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

November 05, 2010 | About:
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10qk

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PS Business Parks Inc (PSB) filed Quarterly Report for the period ended 2010-09-30.

Ps Business Parks Inc has a market cap of $1.42 billion; its shares were traded at around $57.62 with and P/S ratio of 5.1. The dividend yield of Ps Business Parks Inc stocks is 3%. 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 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 24.0%, 20.8% and 19.7%, respectively. The Companys vacancy rate in its Northern California portfolio at September 30, 2010 was 10.4%. During the first nine months of 2010, demand in these submarkets remained low, which negatively impacted both rental and occupancy rates. For the nine months ended September 30, 2010, the combined submarkets experienced negative net absorption of 0.3%. The Companys weighted average occupancy in this region increased from 85.5% for the first nine months of 2009 to 89.5% for the first nine months of 2010. Annualized realized rent per square foot decreased 8.9% from $13.36 per square foot for the first nine months of 2009 to $12.17 per square foot for the first nine months of 2010.

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 14.3% in the Austin market and 16.3% in the Houston market. The Companys vacancy rate for these combined markets at September 30, 2010 was 13.0%. During the first nine months of 2010, demand remained flat in these markets, however, the combined markets experienced positive net absorption of 0.1% for the nine months ended September 30, 2010 as opposed to negative net absorption in 2009. The Companys weighted average occupancy in this region increased from 85.3% for the first nine months of 2009 to 86.6% for the first nine months of 2010. The increase in weighted average occupancy was a result of current year acquisition with a higher weighted average occupancy of 89.6% for the nine months ended September 30, 2010. Weighted average occupancy for the Companys Same Park portfolio for this market increased from 85.3% for the first nine months of 2009 to 85.5% for the first nine months of 2010. Annualized realized rent per square foot decreased 1.8% from $11.18 per square foot for the first nine months of 2009 to $10.98 per square foot for the first nine months of 2010. Annualized realized rent per square foot for the Same Park portfolio for this market decreased 3.2% from $11.18 per square foot for the first nine months of 2009 to $10.82 per square foot for the first nine months of 2010.

The Company owns 3.7 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. Market fundamentals may be stabilizing in Miami as market vacancy is at its lowest since the second quarter of 2009 and positive absorption was recorded for two consecutive quarters. Market vacancy rates for Miami-Dade County and Palm Beach County are 8.8% and 10.6%, respectively, compared to the Companys vacancy rate for Miami-Dade County and Palm Beach County of 5.7% and 11.9%, respectively, at September 30, 2010. For the nine months ended September 30, 2010, the combined markets experienced positive net absorption of 1.1%. The Companys weighted average occupancy in this region increased from 94.4% for the first nine months of 2009 to 94.8% for the first nine months of 2010. Annualized realized rent per square foot decreased 3.9% from $9.34 per square foot for the first nine months of 2009 to $8.98 per square foot for the first nine months of 2010. During the third quarter of 2010, the Company completed construction on a parcel of land within MICC, which added 75,000 square feet of leasable small tenant industrial space. As of September 30, 2010, the newly constructed building was 53.5% occupied and 60.1% leased.

The Company owns 3.3 million square feet in the Northern Virginia submarket of Washington D.C. During the third quarter of 2010, the Company acquired a two-building multi-tenant office park aggregating 270,000 square feet in Tysons Corner, Virginia, known as Tycon II and Tycon III. The Companys overall vacancy rate at September 30, 2010 was 12.1% compared to the average market vacancy rate of 13.8%. During the first nine months of 2010, the market experienced an increase in activity across all tenant sizes. For the nine months ended September 30, 2010, the market experienced positive net absorption of 0.5%. Weighted average occupancy for the Companys Same Park portfolio for this market remained flat at 93.3% for the first nine months of 2009 and 2010. The Companys overall weighted average occupancy decreased from 93.3% for the first nine months of 2009 to 92.4% for the first nine months of 2010. The decrease in weighted average occupancy was a result of third quarter acquisition which had an overall combined weighted average occupancy of 48.2% for the nine months ended September 30, 2010. Annualized realized rent per square foot decreased 1.6% from $20.87 per square foot for the first nine months of 2009 to $20.54 per square foot for the first nine months of 2010. However, annualized realized rent per square foot for the Same Park portfolio for this market decreased 2.0% from $20.87 per square foot for the first nine months of 2009 to $20.46 per square foot for the first nine 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 overall vacancy rate in the region at September 30, 2010 was 13.7% compared to 14.3% for the market as a whole. For the nine months ended September 30, 2010, the market experienced positive net absorption of 0.2%, which is attributed to an increase in activity across all tenant sizes. The Companys weighted average occupancy decreased from 91.7% for the first nine months of 2009 to 89.2% for the first nine months of 2010. The decrease in weighted average occupancy was a result of current year acquisitions which had a combined weighted average occupancy of 76.3% for the nine months ended September 30, 2010. Weighted average occupancy for the Companys Same Park portfolio for this market increased from 91.7% for the first nine months of 2009 to 91.9% for the first nine months of 2010. Annualized realized rent per square foot increased 2.0% from $23.93 per square foot for the first nine months of 2009 to $24.40 per square foot for the first nine months of 2010. Annualized realized rent per square foot for the Same Park portfolio for this market increased 0.3% from $23.93 per square foot for the first nine months of 2009 to $24.01 per square foot for the first nine months of 2010.

The Company owns 1.3 million square feet in the Beaverton submarket of Portland, Oregon. The submarket vacancy rate in this region is 27.2%. The Companys vacancy rate in the submarket was 17.1% at September 30, 2010. The economic recession has resulted in higher vacancy rates and increased rent concessions in the market. Although the market experienced negative net absorption of 2.7% for the nine months ended September 30, 2010, the Companys weighted average occupancy increased from 79.7% for the first nine months of 2009 to 83.2% for the first nine months of 2010. The increase in the Companys weighted average occupancy was due to 40,000 square feet of vacant space leased to two tenants during the fourth quarter of 2009 and the second quarter of 2010. However, annualized realized rent per square foot decreased 0.6% from $16.38 per square foot for the first nine months of 2009 to $16.28 per square foot for the first nine months of 2010 as the Company reduced rental rates in an effort to maintain and grow occupancy.

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10qk
GuruFocus - Stock Picks and Market Insight of Gurus

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