PS Business Parks Inc.’s (PSB) second-quarter 2014 adjusted FFO per share of $1.26 was 3.3% ahead of both the Zacks Consensus Estimate as well as the year-ago quarter figure of $1.22. Upbeat results were backed by growth in rental income from both Same Park and Non-Same Park portfolios.
Despite the FFO beat, shares of PS Business Parks were down nearly 1% during yesterday’s regular trading session, reflecting broader market concerns.
Including non-recurring items, PS Business Parks reported second-quarter 2014 FFO of $1.19 per share, unchanged year over year.
Quarter in Detail
Aided by growth in rental income, total revenue in the reported quarter rose 6.9% year over year to around $94.2 million, exceeding the Zacks Consensus Estimate of $92 million.
Rental income moved up 6.9% year over year to $94.0 million, primarily driven by an increase in rental revenues from Same Park and Non-Same Park portfolios. While the company experienced an occupancy rise in the Same-Park portfolio, acquisition of additional parks in the second half of 2013 as well as increasing occupancy levels helped raise the rental income in the Non Same-Park facilities.
Annualized Same Park realized rent per square foot edged up 0.6% year over year to $14.19. Same Park weighted average occupancy in the quarter was 92.5%, up 160 basis points (bps) year over year, while Non-Same Park weighted average occupancy climbed significantly year over year to 77.9% from 61.9%.
Total cost of operations grew 7.7% year over year to $30.7 million, reflecting a rise across both Same-Park and Non-Same Park portfolio. Consequently, total portfolio NOI increased 6.5% year over year to $63.3 million. In particular, Same Park NOI was up 2.9% year over year to $60.4 million, while Non-Same Park NOI increased substantially to $2.9 million from $0.7 million in the prior-year quarter.
Liquidity
PS Business Parks exited second-quarter 2014 with cash and cash equivalents of $62.5 million, up from $31.5 million as of Dec 31, 2013. The company had full capacity available under its $250 million unsecured credit facility. Debt and preferred equity to market cap was 30.4%, while ratio of FFO to fixed charges and preferred distributions was 3.2x.
Dividend Update
On Jul 28, 2014, the board of directors of PS Business Parks declared a quarterly dividend of 50 cents per share on its common stock. The dividend is payable on Sep 30, 2014 to shareholders of record on Sep 15.
Other Stocks in Focus
PS Business Parks currently carries a Zacks Rank #5 (Strong Sell). However, investors interested in the REIT industry may consider stocks like HCP Inc. (HCP), Vornado Realty Trust (VNO) and Ventas, Inc. (VTR). All these stocks have a Zacks Rank #2 (Buy).
Note: 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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