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Analysis of Operating Results and Financial Condition
September 30, 2015
ANALYSIS OF OPERATING RESULTS AND FINANCIAL CONDITION FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 INDEX
Page
Fact Sheet ................................................................................................................................
3
Funds from Operations (FFO) ....................................................................................................
4
Capital Structure.........................................................................................................................
6
Consolidated Balance Sheets......................................................................................................
7
Consolidated Statements of Income ...........................................................................................
9
Capital Expenditure Analysis .....................................................................................................
13
Portfolio Analysis.......................................................................................................................
14
2
PS BUSINESS PARKS, INC. THIRD QUARTER FACT SHEET (in thousands, except per share amounts) NET OPERATING INCOME For The Three Months Ended 09/30/15 09/30/14 % Change Rental income: (1) Same Park (2) Non-Same Park Total rental income Cost of operations: (1) Same Park (2) Non-Same Park Total cost of operations Net operating income: (1) Same Park (2) Non-Same Park Total net operating income
$
$
86,904 6,073 92,977
$
83,715 4,144 87,859
3.8% 46.5% 5.8%
27,617 2,344 29,961
27,166 2,100 29,266
1.7% 11.6% 2.4%
59,287 3,729 63,016
56,549 2,044 58,593
4.8% 82.4% 7.5%
$
For The Nine Months Ended 09/30/15 09/30/14 % Change $
$
258,093 17,781 275,874
$
250,754 11,638 262,392
2.9% 52.8% 5.1%
82,317 6,897 89,214
81,727 5,585 87,312
0.7% 23.5% 2.2%
175,776 10,884 186,660
169,027 6,053 175,080
4.0% 79.8% 6.6%
$
FUNDS FROM OPERATIONS For The Three Months Ended 09/30/15 09/30/14 % Change
For The Nine Months Ended 09/30/15 09/30/14 % Change
FFO allocable to common and dilutive shares - as reported
$
38,905
$
41,167
(5.5%)
$
119,096
$
123,110
(3.3%)
Non-cash distributions related to redemption of preferred equity FFO allocable to common and dilutive shares - as adjusted
$
2,487 41,392
$
41,167
100.0% 0.5%
$
2,487 121,583
$
123,110
100.0% (1.2%)
FFO per common and dilutive share - as reported FFO per common and dilutive share - as adjusted
$ $
1.13 1.20
$ $
1.20 1.20
(5.8%) -
$ $
3.46 3.53
$ $
3.58 3.58
(3.4%) (1.4%)
27,003 7,305 55 34,363
0.2% 125.5% 0.3%
26,988 7,305 54 34,347
0.2% 113.0% 0.3%
Weighted average common shares outstanding - diluted Weighted average common OP units outstanding Weighted average restricted stock units outstanding Total common and dilutive shares
27,049 7,305 124 34,478
27,034 7,305 115 34,454
PROPERTY INFORMATION For The Three Months Ended 09/30/15 09/30/14 % Change Total Portfolio Total rentable square footage at period end Weighted average occupancy Period end occupancy (3) Annualized realized rent per sq. ft. (4) REVPAF
$ $
27,969 93.4% 93.7% 14.23 $ 13.30 $
27,604 91.3% 91.5% 14.01 12.73
1.3% 2.3% 2.4% 1.6% 4.4%
$ $
25,758 93.9% 93.9% 14.37 $ 13.50 $
25,758 92.6% 93.1% 14.03 13.00
1.4% 0.9% 2.4% 3.8%
1,846 71.5% 69.1%
19.8% 22.9% 32.3%
For The Nine Months Ended 09/30/15 09/30/14 % Change
$ $
27,969 92.5% 93.7% 14.22 $ 13.15 $
27,604 91.1% 91.5% 14.03 12.67
1.3% 1.5% 2.4% 1.4% 3.8%
$ $
25,758 93.2% 93.9% 14.33 $ 13.36 $
25,758 92.2% 93.1% 14.07 12.98
1.1% 0.9% 1.8% 2.9%
1,846 73.5% 69.1%
19.8% 13.3% 32.3%
(1)
Same Park Portfolio Total rentable square footage at period end Weighted average occupancy Period end occupancy (3) Annualized realized rent per sq. ft. (4) REVPAF (2)
Non-Same Park Portfolio Total rentable square footage at period end Weighted average occupancy Period end occupancy
2,211 87.9% 91.4%
2,211 83.3% 91.4%
MARKET VALUE INFORMATION 09/30/15 Market value of common stock and common OP units Total debt Total preferred equity Total market capitalization Stock price at the end of the period
$
$ $
% of Total
2,724,245 250,000 995,000 3,969,245 79.38
NOTES (1) (2) (3) (4)
All owned assets acquired prior to January 1, 2013 (excludes assets held for sale). All owned assets acquired subsequent to January 1, 2013. Represents the annualized revenues earned per occupied square foot. Represents the annualized revenues earned per total weighted average square foot.
3
68.6% 6.3% 25.1% 100.0%
12/31/14 $
$ $
2,722,218 250,000 995,000 3,967,218 79.54
% of Total 68.6% 6.3% 25.1% 100.0%
PS BUSINESS PARKS, INC. ANALYSIS OF FUNDS FROM OPERATIONS (in thousands, except per share amounts)
For The Three Months Ended 09/30/15 09/30/14
Change
% Change
For The Nine Months Ended 09/30/15 09/30/14
Change
% Change
Funds from operations (FFO): Net income allocable to common shareholders Adjustments: Gain on sale of real estate facility Depreciation and amortization Net income allocable to noncontrolling interests - common units Net income allocable to restricted stock unit holders FFO allocable to common and dilutive shares
$
$
Weighted average common shares outstanding Weighted average common OP units outstanding Weighted average restricted stock units outstanding Weighted average common share equivalents outstanding Total common and dilutive shares FFO per common and dilutive share
22,484
$
11,268
(15,748) 25,985 6,087 97 38,905 $
$
11,216
(15,748) 26,811 (826) 3,058 3,029 30 67 41,167 $ (2,262)
26,985 7,305 124 64 34,478
26,914 7,305 55 89 34,363
99.5% (100.0%) (3.1%) 99.1% 223.3% (5.5%)
71 69 (25) 115
0.3% 124.8% (28.1%) 0.3%
$
$
53,384
$
(28,235) 79,243 14,467 237 119,096 $ 26,956 7,305 115 78 34,454
31,034
$
22,350
(28,235) 83,547 (4,304) 8,430 6,037 99 138 123,110 $ (4,014) 26,892 7,305 54 96 34,347
72.0% (100.0%) (5.2%) 71.6% 139.4% (3.3%)
64 61 (18) 107
0.2% 112.8% (18.8%) 0.3%
$
1.13
$
1.20
$
(0.07)
(5.8%)
$
3.46
$
3.58
$
(0.12)
(3.4%)
Funds from operations Adjustments: Recurring capital improvements Tenant improvements Lease commissions Total recurring capital expenditures (sold assets) Straight-line rent Stock compensation expense (excluding LTEIP) LTEIP amortization In-place lease adjustment Tenant improvement reimbursements, net of lease incentives Capitalized interest expense Non-cash distributions related to redemption of preferred equity
$
38,905
$
41,167
$
(2,262)
(5.5%)
$
119,096
$
123,110
$
(4,014)
(3.3%)
551 2,612 573 621 43 (78) (229) (110) (122) (42) 2,487
(15.5%) (33.2%) (20.0%) (84.4%) (7.7%) (24.2%) (12.1%) 47.6% 34.3% 17.5% 100.0%
131 227 728 2,342 (465) (217) 1,050 (332) (223) (116) 2,487
(1.9%) (1.2%) (10.0%) (84.2%) 20.7% (22.0%) 20.5% 49.4% 18.7% 16.6% 100.0%
FAD
$
30,997
$
26,953
$
4,044
15.0%
$
90,509
$
88,911
$
1,598
1.8%
FAD per common and dilutive share
$
0.90
$
0.78
$
0.12
15.4%
$
2.63
$
2.59
$
0.04
1.5%
$
30,997 $ (16,208) (4,384) (63) (514) 9,828 $
26,953 (13,458) (3,653) (30) (1,372) 8,440 $
15.0% 20.4% 20.0% 110.0% (62.5%) 16.4%
$
90,509 $ (43,157) (11,689) (181) (2,988) 32,494 $
88,911 $ (40,351) (10,958) (99) (3,159) 34,344 $
66.6%
63.6%
60.8%
57.8%
Funds available for distribution (FAD):
(3,012) (5,266) (2,295) (115) (517) 244 1,667 (341) (478) (282) 2,487
(3,563) (7,878) (2,868) (736) (560) 322 1,896 (231) (356) (240) -
(6,795) (18,289) (6,555) (440) (2,709) 771 6,178 (1,004) (1,418) (813) 2,487
(6,926) (18,516) (7,283) (2,782) (2,244) 988 5,128 (672) (1,195) (697) -
Free cash available for debt repayment and investments: FAD Distributions to common shareholders Distributions to common OP unit holders Distributions to restricted stock unit holders Non-recurring property renovations Free cash available for debt repayment and investments FAD distributions payout ratio
$
4
4,044 (2,750) (731) (33) 858 1,388
$
1,598 (2,806) (731) (82) 171 (1,850)
1.8% 7.0% 6.7% 82.8% (5.4%) (5.4%)
Adjusted FFO Per Common and Dilutive Share⁽¹⁾
$1.30 $1.26
$1.25
$1.24
$1.23 $1.22
$1.20
$1.20
$1.20
$1.20
Q2
Q3
$1.19
$1.20
$1.14
$1.15
$1.13
$1.10
$1.05
$1.00 Q1
Q2
Q3
Q1
Q4⁽²⁾
Q2
Q3
Q4
|_____________2013 ⁽³⁾____________| |_____________2014_____________|
1
(1) Where
2
3
4
5
6
Q1
|______2015______|
7
8
applicable, amounts exclude net gain on repurchase of preferred equity, non-cash distributions related to the redemption/repurchase of preferred equity and acquisition transaction costs. (2) Amount (3) Adjusted
excludes lease buyout payment of $2.3 million in Q4'13.
FFO per share excludes amortization related to the previous LTEIP (2012-2015).
5
9
PS BUSINESS PARKS, INC. CAPITAL STRUCTURE (in thousands) As of September 30, 2015 % of Total Market WTD Average Total Capitalization Rate
As of December 31, 2014 % of Total Market WTD Average Total Capitalization Rate
Mortgage Debt: 5.452% mortgage note, due December 2016
$
Total mortgage debt
250,000 250,000
$ 6.3%
5.45%
250,000 250,000
6.3%
5.45%
Unsecured Debt: $250.0 million unsecured credit facility (LIBOR + 0.925%)
-
Total unsecured debt
-
-
Total debt
250,000
6.3%
5.45%
250,000
-
-
6.3%
5.45%
Preferred Equity: 6.450% Series S preferred stock (9,200,000 depositary shares outstanding) callable 1/18/17 6.000% Series T preferred stock (14,000,000 depositary shares outstanding) callable 5/14/17 5.750% Series U preferred stock (9,200,000 depositary shares outstanding) callable 9/14/17 5.700% Series V preferred stock (4,400,000 depositary shares outstanding) callable 3/14/18 6.875% Series R preferred stock (3,000,000 depositary shares outstanding) redeemed 10/15/15
230,000 350,000 230,000 110,000 75,000
Total preferred equity Total debt and preferred equity Common stock (27,013,685 and 26,919,161 shares outstanding as of September 30, 2015 and December 31, 2014, respectively) Common operating partnership units (7,305,355 units outstanding as of September 30, 2015 and December 31, 2014) Total common equity (1) Total market capitalization
$
230,000 350,000 230,000 110,000 75,000
995,000
25.1%
6.08%
995,000
25.1%
6.08%
1,245,000
31.4%
5.95%
1,245,000
31.4%
5.95%
2,144,346 579,899 2,724,245 3,969,245
68.6%
2,141,150 581,068 2,722,218
68.6%
100.0%
$ 3,967,218
100.0%
Principal maturity dates are represented by the following chart: Total Market Capitalization as of September 30, 2015: $4.0 billion Principal Maturity Dates 2014 5.452% Mortgage Note $ $
2015 -
$ $
2016 -
$ $
250,000 250,000
2017 $ $
2018 -
$ $
Common Stock/OP Units 68.6%
Total -
$ $
Mortgage Debt 6.3%
250,000 250,000
Preferred Equity 25.1%
(1)
Closing stock price was $79.38 and $79.54 as of September 30, 2015 and December 31, 2014, respectively.
6
PS BUSINESS PARKS, INC. CONSOLIDATED BALANCE SHEETS (in thousands)
09/30/15
12/31/14
Change
% Change
ASSETS Cash and cash equivalents
$
Real estate facilities, at cost: Land Buildings and equipment Accumulated depreciation Properties held for disposition, net Land and building held for development
Rent receivable Deferred rent receivable Other assets Total assets
$
252,142
$
152,467
$
99,675
793,569 2,209,219 3,002,788 (1,059,561) 1,943,227 27,251 1,970,478
793,569 2,182,993 2,976,562 (991,497) 1,985,065 25,937 24,442 2,035,444
26,226 26,226 (68,064) (41,838) (25,937) 2,809 (64,966)
3,788 28,147 9,982 2,264,537
2,838 26,050 10,315 2,227,114
950 2,097 (333) 37,423
$
$
(a)
(b)
(c) (d)
65.4%
1.2% 0.9% 6.9% (2.1%) (100.0%) 11.5% (3.2%) 33.5% 8.0% (3.2%) 1.7%
LIABILITIES AND EQUITY Accrued and other liabilities Preferred stock called for redemption Mortgage note payable
$
Total liabilities
80,662 75,000 250,000
$
405,662
Equity: PS Business Parks, Inc.'s shareholders' equity: Preferred stock Common stock Paid-in capital Cumulative net income Cumulative distributions Total PS Business Parks, Inc.'s shareholders' equity Noncontrolling interests: Common units Total noncontrolling interests:
Total liabilities and equity
$
7
995,000 268 709,008 1,244,946 (1,235,941) 1,713,281
199,855 199,855
194,928 194,928
1,858,875
1,908,209
2,264,537
$ $
318,905
920,000 268 719,282 1,346,420 (1,326,950) 1,659,020
Total equity
68,905 250,000
$
2,227,114
11,757 75,000 -
17.1% 100.0% -
86,757
27.2%
(75,000) 10,274 101,474 (91,009) (54,261)
(7.5%) 1.4% 8.2% 7.4% (3.2%)
4,927 4,927 (49,334) $
(e)
37,423
(f) (g)
2.5% 2.5% (2.6%) 1.7%
PS BUSINESS PARKS, INC. CONSOLIDATED BALANCE SHEETS VARIANCE DETAIL (in thousands) (a) Change in cash and cash equivalents: Beginning cash balance Net cash provided by operating activities Net cash provided by investing activities Net cash used in financing activities Ending cash balance
$
$
(b) Change in real estate facilities, at cost: Beginning balance Nonrecurring capital improvements Recurring capital improvements Tenant improvements, gross Lease commissions Transfer to properties held for disposition Depreciation and amortization Ending balance
$ 1,985,065 2,988 6,988 20,799 6,597 33 (79,243) $ 1,943,227
(c) Rent receivable consists of: Non-government tenants U.S. Government tenants ## Allowance for doubtful accounts
09/30/15 2,094 2,094 (400) $ 3,788
12/31/14 $ 1,810 1,428 (400) $ 2,838
09/30/15 2,362 5,381 2,239 $ 9,982
12/31/14 $ 3,050 3,750 3,515 $ 10,315
09/30/15 28,238 18,140 18,680
12/31/14 $ 27,482 8,767 15,839
7,964 7,640 80,662
8,099 8,718 $ 68,905
$
(d) Other assets consist of: ## ## In-place lease adjustment and incentives, net ## ## Prepaid property taxes and insurance Other
$
(e) Accrued and other liabilities consist of: SecurityTOTAL deposits SECURITY DEPOSITS Accrued TOTAL property A/Ptaxes PROPERTY TAXES Prepaid rent In-place lease adjustment and tenant improvement reimbursements, net Other
$
$
(f)
152,467 178,615 17,284 (96,224) 252,142
Change in paid-in capital: Beginning paid-in capital Non-cash distributions related to the redemption of preferred equity Exercise of stock options Stock compensation, net Adjustment to reflect noncontrolling interests to underlying ownership Ending paid in capital
(g) Change in cumulative distributions: Beginning cumulative distributions Distributions to preferred shareholders Distributions to common shareholders Ending cumulative distributions
Change 284 666 $ 950 $
Change (688) 1,631 (1,276) $ (333) $
$
$
$
$
Change 756 9,373 2,841 (135) (1,078) 11,757
709,008 2,487 3,987 5,949 (2,149) 719,282
$ (1,235,941) (47,853) (43,156) $ (1,326,950)
8
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts)
For The Three Months Ended 09/30/15 09/30/14 Revenues: Rental income Facility management fees Total operating revenues
$
93,322 130 93,452
$
95,627 164 95,791
Expenses: Cost of operations Depreciation and amortization General and administrative Total operating expenses
30,448 25,985 3,276 59,709
33,102 26,811 3,078 62,991
Other income and (expense): Interest and other income Interest and other expense Total other income and (expense)
154 (3,368) (3,214)
90 (3,412) (3,322)
Gain on sale of real estate facilities
15,748
-
Net income Net income allocation: Net income allocable to noncontrolling interests: Noncontrolling interests - common units Total net income allocable to noncontrolling interests
$
% Change
(2,305) (a) (34) (2,339)
(2.4%) (20.7%) (2.4%)
(2,654) (b) (826) 198 (c) (3,282)
(8.0%) (3.1%) 6.4% (5.2%)
64 44 108
(d)
71.1% (1.3%) (3.3%)
15,748
100.0%
$
46,277
$
29,478
$
16,799
57.0%
$
6,087 6,087
$
3,058 3,058
$
3,029 3,029
99.1% 99.1%
2,487 67 11,216 13,770
16.4% 223.3% 99.5% 52.1%
Net income allocable to PS Business Parks, Inc.: Preferred shareholders Restricted stock unit holders Common shareholders Total net income allocable to PS Business Parks, Inc.
Net income per common share Basic Diluted
Change
17,609 97 22,484 40,190
15,122 30 11,268 26,420
$
46,277
$
29,478
$
16,799
57.0%
$ $
0.83 0.83
$ $
0.42 0.42
$ $
0.41 0.41
97.6% 97.6%
71 46
0.3% 0.2%
Weighted average common shares outstanding: Basic Diluted
26,985 27,049
9
26,914 27,003
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENT OF INCOME VARIANCE DETAIL (in thousands)
(a) Rental income: Same Park Non-Same Park Same Park straight-line rent Non-Same Park straight-line rent Sold Assets
For The Three Months Ended 09/30/15 09/30/14 $ 86,626 $ 83,463 5,845 4,054 278 252 228 90 345 7,768 $ 93,322 $ 95,627
(b) Cost of Operations: Same Park Non-Same Park Sold Assets LTEIP amortization
For The Three Months Ended 09/30/15 09/30/14 $ 27,617 $ 27,166 2,344 2,100 203 3,190 284 646 $ 30,448 $ 33,102
(c) General and administrative expenses: Cash and non-cash compensation expense LTEIP amortization Acquisition transaction costs Professional fees and other
For The Three Months Ended 09/30/15 09/30/14 $ 1,289 $ 1,142 1,383 1,250 124 604 562 $ 3,276 $ 3,078
(d) Interest and other expense: Mortgage notes payable Capitalized interest Facilities fees & other charges
For The Three Months Ended 09/30/15 09/30/14 $ (3,483) $ (3,483) 282 240 (167) (169) $ (3,368) $ (3,412)
10
Change 3,163 1,791 26 138 (7,423) $ (2,305) $
Change 451 244 (2,987) (362) $ (2,654) $
Change 147 133 (124) 42 $ 198 $
Change 42 2 $ 44 $
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts)
For The Nine Months Ended 9/30/2015 9/30/2014 Revenues: Rental income Facility management fees Total operating revenues
$
278,585 410 278,995
$
284,934 495 285,429
Expenses: Cost of operations Depreciation and amortization General and administrative Total operating expenses
92,251 79,243 10,172 181,666
98,081 83,547 8,928 190,556
Other income and (expense): Interest and other income Interest and other expense Total other income and (expense)
406 (10,029) (9,623)
247 (10,191) (9,944)
28,235
-
Gain on sale of real estate facilities Net income Net income allocation: Net income allocable to noncontrolling interests: Noncontrolling interests - common units Total net income allocable to noncontrolling interests
(2.2%) (17.2%) (2.3%)
(5,830) (b) (4,304) 1,244 (c) (8,890)
(5.9%) (5.2%) 13.9% (4.7%)
159 162 321
(d)
64.4% (1.6%) (3.2%)
28,235
100.0%
$
84,929
$
31,012
36.5%
$
14,467 14,467
$
8,430 8,430
$
6,037 6,037
71.6% 71.6%
2,487 138 22,350 24,975
5.5% 139.4% 72.0% 32.6%
45,366 99 31,034 76,499
$
115,941
$
84,929
$
31,012
36.5%
$ $
1.98 1.97
$ $
1.15 1.15
$ $
0.83 0.82
72.2% 71.3%
64 46
0.2% 0.2%
26,956 27,034
11
(6,349) (a) (85) (6,434)
115,941
47,853 237 53,384 101,474
Weighted average common shares outstanding: Basic Diluted
$
% Change
$
Net income allocable to PS Business Parks, Inc.: Preferred shareholders Restricted stock unit holders Common shareholders Total net income allocable to PS Business Parks, Inc.
Net income per common share Basic Diluted
Change
26,892 26,988
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENT OF INCOME VARIANCE DETAIL (in thousands)
(a) Rental income: Same Park Non-Same Park Same Park straight-line rent Non-Same Park straight-line rent Sold Assets
For The Nine Months Ended 09/30/15 09/30/14 $ 256,108 $ 249,437 17,046 11,351 1,985 1,317 735 287 2,711 22,542 $ 278,585 $ 284,934
(b) Cost of operations: Same Park Non-Same Park Sold Assets LTEIP amortization
For The Nine Months Ended 09/30/15 09/30/14 $ 82,317 $ 81,727 6,897 5,585 1,242 8,938 1,795 1,831 $ 92,251 $ 98,081
(c) General and administrative expenses: Cash and non-cash compensation expense LTEIP amortization Acquisition transaction costs Professional fees and other
For The Nine Months Ended 09/30/15 09/30/14 $ 3,970 $ 3,746 4,383 3,297 124 1,819 1,761 $ 10,172 $ 8,928
(d) Interest and other expense: Mortgage notes payable Capitalized interest Facilities fees & other charges
For The Nine Months Ended 09/30/15 09/30/14 $ (10,335) $ (10,335) 812 697 (506) (553) $ (10,029) $ (10,191)
12
Change 6,671 5,695 668 448 (19,831) $ (6,349) $
Change 590 1,312 (7,696) (36) $ (5,830) $
Change 224 1,086 (124) 58 $ 1,244 $
Change 115 47 $ 162 $
PS BUSINESS PARKS, INC. Analysis of Capital Expenditures (in thousands, except per square foot data)
Recurring capital expenditures
(1)
For The Nine Months Ended
Cost per Weighted
September 30, 2015
Average Square Foot
Capital improvements
$6,988
$0.25
Tenant improvements
18,494
$0.65
6,597
$0.23
$32,079
$1.13
Lease commissions Total recurring capital expenditures Non-recurring property renovations Non-recurring property renovations
(1)
$2,988
The Company defines "recurring capital expenditures" as those capitalized costs necessary to continue to operate the property at its current economic value. Capital improvements in excess of $2,000 with a useful life greater than 24 months are capitalized. Lease transaction costs in excess of $1,000 for leases with terms greater than 12 months are capitalized. It excludes 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 expense was $21.0 million or approximately $0.74 per weighted average square foot for the nine months ended September 30, 2015 compared to $22.0 million or approximately $0.74 per weighted average square foot for the nine months ended September 30, 2014.
13
Same Park Gross Operating Margin Percentage ⁽¹⁾ 75.0% 73.5% 72.0% 69.8%
70.5%
69.1% 68.5%
69.0% 67.5%
67.0%
66.9%
66.5%
68.2%
68.1%
67.4%
66.8%
65.6%
66.0% 64.5% 63.0% 61.5% 60.0% Q1
Q2
Q3
Q4⁽²⁾
|_________2013_________|
Q1
Q2
Q3
Q4
|__________2014__________|
Q1
Q2
Q3
|____2015____|
⁽¹⁾ Gross margin is computed by dividing property net operating income by rental income for Same Park properties in each period. Amounts exclude LTEIP amortization. ⁽²⁾ Amount excludes lease buyout payment of $2.3 million in Q4'13.
14
Change in Same Park Revenue⁽¹⁾ 5.0%
3.8%
4.0%
3.6% 3.1%
3.0%
2.6% 2.3%
2.0%
1.7% 1.8% 1.4%
1.0%
1.3% 1.0% 0.6%
0.0% Q1
Q2
Q3
Q4⁽²⁾
|____________2013____________|
(1)
Q1
Q2
Q3
Q4
|____________2014_____________|
Q1
Q2
Q3
|____2015____|
Percentage represents the change over the comparable period in the previous year based on Same Park operating assets as reported in each period. (2) Amount excludes lease buyout payment of $2.3 million in Q4'13.
15
Change in Same Park NOI⁽¹⁾ 6.0% 4.8%
5.0% 4.2%
4.0% 3.6% 2.9%
3.0% 2.2%
2.1%
2.6%
2.0% 1.0% 0.8%
0.0% Q1
1.0% 0.7%
Q2
0.5%
Q3
Q4⁽²⁾
|____________2013____________| (1)
Q1
Q2
Q3
Q4
|_____________2014____________|
Q1
Q2
Q3
|____2015___|
Percentage represents the change over the comparable period in the previous year based on Same Park operating assets as reported in each period. Amounts exclude LTEIP amortization. (2)Amount
excludes lease buyout payment of $2.3 million in Q4'13.
16
PS BUSINESS PARKS, INC. PORTFOLIO CONCENTRATION SUMMARY (in thousands) Industry Concentration as of September 30, 2015 % of Total Rental Income 17.6% 10.4% 10.1% 10.0% 9.5% 6.9% 6.7% 4.4% 2.9% 2.8% 2.8% 2.2% 1.7% 12.0% 100.0%
Business services Government Warehouse, distribution, transportation and logistics Computer hardware, software and related services Health services Retail, food, and automotive Engineering and construction Insurance and financial services Home furnishings Electronics Aerospace/defense products and services Communications Educational services Other Total
Top 10 Customers by Total Annual Rental Income as of September 30, 2015
Tenant
Square Footage
US Government Kaiser Permanente Lockheed Martin Corp Keeco, L.L.C. Luminex Corp MAXIMUS, Inc. Wells Fargo Investorplace Media, LLC Valley Relocation and Storage of Northern California Inova Health Care Services Total
842 199 168 460 185 102 118 46 213 63 2,396
Annualized Rental Income (1) $
$
19,201 4,473 4,411 3,362 3,179 1,993 1,867 1,759 1,720 1,693 43,658
% of Total Annualized Rental Income 5.2% 1.2% 1.2% 0.9% 0.9% 0.5% 0.5% 0.5% 0.5% 0.5% 11.9%
(1) - For leases expiring within one year, annualized rental income represents income to be received under existing leases from October 1, 2015 through the date of expiration.
17
Total Portfolio Net Operating Income by Region
Three Months Ended September 30, 2014
Three Months Ended September 30, 2015 $63,016 (in thousands)
$58,593 (in thousands)
S. California (15%)
S. California (15%)
N. California (22%)
N. California (22%)
S. Texas (6%)
S. Texas (6%)
N. Texas (8%)
N. Texas (7%)
Virginia (22%)
Virginia (23%)
Maryland (13%)
Maryland (13%)
South Florida (10%)
$2,677
South Florida (10%)
$2,208
Washington (4%)
$6,039
Washington (4%)
$6,007
$9,698
$8,428
$7,825
$8,064
$12,648
$14,127
$13,848
$3,754 $3,540 $13,661
$4,809
$4,276
18
Total Rentable Square Footage by Region
September 30, 2015 27,969 square feet (in thousands)
September 30, 2014 27,604 square feet (in thousands) S. California (14%)
S. California (14%)
N. California (26%)
N. California (26%)
S. Texas (7%)
S. Texas (6%)
N. Texas (11%)
N. Texas (11%)
Virginia (15%) Virginia (15%) Maryland (8%) Maryland (9%) South Florida (14%) South Florida (14%) Washington (5%)
1,390
1,390
Washington (5%)
3,988
3,988 3,866 3,866
2,352 2,352 7,126
7,245
4,040
4,040
1,717
1,963
3,125
3,125
19
Same Park Weighted Average Occupancy
(1)
95.0% 93.9% 93.5% 93.0%
92.7%
92.6%
93.1%
92.2% 91.8% 91.0%
91.0% 90.4% 89.3%
89.6%
89.0%
87.0%
85.0% Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
|_______________2013_______________| |_______________2014_______________|
(1)
Q1
Q2 |_____2015_____|
Represents the weighted average occupancy for the current Same Park portfolio.
20
Q3
Total Portfolio Weighted Average Occupancy (1) 94.0% 93.4% 93.0% 92.3% 92.0%
92.0%
91.6% 90.8%
91.0% 90.0%
90.1%
90.2%
Q3
Q4
91.3%
91.3%
Q2
Q3
89.6% 89.3%
89.0% 88.0% 87.0% 86.0% 85.0% Q1
Q2
Q1
Q4
|______________2013_____________| |______________2014_____________|
(1)
Q1
|_____2015____|
Represents the weighted average occupancy for the total owned portfolio .
21
Q2
Q3
PS BUSINESS PARKS, INC. SAME PARK PORTFOLIO OVERVIEW (in thousands) Rentable Square Footage of Properties as of September 30, 2015 Primary Markets Northern California Northern Virginia South Florida Maryland Dallas Orange County Los Angeles County Austin San Diego County Seattle Total Percentage by Product Type
Industrial
Office
3,906 2,631 231 712 951 8,431 32.7%
2,093 12 1,382 705 31 28 4,251 16.5%
Flex 2,880 1,947 1,074 970 1,537 911 861 1,717 768 411 13,076 50.8%
Total 6,786 4,040 3,717 2,352 1,768 1,616 1,604 1,717 768 1,390 25,758 100.0%
% of Total 26.3% 15.7% 14.4% 9.1% 6.9% 6.3% 6.2% 6.7% 3.0% 5.4% 100.0%
Weighted Average Occupancy Rates by Product Type for the Three Months Ended September 30, 2015 Primary Markets Northern California Northern Virginia South Florida Maryland Dallas Orange County Los Angeles County Austin San Diego County Seattle Total
Industrial 97.2% 95.2% 100.0% 98.2% 99.3% 96.9%
Office 90.9% 100.0% 93.7% 87.6% 94.2% 100.0% 91.4%
Flex 94.9% 93.2% 95.1% 85.4% 86.6% 91.5% 96.9% 93.1% 96.6% 96.8% 92.8%
Total 96.2% 92.0% 95.2% 90.3% 88.3% 89.8% 97.4% 93.1% 96.6% 98.5% 93.9%
Weighted Average Occupancy Rates by Portfolio Type for the Three Months Ended September 30, 2015 Primary Markets Northern California Northern Virginia South Florida Maryland Dallas Orange County Los Angeles County Austin San Diego County Seattle Total
Large Tenant
Small Tenant
96.5% 93.1% 95.5% 90.2% 87.9% 89.0% 98.2% 93.2% 99.3% 94.2%
94.4% 90.1% 93.7% 90.5% 90.3% 90.5% 96.8% 92.6% 96.6% 97.0% 93.1%
Total 96.2% 92.0% 95.2% 90.3% 88.3% 89.8% 97.4% 93.1% 96.6% 98.5% 93.9%
Note: 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.
22
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO OVERVIEW (in thousands) Rentable Square Footage of Properties as of September 30, 2015 Primary Markets Northern California Northern Virginia South Florida Maryland Dallas Austin Orange County Los Angeles County Seattle San Diego County Total Percentage by Product Type
Industrial
Office
3,906 2,780 231 246 712 951 8,826 31.6%
340 2,093 12 1,382 705 31 28 4,591 16.4%
Flex 2,999 1,947 1,074 970 2,894 1,717 911 861 411 768 14,552 52.0%
Total 7,245 4,040 3,866 2,352 3,125 1,963 1,616 1,604 1,390 768 27,969 100.0%
% of Total 25.9% 14.5% 13.8% 8.4% 11.2% 7.0% 5.8% 5.7% 5.0% 2.7% 100.0%
Weighted Average Occupancy Rates by Product Type for the Three Months Ended September 30, 2015 Primary Markets Northern California Northern Virginia South Florida Maryland Dallas Austin Orange County Los Angeles County Seattle San Diego County Total
Industrial 97.2% 95.4% 100.0% 81.8% 98.2% 99.3% 96.6%
Office 86.2% 90.9% 100.0% 93.7% 87.6% 94.2% 100.0% 91.0%
Flex 94.8% 93.2% 95.1% 85.4% 87.1% 93.1% 91.5% 96.9% 96.8% 96.6% 92.3%
Total 95.7% 92.0% 95.4% 90.3% 88.0% 91.7% 89.8% 97.4% 98.5% 96.6% 93.4%
Weighted Average Occupancy Rates by Portfolio Type for the Three Months Ended September 30, 2015 Primary Markets Northern California Northern Virginia South Florida Maryland Dallas Austin Orange County Los Angeles County Seattle San Diego County Total
Large Tenant
Small Tenant
96.5% 93.1% 95.8% 90.2% 89.5% 91.6% 89.0% 98.2% 99.3% 94.1%
92.2% 90.1% 93.7% 90.5% 85.6% 92.6% 90.5% 96.8% 97.0% 96.6% 91.9%
Total 95.7% 92.0% 95.4% 90.3% 88.0% 91.7% 89.8% 97.4% 98.5% 96.6% 93.4%
Note: 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.
23
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO LEASE EXPIRATIONS AS OF SEPTEMBER 30, 2015 (in thousands) Lease Expirations - Flex
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 1,044 3,378 3,131 2,141 1,248 2,624 13,566
$
12,051 48,561 46,215 30,253 20,016 46,732 203,828
$
% 5.9% 23.8% 22.7% 14.8% 9.9% 22.9% 100.0%
% of Total Annualized Rental Income 3.1% 12.4% 11.7% 7.7% 5.1% 11.9% 51.9%
Lease Expirations - Office
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 378 1,161 841 804 450 601 4,235
$
10,012 28,799 20,696 20,674 12,416 17,751 110,348
$
% 9.1% 26.1% 18.8% 18.6% 11.3% 16.1% 100.0%
% of Total Annualized Rental Income 2.5% 7.3% 5.3% 5.2% 3.2% 4.5% 28.0%
Lease Expirations - Industrial
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 217 1,521 1,898 1,227 1,572 2,222 8,657
$
1,468 12,440 15,782 11,215 13,965 23,870 78,740
$
% 1.9% 15.8% 20.0% 14.2% 17.8% 30.3% 100.0%
% of Total Annualized Rental Income 0.4% 3.2% 4.0% 2.9% 3.5% 6.1% 20.1%
Lease Expirations - Total Portfolio
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 1,639 6,060 5,870 4,172 3,270 5,447 26,458
$
23,531 89,800 82,693 62,142 46,397 88,353 392,916
$
24
% 6.0% 22.9% 21.0% 15.8% 11.8% 22.5% 100.0%
% of Total Annualized Rental Income 6.0% 22.9% 21.0% 15.8% 11.8% 22.5% 100.0%
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO LEASE EXPIRATIONS AS OF SEPTEMBER 30, 2015 (in thousands) Southern California
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 351 1,098 1,116 516 302 390 3,773
$
5,561 16,997 17,413 9,258 4,587 8,448 62,264
$
% 8.9% 27.3% 28.0% 14.9% 7.4% 13.5% 100.0%
% of Total Annualized Rental Income 1.4% 4.2% 4.5% 2.4% 1.2% 2.2% 15.9%
Northern California
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 242 1,212 1,305 1,034 1,487 1,710 6,990
$
3,325 15,163 15,785 13,167 15,532 23,088 86,060
$
% 3.9% 17.6% 18.3% 15.3% 18.1% 26.8% 100.0%
% of Total Annualized Rental Income 0.9% 3.9% 4.0% 3.4% 4.0% 5.9% 22.1%
Southern Texas
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 82 269 421 390 82 625 1,869
$
726 3,751 5,590 5,062 1,265 9,669 26,063
$
% 2.8% 14.4% 21.4% 19.4% 4.9% 37.1% 100.0%
% of Total Annualized Rental Income 0.2% 1.0% 1.4% 1.3% 0.3% 2.5% 6.7%
Northern Texas
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 185 609 596 428 369 622 2,809
$
1,743 5,896 6,801 4,394 5,138 8,388 32,360
$
25
% 5.4% 18.2% 21.0% 13.6% 15.9% 25.9% 100.0%
% of Total Annualized Rental Income 0.4% 1.5% 1.7% 1.1% 1.3% 2.1% 8.1%
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO LEASE EXPIRATIONS AS OF SEPTEMBER 30, 2015 (in thousands) South Florida
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 300 1,065 911 802 177 481 3,736
$
1,834 10,025 9,048 8,461 2,059 5,194 36,621
$
% 5.0% 27.4% 24.7% 23.1% 5.6% 14.2% 100.0%
% of Total Annualized Rental Income 0.5% 2.6% 2.3% 2.2% 0.5% 1.3% 9.4%
Northern Virginia
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 230 1,016 849 395 427 833 3,750
$
3,653 21,564 18,526 8,998 10,905 19,293 82,939
$
% 4.4% 26.0% 22.3% 10.9% 13.1% 23.3% 100.0%
% of Total Annualized Rental Income 0.9% 5.5% 4.7% 2.2% 2.8% 4.9% 21.0%
Maryland
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 207 574 259 440 243 435 2,158
$
5,912 13,326 5,363 10,483 5,329 10,738 51,151
$
% 11.6% 26.0% 10.5% 20.5% 10.4% 21.0% 100.0%
% of Total Annualized Rental Income 1.5% 3.4% 1.3% 2.7% 1.3% 2.7% 12.9%
Washington
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 42 217 413 167 183 351 1,373
$
777 3,078 4,167 2,319 1,582 3,535 15,458
$
26
% 5.0% 19.9% 27.0% 15.0% 10.2% 22.9% 100.0%
% of Total Annualized Rental Income 0.2% 0.8% 1.1% 0.5% 0.4% 0.9% 3.9%
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO LEASE EXPIRATIONS AS OF SEPTEMBER 30, 2015 (in thousands) Total Portfolio
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 1,639 6,060 5,870 4,172 3,270 5,447 26,458
$
23,531 89,800 82,693 62,142 46,397 88,353 392,916
$
27
% 6.0% 22.9% 21.0% 15.8% 11.8% 22.5% 100.0%
% of Total Annualized Rental Income 6.0% 22.9% 21.0% 15.8% 11.8% 22.5% 100.0%
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO LEASE EXPIRATIONS AS OF SEPTEMBER 30, 2015 (in thousands) Lease Expirations - Large Tenant Portfolio
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 768 3,528 3,751 2,996 2,724 4,818 18,585
$
11,458 47,115 45,832 40,801 35,703 73,976 254,885
$
% 4.5% 18.5% 18.0% 16.0% 14.0% 29.0% 100.0%
% of Total Annualized Rental Income 2.9% 12.0% 11.7% 10.4% 9.1% 18.8% 64.9%
Lease Expirations - Small Tenant Portfolio
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 871 2,532 2,119 1,176 546 629 7,873
$
12,073 42,685 36,861 21,341 10,694 14,377 138,031
$
% 8.8% 30.9% 26.7% 15.5% 7.7% 10.4% 100.0%
% of Total Annualized Rental Income 3.1% 10.9% 9.3% 5.4% 2.7% 3.7% 35.1%
Lease Expirations - Total Portfolio
Year of Lease Expiration 2015 2016 2017 2018 2019 Thereafter Total
Annualized Rental Income
Leased Square Footage 1,639 6,060 5,870 4,172 3,270 5,447 26,458
$
23,531 89,800 82,693 62,142 46,397 88,353 392,916
$
28
% 6.0% 22.9% 21.0% 15.8% 11.8% 22.5% 100.0%
% of Total Annualized Rental Income 6.0% 22.9% 21.0% 15.8% 11.8% 22.5% 100.0%
PS BUSINESS PARKS, INC. QUARTER TO DATE PRODUCTION STATISTICS - TOTAL PORTFOLIO September 30, 2015
Leasing Volume Q3 2015
Leasing Volume YTD
Tenant Retention Q3 2015
Tenant Retention YTD
Rental Rate Change (1) Q3 2015
Rental Rate Change (1) YTD
Maryland
125,000
406,000
78.3%
71.9%
-10.1%
-8.1%
Northern Virginia
308,000
907,000
67.0%
68.5%
-4.3%
-6.1%
San Diego County
93,000
290,000
67.1%
66.5%
4.0%
1.6%
Orange County
140,000
419,000
61.6%
52.3%
5.0%
2.5%
Los Angeles County
188,000
519,000
74.8%
65.7%
4.1%
3.4%
South Florida
331,000
1,204,000
83.5%
71.8%
5.8%
6.2%
Austin
297,000
704,000
79.7%
60.3%
10.2%
11.7%
Dallas
230,000
768,000
43.9%
41.2%
1.6%
3.3%
Seattle
52,000
333,000
51.3%
47.1%
12.5%
10.3%
806,000
1,829,000
61.9%
67.1%
17.0%
16.8%
2,570,000
7,379,000
66.7%
63.0%
5.5%
4.6%
Northern California Company Totals (1)
Rental rate change is computed by taking the percentage difference between outgoing rents and incoming rents for leases executed during the period. Leases executed on spaces vacant for more than the preceding twelve months have been excluded.
29
