PS Business Parks Inc.
), a real estate investment trust (REIT), reported fourth quarter
2011 FFO (fund from operations) of $32.8 million or $1.04 per share
compared to $31.7 million or 99 cents per share in the year-earlier
quarter. Fund from operations, 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.
Excluding the non-recurring items, recurring FFO for the
reported quarter was $1.13 per share compared to $1.07 in the
year-ago quarter. The recurring FFO for the quarter surpassed the
Zacks Consensus Estimate by 8 cents.
For full year 2011, the company reported FFO of $149.8 million
or $4.69 per share compared to $124.4 million or $3.88 per share in
the previous year. The fiscal 2011 reported FFO exceeded the Zacks
Consensus Estimate by 4 cents. Recurring FFO for the reported
fiscal was $4.46 per share compared to $4.11 in 2010.
Rental revenues during the reported quarter surged 5.5%
year-over-year to $74.7 million, driven by an increase in revenues
of $5.4 million from non same-store properties, offset partially by
a decrease in the rental rates in the same-store portfolio. Total
revenues during the reported quarter beat the Zacks Consensus
Estimate of $74 million.
For full year 2011, PS Business Parks reported a 7.7%
year-over-year increase in rental revenues to $297.8 million,
driven by an increase in revenues of $25.9 million from non
same-store properties, offset partially by a decrease in the
company's rental rates in the same-store portfolio.
Average same-store occupancy during the quarter was 91.8%
compared with 91.6% in the year-ago quarter. Annualized same-store
realized rent per square foot during the quarter decreased 2.5% to
$14.25 from $14.62 in the fourth quarter of 2010. Total net
operating income during the quarter increased 2.5% to $49.3 million
from $48.1 million in the year-earlier quarter.
During the reported quarter, PS Business Parks augmented its
Northern California portfolio with the acquisition of 18
multi-tenant business parks comprising 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
The acquired properties (82.2% leased to 216 tenants) were
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
Wells Fargo & Company
) 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 recorded approximately $2.8
million as additional G&A expense in fourth quarter 2011
related to transaction costs for the acquisition.
At year-end 2011, PS Business Parks had cash and cash
equivalents of $5.0 million and about $150 million available under
the $250.0 million unsecured credit facility. Debt and preferred
equity to market cap was 43.1% at quarter-end, with ratio of FFO to
fixed charges and preferred distributions was 3.7x. The company
maintained its dividend rate of 44 cents per share during the
quarter. The distribution payout ratio during the quarter was 82.9%
compared to 60.1% in the year-ago quarter.
We maintain our 'Outperform' recommendation on PS Business
Parks, which presently has a Zacks #2 Rank that translates into a
short-term 'Buy' rating.
PS BUSINESS PKS (
): Free Stock Analysis Report
WELLS FARGO-NEW (
): Free Stock Analysis Report
To read this article on Zacks.com click here.