PSB - Earnings call transcript Q2 2019 | PS Business Parks, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, and welcome to the PS Business Parks' Second Quarter 2019 Earnings Results and Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to Jeff Hedges, PSB's Chief Financial Officer.

You may begin.

Jeff Hedges

Thank you. Good morning, everyone, and thank you for joining us for the second quarter 2019 PS Business Parks' investor conference call. Chief Hedges, Jeff is Financial Officer. This

me and Trenton with are Maria COO; Petersen, John CEO; Groves, Hawthorne, Here CAO.

included such set call Before of Parks' any forth obligation PS we All in statements otherwise. PS differ and than forward-looking materially result actual facts by uncertainties, other as date statements. or cause forward-looking that statements are implied control, the Business all this begin, from let number to a or as which results this me of which statements only remind subject speak to revise those many of could whether to update no of forward-looking information, or These new of forward-looking Business events call. statements, statements. are everyone a Parks statements in forward-looking of conference risks undertakes historical conference beyond future are

uncertainties Parks by refer adversely about our For could on affect Form that Annual information with Report Company Form the the Business PS Exchange to subsequent and Securities on X-K. the risks Commission, additional Form reports and and including please statements, reports and XX-K forward-looking XX-Q filed

provide GAAP and can these Reconciliation financial non-GAAP financial measures on our press non-GAAP found be to We measures. earnings psbusinessparks.com. also is will our certain in which included of release supplement, at website

to will I over turn Maria. the now call

Maria Hawthorne

thank and everyone, joining us for morning, you Good Jeff. Thanks, today.

morning, quarterly of with million starting We X.X%, same are results. on our rate NOI reported this us was report executed feet rental of growth with quarter park items to cash for another our leases. square X.X as pleased exciting several QX financial X% strong grew

markets retention our results with XX.X% our infill customer average weighted of total portfolio a the strategy. small These strong again at steady XX%. over and of our same strength for combined was park demonstrate held Occupancy portfolio

success of very that am the Highgate, rezoning Mile The XXX-unit, multifamily received Virginia. we Tysons, We're to master I existing recently happy Now, property. in plan pleased announce extremely with for approval our

with this or phases square plan redevelopments, have units. includes now forward X,XXX which said all future approval, density to move mixed million nearly differently, with And multifamily of additional use X master we feet of the ability about

take approval Of us complete, course, to complete forward will discretion park affords of our and when move rezoning years on but several with development. phase future the if redevelopment to of any

can and very phase of Today, called we will phase size Brentford What only of multifamily the next both over The any Highgate which of design. Brentford, construction that, begin in a next be too from development, behind early Mile, our be leased. existing properties, It currently developed potential estimating we we be it Brentford, development are but in similar pursuing sometime and at we the property, on without which which is exactly are the generating currently mid-XXXX. XX% will is to office about disrupting to say love NOI in-place when will are are

of course, will informed Of keep our they you as evolve. plans we

the Now, announced call. our Maryland portfolio, sale office the quick update which previous we on for a on potential earnings of

our process another update total reclassified our progressed on Expect we us X.X% for X.X% XXXX. properties of has NOI first that year Company and in you'll process marketing financials, this call. and in the of fiscal how with pleased quarterly total our XXXX, the our of held-for-sale accounted a portfolio next are marketed GAAP have in of These NOI held-for-sale. We note half from to Company the portion on

excited we advising Board Pipes Kristy have estate welcome to Lastly, Both I and to and bring would and Steve going and are financial Wilson our Kristy Directors. Steve forward real them like with them of us to extremely extensive expertise,

to that, over With call JP. I the turn

John Petersen

low QX. demand, and portfolio each in know, As our strong in market you with is for of impact of metrics this Maria, the industrial robust solid unemployment. is The historically operating vacancy most our overall all of low cumulative already Thanks regions,

another Our rent had quarter, XXX,XXX Washington of almost Metro and growth. XX% division leasing retention good square essentially, flat feet,

same Northern Washington basis with Virginia, Metro park XX.X%, XX.X%, QX a XXX in outstanding occupancy combined an over XXXX. was point Additionally, improvement

what to recent that economy into tech as a and parks, bad. about the an been team buildings So And good suites, success? this have an our the multi-tenant allows on some our has experienced, One, for key more expanding small is are been capturing fair we us focus and has talented DC decade, of times we environment been for share than growing has the small tap three, talking a to and business that through in sector over been time. Two, leading our activity. market we've

update X Northern square for multi-tenant million purchased on an foot, Now, Portfolio our we XXXX. in Industrial Virginia XX-building, June

and have users undesirable repositioning We our cleansed to completed occupancy of over efforts, today. improved the XX% XX% as of some from

in near as just NVIP mid-XXXX on we are to We XX%, stabilize track expected.

commenced an priced occupancy by also space. points active lease was QX, as our basis excess on signing XX,XXX square growth square mentioned over able a late We users as XXX,XXX cash existing of California foot XX%, deals, were a That in QX, rate. Rent customer feet almost of current handful market Northern was Occupancy saw in the we to in from vacancy XX%. additional out. activity last Leasing XXX,XXX to dipped XX square that in growth with generating of teams to feet of rent move lease QX. we I that space call needed the

negotiations. various We have three currently in XXX,XXX QX stages expirations square feet of other over in are that

these these sub-markets them, expect have we and some more rent or on are buildings we one experience solid We while on of growth interest. downtime deals may in good healthy and

levels, keep by and high giving historically XX%. quarter, another tenant had rents. industrial demand customers strong The is industrial California and Southern for nearly ability the California XXX,XXX push quite was XX% us Southern growth to performing square leases, space economy, buoyed of especially signing Rent is feet retention of healthy. sector, small at our

XXX,XXX users volume, X,XXX leasing feet Combined our Dallas solid the of with XX X.X%, increased a customer on square square in an in feet. with average retention and rent our signed points XX.X%. at and in users size Occupancy almost was of strength led of deal deals. Dallas basis Austin XX%. these Texas XXX In teams small Texas, growth Small

In over square deal South as and low feet, signed Florida, out foot feet we square under have yet trade for is We for especially wars, any in demand us Retention move suites feet. to see at signs square XXX,XXX XX,XXX three users we quarter. was the X,XXX average size. the of saw active, XX%, XX,XXX square material

those and Based including activity, on customers demand, over spaces have strong rent market QX. back was the two. existing in other have of XX% We one on filled growth

XX.X%, Seattle growth occupancy in XX,XXX Finally, Seattle mid-teens. with leases for completed spaces over rent square which as Subsequently, feet. has two had feet strong we already one, XX,XXX XX released vacate in in square taken Occupancy is we QX. the

the growth as the For of the country. hottest remains the XX% rent was quarter, market over in Seattle industrial one

larger to opportunity near metrics. will Northern and credit As of California our I in markets the upgrade balance optimistic look to rents, we or ahead the and we our XXXX, put user vacancies lows, that remain we will at quality. three together teams expirations economic with to demand historic positive the with look our drive forward push improve have engine in users

of to XXXX, teams X.X Other or with costs mid million our continue feet transaction will than to lowering pushing occupancy by portfolio expiring in our and in square that, high XXs. execute maintaining the XX% rents,

Now, over to Jeff.

Jeff Hedges

a first $X.XX for per strong for the a XXth, the half half of share. second was quarter. JP. six rounded the first increased in for available we during of quarter X.X% were year. basic and half year six per an XXXX per the rental ended XXth, income On common I'm excludes driven was XXXX the of cash which growth. of FAD, income pleased Meanwhile, in cash $X growth with and per XXth, NOI common X.X% months the X.X% X.X% for diluted both non-cash by attributable months distribution, of increases compared to a ago. rent, ended out prior and diluted you, to was same months Thank for the the share, FFO first park to effect primarily in June the The was XXXX, first increased $X.XX FAD the share, and NOI, three report FFO $X.XX the June from that increase which share funds Net or and ended for increased basic of half June year. basis, X.X%

our like would point couple to to related park out a of operating same results. items are There I

for June GAAP with financial in results been XXth, classification well and same First, six as-held-for the the comparative in XXXX. from periods months the three for disposition purposes, their as sale ended park our have connection for excluded as properties Maryland

would in that benefit normalizing approximately lease basis. our ending buyout NOI been cash above on income which growth QX, for Second, same After XXth, or X.X%, months from income, a did average June quarter. X.X% I six to point during would park out $XXX,XXX like was the leased buyout for the have second we

Turning Mile. now to an update The on

our continues that was $X.X line We XXXX million, came expectations. at the are NOI Highgate to which in perform with pleased to and for first in report of well half

as We expect generation half continued remainder the NOI we of in through churn of XXXX, leases. improvement second the first

to Board to in out of Finally, that a shareholders common XXth September I'll pointing September and we of on shareholders quarter, record $X.XX shareholders on by recently wrap third be the of paid a in to quarter, our paid dividend dividend declared to up $X.XX second the payable XXth.

now questions. will for we call the that, Operator? open With

Operator

Craig ahead. [Operator go is Instructions] Mailman Markets. Our Capital coming question from with first Please KeyBanc

Craig Mailman

of the being Maryland just ups assets want sell? of us portfolio of where are just you everyone. in sense excluded follow Hi, what's couple Could process here the also give to and the the a a you Maria, from you held-for-sale on portfolio.

Maria Hawthorne

be said was could piece, of a pricing small six term lease. land purchased. square square there separate government just in, decided to it that. if and is came that, as portfolio Morning, we the but term we a what bank the happened remember, XXX,XXX marketed what foot And a the evaluate sell, user, other a portfolio, marketed years on determined Craig. we was the you when there's user, a keep a And and which marketed if portfolios lot left of it's left X.X we keep was we would to with we also did that pieces we with we as million it then It's with that, and and And total the one with That's building a ground that. six on decided lease, on good piece to the was, and what in when Yeah. that when we question. feet lot single

sell. we're excluded portfolio, the we points confident X.X those of two million balance will So the feet, square and that we

Craig Mailman

quarter last you came million the out. feet of bogey XXX,XXX when said gone, had guys I here? of $XX square know you trying that or kind $XX to gave still or it was think nominal with I NOI. the And percentages. it just Is I'm coming the value. the I like guess, first get million

Jeff Hedges

NOI This specific mentioned percentage in related that the you of classified just Yeah. NOI any We Jeff. opening her Other being held-for-sale. number have is remarks. to is Hi Maria than guide portion Craig. don't the on as to that

Craig Mailman

assets And are contract then any anywhere on tax sell? other LOIs would pretty you under close to And guys to stuff? timing even just do guys you I this. you that What on think the planning. on know timing sensitive or are be could

Maria Hawthorne

Yeah.

Okay.

for to feel moving of year. do uncertain disposition. is we did that like happen an in we're these the the to so I earlier acquisition Craig, that doing enough also So have We We're other that an dividend, would to confident will identified year. held able thing a hopeful we then, were will being we special this we that, be that won't say exchange to which be qualify about we And in pipeline, it negotiations.

Craig Mailman

range, dilution And office? of more Okay. more think redeploy? are rolling you're the if guys get do or sense what where into, what on that be in could the you can I X% to industrial is to think you you a that these X% am flex it trying just

Maria Hawthorne

Okay.

redeploy looking core on we're a to Coast. West in market now the right So, plus

to So at that's a than lower be rate cap far X% going or X%.

Craig Mailman

used guys one of the build build for of preferred Mile. as more Is here you we last starting next how at you year? construction be then going you typically are And rest You have and guys all past. should guys it terms you be to this out? sheet the see how balance one management financing unsecured, just do anticipate in the pretty Brentford deliberate how funding know guys to I The But the if changing out on going me. in Fair. you

Jeff Hedges

than sufficient under real little our say guidance Craig, to early have credit point, other any give we to facility. on that it's too a capacity

we are that our and for to could other play, impact we in So we see corporate that choose capacity construction a construction on potential cash would that have it. at the we including or again, have actually I our either now facility or of financing opportunities credit number financing that if not on acquisition use to disposal construction variables other when But just to there start available means management between other sufficient project. secured any us our true expect through fund to project. given things

Operator

Heck will with from come question Fargo. next Blaine Our ahead. Wells go Please

Blaine Heck

Thanks.

you cost a that. have. on on your equity underwriting? think as equity to along? When think you attractive consider source an follow of about were that investment guys effect I Does you strategy And large would a any have better just have clearly So, your funds ever than cost capital, of if guys opportunity you of there or up come

Maria Hawthorne

Yeah. a Blaine, point. really that's good

are lowest in we that XXXX. We our we have the at It right seen the are we going, with go cost we are extremely acquisitions. industrial multiples now trading and balance and went strength history markets looking how utilize is our sheet the certainly as acquisitions. is it of plan attractive at way forward And potential the changing to since development of given of future the is are we our public capital markets, strength the in that

Blaine Heck

in Okay. you're then, not the you'd that there generally currently you're markets be and currently? with in guess separate the from conjunction Maryland in any you're industrial talking XXXX sales, and I And are about that like that targeting to

Maria Hawthorne

Right deep. the now, that all in, are of markets very we're

deeper to the platforms. But we enter nearly our leasing concentration market, before, where if market, feet, we markets, which is which can do allows within feet, billion I facilities. million at operating look a new team have square So you into markets, is much market think us like our Los like about we to place, we of said put and Angeles we've and as to go in to X.X actually our and new X go management square think, we do hopefully about successful which how like operate with own a

existing current So, but new going into acquisitions markets. we potential wouldn't markets, exclude now, right are within

Blaine Heck

was Okay. lastly, stronger Jeff, for it has helpful. recently. And NOI quarter this margin That's been your than

other While G&A that I think to due some OpEx, of of may is there or you instead this reclassifying the any out the gotten other pushed incur expected any were that have that nuances? expenses operating to salary, quarter

JeffHedges

answer us. short quarter a was it normal The for Yeah. pretty is

items, of business, Now, and number influence a obviously, given expense that and the there's of nature timing the our things could certain operating including of utilities maintenance. repairs

could depending always QX, on additional QX have to items that. area. large not that a no storm-related like spend, little, but in that things we're damage, forecasting be It's necessarily there's potentially So weather anything note. possible There could patterns, R&M

do period on you clear the restated reclassification salaries, One regarding though, what to item that have want shown. in we up, the said of the I

make periods based we just have sure, all our this that you're on comparative basis if have So on what last quarter looking quarter produced shown. supplement, for want we in a earnings to normalized and

Operator

ahead. go Eric Our Advisors. Frankel Street next Green from Please question come with will

Eric Frankel

you. Thank

better. is understand clarify just the to a to been left, I that Just I held-for-sale, on occupancy that that I assets assets? but large the make want understand reclassified have as Maryland those sure tenant what of

Maria Hawthorne

know Eric? You what,

John Petersen

as and occupancy, move get customers now, we to is specific back it in out. because we you where marketing space continue on been we've Eric, lease it, and right to to have will the

it question, now, know. you back to your answer is We'd have So that. to right get don't we where to on

Eric Frankel

did planned vacancy? Okay. that you But backfill

John Petersen

that No, not larger to. we did you're vacancy back referring think fill that I

Eric Frankel

Yes.

Okay. That's helpful.

Maria Hawthorne

vacant, it the they is which square is so, customer that take Eric, zone, that, advantage of and did someone The a if of was wanted an currently the to to XX,XXX, because property big keep feet. in balance XXX,XXX do but it, marketed chose could. so the opportunity one we we and there downsize

Eric Frankel

valuation And you vacancy that X% part is Right. quarter? cap X% last of your estimate speculated that not to

Maria Hawthorne

Yes, it is.

Eric Frankel

It is.

would Even or X% you that with value vacancy, everything, Got Okay. a cap, whatever? space, including at still you. that

Maria Hawthorne

Yes.

Eric Frankel

the I'll Maybe Okay. clarify after call.

optimistic of redeploy it opportunities in the there seems why that Obviously, rest Have going more at, a portfolio are you're math. cap be sale well. that you're to Just always what proceeds? the move your looking fundamentals to for in doing to you're like is quite values reason find seen a or now able you rates

Maria Hawthorne

in looking we at aggressive our being the just more would the stock areas, our is bit long unsecured We're what given market, term little we're deploy debt. valuation and at to be able happening of just from a looking and where

necessarily giving that us past. So in is we that the have flexibility didn't

Eric Frankel

you. That's Okay. all I've Thank got.

Maria Hawthorne

Eric. Thanks,

Operator

[Operator Instructions] Please We'll Citi. go Korchman with Manny next go to ahead.

Manny Korchman

everyone. Hey,

development. you're was? be build are Just to there, switching going your Brentford looking they cost Highgate assumptions different how the than to at When

Maria Hawthorne

Manny, that's good a question.

finalizing are when in We design and gone pricing we built up. we is interior the when budget complete, in Highgate, construction the yet costs but locked XXXX, not have

where to in news are see increased move in we that, we seeing over an Highgate. renew price. as -- The last seeing we're year, Tysons the good have in that's as So rents is new definitely residents increase and you'll

what So, anticipating we're far, so similar we're returns getting -- similar returns Highgate. at to

Manny Korchman

it and or to to be a will the is is finish going higher and scale? or Highgate equal to going fit be product competitive the And be or quality this on lower

Maria Hawthorne

in expertise this we be Finishes on equal. be who development are to Highgate. tweaks making different and area. from based recommendations it's some have equal But will partners, It'll our

delivered have mix. unit market to So, with what's for the to and being they do instance, we look at

with be our well be market add as to delivered as competition. will the because some we based what's smaller much to success larger, will being want don't some on Highgate, direct too And

Manny Korchman

think asset And Maryland. beyond in as marketing to about Great. you I office the Can give spoken sales then where we had the stand other an in process? update those earlier year us

Maria Hawthorne

Okay.

about additional sales. highest if really XXX,XXX we currently am office right looking Mateo, in What Northern getting are And to the the San which is we park, XX% any nor portfolio. office not think have only in one have it, So, leased. are announce we're and I now, about you entire rents park ready feet we in our --

won't we said, assets, our extremely of JP Maryland office leased, sell. the amazing that as Northern bulk So we're the the is then, well It's And of piece land. Virginia an office and portfolio. selling

So, at we're evaluate what but won't it as this we be happy point, with own, something we we proceed, this we that else but announcing anything is will year.

Manny Korchman

or back in all thought CEO you the that did just letters out or earlier in miss-read that that? suburban the of year be Has the I you'll plainly I there changed pretty miss-remember and selling put chairman's guys something office.

Maria Hawthorne

out a you that not of that's we it. further, No. asset, and to we we have Manny, we I'm Mateo, now for on parks put going And but the that's San which be year, market, know, would don't there future that on is announce. that's office Virginia, plans it will sell not other in be what we won't office redevelopment to didn't table future to opportunity. But of announce that a we're are we because sell the anything saying, put Maryland the DC for say outside there timeline sale. the that there's office just That other in that this and would but only that one redevelop, parks not so all

Operator

this And there questions at are time. further no

remarks. it closing Jeff turn I'll any to for So Hedges additional or back

Jeff Hedges

your you great you, all look right. of We Have forward to All Thank day. with rest everyone. a soon. speaking

Operator

this and this disconnect call, day. at have conclude you, time Thank conference today's your please a wonderful does lines

PS Business Parks (PSBXP) 24 Jul 192019 Q2 Earnings call transcript