PS Business Parks, Inc.
(
PSB
), a real estate investment trust (REIT) that owns and operates
commercial real estate properties across the U.S., has recently
augmented its Northern California portfolio with the acquisition of
18 multi-tenant business parks comprised of 2.9 million square feet
of industrial space and 2.4 million square feet of flex space. The
properties were purchased from RREEF America REIT II Corp. and its
affiliate Northern California Industrial Portfolio Inc., for $520
million.
The acquired properties, currently 82.2% leased to 216 tenants,
are located in the Bay Area, primarily concentrated in Oakland,
Hayward, Fremont, Milpitas, San Jose, Santa Clara and Sunnyvale.
With the strategic purchase, PS Business Parks presently has 7.2
million square feet of multi-tenant industrial and flex space in 30
business parks in Northern California, accounting for about 26.3%
of the total portfolio.
In order to fund the acquisition, the company assumed a $250
million secured loan scheduled to mature in December 2016, which
bears a fixed interest rate of 5.45%. PS Business Parks also
entered into a three-year unsecured term loan worth $250 million
with
Wells Fargo & Company
(
WFC
) that bears an interest rate of LIBOR plus 1.20%. The remainder of
the purchase price was funded from retained cash and available
credit facility. PS Business Parks intends to record approximately
$2.8 million as additional G&A expense in fourth quarter 2011
related to transaction costs for the acquisition.
PS Business Parks owns low-rise suburban multi-tenant offices,
business parks and industrial and flex assets. Located mostly in
high population markets, flex properties are a combination of
warehouse and office space and can be easily configured to suit a
variety of uses.
The warehouse component of the flex space is primarily used for
purposes such as light manufacturing and assembly, storage and
warehousing, showroom, laboratory, distribution and research and
development activities. The office component of the flex space is
complementary to the warehouse component and enables businesses to
accommodate management and production staff in the same
facility.
Over the years, PS Business Parks has focused on investing and
owning real estate in diversified markets, thereby tapping multiple
industry concentrations and minimizing the risks associated with
the economic down cycles. In addition, the company seeks to
maximize its cash flow by controlling capital expenditures
associated with re-leasing space by acquiring and owning
properties, which can be easily reconfigured to suit a variety of
uses for a wide range of tenants.
We maintain our 'Outperform' recommendation for PS Business
Parks, which presently has Zacks #2 Rank that translates into a
short-term 'Buy' rating.
PS BUSINESS PKS (
PSB
): Free Stock Analysis Report
WELLS FARGO-NEW (
WFC
): Free Stock Analysis Report
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