsecured Regular Bond/Debenture
(Local Currency), Upgraded to Baa1 from Baa2
Outlook Actions:
..Issuer: Alexandria Real Estate Equities, Inc.
....Outlook, Remains Stable
Today's rating action reflects Alexandria's improved credit
profile, which is supported by lower leverage levels and strengthened
fixed charge coverage. Alexandria has improved its fixed charge
coverage ratio to 4.5x in Q2 2018 from 3.6x at year end
2016. During the same period, the REIT has reduced its Net
debt/EBITDA to 6.1x from 7.2x, with further improvements
expected in the next 12-18 months. The rating upgrade also
incorporates Alexandria's diversified portfolio of life science
properties in key markets with consistently high occupancy and retention,
good quality tenants, many of which are insensitive to economic
cyclicality.
RATINGS RATIONALE
Moody's Baa1 senior unsecured rating for Alexandria reflects the REIT's
nationally diversified portfolio of high quality life science assets clustered
around key life science markets such as Boston, San Francisco Bay
Area, San Diego, New York City, Maryland, Seattle,
and the North Carolina Research Triangle Park. The rating also
incorporates the good credit quality of many of Alexandria's international
pharmaceutical, biotech and institutional tenants, as well
as their relative independence from the business cycle. Moody's
acknowledges Alexandria's solid debt protection metrics, including
its high amount of unencumbered assets relative to gross assets of 86.5%
at Q2 2018 which provides the REIT with valuable sources of alternative
liquidity via the issuance of property-specific mortgage debt,
or even sales to repay its unsecured debt in potential periods of stress.
These positives are counterbalanced by the REIT's high albeit improving
Net debt/EBITDA relative to similarly rated issuers and niche asset class
with geographical concentrations.
Future positive rating momentum would be predicated on Alexandria successfully
reducing leverage further with Net debt/EBITDA to well below 5.0x
while continuing to limit development and re-development efforts
to less than 5% of gross assets, all sustained over several
quarters. Positive rating momentum would also be predicated on
the REIT continuing to deliver consistently strong operating performance
while maintaining its fixed charge coverage ratio above 4.5x.
Negative rating movement would likely result from any challenges in executing
developments on budget or from any liquidity concerns. A reversal
of the current improving trend in leverage and coverage that would lead
to a sustained level of Net debt/EBITDA above 6.0x, or fixed
charge coverage falling below 3.5x would also create negative pressure
on the ratings. A rise in the development exposure or secured debt
approaching 10% of gross assets would also be viewed negatively.
Alexandria Real Estate Equities, Inc. (NYSE: ARE),
headquartered in Pasadena, CA, is a REIT that focuses principally
on the ownership, operation, management, and selective
acquisition, redevelopment, and development of properties
containing life science laboratory space. As of June 30,
2018, Alexandria had 234 properties aggregating 32.0 million
square feet and total assets of $13.6 billion.
The principal methodology used in these ratings was REITs and Other Commercial
Real Estate Firms published in September 2018. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Thuy Nguyen
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Philip Kibel
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653