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PS Business Parks (PSB) Q4 FFO Misses, Revenues Beat Estimates
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PS Business Parks, Inc. reported fourth-quarter 2021 core funds from operations (FFO) per share of $1.81, up 9% year over year. Results reflect higher net operating income (NOI). However, the figure marginally lagged the Zacks Consensus Estimate of $1.82.
Total rental income came in at $110.84 million, narrowly beating the Zacks Consensus Estimate of $110.82 million. The figure increased 5.5% from the year-ago period. PS Business witnessed growth in cash rental income, partly offset by a rise in the adjusted cost of operations.
PSB noted that as of Feb 18, it had collected 99.9% of billed revenues during 2021. Further, as of Dec 31, 2021, the company had open rent relief requests from less than 1% of its customers.
In 2021, the company’s core FFO of $6.97 per share was up 6.1% from a year ago and beat the consensus estimate of $6.88. Total rental income grew 5.6% to $438.7 million.
Quarter in Detail
During the fourth quarter, PS Business Parks executed leases on 1.8 million square feet, in line with the prior-year quarter. The cash rental rate growth was 6.1%, while net effective rent growth was 16.4%.
The average lease term of all the leases executed during the quarter was 3.6 years, with associated average transaction costs (tenant improvements and leasing commissions) of $3.15 per square foot. This compares with the average lease term and transaction costs on leases executed of 3.3 years and $2.90 per square foot, respectively, in the prior-year period.
The same-park rental income increased 7.3% year over year to $100.4 million, while the same-park NOI grew 8.6% to $72.2 million. The same-park cash rental income increased 5.8%, while cash NOI grew 6.5% year over year. The same-park revenue per occupied-square-foot climbed 3.8% to $16.74. In addition, the weighted average occupancy of 95.7% increased 3% year over year in the fourth quarter.
During the quarter, the company sold Lusk, a 371,000 square foot industrial-flex business park located in San Diego, CA, for net sale proceeds of $311.1 million. Also, PSB sold Ammendale, a 53,000 square foot industrial building located in Beltsville, MD, for net sale proceeds of $4.5 million. Further, Royal Tech 10, a 70,000 square foot industrial-flex building located in Irving, TX, was sold for net sale proceeds of $8.8 million.
Moreover, during the fourth quarter, PS Business Parks acquired Jupiter Business Park, a 141,000 square foot industrial business park located in Plano, TX, for a total purchase price of $25.6 million, inclusive of capitalized transaction cost.
Liquidity
PS Business Parks exited fourth-quarter 2021 with cash and cash equivalents of $27.1 million, down from $69.1 million reported at the end of 2020.
Dividend Update
On Feb 21, the company’s board of directors announced a quarterly dividend of $1.05 per common share. The dividend will be paid out on Mar 31 to shareholders on record as of Mar 16.
PS Business Parks, Inc. Price, Consensus and EPS Surprise
Mid-America Apartment Communities, Inc. (MAA - Free Report) , commonly referred to as MAA, reported fourth-quarter 2021 core FFO per share of $1.90, surpassing the Zacks Consensus Estimate of $1.87. The reported number increased 15.2% from the year-ago figure of $1.57.
MAA’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio. The average physical occupancy for the same-store portfolio also increased year over year.
Equity Residential’s (EQR - Free Report) fourth-quarter 2021 normalized FFO per share of 82 cents outpaced the Zacks Consensus Estimate of 80 cents. Rental income of $645.1 million also beat the consensus mark of $628.6 million.
On a year-over-year basis, Equity Residential’s normalized FFO per share improved 7.9%, while rental income rose 5.2%. EQR’s results were driven by a strong physical occupancy, a substantial improvement in pricing power and an increase in non-Residential revenues.
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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PS Business Parks (PSB) Q4 FFO Misses, Revenues Beat Estimates
PS Business Parks, Inc. reported fourth-quarter 2021 core funds from operations (FFO) per share of $1.81, up 9% year over year. Results reflect higher net operating income (NOI). However, the figure marginally lagged the Zacks Consensus Estimate of $1.82.
Total rental income came in at $110.84 million, narrowly beating the Zacks Consensus Estimate of $110.82 million. The figure increased 5.5% from the year-ago period. PS Business witnessed growth in cash rental income, partly offset by a rise in the adjusted cost of operations.
PSB noted that as of Feb 18, it had collected 99.9% of billed revenues during 2021. Further, as of Dec 31, 2021, the company had open rent relief requests from less than 1% of its customers.
In 2021, the company’s core FFO of $6.97 per share was up 6.1% from a year ago and beat the consensus estimate of $6.88. Total rental income grew 5.6% to $438.7 million.
Quarter in Detail
During the fourth quarter, PS Business Parks executed leases on 1.8 million square feet, in line with the prior-year quarter. The cash rental rate growth was 6.1%, while net effective rent growth was 16.4%.
The average lease term of all the leases executed during the quarter was 3.6 years, with associated average transaction costs (tenant improvements and leasing commissions) of $3.15 per square foot. This compares with the average lease term and transaction costs on leases executed of 3.3 years and $2.90 per square foot, respectively, in the prior-year period.
The same-park rental income increased 7.3% year over year to $100.4 million, while the same-park NOI grew 8.6% to $72.2 million. The same-park cash rental income increased 5.8%, while cash NOI grew 6.5% year over year. The same-park revenue per occupied-square-foot climbed 3.8% to $16.74. In addition, the weighted average occupancy of 95.7% increased 3% year over year in the fourth quarter.
During the quarter, the company sold Lusk, a 371,000 square foot industrial-flex business park located in San Diego, CA, for net sale proceeds of $311.1 million. Also, PSB sold Ammendale, a 53,000 square foot industrial building located in Beltsville, MD, for net sale proceeds of $4.5 million. Further, Royal Tech 10, a 70,000 square foot industrial-flex building located in Irving, TX, was sold for net sale proceeds of $8.8 million.
Moreover, during the fourth quarter, PS Business Parks acquired Jupiter Business Park, a 141,000 square foot industrial business park located in Plano, TX, for a total purchase price of $25.6 million, inclusive of capitalized transaction cost.
Liquidity
PS Business Parks exited fourth-quarter 2021 with cash and cash equivalents of $27.1 million, down from $69.1 million reported at the end of 2020.
Dividend Update
On Feb 21, the company’s board of directors announced a quarterly dividend of $1.05 per common share. The dividend will be paid out on Mar 31 to shareholders on record as of Mar 16.
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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other REITs
Mid-America Apartment Communities, Inc. (MAA - Free Report) , commonly referred to as MAA, reported fourth-quarter 2021 core FFO per share of $1.90, surpassing the Zacks Consensus Estimate of $1.87. The reported number increased 15.2% from the year-ago figure of $1.57.
MAA’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio. The average physical occupancy for the same-store portfolio also increased year over year.
Equity Residential’s (EQR - Free Report) fourth-quarter 2021 normalized FFO per share of 82 cents outpaced the Zacks Consensus Estimate of 80 cents. Rental income of $645.1 million also beat the consensus mark of $628.6 million.
On a year-over-year basis, Equity Residential’s normalized FFO per share improved 7.9%, while rental income rose 5.2%. EQR’s results were driven by a strong physical occupancy, a substantial improvement in pricing power and an increase in non-Residential revenues.
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.