Alexandria Real Estate Equities, Inc. (ARE): A Bear Case Theory

We came across a bearish thesis on Alexandria Real Estate Equities, Inc. on Compounding Dividends’s Substack by TJ Terwilliger. In this article, we will summarize the bears’ thesis on ARE. Alexandria Real Estate Equities, Inc.’s share was trading at $54.64 as of January 13th. ARE’s trailing and forward P/E were 150.89 and 16.69 respectively according to Yahoo Finance.

Alexandria Real Estate Equities (ARE), long considered a reliable high-yield REIT, recently slashed its dividend by 45%, surprising many investors. The company, a premier landlord for the life science industry, owns large “Mega Campuses” in key innovation hubs like Boston, San Francisco, and San Diego, leasing to pharmaceutical giants such as Eli Lilly, Bristol Myers Squibb, and Moderna, as well as early-stage biotech firms and research divisions of universities.

Despite a strong balance sheet and high-quality assets, Alexandria’s concentration in life sciences has exposed it to a severe, structural downturn across the industry. Four major headwinds—tightening NIH funding, declining venture capital for startups, FDA leadership turnover and delayed approvals, and government pricing pressure on drugs—have collectively strained the revenue prospects of its tenants, directly impacting rent collection.

These challenges are compounded by a dramatic oversupply of lab space, which has grown 7.5 times since 2021 even as demand has dropped 60%, reducing projected cash flows by roughly 8.5% per building in 2026 and causing a nearly 30% expected decline in FFO. While Alexandria’s core tenants remain operational, these structural pressures fundamentally reduce future earnings power, making the dividend cut necessary to preserve the balance sheet.

This situation highlights the critical importance of evaluating industry-specific risks and the direct connection between tenant health and landlord performance, even for well-managed, high-quality REITs with seemingly strong financials.

Previously, we covered a bullish thesis on Simon Property Group, Inc. (SPG) by David in April 2025, which highlighted its disciplined capital structure, strong free cash flow, strategic tenant mix, and rising dividends. The company’s stock price has appreciated approximately by 24.53% since our coverage. This is because the thesis played out as SPG benefited from resilient retail operations. TJ Terwilliger shares a contrarian perspective on Alexandria Real Estate Equities, Inc. (ARE), emphasizing structural life science headwinds and a necessary dividend cut.

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Disclosure: None.