Alexandria’s (ARE) Profit Rebound Comes With A Cash Flow Catch

On August 3, Alexandria Real Estate Equities (NYSE: ARE ) reported a Q2 2026 net loss of $0.43 per diluted share, narrower than the $0.64 loss posted a year earlier, while first-half net income swung to $1.68 per share from a loss of $0.71 in H1 2025. Funds from operations, the metric real estate investors watch most closely, moved the other way. Second-quarter FFO per share, as adjusted, fell to $1.73 from $2.33, and first-half FFO per share dropped to $3.46 from $4.63.

Leasing activity picked up meaningfully in the second quarter. Alexandria signed 1,038,917 rentable square feet of leases in Q2 2026, a 60% jump from the first quarter and roughly 87,000 square feet above its trailing quarterly average. Three-quarters of that leasing activity over the trailing twelve months came from existing tenants, and once executed leases with future occupancy are counted, total occupancy climbs to 90.9% from the reported 86.9%. Tenant quality remains a selling point too: 80% of annual rental revenue comes from the company's Megacampus platform, and 57% comes from investment-grade or publicly traded large-cap tenants, with 99.9% of second-quarter rents and receivables collected as of August 3.

The balance sheet backs that stability up. Alexandria holds $3.60 billion in liquidity and just extended its $5.0 billion unsecured line of credit to 2032 at a lower borrowing rate of SOFR plus 0.725%, down from SOFR plus 0.835%. Only 6% of total debt matures through 2028, and the company's 9.7-year weighted-average remaining debt term is the longest among S&P 500 REITs. General and administrative expenses fell 17.4% from Q2 2024, even after a year-over-year uptick, and the company maintained its $0.72 per share quarterly dividend, a 5.4% yield as of June 30.

The numbers behind the improved per-share figures are less reassuring on closer look. Same-property net operating income fell 10.6% in the second quarter and 11.5% for the first half, driven largely by occupancy declines tied to lease expirations. Operating occupancy slipped from 87.7% at the end of March to 86.9% at the end of June, and the current-period average occupancy of 87.1% compares with 92.6% a year earlier. Lease renewals aren't helping much either: rental rate changes on renewed and re-leased space fell 0.7% in the second quarter and 15.0% in the first quarter, with cash-basis declines of 4.3% and 15.8%, respectively.

Leverage remains elevated in the near term. Net debt and preferred stock to Adjusted EBITDA stood at 7.0x on a Q2 2026 annualized basis, well above the company's 5.6x to 6.2x target for the fourth quarter, which depends on completing $2.9 billion in planned dispositions and other capital sources. General and administrative expenses rose 26.5% from Q2 2025 to $36.9 million. The company also recorded $222.5 million of real estate impairment charges in the quarter and continues to evaluate the business and financial strategy for five development and redevelopment projects totaling 1.4 million square feet.