Following the first data earlier this week, we could learn the first results of real estate developers in the United States, such as Boston Properties (BXP), Sun (SunCommun), and Alexandria RE (AlexRealE). The latter, in particular, reported remarkably strong results relative to expectations, whose EPS was 104 percent higher than expected.
Is the real estate market changing?
A period of rising interest rates and high commodity prices did not seem to be favorable for the real estate market. This could be seen, among other things, from the listing of the Vanguard Real Estate ETF (VNQ), which has lost more than 30 percent since the beginning of the year. However, the prices of construction commodities seem to have fallen much faster relative to real estate prices since recent months. For example, the prices of iron, which is one of the main commodities for this market, have fallen by about 40 percent since their peaks, compared to steel prices on the Shanghai Stock Exchange, which have fallen by about 30 percent since their peaks. Over a similar period, according to the Redfin Institute, real estate prices peaked in May and have since fallen by an average of 6 percent. However, note the demand side, where, according to the Mortgage Bankers Association, "Mortgage applications fell more than 14 percent from the previous week. Sales of existing homes in August fell 19 percent year-on-year, according to the National Association of Realtors."
Source: Mt5, VNQ, Weekly
Alexandria RE with surprisingly good results
Negative data from the demand side seemed to not affect the investment fund, which has been in operation since 1994 and invests in modern life science, AgTech and technology campus office space. As it turned out, the company leased a total of 1.7 million square feet of space (RSF) and saw rental rates increase by about 27%. As it seems, this had a positive impact on EBITDA, which increased by about 23% year-on-year in Q3. The company's revenue seems to have grown steadily since 2012, as did the volume of assets under management. Net income per share EPS was $2.11 (expected $0.66), the same as in Q2 this year. Reduced demand in the market does not seem to be an obstacle for the company, as it seems effectively passing on costs to consumers through increased rental costs.
What is being said on Wall Street about Alexandria RE?
Source: Mt5, AlexRealE, Daily
According to Market Screener, the company has 11 recommendations, 7 of which are “Buy” recommendations. The average target price is set at $182.55, more than 30.2% higher than the last closing price. The highest target price is at $232, and the lowest is at $141.
Author: Grzegorz Dróżdż, a Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Read more reviews and open a demo account at invest.conotoxia.com
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
