PS Business Parks, Inc. (NYSE:PSB) reported operating results
for the second quarter ended June 30, 2015.
Funds from operations (“FFO”) were $41.2 million, or $1.20
per share for the three months ended June 30, 2015, an increase of
$389,000 from the three months ended June 30, 2014 of $40.8
million, or $1.19 per share. FFO was $80.2 million, or $2.33 per
share for the six months ended June 30, 2015, a decrease of $1.8
million from the six months ended June 30, 2014 of
$81.9 million, or $2.39 per share. The three month increase in
FFO was primarily the result of a $4.4 million increase in net
operating income (“NOI”) resulting from both the Same Park and
Non-Same Park portfolios. These increases were partially offset by
a decrease in NOI from assets sold. The six month decrease in FFO
was due to a decrease in NOI from assets sold partially offset by
higher NOI from both the Same Park and Non-Same Park
portfolios.
Same Park NOI increased $2.4 million, or 4.2%, for the three
months ended June 30, 2015 and $4.0 million, or 3.6%, for the six
months ended June 30, 2015 compared to the same periods in 2014.
Same Park rental income increased $3.0 million, or 3.6%, from $83.0
million for the three months ended June 30, 2014 to $86.0 million
for the three months ended June 30, 2015. Same Park rental income
increased $4.2 million, or 2.5%, from $167.0 million for the six
months ended June 30, 2014 to $171.2 million for the six months
ended June 30, 2015. The three and six month increases were
primarily a result of increases in occupancy and rental rates.
Non-Same Park NOI increased $2.0 million, or 121.5%, for the
three months ended June 30, 2015 and $3.1 million, or 78.5%, for
the six months ended June 30, 2015 compared to the same periods in
2014 as a result of an increase in occupancy and the acquisition of
additional parks during the latter half of 2014.
Net income allocable to common shareholders increased $1.3
million, or 13.3%, from $9.8 million, or $0.36 per share, for the
three months ended June 30, 2014 to $11.1 million, or $0.41 per
share, for the three months ended June 30, 2015. The increase was
primarily the result of a decrease in depreciation of $1.3 million.
Net income allocable to common shareholders increased $11.1
million, or 56.3%, from $19.8 million, or $0.73 per share, for the
six months ended June 30, 2014 to $30.9 million, or $1.14 per
share, for the six months ended June 30, 2015. The increase was
primarily due to the gain on sale of real estate facilities of
$12.5 million and an increase in NOI from both the Same Park
and Non-Same Park portfolios of $7.2 million offset by a
decrease in NOI from assets sold.
All per share amounts noted above are presented on a diluted
basis.
Property Operations
To evaluate the performance of the Company’s portfolio over
comparable periods, management analyzes the operating performance
of properties owned and operated throughout both periods (herein
referred to as “Same Park”). The Same Park portfolio includes all
operating properties owned or acquired prior to
January 1, 2013 (excluding 390,000 square feet of assets
held for sale as of June 30, 2015). Operating properties that the
Company acquired subsequent to January 1, 2013 are referred to as
“Non-Same Park.” For the three and six months ended June 30, 2015
and 2014, the Same Park facilities constitute 25.8 million
rentable square feet, representing 90.8% of the 28.4 million square
feet in the Company’s total portfolio as of June 30, 2015.
The following table presents the operating results of the
Company’s properties for the three and six months ended
June 30, 2015 and 2014 in addition to other income and
expense items affecting net income (unaudited, in thousands, except
per square foot amounts):
For the Three Months
For the Six Months Ended June 30, Ended June
30, 2015 2014 Change 2015
2014 Change Rental income:
Same Park (25.8 million rentable square
feet)
$
85,970
$ 83,018 3.6% $ 171,189 $ 167,039 2.5%
Non-Same Park (2.2 million rentable square
feet)
6,000 3,544 69.3% 11,708 7,494 56.2%
Total rental income 91,970 86,562 6.2% 182,897
174,533 4.8% Cost of operations: Same Park 26,585 26,028
2.1% 54,700 54,561 0.3% Non-Same Park 2,266 1,858
22.0% 4,553 3,485 30.6% Total cost of operations
28,851 27,886 3.5% 59,253 58,046 2.1%
Net operating income (1): Same Park 59,385 56,990 4.2% 116,489
112,478 3.6% Non-Same Park 3,734 1,686 121.5%
7,155 4,009 78.5% Total net operating income 63,119
58,676 7.6% 123,644 116,487 6.1% Other: Net
operating income from assets held for sale or sold (2) 551 4,631
(88.1%) 1,327 9,026 (85.3%)
LTEIP amortization (3):
Cost of operations (779) (856) (9.0%) (1,511) (1,185) 27.5% General
and administrative (1,642) (1,518) 8.2% (3,000) (2,047) 46.6%
Facility management fees 133 165 (19.4%) 280 331 (15.4%) Other
income and expense (3,193) (3,308) (3.5%) (6,409) (6,622) (3.2%)
Depreciation and amortization (27,025) (28,295) (4.5%) (53,258)
(56,736) (6.1%) General and administrative (1,855) (1,845) 0.5%
(3,896) (3,803) 2.4% Gain on sale of real estate facilities
— — 0.0% 12,487 — 100.0% Net income $ 29,309 $
27,650 6.0% $ 69,664 $ 55,451 25.6% Same Park gross margin (4)
69.1% 68.6% 0.7% 68.0% 67.3% 1.0% Same Park weighted average
occupancy 93.1% 92.2% 1.0% 92.9% 92.0% 1.0% Non-Same Park weighted
average occupancy 82.8% 75.9% 9.1% 81.0% 74.7% 8.4% Same Park
annualized realized rent per square foot (5) $ 14.34 $ 13.98 2.6% $
14.31 $ 14.09 1.6% (1) NOI is an important
measurement in the commercial real estate industry for determining
the value of the real estate generating the NOI. The Company’s
calculation of NOI may not be comparable to those of other
companies and should not be used as an alternative to measures of
performance in accordance with generally accepted accounting
principles (“GAAP”). (2) The Company sold one business park located
in Milwaukie, Oregon, on February 13, 2015 and five buildings
located in Redmond, Washington, on February 27, 2015. Combined with
the business parks in Beaverton, Oregon, and Phoenix, Arizona, sold
in 2014 and the assets held for sale in Tempe, Arizona, and
Sacramento, California, these assets generated rental income of
$978,000 and $2.4 million for the three and six months ended June
30, 2015, respectively, compared to $7.4 million and $14.8 million
for the three and six months ended June 30, 2014, respectively.
Cost of operations for the assets held for sale or sold was
$427,000 and $1.0 million for the three and six months ended June
30, 2015, respectively, compared to $2.8 million and $5.7 million
for the three and six months ended June 30, 2014, respectively. (3)
Senior Management Long-Term Equity Incentive Plan (“LTEIP”). (4)
Computed by dividing Same Park NOI by Same Park rental income. (5)
Represents the annualized Same Park rental income earned per
occupied square foot.
Property Dispositions
In July, 2015, the Company disposed of North Pointe Business
Park located in Sacramento, California, for net proceeds of
$17.4 million. The parks consist of five multi-tenant flex
buildings aggregating 213,000 square feet and was 75.7% leased as
of June 30, 2015.
Financial Condition
The following are key financial ratios with respect to the
Company’s leverage as of and for the six months ended
June 30, 2015:
Ratio of FFO to fixed charges (1) 16.6x Ratio of FFO to
fixed charges and preferred distributions (1) 3.2x
Debt and preferred equity to total market
capitalization (based on common stock price of $72.15 at June 30,
2015)
33.5% Available balance under the $250.0 million unsecured
credit facility at June 30, 2015 $250.0 million (1)
Fixed charges include interest expense and capitalized
interest totaling $3.6 million.
Distributions Declared
On July 28, 2015, the Board of Directors declared a quarterly
dividend of $0.60 per common share, an increase of 20.0%, from
$0.50 per common share. Distributions were also declared on the
various series of depositary shares, each representing 1/1,000 of a
share of preferred stock listed below. Distributions are payable on
September 30, 2015 to shareholders of record on September 15,
2015.
Series
Dividend
Rate
Dividend
Declared
Series R 6.875% $0.429688 Series S 6.450% $0.403125 Series T
6.000% $0.375000 Series U 5.750% $0.359375 Series V 5.700%
$0.356250
Company Information
PS Business Parks, Inc., a member of the S&P SmallCap 600,
is a self-advised and self-managed real estate investment trust
(“REIT”) that acquires, develops, owns and operates commercial
properties, primarily multi-tenant flex, office and industrial
space. The Company defines “flex” space as buildings that are
configured with a combination of office and warehouse space and can
be designed to fit a number of uses (including office, assembly,
showroom, laboratory, light manufacturing and warehouse space). As
of June 30, 2015, the Company wholly owned 28.4 million
rentable square feet with approximately 4,900 customers
concentrated primarily in six states.
Forward-Looking
Statements
When used within this press release, the words “may,”
“believes,” “anticipates,” “plans,” “expects,” “seeks,”
“estimates,” “intends” and similar expressions are intended to
identify “forward-looking statements.” Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors, which may cause the actual results and performance of the
Company to be materially different from those expressed or implied
in the forward-looking statements. Such factors include the impact
of competition from new and existing commercial facilities which
could impact rents and occupancy levels at the Company’s
facilities; the Company’s ability to evaluate, finance and
integrate acquired and developed properties into the Company’s
existing operations; the Company’s ability to effectively compete
in the markets that it does business in; the impact of the
regulatory environment as well as national, state and local laws
and regulations including, without limitation, those governing
REITs; the impact of general economic conditions upon rental rates
and occupancy levels at the Company’s facilities; the availability
of permanent capital at attractive rates, the outlook and actions
of Rating Agencies and risks detailed from time to time in the
Company’s SEC reports, including quarterly reports on Form 10-Q,
reports on Form 8-K and annual reports on Form 10-K.
Additional information about PS Business Parks, Inc., including
more financial analysis of the second quarter operating results, is
available on the Internet. The Company’s website is
psbusinessparks.com.
A conference call is scheduled for Wednesday, July 29, 2015, at
8:00 a.m. (PDT) to discuss the second quarter results. The toll
free number is (888) 299-3246; the conference ID is 80668254. The
call will also be available via a live webcast on the Company’s
website. A replay of the conference call will be available through
August 4, 2015 at (855) 859-2056. A replay of the conference
call will also be available on the Company’s website.
Additional financial data attached.
PS BUSINESS PARKS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, December 31, 2015 2014
(Unaudited) ASSETS Cash and cash equivalents $
200,194 $ 152,467 Real estate facilities, at cost: Land
793,569 793,569 Buildings and improvements 2,200,094
2,182,993 2,993,663 2,976,562 Accumulated
depreciation (1,036,023 ) (991,497 ) 1,957,640
1,985,065 Properties held for disposition, net 14,267 25,937 Land
and building held for development 26,288
24,442 1,998,195 2,035,444 Rent receivable, net 4,538 2,838
Deferred rent receivable, net 28,199 26,050 Other assets
8,493 10,315 Total assets $ 2,239,619
$ 2,227,114
LIABILITIES AND EQUITY
Accrued and other liabilities $ 70,014 $ 68,905 Mortgage
note payable 250,000 250,000 Total
liabilities 320,014 318,905 Commitments and contingencies
Equity: PS Business Parks, Inc.’s shareholders’ equity:
Preferred stock, $0.01 par value,
50,000,000 shares authorized, 39,800 shares issued and outstanding
at June 30, 2015 and December 31, 2014
995,000 995,000
Common stock, $0.01 par value, 100,000,000
shares authorized, 26,971,885 and 26,919,161 shares issued and
outstanding at June 30, 2015 and December 31, 2014,
respectively
268 268 Paid-in capital 714,182 709,008 Cumulative net income
1,306,231 1,244,946 Cumulative distributions (1,293,133 )
(1,235,941 ) Total PS Business Parks, Inc.’s shareholders’
equity 1,722,548 1,713,281 Noncontrolling interests: Common
units 197,057 194,928 Total
noncontrolling interests 197,057 194,928
Total equity 1,919,605 1,908,209
Total liabilities and equity $ 2,239,619 $ 2,227,114
PS BUSINESS PARKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share
amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30, 2015 2014
2015 2014 Revenues: Rental income $ 92,948 $ 93,986 $
185,263 $ 189,307 Facility management fees 133
165 280 331 Total operating
revenues 93,081 94,151 185,543
189,638 Expenses: Cost of operations 30,057
31,535 61,803 64,979 Depreciation and amortization 27,025 28,295
53,258 56,736 General and administrative 3,497
3,363 6,896 5,850 Total
operating expenses 60,579 63,193
121,957 127,565 Other income and (expense):
Interest and other income 145 95 252 157 Interest and other expense
(3,338 ) (3,403 ) (6,661 ) (6,779 )
Total other income and (expense) (3,193 ) (3,308 )
(6,409 ) (6,622 ) Gain on sale of real estate
facilities — — 12,487 —
Net income $ 29,309 $ 27,650 $ 69,664
$ 55,451 Net income allocation: Net income
allocable to noncontrolling interests:
Noncontrolling interests—common units
$ 3,016 $ 2,669 $ 8,379 $ 5,372 Total
net income allocable to noncontrolling interests 3,016
2,669 8,379 5,372
Net income allocable to PS Business Parks, Inc.: Preferred
shareholders 15,122 15,122 30,244 30,244 Restricted stock unit
holders 42 33 140 69 Common shareholders 11,129
9,826 30,901 19,766 Total
net income allocable to PS Business Parks, Inc. 26,293
24,981 61,285 50,079
$ 29,309 $ 27,650 $ 69,664 $ 55,451
Net income per common share: Basic $ 0.41 $ 0.37 $
1.15 $ 0.74 Diluted $ 0.41 $ 0.36 $ 1.14 $ 0.73 Weighted
average common shares outstanding: Basic 26,956
26,899 26,941 26,881
Diluted 27,033 26,999 27,027
26,981
PS BUSINESS PARKS, INC.
Computation of Diluted Funds from
Operations and Funds Available for Distribution
(Unaudited, in thousands, except per share
amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30, 2015 2014
2015 2014
Computation of
Diluted Funds From Operations (1):
Net income allocable to common shareholders $ 11,129 $ 9,826
$ 30,901 $ 19,766 Adjustments: Gain on sale of real estate
facilities — — (12,487 ) — Depreciation and amortization 27,025
28,295 53,258 56,736
Net income allocable to noncontrolling
interests—common units
3,016 2,669 8,379 5,372 Net income allocable to restricted stock
unit holders 42 33 140
69 FFO allocable to common and dilutive shares $
41,212 $ 40,823 $ 80,191 $ 81,943
Weighted average common shares outstanding 26,956 26,899
26,941 26,881 Weighted average common OP units outstanding 7,305
7,305 7,305 7,305 Weighted average restricted stock units
outstanding 110 56 114 56 Weighted average common share equivalents
outstanding 77 100 86
100 Total common and dilutive shares 34,448
34,360 34,446 34,342
Net income per common share—diluted $ 0.41 $ 0.36 $
1.14 $ 0.73 Depreciation and amortization (2) 0.79 0.83 1.55 1.66
Gain on sale of real estate facilities (2) — —
(0.36 ) — FFO per common and dilutive
share, as reported (2) $ 1.20 $ 1.19 $ 2.33 $
2.39
Computation of
Funds Available for Distribution ("FAD") (3):
FFO allocable to common and dilutive shares $ 41,212 $
40,823 $ 80,191 $ 81,943 Adjustments: Recurring capital
improvements (2,764 ) (2,534 ) (3,881 ) (3,781 ) Tenant
improvements (6,425 ) (6,348 ) (13,225 ) (11,538 ) Lease
commissions (2,717 ) (1,884 ) (4,285 ) (5,144 ) Straight-line rent
(1,159 ) (497 ) (2,192 ) (1,682 ) Non-cash stock compensation
expense 213 294 526 666 Long-term equity incentive amortization
2,421 2,374 4,511 3,232 In-place lease adjustment (352 ) (244 )
(663 ) (441 ) Tenant improvement reimbursements, net of lease
incentives (543 ) (401 ) (940 ) (839 ) Capitalized interest
(271 ) (233 ) (531 ) (457 ) FAD $ 29,615 $
31,350 $ 59,511 $ 61,959 Distributions
to common and dilutive shares $ 17,193 $ 17,135 $
34,372 $ 34,267 Distribution payout ratio
58.1 % 54.7 % 57.8 % 55.3 % (1)
FFO is computed in accordance with the White Paper on
FFO approved by the Board of Governors of the National Association
of Real Estate Investment Trusts (“NAREIT”). The White Paper
defines FFO as net income, computed in accordance with GAAP, before
depreciation, amortization, gains or losses on asset dispositions,
net income allocable to noncontrolling interests—common units, net
income allocable to restricted stock unit holders, impairment
charges and nonrecurring items. FFO should be analyzed in
conjunction with net income. However, FFO should not be viewed as a
substitute for net income as a measure of operating performance or
liquidity as it does not reflect depreciation and amortization
costs or the level of capital expenditure and leasing costs
necessary to maintain the operating performance of the Company’s
properties, which are significant economic costs and could
materially impact the Company’s results from operations. Other
REITs may use different methods for calculating FFO and,
accordingly, the Company’s FFO may not be comparable to other real
estate companies. (2) Per share amounts are computed using
additional dilutive shares related to noncontrolling interests and
restricted stock units. (3) FAD is computed by adjusting
consolidated FFO for recurring capital improvements, which the
Company defines as those costs incurred to maintain the assets’
value, tenant improvements, lease commissions, straight-line rent,
stock compensation expense, in-place lease adjustment, amortization
of lease incentives and tenant improvement reimbursements,
capitalized interest and the effect of redemption/repurchase of
preferred equity. Like FFO, the Company considers FAD to be a
useful measure for investors to evaluate the operations and cash
flows of a REIT. FAD does not represent net income or cash flow
from operations as defined by GAAP.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150728006830/en/
PS Business Parks, Inc.Edward A. Stokx(818) 244-8080, Ext.
1649
PS Business Parks (NYSE:PSB)
Historical Stock Chart
From Aug 2024 to Sep 2024
PS Business Parks (NYSE:PSB)
Historical Stock Chart
From Sep 2023 to Sep 2024