We value ARE through a combination of net asset value analysis and relative earnings multiples approach. Our methodology results in a target price of $110, which reflects a ~14x 2025E AFFO multiple. Our valuation takes into account ARE's exposure to high quality laboratory space while balancing risk from elevated market supply, which we expect to persist in the near-and-medium term, as well as lease-up risk within the development pipeline.

In a potential recessionary environment, earnings could be negatively impacted by elevated supply, development and leasing delays, slower transaction markets, stock price volatility, and capital markets availability. If Alexandria is unable to lease space on pace with expiring leases, or is unable to lease up its development pipeline, we believe AFFO and NAV growth could be impacted, limiting the stock’s ability to achieve our target price. If the overall market enters into a severe bear market, the company may not be able to follow through with its future development pipeline, limiting future growth potential. Increased competition could potentially erode the company’s historically high returns in the laboratory niche. Similarly, a reversal in the trend of increased spending on pharmaceutical research and development could have an adverse effect on demand from Alexandria’s core life science tenants. Additionally, if private market cap rates expand or compress more than we anticipate, the stock could underperform or outperform.