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PS Business Parks (PSB) Q3 FFO Lags Estimates, Revenues Fall

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PS Business Parks, Inc. (PSB - Free Report) reported third-quarter 2020 core funds from operations (FFO) per share of $1.61, lagging the Zacks Consensus Estimate of $1.66. Moreover, the reported figure declined from the $1.71 reported in the year-ago quarter.

Quarterly results reflect a dip in both rental income and same-park net operating income (NOI), along with a contraction in weighted average square-foot occupancy.

Nevertheless, the company reported robust rent collections for the third quarter and also recently acquired an industrial park. Reflecting positive sentiments, shares of PS Business Parks appreciated marginally during Thursday’s trading session.

Rental income came in at $103.8 million, marking a fall of 4% from the year-ago quarter’s $108.1 million.

In the third quarter, the company collected about 96% of total rent, comprising 96%, 96% and 97% collection for industrial, flex and office assets, respectively. In addition, 1% of the quarter’s total rent remained uncollected and 2% has been deferred. In October, the company collected about 96% of total rent, comprising 96%, 95% and 98% collection for industrial, flex and office assets, respectively. Notably, 4% ofthe total rent remained uncollected.

Further, through Sep 30, 2020, roughly 11% of its customers, based on total rental income, had been granted rent relief in the formof rent deferral and/or abatement.

Recently, the company completed the acquisition of Pickett Industrial Park in Alexandria, VA. The infill multi-tenant industrial park spans across an area of 246,000 square feet and was acquired for $46.3 million.

Quarter in Detail

During the third quarter, PS Business Parks executed leases on 2 million square feet, in line with the leasing production of the prior-year quarter. Weighted average cash rental rate growth on leases executed during the reported quarter was 5.2%, while net effective rental rate growth was 18.7% for the same period.

Average lease term of the leases executed during the quarter was 4.3 years, with associated average transaction costs (tenant improvements and leasing commissions) of $3.46 per square foot. This compares to average lease term and transaction costs on leases executed in the prior-year period of 3.9 years and $3.80 per square foot, respectively.

Same-park rental income inched up 1.3% year over year to $96.4 million, while same-park NOI slid marginally to $67.5 million. Same-park annualized revenue per occupied-square-foot increased 4% year on year to $16.29. Weighted average square-foot occupancy shrunk 2.4% year on year to 92.3%.

On Sep 16, the company sold two industrial buildings in Redmond, WA, spanning an area of about 40,000 square feet. The properties were sold for a gross price of $11.4 million, which resulted in a gain of $7.7 million.

Liquidity

PS Business Parks exited the July-September quarter with cash and cash equivalents of $117.9 million, up from the $62.8 million reported at the end of 2019.

Dividend Update

On Oct 21, the company announced a quarterly dividend of $1.05 per common share. This dividend will be paid on Dec 30, to shareholders of record as of Dec 15, 2020.

PS Business Parks, Inc. Price, Consensus and EPS Surprise

PS Business Parks, Inc. Price, Consensus and EPS Surprise

PS Business Parks, Inc. price-consensus-eps-surprise-chart | PS Business Parks, Inc. Quote

PS Business Parks currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITS

Boston Properties Inc.’s (BXP - Free Report) third-quarter 2020 FFO per share of $1.57 missed the Zacks Consensus Estimate of $1.64. The reported figure also decreased 4.3% from the year-ago quarter’s $1.64.

SITE Centers Corp.’s (SITC - Free Report) third-quarter operating FFO per share of 23 cents came in line with the Zacks Consensus Estimate. The reported figure, however, declined 23.3% year over year.

Highwoods Properties, Inc. (HIW - Free Report) third-quarter 2020 FFO per share of 86 cents missed the Zacks Consensus Estimate of 88 cents. The figure included 5 cents from debt extinguishment charges and non-cash straight-line credit losses. Nonetheless, the reported figure improved 3.6% from the 83 cents reported in the year-ago period.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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