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PS Business Parks Inc Reports Operating Results (10-Q)

August 06, 2010 | About:
10qk

10qk

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PS Business Parks Inc (PSB) filed Quarterly Report for the period ended 2010-06-30.

Ps Business Parks Inc has a market cap of $1.46 billion; its shares were traded at around $59.56 with and P/S ratio of 5.4. The dividend yield of Ps Business Parks Inc stocks is 3.1%. Ps Business Parks Inc had an annual average earning growth of 5.8% over the past 10 years. GuruFocus rated Ps Business Parks Inc the business predictability rank of 3-star.PSB is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

The Company owns 4.0 million square feet in Southern California located in Los Angeles, Orange and San Diego Counties. Market vacancies have increased due to the continued weakness in the economy and the resulting job losses combined with the lack of credit availability and its effect on businesses. These factors have created significantly more competition for tenants, which in turn has placed pressure on occupancy and rental rates. Vacancy rates in Southern California range from 4.7% to 17.6%. The Companys vacancy rate in this region at June 30, 2010 was 6.1%. Although the overall market experienced negative net absorption of 0.1% for the six months ended June 30, 2010, the Companys weighted average occupancy for the region increased from 90.4% for the first six months of 2009 to 92.7% for the first six months of 2010. However, annualized realized rent per square foot decreased 7.4% from $17.22 per square foot for the first six months of 2009 to $15.94 per square foot for the first six months of 2010 as the Company reduced rental rates in an effort to maintain and grow occupancy.

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). Vacancy rates in these submarkets are 23.2%, 21.4% and 19.3%, respectively. The Companys vacancy rate in its Northern California portfolio at June 30, 2010 was 7.5%. During the first six months of 2010, demand in these submarkets remained slow. Company consolidations continued to be the trend in this submarket, which negatively impacted both rental and occupancy rates. For the six months ended June 30, 2010, the combined submarkets experienced negative net absorption of 0.4%. The Companys weighted average occupancy in this region increased from 86.7% for the first six months of 2009 to 89.0% for the first six months of 2010. However, annualized realized rent per square foot decreased 10.9% from $13.72 per square foot for the first six months of 2009 to $12.23 per square foot for the first six months of 2010 as the Company reduced rental rates in an effort to maintain occupancy.

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 business parks. Market vacancy rates are 14.2% in the Austin market and 16.4% in the Houston market. The Companys vacancy rate for these combined markets at June 30, 2010 was 12.5%. During the first six months of 2010, demand remained flat in these markets. The combined markets experienced positive net absorption of 0.1% for the six months ended June 30, 2010 as opposed to the net negative absorption experienced in 2009. The Companys weighted average occupancy in this region increased from 84.8% for the first six months of 2009 to 86.1% for the first six months of 2010. The increase in weighted average occupancy was a result of current year acquisition with a higher weighted average occupancy of 89.1% for the six months ended June 30, 2010. Weighted average occupancy for the Companys Same Park portfolio for this market increased from 84.8% for the first six months of 2009 to 85.1% for the first six months of 2010. Including current year acquisition, annualized realized rent per square foot decreased 4.5% from $11.36 per square foot for the first six months of 2009 to $10.85 per square foot for the first six months of 2010.

The Company owns 3.6 million square feet in South Florida, which consists of 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. The effect of the economic recession on the import/export business has had a measurable negative impact on the overall Miami market. Market vacancy rates for Miami-Dade County and Palm Beach County are 11.8% and 10.9%, respectively, compared to the Companys vacancy rate for Miami-Dade County and Palm Beach County of 4.2% and 10.5%, respectively, at June 30, 2010. For the six months ended June 30, 2010, the combined markets experienced positive net absorption of 0.6%. The Companys weighted average occupancy remained flat at 95.4% for the first six months of 2009 and 2010. Annualized realized rent per square foot decreased 4.3% from $9.45 per square foot for the first six months of 2009 to $9.04 per square foot for the first six months of 2010.

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 business park, and Parklawn Business Park, a 232,000 square foot multi-tenant office and flex business park, each located in Rockville, Maryland. The Companys vacancy rate in the region at June 30, 2010 was 12.9% compared to 14.8% for the market as a whole. For the six months ended June 30, 2010, the market experienced negative net absorption of 0.1%, which is attributed to a decrease in transactions for government tenants. The Companys weighted average occupancy decreased from 92.0% for the first six months of 2009 to 90.9% for the first six months of 2010. The decrease in weighted average occupancy was a result of current year acquisitions with a combined lower weighted average occupancy of 75.0% for the six months ended June 30, 2010. Weighted average occupancy for the Companys Same Park portfolio for this market increased from 92.0% for the first six months of 2009 to 92.9% for the first six months of 2010. Including current year acquisitions, annualized realized rent per square foot increased 2.4% from $23.77 per square foot for the first six months of 2009 to $24.35 per square foot for the first six months of 2010.

The Company owns 521,000 square feet in the state of Washington which mostly consists of Overlake Business Center, a 493,000 square foot multi-tenant office and flex business park located in Redmond. The weakened global and local economies slowdown has resulted in a softened demand in this market. The market vacancy rate is 14.3%. For the six months ended June 30, 2010, this market experienced negative net absorption of 1.5%. The Companys vacancy rate in this region at June 30, 2010 was 11.0%. The Companys weighted average occupancy decreased from 90.8% for the first six months of 2009 to 88.2% for the first six months of 2010. Annualized realized rent per square foot decreased 9.4% from $19.77 per square foot for the first six months of 2009 to $17.92 per square foot for the first six months of 2010 as rental rate decreased on new and renewed leases.

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