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Analysis of Operating Results and Financial Condition June 30, 2005
ANALYSIS OF OPERATING RESULTS AND FINANCIAL CONDITION FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 INDEX
Page
Fact Sheet ................................................................................................................................
1
Sources and Uses of Funds......................................................................................................
2
Funds from Operations (FFO) .................................................................................................
3-4
Capital Structure......................................................................................................................
5
Consolidated Balance Sheets...................................................................................................
6-7
Consolidated Income Statements ............................................................................................
8 - 11
Gross Margins .........................................................................................................................
12
Capital Expenditure Analysis ..................................................................................................
13
Rentable Square Footage by Region .......................................................................................
14
Portfolio Analyses ................................................................................................................... 15 - 26
PS BUSINESS PARKS, INC. SECOND QUARTER FACT SHEET (in thousands, except per share amounts)
OPERATING DATA
06/30/05
FOR THE QUARTER ENDED 06/30/04 Difference
FOR THE SIX MONTHS ENDED 06/30/05 06/30/04 Difference
Total operating revenues Net income allocable to common shareholders
$ $
55,501 5,772
$ $
52,008 5,206
6.7% 10.9%
$ $
109,506 13,096
$ $
103,858 9,364
5.4% 39.9%
Net income per common share - diluted: Continuing operations Discontinued operations Net income per common share - diluted
$ $ $
0.20 0.06 0.26
$ $ $
0.20 0.04 0.24
0.0% 50.0% 8.3%
$ $ $
0.40 0.19 0.59
$ $ $
0.34 0.09 0.43
17.6% 111.1% 37.2%
Weighted average common shares outstanding - Basic
21,893
21,808
0.4%
21,872
21,710
0.7%
Weighted average common shares outstanding - Diluted
22,029 7,305 29,334
22,016 7,305 29,321
0.1% 0.0% 0.0%
22,015 7,305 29,320
21,942 7,305 29,247
0.3% 0.0% 0.2%
Weighted average common OP units outstanding Total pro forma fully-converted shares
FUNDS FROM OPERATIONS
06/30/05 $
FOR THE QUARTER ENDED 06/30/04 Difference
FFO allocable to common shareholders before adjustments EITF Topic D-42 FFO allocable to common shareholders, reported
$
26,062 $ (301) 25,761 $
FFO per common share and units - before adjustments FFO per common share and units - as reported
$ $
0.89 0.88
FOR THE SIX MONTHS ENDED 06/30/05 06/30/04 Difference
25,448 25,448
2.4% 100.0% 1.2%
$
51,942 $ (301) 51,641 $
0.87 0.87
2.3% 1.1%
$ $
1.77 1.76
$ $
$
$ $
51,028 (2,133) 48,895 1.74 1.67
1.8% (85.9%) 5.6% 1.7% 5.4%
PROPERTY INFORMATION
06/30/05 Total Owned Portfolio (excluding discontinued operations) Net rentable square footage at period end Weighted average occupancy Annualized realized rent per sq. ft. (1) REVPAR (2)
FOR THE QUARTER ENDED 06/30/04 Difference
$ $
17,283 91.8% 13.69 $ 12.57 $
17,175 88.4% 13.47 11.91
0.6% 3.8% 1.6% 5.5%
$ $
17,118 91.8% 13.62 $ 12.50 $
17,118 88.4% 13.46 11.90
0.0% 3.8% 1.2% 5.0%
FOR THE SIX MONTHS ENDED 06/30/05 06/30/04 Difference
$ $
17,283 91.6% 13.52 $ 12.38 $
17,212 88.6% 13.40 11.87
0.4% 3.4% 0.9% 4.3%
$ $
17,118 91.6% 13.46 $ 12.33 $
17,118 88.6% 13.44 11.91
0.0% 3.4% 0.1% 3.5%
Same Park Portfolio Net rentable square footage Weighted average occupancy Annualized realized rent per sq. ft. (1) REVPAR (2)
(1) Represents the actual revenues earned per occupied square foot. (2) Represents the actual revenues earned per total square foot. BALANCE SHEET DATA 06/30/05 Total assets Minority interest - preferred Minority interest - common Perpetual preferred stock Common shareholders' equity Total common shares outstanding at period end Book value per common share
$ $ $ $ $ $
12/31/04
1,444,060 115,750 168,994 593,350 506,525 21,896 23.13
$ $ $ $ $ $
Difference
1,363,829 127,750 169,295 510,850 506,114 21,840 23.17
5.9% (9.4%) (0.2%) 16.1% 0.1% 0.3% (0.2%)
MARKET VALUE INFORMATION 06/30/05 Market value of common stock and common OP units
$
Total debt
1,298,015
12/31/04 $
11,161
Total preferred stock and preferred OP units
721,100
Difference
1,314,441
(1.2%)
11,367
(1.8%)
638,600
12.9%
Total market capitalization
$
2,030,276
$
1,964,408
3.4%
Stock price at the end of the period
$
44.45
$
45.10
(1.4%)
1
PS BUSINESS PARKS, INC.
Sources and Uses of Funds (in thousands)
FOR THE SIX MONTHS ENDED June 30, 2005 Sources of Funds: Funds from operations, before EITF Topic D-42 Proceeds from disposition of real estate Proceeds from placement of preferred stock, net Exercise of stock options
$
Total Sources of Funds
51,942 16,283 79,701 1,291 149,217
Uses of Funds: Property renovations and other capital expenditures Recurring capital expenditures Common dividends and OP distributions Principal payments on mortgage notes payable Change in working capital
(2,246) (16,443) (16,928) (206) (3,932)
Total Uses of Funds
(39,755)
Net increase in cash balance
109,462
Beginning cash balance
39,688
Ending cash balance
$
2
149,150
PS BUSINESS PARKS, INC. ANALYSIS OF FUNDS FROM OPERATIONS (in thousands except per share amounts)
FOR THE QUARTER ENDED 06/30/05 06/30/04
Increase (Decrease)
FOR THE SIX MONTHS ENDED 06/30/05 06/30/04
% Change
Increase (Decrease)
% Change
Funds from operations (FFO): Net income allocable to common shareholders Adjustments: (Gain) loss on disposition of real estate Depreciation and amortization Minority interest in income - common units FFO allocable to common shareholders/unitholders
$
$
Weighted average common shares outstanding Weighted average common OP units outstanding Weighted average dilutive stock options Total pro forma fully-converted shares Fully diluted FFO per common share/OP unit
5,772
$
5,206
(1,016) 19,084 1,921 25,761 $
168 18,330 1,744 25,448
21,893 7,305 136 29,334
21,808 7,305 208 29,321
$
566
10.9%
$
1,184 754 177 313
704.8% 4.1% 10.1% 1.2%
85 (72) 13
$
13,096
$
9,364
$
(3,930) 38,100 4,375 51,641 $
168 36,214 3,149 48,895
0.4% 0.0% (34.6%) 0.0%
21,872 7,305 143 29,320
21,710 7,305 232 29,247
1.76
1.67
$
0.09
5.4%
48,895
$
2,746
5.6%
$
0.88
$
0.87
$
0.01
1.1%
Funds from operations Adjustments: Maintenance capital expenditures Tenant improvements Lease commissions Straight-line rent Stock compensation expense In-place rents adjustment (SFAS 141) Redemption amount over carrying amount related to preferred equity called for redemption or redeemed
$
25,761
$
25,448
$
313
1.2%
FAD
$
17,235
$
15,651
FAD per common share/OP unit
$
0.59
$
0.53
$
17,235 $ (6,342) (2,118) 8,775 $
$
3,732
39.9%
$
4,098 1,886 1,226 2,746
2439.3% 5.2% 38.9% 5.6%
162 (89) 73
0.7% 0.0% (38.4%) 0.2%
Funds available for distribution (FAD):
(1,165) (5,259) (1,679) (1,069) 306 39 301
$
51,641
$
(802) (6,160) (2,321) (727) 174 39
363 (901) (642) 342 132 -
45.3% (14.6%) (27.7%) 47.0% 76.1% 0.0%
(1,504) (11,706) (3,233) (2,257) 434 78
-
301
100.0%
$
1,584
10.1%
$
33,754
$
35,420
$
3,370
$
0.06
11.3%
$
1.15
$
1.21
$
(0.06)
(5.0%)
15,651 $ (6,325) (2,118) 7,208 $
1,584 17 1,567
10.1% 0.3% 0.0% 21.7%
$
33,754 $ (12,691) (4,237) 16,826 $
35,420 $ (12,604) (4,237) 18,579 $
(1,666) 87 (1,753)
(4.7%) 0.7% 0.0% (9.4%)
50.2%
47.5%
301
(1,682) (9,387) (3,734) (1,379) 496 78
(178) 2,319 (501) 878 (62) -
(10.6%) 24.7% (13.4%) 63.7% (12.6%) 0.0%
2,133
(1,832)
(85.9%) 9.5%
Cash available for debt repayments and reinvestments: FAD Distributions to common shareholders Distributions to common OP unitholders Cash available for debt repayments and reinvestments FAD payout ratio
$
49.1%
53.9%
3
(8.9%)
$
5.7%
Diluted FFO Per Common Share/OP Unit $0.95
$0.91
$0.90
$0.89
$0.89
$0.90
$0.88
$0.87
$0.88
$0.85
$0.85 $0.81
$0.80
$0.76
$0.75 $0.70 $0.65 $0.60 Q103
Q203
Q303
Q403
Q104
4
Q204
Q304
Q404
Q105
Q205
PS BUSINESS PARKS, INC. CAPITAL STRUCTURE (in thousands)
As of June 30, 2005 % of Total Market WTD Average Capitalization Rate
Total
As of December 31, 2004 % of Total Market WTD Average Total Capitalization Rate
Long-Term Debt: 8.190% mortgage note, secured by one commercial property, due March 2007 7.290% mortgage note, secured by one commercial property, due February 2009 Total mortgage notes payable (1)
$
5,443 5,718 11,161
Short-Term Debt: $100 million unsecured line of credit Total Short-Term Debt
0.6%
-
Total debt
7.73%
5,578 5,789 11,367
-
-
7.73%
11,367
-
11,161
8.875% Series Y preferred operating partnership units (480,000 units outstanding) callable 7/12/05 (3) 9.500% Series D preferred stock (2,634,000 depositary shares outstanding) callable 5/10/06 9.250% Series E preferred operating partnership units (2,120,000 units outstanding) callable 9/21/06 8.750% Series F preferred stock (2,000,000 units outstanding) callable 1/28/07 7.950% Series G preferred operating partnership units (800,000 units outstanding) callable 10/30/07 7.000% Series H preferred stock (8,200,000 units outstanding) callable 1/30/09 6.875% Series I preferred stock (3,000,000 units outstanding) callable 4/21/09 7.500% Series J preferred operating partnership units (1,710,000 units outstanding) callable 5/27/09 7.950% Series K preferred stock (2,300,000 units outstanding) callable 6/30/09 7.600% Series L preferred stock (2,300,000 units outstanding) callable 8/31/09 7.200% Series M preferred stock (3,300,000 units outstanding) callable 5/2/10
0.6%
12,000 65,850 53,000 50,000 20,000 205,000 75,000 42,750 57,500 57,500 82,500
0.6%
-
7.73%
-
0.6%
7.73%
12,000 65,850 53,000 50,000 20,000 205,000 75,000 42,750 57,500 57,500 -
Total preferred equity
721,100
35.5%
7.74%
638,600
32.5%
7.80%
Total debt and preferred equity
732,261
36.1%
7.74%
649,967
33.1%
7.80%
984,969 329,472 1,314,441
66.9%
1,964,408
100%
Common stock (21,896,338 and 21,839,667 shares outstanding in June 30, 2005 and December 31, 2004 respectively) Common operating partnership units (7,305,355 units outstanding as of June 30, 2005 and December 31, 2004 ) Total common equity (2) Total market capitalization
(1)
$
$
973,292 324,723 1,298,015
$ 63.9%
2,030,276
100%
$
Principal Maturity Dates are represented by the following chart: Principal Maturity Dates 2005
Park East I & II $ Park East III $
(2)
Closing stock price was $44.45 and $45.10 as of June 30, 2005 and December 31, 2004, respectively.
(3)
Subsequent to June 30, 2005, Series Y preferred operating partnership units were redeemed at par.
2006
141 73 214
5
$ $
2007
300 155 455
$ $
5,002 167 5,169
2008
$ $
179 179
2009
$ $
5,144 5,144
PS BUSINESS PARKS, INC. CONSOLIDATED BALANCE SHEETS (in thousands)
06/30/05
12/31/04
Increase (Decrease)
% Change
ASSETS Cash and cash equivalents
$
Real estate facilities, at cost: Land Buildings and equipment
$
368,764 1,153,288 1,522,052 (317,258) 1,204,794 56,643 10,236 1,271,673
Accumulated depreciation Properties held for disposition, net Land held for development
Rent receivable Deferred rent receivables Other assets Total assets
149,150
39,688
$
368,764 1,135,772 1,504,536 (280,215) 1,224,321 67,632 11,583 1,303,536
109,462
17,516 17,516 37,043 (19,527) (10,989) (1,347) (31,863)
3,127 17,602 2,508 $ 1,444,060
2,079 15,470 3,056 $ 1,363,829
$
$
$
$
(a)
(b)
(c) (d)
1,048 2,132 (548) 80,231
(e)
(2,173) 12,000 (206)
(g)
(f)
275.8%
0.0% 1.5% 1.2% 13.2% (1.6%) (16.2%) (11.6%) (2.4%) 50.4% 13.8% (17.9%) 5.9%
LIABILITIES AND SHAREHOLDERS' EQUITY Accrued and other liabilities Preferred operating units called for redemption Mortgage notes payable
36,280 12,000 11,161
Total liabilities
Total liabilities and shareholders' equity
(5.7%) 100.0% (1.8%)
59,441
49,820
9,621
19.3%
115,750 168,994
127,750 169,295
(12,000) (301)
(9.4%) (0.2%)
593,350 219 420,356 377,127 (291,177) 1,099,875
510,850 218 420,351 343,529 (257,984) 1,016,964
82,500 1 5 33,598 33,193 82,911
16.1% 0.5% 0.0% 9.8% 12.9% 8.2%
Minority interests: Preferred units Common units Shareholders' equity: Preferred stock Common stock Paid-in capital Cumulative net income Cumulative distributions Total shareholders' equity
38,453 11,367
$ 1,444,060
6
$ 1,363,829
$
80,231
(h) (i)
5.9%
PS BUSINESS PARKS, INC. CONSOLIDATED BALANCE SHEETS VARIANCE EXPLANATIONS
(a) See sources and uses of funds on page 2 (b) Change in real estate facilities, at cost: Property renovations Maintenance capital expenditures Tenant improvements Lease commissions Capital expenditures, properties held for sale
$
$ (c) Change in discontinued operations, net: Beaverton / Woodside MICC - Retail
$
(245) (10,192) (552) $ (10,989)
MICC - Center 17 (Cape Cod)
(d) Change in land held for sale: Cornell Oaks Land Sold
$
Improvements on Land
$ (e) Rent receivable consists of the following: U.S. Government Tenants Other Allowance for bad debt
(f)
06/30/05 $ 1,698 1,979 (550) $ 3,127
Change in other assets: Due on rental properties sold Prepaid Insurance Amortization of prepaid costs Other
12/31/04 1,132 1,497 (550) $ 2,079
$
(g) Accrued and other liabilities consists of: Prepaid Rent Property taxes Security deposits Reserves for acquisition costs Other
06/30/05 $ 5,944 6,683 16,013 4,767 2,873 $ 36,280
(h) Change in paid-in capital: Beginning paid-in capital Preferred stock issuance costs Redemption of preferred units (EITF Topic D-42) Exercise of stock options Stock option amortization Restricted stock amortization Change in minority interest, common Ending paid in capital
12/31/04 $ 6,778 3,109 15,220 5,051 8,295 $ 38,453
(1,543) 196 (1,347)
$
$
(i)
2,051 1,504 11,706 3,233 (978) 17,516
(1,438) 1,018 (55) (73) (548)
Change $
(834) 3,574 793 (284) (5,422)
$
(2,173)
$ 420,351 (2,799) 301 1,290 188 586 439 $ 420,356
Change in cumulative distributions: Distributions to preferred shareholders Distributions to common shareholders
$ (20,502) (12,691) $ (33,193)
7
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE QUARTER ENDED (in thousands, except per share amounts)
06/30/05 Revenues: Rental income Facility management fees primarily from affiliates Total operating revenues
$
55,357 144 55,501
Expenses: Property operations Depreciation and amortization General and administrative Total operating expenses
$
16,646 18,513 1,326 36,485
Other income and expenses: Interest and other income Interest expense Total other income and expenses
Increase (Decrease)
06/30/04
51,848 160 52,008
$
15,335 17,247 1,004 33,586
982 (280) 702
51 (833) (782)
3,509 (a) (16) 3,493
6.8% (10.0%) 6.7%
1,311 (b) 1,266 322 (c) 2,899
8.5% 7.3% 32.1% 8.6%
931 (553) (d) (1,484)
1825.5% (66.4%) (189.8%)
Income from continuing operations before minority interests
19,718
17,640
2,078
Minority interests in continuing operations: Minority interest in income - preferred units Distributions paid to preferred unit holders Redemption of preferred operating partnership units Minority interest in income - common units Total minority interests in continuing operations
(2,691) (301) (1,497) (4,489)
(4,805) (1,439) (6,244)
(2,114) 301 58 (1,755)
Income from continuing operations
15,229
11,396
3,833
Discontinued operations: Income from discontinued operations Gain (loss) on disposition of real estate Minority interest in earnings attributable to discontinued operations - common units Income from discontinued operations
684 1,016
1,368 (168)
(424) 1,276
(305) 895
Net Income
16,505
12,291
Net Income allocable to preferred shareholders Preferred distributions Preferred distributions paid Redemption of preferred stock Total preferred distributions
10,733 10,733
7,085 7,085
% Change
(684) (e) 1,184
11.8%
(44.0%) 100.0% 4.0% (28.1%) 33.6%
(50.0%) 704.8%
119 381
39.0% 42.6%
4,214
34.3%
3,648 (f) 3,648
51.5% N/A 51.5%
Net Income allocable to common shareholders
$
5,772
$
5,206
$
566
10.9%
Net income per common share - basic: Continuing operations Discontinued operations Net Income
$ $ $
0.21 0.06 0.26
$ $ $
0.20 0.04 0.24
$ $ $
0.01 0.02 0.02
5.0% 50.0% 8.3%
Net income per common share - diluted Continuing operations Discontinued operations Net Income
$ $ $
0.20 0.06 0.26
$ $ $
0.20 0.04 0.24
$ $ $
0.02 0.02
0.0% 50.0% 8.3%
Weighted average common shares outstanding: Basic Diluted
21,893 22,029
8
21,808 22,016
85 (g) 13
0.4% 0.1%
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENT OF INCOME VARIANCE EXPLANATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2005
(a) Rental income has increased due to the following: Same Park facilities Acquisitions Straight-line rent
$
$ (b) Cost of operations have increased due to the following: Same Park facilities Acquisitions
$ $
2,549 618 342 3,509
(32) 1,343 1,311
(c) General and administrative expenses for the three months ended: June 30, 2005 735 134 176 281 $ 1,326
Compensation expense Stock compensation expense Professional fees Other
$
June 30, 2004 $
$
416 93 74 421 1,004
(d) Interest expense for the three months ended: June 30, 2005 217 63 $ 280
Mortgage notes payable Facilities fees & other charges Line of Credit interest (Wells Fargo)
$
June 30, 2004 $
$
363 51 419 833
(e) Net operating income from discontinued operations for the three months ended: Rental revenue ( MICC Retail and Cape Cods, and Woodside) Operating expenses Depreciation expense
(f) Increase relates to issuance of additional preferred stock . (g) Net increase relates to stock option exercises and vesting of restricted stock units.
9
June 30, 2005 1,799 $ (544) (571) $ 684 $ $
June 30, 2004 3,515 (1,064) (1,083) 1,368
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED (in thousands, except per share amounts)
06/30/05 Revenues: Rental income Facility management fees primarily from affiliates Total operating revenues
$ $
Expenses: Property operations Depreciation and amortization General and administrative Total operating expenses Other income and expenses: Interest and other income Interest expense Total other income and expenses
109,217 289 109,506
Increase (Decrease)
06/30/04
$ $
103,543 315 103,858
32,544 36,965 2,764 (c) 72,273
31,036 34,061 2,095 (c) 67,192
1,380 (562) (d) 818
78 (2,099) (d) (2,021)
$
5,674 (a) (26) 5,648
5.5% (8.3%) 5.4%
1,508 (b) 2,904 669 5,081
4.9% 8.5% 31.9% 7.6%
1,302 (1,537) 2,839
Income from continuing operations before minority interests
38,051
34,645
3,406
Minority interests in continuing operations: Minority interest in income - preferred units Distributions paid to preferred unit holders Redemption of preferred operating partnership units Minority interest in income - common units Total minority interests in continuing operations
(5,382) (301) (2,971) (8,654)
(9,615) (267) (2,478) (12,360)
(4,233) (34) 493 3,706
Income from continuing operations
29,397
22,285
7,112
Discontinued operations: Income from discontinued operations Gain (loss) on disposition of real estate Minority interest in earnings attributable to discontinued operations - common units Income from discontinued operations
(1,404) 4,201
Net Income
33,598
24,274
Net Income allocable to preferred shareholders Preferred distributions Preferred distributions paid Redemption of preferred stock Total preferred distributions
20,502 20,502
13,044 1,866 14,910
Net Income allocable to common shareholders
Net income per common share - basic: Continuing operations Discontinued operations
Net income per common share - diluted Continuing operations Discontinued operations
Weighted average common shares outstanding: Basic Diluted
1,675 (e) 3,930
2,828 (e) (168) (671) 1,989
$
13,096
$
9,364
$ $ $
0.41 0.19 0.60
$ $ $
0.34 0.09 0.43
$ $ $
0.40 0.19 0.59
$ $ $
0.34 0.09 0.43
21,872 22,015
10
21,710 21,942
% Change
1669.2% (73.2%) 140.5% 9.8%
44.0% 12.7% 19.9% (30.0%) 31.9%
(1,153) 4,098
(40.8%) 2439.3%
733 2,212
109.2% 111.2%
9,324
38.4%
7,458 (1,866) 5,592 (f)
57.2% (100.0%) 37.5%
3,732
39.9%
$
0.07 0.10 0.17
20.6% 111.1% 39.5%
$ $ $
0.06 0.10 0.16
17.6% 111.1% 37.2%
$
162 (g) 73
0.7% 0.3%
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENT OF INCOME VARIANCE EXPLANATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2005
(a) Rental income has increased due to the following: Same Park facilities Acquisitions Straight-line rent
$
$ (b) Cost of operations have increased due to the following: Same Park facilities Acquisitions
$ $
3,489 1,307 878 5,674
946 562 1,508
(c) General and administrative expenses for the six months ended: June 30, 2005 1,580 253 347 584 $ 2,764
Compensation expense Stock compensation expense Professional fees Other
$
June 30, 2004 $
$
900 220 143 832 2,095
(d) Interest expense for the six months ended: Mortgage notes payable Facilities fees & other charges Line of Credit interest (Wells Fargo) Interest Rate Swap Charges Term Loan Interest (Fleet)
$
June 30, 2005 436 126 -
June 30, 2004 $
731 247 484 128 145
$
2,099
-
-
Affiliated Loan (PSI
-
$
562
364
(e) Net operating income from discontinued operations for the six months ended: Rental revenue ( MICC Retail and Cape Cods, and Woodside) Operating expenses Depreciation expense
(f) Increase relates to issuance of additional preferred stock . (g) Net increase relates to stock option exercises and vesting of restricted stock units.
11
June 30, 2005 3,932 $ (1,122) (1,135) $ 1,675 $ $
June 30, 2004 7,039 (2,058) (2,153) 2,828
Gross Operating Margin Percentage * (Same Park) 75.0% 73.4% 72.8%
74.0% 73.0% 72.0%
72.0%
72.4% 71.7% 71.8%
71.9% 70.6%
71.0%
70.1%
69.6%
70.0% 69.0% 68.0% 67.0% 66.0% 65.0% Q103 Q203 Q303 Q403 Q104 Q204 Q304 Q404 Q105 Q205 * Gross margin is computed by dividing property net operating income by rental income (excluding straight-line rent adjustment) for operating assets owned in period disclosed .
12
PS BUSINESS PARKS, INC. Analysis of Capital Expenditures (in thousands)
Recurring capital expenditures (1)
Six Months Ended June 30, 2005 Costs
Cost per Weighted Average Square Foot
Maintenance capital expenditures (2)
$1,503
$0.09
Tenant improvements
11,707
$0.65
Leasing commissions
3,233
$0.18
$16,443
$0.92
Total recurring capital expenditures Non-recurring capital expenditures Property renovations
$2,051
Total non-recurring capital expenditures
$2,051
(1)
The company defines "recurring capital expenditures" as those capitalized costs necessary to continue to operate the property at its current economic value. Costs in excess of $1,000 for tenant improvements and $2,000 for maintenance capital expenditures with a useful life greater than 24 months are capitalized. It excludes deferred maintenance and leasing costs committed to by previous owners for acquired properties, leasing costs committed to by previous owners for acquired properties, renovations that substantially enhance the value of a property and first generation leasing costs on development properties. Lease-up costs on acquired properties are included in recurring capital expenditures. Repairs and maintenance were $7.8 million or approximately $0.43 per weighted average square foot for the six months ended June 30, 2005 compared to $7.6 million or $0.41 per square foot during the six months ended June 30, 2004.
(2)
Major costs include roof and HVAC replacement, parking lot replacement and other major repairs that extend the life of the respective component of the building.
13
Total Owned Rentable Square Footage by Region *
December 31, 2004 and June 30, 2005 (17,283 square feet, in thousands)
679 3,663 3,191
1,500
1,371
1,166
1,238
1,688 2,787 * Square footage excludes discontinued operations.
S. California (21%)
N. California (9%)
S. Texas (7%)
N. Texas (9%)
Maryland (7%)
Oregon (8%)
Florida (19%)
Arizona (4%)
* Square footage excludes discontinued operations.
14
Virginia (16%)
Change in Same Park Revenue * 7.0%
5.7%
5.0% 2.2%
2.5%
3.0% 1.0% -1.0%
0.0% -0.3% -1.4%
-3.0%
-1.8%
-2.5%
-2.3%
-3.1%
-5.0% Q103
Q203
Q303
Q403
Q104
Q204
Q304
Q404
Q105
Q205
* Percentage represents the change from the same period in the prior year based on the defined Same Park assets for each period disclosed.
15
Change in Same Park NOI * 7.0% 5.0%
3.6%
3.0%
5.5%
1.6% 0.6%
1.0% -1.0% -3.0%
-1.5%
-3.8%
-1.9% -2.8%
-3.9%
-5.0%
-5.2% -7.0% Q103
Q203
Q303
Q403
Q104
Q204
Q304
Q404
Q105
Q205
* Percentage represents the change from the same period in the prior year based on the defined Same Park assets for each period disclosed.
16
PS BUSINESS PARKS, INC. OWNED PORTFOLIO ANALYSIS (in thousands) Industry Concentration as of June 30, 2005 % of Total Rents 12.2% 12.1% 10.0% 9.8% 9.2% 8.8% 6.3% 4.6% 4.0% 3.8% 80.8%
Computer Hardware, software and related services Business services Government Contractors Financial services Warehouse, Transportation and Logistics Retail Home funishings Communications Electronics
Top Ten Customers by Total Annual Revenues as of June 30, 2005
Tenant U.S. Government Intel County of Santa Clara Citigroup Axcelis Technologies Wells Fargo AARP TRW Systems Welch Allen Protocol, Inc MCI
Annualized Rental Income
Square Footage
% of Total Annualized Rental Income
463 214 97 262 89 102 102 58 91 72
$
10,215 3,120 2,951 2,836 1,653 1,571 1,398 1,319 1,260 1,162
4.7% 1.4% 1.4% 1.3% 0.8% 0.7% 0.6% 0.6% 0.6% 0.5%
1,550
$
27,485
12.6%
17
PS BUSINESS PARKS, INC. TOTAL OWNED PORTFOLIO OVERVIEW (in thousands) Rentable Square Footage of Properties as of June 30, 2005 Primary Markets Miami Northern Virginia Portland Dallas Orange County Los Angeles County Northern California Maryland Austin Phoenix San Diego County Houston
Industrial
Office
2,556 231 712 407 3,906
12 948 187 704 31 430 717 131 3,160
Flex 623 1,839 1,184 1,457 911 770 663 521 792 679 535 243 10,217
Total 3,191 2,787 1,371 1,688 1,615 1,513 1,500 1,238 792 679 535 374 17,283
% 18.5% 16.1% 7.9% 9.8% 9.3% 8.8% 8.7% 7.2% 4.6% 3.9% 3.0% 2.2% 100.0%
Average Occupancy Rates by Product Type for the Quarter Ending June 30, 2005 Primary Markets Miami Northern Virginia Portland Dallas Orange County Los Angeles County Northern California Maryland Austin Phoenix San Diego County Houston
Industrial
Office
90.8% 100.0% 96.7% 85.7% 91.9%
100.0% 97.3% 85.3% 86.4% 92.7% 91.7% 94.1% 75.1% 91.7%
Flex 95.8% 94.7% 84.8% 84.3% 98.0% 95.9% 97.9% 96.7% 82.7% 95.4% 94.5% 90.2% 91.8%
Total 91.8% 95.6% 84.9% 86.5% 93.0% 96.2% 92.8% 95.2% 82.7% 95.4% 94.5% 84.9% 91.8%
Weighted Average Occupancy Rates by Portfolio Type for the Quarter Ending June 30, 2005 Primary Markets Miami Northern Virginia Portland Dallas Orange County Los Angeles County Northern California Maryland Austin Phoenix San Diego County Houston
Large Tenant
Small Tenant
91.3% 94.9% 85.4% 88.2% 90.5% 96.7% 91.5% 95.5% 80.6% 91.1%
95.9% 96.8% 82.2% 78.4% 95.2% 95.7% 94.8% 82.4% 89.3% 95.4% 94.5% 84.9% 93.2%
Total 91.8% 95.6% 84.9% 86.5% 93.0% 96.2% 92.8% 95.2% 82.7% 95.4% 94.5% 84.9% 91.8%
Note: Includes all properties reported in continuing operations as of June 30, 2005. The Company's "large tenant" portfolio consists of properties with average leases greater than or equal to 5,000 square feet while the "small tenant" portfolio consists of properties with average leases less than 5,000 square feet.
18
PS BUSINESS PARKS, INC. SAME PARK PORTFOLIO OVERVIEW (in thousands) Rentable Square Footage of Properties as of June 30, 2005 Primary Markets Miami Northern Virginia Portland Dallas Orange County Los Angeles County Northern California Maryland Austin Phoenix San Diego County Houston
Industrial
Office
2,556 231 712 407 3,906
12 782 187 704 31 431 717 131 2,995
Flex
Total
623 1,839 1,184 1,457 911 770 663 521 792 679 535 243 10,217
3,191 2,621 1,371 1,688 1,615 1,513 1,501 1,238 792 679 535 374 17,118
% 18.7% 15.3% 8.0% 9.9% 9.4% 8.8% 8.8% 7.2% 4.6% 4.0% 3.1% 2.2% 100.0%
Average Occupancy Rates by Product Type for the Quarter Ending June 30, 2005 Primary Markets Miami Northern Virginia Portland Dallas Orange County Los Angeles County Northern California Maryland Austin Phoenix San Diego County Houston
Industrial
Office
90.8% 100.0% 96.7% 85.7% 91.9%
100.0% 98.2% 85.3% 86.4% 92.7% 91.7% 94.1% 75.1% 91.7%
Flex
Total
95.8% 94.7% 84.8% 84.3% 98.0% 95.9% 97.9% 96.7% 82.7% 95.4% 94.5% 90.2% 91.8%
91.8% 95.8% 84.9% 86.5% 93.0% 96.2% 92.8% 95.2% 82.7% 95.4% 94.5% 84.9% 91.8%
Weighted Average Occupancy Rates by Portfolio Type for the Quarter Ending June 30, 2005 Primary Markets Miami Northern Virginia Portland Dallas Orange County Los Angeles County Northern California Maryland Austin Phoenix San Diego County Houston
Large Tenant
Small Tenant
91.3% 94.9% 85.4% 88.2% 90.5% 96.7% 91.5% 95.5% 80.6% 91.1%
95.9% 97.5% 82.2% 78.4% 95.2% 95.7% 94.8% 82.4% 89.3% 95.4% 94.5% 84.9% 93.3%
Total 91.8% 95.8% 84.9% 86.5% 93.0% 96.2% 92.8% 95.2% 82.7% 95.4% 94.5% 84.9% 91.8%
Note: Includes all properties included in continuing operations owned since January 1, 2005. The Company's "large tenant" portfolio consists of properties with average leases greater than or equal to 5,000 square feet while the "small tenant" portfolio consists of properties with average leases less than 5,000 square feet.
19
Same Park Weighted Average Occupancy 96.0% 95.0% 94.0% 92.7%
93.0%
92.4%
92.9% 92.6% 91.8%
92.0% 90.4%
91.0%
90.5%
90.5%
90.8%
Q304
Q404
Q105
90.0%
90.0% 89.0% Q103
Q203
Q303
Q403
Q104
Q204
Q205
Percentage represents the change from the same period in the prior year based on the defined Same Park assets for each period disclosed.
20
Total Owned Portfolio Weighted Average Occupancy * 97.0% 96.0% 95.0% 94.0%
92.6%
93.0%
92.2%
91.8%
91.9%
91.8%
92.0% 90.8%
91.0% 89.6%
90.0% 88.7%
89.0%
88.2%
87.9%
Q104
Q204
88.0% 87.0% Q103
Q203
Q303
Q403
Q304
Q404
Q105
* Represents weighted average occupancy for operating assets owned in period disclosed.
21
Q205
PS BUSINESS PARKS, INC. Owned Portfolio Lease Expirations as of June 30, 2005 (in thousands) Lease Expirations - Flex Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 1,129 2,082 1,852 1,436 1,003 2,009 9,511
Annual Rents $
$
12,567 24,885 21,983 18,885 10,791 27,533 116,644
% 10.8% 21.3% 18.8% 16.2% 9.3% 23.6% 100.0%
% of Company Annual rents 6.1% 12.2% 10.7% 9.2% 5.3% 13.5% 57.0%
Lease Expirations - Office Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 373 684 477 481 277 651 2,943
Annual Rents $
$
7,996 14,301 9,576 10,787 5,347 15,707 63,714
% 12.5% 22.4% 15.0% 16.9% 8.4% 24.8% 100.0%
% of Company Annual rents 3.9% 7.0% 4.7% 5.3% 2.6% 7.6% 31.1%
Lease Expirations - Industrial Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 415 775 712 646 313 826 3,687
Annual Rents $
$
2,744 5,075 4,774 4,595 1,902 5,324 24,414
% 11.2% 20.8% 19.6% 18.8% 7.8% 21.8% 100.0%
% of Company Annual rents 1.3% 2.5% 2.3% 2.2% 0.9% 2.7% 11.9%
Lease Expirations - Total Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 1,917 3,541 3,041 2,563 1,593 3,486 16,141
Annual Rents $
$
22
23,307 44,261 36,333 34,267 18,040 48,564 204,772
% 11.4% 21.6% 17.8% 16.7% 8.8% 23.7% 100.0%
% of Company Annual rents 11.4% 21.6% 17.8% 16.7% 8.8% 23.7% 100.0%
PS BUSINESS PARKS, INC. Owned Portfolio Lease Expirations as of June 30, 2005 (in thousands) Southern California Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 428 1,126 751 530 289 368 3,492
Annual Rents $
%
6,324 13,749 10,580 8,154 4,225 6,330 49,362
$
12.8% 27.9% 21.4% 16.5% 8.6% 12.8% 100.0%
% of Company Annual rents 3.1% 6.7% 5.2% 4.0% 2.1% 3.0% 24.1%
Northern California Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 116 321 283 271 122 259 1,372
Annual Rents $
%
1,487 3,634 3,168 5,283 1,217 2,754 17,543
$
8.5% 20.7% 18.1% 30.1% 6.9% 15.7% 100.0%
% of Company Annual rents 0.7% 1.8% 1.5% 2.6% 0.6% 1.3% 8.5%
Southern Texas Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 194 172 158 195 192 159 1,070
Annual Rents $
% 1,185 1,765 1,488 1,333 1,304 1,853 8,928
$
13.3% 19.8% 16.7% 14.9% 14.6% 20.7% 100.0%
% of Company Annual rents 0.6% 0.9% 0.7% 0.7% 0.6% 0.9% 4.4%
Northern Texas Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 161 259 155 150 186 579 1,490
Annual Rents $
$
23
1,564 3,117 1,162 1,486 917 4,842 13,088
% 11.9% 23.8% 8.9% 11.4% 7.0% 37.0% 100.0%
% of Company Annual rents 0.8% 1.5% 0.6% 0.7% 0.4% 2.3% 6.3%
PS BUSINESS PARKS, INC. Owned Portfolio Lease Expirations as of June 30, 2005 (in thousands) Florida Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 361 692 616 605 190 577 3,041
Annual Rents $
2,503 5,534 4,511 4,489 1,489 4,153 22,679
$
% 11.0% 24.4% 19.9% 19.8% 6.6% 18.3% 100.0%
% of Company Annual rents 1.2% 2.7% 2.2% 2.3% 0.7% 2.0% 11.1%
Northern Virginia Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 224 480 337 446 328 843 2,658
Annual Rents $
$
3,288 8,856 4,753 7,993 4,897 14,934 44,721
% 7.4% 19.8% 10.6% 17.9% 11.0% 33.3% 100.0%
% of Company Annual rents 1.6% 4.3% 2.3% 3.9% 2.4% 7.2% 21.7%
Maryland Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 203 120 223 165 152 343 1,206
Annual Rents $
$
4,311 2,986 4,693 3,365 2,074 7,177 24,606
% 17.5% 12.1% 19.1% 13.7% 8.4% 29.2% 100.0%
% of Company Annual rents 2.1% 1.5% 2.3% 1.6% 1.0% 3.5% 12.0%
Oregon Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 127 188 307 147 70 333 1,172
Annual Rents $
$
24
1,543 2,674 3,951 1,600 1,221 6,100 17,089
% 9.0% 15.6% 23.1% 9.4% 7.1% 35.8% 100.0%
% of Company Annual rents 0.8% 1.3% 1.9% 0.8% 0.6% 3.0% 8.4%
PS BUSINESS PARKS, INC. Owned Portfolio Lease Expirations as of June 30, 2005 (in thousands) Arizona Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 103 183 211 54 64 25 640
Annual Rents $
% 1,102 1,946 2,027 564 696 421 6,756
$
16.3% 28.8% 30.0% 8.3% 10.3% 6.3% 100.0%
% of Company Annual rents 0.6% 0.9% 1.1% 0.3% 0.3% 0.3% 3.5%
Total Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter
Rentable Square Footage 1,917 3,541 3,041 2,563 1,593 3,486 16,141
Annual Rents $ $ $ $ $ $ $
25
23,307 44,261 36,333 34,267 18,040 48,564 204,772
% 11.4% 21.6% 17.8% 16.7% 8.8% 23.7% 100.0%
% of Company Annual rents 11.4% 21.6% 17.8% 16.7% 8.8% 23.7% 100.0%
PS BUSINESS PARKS, INC. Owned Portfolio Lease Expirations as of June 30, 2005 (in thousands) Lease Expirations - Large Tenant Portfolio Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter Total
Rentable Square Footage 1,101 1,886 1,688 1,770 1,098 2,956 10,499
Annual Rents $
13,041 22,230 18,380 22,084 10,285 38,772 124,792
$
% 10.5% 17.8% 14.7% 17.7% 8.2% 31.1% 100.0%
% of Company Annual rents 6.4% 10.9% 9.0% 10.8% 5.0% 18.8% 60.9%
Lease Expirations - Small Tenant Portfolio Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter Total
Rentable Square Footage 816 1,655 1,353 793 495 530 5,642
Annual Rents $
$
10,266 22,031 17,953 12,183 7,755 9,792 79,980
% 12.8% 27.5% 22.5% 15.2% 9.7% 12.3% 100.0%
% of Company Annual rents 5.0% 10.8% 8.8% 5.9% 3.8% 4.8% 39.1%
Lease Expirations - Total Year of Lease Expiration 2005 2006 2007 2008 2009 Thereafter Total
Rentable Square Footage 1,917 3,541 3,041 2,563 1,593 3,486 16,141
Annual Rents $
$
26
23,307 44,261 36,333 34,267 18,040 48,564 204,772
% 11.4% 21.6% 17.8% 16.7% 8.8% 23.7% 100.0%
% of Company Annual rents 11.4% 21.6% 17.8% 16.7% 8.8% 23.7% 100.0%
