A month has gone by since the last earnings report for PS Business Parks (PSB). Shares have lost about 3.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is PS Business Parks due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

PS Business Parks Q1 FFO Meets Estimates, Revenues Beat

PS Business Parks reported first-quarter 2021 core FFO per share of $1.67, in line with the Zacks Consensus Estimate. However, the reported figure decreased 2.9% year on year.

The results reflect flat net operating income, and higher general and administrative expenses.

Nevertheless, rental income came in at $108 million, beating the Zacks Consensus Estimate of $105 million. Moreover, the figure inched up 1.7% from the year-ago quarter’s $106.2 million.

During the first quarter, the company granted $0.2 million of deferred rent and $0.1 million of rent abatement. Moreover, as of Mar 31, 2021, it collected $3.9 million, or 98.5%, of the scheduled repayments of COVID-related rent deferrals billed through Mar 1, 2021.

The company also noted that as of Apr 26, 2021, it collected 98.8% of billed revenues during first-quarter 2021. Further, as of the same date, the company had open rent relief requests from roughly 1% of customers.

Quarter in Detail

During the first quarter, PS Business Parks executed leases on 2.0 million square feet in 569 transactions compared with the prior-year quarter’s 1.9 million square feet in 495 transactions. Weighted average cash rental rate growth on leases executed during the quarter was 5.7%, while average net effective rent growth was 14.8% for the same period.

Average lease term of the leases executed during the quarter was 3.2 years, with associated average transaction costs (tenant improvements and leasing commissions) of $2.59 per square foot. Average lease term and transaction costs on leases executed were 3.8 years and $3.08 per square foot, respectively, in the prior-year period.

Same-park rental income inched up 0.9% year over year to $99.99 million, while same-park NOI slid 0.6% to $70.3 million. However, same-park revenue per occupied-square-foot climbed 1.2% year on year to $16.47.

Same-park cash NOI declined 0.2% year on year to $69.9 million, reflecting 1.2% cash rental income growth offset by 4.6% growth in adjusted cost of operations. Also, weighted average occupancy for the first quarter of 92.4% shrunk 40 basis points (bps) year on year.