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PS Business Parks (PSB) Q4 FFO Beats on Rental Rate Growth

Zacks Equity Research

PS Business Parks, Inc. PSB reported fourth-quarter 2018 core funds from operations (FFO) of $1.65 per share, beating the Zacks Consensus Estimate of $1.63. The figure also comes in 8.6% higher than $1.52 recorded in the prior-year quarter.

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 asset sold in 2018 partly offset the positives.

Rental income came in at around $104.1 million, marking 2.2% growth from the year-ago tally. The reported figure also exceeded the Zacks Consensus Estimate of $103.6 million.

For full-year 2018, core FFO per share was $6.47, up 5.5% from $6.13 in 2017. Rental income for the year increased 2.8% to $413.5 million.

Quarter in Detail

Same-Park rental income was up 1% year over year to $98.1 million, while Same-Park NOI climbed 4% year over year to $70.3 million, driven by improving rental rates and occupancy level.

Same-Park annualized revenue per occupied-square-foot inched up 0.8% to $15.32, while weighted average square-foot occupancy was 95.2%, up 10 basis points year over year.

Liquidity

PS Business Parks exited 2018 with cash and cash equivalents of $37.4 million, down from $114.9 million reported at the end of the previous year.

Dividend Update

On Feb 20, the company announced a quarterly dividend of $1.05 per share. The dividend is payable on Mar 28, to shareholders of record as of Mar 13, 2019.

Conclusion

We are encouraged with the decent FFO per share performance of PS Business Parks in the fourth quarter. The company is expected to benefit from healthy fundamentals in the industrial and flex categories, going ahead. Also, improving fundamentals in the industrial real estate market has been spurring demand for the company’s warehouse space. In fact, it is witnessing 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, supply is rising in certain submarkets and this could partly impede its growth momentum.

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.

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

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

We, now, look forward to the earnings releases of other REITs like Public Storage PSA, Outfront Media Inc. OUT and American Tower Corporation AMT, which are slated to report their quarterly numbers next week.

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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