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PS Business Parks, Inc. Reports Results For The Third Quarter Ended September 30, 2012

Additional financial data attached.

       
 

PS BUSINESS PARKS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 
 
September 30, December 31,
2012 2011
(Unaudited)
 
ASSETS
 
Cash and cash equivalents $ 159,792 $ 4,980
 
Real estate facilities, at cost:
Land 792,146 772,573
Buildings and equipment   2,211,220     2,155,772  
3,003,366 2,928,345
Accumulated depreciation   (917,728 )   (845,700 )
2,085,638 2,082,645
Properties held for disposition, net 1,201 1,218
Land held for development   6,829     6,829  
2,093,668 2,090,692
 
Rent receivable 4,418 3,198
Deferred rent receivable 25,843 23,388
Other assets   17,088     16,361  
 
Total assets $ 2,300,809   $ 2,138,619  
 
LIABILITIES AND EQUITY
 
Accrued and other liabilities $ 73,656 $ 60,940
Preferred stock called for redemption 132,250
Credit facility

185,000
Term loan 200,000 250,000
Mortgage notes payable   281,448     282,084  
Total liabilities 687,354 778,024
 
Commitments and contingencies
 
Equity:
PS Business Parks, Inc.’s shareholders’ equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized,

35,400 and 23,942 shares issued and outstanding at

September 30, 2012 and December 31, 2011, respectively

885,000 598,546
Common stock, $0.01 par value, 100,000,000 shares authorized,

24,284,548 and 24,128,184 shares issued and outstanding at

September 30, 2012 and December 31, 2011, respectively

242 240
Paid-in capital 535,496 534,322
Cumulative net income 944,245 878,704
Cumulative distributions   (919,988 )   (832,607 )
Total PS Business Parks, Inc.’s shareholders’ equity 1,444,995 1,179,205
Noncontrolling interests:
Preferred units 5,583
Common units   168,460     175,807  
Total noncontrolling interests   168,460     181,390  
Total equity   1,613,455     1,360,595  
 
Total liabilities and equity $ 2,300,809   $ 2,138,619  
 
 
         
 
 

PS BUSINESS PARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in thousands, except per share amounts)

 
 

For The Three Months Ended September 30,

For The Nine Months Ended September 30,

2012     2011 2012     2011
 
Revenues:
Rental income $ 87,020 $ 76,463 $ 257,324 $ 222,894
Facility management fees   159     170     489     517  
Total operating revenues   87,179     76,633     257,813     223,411  
Expenses:
Cost of operations 29,294 24,778 85,126 74,589
Depreciation and amortization 26,884 21,382 81,326 63,100
General and administrative   2,240     1,365     6,925     4,683  
Total operating expenses   58,418     47,525     173,377     142,372  
Other income and (expense):
Interest and other income 37 37 160 174
Interest expense   (5,172 )   (1,261 )   (15,733 )   (3,621 )
Total other income and (expense)   (5,135 )   (1,224 )   (15,573 )   (3,447 )
Income from continuing operations   23,626     27,884     68,863     77,592  
Discontinued operations:
Income from discontinued operations 69 25 32 297
Gain on sale of real estate facilities  

    2,717    

    2,717  
Total discontinued operations   69     2,742     32     3,014  
 
Net income $ 23,695   $ 30,626   $ 68,895   $ 80,606  
 
Net income allocation:
Net income allocable to noncontrolling interests:
Noncontrolling interests — common units $ 1,557 $ 4,597 $ 3,031 $ 12,858
Noncontrolling interests — preferred units  

    99     323     (7,091 )
Total net income allocable to noncontrolling interests   1,557     4,696     3,354     5,767  
Net income allocable to PS Business Parks, Inc.:
Common shareholders 5,172 15,444 10,049 43,382
Preferred shareholders 16,936 10,450 55,386 31,349
Restricted stock unit holders   30     36     106     108  
Total net income allocable to PS Business Parks, Inc.   22,138     25,930     65,541     74,839  
$ 23,695   $ 30,626   $ 68,895   $ 80,606  
 
Net income per common share — basic:
Continuing operations $ 0.21 $ 0.54 $ 0.41 $ 1.67
Discontinued operations $ $ 0.09 $ $ 0.09
Net income $ 0.21 $ 0.63 $ 0.41 $ 1.76
 
Net income per common share — diluted:
Continuing operations $ 0.21 $ 0.54 $ 0.41 $ 1.66
Discontinued operations $ $ 0.09 $ $ 0.09
Net income $ 0.21 $ 0.63 $ 0.41 $ 1.75
 
Weighted average common shares outstanding:
Basic   24,257     24,543     24,216     24,647  
Diluted   24,350     24,612     24,309     24,738  
 
 
     
 

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 September 30,

For The Nine Months Ended September 30,

2012   2011 2012   2011

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

 
Net income allocable to common shareholders $ 5,172 $ 15,444 $ 10,049 $ 43,382
Adjustments:
Gain on sale of real estate facilities

(2,717 )

(2,717 )
Depreciation and amortization 26,884 21,423 81,422 63,340
Net income allocable to noncontrolling

interests — common units

1,557 4,597 3,031 12,858
Net income allocable to restricted stock unit holders   30     36     106     108  
FFO allocable to common and dilutive shares $ 33,643   $ 38,783   $ 94,608   $ 116,971  
 
Weighted average common shares outstanding 24,257 24,543 24,216 24,647
Weighted average common OP units outstanding 7,305 7,305 7,305 7,305
Weighted average restricted stock units outstanding 103 59 108 66
Weighted average common share equivalents outstanding   93     69     93     91  
Total common and dilutive shares   31,758     31,976     31,722     32,109  
 
FFO per common and dilutive share $ 1.06   $ 1.21   $ 2.98   $ 3.64  
 

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

 
FFO allocable to common and dilutive shares $ 33,643 $ 38,783 $ 94,608 $ 116,971
 
Adjustments:
Recurring capital improvements (4,305 ) (3,029 ) (6,537 ) (5,343 )
Tenant improvements (9,161 ) (6,879 ) (28,081 ) (17,756 )
Lease commissions (1,978 ) (1,843 ) (4,986 ) (4,728 )
Straight-line rent (765 ) (276 ) (2,683 ) (659 )
Non-cash stock compensation expense 1,383 381 4,060 1,203
In-place lease adjustment 116 222 402 643
Tenant improvement reimbursements, net of lease incentives (212 ) (183 ) (561 ) (615 )
Non-cash distributions related to the redemption of preferred equity 3,848 17,316
Gain on repurchase of preferred equity, net of issuance costs               (7,389 )
FAD $ 22,569   $ 27,176   $ 73,538   $ 82,327  
 
Distributions to common and dilutive shares $ 13,922   $ 13,926   $ 41,743   $ 42,151  
 
Distribution payout ratio   61.7 %   51.2 %   56.8 %   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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