PS Business Parks Inc.
), a real estate investment trust (REIT), reported first-quarter
2013 core FFO (fund from operations) of $1.20 per share, in line
with the Zacks Consensus Estimate and up 2.6% from $1.17 per
share reported in the prior-year quarter. The uptick was driven
by an increase in net operating income from Non-Same Park
facilities and a dip in interest expense. However, a rise in
preferred equity distributions acted as a dampener.
FFO, including the non-recurring items, reached $38.1 million
or $1.20 per share, up from $31.9 million or $1.01 per share in
the prior-year period.
Total revenue in the reported quarter rose 4.0% year over year
to $88.3 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 and Same Park properties.
Behind the Headlines
Same Park weighted average occupancy in the quarter was 92.0%,
up from 91.6% in the year-ago quarter. Annualized same park
realized rent per square foot during the quarter increased 0.9%
to $15.07 from $14.93 in the first quarter of 2012.
Total portfolio net operating income (NOI) increased 3.8% to
$58.7 million from $56.6 million in the year-earlier quarter.
Non-same park NOI increased 23.1% to $9.6 million from $7.8
At quarter-end, PS Business Parks had cash and cash
equivalents of $8.1 million compared to $12.9 million as of Dec
31, 2012. The company had full capacity available under the $250
million unsecured credit facility. Debt and preferred equity to
market cap was 34.8% 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. This dividend will be paid on Jun
27, 2013 to shareholders of record as of Jun 12, 2013.
We are encouraged by another decent quarterly result at PS
Business Parks that reported healthy year-over-year increase in
revenues 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 risks 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
PS Business Parks currently has a Zacks Rank #3 (Hold).
However, other well performing REITs include
Parkway Properties Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
Note: 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.
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