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PS Business Parks (PSB) Q4 FFO Beats Estimates, Stock Up

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Shares of PS Business Parks, Inc. (PSB - Free Report) appreciated 3.31% during Tuesday’s trading session, reflecting investors’ positive sentiments as the REIT delivered a better-than-expected performance in the fourth quarter.

The company reported fourth-quarter 2020 core funds from operations (FFO) per share of $1.66, surpassing the Zacks Consensus Estimate of $1.64. Moreover, the reported figure increased from the $1.65 reported in the year-ago quarter.

Rental income came in at $105.1 million, beating the Zacks Consensus Estimate of $101.1 million. However, the figure edged down 1% from the year-ago quarter’s $106.2 million.

Results highlight increased cash rental income from the occupied portion of its same-park portfolio, though lower weighted average occupancy in the quarter played spoilsport.

Moreover, the company reported decent rent collections for the fourth quarter, collecting about 98% of total rent, comprising 98%, 98% and 99% collection for industrial, flex and office assets, respectively.

In addition, 2% of the quarter’s total rent remained outstanding. Also, during the same period, the company granted $0.2 million of deferred rent and less than $0.1 million of rent abatement. Further, as of Feb 19, 2021, the company had open rent relief requests from roughly 1% of customers.

Quarter in Detail

During the fourth quarter, PS Business Parks executed leases on 1.9 million square feet, compared with the prior-year quarter’s 2.1 million. Weighted average cash rental rate growth on leases executed during the reported quarter was 5.3%, while average net effective rent growth was 14.9% for the same period.

Average lease term of the leases executed during the quarter was 3.3 years, with associated average transaction costs (tenant improvements and leasing commissions) of $2.92 per square foot. This compares to average lease term and transaction costs on leases executed in the prior-year period of 4.8 years and $4.08 per square foot, respectively.

Same-park rental income edged down 0.9% year over year to $96.6 million, while same-park NOI slid 3% to $68 million. However, same-park revenue per occupied-square-foot inched up 1.7% year on year to $16.37.

Same-park cash NOI declined 0.5% year on year to $69.2 million, reflecting lower weighted average occupancy in the fourth quarter, which declined to 92% from 94.4% in the year-ago period. This was mostly negated by increased cash rental income from the occupied part of its same-park portfolio with cash rental income per occupied square foot increasing 3.6% year on year to $16.57.

Portfolio Activity

In October 2020, PS Business Parks 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. The company also completed the development of its 83,000-square-foot multi-tenant industrial property at the Freeport Business Park neighboring the Dallas/Fort Worth International Airport in Dallas, TX, for a total development cost of $8.1 million, exclusive of land value.

Furthermore, management noted that the construction of Brentford at The Mile is continuing on schedule and in line with the prior development cost estimate of $110-$115 million, exclusive of land value.

Liquidity

PS Business Parks exited 2020 with cash and cash equivalents of $69.1 million, up from the $62.8 million reported at the end of 2019.

Dividend Update

On Feb 17, the company’s board of directors announced a quarterly dividend of $1.05 per common share. This dividend will be paid on Mar 31, to shareholders of record as of Mar 16, 2021.

PS Business Parks currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

We now look forward to the earnings releases of other REITs, including American Tower Corporation (AMT - Free Report) , Outfront Media Inc. (OUT - Free Report) and Mack-Cali Realty Corporation (CLI - Free Report) , which are slated to release results this week.

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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