PS Business Parks, Inc. Reports Results for the Quarter Ended June 30, 2018 and Increases Quarterly Common Dividend by 23.5% to $1.05 Per Share
GLENDALE, Calif.--(BUSINESS WIRE)--Jul 24, 2018--PS Business Parks, Inc. (NYSE:PSB) reported operating results for the three and six months ended June 30, 2018.
Operating Results for the Three Months Ended June 30, 2018
Net income allocable to common shareholders was $70.2 million, or $2.56 per diluted common share, for the three months ended June 30, 2018, an increase of $45.5 million, or 183.8%, from $24.7 million, or $0.90 per diluted common share, for the same period in 2017. The increase was mainly due to gain on sale of an office park in Orange County, California, and an industrial park in Dallas, Texas, during the second quarter of 2018 and an increase in net operating income (“NOI”–described below) with respect to our real estate facilities. The increase in NOI includes a $1.4 million increase for our Same Park facilities (described below) due primarily to an increase in rental rates and occupancy combined with increased NOI from our non-Same Park and multi-family assets, partially offset by reduced NOI with respect to facilities we sold.
Operating Results for the Six Months Ended June 30, 2018
Net income allocable to common shareholders was $116.3 million, or $4.24 per diluted common share, for the six months ended June 30, 2018, an increase of $65.1 million, or 127.4%, from $51.1 million, or $1.87 per diluted common share, for the same period in 2017. The increase was mainly due to gain on sale of two office parks in Orange County, California, and an industrial park in Dallas, Texas, during 2018 and an increase in NOI with respect to our real estate facilities. The increase in NOI includes a $1.9 million increase for our Same Park facilities due primarily to an increase in rental rates and occupancy combined with increased NOI from our non-Same Park and multi-family assets, partially offset by reduced NOI with respect to facilities we sold.
Funds from Operations
Funds from operations (“FFO”) per share was $1.59 for the three months ended June 30, 2018, as compared to $1.55 for the same period in 2017, an increase of $0.04 per share. FFO per share was $3.18 for the six months ended June 30, 2018, an increase of $0.11 per share from the six months ended June 30, 2017 of $3.07.
FFO, which is described in more detail below, is a non-GAAP (generally accepted accounting principles) measure defined by the National Association of Real Estate Investment Trusts and generally represents net income before depreciation and amortization expense, gains and losses from sales and impairment charges with respect to real estate assets.
Property Operations–Same Park Portfolio
To evaluate the ongoing performance of the Company’s portfolio over comparable periods, management analyzes the operating performance of properties owned and operated throughout both periods (the “Same Park” facilities). The Same Park portfolio includes all properties we owned and operated as of June 30, 2018 that were acquired prior to January 1, 2016, except for an asset held for sale described below under “Property Dispositions.” For the three and six months ended June 30, 2018 and 2017, the Same Park facilities constitute 26.9 million rentable square feet, representing 95.1% of the 28.3 million rentable square feet in the Company’s total portfolio as of June 30, 2018.
The following table presents the operating results of the Company’s Same Park facilities for the three and six months ended June 30, 2018 and 2017 (unaudited, in thousands, except per square foot amounts):
The following table summarizes selected quarterly financial data with respect to the Same Park facilities (unaudited, in thousands, except per square foot amounts):
On June 8, 2018, we acquired two multi-tenant industrial parks aggregating 1.1 million rentable square feet in Springfield, Virginia, for a net purchase price of $143.8 million. The portfolio consists of 19 buildings and was 76.1% occupied as of the date of acquisition. The 19 buildings are located in the Springfield/Newington industrial submarket where we already own three industrial parks totaling 606,000 square feet.
During the six months ended June 30, 2018, as previously announced, we sold Corporate Pointe Business Park and Orange County Business Center for an aggregate $115.0 million in net proceeds, and on April 30, 2018, we sold Northgate Business Park, consisting of seven multi-tenant flex buildings totaling 194,000 square feet located in Dallas, Texas, for net proceeds of $11.8 million. In connection with these dispositions, we recorded gains of $58.4 million and $85.3 million for the three and six months ended June 30, 2018, respectively. We deferred substantially all of the taxable gains by acquiring the Springfield, Virginia, assets noted above.
We have one remaining facility that we are seeking to dispose of with 107,000 rentable square feet located in Orange County, California.
On July 24, 2018, the Board of Directors declared a quarterly dividend of $1.05 per common share, an increase of 23.5% from $0.85 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. Distributions are payable on September 27, 2018 to shareholders of record on September 12, 2018.
PS Business Parks, Inc., a member of the S&P SmallCap 600, is a real estate investment trust (“REIT”) that acquires, develops, owns and operates commercial properties, primarily multi-tenant industrial, flex and office space. As of June 30, 2018, the Company wholly owned 28.3 million rentable square feet with approximately 5,000 commercial customers in six states and a 95.0% interest in a 395-unit apartment complex.
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 Company’s website at psbusinessparks.com.
A conference call is scheduled for Wednesday, July 25, 2018, at 9:00 a.m. PDT (12:00 p.m. EDT) to discuss the second quarter results. The toll free number is (888) 299-3246; the conference ID is 2377708. 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 25, 2018 at (855) 859-2056, as well as via webcast on the Company’s website. Additional financial data attached.
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