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PS Business Parks, Inc. Reports Results For The Second Quarter Ended June 30, 2013 And Acquisition Of A $14.8 Million Flex Park In Dallas, Texas

Stocks in this article: PSB

Additional financial data attached.

PS BUSINESS PARKS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

             
June 30, December 31,
  2013     2012  
(Unaudited)
 
ASSETS
 
Cash and cash equivalents $ 18,762 $ 12,883
 
Real estate facilities, at cost:
Land 787,425 793,352
Buildings and equipment   2,243,149     2,235,448  
3,030,574 3,028,800
Accumulated depreciation   (988,256 )   (942,639 )
2,042,318 2,086,161
Land and building held for development   22,301     6,829  
2,064,619 2,092,990
 
Rent receivable 4,806 4,754
Deferred rent receivable 26,194 25,329
Other assets   11,899     15,861  
 
Total assets $ 2,126,280   $ 2,151,817  
 
LIABILITIES AND EQUITY
 
Accrued and other liabilities $ 65,095 $ 69,454
Term loan 90,000 200,000
Mortgage notes payable   250,000     268,102  
Total liabilities 405,095 537,556
 
Commitments and contingencies
 
Equity:
PS Business Parks, Inc.’s shareholders’ equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized,

39,800 and 35,400 shares issued and outstanding at

June 30, 2013 and December 31, 2012, respectively

995,000 885,000
Common stock, $0.01 par value, 100,000,000 shares authorized,

24,380,571 and 24,298,475 shares issued and outstanding at

June 30, 2013 and December 31, 2012, respectively

242 242
Paid-in capital 539,270 537,091
Cumulative net income 1,014,069 967,783
Cumulative distributions   (994,822 )   (944,427 )
Total PS Business Parks, Inc.’s shareholders’ equity 1,553,759 1,445,689
Noncontrolling interests:
Common units   167,426     168,572  
Total noncontrolling interests   167,426     168,572  
Total equity   1,721,185     1,614,261  
 
Total liabilities and equity $ 2,126,280   $ 2,151,817  
 

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,

  2013         2012     2013         2012  
 
Revenues:
Rental income $ 87,930 $ 85,627 $ 176,050 $ 170,304
Facility management fees   157     164     315     330  
Total operating revenues   88,087     85,791     176,365     170,634  
Expenses:
Cost of operations 28,720 27,717 58,104 55,832
Depreciation and amortization 26,629 27,198 53,590 54,442
General and administrative   2,370     2,412     4,769     4,685  
Total operating expenses   57,719     57,327     116,463     114,959  
Other income and (expense):
Interest and other income 69 80 112 123
Interest and other expense   (3,961 )   (5,213 )   (8,549 )   (10,561 )
Total other income and (expense)   (3,892 )   (5,133 )   (8,437 )   (10,438 )
Income from continuing operations   26,476     23,331     51,465     45,237  
Discontinued operations:
Income (loss) from discontinued operations       24         (37 )
Total discontinued operations       24         (37 )
 
Net income $ 26,476   $ 23,355   $ 51,465   $ 45,200  
 
Net income allocation:
Net income allocable to noncontrolling interests:
Noncontrolling interests — common units $ 2,613 $ 425 $ 5,179 $ 1,473
Noncontrolling interests — preferred units       224         323  
Total net income allocable to noncontrolling interests   2,613     649     5,179     1,796  
Net income allocable to PS Business Parks, Inc.:
Preferred shareholders 15,122 21,264 28,972 38,450
Restricted stock unit holders 30 32 63 76
Common shareholders   8,711     1,410     17,251     4,878  
Total net income allocable to PS Business Parks, Inc.   23,863     22,706     46,286     43,404  
$ 26,476   $ 23,355   $ 51,465   $ 45,200  
 
Net income per common share — basic:
Continuing operations $ 0.36 $ 0.06 $ 0.71 $ 0.20
Discontinued operations $ $ $ $
Net income $ 0.36 $ 0.06 $ 0.71 $ 0.20
 
Net income per common share — diluted:
Continuing operations $ 0.36 $ 0.06 $ 0.71 $ 0.20
Discontinued operations $ $ $ $
Net income $ 0.36 $ 0.06 $ 0.71 $ 0.20
 
Weighted average common shares outstanding:
Basic   24,358     24,234     24,333     24,195  
Diluted   24,470     24,324     24,441     24,286  
 

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,

  2013         2012     2013         2012  

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

 
Net income allocable to common shareholders $ 8,711 $ 1,410 $ 17,251 $ 4,878
Adjustments:
Depreciation and amortization 26,629 27,239 53,590 54,538
Net income allocable to noncontrolling

interests — common units

2,613 425 5,179 1,473
Net income allocable to restricted stock unit holders   30     32     63     76  
FFO allocable to common and dilutive shares $ 37,983   $ 29,106   $ 76,083   $ 60,965  
 
Weighted average common shares outstanding 24,358 24,234 24,333 24,195
Weighted average common OP units outstanding 7,305 7,305 7,305 7,305
Weighted average restricted stock units outstanding 92 111 95 110
Weighted average common share equivalents outstanding   112     90     108     91  
Total common and dilutive shares   31,867     31,740     31,841     31,701  
 
FFO per common and dilutive share $ 1.19   $ 0.92   $ 2.39   $ 1.92  
 

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

 
FFO allocable to common and dilutive shares $ 37,983 $ 29,106 $ 76,083 $ 60,965
 
Adjustments:
Recurring capital improvements (2,695 ) (1,115 ) (3,604 ) (2,232 )
Tenant improvements (7,161 ) (11,337 ) (12,953 ) (18,920 )
Lease commissions (2,117 ) (1,739 ) (4,332 ) (3,008 )
Straight-line rent (258 ) (782 ) (864 ) (1,918 )
Non-cash stock compensation expense 1,205 1,412 2,628 2,677
In-place lease adjustment 49 127 121 286
Tenant improvement reimbursements, net of lease incentives (348 ) (179 ) (625 ) (349 )
Non-cash distributions related to the redemption of preferred equity       8,208         13,468  
FAD $ 26,658   $ 23,701   $ 56,454   $ 50,969  
 
Distributions to common and dilutive shares $ 13,971   $ 13,914   $ 27,914   $ 27,821  
 
Distribution payout ratio   52.4 %   58.7 %   49.4 %   54.6 %
 
(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, impairment charges 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, 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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