PS Business Parks Inc. is stacking up as a standout among local, publicly traded real estate companies.
The Glendale-based real estate investment trust, with a market cap of just $1.1 billion, has managed to hold its own among investors amid a brutal commercial real estate market that has taken many of its far bigger rivals down a notch or two.
The REIT, which specializes in developing and operating office and industrial parks, has seen its stock actually rise about 3 percent since the beginning of the year and that’s despite less than enthusiastic support from Wall Street.
“They are showing some resiliency that is frankly a bit of a surprise to me,” said Richard Anderson of BMO Capital Markets Corp., who rates the stock “market perform.”
He’s one of five analysts tracked by Bloomberg News that rate the stock a “hold,” while three others rate it a “sell.”
The surprise?
The company’s largest tenant is the U.S. government, followed by health maintenance organization Kaiser Permanente. But those entities account for a small percentage less than 5 percent each of the REIT’s total rental income.
PS, which has a portfolio of 20 million square feet in Southern California and seven other states, has a specialty in flex space. That space, which can function as offices or warehouse, mostly appeals to smaller tenants.
“These are smaller companies that tend to not be as well capitalized,” Anderson noted.
PS also is not a particularly liquid stock, with less than 50,000 shares trading hands on some slower days though that can cut both ways by reducing volatility. The company was spun off in 1998 by storage giant Public Storage Inc., which owns 44 percent of its common stock.
“That eliminates a lot of the liquidity and scares some of the investors off,” Anderson said.
Of course, nothing pleases investors like solid financial performance. The company has been profitable for years and recently reported that its second quarter net income was up 22 percent to $4.62 million.
Shares of PS Business Parks closed up nearly 1 percent to $53.95 on Aug. 27 on the American Stock Exchange.
The company did not return calls seeking comment.
Crosstown Move
A local design and entertainment development company is leaving the pricey Santa Monica office market for Sherman Oaks.
Chimera Design LLC signed a five-year lease Aug. 22 for 16,000 square feet at 15490 Ventura Blvd., a three-story building owned by privately-held local real estate investor Drisson Corp.
According to an industry source, the lease is valued at $2.5 million, with a start rate of roughly $2.50 per square foot per month on a modified gross basis. That’s a bargain compared with Santa Monica prices.
Chimera now leases at 310 Wilshire Blvd., where it pays over $4 per square foot per month on a modified gross basis. It plans to move Sept. 15. into the Sherman Oaks building’s penthouse, space that once housed brokerage Morgan Stanley.
“They needed to expand and we took a look at Westside and downtown and the Valley, and it turned out Sherman Oaks was the best area and most suited for their needs,” said Gibran Begum of Cushman & Wakefield Inc., who represented Chimera.
Begum added that the company, which is in the midst of a big theme-park project, will do some remodeling before moving in. “They are opening it up. They want to make it more of a creative layout that’s conducive to their company,” he said.
The landlord represented itself in-house.
Industrial Sale
Roland Products Inc., a distributor of luxury household products, has purchased an industrial building in Gardena for $5.5 million after selling a smaller property in the city.
The Los-Angeles based company, which has a showroom in the Mid-City area on Olympic Boulevard, will use the 40,032-square-foot building at 1700-1702 El Segundo Blvd. for warehousing.
The early August deal with seller David Yi, whose Lucky Sportswear company relocated, breaks down to about $137 per square foot.
Joshua May of Grubb & Ellis Co. said Roland sold its 7,000-square-foot Gardena property and traded up because the company is growing. Roland will occupy about 28,000 square feet, with the balance occupied by mushroom importer Clover Specialties Inc., which has a long-term lease.
May said the one-story building, built in 2004, is a higher-end industrial property, and that Roland sought it out because of the nature of its own business selling top-shelf European goods.
The sale price did not reflect the current weakness of the commercial real estate market, but May said prices could soon fall.
“There has been a bit of slowing in the area,” he said. “I think we are at that breaking point where we are going to start to see lower sale comps. Buildings are sitting longer.”
Rudy Lara of Daum Commercial represented the seller.
Staff reporter Daniel Miller can be reached at [email protected] or (323) 549-5225, ext. 263.
