PS Business Parks (PSB) Q1 FFO Beats On Rental Rate Growth

PS Business Parks, Inc. (NYSE:PSB) reported first-quarter 2019 core funds from operations (FFO) of $1.67 per share, beating the Zacks Consensus Estimate by a penny. The figure also comes in 5% higher than the prior-year quarter’s $1.59.

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 facilities sold in 2018 partly offset the positives.

Rental income came in at around $107.8 million, marking 3.9% growth from the year-ago quarter tally. The reported figure also exceeded the Zacks Consensus Estimate of $103.1 million.

Quarter in Detail

Same-Park rental income was up 4.3% year over year to $102.8 million, while Same-Park NOI climbed 4.3% year over year to $71.8 million, driven by improving rental rates and occupancy level.

Same-Park annualized revenue per occupied-square-foot increased 4% to $16.04, while weighted average square-foot occupancy was 94.5%, up 30 basis points year over year.

Liquidity

PS Business Parks exited first-quarter 2019 with cash and cash equivalents of $39.4 million, up from $37.4 million reported at the end of 2018.

Dividend Update

On Apr 23, the company announced a quarterly dividend of $1.05 per share. The dividend is payable on Jun 27, to shareholders of record as of Jun 12, 2019.

Conclusion

We are encouraged with the decent FFO per share performance of PS Business Parks in the first quarter. The company is expected to benefit from healthy fundamentals in the industrial and flex categories, in the days ahead. Its portfolio is well diversified with respect to tenants and markets.

Moreover, PS Business Parks has ample financial flexibility to cushion and enhance its market position, while asset-repositioning efforts are likely to improve the overall portfolio quality. Nevertheless, supply is rising in certain submarkets and this could partly impede its growth momentum.

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.

We now look forward to the earnings releases of other REITs like Apartment Investment and Management Company (NYSE:AIV) , Regency Centers Corporation (NASDAQ:REG) and Federal Realty Investment Trust (NYSE:FRT) which are slated to report their quarterly numbers on May 2.

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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