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PS Business Parks Inc Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 4, 2011 02:21PM

PS Business Parks Inc (PSB) filed Quarterly Report for the period ended 2011-03-31. Ps Business Parks Inc. has a market cap of $1.49 billion; its shares were traded at around $60.45 with a P/E ratio of 15.5 and P/S ratio of 5.3. The dividend yield of Ps Business Parks Inc. stocks is 2.9%. Ps Business Parks Inc. had an annual average earning growth of 3.5% over the past 10 years. GuruFocus rated Ps Business Parks Inc. the business predictability rank of 2-star.



Highlight of Business Operations:

The Company owns 4.0 million square feet in Southern California located in Los Angeles, Orange and San Diego Counties. For the first three months of 2011, fundamentals for Southern California continued to reflect signs of modest stability despite slight decreases in rental rates. Two of the three markets experienced a decline in vacancy rate and had positive net absorption year over year. Market vacancy rates in Southern California range from 3.9% to 16.7%. The Company’s vacancy rate in its Southern California portfolio was 10.7% at March 31, 2011. For the three months ended March 31, 2011, the overall region experienced a weighted positive net absorption of 0.6%. Despite the positive net absorption in the overall region, the Company’s weighted average occupancy in this region decreased from 92.4% for the first three months of 2010 to 89.6% for the first three months of 2011. The decrease in the Company’s weighted average occupancy was primarily due to several large tenants vacating 91,000 square feet in 2010 and 2011. Annualized realized rent per square foot decreased 1.8% from $15.74 per square foot for the first three months of 2010 to $15.46 per square foot for the first three months of 2011.

The Company owns 1.8 million square feet in Northern California with concentrations in Sacramento, the East Bay (Hayward and San Ramon) and Silicon Valley (San Jose and Santa Clara). Market vacancy rates in these submarkets are 23.5%, 21.3% and 18.2%, respectively. The Company’s vacancy rate in its Northern California portfolio was 10.1% at March 31, 2011. During the first three months of 2011, demand in these submarkets remained low, which negatively impacted both rental and occupancy rates. Leasing activity was primarily related to companies contracting and reorganizing business operations. For the three months ended March 31, 2011, the combined submarkets experienced negative net absorption of 0.2%. Despite the negative net absorption in these submarkets, the Company’s weighted average occupancy in this region increased from 88.9% for the first three months of 2010 to 90.5% for the first three months of 2011. The increase in the weighted average occupancy was due to 32,000 square feet of vacant space leased during the fourth quarter of 2010. However, annualized realized rent per square foot decreased 2.3% from $12.35 per square foot for the first three months of 2010 to $12.07 per square foot for the first three months of 2011.

The Company owns 1.7 million square feet in Southern Texas, specifically in the Austin and Houston markets. During the second quarter of 2010, the Company acquired a portfolio of assets in Austin aggregating 704,000 square feet of multi-tenant flex parks. Market vacancy rates are 20.8% in the Austin market and 16.0% in the Houston market. The Company’s vacancy rate for these combined markets at March 31, 2011 was 10.8%. For the first three months of 2011, fundamentals continue to reflect signs of stability for the combined markets as they experienced a weighted positive net absorption of 0.1% and flat rental rate growth. Weighted average occupancy for the Company’s Same Park portfolio for this market increased from 85.3% for the first three months of 2010 to 88.3% for the first three months of 2011. The increase in the weighted average occupancy was primarily due to 28,000 square feet of vacant space leased during the second quarter of 2010. The Company’s overall weighted average occupancy for this market increased from 85.3% for the first three months of 2010 to 87.7% for the first three months of 2011. Annualized realized rent per square foot increased 6.9% from $10.90 per square foot for the first three months of 2010 to $11.65 per square foot for the first three months of 2011. Excluding the acquisition, annualized realized rent per square foot for this market increased 0.5% from $10.90 per square foot for the first three months of 2010 to $10.95 per square foot for the first three months of 2011.

The Company owns 3.7 million square feet in South Florida, which consists of the Miami International Commerce Center (“MICC”) business park located in the Airport West submarket of Miami-Dade County and two multi-tenant flex parks located in Palm Beach County. MICC is located less than one mile from the cargo entrance of the Miami International Airport, which is one of the most active cargo airports in the United States. For the first three months of 2011, the Miami and Palm Beach markets experienced a decline in vacancy rates and had positive net absorption year over year. Market fundamentals may be stabilizing in Miami as market vacancy is at its lowest since 2009 and positive net absorption was recorded for four consecutive quarters. Market vacancy rates for Miami-Dade County and Palm Beach County are 7.8% and 11.7%, respectively, compared to the Company’s vacancy rate for Miami-Dade County and Palm Beach County of 1.2% and 10.3%, respectively, at March 31, 2011. For the three months ended March 31, 2011, the combined markets experienced a weighted positive net absorption of 1.1%. The Company’s weighted average occupancy in this region increased from 95.2% for the first three months of 2010 to 96.9% for the first three months of 2011. Annualized realized rent per square foot decreased 6.1% from $9.23 per square foot for the first three months of 2010 to $8.67 per square foot for the first three months of 2011. During the third quarter of 2010, the Company completed construction on a parcel of land within MICC, which added 75,000 square feet of rentable small tenant industrial space. As of March 31, 2011, the newly constructed building was 100.0% occupied.

The Company owns 4.0 million square feet in the Northern Virginia submarket of Washington D.C. During the second half of 2010, the Company acquired Tysons Corporate Center, a 270,000 square foot two-building multi-tenant office park, and Westpark Business Campus, a 735,000 square foot seven-building multi-tenant office park, each located in Tysons Corner, Virginia. The Company’s overall vacancy rate at March 31, 2011 was 17.2% compared to the average market vacancy rate of 13.7%. For the three months ended March 31, 2011, the market experienced negative net absorption of 0.3%. Weighted average occupancy for the Company’s Same Park portfolio for this market decreased from 94.4% for the first three months of 2010 to 90.7% for the first three months of 2011. The decrease in the Same Park weighted average occupancy was primarily due to four large tenants with scheduled expirations in 2010 and 2011. The Company’s overall weighted average occupancy for this market decreased from 94.4% for the first three months of 2010 to 82.8% for the first three months of 2011 as a result of the acquisitions which had a combined weighted average occupancy of 58.9% for the three months ended March 31, 2011. Annualized realized rent per square foot increased 4.2% from $21.13 per square foot for the first three months of 2010 to $22.01 per square foot for the first three months of 2011. Excluding the acquisitions, annualized realized rent per square foot for this market decreased 4.0% from $21.13 per square foot for the first three months of 2010 to $20.28 per square foot for the first three months of 2011.

The Company owns 2.4 million square feet in the Maryland submarket of Washington D.C. During the first half of 2010, the Company acquired Shady Grove Executive Center, a 350,000 square foot multi-tenant office park, and Parklawn Business Park, a 232,000 square foot multi-tenant office and flex park, each located in Rockville, Maryland. The Company’s overall vacancy rate in the region at March 31, 2011 was 13.5% compared to 14.3% for the market as a whole. For the three months ended March 31, 2011, the net absorption remained flat for the market. Weighted average occupancy for the Company’s Same Park portfolio for this market decreased from 93.6% for the first three months of 2010 to 88.9% for the first three months of 2011. The decrease in the Same Park weighted average occupancy was primarily due to several tenants aggregating 74,000 square feet vacating in 2010, of which 39,000 square feet were scheduled expirations. The Company’s overall weighted average occupancy decreased from 92.9% for the first three months of 2010 to 86.3% for the first three months of 2011 as a result of the acquisitions which had a combined weighted average occupancy of 78.4% for the three months ended March 31, 2011. Annualized realized rent per square foot increased 3.5% from $23.74 per square foot for the first three months of 2010 to $24.57 per square foot for the first three months of 2011. Excluding the acquisitions, annualized realized rent per square foot for this market increased 3.8% from $23.56 per square foot for the first three months of 2010 to $24.46 per square foot for the first three months of 2011.

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