PS Business Parks Inc.
) first-quarter 2014 adjusted FFO per share came in at $1.22, a
penny shy of the Zacks Consensus Estimate as well as the
prior-year quarter figure.
While this real estate investment trust (REIT) experienced an
uptick in net operating income (NOI) from the Non-Same Park
portfolio, the year-over-year decrease in FFO per share is mainly
due to the rise in share count from the Nov 2013 common equity
Including non-recurring items, PS Business Parks reported
first-quarter 2014 FFO of $1.20 per share, unchanged year over
However, total revenue in the reported quarter rose 8.2% year
over year to $95.5 million and exceeded the Zacks Consensus
Estimate of $93 million.
Quarter in Detail
Rental income moved up 8.2% year over year to $95.3 million
during the quarter. This was primarily driven by increase in
rental revenues from Same Park and Non-Same Park portfolio. The
company experienced a rise in occupancy in the Same-Park
portfolio while acquisition of additional parks in the second
half of 2013 as well as increasing occupancy levels helped raise
rental income in the Non Same-Park facilities.
Annualized Same Park realized rent per square foot rose 1.4% year
over year to $14.37. Same Park weighted average occupancy in the
quarter was 92.3%, up 150 basis points (bps) year over year while
Non-Same Park weighted average occupancy climbed significantly
year over year to 75.4% from 55.7%.
Total cost of operations grew 14.1% year over year to $33.1
million, reflecting rise across both Same-Park and Non-Same Park
portfolio. Consequently, total portfolio NOI increased 5.3% year
over year to $62.2 million. In particular, Same Park NOI was up
0.5% year over year to $58.8 million while Non-Same Park NOI
increased substantially to $3.5 million from $0.6 million in the
PS Business Parks exited first-quarter 2014 with cash and cash
equivalents of $45.8 million, up from $31.5 million as of Dec 31,
2013. The company had full capacity available under its $250
million unsecured credit facility. Debt and preferred equity to
market cap was 30.3%, while ratio of FFO to fixed charges and
preferred distributions was 3.2x.
Following the quarter end, the company amended and extended the
terms of its $250.0 million credit facility. The move helped in
lowering borrowing rate and extend the maturity date to May 1,
2019 from Aug 1, 2015.
Concurrent with its earnings release, the board of directors of
PS Business Parks declared a quarterly dividend of 50 cents per
share on its common stock. The dividend is payable Jun 30, 2014
to shareholders of record on Jun 13.
The earnings miss, though by a penny, is not encouraging.
Moreover, anticipated rise in interest rates in the long term and
tepid recovery of the office market fundamentals remain headwinds
for this Zacks Rank #4 (Sell) stock. Nevertheless, we believe
that PS Business Parks' portfolio in diversified markets as well
as acquisitions in the past year would support its top line and
We now look forward to results of other REITs that are scheduled
to report this week. These include
Duke Realty Corp.
Apartment Investment and Management Co.
FFO, a widely used metric to gauge the performance of REITs,
is obtained after adding depreciation and amortization and other
non-cash expenses to net income.
APARTMENT INVT (AIV): Free Stock Analysis
DUKE REALTY CP (DRE): Free Stock Analysis
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PS BUSINESS PKS (PSB): Free Stock Analysis
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