Affiliates of Alexandria Real Estate Equities, Inc. (ARE) – a real estate investment trust (REIT) – have divested 3 clustered legacy assets for $40.3 million. The sale is in accordance with the company’s asset-recycling strategy.
As per telegram.com, 3 newly formed non-profit subsidiaries of the University of Massachusetts Medical School have purchased these assets for possible future development.
The 3-clustered legacy assets comprise of 300,000 rentable square feet situated in Worcester, Mass. Alexandria purchased these assets – One Innovation Drive, 377 Plantation Street and 381 Plantation Street – in 1999 for unlevered cash yields of nearly 13%.
Worcester Business Development Corporation developed One Innovation Drive and 377 Plantation Street. These were part of the country's first purpose-built biotechnology park – the Massachusetts Biotechnology Research Park (MBRP). 381 Plantation Street was later developed at MBRP.
The divestment proceeds are likely to be utilized for reinvestment into higher value Class-A, CBD assets in Cambridge, Mass. Alexandria follows a strategy of asset recycling through which it monetizes limited non-strategic operating assets along with considerable non-income-generating plots of land.
Alexandria believes this strategy to be a useful source of internal capital generation which considerably reduces the need to issue new common equity.
The contractual termination dates of in-place leases is probably going to boost vacancy to 48% in 2013 as tenants, including associates of University of Massachusetts Medical School and Quest Diagnostics Incorporated, move to bigger, single-tenant facilities outside of the MBRP.
Alexandria has always been of the opinion that assets are best positioned for alternative uses, given the current market trends. However, for these specific assets, the company finds it lucrative to sell assets rather than invest considerable capital to reposition these for alternative uses.
Pasadena, CA-based Alexandria Real Estate is a major owner and leading life science real estate company, focused chiefly on science-driven cluster development through the ownership, operation, management, and selective acquisition, development, and redevelopment of properties containing life science laboratory space.
Currently, Alexandria carries Zacks Rank #3 (Hold). Other stocks in the same sector that are performing quite well and worth considering for investment include MHI Hospitality Corp. (MDH), Omega Healthcare Investors Inc. (OHI) and Ryman Hospitality Properties, Inc. (RHP). All these carry Zacks Rank #1 (Strong Buy).