PSB - Earnings call transcript Q2 2021 | PS Business Parks, Inc.

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Operator

Good afternoon, and welcome to the PS Business Parks' Second Quarter 2021 Earnings Results Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode. 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, Chief Financial Officer.

You may begin.

Jeff Hedges

you. Thank and PS joining Call. Business everyone, second for you XXXX quarter Parks' thank morning, us for the Good Investor Conference is Financial Chief Jeff This Officer. Hedges, Chief and With Officer, Trenton President is me and today Groves. Mac Chief our Chandler; Accounting Officer, our Executive

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

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

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

Mac Chandler

On investment highlight on provide quarter second quarter will balance rundown and financial update our and good today's Thank capital on provide call. an you, Parks' Jeff to those our welcome a results, markets Good PS afternoon in to earnings will achievements Business and then our I and sheet call, East, activity. allocation. and morning second Jeff. XXXX the

years. strong levels, This encouraging signed half of in lease first Our with of another at second to square XX for by the at did gains QX. same our the our of XXXX labor. which five basis than more industrial in averaged the our many half quarter are points starts NOI, quarter the we more footage increased for fruits leases first XX.X% Same any portfolio, and to by the led contributing of which, rewarding was production. of it's in quarter the These XX.X% previous by over see cash XX.X%, Park the over QX, for to We prior year. period end increased Occupancy

efficiently. our utilize team to Our continues capital

year, and growth our or of powerful lease For compounding astute transaction were of and for costs of cash contractual available funds square $X.XX an half the of the distribution. foot capital contributed deployment The per first just NOI X.X% combination rent. to

the period the our in XX.X% FAD same Specifically, increased over year. QX prior

XX,XXX Now In the XX% XX% strong let's Last retention users. and is turn square Interest in remains we Seattle, leased. markets. touched Park. foot industrial high cash in is the came This growth approximately product our logistics our industrial QX demand at and driven Business activity of and sector rent with our on XX%. quarter, XXX vacancy our fulfillment of by to overall market our through

are leading but continues available but the activity, the up In demand California, nothing the space a sector XX.X%. rent foot date to California is We logistics knows, but the is doing Northern to in the we growth remain line on improvements be of to is leased hold. complacent, is confident but seeing good The business, transaction a all It's as are It's square was by are a occupancy. if now our as location and substantially this in median one-yard driver, The would unfortunately, customer. anyone complete Northern anything had we quality on tenant the they have part pending. market for it our demand the a momentum. had well. XXX,XXX past very year-end, but the the and and right quarter, in put Industrial for team we Hayward broader long-term. base vacancy We but space things identify pick uncertain now to the

Moving to Southern California.

average less smaller continues companies, mile average The occupancy market especially is This of mid-counties demand the and particularly the with industrial weighted immigration was than retention and construction. construction in quarter. healthy, by our As occupancy of team as in region strong the of led activity demand contributed is open, has where XX.X% well to expansion Industrial firms medical strong last businesses. and Austin to industrial technology-related users Austin seeing second XX.X%. import/export for our the vacancy is is strong as Texas, In XX.X% X%. logistics, in

The vacating As subdivide in meet space be XX,XXX QX Las a Austin order demand September. to to will last mentioned in which an user quarter, the ended is potentially building flex plan occupied. Colinas, was due at In at our located well market. XX.X% occupancy Flex the large space Dallas, reposition North is a office XX% the and Park quarter their primarily in premises square building in vacancies to in Royal the and foot within Tech

Tech. marketing vacant suites currently Royal We are the at

other to Washington regions expectation In XX.X%. that XXXX. occupancy is remainder with Industrial in at our well, for coming Dallas perform occupancy lag Metro, QX of portfolio the our our However, will in continues

we the tour lagging XX.X% better suburban occupied, a certainly office, seen this quarter. continue activity portfolio the employees is office office portfolio. Our but than overall and increase return improving as for Demand in competition, have the was notable to to

industrial increase from for overall, all renew, in leading appear e-commerce. or to but X.X%, users high. all-time decrease and MICC with set Florida demand. midsized there increasing growth at and is driving levels. pre-pandemic Park Our exceeding continued to to GSA was to our in market at due leases rents with allowing business is and be XX.X%. distribution XX.X% was doesn’t us demand, Rent markets Average logistics, an activity QX GSA small of occupancy Occupancy services, Miami an was the demand our

is foot our is XX,XXX yield above approximately nearly development our rents on XX% square development pro currently building Dallas exceed with in Moving projects. industrial forma. XX% The expectations. leased to our Freepoint, track to

We delayed staffing is have tracking Kent building, and have we it for the the year-end. inundated of our in remainder fully are interest solid city the due were by the to permits building Seattle, as XXX to In cuts. development of another still quarter committed

our second of is one and approved two is one Fortunately, imminent. permits the

to our first challenge. However, for Brentford trusses in next anticipate Construction a breaking as is we our XXX of the of and steel And multifamily the sourcing year. the in ground on columns the projects XXX-unit complete small schedule. is underway. Virginia in and at Mile, is XXXX. summer Tysons, quarter We units development or plan Concrete well quarter are such first fourth deliver foundations framing

disposition an opportunistically cap sold our Herndon. is Corporate located transactions to Center, East we rate of we was Monroe flex end, Office quarter the in of assets. June, divest approximately and The Park Park park, On with strategy to consistent office-oriented X.X%. subsequent sale combined both in non-strategic front, sold our The

additional in and of Colinas. are We flex have at assets, that Diego Tech we flex buildings Royal San sub-portfolio cluster the considering science also park business sale flex a two a of the at park, of announced life Las

if sell expectations only consider met. assets. our pricing will pressure And no to We these timing and are are transacting under we

some acquisitions market the on next us in provide that our multi-tenant update actively to and to an leasing are that are high our parks add hope operating industrial through We meet platform. we that quarter compelling pursuing. particularly for standards, value allow best-in-class We acquisitions

markets like acknowledge past spend Jeff, offices. in I Before over our our the had quarter, to to In turn all just time local our tour the call team. the of of dedication I’d to opportunity I’ve and the

truly We off them. customers our have about hat amazing team a our My stakeholders. and cares to Jeff? that is

Jeff Hedges

$X.XX results begin June months Thank of common an XX, income you, increase stockholders the $XX.X three share, $X.XX XX XXXX. period prior while I’ll the was financial million Mac. share, the an the months FFO and same in for per overview ended core June or million $XX.X six year. to with from XX.X% ended or allocable diluted quarter Net for per representing was our

$X.XX June was income share share year. the X.X% the from increase XX, six prior per was FFO core a months ended representing For net and $X.XX, diluted per

that XX.X%, primarily portfolio rental to in Same increase cash attributable income our quarter, XXXX but operating in due net than of the to The write-off a by to was less cash in deferral prior million, and had was Park increase we partly $XX.X activity XX.X% an year. NOI occupancy, net was Same Park driven abatement During year. rent also the income prior fact from and growth the QX rental the increase rate attributable cash growth

in activity During and $XXX,XXX of year the portfolio million $X.X quarter, our to Park abatement deferral approximately roughly compared net a rent Same write-off ago. incurred we

months by a six XX, June from or driven representing ended increase NOI a increased X.X% XXXX. cash Funds million in Same cash ended rental income. for XX.X% $XX.X year, FAD, growth X.X% the For distribution, available the for was months three June Park XX, prior the over QX

XX, was million, the $XXX.X increase For the FAD six months ended XX.X% from prior June an year.

from X.X% of for mentioned In capital to registered expenditures, continues our low at addition NOI previously recurring growth, NOI. the Park to which, benefit FAD Same cash portfolio,

of but reflection As to transaction are I also certain capital use low capital, team’s continuing our said costs on these improvements. attributable efficient of call, capital a our timing prior recurring of partially

a as of NOI half Our increase historic to expectation to of capital average. that measured in our will second percentage year the closer be is recurring slightly the

the of end, Park utilize operating and activity, on We also facility the on quarter at facility Virginia fund sheet. for our XX. as shares flow, balance million. Series to to opportunities. I’d now and Turning $XX.X highlight Herndon, like to become to intend that We investment necessary credit also million and sold our callable $XXX free unrestricted auction development our our cash credit Subsequent with hand including Monroe cash remains W Office to future undrawn. in we quarter acquisition preferred October cash ended

many made to we we preferred we refinance our may As historically know, what At you of Series when W shares. a as not determination time, are opportunistically with attractive. this to sought to rates have equity regard do series of have

as are opportunities. the our cash market approaches, the capitalization date we our However, favorable, as call monitor evaluate and we markets capital conditions needs will and

our of common stockholders second paid be that, point call September in Board and dividend paid I'll third Operator? on of in $X.XX per XX stockholders recently on to of a for we to the quarter, With to the declared $X.XX questions. now quarter share that of per record will the dividend XX. open XXXX Lastly, September out share a we

Operator

from [Operator Instructions] Our question Manny first Please Citi. will Korchman go with come ahead.

is line open. Your

Manny Korchman

parks flex us balance just, Jeff, potential details opportunities SOPs of But mentioned the call. those that might at some realize a couple to I everyone. of on your you'd trying next size be? acquisition Hi, and give with promising maybe acquisitions, the you what versus dispositions

Mac Chandler

Manny, this is Mac.

try Let me different to address a in way. that

me of doing we're a it. in focusing just spending a more bit things lot little ways. couple being on time on a I'm acquisitions, here, and So more different we're One,

in directly to on on Second working also is and someone hired who's these about underway entitlements, more we multifamily a for ago, to just team have the lot who's Seattle, and month a acquisitions acquisitions. it focus we that strictly dedicated provides bandwidth up our projects

of flexibility things with focused we’re So, talk have as promising. able And have compelling patient that we timing – think think Hopefully, such advantage. some these mentioned, about pursuing ready to as about. helping not we’re the potential lot previously. question. that your think it in really interest with also now. have more answers we buyers we manage But them be that’s we see or And I than sales And a opportunities I our to be there two it. to the very I us. that we’re we on are And we that And talked we’ll that we’ll been

Manny Korchman

elsewhere then And to is we you’ve guess, concentrated Virginia within uses now with be be the expect to conversions I And going portfolio? multifamily where the dedicated, Mac. person that it? would Thanks phrase the way more right that Great. that done or in to Should come? Yes. alternate of

Mac Chandler

we’re is where we’re set favorable but start and Virginia have opportunities certainly, in position phase working third the through the a starts entitlements the mile, likely the portfolio rezone are which that our there – plan, to our where other West are with properties But of already up, get our land. increase finalized. of is we value Coast to the and Well, a the within density, the well, near-term project on are county going to the as the master ability attain increase that also

in that So great the us optionality gives future.

Manny Korchman

you. Thank

Operator

KeyBanc with Mailman Craig from Please comes question Capital. go next our And ahead.

Your line is open.

Craig Mailman

talk profile to-date on looking and much you're Maybe want up of talk what appreciate the you on to just the in be to gap? at? looking Mac, may don’t But kind opportunities know, you following acquisitions. and San could bridge Manny’s acquisitions. what of about too just sell question Dallas type relative I you're I what what and yield Diego versus And the potentially you've and sold maybe about

Mac Chandler

Sure. really – our the multi-tenant I it's larger asset mean, general, parks. class in is preferred the

walt is is said management-intensive average are well that. larger built where generally, is in years quite the these located, size Xs three our years, long-term but properties like the growth high yield starting difference and the profile. that consistent high-quality because one Xs assets, are current take X.X that the is to and portfolio. the projects and having And years the platform our for bigger years X.X later parks generally small high few they'll we're low do to to on really We So Xs in and a stabilize that the those are looking so, with a

flat-to-negative the the that projects the cash the but much more we're So flow further are looking look we're also in as a more out future. especially long-term selling efficient. assets really profile, intensive profile capital they're capital much is growth outlook, And positive quite a versus at you have

Craig Mailman

So just to maybe follow-up that. a

maybe you much drag CapEx the office of that It's mean you're So like it and does asset it of how but can to are class the long-term. be always flex more to for rid get out own? bit challenging. a sounds do want good, selling assets trying maybe little What good things of And get higher balance and a that of altogether? when that on things expensive timing

Mac Chandler

But that averaging portfolio. last opportunistically. continue two we if Well, look office sold, can realized many we'll I expectations. high to we And mean, not historically, better from to you cap I that. on our probably really rate think rush mean, assets X.X% value. you that of than the see that. solid pretty in we can we properties have older do we're a – thinned you – was And I that It's these matter expected. do We'll

So we'll all office within Not look for assets equal. are created portfolio our opportunities.

of ratio really for and some Some of long-term is than it certainly been properties does – Flex our our that more goes And flex differ same have flex. profilers are office properties. others. that industrial And good office-oriented a build-out some resemble market-to-market. indicator certainly But the are pretty for performance.

Craig Mailman

Jeff, room the the from any And decent some on gains then for the you these, To to have and activity just a do timeframe timing dividend. XX/XX? have with of within enough you maybe perspective extent

Jeff Hedges

Mac that capacity and an with regard said, certainly, – two Craig. do the Monroe sales We're that we be that's flexibility look Yes, when in as have – the those be have we'll to absorb forward announced, potential that and sales And to go that sales. or decide we transaction, potential Hey have potential be with those Park would closed certainly how and gain East Yes. considered sales we there without other great. exchange. with with on if and and Virginia, will timing manage not gains strategic the two to we we Northern the the to

Craig Mailman

where of on details was maybe any potentially and one pipeline decided last step Hayward; to the tenant that be? going And why away? on the one the in the to kind just there XXX And mark-to-market about

Jeff Hedges

on pause. needed kill until they on put didn't they tenant deal, the a about summer. pause was why coy it They to put the The little it actually but

had right It's ready user it space But want will for was quote mentioned, across We that's – tenants not other that able it special. to not But that out So We're space. come there it there. a that. pretty of to We're the condition other were that work go we waiting to as come rent back, in deal. If ourselves very sort at space is comes are growth. to looking really be. needs don't around, to but may opportunities terrific it with I who pleased back. against we as the be are

bullish we're business. one one things other of the the So very yard the get things – that's line feels about and down the team sometimes make, don't And to just nature you it.

Craig Mailman

Great, thanks.

Operator

we And take Heck Instructions] go question will [Operator our from next Blaine ahead. with Please Fargo. Wells

Your line is open.

Blaine Heck

you looking marketing Great, thanks. kind gave what the on sale characteristics morning you you're Can as just great now? terms right acquisition what the for that detail in well assets of block drove side. kind the that to what the sold? out Good you're rate of there. Mac, as the you of same you And sell pricing for other for kind some do are have what's targets cap look on on or to of

Mac Chandler

to discourage not Well, their most. sharpening want would but point pencil, out different than our I it's a wouldn't I'll say little because anything less that buyers from

two right cluster. happened life is So heart growing cluster located largest in science probably there's San – fastest be assets, the it the and and life the science to in Diego respects. many the third this of And

rebuild these these that going And likely assets to buyers zoning favorable at looking underlying so two rebuild down to up there's and FAR go because the the tear very and product assets and is ground available. are

favorable very pricing. have we'll think we So

And so to anything than that's expect IRR a we we forward would think a on achieve cap we would achieve better rate far basis.

the a the you, of well-located of markets grew beauty is example property and buying So it. and up ago part good around of years it's this

is it's And and around use you flow property time something else. generated to We've look really the highest over is sort of today. So – cash not the best years. and just be the asset the tremendous

date buyers buyers life are largely science the this the developers. – to for asset so interested are And

for the excited prospects And about so that. we're

Blaine Heck

just Got that, follow That's really on it. Mac. helpful. And up to

at Diego? As much there these multifamily point, more as bucket do you are like seen if to kind opportunistic the of of not in even sure describing all or the sell San sales How you portfolio, how of look across noncore in you've much it, you'd buckets situations look is How industrial office the in most, is of bucket or the anything many more and I'm you're have this in well? that left – there?

Mac Chandler

think that don't of a re-entitlement described. in there I other the sort but up necessarily that have not upside, assets. have for to assets reasons a think Well, straight the are unique that. one's any I I But we in sale, similar of as these

it that's takes our decide, opportunities to so a going value to but the we think we're we high where in, in create the years. over in several on we the And and tight – use created may not. local some then some creation value enhancing to real to and ability that be it's there's patience. partner, have we years, bringing really in the creation this see is have next to few I actually reinvest asset And expertise think to better to bandwidth it that often, for entry, do may And entitlements us markets And value. we the create going we And there. the think now is barriers we'll whether those. we're value expertise But we're

Blaine Heck

Okay, thanks.

Mac Chandler

flex, that garden would that have, around of helps typically some style but traditionally that's of wrapped opportunities your you if sort those the older assets. product core I get it's industrial to office where sort lie. of walk-up head we would It's say, the the not and

Blaine Heck

it. Got it. Appreciate

Operator

further over call I Mac for remarks. appears Instructions] back to questions. there no will Chandler closing [Operator the to turn any be And

Mac Chandler

the and time PSB. to and of to want enjoy a interest talk thank everyone take your moment rest day, your we'll Please Just in soon. your for

Operator

today’s a line this does Thank call. you. conference wonderful Please your have day. this time, at And disconnect conclude and

PS Business Parks (PSBXP) 5 Aug 212021 Q2 Earnings call transcript