PS Business Parks Inc.
), a real estate investment trust (REIT), reported fourth quarter
core FFO (fund from operations) of $1.20 per share, a cent ahead
of the Zacks Consensus Estimate and up 6.2% from $1.13 per share
reported in the prior-year quarter.
The uptick was driven by an increase in net operating income from
Non-Same Park facilities that include the 5.3 million square foot
portfolio purchased in Dec 2011. A rise in interest expense,
preferred equity distributions as well as general and
administrative expenses acted as dampeners.
For full year 2012, the company's core FFO came in at $4.74 per
share, significantly surpassing the Zacks Consensus Estimate of
$4.26 per share and 6.3% ahead of $4.46 per share reported a year
However, FFO after non-cash and other adjustments reached $39.9
million or $1.25 per share in the reported quarter, up from $32.8
million or $1.04 per share in the prior-year period. For full
year 2012, FFO came in at $134.5 million or $4.24 per share, down
from $149.8 million or $4.69 per share.
Total revenues during the reported quarter surged 19.6% year over
year to $89.4 million and exceeded the Zacks Consensus Estimate
of $88 million. This was mainly driven by a significant increase
in rental revenues from non-same park properties. For full year
2012, total revenues reached $347.2 million, up 16.5% from a year
ago and ahead of the Zacks Consensus Estimate of $338 million.
Same Park weighted average occupancy during the quarter was 92.3%
compared with 91.8% in the year-ago quarter. Annualized same park
realized rent per square foot during the quarter increased 0.5%
to $14.34 from $14.27 in the fourth quarter of 2011.
Total portfolio net operating income (NOI) during the quarter
increased 18.7% to $58.5 million from $49.2 million in the
year-earlier quarter. Non-same park NOI increased 121.3% year
over year to $15.7 million.
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Acquisition and Disposition
During the quarter, the company acquired 3 multi-tenant flex
buildings in Austin, Texas, for $14.9 million. The properties
span 226,000 square feet and 86.1% occupied at the time of
Moreover, during the quarter, PS Business Parks sold Quail Valley
Business Park, a 66,000 square foot flex park in Houston, Texas,
for $2.3 million. This led to a net gain of $935,000.
At quarter-end, PS Business Parks had cash and cash equivalents
of $12.9 million and full capacity available under the $250
million unsecured credit facility. Debt and preferred equity to
market cap was 39.7% at quarter-end, while ratio of FFO to fixed
charges and preferred distributions was 3.1x.
Concurrent with its earnings release, the Board of Directors of
PS Business Parks declared a quarterly dividend of 44 cents per
share on its common stock. The dividend will be paid on Mar 28,
2013 to shareholders of record on Mar 13, 2013.
We are encouraged with the decent fourth quarter results at PS
Business Parks that reported healthy year-over-year increase in
revenue and core FFO per share. This REIT owns and operates
commercial real estate properties in diversified markets, which
can be easily configured to suit a variety of uses to minimize
downside risk and generate a steady source of revenue.
The company also has a strong balance sheet with adequate
liquidity and minimal debt maturities. However, if job cuts
recur, operations in the company's office portfolio are likely to
suffer, thereby undermining its long-term growth potential.
PS Business Parks currently has a Zacks Rank #3 (Hold). However,
a number of other REITs that are performing well and deserve a
Terreno Realty Corp.
), having a Zacks Rank #1 (Strong Buy) as well as
Hersha Hospitality Trust
DCT Industrial Trust Inc.
), both carrying a Zacks Rank #2 (Buy).
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.