Alexandria Real Estate Equities, Inc. (NYSE:ARE.PRE) Q1 2016 Earnings Conference Call - Preliminary Transcript

May 03, 2016 • 03:00 pm ET


Alexandria Real Estate Equities, Inc. (NYSE:ARE.PRE) Q1 2016 Earnings Conference Call - Preliminary Transcript


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Welcome to the Alexandria Real Estate Equities Inc. First Quarter 2016 Earnings Conference Call. My name is Craig, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I would now like to turn the conference over to Paula Schwartz. Please go ahead, ma'am.

Paula Schwartz

Thank you, and good afternoon everyone. This conference call contains forward-looking statements within the meaning of the federal securities laws. The Company's actual results might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the Company's periodic reports filed with the Securities and Exchange Commission.

And now, I'd like to turn the call over to Joel Marcus. Please go ahead.

Joel S. Marcus

Yes. Thank you Paula, and welcome everybody to the first quarter Alexandria call and welcome, everybody. And with me today are Dean Shigenaga; Peter Moglia; Steve Richardson; Tom Andrews; and Dan Ryan. And I want to open up as I always like to do to congratulate the entire Alexandria family for another strong quarter operationally and financially. Also want to recognize the passing of Rich Jennings a long time director of Alexandria, who passed on February 28th after our last earnings call. And Rich was such an important influence on the development of the company and we're going to miss him a lot.

Let me start right away. At a recent investment conference, I presented kind of key three key takeaways for 2016. The first thing that our markets are continuing to stay rock solid with strong demand, a little bit or no supply, rents up over the past year about 15% and continuing high occupancy. Secondly, our highly preleased value add pipeline, which will continue to drive growth in earnings and decrease in the leverage where we've also been able to achieve significant yields is really key takeaway two[Phonetic]. And then number three would be fundamentals are really overtaking sentiment in the life science factor. And so far as the tactical ground level as I mentioned there are no cracks. Novel and innovative bio-pharmaceutical products will be the key to managing the cost of chronic disease.

On the core quickly continued very strong performance in our urban innovation cluster markets. We have a strong 6.2% cash same store NOI growth, strong occupancy of 97.3 and continuing strong margins. On the leasing side again, in virtually all of our markets, very tight and we're seeing strong demand and good performance. We leased about 390,000 square feet this quarter, down from other quarters because we're having less space to lease due to high occupancy, at about 17% cash rent spreads, contributed heavily by Cambridge, San Francisco, Seattle and Research Triangle Park. Important to keep in mind, 52% of our total ABR this quarter from investment grade tenants, so very strong underlying credit to