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Activist investor Jonathan Litt, known for shorting major office-owning REITs, is now asserting that life sciences space is as underutilized as standard office space and that valuations are going to suffer as a result.
Litt said Alexandria Real Estate Equities, a major holder of life sciences assets, is going to feel the pinch of empty space, especially as major leases are up for renewal.
Litt's hedge fund, Land & Buildings Investment Holdings, holds a short position on Alexandria, a fact he confirmed on CNBC on Thursday.
“Alexandria has got a real problem,” Litt said on the network. “There's about 20% of new space coming on the market, which is on top of likely increasing vacancies.”
If the company's portfolio were valued the way office is valued, it might be down by as much as 40%, he said.
Alexandria is the largest life sciences real estate income trust in the country and has many active projects in a broad swath of markets. However, the company has slowed its progress in recent months and this week sold a five-building campus in the Boston area.
Alexandria Executive Chairman Joel Marcus dismissed Litt's assertions as a mischaracterization of life sciences space and how it is used.
“Life science is not office space,” he told Bisnow Friday afternoon. “You can't in any way, shape or form associate it with generic office, which is, in fact, in secular decline.”
Moreover, life sciences usage is supported by the strength of the $4T to $5T life sciences industry, Marcus said, which is avid for new space, including some recent leases Alexandria has inked.
In a white paper released on Friday, Land & Buildings found that the presence of cellphones in Alexandria's portfolio was down about 50% compared to pre-pandemic figures. The data collection counted only phones that were in the buildings more than 60 minutes to eliminate short-term visitors.
“The white paper is intended to bring attention to his short position on the company, as opposed to independent, viable research,” Marcus said. “You have to remember where it's coming from.”
At one time, Litt said, he considered life sciences immune to the troubles of reduced space usage, but he changed his mind following the cellphone study.
Marcus criticized the cellphone data analysis — which he said was developed for a retail context — as having no meaning in a lab property because the properties count as mission-critical infrastructure to the life sciences industry.
Alexandria stock was down about 2.8% on Friday. Compared with a year ago, it is down nearly 10%.
UPDATE, JUNE 16, 6:50 P.M. ET: This story has been updated with comments from Alexandria Executive Chairman Joel Marcus.
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