Analysis of Operating Results and Financial Condition - Rackcdn.comhttps://40b8011386169f55de96-725c435c541f29a53fba967f09ea3d89.ssl.cf5.rackcdn...
0 downloads
143 Views
190KB Size
Analysis of Operating Results and Financial Condition September 30, 2004
ANALYSIS OF OPERATING RESULTS AND FINANCIAL CONDITION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2004 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 ............................................................................................
8-9
Gross Margins .........................................................................................................................
10
Capital Expenditure Analysis ..................................................................................................
11
Rentable Square Footage by Region .......................................................................................
12
Portfolio Analyses ................................................................................................................... 13 - 24
PS BUSINESS PARKS, INC. THIRD QUARTER FACT SHEET (in thousands, except per share amounts)
OPERATING DATA Three Months Ended 09/30/03
09/30/04 Total operating revenues Net income allocable to common shareholders Net income per common share - diluted: Continuing operations Discontinued operations
Difference
Nine Months ended 09/30/03
09/30/04
$ $
55,179 11,343
$ $
48,897 11,844
12.8% (4.2%)
$ $
162,920 35,619
$ $
$ $ $
0.10 0.03 0.13
$ $ $
0.33 0.03 0.36
(70.0%) 0.0% (63.8%)
$ $ $
0.50 0.06 0.56
$ $ $
144,677 38,490
1.25 (0.01) 1.24
Difference 12.6% (7.5%)
(60.0%) 700.0% (54.8%)
Weighted average common shares outstanding - Basic
21,813
21,417
1.8%
21,744
21,368
1.8%
Weighted average common shares outstanding - Diluted
21,977 7,305 29,282
21,617 7,305 28,922
1.7% 0.0% 1.2%
21,919 7,305 29,224
21,514 7,305 28,819
1.9% 0.0% 1.4%
Weighted average common OP units outstanding Total pro forma fully-converted shares
FUNDS FROM OPERATIONS Three Months Ended 09/30/03
09/30/04 FFO allocable to common shareholders before adjustments EITF Topic D-42 Impairment provision FFO allocable to common shareholders
$
$
25,161 $ (2,872) 22,289 $
FFO per common share and units - before adjustments FFO per common share and units - as reported
$ $
0.86 0.76
Difference
Nine Months ended 09/30/03
09/30/04
29,865 29,865
(15.8%) (100.0%) (25.4%)
$
76,190 $ (5,005) 71,185 $
0.89 1.03
(3.5%) (26.2%)
$ $
2.61 2.44
$ $
$
$ $
89,781 (5,907) 83,874 2.70 2.91
Difference (15.1%) (100.0%) 100.0% (15.1%) (3.4%) (16.2%)
PROPERTY INFORMATION Three Months Ended 09/30/03
09/30/04
Difference
09/30/04
Nine Months ended 09/30/03
Difference
Total Owned Portfolio Net rentable square footage at period end Weighted average occupancy Annualized realized rent per sq. ft. (1) REVPAR (2)
$ $
18,408 88.7% 13.52 $ 11.99 $
14,784 91.8% 14.41 13.23
24.5% (3.4%) (6.2%) (9.4%)
$ $
13,726 90.5% 14.75 $ 13.35 $
13,726 92.9% 14.77 13.72
0.0% (2.6%) (0.1%) (2.7%)
$ $
18,338 88.2% 13.43 $ 11.85 $
14,535 91.5% 14.50 13.27
26.2% (3.6%) (7.4%) (10.7%)
$ $
13,726 90.4% 14.70 $ 13.29 $
13,726 92.9% 14.72 13.67
0.0% (2.7%) (0.1%) (2.8%)
Same Park Facilities 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 09/30/04 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
$ $ $ $ $ $
12/31/03
1,358,646 127,374 165,945 478,350 496,080 21,819 22.74
$ $ $ $ $ $
Difference
1,358,861 217,750 169,888 168,673 502,155 21,566 23.28
(0.0%) (41.5%) (2.3%) 183.6% (1.2%) 1.2% (2.4%)
MARKET VALUE INFORMATION 09/30/04 Market value of common stock and common OP units
$
Total debt Total preferred stock and preferred OP units
1,160,586
12/31/03 $
Difference
1,191,213
(2.6%)
49,225
264,694
(81.4%)
605,724
386,423
56.8%
Total market capitalization
$
1,815,535
$
1,842,330
(1.5%)
Stock price at the end of the period
$
39.85
$
41.26
(3.4%)
1
PS BUSINESS PARKS, INC.
Sources and Uses of Funds (in thousands)
Nine Months Ended September 30, 2004 Sources of Funds: Funds from operations, before EITF Topic D-42 Proceeds from disposition of real estate Proceeds from placement of preferred units, net Issuance of preferred stock, net Exercise of stock options Borrowings on line of credit
$ Series J Series H, I, K ,L
Total Sources of Funds
76,189 5,066 41,533 351,082 6,550 138,000 618,420
Uses of Funds: Property rennovations Land Held for Development Recurring capital expenditures Acquisition of real estate Common dividends and OP distributions Principal payments on mortgage notes payable Redemption of preferred stock Repayments on line of credit Repayment of borrowings from an affiliate Repayment of unsecured note payable Preferred stock shelf registration Change in working capital
(6,400) (234) (29,381) (22,375) (25,296) (469) (185,573) (203,000) (100,000) (50,000) (101) 1,703
Total Uses of Funds
(621,126)
Net (decrease) increase in cash balance
(2,706)
Beginning cash balance
5,809
Ending cash balance
$
2
3,103
PS BUSINESS PARKS, INC. ANALYSIS OF FUNDS FROM OPERATIONS (in thousands except per share amounts)
Three Months Ended 09/30/04 09/30/03
Increase (Decrease)
Nine Months Ended 09/30/04 09/30/03
% Change
Increase (Decrease)
% Change
Funds from operations (FFO): Net income allocable to common shareholders, before effect of EITF Topic D-42 Adjustments: Gain on sale of marketable securities (Gain) loss on disposition of real estate Equity income from gain on sale of joint venture properties 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
2,846
$
7,792
$
(4,946)
(63.5%)
(313) 18,802 954 22,289 $
(14) 15,382 2,653 25,813 $
(299) 3,420 (1,699) (3,524)
0.0% 2135.7% 0.0% 22.2% (64.0%) (13.7%)
21,813 7,305 164 29,282
21,417 7,305 200 28,922
396 (36) 360
1.8% 0.0% (18.0%) 1.2%
$
12,211
$
$
26,586
$
(14,375)
(54.1%)
(145) 55,016 4,103 71,185 $
(2,043) (3,498) (1,376) 43,237 9,064 71,970
$ $ $ $ $ $
2,043 3,353 1,376 11,779 (4,961) (785)
(100.0%) (95.9%) (100.0%) 27.2% (54.7%) (1.1%)
21,745 7,305 175 29,225
21,368 7,305 146 28,819
377 29 406
1.8% 0.0% 19.9% 1.4%
$
0.76
$
0.89
$
(0.13)
(14.6%)
$
2.44
$
2.50
$
(0.06)
(2.4%)
Funds from operations Adjustments: Maintenance capital expenditures Tenant improvements Lease commissions Straight-line rent Stock compensation expense In-place rents adjustment (SFAS 141) Impairment charge on properties held for sale Redemption amount over carrying amount related to preferred equity called for redemption
$
22,289
$
25,813
$
(3,524)
(13.7%)
$
71,185
$
71,970
$
(785)
(1.1%) 75.4% 105.3% 54.2% 65.8% 23.4% 100% (100.0%)
FAD
$
10,034
$
19,421
FAD per common share/OP unit
$
0.34
$
0.67
FAD
$
Distributions to common shareholders Distributions to common OP unitholders Non-recurring capital expenditures Cash available for debt repayments and reinvestments
$
10,034 $ (6,327) (2,119) (3,269) (1,681) $
Funds available for distribution (FAD):
(3,226) (9,573) (1,780) (863) 276 39 -
(1,614) (2,835) (1,420) (793) 270 -
(1,612) (6,738) (360) (70) 6 39 -
99.9% 237.7% 25.4% 8.8% 2.2% 100% 0.0%
(4,908) (18,960) (5,514) (2,242) 892 117 -
(2,798) (9,236) (3,577) (1,352) 723 5,907
(2,110) (9,724) (1,937) (890) 169 117 (5,907)
2,872
-
2,872
100.0%
5,004
-
5,004
100.0%
$
(9,387)
(48.3%)
$
45,574
$
61,637
$
(16,063)
(26.1%)
$
(0.33)
(49.3%)
$
1.56
$
2.14
$
(0.58)
(27.1%)
19,421 $ (6,192) (2,119) (3,899) 7,211 $
(9,387) (135) 630 (8,892)
(48.3%) 2.2% 0.0% (16.2%) (123.3%)
$
45,574 $ (18,930) (6,357) (6,400) 13,887 $
61,637 $ (18,582) (6,357) (5,060) 31,638 $
(16,063) (348) (1,340) (17,751)
(26.1%) 1.9% 0.0% 26.5% (56.1%)
Cash available for debt repayments and reinvestments:
3
$
Diluted FFO Per Common Share/OP Unit * $0.95 $0.90
$0.90
$0.89 $0.88
$0.90 $0.85
$0.87
$0.86
$0.85 $0.80 $0.75 $0.70 $0.65 $0.60 Q103
Q203
Q303
Q403
Q104
Q204
Q304
* Amounts before adjustments for ETIF Topic D-42 costs and impairment charges.
4
PS BUSINESS PARKS, INC. CAPITAL STRUCTURE (in thousands)
Long-Term Debt: 7.050% mortgage note, secured by one commercial property, due May 2006 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)
As of September 30, 2004 % of Total Market WTD Average Total Capitalization Rate
$
7,757 5,644 5,824 19,225
Term facility Loan (4.46% @ 12/31/03) Total Long-Term Debt
Total debt
9.250% Series A preferred stock (2,112,900 depositary shares outstanding) called 4/30/04 8.875% Series B preferred operating partnership units (510,000 units outstanding) called 4/23/04 8.750% Series C preferred operating partnership units (3,200,000 units outstanding) callable 9/3/04 8.875% Series X preferred operating partnership units (1,600,000 units outstanding) callable 9/23/04 8.875% Series Y preferred operating partnership units (480,000 units outstanding) callable 7/12/05 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 (6,900,000 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
1%
7.46%
7,938 5,832 5,924 19,694
1%
7.46%
-
50,000 69,694
4%
5.31%
11%
1.64%
14%
2.60%
-
30,000 30,000
2%
1.89%
95,000 100,000 195,000
49,225
3%
4.06%
264,694
12,000 65,850 53,000 50,000 20,000 172,500 75,000 42,750 57,500 57,500
52,823 12,750 80,000 40,000 12,000 65,850 53,000 50,000 20,000 -
Total preferred equity
606,100
33%
7.85%
386,423
21%
8.99%
Total debt and preferred equity
655,325
36%
7.56%
651,117
35%
6.40%
889,794 301,419 1,191,213
65%
1,842,330
100%
Common stock (21,818,529 and 21,565,528 shares outstanding in September 30, 2004 and December 31, 2003 respectively) Common operating partnership units (7,305,355 units outstanding as of September 30, 2004 and December 31, 2003 ) Total common equity (3) Total market capitalization
(1)
$
-
Short-Term Debt: $100 million unsecured line of credit (2.575% @ 9/30/04) (2) Notes Payable affiliate Total Short-Term Debt
As of December 31, 2003 % of Total Market WTD Average Total Capitalization Rate
$
869,468 291,118 1,160,586
$ 64%
1,815,911
100%
$
Principal Maturity Dates are represented by the following chart: Principal Maturity Dates 2004
$
62 $ 66 34 162 $
$ (2)
The outstanding balance on the line of credit was repaid in full subsequent to September 30, 2004.
(3)
Closing stock price was $39.85 and $41.26 as of September 30, 2004 and December 31, 2003, respectively.
2005
5
2006
260 $ 276 144 680 $
7,435 300 155 7,890
2007
$
- $ 5,002 167 $ 5,169 $
2008
Thereafter
- $ 179 179 $
5,145 5,145
PS BUSINESS PARKS, INC. CONSOLIDATED BALANCE SHEETS (in thousands)
09/30/04
Increase (Decrease)
12/31/03
% Change
ASSETS Cash and cash equivalents
$
Real estate facilities, at cost: Land Buildings and equipment
$
385,077 1,170,370 1,555,447 (278,843) 1,276,604 47,038 11,633 1,335,275
Accumulated depreciation Properties held for disposition, net Land held for development
Rent receivable Deferred rent receivables Intangible assets, net Other assets Total assets
3,103
$
5,809
$
379,268 1,116,750 1,496,018 (223,786) 1,272,232 51,957 11,399 1,335,588
1,821 15,171 3,276 1,358,646
(d)
41,672 30,000 11,468 7,757 90,897
(f)
$
1,885 (d) 13,626 76 1,877 1,358,861 $
(2,706) (a)
(46.6%)
5,809 53,620 59,429 (b) (55,057) 4,372 (4,919) (c) 234 (313)
1.5% 4.8% 4.0% 24.6% 0.3% (9.5%) 2.1% (0.0%)
(64) 1,545 (76) 1,399 (e) (215)
(3.4%) 11.3% (100.0%) 74.5% (0.0%)
LIABILITIES AND SHAREHOLDERS' EQUITY Accrued and other liabilities Line of credit Mortgage notes payable Mortgage on asset held for sale Notes payable to affiliate Unsecured term loan Total liabilities
$
Minority interest: Preferred units Common units Shareholders' equity: Preferred stock Common stock Paid-in capital Cumulative net income Comprehensive gain (loss) Cumulative distributions Total shareholders' equity Total liabilities and shareholders' equity
$
35,701 95,000 11,756 7,938 100,000 50,000 300,395
127,374 165,945
217,750 169,888
478,350 218 420,895 317,006 (242,039) 974,430
168,673 216 420,778 281,386 (535) (199,690) 670,828
1,358,646
6
$
$
1,358,861
$
5,971 (65,000) (288) (181) (100,000) (50,000) (209,498)
16.7% (68.4%) (2.4%) (2.3%) (100.0%) (100.0%) (69.7%)
(90,376) (g) (3,943)
309,677 2 117 35,620 535 (42,349) 303,602 $
(215)
(h) (i) (j) (k)
(41.5%) (2.3%)
183.6% 0.9% 0.0% 12.7% (100.0%) 21.2% 45.3% (0.0%)
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 is due to the following: Property acquisition (includes capitalized acquisition costs) Property dispositions Property renovations Maintenance capital expenditures Tenant improvements Lease commissions $
24,140 (6,301) 12,208 4,908 18,960 5,514 59,429
(c) Discontinued operations includes assets identified for sale located in the Company's Miami and Maryland portfolios.
(d) Rent receivable consists of the following: U.S. Government Acquisitions Same Park Additional allowance for bad debt (Q204)
$
09/30/04 1,064 441 566
12/31/03 $ 1,175 14 696
(250)
$
1,821
(e) Change in other assets is due to the following: Prepayment of insurance premiums Other
-
$
1,885
$
1,200 199 1,399
$
(f)
Accrued and other liabilities at September 30, 2004 consists of: Deferred rental revenue Accounts payable Property taxes Security deposits Accrued interest Reserves for acquisition costs Unrealized loss on interest rate swap
Other (Professional fees - $360,000, accrued bonus - $856,000, restricted stock - $1.2 million) and restricted stock - $1.5 million)
(g) Change in minority interest - preferred units: Redemption of Series B Issuance of Series J Redemption of Series C and X
(j)
12/31/2003 8,290 927 3,427 14,056 112 4,920
3,750 $ 41,672
3,435 35,701
Change $
(2,063) 1,730 5,538 438 (112) 659 (534)
$
5,971
534
315
(12,750) 42,374 (120,000) $ (90,376)
(h) Change in preferred stock: Redemption of Series A Issuance of Series H Issuance of Series I Issuance of Series K Issuance of Series L
(i)
9/30/2004 $ 6,227 2,657 8,965 14,494 5,579 -
(52,823) 172,500 75,000 57,500 57,500 $ 309,677
Change in paid-in capital: Beginning paid-in capital Preferred stock issuance costs Shelf registration costs Redemption of preferred stock (application of EITF Topic D-42) Exercise of stock options Stock option amortization Restricted stock amortization Change in minority interest, common, due to repurchase of shares Ending paid in capital
$ 420,778 (12,129) (101) 5,004 6,550 270 623 (100) $ 420,895
Change in unrealized loss is due to the following: Decrease in liability related to interest rate SWAP $
(k) Change in cumulative distributions: Distributions to preferred shareholders Distributions to common shareholders
535 535
$ (23,002) (19,347) $ (42,349)
7
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED (in thousands, except per share amounts)
09/30/04 Revenues: Rental income Facility management fees primarily from affiliates Total operating revenues
$ $
Expenses: Property operations Depreciation and amortization General and administrative Total operating expenses
54,979 200 55,179
$ $
16,342 18,310 1,155 (c) 35,807
Other income and expenses Gain on sale of marketable securities Interest and other income Interest expense Total other income and expenses
Increase (Decrease)
09/30/03
48,719 178 48,897
$
13,403 15,015 1,055 (c) 29,473
% Change
6,260 (a) 22 6,282
12.8% 12.4% 12.8%
2,939 (b) 3,295 100 6,334
21.9% 21.9% 9.5% 21.5%
(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
136 (513) (d) (377)
145 (1,013) (d) (868)
(9) 500 491
18,995
18,556
439
-
-
Minority interests in continuing operations: Minority interest in income - preferred units Distributions paid to preferred unit holders Redemption of preferred operating partnership unit Minority interest in income - common units Total minority interests in continuing operations
Equity in income of liquidated joint venture
(4,794) (2,872) (714) (8,380)
(4,810) (2,462) (7,272)
Income from continuing operations
10,615
11,284
2.4%
655 (e) 313
737 (e) 14
(240) 728
Net Income
(191) 560
11,343
11,844
16 (2,872) 1,748 (1,108)
(0.3%) (100.0%) (71.0%) 15.2%
(669)
(5.9%)
(82) 299
(11.1%) 2135.7%
(49) 168
25.8% 30.0%
(501)
(4.2%)
Mortgage notes payable Facilities fees & other charges Line of Credit interest (Wells Fargo) Term Loan Interest (Fleet)
(e)
Net income per common share - diluted Continuing operations Discontinued operations
Weighted average common shares outstanding: Basic Diluted
September 30, 2004 September 30, 2003 $ 317 $ 327 180 180 125 121 252 121 140 50 17 68 124 188 $ 1,155 $ 1,055
Interest expense for the three months ended: September 30, 2004 September 30, 2003 $ 360 $ 371 63 70 90 572 $ 513 $ 1,013
Net operating income from discontinued operations for the three months ended: Rental revenue Operating expenses Depreciation expense
Net Income allocable to preferred shareholder Preferred distributions Preferred distributions paid Redemptions of preferred stock Total preferred distributions
September 30, 2004 September 30, 2003 $ 1,624 1,576 (477) (472) (492) (367) $
8,497 8,497 $
2,846
4,052 4,052 $
7,792
4,445 (f) 4,445 $
$ $ $
0.10 0.03 0.13
$ $ $
0.33 0.03 0.36
$
$ $ $
0.10 0.03 0.13
$ $ $
0.33 0.03 0.36
$
21,813 21,977
21,417 21,617
$
$
(4,946)
109.7% 109.7%
(f)
Increase relates to issuance of additional preferred stock .
(g)
Net increase relates to stock option exercises.
(63.5%)
(0.23) (0.23)
(70.0%) 0.0% (63.8%)
(0.23) (0.23)
(70.5%) 0.0% (63.8%)
396 (g) 360
230 2,709 2,939
General and administrative expenses for the three months ended: Salaries Bonus Accrual Stock option and stock compensation expense Professional fees Investor services Internal acquisition costs Other
(d)
Discontinued operations: Income from discontinued operations Impairment charge on properties held for sale Gain (loss) on disposition of real estate Minority interest in earnings (loss) attributable to discontinued operations - common units Income (loss) from discontinued operations
(836) 7,026 70 6,260
(6.2%) (49.4%) (56.6%) (c)
Net income per common share - basic: Continuing operations Discontinued operations
$ $
Income from continuing operations before minority interests and equity in income of liquidated joint venture
Net Income allocable to common shareholder
$
1.8% 1.7%
8
655
$
737
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED (in thousands, except per share amounts)
09/30/04 Revenues: Rental income Facility management fees primarily from affiliate Total operating revenues
$ 162,405 515 $ 162,920
Expenses: Property operations Depreciation and amortization General and administrative
Increase (Decrease)
09/30/03
$ $
144,124 553 144,677
$
% Change
18,281 (a) (38) 18,243
12.7% (6.9%) 12.6%
23.6% 27.6% (7.4%) 24.3%
48,270 53,559 3,249 (c) 105,078
39,038 41,972 3,509 (c) 84,519
9,232 (b) 11,587 (260) 20,559
Other income and expenses: Gain on sale of marketable securities Interest and other income Interest expense Total other income and expenses
212 (2,612) (d) (2,400)
2,043 970 (3,013) (d) 0
(2,043) (758) 401 (2,400)
(100.0%) (78.1%) (13.3%) (100.0%)
Income from continuing operations before minority interest and equity in income of liquidated joint ventur
55,442
60,158
(4,716)
(7.8%)
-
2,296
(2,296)
(100.0%)
(14,409) (3,139) (3,643) (21,191)
(14,430) (9,183) (23,613)
21 (3,139) 5,540 2,422
(0.1%) 100.0% (60.3%) (10.3%)
34,251
38,841
(4,590)
(11.8%)
1,939 (e) (5,907) 3,498
(257) 5,907 (3,353)
(13.3%) (100.0%) (95.9%)
(578) 1,719
(485.7%) (489.7%)
(2,212)
(5.7%)
Total operating expenses
(a)
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 unit Total minority interests in continuing operations Income from continuing operations Discontinued operations: Income from discontinued operations Impairment charge on properties held for sale Gain (loss) on disposition of real estate Minority interest in earnings (loss) attributable to discontinued operations - common units Income (loss) from discontinued operations
1,682 (e) 145 (459) 1,368
Net Income
35,619
38,490
$
21,542 1,866 23,408 12,211
$
11,904 11,904 26,586
$ $ $
0.50 0.06 0.56
$ $ $
1.26 (0.02) 1.24
$ $ $
0.50 0.06 0.56
$ $ $
1.25 (0.01) 1.24
Net Income allocable to preferred shareholder Preferred distributions Preferred distributions paid Redemptions of preferred stock Total preferred distributions 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
119 (351)
21,744 21,919
21,368 21,514
$ $
$ $
9,638 1,866 11,504 (f) (14,375)
81.0% 100.0% 96.6% (54.1%)
(0.76) 0.08 (0.68)
(60.4%) 400.0% (54.9%)
(0.75) 0.07 (0.68)
(60.0%) 700.0% (54.9%)
376 (g) 405
1.8% 1.9%
9
$
$
(b ) Cost of operations have increased due to the following Same Park facilities Acquisitions
$ $
(c)
Equity in income of liquidated joint venture
Rental income has increased due to the following Same Park facilities Acquisitions Straight-line rent
September 30, 2004 $ 1,150 540 330 368 334 97 430 $ 3,249
September 30, 2003 $ 1,123 721 369 340 253 145 558 $ 3,509
September 30, 2004 $ 1,092 335 557 191 145 292 $ 2,612
September 30, 2003 $ 1,129 196 1,688 $ 3,013
Interest expense for the year ended Mortgage notes payable Line of credit interest Interest rate swap charges Facilities fees & other charges Loan from Affiliate (PSI) Term loan interest
(e)
1,031 8,201 9,232
General and administrative expenses for the year ended Salaries Bonuses Stock option and stock compensation expense Professional fees Investor services Internal acquisition costs Other
(d)
(3,832) 21,223 890 18,281
Net operating income from discontinued operations for the nine months ended Rental revenue Operating expenses Depreciation Operating income from discontinued property
September 30, 2004 September 30, 2003 $ 4,780 $ 4,829 (1,638) (1,625) (1,460) (1,265) $ 1,682 $ 1,939
(f)
Increase relates to the issuance of additional preferred equity as well as $1,866,000 related to the redemption of the Series A preferred stock
(g)
Net increase relates to stock option exercises
Gross Operating Margin Percentage * (Same Park) 74.0%
73.4% 72.8%
73.0% 72.0% 71.7%
72.0%
71.8%
71.3%
71.0%
70.6%
70.0% Q103
Q203
Q303
Q403
Q104
Q204
Q304
* Gross margin is computed by dividing property net operating income by rental income (excluding straight-line rent adjustment).
10
PS BUSINESS PARKS, INC. Analysis of Capital Expenditures (in thousands)
Recurring capital expenditures (1)
Nine Months Ended September 30, 2004 Costs
Cost per Weighted Average Square Foot
Maintenance capital expenditures (2)
$4,908
$0.27
Tenant improvements (3)
18,960
1.04
5,514
0.30
$29,382
$1.61
Leasing commissions Total recurring capital expenditures Non-recurring capital expenditures Property renovations
$6,634
Acquisition costs
22,375
Total non-recurring capital expenditures
$29,009
(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 $5,000 for maintenance capital expenditures with a useful life greater than 24 months for tenant improvements and 30 months for maintenance capital expenditures are capitalized. It excludes deferred maintenance and 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 $10.6 million or approximately $0.58 per weighted average square foot for the nine months ended September 30, 2004 compared to $9.1 million or $0.63 per square foot during the nine months ended September 30, 2003.
(2)
Major costs include roofing, HVAC replacement, parking lot replacement and other major repairs that extend the life of the respective component of the building.
(3)
Tenant improvements less than $1,000 or for leases of two years or less are expensed and included in cost of operations ($593,000 for the nine months ended September 30, 2004 as compared to $478,000 for the nine months ended September 30, 2003).
11
Total Owned Rentable Square Footage by Region
September 30, 2003 (14,784 square feet, in thousands)
September 30, 2004 (18,408 square feet, in thousands)
S. California (24%) N. California (10%) S. Texas (8%) N. Texas (11%) Virginia (18%) Maryland (11%) Oregon (13%)
570
679
Arizona (4%)
2,001
S. California (20%) N. California (8%) S. Texas (6%) N. Texas (9%) Virginia (15%) Maryland (9%) Oregon (11%) Florida (18%) Arizona (4%)
3,663
3,556
3,342
1,646
1,497 1,938
1,495
1,162
2,621
1,646
1,205 1,690
1,690 2,791
12
PS BUSINESS PARKS, INC. TOTAL OWNED PORTFOLIO OVERVIEW (in thousands) Rentable Square Footage of Properties as of September 30, 2004 Primary Markets Miami Northern Virginia Portland Maryland Dallas Los Angeles County Northern California Orange County Austin Phoenix San Diego County Houston
Industrial
Office
2,617 231 712 407 3,967
12 572 346 720 31 430 704 131 2,946
Flex 713 2,219 1,592 926 1,459 770 660 911 788 679 535 243 11,495
Total 3,342 2,791 1,938 1,646 1,690 1,513 1,497 1,615 788 679 535 374 18,408
% 18.2% 15.2% 10.5% 8.9% 9.2% 8.2% 8.1% 8.8% 4.3% 3.7% 2.9% 2.0% 100.0%
Average Occupancy Rates by Product Type for the Quarter Ending September 30, 2004 Primary Markets Miami Northern Virginia Portland Maryland Dallas Los Angeles County Northern California Orange County Austin Phoenix San Diego County Houston
Industrial
Office
83.0% 100.0% 99.7% 98.9% 88.6%
90.5% 92.0% 67.8% 96.2% 96.4% 90.3% 83.3% 79.5% 87.4%
Flex 86.7% 96.9% 81.2% 87.7% 81.3% 94.3% 93.8% 93.0% 81.0% 91.0% 96.1% 90.4% 89.1%
Total 83.9% 95.9% 78.8% 91.4% 83.8% 96.9% 94.2% 88.8% 81.0% 91.0% 96.1% 86.6% 88.7%
Weighted Average Occupancy Rates by Portfolio Type for the Quarter Ending September 30, 2004 Primary Markets Miami Northern Virginia Portland Maryland Dallas Los Angeles County Northern California Orange County Austin Phoenix San Diego County Houston
Large Tenant
Small Tenant
83.0% 96.4% 78.3% 91.4% 84.3% 99.7% 94.5% 88.1% 81.3% 98.0% 79.5% 87.7%
89.7% 94.1% 85.3% 94.2% 81.2% 94.4% 93.7% 90.7% 79.8% 90.1% 96.1% 90.4% 91.6%
Total 83.9% 95.9% 78.8% 91.4% 83.8% 96.9% 94.2% 88.8% 81.0% 91.0% 96.1% 86.6% 88.7%
Note: Includes all properties owned as of September 30, 2004. 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.
13
PS BUSINESS PARKS, INC. SAME PARK PORTFOLIO OVERVIEW (in thousands) Rentable Square Footage of Properties as of September 30, 2004 Primary Markets Northern Virginia Portland Maryland Dallas Los Angeles County Northern California Orange County Austin Phoenix San Diego County Houston
Industrial
Office
231 712 407 1,350
406 347 720 31 430 161 131 2,226
Flex
Total
2,215 1,592 522 1,345 770 660 911 788 569 535 243 10,150
2,621 1,939 1,242 1,576 1,513 1,497 1,072 788 569 535 374 13,726
% 19.1% 14.1% 9.1% 11.5% 11.0% 10.9% 7.8% 5.7% 4.1% 3.9% 2.8% 100.0%
Average Occupancy Rates by Product Type for the Quarter Ending September 30, 2004 Primary Markets Northern Virginia Portland Maryland Dallas Los Angeles County Northern California Orange County Austin Phoenix San Diego County Houston
Industrial
Office
100.0% 99.7% 98.9% 99.5%
95.5% 67.8% 96.2% 96.4% 90.3% 99.3% 79.5% 89.8%
Flex
Total
96.9% 81.2% 88.7% 80.9% 94.3% 93.8% 93.0% 81.0% 93.4% 96.1% 90.4% 89.5%
96.7% 78.8% 93.1% 83.7% 96.9% 94.2% 93.9% 81.0% 93.4% 96.1% 86.6% 90.5%
Weighted Average Occupancy Rates by Portfolio Type for the Quarter Ending September 30, 2004 Primary Markets Northern Virginia Portland Maryland Dallas Los Angeles County Northern California Orange County Austin Phoenix San Diego County Houston
Large Tenant
Small Tenant
96.4% 78.3% 93.1% 84.2% 99.7% 94.5% 95.8% 81.3% 98.0% 79.5% 89.8%
98.1% 85.3% 94.2% 81.2% 94.4% 93.7% 90.7% 79.8% 92.6% 96.1% 90.4% 92.5%
Total 96.7% 78.8% 93.1% 83.7% 96.9% 94.2% 93.9% 81.0% 93.4% 96.1% 86.6% 90.5%
Note: Includes all properties included in continuing operations owned since January 1, 2003. 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.
14
Change in Same Park Revenue * 5.0% 3.0%
2.5% 1.9% 0.4%
1.0%
0.9%
0.8%
0.4%
-1.0%
-0.8% -1.6%
-1.8%
-3.0%
-2.9%
-3.1%
Q104
Q204
-5.0% Q102
Q202
Q302
Q402
Q103
Q203
Q303
Q403
* Percentage represents the change from the same period in the prior year.
15
Q304
Change in Same Park NOI before Straight Line Rent * 3.0%
2.0%
1.7% 0.7%
1.0% -1.0%
-0.7%
-0.4%
-0.5%
-0.3%
-3.0% -3.1%
-3.1%
-5.0% -4.9% -5.7%
-7.0% Q102
Q202
Q302
Q402
Q103
Q203
Q303
Q403
Q104
* Percentage represents the change from the same period in the prior year.
16
Q204
Q304
Same Park Weighted Average Occupancy 96.0%
95.1%
95.0%
94.7% 93.9%
94.0%
93.5% 92.7%
93.0%
92.4%
92.9%
92.5%
92.0%
90.5%
91.0%
90.4%
90.0%
Q104
Q204
90.0% 89.0% Q102
Q202
Q302
Q402
Q103
Q203
Q303
Q403
Q304
Note: Same Park is defined as all properties included in continuing operations since January 1 , 2003.
17
Total Owned Portfolio Weighted Average Occupancy 97.0% 96.0% 95.0%
94.6% 94.3%
94.0%
93.5% 93.2%
93.0%
92.6% 92.2%
92.0%
91.8%
91.8%
91.0% 90.0% 89.0%
88.2%
88.0%
88.7% 87.9%
87.0% Q102
Q202
Q302
Q402
Q103
Q203
18
Q303
Q403
Q104
Q204
Q304
PS BUSINESS PARKS, INC. OWNED PORTFOLIO ANALYSIS (in thousands) Industry Concentration as of September 30, 2004 % of Total Rents 11.5% 11.7% 10.9% 8.6% 9.3% 8.1% 5.6% 4.5% 4.5% 3.9% 78.6%
Computer Hardware, software and related service Business services Government Warehouse / Logistics Contractors Financial services Retail Electronics Home funishings Communications
Top Ten Customers by Total Annual Revenues as of September 30, 2004 Tenant
Square Footage
U.S. Government Citigroup Intel IBM County of Santa Clara Hughes Network Systems ** Axcelis Technologies Symantec Corporation Inc Welch Allyn Protocol, Inc MCI Worldcom
Total Annual Revenues
%
536 262 214 180 97 106 89 81 95 88
$
12,459 4,255 3,647 2,961 2,935 2,669 1,609 1,576 1,511 1,414
5.7% 1.9% 1.7% 1.3% 1.3% 1.2% 0.7% 0.7% 0.7% 0.6%
1,748
$
35,036
15.8%
** Electronics subsidiary of Hughes Aircraft
19
PS BUSINESS PARKS, INC. Owned Portfolio Lease Expirations as of September 30, 2004 (in thousands) Lease Expirations - Flex Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 579 2,542 2,151 1,373 1,082 2,556 10,283
Annual Rents $
$
7,247 29,813 26,756 17,735 16,548 31,964 130,063
% 5.6% 22.9% 20.6% 13.6% 12.7% 24.6% 100.0%
% of Company Annual rents 3.4% 13.9% 12.5% 8.3% 7.7% 14.9% 60.5%
Lease Expirations - Office Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 79 710 493 373 354 697 2,706
Annual Rents $
$
2,047 15,183 10,539 7,945 8,381 15,835 59,930
% 3.4% 25.3% 17.6% 13.3% 14.0% 26.4% 100.0%
% of Company Annual rents 1.0% 7.1% 4.9% 3.7% 3.9% 7.4% 27.9%
Lease Expirations - Industrial Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 188 953 1,038 654 233 677 3,743
Annual Rents $
$
1,423 6,483 6,650 4,245 1,794 4,281 24,876
% 5.7% 26.1% 26.7% 17.1% 7.2% 17.2% 100.0%
% of Company Annual rents 0.7% 3.0% 3.1% 2.0% 0.8% 2.0% 11.6%
Lease Expirations - Total Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 846 4,205 3,682 2,400 1,669 3,930 16,732
Annual Rents $
$
20
10,717 51,479 43,945 29,925 26,723 52,080 214,869
% 5.0% 24.0% 20.5% 13.9% 12.4% 24.2% 100.0%
% of Company Annual rents 5.0% 24.0% 20.5% 13.9% 12.4% 24.2% 100.0%
PS BUSINESS PARKS, INC. Owned Portfolio Lease Expirations as of September 30, 2004 (in thousands) Southern California Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 254 1,017 1,041 486 250 446 3,494
Annual Rents $
%
3,291 14,395 12,132 7,284 4,852 7,206 49,160
$
6.7% 29.2% 24.7% 14.8% 9.9% 14.7% 100.0%
% of Company Annual rents 1.5% 6.7% 5.6% 3.4% 2.3% 3.4% 22.9%
Northern California Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 70 274 306 278 214 264 1,406
Annual Rents $
%
967 3,143 3,523 3,312 4,773 3,059 18,777
$
5.1% 16.7% 18.8% 17.6% 25.4% 16.4% 100.0%
% of Company Annual rents 0.5% 1.5% 1.6% 1.5% 2.2% 1.3% 8.6%
Southern Texas Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 77 294 160 96 71 226 924
Annual Rents $
% 728 2,752 1,655 892 661 1,691 8,379
$
8.7% 32.8% 19.8% 10.6% 7.9% 20.2% 100.0%
% of Company Annual rents 0.3% 1.3% 0.9% 0.4% 0.3% 0.8% 4.0%
Northern Texas Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 67 287 284 137 115 533 1,423
Annual Rents $
$
21
585 2,871 2,845 1,024 1,300 3,755 12,380
% 4.7% 23.2% 23.0% 8.3% 10.5% 30.3% 100.0%
% of Company Annual rents 0.3% 1.4% 1.3% 0.5% 0.6% 1.6% 5.7%
PS BUSINESS PARKS, INC. Owned Portfolio Lease Expirations as of September 30, 2004 (in thousands) Florida Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 133 884 832 532 253 404 3,038
Annual Rents $
1,373 6,707 6,019 3,907 1,911 3,053 22,970
$
% 6.0% 29.2% 26.2% 17.0% 8.3% 13.3% 100.0%
% of Company Annual rents 0.6% 3.1% 2.8% 1.8% 0.9% 1.4% 10.6%
Northern Virginia Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 105 439 477 311 402 969 2,703
Annual Rents $
$
2,015 6,123 8,772 4,605 7,287 15,329 44,131
% 4.6% 13.9% 19.9% 10.4% 16.5% 34.7% 100.0%
% of Company Annual rents 1.0% 2.8% 4.1% 2.1% 3.4% 7.1% 20.5%
Maryland Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 20 359 194 240 163 560 1,536
Annual Rents $
$
481 7,708 3,520 4,859 3,314 9,256 29,138
% 1.6% 26.4% 12.1% 16.7% 11.4% 31.8% 100.0%
% of Company Annual rents 0.2% 3.6% 1.6% 2.3% 1.5% 4.4% 13.6%
Oregon Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 72 449 285 160 177 448 1,591
Annual Rents $
$
22
620 5,687 4,457 2,478 2,374 7,916 23,532
% 2.6% 24.2% 18.9% 10.5% 10.1% 33.7% 100.0%
% of Company Annual rents 0.3% 2.6% 2.1% 1.2% 1.1% 3.7% 11.0%
PS BUSINESS PARKS, INC. Owned Portfolio Lease Expirations as of September 30, 2004 (in thousands) Arizona Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 48 202 103 160 24 80 617
Annual Rents $
% 657 2,093 1,022 1,564 251 815 6,402
$
10.3% 32.7% 16.0% 24.4% 3.9% 12.7% 100.0%
% of Company Annual rents 0.3% 1.0% 0.5% 0.7% 0.1% 0.5% 3.1%
Total Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter
Rentable Square Footage 846 4,205 3,682 2,400 1,669 3,930 16,732
Annual Rents $ $ $ $ $ $ $
23
10,717 51,479 43,945 29,925 26,723 52,080 214,869
% 5.0% 24.0% 20.5% 13.9% 12.4% 24.2% 100.0%
% of Company Annual rents 5.0% 24.0% 20.5% 13.9% 12.4% 24.2% 100.0%
PS BUSINESS PARKS, INC. Owned Portfolio Lease Expirations as of September 30, 2004 (in thousands) Lease Expirations - Large Tenant Portfolio Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter Total
Rentable Square Footage 568 2,871 2,512 1,685 1,386 3,435 12,457
Annual Rents $
6,937 35,761 29,649 21,323 22,781 45,895 162,346
$
% 4.3% 22.0% 18.3% 13.1% 14.0% 28.3% 100.0%
% of Company Annual rents 3.2% 16.6% 13.8% 9.9% 10.6% 21.5% 75.6%
Lease Expirations - Small Tenant Portfolio Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter Total
Rentable Square Footage 278 1,334 1,170 715 283 495 4,275
Annual Rents $
$
3,780 15,718 14,296 8,602 3,942 6,185 52,523
% 7.2% 29.9% 27.2% 16.4% 7.5% 11.8% 100.0%
% of Company Annual rents 1.8% 7.3% 6.7% 4.0% 1.8% 2.9% 24.4%
Lease Expirations - Total Year of Lease Expiration 2004 2005 2006 2007 2008 Thereafter Total
Rentable Square Footage 846 4,205 3,682 2,400 1,669 3,930 16,732
Annual Rents $
$
24
10,717 51,479 43,945 29,925 26,723 52,080 214,869
% 5.0% 24.0% 20.5% 13.9% 12.4% 24.2% 100.0%
% of Company Annual rents 5.0% 24.0% 20.5% 13.9% 12.4% 24.2% 100.0%
