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TheStreet Open House

PS Business Parks, Inc. Reports Results For The Second Quarter Ended June 30, 2012

Additional financial data attached.

                     

PS BUSINESS PARKS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 
June 30, December 31,
2012 2011
(Unaudited)
 
ASSETS
 
Cash and cash equivalents $ 3,036 $ 4,980
 
Real estate facilities, at cost:
Land 772,573 772,573
Buildings and equipment   2,178,330     2,155,772  
2,950,903 2,928,345
Accumulated depreciation   (893,883 )   (845,700 )
2,057,020 2,082,645
Properties held for disposition, net 1,195 1,218
Land held for development   6,829     6,829  
2,065,044 2,090,692
 
Rent receivable 5,415 3,198
Deferred rent receivable 25,078 23,388
Other assets   14,806     16,361  
 
Total assets $ 2,113,379   $ 2,138,619  
 
LIABILITIES AND EQUITY
 
Accrued and other liabilities $ 68,348 $ 60,940
Credit facility 185,000
Term loan 240,000 250,000
Mortgage notes payable   281,662     282,084  
Total liabilities 590,010 778,024
 
Commitments and contingencies
 
Equity:
PS Business Parks, Inc.’s shareholders’ equity:

Preferred stock, $0.01 par value, 50,000,000 shares authorized, 31,490 and 23,942 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively

787,250 598,546

Common stock, $0.01 par value, 100,000,000 shares authorized, 24,247,428 and 24,128,184 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively

241 240
Paid-in capital 535,712 534,322
Cumulative net income 922,108 878,704
Cumulative distributions   (892,374 )   (832,607 )
Total PS Business Parks, Inc.’s shareholders’ equity 1,352,937 1,179,205
Noncontrolling interests:
Preferred units 5,583
Common units   170,432     175,807  
Total noncontrolling interests   170,432     181,390  
Total equity   1,523,369     1,360,595  
 
Total liabilities and equity $ 2,113,379   $ 2,138,619  
 
 
           

PS BUSINESS PARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in thousands, except per share amounts)

 
For The Three Months

Ended June 30,

For The Six Months

Ended June 30,

2012       2011 2012       2011
 
Revenues:
Rental income $ 85,627 $ 72,970 $ 170,304 $ 146,431
Facility management fees   164     169     330     347  
Total operating revenues   85,791     73,139     170,634     146,778  
Expenses:
Cost of operations 27,717 24,156 55,832 49,811
Depreciation and amortization 27,198 20,988 54,442 41,718
General and administrative   2,412     1,748     4,685     3,318  
Total operating expenses   57,327     46,892     114,959     94,847  
Other income and (expense):
Interest and other income 80 43 123 137
Interest expense   (5,213 )   (1,145 )   (10,561 )   (2,360 )
Total other income and (expense)   (5,133 )   (1,102 )   (10,438 )   (2,223 )
Income from continuing operations   23,331     25,145     45,237     49,708  
Discontinued operations:
Income (loss) from discontinued operations   24     162     (37 )   272  
Total discontinued operations   24     162     (37 )   272  
 
Net income $ 23,355   $ 25,307   $ 45,200   $ 49,980  
 
Net income allocation:
Net income allocable to noncontrolling interests:
Noncontrolling interests — common units $ 425 $ 3,362 $ 1,473 $ 8,262
Noncontrolling interests — preferred units   224     100     323     (7,190 )
Total net income allocable to noncontrolling interests   649     3,462     1,796     1,072  
Net income allocable to PS Business Parks, Inc.:
Common shareholders 1,410 11,374 4,878 27,937
Preferred shareholders 21,264 10,449 38,450 20,899
Restricted stock unit holders   32     22     76     72  
Total net income allocable to PS Business Parks, Inc.   22,706     21,845     43,404     48,908  
$ 23,355   $ 25,307   $ 45,200   $ 49,980  
 
Net income per common share — basic:
Continuing operations $ 0.06 $ 0.46 $ 0.20 $ 1.12
Discontinued operations $ $ 0.01 $ $ 0.01
Net income $ 0.06 $ 0.46 $ 0.20 $ 1.13
 
Net income per common share — diluted:
Continuing operations $ 0.06 $ 0.45 $ 0.20 $ 1.12
Discontinued operations $ $ 0.01 $ $ 0.01
Net income $ 0.06 $ 0.46 $ 0.20 $ 1.13
 
Weighted average common shares outstanding:
Basic   24,234     24,715     24,195     24,700  
Diluted   24,324     24,807     24,286     24,800  
 
 
           

PS BUSINESS PARKS, INC.

Computation of Diluted Funds from Operations (“FFO”) and Funds Available for Distribution (“FAD”)

(Unaudited, in thousands, except per share amounts)

 
For The Three Months

Ended June 30,

For The Six Months

Ended June 30,

2012       2011 2012       2011

Computation of Diluted Funds From Operations (“FFO”) (1) :

 
Net income allocable to common shareholders $ 1,410 $ 11,374 $ 4,878 $ 27,937
Adjustments:
Depreciation and amortization 27,239 21,058 54,538 41,917

Net income allocable to noncontrolling interests — common units

425 3,362 1,473 8,262
Net income allocable to restricted stock unit holders   32     22     76     72  
FFO allocable to common and dilutive shares $ 29,106   $ 35,816   $ 60,965   $ 78,188  
 
Weighted average common shares outstanding 24,234 24,715 24,195 24,700
Weighted average common OP units outstanding 7,305 7,305 7,305 7,305
Weighted average restricted stock units outstanding 111 58 110 67
Weighted average common share equivalents outstanding   90     92     91     100  
Total common and dilutive shares   31,740     32,170     31,701     32,172  
 
FFO per common and dilutive share $ 0.92   $ 1.11   $ 1.92   $ 2.43  
 

Computation of Funds Available for Distribution (“FAD”) (2) :

 
FFO allocable to common and dilutive shares $ 29,106 $ 35,816 $ 60,965 $ 78,188
 
Adjustments:
Recurring capital improvements (1,115 ) (1,458 ) (2,231 ) (2,314 )
Tenant improvements (11,337 ) (6,189 ) (18,920 ) (10,877 )
Lease commissions (1,739 ) (1,405 ) (3,008 ) (2,885 )
Straight-line rent (782 ) (102 ) (1,918 ) (383 )
Non-cash stock compensation expense 1,412 363 2,677 822
In-place lease adjustment 127 212 286 421
Tenant improvement reimbursements, net of lease incentives (179 ) (237 ) (349 ) (432 )
Non-cash distributions related to the redemption of preferred equity 8,208 13,468
Gain on repurchase of preferred equity, net of issuance costs               (7,389 )
FAD $ 23,701   $ 27,000   $ 50,969   $ 55,151  
 
Distributions to common and dilutive shares $ 13,914   $ 14,111   $ 27,821   $ 28,225  
 
Distribution payout ratio   58.7 %   52.3 %   54.6 %   51.2 %
 
(1)     Funds From Operations (“FFO”) is computed in accordance with the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). The White Paper defines FFO as net income, computed in accordance with GAAP, before depreciation, amortization, gains or losses on asset dispositions, net income allocable to noncontrolling interests — common units, net income allocable to restricted stock unit holders and nonrecurring items. FFO should be analyzed in conjunction with net income. However, FFO should not be viewed as a substitute for net income as a measure of operating performance or liquidity as it does not reflect depreciation and amortization costs or the level of capital expenditure and leasing costs necessary to maintain the operating performance of the Company’s properties, which are significant economic costs and could materially impact the Company’s results from operations. Other REITs may use different methods for calculating FFO and, accordingly, the Company’s FFO may not be comparable to other real estate companies.
 
(2) Funds Available for Distribution (“FAD”) is computed by adjusting consolidated FFO for recurring capital improvements, which the Company defines as those costs incurred to maintain the assets’ value, tenant improvements, lease commissions, straight-line rent, stock compensation expense, impairment charges, amortization of lease incentives and tenant improvement reimbursements, in-place lease adjustment and the effect of redemption/repurchase of preferred equity. Like FFO, the Company considers FAD to be a useful measure for investors to evaluate the operations and cash flows of a REIT. FAD does not represent net income or cash flow from operations as defined by GAAP.




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