PS Business Parks, Inc.PSB reported third-quarter 2018 core funds from operations (FFO) of $1.64 per share, beating the Zacks Consensus Estimate of $1.60. The figure also came in 6.5% higher than $1.54 recorded in the prior-year quarter.
Results highlight improvement in Same-Park net operating income (NOI) backed by growth in rental rates and occupancy, as well as improved NOI from non-Same-Park and multi-family assets. However, NOI reduction due to asset sold earlier partly offset the positives.
Rental income came in at around $103.8 million, marking 3.3% growth from the year-ago tally. The reported figure also exceeded the Zacks Consensus Estimate of $100 million.
Quarter in Detail
Same-Park rental income was up 2.2% year over year to $98.2 million, while Same-Park NOI climbed 3.8% year over year to $69.4 million, driven by improving rental rates and occupancy level.
Same-Park annualized rental income per occupied-square-foot inched up 1.2% to $15.36, while weighted average square-foot occupancy was 95.0%, up 90 basis points year over year.
PS Business Parks exited third-quarter 2018 with cash and cash equivalents of $8.7 million, down from $114.9 million reported at the end of the previous year.
As of Sep 30, 2018, the company had two multi-tenant office buildings, aggregating 107,000 square feet in Orange County, CA, as held for sale. The company expects to close this sale during fourth-quarter 2018.
On Oct 23, the company announced a quarterly dividend of $1.05 per share. The dividend is payable on Dec 27, to shareholders of record as of Dec 12, 2018.
We are encouraged with the decent FFO per share performance of PS Business Parks in the third quarter. Nonetheless, supply is rising in certain submarkets and this could partly impede the company's growth momentum. Stiff competition from other office and industrial asset owners in the market curtails its ability to attract and retain tenants at higher rents. Further, dilutive impact on earnings from dispositions of assets cannot be avoided in the near run. Lastly, rate hike adds to its woes.
PS Business Parks currently carries a Zacks Rank #4 (Sell).
PS Business Parks, Inc. Price, Consensus and EPS Surprise
We now look forward to the earnings releases of other REITs like Kimco Realty Corporation KIM , Simon Property Group, Inc. SPG and Iron Mountain Incorporated IRM which are slated to report their quarterly numbers on Oct 25.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) - a widely used metric to gauge the performance of REITs.
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