Alexandria Real Estate Equities, Inc. recently announced a 45% reduction in its dividend, a move that surprised many investors. The company, a major landlord for the life science sector, owns large campuses in Boston, San Francisco, and San Diego, leasing to tenants such as Eli Lilly, Bristol Myers Squibb, and Moderna, along with biotech startups and university research divisions.
As of January 13th, Alexandria's share price was $54.64. According to Yahoo Finance, its trailing P/E ratio stood at 150.89, with a forward P/E of 16.69.
The dividend cut follows a severe downturn in the life science industry, which has exposed the company to significant structural challenges. Four major headwinds are impacting tenant revenue prospects: tightening NIH funding, declining venture capital for startups, FDA leadership turnover and approval delays, and government pricing pressure on drugs. These factors have directly strained rent collection for Alexandria.
Compounding these issues is a dramatic oversupply of lab space. Since 2021, supply has grown 7.5 times while demand has dropped 60%. This is reducing projected cash flows by roughly 8.5% per building in 2026 and causing an expected decline in funds from operations of nearly 30%.
While Alexandria's core tenants remain operational, these pressures have fundamentally reduced future earnings power. The company stated the dividend reduction was necessary to preserve its balance sheet, despite its strong financial position and high-quality assets.
Analyst TJ Terwilliger of Compounding Dividends's Substack presented this bearish thesis on Alexandria Real Estate Equities, emphasizing the structural life science headwinds and the necessity of the dividend cut. This contrasts with a previously covered bullish thesis on Simon Property Group in April 2025, which highlighted that company's resilient retail operations and 24.53% stock price appreciation since coverage.
According to database records, 31 hedge fund portfolios held Alexandria Real Estate Equities at the end of the third quarter, down from 33 in the previous quarter. The company is not listed among the 30 Most Popular Stocks Among Hedge Funds.