PS Business Parks (PSB) Beats Q1 FFO & Revenue Estimates

PS Business Parks, Inc. (NYSE:PSB) reported first-quarter 2017 funds from operations (“FFO”) of $1.52 per share, surpassing the Zacks Consensus Estimate of $1.41. Moreover, the figure was 20.6% higher than $1.26 in the prior-year quarter. The rise was attributable to higher net operating income (NOI), reduced interest expenses and savings from lower preferred distributions.

Total operating revenues came in at around $100.2 million, reflecting 4.4% growth from the prior-year period. The figure also surpassed the Zacks Consensus Estimate of $96 million.

Quarter in Detail

Same Park rental income was up 5% year over year while Same Park operating expenses decreased 3% year over year primarily due to a decline in snow removal cost. As a result, Same Park NOI rose 8.9% year over year, mainly attributable to improving rental rates and occupancy. On the other hand, non-Same Park NOI plunged significantly year over year.

Annualized Same Park realized rent per square foot rose 4.5% year over year to $15.16. Same Park weighted average occupancy in the quarter was 94.6%, up 50 basis points (bps) year over year. Non-Same Park weighted average occupancy also increased significantly year over year to 18.5%.

Liquidity

PS Business Parks exited first-quarter 2017 with cash and cash equivalents of $4.8 million, lower than the prior-year end tally of $128.6 million. The company’s available balance under its $250-million unsecured credit facility at the end of the reported quarter was $143 million.

Dividend Update

Concurrent with its first-quarter earnings release, the company announced a regular quarterly dividend of 85 cents per share, same as the prior payout. The dividend is payable on Jun 29, 2017 to shareholders of record as of Jun 14.

Conclusion

We are encouraged by the better-than-expected performance of PS Business Parks. The company has a diversified portfolio and its ample liquidity augurs well for long-term growth. Further, healthy fundamentals in the multi-tenant flex, office and industrial asset categories are expected to drive growth, while portfolio repositioning strategies can help the company emerge stronger. However, pricing pressure in certain markets, intense competition from developers, owners and operators, and hike in interest rate remain the key concerns.

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

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

PS Business Parks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Further, shares of PS Business Parks outperformed the Zacks categorized REIT and Equity Trust - Other industry over the past six months. Over this time frame, PS Business Parks shares logged in a return of 11% against the industry’s 2.5% decline.

We now look forward to the earnings releases of other REITs like Cousins Properties Incorporated (NYSE:CUZ) , Ventas, Inc. (NYSE:VTR) and Host Hotels & Resorts, Inc. (NYSE:HST) . While Cousin Properties will announce its results on Apr 27, Ventas and Host Hotels are slated to report results on Apr 28.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. 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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