PSB - Earnings call transcript Q2 2020 | PS Business Parks, Inc.

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Operator

Good afternoon and welcome to the PS Business Parks Second 2020 Earnings Results Conference Call and Webcast. At this time, all participants have been placed in listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Jeff Hedges, PSB's Chief Financial Officer. Sir, you may begin.

Jeff Hedges

Thank you. thank PS joining call. Business and second for everyone, XXXX quarter Parks morning, you us for the Good investor conference is Financial Chief Jeff This Officer. Hedges, Executive Petersen; With and Officer, Interim is me Chief today Trenton Groves. COO, our and John Chief Accounting our Officer

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

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

will We financial supplement, earnings which will Reconciliation measures turn measures. in also non-GAAP call press provide on the JP. release and can I certain of to psbusinessparks.com. included these now non-GAAP over financial found our GAAP to is be

John Petersen

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

medical time CEO, been for everyone President want remains She's results, into update an on out leave Maria being. QX the recovering April. Maria and leave get and Hawthorne. we give since on has I on non-COVID Before our to

well for her we wishes soon. full her team hoping recovery are Our and

minute each the In solid remained tremendous parks delivered production, for of last thank our our every to and over the of this throughout. collections. family efforts our many I functional presented months. spite and transaction costs and by and improving pandemic, of results, their member PSB steadily have take a the low leasing team, open including want of challenges Speaking team unprecedented impressive all several And

feet Our an first during almost leasing same more Retention leasing than and million XX.X%. XXXX half XXX,XXX square team us period was production in volume square impressive was of X.X the to feet led the quarter XXXX.

was by a impacted metric XXX,XXX at planned customer this of single-tenant However, Park. square move-out the our Hathaway foot Business

a foot XX.X%. quarters. was production have of lease XX% represents in retention This foot our Included the which discussing Fortune XXX in vacancy square XXX,XXX XXX,XXX building, the our that activity. was good move-out vacant this Park approximately of Business have XXX,XXX couple Excluding lease on square feet have QX last customer. to we in still Hayward been I We square

out portfolio. here achieved vacancy midst feet recent for term. in are the of quarters, did with was the large we as growth the square will Industrial rent per than in this of we hold. have Regarding million pandemic. declined on low X.X QX. nearly to feet growth at to rents prioritize our for to shutdowns economic office Springs the costs while an as lower our ability point on foot other of shutdowns in near we in Fe reported QX, push space effects production rents, in the be Southern X.X% QX government XXX,XXX ordered optimistic leasing we $X.XX in highest Cash production California. X.X%, like Santa for that the transaction near I in record total QX by slowed rent would although in we was have is in lease Activity growth in as was level took production space PSB demand square in X% and this what of The office able high impact rent markets the square

continues keeping has preserving and to strategy be well always our buildings been occupied, Our while capital.

Mile, the unit XXX last Virginia. button we development our Tysons, evaluate Next, Brentford On I multifamily would an mentioned on to like call, update pause fundamentals pricing. I in at were our provide market and the pressing to

$X last deliver believe for will worked our development units QX Not will the high-quality, are on few Over and anticipating front, be to pleased the well and these of with are the multi-tenant we square foot to located plan summer this have and when delivery industrial fall completion In for securing XXXX. pricing XXXX. a in with in months, are QX our development targeting week. is lower on year. we partner basis, improved square our this we multi-tenant XX,XXX permits track but foot similar in XX,XXX of JV only for that million Seattle, hard construction contractor demand building we we industrial secure also we Brentford multifamily Also this Dallas strong, in we our cost commence

Finally, Initial on was core to same guidance the in as pre-COVID. these investment quiet. But markets. pricing deals our has is we offerings market starting surface it some are been the see essentially,

pursue the will actively disciplined like, remain that deals but We as markets reopen. also we we'll

Now, Jeff. I'll over turn call the to

Jeff Hedges

the or per an $XX.X was income $XX.X FFO per with June ended million financial Thank Net or the you, $X.XX our JP. share. months quarter. while share of for for I'll second overview three million, was XX, begin results $X.XX

operating write-offs which from same of Same the $XX.X non-cash did due and quarter $XX.X from Second cash rent receivable was to $X.X was NOI. the write-offs above. per Same deferred cash write million includes FFO of and $X.XX additional Park portfolio decrease accounts write-offs year, off, not attributable $X.X of deferred receivable The receivable NOI prior non-cash respectively. receivable AR mentioned primarily impact $X.XX a rent prior to deferred million, X.X% X.X% year. million rent non-cash and decreasing the reductions Park FFO in an our of represent million Net income share

Same will rents recognize deferred Similarly, deferred computation in purposes and which in NOI, our of NOI of available abated. Park excluded which collection update for $X.X effect the been in abated deferred are second distribution, million rent To cash the and have amounts an we did and of that and than However, on exclude rents abated XX% X% they deferred from received. period to cash I'll for quarter computation collections. rents are million rents less the $XX.X our funds uncollected of given collected was provide now or date, for after remain were of quarter.

experience April. collection as rent month each has X% remains today, uncollected. approximately improved And Our rent of of July's progressively since

improving Subsequent we to slowed several of collection rent. July an did additional the weeks. quarter past addition rent $X over the the rent defer volume steadily activity, end, of requests has In to significantly million relief

quarter, of end in majority However, the of were agreements agreed to in or progress been at prior already had either a month. those the the

facility million Turning roughly And outstanding. credit now to the unrestricted our quarter the sheet. corporate $XXX of undrawn, we balance cash. debt have with We no meaning remains ended

the we volume the on necessary, As with JP to acquisition net mentioned, we and development retained development are credit on finance Brentford cash hand, cash excited Mile, depending on to period. draw over we'll the on facility and if commence our intend at development and

turn in a third back dividend on Lastly, I'll in record XX and we Board call to quarter declared point JP, a the that shareholders September to quarter recently our on dividend before turn I'll the of shareholders September it of back be $X.XX paid common share of second to With I to $X.XX per paid to per that, the XXth. share JP. out

John Petersen

Jeff. Thanks,

like to call am our I the their for Before customer momentum, second would that, customers. sets current half who look dedication to we I call proud America, to with the again of the for of the efforts our as are and extraordinary I serving towards And of questions we of pleased am our second our open half in the we we resiliency year. will XXXX, and confident for acknowledge the questions. business as small stage open core now Operator? the which With serve the base. team

Operator

question [Operator move your open open. The Mr. We'll Mailman, mute for to from Mailman, questions. KeyBanc your Capital. check Craig Instructions] Please now next Heck. Our is switch. first comes is Blaine line floor And

Your Wells is of -- line Fargo. open

Blaine Heck

Great. Thanks.

Just wanted retention. on to start

I larger expiring. out skewed now had. think of pretty looking you between XXXX the and leases first probably quarter the I'm were JP, you move-outs as end But the you figures your As and that by known of noted have second XX% over

on get to trying period. the And of space might just the of retention or that move-outs for fence you any sense during that I'm for chunks is time? expectation known be that over a have more large So period what whether time guys you

John Petersen

Blaine. Yeah,

that vacated in -- or you over were if XX%. pointed If the you Hathaway were pull And two other quarter. you at that as low out, I -- we we're pull foot expiration, out XX,XXX the square customers pull you those three out XX%. there And mean other if during out,

and even back those are expect So to I would reopen. as XXXX have California, a normalized where and get would into our we expirations especially which retention numbers look portion economies to continue our in good if we XXXX

relying mean we're that's look So what I on.

economy So question? our retention expect if answer going momentum get mid-XXs be the in your some I we XXs to the I Did with forward. to low

Blaine Heck

large Okay. just next coming couple be then And might years? can that in any helpful. about up move-outs that Yeah of you the that's talk

John Petersen

magnitude looking up we've have on been We coming Dallas magnitude, Nothing which discussing on year, the been which at what of about. what But talking we've we're today. nothing do extending. in the one this later

Blaine Heck

Can That's Okay, to going to comment rent forward. to? those rent you little And great. what then that press how much helpful. the relief relief we said having you on talking How release might on plan or you grant periods in that? discussions give and additional you many maybe noted these of for kind your about, a expect requests color just future? you're Could you apply are of relief so

Jeff Hedges

Yeah is Blaine, this Jeff.

quite queue. has what less what rent X% lower we of were evaluating months will around now, or that say little or in a month requests evaluation be than a or those revenue have our a percentage certainly So But not right as bit on two basis right ago. three is base approved. or Can't opened relief really a our customer of we of will

changes QX going look in activity. that were where we beyond. dependent my as many in a absent now the come in. environment declining any a which other said QX, as hard find us ago. that, from it's requests significantly of, ourselves how decreased kind for forward, on expect prepared perspective So months we have And to the economy, macroeconomic to few right requests But volume see have remarks, additional come I in the That's from be to predict we in in in they will of

Blaine Heck

one Jeff. maybe for great. you. then more Okay, helpful And That's

Mile, which guys of sounds great. costs construction cost yields. looking it at important So most as Brentford Obviously you the those the is the like of negotiate inputs forma to were at one down pro the are you're at able

development targeted I'm if give you that cost us reset. So wondering been yield your now has that that guys can on

John Petersen

Blaine, we we're And real we're that starting Yeah, ability with could were this ready this in some you lower as And go week. we work touched on And our realized pleased to I we've our savings. basis that. to if mentioned partners in in demonstrate remarks, project Brentford. as here done our my

So that's very exciting.

there of returns, high do two in pleased realizing to that range I this our so expect and And there. be the that savings, sixes we're fives, when in be mean, I we terms submarket. thing In real demand going that this years deliver we on good the cost efforts in with will Brentford think low

with far getting question? in we're answer Brentford started. So, your Did our that so execution excited

Blaine Heck

Thanks guys. Absolutely.

John Petersen

Thanks Blaine

Operator

Our next of Eric Street. question Frankel is Green from

Eric Frankel

giving going kind color in of where where of what you the be written off on to shape deferrals in of get were of sense of looking Would might bit more of occurred have just or tenants second a a the they the depending at and offered we the breakout or detail July economic you. might quarter the just been forward abatements or Thank either or on industries types rental that rents mind recovery?

Jeff Hedges

Yes. is Hi this Eric, Jeff.

that ranged really of the our industries So, performed location. some less that it by rely segments better the relates others. traffic, But have the retail were the that others. some so have locations showroom customer shutdowns than and to it of And the we impacted impacted we certainly that gyms at of -- were a number our base customers foot our as or parks across the than were in-person on deferrals more restaurant granted geographic business

the and a But ranged they and So, the abatements. the certainly a deferrals I locations. number got disproportionate as amount deferrals geographic kind said, of of industries across of

predominantly was a granted. to requests attributable segment pinpoint base that customer to our So, hard it's of specific the that rent were relief

Eric Frankel

Okay.

just next is health then that six restaurants is year X% by kind or we on of -- be Is So, us can to to fairly about were revenue it to live the it? for that officials of that how the fair operate X% closed rental what way we gyms the a based for of and X% per while telling months closed virus kind and say recommended a that Is month? think deduct generally so that -- should or or to to continue right period? to time the X% during probably

Jeff Hedges

model. the of extrapolate might it -- don't exactly that changed percentage customers these is we way a I that forward think know about general you're logical, I pivoted. have their thinking think revenue could I in because They've lot going that but

the have able and some For restaurants revenue curbside or return instance we to pickup generation. to model embraced the been delivery have have that

that So, our continue affected on that effects the is e-commerce-related commerce yes, on to the portfolio of be so continue pandemic I hesitate But would more does saying that segment as of the going extrapolation. than on. remain certainly, the tenants probably in-person use to

Eric Frankel

including would July XXXX? you few to compare compare collection -- mind that it's what rent How for deferrals July your last stats already And like XXXX? How relative offered progressing sharing of you that understand that months. year kind then Okay. does could I does to last the -- your

Jeff Hedges

we significantly given typically the end uncollected XXth, is normal X% at I than uncollected where of month. don't collection be X% exact would as Eric, X% July have a in but around the We're would higher the usually it of that XXXX, of end to at times. percentage month

Eric Frankel

obviously, sure kind for your is of queue. looks cost at project for Final what fact in else the after apartment of like fundamental it this that's Can not apartments But just the area like I'm But a -- somebody sure can I'm at sense that wants about talk full a you first fundamentals affecting least of the Brentford whether ask or to question obviously is the that talk Okay, have at capacity whether meaningfully looks negotiating changed? decrease just helpful. But somebody operating to for get near-term demand there is -- deteriorated I'll the project in get in that view about you And there? the just back Mile. questions. region. fundamentals the there's win. that kind mall of the the outlook occupancy the --

John Petersen

Sure Eric.

hit for we So, as held you March can imagine the of a -- to when we kind May, and and then had And drop of move-outs. activity – April, generate the in had to rent. lot March pandemic over then we

XX% weeks, over kind And occupancy July few that. early of June, move-outs kind up the last did we And then So in of in fact moderated. so. we're late pushing towards back or

for term as out of So we And and the is for it for like progress. ahead near two outlook choppy we the But we us. that submarket really we're worst the is Highgate the of – in Brentford. multifamily Brentford, demographics look think when years there's delivering We made behind Tysons.

going Brentford We've it's And be summer fall, like So to I reverse at nicely continue rest it's two overall anticipation we the think we Does trend. this help? in we're able been said, month. then And going to the years' early where the in And that of decline occupancy is should our like to and that time. trending Highgate. choppy. I be

Eric Frankel

you. Yes does. it Thank

Operator

[Operator comes Manny next question of Instructions] from Citi. Our Korchman

open. is line Your

Manny Korchman

you. Thank everyone. Hey,

it looked impact – collect have burns for able how or Just more the or have rents deferral is coming as requests? abatement about to you PPP rent that might wondering, if the people in off guys been or at impacting how thought you either

John Petersen

rents? and I'll to – turn Manny, PPE impacting when collect our Is ability over start then it that is But say how what right? Jeff. you to

Manny Korchman

Sorry PPE masks gloves. PPP, in Not PPP as the loans. and

Sorry.

John Petersen

in There's half which it's if base roll passing a PPP good Okay. the stabilizing Well as then our it to second economies masks see off certainly and going each But happens – that the the choppy. to yes, and we year, to wear We what going is here rolls customer our of continued week. be we be we're will see it's interesting think the maybe rent. question. open, although collect gloves to when with

be PPP to So think the effects of our will the you minimal I anything base. Jeff, there? did customer to add want

Jeff Hedges

programs the Yes. things are I program loan program just – stimulus and mean – PPP other the there. government-sponsored I think of a couple out regarding that government

As we've were customers relief and our number and seen the a we them adapt to programs developed applying general current we've keep us model And loans. from and for or them sorry, the to that to were headcount. for In mentioned to which government-sponsored a create all payroll came what some environment. as were large bridge to requests, relief PPP those allow keep I customers loans required of on for that the relief that those. relief, mentioned evaluating that our – those customer pivot staff to to certainly have And worked eligible for looking intended, is to our including rent earlier verified was we their before, who cases loans process exploring as an we available on base for the business rehire in question headcount I'm benefited

originally said, And the in their seen to I anticipated. has And has so and as further we in drawn shutdowns have ourselves and we've base pretty environment the was been returned. returned find that many have the in – that our than cases effects of resilient JP some customer just cases what businesses think out

we with those being we are that stands today funds return has suppose requests in continued about that the what a do so a that base they hope PPP and relief relief select right customers received quite positive now. something that that And see depleted. that as good we our – ago. months we I as are a few And certainly the coming seen feel And were we mentioned will But very before, year to to in requests lower the few where customer than have earlier think I bit – momentum.

Manny Korchman

Do have think retail talked that use? portfolio is portfolio maybe JP, you you much And or uses retail to in or your and how happen call, in I most to or you earlier the showroom uses your it showrooming as about of impacted. sort was of Jeff, stats available being similar

Jeff Hedges

Yes. We don't you're portfolio think referring But have code. exact I those we do have our earnings there, a that SIC defined that's stats to breakout of in Manny. supplement by our

into right will provide. We don't those percentages now, of those to some look have in more stats But to future. available trying exact as of make the detailed we

Manny Korchman

your not have is, tenants So, point type I that's within it that by but think necessarily are a signed so type you of lease, your portfolio? use tenant the

Jeff Hedges

correct. That's

Manny Korchman

Perfect. guys. Thanks

Operator

from a We Frankel [Operator Green Instructions] have follow-up of Eric Street.

Eric Frankel

-- Just provide the maybe to the abated business obviously foot quarter to over color changes have lease or to in rents. of just that's get have little the traffic a seemed recent a market on have roll rent into just of seem inability and decelerated to decelerated more transact to actually just to whether Rents little trends terms break -- second and bit. in and activity a July -- bit. Maybe little on lack do

John Petersen

Sure Eric.

we all not demand have at to our created certain that. even still upside in -- to is to if our certain as more be some imagine California. there's stab in not and in we've rents. And a properties we each a certain point, all last take it especially you we market terms so maybe in back. our for can Southern you mean, of push Northern mean in aggressive submarkets -- some with through towards positive there. had rent submarkets in markets, pushing portfolio, and other look high Certainly the created in markets have markets me rents are call And not California office, I I go ability equal office of Let the XX in days your we've of

normal We've in it distance but on country. the increase early fairly started we power help? been product as that didn't better know numbers where certain in velocity to And wouldn't that get was the call doing We've it cases a quarter, have pricing certain tours as fall. I of Notwithstanding thing normally, we've pricing tours, social the but there. -- in in can we summer this second head when able keep we and the been submarkets extent, we expect the you kind production, virtual into have the tours. been we So saw to we'll to our types around ton, power Does going. will operating not in better

Eric Frankel

deceleration cash touch to had just Maybe does. markets and quarter. quarter the rate second the first change it of real you the Yes, upon from some run where the significant

to it So, it Seattle, but like looks County turned has negative there. a lesser extent Orange San Diego,

So, any other color for those markets would be appreciated.

John Petersen

Eric. sure, Yes,

were For businesses Diego, initially we viable feel couldn't that is really and some forward. specifically, really -- by didn't it impacted going San that make was portfolio that just

push and to rents in notice did almost was up occupancy, San XX%. back drop occupancy So Diego you'll we

-- businesses there enough companies for space were looking small parts pandemic lot these even the you uncertainty, think a of not for not a So back and there's there out April, but this for space for that target started. May as looking was when to of more if lot June sometimes small

rents. some in San did XX% And attract I But didn't were in quarter. to at as make parks So able to we to Diego order drop had said. it keep the we that we least that to our and activity almost

XX% occupancy We Orange over a of quarter but to thing activity County. are County, second Orange Same lot we're with that. Not there. in keep in able the happy with

you're to prospect get for want to if availability business space. pandemic small order our space -- to a looking in there's get that and in a So we

well rents And still or to ours to parts aggressive. going leased and having appropriate where we're are we're certain of not be there. still So drop fine XXX% leased then still and

The situation. park market asked... park So by last it's really a you

Eric Frankel

Seattle.

John Petersen

sorry. I am

Eric Frankel

Seattle.

John Petersen

know here that expiration us most here let had you up growth positive at the XX%. well Seattle we've pretty our growth of as there Seattle quick. expect remainder several Seattle just I real Yes, rent really is good last year. rental as push the Seattle we look into we me should occupied quarters. in Yes. of for get the in And back to still over --

Eric Frankel

it. Okay. Appreciate Thank you.

John Petersen

Thanks, Eric.

Operator

this session. concludes any our return happy Hedges question-and-answer for Mr. be remarks. call I'd And to to the concluding Jeff

Jeff Hedges

All right. you Thank everyone. We and you, a again hope afternoon. forward with safe to stay you good Have all soon. talking look

Operator

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

PS Business Parks (PSBXP) 5 Aug 202020 Q2 Earnings call transcript