Alexandria Real Estate (ARE) is a good REIT: But is it a good buy?

Alexandria Real Estate (NYSE: ARE) stock price has not been left behind in the ongoing REIT carnage. The stock has dropped by 15% this year and by 26% in the past 12 months as concerns about high-interest rates and debt maturities remain.

ARE is crawling back

REITs are having a difficult year as investors remain concerned about the elevated interest rates, falling valuations, and upcoming maturities. Estimates are that debt worth over $1 trillion will mature in the next few months.

REITs have also been affected by the hybrid working environment that has seen many companies downsize their office requirements. This trend has mostly hit office REITs in places like New York and California. Some of the most affected are companies like SL Green and Vornado Realty.

But REITs are not created the same. For example, Alexandria Real Estate is a company that focuses on the life sciences industry. It owns 64 properties that have an occupancy rate of almost 95%. It uses a cluster model that focuses on location, innovation, talent, and capital.

Life sciences is a unique business because, unlike other industries, work-from-home trends don’t apply too much. And there are signs that investments in the sector are rising as investors allocated over $450 billion in funding this year.

Alexandria Real Estate published strong results in July. The most recent results showed that the company’s revenue jumped by 10.9% in Q2 to $713 million, helped by higher prices and occupancy rate. Its  Net Operating Income (NOI) rose by 12.2% as its collections rose to 99.9%.

These results, therefore, invalidated the thesis by Land and Buildings, a short-seller that warned about the company a few months ago. I believe that the company will continue thriving for a long time.

The question is whether the company’s 4% dividend yield provides a good margin of safety as interest rates rise. I believe that investors should invest in areas poised to grow in the near term.

Alexandria Real Estate stock price forecast

The daily chart shows that the ARE stock price bottomed at $107.53 in July and then bounced back to the current $125. The shares have formed an inverted head and shoulders pattern, which is usually a bullish sign. It has moved above the 25-day and 50-day moving averages.

Therefore, I believe that the shares will continue rising in the near term as buyers target the key resistance level at $140, which is about 15.2% from the current level.