PS Business Parks Inc. (PSB) reported second quarter 2011 FFO (fund from operations) of $35.8 million or $1.11 per share compared to $30.7 million or $0.96 per share in the year-earlier quarter. Fund from operations, 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.
The reported FFO for second quarter 2011 was ahead of the Zacks Consensus Estimate by a penny. Excluding non-recurring items, recurring FFO for the reported quarter was $1.12 per share compared to $1.06 in the year-ago quarter.
Total revenues during the reported quarter increased to $73.1 million or surged 5.2% year-over-year driven by an increase in revenues from non same-store properties, offset partially by a decrease in the same-store portfolio due to decreases in rental and occupancy rates.
Average same-store occupancy during the quarter was 90.8% compared with 91.8% in the year-ago quarter. Average same-store realized rent per square foot during the quarter decreased to $14.49 from $14.95 in the year earlier quarter. Total net operating income during the quarter increased 1.8% to $48.8 million from $47.9 million in the year-earlier quarter.
During the quarter the company acquired a multi-tenant office building – the Warren Building spanning 140,000 square feet located in Virginia for $27.1 million. Additionally, the company is currently under a contract to sell a 177,000 square foot flex park consisting of 13 buildings in Houston, Texas, for $9.8 million. The transaction is expected to be completed by August, 2011.
At quarter-end, PS Business Parks had cash and cash equivalents of $2.9 million and $17.5 million outstanding on its credit facility, which was subsequently reduced to $10.0 million. Debt and preferred equity to market cap was 30.8% as of June 30, 2011 with ratio of FFO to fixed charges and preferred distributions at 4.1x. The company maintained its dividend rate of 44 cents per share during the quarter.
PS Business Parks currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Brandywine Realty Trust. (BDN) also retains a Zacks #3 Rank, which translates into a short-term Hold Rating.
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