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Analysis of Operating Results and Financial Condition June 30, 2011
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ANALYSIS OF OPERATING RESULTS AND FINANCIAL CONDITION FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 INDEX
Page
Fact Sheet............................................................................................................................
3
Funds from Operations (FFO) .............................................................................................
4 –5
Capital Structure..................................................................................................................
6
Consolidated Balance Sheets ...............................................................................................
7-8
Consolidated Statements of Income ..................................................................................... 9 –12 Capital Expenditure Analysis ..............................................................................................
13
Portfolio Analysis ................................................................................................................ 14 - 28
O
PS BUSINESS PARKS, INC. SECOND QUARTER FACT SHEET (in thousands, except per share amounts) OPERATING DATA
06/30/11
For The Three Months Ended 06/30/10 % Change
06/30/11
For The Six Months Ended 06/30/10
% Change
Total rental income Total cost of operations Net operating income
$
73,053 $ 24,213 48,840 $
69,432 21,476 47,956
5.2% 12.7% 1.8%
$
$
$
146,565 $ 49,921 96,644 $
136,080 44,217 91,863
7.7% 12.9% 5.2%
Net income allocable to common shareholders
$
11,374 $
9,229
23.2%
$
27,937 $
20,974
33.2%
Net income per common share - diluted: Continuing operations Discontinued operations Net income per common share
$ $ $
0.45 $ 0.01 $ 0.46 $
0.37 0.37
21.6% 100.0% 24.3%
$ $ $
1.12 $ 0.01 $ 1.13 $
0.68 0.17 0.85
64.7% (94.1%) 32.9%
24,524 24,669
0.8% 0.6%
24,469 24,611
0.9% 0.8%
Weighted average common shares outstanding - basic Weighted average common shares outstanding - diluted
24,715 24,807
24,700 24,800
FUNDS FROM OPERATIONS
06/30/11 FFO allocable to common and dilutive shares - adjusted
For The Three Months Ended 06/30/10 % Change
$
36,034 $
33,904
Non-cash distributions related to the redemption of preferred equity Acquisition transaction costs Gain on repurchase of preferred equity, net of issuance costs FFO allocable to common and dilutive shares - as reported
$
(218) 35,816 $
(2,436) (787) 30,681
FFO per common and dilutive share - adjusted FFO per common and dilutive share - as reported
$ $
1.12 $ 1.11 $
Weighted average common shares outstanding - diluted Weighted average common OP units outstanding Weighted average restricted stock units outstanding Total common and dilutive shares
24,807 7,305 58 32,170
6.3%
06/30/11
For The Six Months Ended 06/30/10
$
71,017 $
63,362
100.0% (72.3%) 16.7%
$
(218) 7,389 78,188 $
(2,436) (1,904) 59,022
1.06 0.96
5.7% 15.6%
$ $
2.21 $ 2.43 $
24,669 7,305 94 32,068
0.6% (38.3%) 0.3%
24,800 7,305 67 32,172
% Change 12.1% 100.0% (88.6%) 100.0% 32.5%
1.98 1.84
11.6% 32.1%
24,611 7,305 102 32,018
0.8% (34.3%) 0.5%
PROPERTY INFORMATION
06/30/11
For The Three Months Ended 06/30/10 % Change
06/30/11
For The Six Months Ended 06/30/10
% Change
Total Portfolio (1) Total rentable square footage at period end Weighted average occupancy
21,754
20,534
5.9%
21,754
20,534
5.9%
89.0%
91.4%
(2.6%)
89.1%
91.4%
(2.5%)
Annualized realized rent per sq. ft. (2)
$
15.16 $
15.06
0.7%
$
15.21 $
15.08
0.9%
REVPAF (3)
$
13.49 $
13.76
(2.0%)
$
13.55 $
13.78
(1.7%)
Same Park Portfolio (4) Total rentable square footage at period end Weighted average occupancy
19,248
19,248
90.8%
91.8%
(1.1%)
-
19,248
19,248
90.9%
91.6%
(0.8%)
-
Annualized realized rent per sq. ft. (2)
$
14.49 $
14.95
(3.1%)
$
14.57 $
15.01
(2.9%)
REVPAF (3)
$
13.16 $
13.72
(4.1%)
$
13.25 $
13.75
(3.6%)
(1) (2) (3) (4)
Amounts exclude discontinued operations. Represents the annualized revenues earned per occupied square foot. Represents the annualized revenues earned per total weighted average square foot. All assets in continuing operations that the Company owned from January 1, 2010 through June 30, 2011.
BALANCE SHEET DATA 06/30/11 Total assets Noncontrolling interests - preferred units Noncontrolling interests - common units Perpetual preferred stock Common shareholders' equity Total common shares outstanding at period end Book value per common share
$ $ $ $ $
1,619,289 5,583 178,387 598,546 603,536 24,716 24.42
$
12/31/10 $ $ $ $ $ $
1,621,057 53,418 176,179 598,546 594,982 24,671 24.12
% Change (0.1%) (89.5%) 1.3% 1.4% 0.2% 1.2%
MARKET VALUE INFORMATION 06/30/11 Market value of common stock and common OP units
$
1,764,385 $
12/31/10 1,781,732
% Change (1.0%)
Total debt
181,684
144,511
25.7%
Total preferred equity
604,129
651,964
(7.3%)
Total market capitalization
$
2,550,198 $
2,578,207
(1.1%)
Stock price at the end of the period
$
55.10 $
55.72
(1.1%)
P
PS BUSINESS PARKS, INC. ANALYSIS OF FUNDS FROM OPERATIONS (in thousands, except per share amounts)
For The Three Months Ended 06/30/11 06/30/10
Increase (Decrease)
For The Six Months Ended 06/30/11 06/30/10
% Change
Increase (Decrease)
% 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
$
11,374 $
9,229 $
2,145
$
21,058 3,362 22 35,816 $
18,666 2,749 37 30,681 $
2,392 613 (15) 5,135
12.8% 22.3% (40.5%) 16.7%
24,715 7,305 58 92 32,170
24,524 7,305 94 145 32,068
191 (36) (53) 102
0.8% (38.3%) (36.6%) 0.3%
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
23.2%
$
27,937 $
20,974 $
6,963
33.2%
$
41,917 8,262 72 78,188 $
(5,153) 36,856 6,261 84 59,022 $
(5,153) 5,061 2,001 (12) 19,166
(100.0%) 13.7% 32.0% (14.3%) 32.5%
24,700 7,305 67 100 32,172
24,469 7,305 102 142 32,018
231 (35) (42) 154
0.9% (34.3%) (29.6%) 0.5%
$
1.11 $
0.96 $
0.15
15.6%
$
2.43 $
1.84 $
0.59
32.1%
Funds from operations Adjustments: Recurring capital improvements Tenant improvements Lease commissions Straight-line rent Stock compensation expense In-place lease adjustment Tenant improvement reimbursements, net of lease incentives Non-cash distributions related to redemption of preferred equity Gain on repurchase of preferred equity, net of issuance costs
$
35,816 $
30,681 $
5,135
16.7%
$
78,188 $
59,022 $
19,166
32.5%
(1,458) (6,396) (1,405) (102) 363 212 (237) -
(1,565) (3,649) (1,229) (391) 520 136 (101) 2,436 -
(107) 2,747 176 (289) (157) (76) 136 2,436 -
(6.8%) 75.3% 14.3% (73.9%) (30.2%) (55.9%) 134.7% 100.0% -
FAD
$
26,793 $
26,838 $
(45)
(0.2%)
$
FAD per common and dilutive share
$
0.83 $
0.84 $
(0.01)
(1.2%)
$
26,793 $ (10,875) (3,214) (22) (271) 12,411 $
26,838 $ (10,819) (3,214) (37) (266) 12,502 $
(45) 56 (15) 5 (91)
(0.2%) 0.5% (40.5%) 1.9% (0.7%)
52.7%
52.4%
0.3%
0.6%
Funds available for distribution (FAD):
(2,314) (11,148) (2,885) (383) 822 421 (432) (7,389)
(3,150) (6,207) (2,063) (645) 1,135 98 (264) 2,436 -
(836) 4,941 822 (262) (313) (323) 168 2,436 7,389
(26.5%) 79.6% 39.8% (40.6%) (27.6%) (329.6%) 63.6% 100.0% 100.0%
54,880 $
50,362 $
4,518
9.0%
$
1.71 $
1.57 $
0.14
8.9%
$
54,880 $ (21,742) (6,428) (55) (549) 26,106 $
50,362 $ (21,566) (6,428) (84) (540) 21,744 $
4,518 176 (29) 9 4,362
9.0% 0.8% (34.5%) 1.7% 20.1%
51.4%
55.8%
(4.4%)
(7.9%)
Cash available for debt repayments and reinvestments: FAD Distributions to common shareholders Distributions to common OP unit holders Distributions to restricted stock unit holders Debt Service Cash available for reinvestments FAD payout ratio
$
Q
$
Adjusted FFO Per Common and Dilutive Share $1.25 $1.20 $1.15
$1.13
$1.13
$1.12 $1.09
$1.10 $1.06
$1.04
$1.05
$1.06
$1.07
$1.02
$1.00 $0.95
$0.92
$0.90 $0.85 $0.80 Q1⁽¹⁾
Q2
Q3
Q4
|____________2009____________|
Q1⁽³⁾
Q3⁽³⁾
Q4⁽²⁾⁽³⁾
|___________2010___________|
(1) Excludes
(2) Excludes
Q2⁽²⁾⁽³⁾
Q1⁽¹⁾
Q2⁽³⁾
|___2011___|
net gain on repurchase of preferred equity. non-cash distributions related to the redemption/repurchase of preferred equity. (3) Excludes acquisition transaction costs.
R
PS BUSINESS PARKS, INC. CAPITAL STRUCTURE (in thousands)
As of June 30, 2011 % of Total Market WTD Average Capitalization Rate
Total
As of December 31, 2010 % of Total Market WTD Average Total Capitalization Rate
Mortgage Debt: 5.730% mortgage note, due March 2013 5.520% mortgage note, due May 2013 5.680% mortgage note, due May 2013 6.150% mortgage note, due November 2031 (includes unamortized premium of $97,000 on $15.6 million mortgage note with stated rate of 7.20%) (1) 5.610% mortgage note, repaid January 2011
$
13,583 9,444 9,467 15,690
$
-
Total mortgage notes payable
13,729 9,572 9,594 15,950 2,666
48,184
1.9%
5.82%
51,511
2.0%
5.81%
Short-term Debt: $100.0 million unsecured credit facility (LIBOR + 1.80%) $121.0 million note payable to affiliate (LIBOR + 0.85%)
17,500 116,000
93,000 -
Total short-term debt
133,500
5.2%
1.22%
93,000
3.6%
2.11%
Total debt
181,684
7.1%
2.44%
144,511
5.6%
3.43%
Preferred Equity 7.000% Series H preferred stock (6,340,776 depositary shares outstanding as of 06/30/11) callable 1/30/09 6.875% Series I preferred stock (2,745,050 depositary share outstanding as of 06/30/11) callable 4/21/09 7.200% Series M preferred stock (3,182,000 depositary shares outstanding as of 06/30/11) callable 5/2/10 7.125% Series N preferred operating partnership units (223,300 units outstanding as of 06/30/11) callable 12/12/10 7.375% Series O preferred stock (3,384,000 depositary shares outstanding as of 06/30/11) callable 6/16/11 6.700% Series P preferred stock (5,290,000 depositary shares outstanding as of 06/30/11) callable 1/17/12 6.875% Series R preferred stock (3,000,000 depositary shares outstanding as of 06/30/11) callable 10/15/15 7.500% Series J preferred operating partnership units (1,710,000 units repurchased 2/6/11) 6.550% Series Q preferred operating partnership units (203,400 units repurchased 2/14/11)
158,520 68,626 79,550 5,583 84,600 132,250 75,000 -
158,520 68,626 79,550 5,583 84,600 132,250 75,000 42,750 5,085
Total preferred equity
604,129
23.7%
6.98%
651,964
25.3%
7.02%
Total debt and preferred equity
785,813
30.8%
5.93%
796,475
30.9%
6.36%
Common stock (24,716,144 and 24,671,177 shares outstanding as of June 30, 2011 and December 31, 2010, respectively) Common operating partnership units (7,305,355 units outstanding as of June 30, 2011 and December 31, 2010) Total common equity (2) Total market capitalization
$
1,361,860 402,525 1,764,385
69.2%
2,550,198
100.0%
$
1,374,678 407,054 1,781,732
69.1%
2,578,207
100.0%
Principal maturity dates are represented by the following chart: Principal Maturity Dates 2011
Rose Canyon $ Meadows (1) Boca Wellington II Meadows Loan Premium $ (1) (2)
This mortgage is repayable without penalty beginning November, 2011. Closing stock price was $55.10 and $55.72 as of June 30, 2011 and December 31, 2010, respectively.
S
2012
147 $ 150 133 130 97 657 $
309 $ 318 275 272 1,174 $
2013
13,127 $ 345 9,036 9,065 31,573 $
2014
- $ 371 371 $
2015
Thereafter
- $ 399 399 $
- $ 14,010 14,010 $
Total
13,583 15,593 9,444 9,467 97 48,184
PS BUSINESS PARKS, INC. CONSOLIDATED BALANCE SHEETS (in thousands)
06/30/11
12/31/10
Increase (Decrease)
% Change
ASSETS Cash and cash equivalents
$
Real estate facilities, at cost: Land Buildings and equipment Accumulated depreciation Properties held for disposition, net Land held for development
Rent receivable Deferred rent receivable Other assets Total assets
$
2,936
$
5,066
$
(2,130)
569,125 1,806,582 2,375,707 (809,810) 1,565,897 6,686 6,829 1,579,412
562,678 1,773,682 2,336,360 (772,407) 1,563,953 6,671 6,829 1,577,453
6,447 32,900 39,347 37,403 1,944 15 1,959
3,214 22,660 11,067 1,619,289
3,127 22,277 13,134 1,621,057
87 383 (2,067) (1,768)
$
$
(a)
(b)
(c) (d)
(42.0%)
1.1% 1.9% 1.7% 4.8% 0.1% 0.2% 0.1% 2.8% 1.7% (15.7%) (0.1%)
LIABILITIES AND EQUITY Accrued and other liabilities Credit Facility Note payable to affiliate Mortgage notes payable Total liabilities 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: Preferred units Common units Total noncontrolling interests: Total equity Total liabilities and equity
$
T
(e)
51,553 17,500 116,000 48,184
53,421 93,000 51,511
(1,868) (75,500) 116,000 (3,327)
233,237
197,932
35,305
17.8%
598,546 246 560,169 833,524 (790,403) 1,202,082
598,546 246 557,882 784,616 (747,762) 1,193,528
2,287 48,908 42,641 8,554
0.4% 6.2% 5.7% 0.7%
5,583 178,387 183,970
53,418 176,179 229,597
(47,835) 2,208 (45,627)
(89.5%) 1.3% (19.9%)
1,386,052
1,423,125
(37,073)
(2.6%)
(1,768)
(0.1%)
1,619,289
$
1,621,057
$
(f) (g)
(3.5%) (81.2%) 100.0% (6.5%)
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 used in investing activities Net cash used in financing activities Ending cash balance
$
$
(b) Change in real estate facilities, at cost: Beginning balance Property acquisitions Property renovations and developments Recurring capital improvements Tenant improvements Lease commissions Depreciation and amortization Ending balance
$
$
5,066 92,058 (44,174) (50,014) 2,936
1,563,953 26,315 904 2,405 11,212 2,885 (41,777) 1,565,897
(c) Rent receivable consists of: Non-government tenants U.S. Government tenants Allowance for bad debt
06/30/11 $ 2,158 1,456 (400) $ 3,214
12/31/10 $ 1,852 1,675 (400) $ 3,127
Increase (Decrease) $ 306 (219) $ 87
(d) Other assets consist of: In-place lease adjustment, net Prepaid property taxes Prepaid insurance Mortgage impounds Lease incentives, net Other
06/30/11 $ 5,242 65 2,467 1,450 444 1,399 $ 11,067
12/31/10 $ 5,422 3,107 1,011 823 514 2,257 $ 13,134
Increase (Decrease) $ (180) (3,042) 1,456 627 (70) (858) $ (2,067)
(e) Accrued and other liabilities consist of: Security deposits Accrued property taxes Prepaid rent In-place lease adjustment and tenant improvement reimbursements, net Other
06/30/11 $ 20,902 7,740 11,501
12/31/10 $ 20,697 4,961 12,778
Increase (Decrease) $ 205 2,779 (1,277)
3,870 7,540 51,553
4,159 10,826 $ 53,421
(289) (3,286) (1,868)
$
(f)
Change in paid-in capital: Beginning paid-in capital Gain on repurchase 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
$
$
$
$
$
U
557,882 10,107 1,050 252 (9,122) 560,169
(747,762) (20,899) (21,742) (790,403)
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts)
For The Three Months Ended 06/30/11 06/30/10 Revenues: Rental income Facility management fees Total operating revenues
$
73,053 169 73,222
Expenses: Cost of operations Depreciation and amortization General and administrative Total operating expenses
24,213 21,023 1,748 46,984
Other income and expenses: Interest and other income Interest expense Total other income and expenses
43 (1,145) (1,102)
Income from continuing operations
25,136
Discontinued operations: Income from discontinued operations Net income Net income allocation: Net income allocable to noncontrolling interests: Noncontrolling interests - common units Noncontrolling interests - preferred units Total net income allocable to noncontrolling interests
$
$
Net income allocable to PS Business Parks, Inc.: Common shareholders Preferred shareholders Restricted stock unit holders Total net income allocable to PS Business Parks, Inc.
171 25,307
3,362 100 3,462
$
69,432 163 69,595
Increase (Decrease)
$
21,476 18,560 2,400 42,436
91 (856) (765) 26,394
$
$
11,374 10,449 22 21,845
96 26,490
2,749 1,752 4,501
$
$
9,229 12,723 37 21,989
% Change
(a)
5.2% 3.7% 5.2%
2,737 2,463 (652) (b) 4,548
12.7% 13.3% (27.2%) 10.7%
(48) 289 (c) 337
(52.7%) 33.8% 44.1%
3,621 6 3,627
(1,258)
(4.8%)
75 (d) (1,183)
78.1% (4.5%)
613 (1,652) (1,039)
22.3% (94.3%) (23.1%)
2,145 (2,274) (15) (144)
23.2% (17.9%) (40.5%) (0.7%)
$
25,307
$
26,490
$
(1,183)
(4.5%)
Net income per common share - basic: Continuing operations Discontinued operations Net Income
$ $ $
0.45 0.01 0.46
$ $ $
0.37 0.38
$ $ $
0.08 0.01 0.08
21.6% 100.0% 21.1%
Net income per common share - diluted: Continuing operations Discontinued operations Net Income
$ $ $
0.45 0.01 0.46
$ $ $
0.37 0.37
$ $ $
0.08 0.01 0.09
21.6% 100.0% 24.3%
191 138
0.8% 0.6%
Weighted average common shares outstanding: Basic Diluted
24,715 24,807
V
24,524 24,669
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
(b) General and administrative expenses: Cash and non-cash compensation expense Professional fees Acquisition transaction costs Other
For The Three Months Ended 06/30/11 06/30/10 $ 63,487 $ 65,833 9,465 3,201 (159) 195 260 203 $ 73,053 $ 69,432
Increase (Decrease) $ (2,346) 6,264 (354) 57 $ 3,621
For The Three Months Ended
Increase
06/30/11 967 196 218 367 $ 1,748 $
06/30/10 $ 1,033 209 787 371 $ 2,400
(Decrease) $ (66) (13) (569) (4) $ (652)
(c) Interest expense: Mortgage notes payable Note payable to affiliate Facilities fees & other charges
For The Three Months Ended 06/30/11 06/30/10 $ (711) $ (768) (328) (106) (88) $ (1,145) $ (856)
Increase (Decrease) $ (57) 328 18 $ 289
(d) Net loss from discontinued operations: Rental revenue Operating expenses Depreciation expense
For The Three Months Ended 06/30/11 06/30/10 $ 425 $ 446 (219) (244) (35) (106) $ 171 $ 96
Increase (Decrease) $ (21) 25 71 $ 75
NM
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts)
For The Six Months Ended 6/30/2011 6/30/2010 Revenues: Rental income Facility management fees Total operating revenues
$
146,565 347 146,912
$
136,080 336 136,416
Increase (Decrease)
$
% Change
(a)
7.7% 3.3% 7.7%
5,704 5,139 (1,831) (b) 9,012
12.9% 14.0% (35.6%) 10.5%
(31.5%) 37.9% 47.1%
10,485 11 10,496
Expenses: Cost of operations Depreciation and amortization General and administrative Total operating expenses
49,921 41,777 3,318 95,016
44,217 36,638 5,149 86,004
Other income and expenses: Interest and other income Interest expense Total other income and expenses
137 (2,360) (2,223)
200 (1,711) (1,511)
(63) 649 (c) 712
Income from continuing operations
49,673
48,901
772
307 307
277 5,153 5,430
Discontinued operations: Income from discontinued operations Gain on sale of real estate facility Total discontinued operations
30 (d) (5,153) (5,123)
1.6%
10.8% (100.0%) (94.3%)
Net income
$
49,980
$
54,331
$
(4,351)
(8.0%)
Net income allocation: Net income allocable to noncontrolling interests: Noncontrolling interests - common units Noncontrolling interests - preferred units Total net income allocable to noncontrolling interests
$
8,262 (7,190) 1,072
$
6,261 3,134 9,395
$
2,001 (10,324) (8,323)
32.0% (329.4%) (88.6%)
6,963 (2,979) (12) 3,972
33.2% (12.5%) (14.3%) 8.8%
Net income allocable to PS Business Parks, Inc.: Common shareholders Preferred shareholders Restricted stock unit holders Total net income allocable to PS Business Parks, Inc.
27,937 20,899 72 48,908
20,974 23,878 84 44,936
$
49,980
$
54,331
$
(4,351)
(8.0%)
Net income per common share - basic: Continuing operations Discontinued operations Net Income
$ $ $
1.12 0.01 1.13
$ $ $
0.69 0.17 0.86
$ $ $
0.43 (0.16) 0.27
62.3% (94.1%) 31.4%
Net income per common share - diluted: Continuing operations Discontinued operations Net Income
$ $ $
1.12 0.01 1.13
$ $ $
0.68 0.17 0.85
$ $ $
0.44 (0.16) 0.28
64.7% (94.1%) 32.9%
Weighted average common shares outstanding: Basic Diluted
24,700 24,800
NN
24,469 24,611
231 189
0.9% 0.8%
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
For The Six Months Ended 06/30/11 06/30/10 $ 127,709 $ 131,899 18,473 3,523 (237) 433 620 225 $ 146,565 $ 136,080
Increase (Decrease) $ (4,190) 14,950 (670) 395 $ 10,485
(b) General and administrative expenses: Cash and non-cash compensation expense Professional fees Acquisition transaction costs Other
For The Six Months Ended 06/30/11 06/30/10 $ 2,085 $ 2,072 385 495 218 1,904 630 678 $ 3,318 $ 5,149
Increase (Decrease) $ 13 (110) (1,686) (48) $ (1,831)
(c) Interest expense: Mortgage notes payable Credit Facility Note payable to affiliate Facilities fees & other charges
For The Six Months Ended 06/30/11 06/30/10 $ (1,420) $ (1,535) (200) (526) (214) (176) $ (2,360) $ (1,711)
Increase (Decrease) $ (115) 200 526 38 $ 649
(d) Net loss from discontinued operations: Rental revenue Operating expenses Depreciation expense
For The Six Months Ended 06/30/11 06/30/10 $ 859 $ 1,021 (412) (526) (140) (218) $ 307 $ 277
Increase (Decrease) $ (162) (114) (78) $ 30
NO
PS BUSINESS PARKS, INC. Analysis of Capital Expenditures (in thousands, except per square foot data)
Recurring capital expenditures Capital improvements
For The Six Months Ended
Cost per Weighted
June 30, 2011
Average Square Foot
(1)
(2)
Tenant improvements Lease commissions Total recurring capital expenditures
$2,314
$0.11
11,148
$0.51
2,885
$0.13
$16,347
$0.75
Non-recurring capital expenditures Property renovations and development
$1,214
Total non-recurring capital expenditures
$1,214
(1)
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 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 expense was $12.1 million or approximately $0.55 per weighted average square foot for the six months ended June 30, 2011 compared to $10.3 million or approximately $0.52 per weighted average square foot for the six months ended June 30, 2010.
(2)
Major costs include roof, HVAC and parking lot replacement as well as other major repairs that extend the life of the respective components of the building.
NP
Same Park Gross Operating Margin Percentage * 70.0% 69.1%
69.1%
68.7% 68.3%
68.0%
68.1% 67.6%
67.4%
67.5%
65.8%
65.7%
66.0%
64.0%
62.0%
60.0% Q1
Q2
Q3
Q4
|___________2009__________|
Q1
Q2
Q3
Q4
|___________2010___________|
Q1
Q2
|__2011__|
* Gross margin is computed by dividing property net operating income by rental income for Same Park properties in each period.
NQ
Change in Same Park Revenue * 0.0% -1.3%
-0.5%
-2.0% -3.1%
-3.3%
-3.4%
-3.5%
-4.0%
-4.1%
-4.0% -5.5%
-4.6%
-6.0% Q1
Q2
Q3
Q4
|____________2009___________|
Q1
Q2
Q3
Q4
|____________2010___________|
Q1
|__2011__|
* Percentage represents the change over the comparable period in the previous year based on Same Park operating assets as reported in each period.
NR
Q2
Change in Same Park NOI * -0.4%
0.0% -1.3%
-2.0% -3.4% -4.5%
-4.3%
-4.0%
-3.8% -6.2%
-6.0%
-5.9%
-5.9% -6.4%
-8.0% Q1
Q2
Q3
Q4
|___________2009___________|
Q1
Q2
Q3
Q4
|___________2010___________|
Q1
|__2011__|
* Percentage represents the change over the comparable period in the previous year based on Same Park operating assets as reported in each period.
NS
Q2
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO CONCENTRATION SUMMARY (in thousands) Industry Concentration as of June 30, 2011 % of Total Rental Income
Industry Business Services Government Health Services Computer Hardware, Software and Related Services Warehouse, Distribution, Transportation and Logistics Insurance and Financial Services Retail, Food and Automotive Engineering and Construction Communications Home Furnishings Aerospace/Defense Products and Services Electronics Educational Services Other Total
15.9% 11.5% 11.2% 10.9% 7.5% 6.8% 5.8% 5.6% 4.8% 3.5% 3.2% 2.8% 2.7% 7.8% 100.0%
Top 10 Customers by Total Annual Rental Income as of June 30, 2011
Tenant U.S. Government Lockheed Martin Corporation Kaiser Permanente Wells Fargo Bank Luminex Corporation ATS Corporation AARP Welch Allyn Protocol, Inc. Verizon Investorplace Media, LLC Total
Annualized Rental Income (1)
Square Footage 799 176 205 126 149 58 102 103 80 46 1,844
$
$
20,365 4,785 4,349 2,248 2,067 1,793 1,752 1,666 1,588 1,514 42,127
% of Total Annualized Rental Income 6.9% 1.6% 1.5% 0.8% 0.7% 0.6% 0.6% 0.6% 0.5% 0.5% 14.3%
(1) - For leases expiring within one year, annualized rental income represents income to be received under existing leases from June 30, 2011 through the date of expiration.
NT
Total Property Net Operating Income by Region
Three Months Ended June 30, 2011 $48,840 (in thousands)
$710
$1,415
Three Months Ended June 30, 2010 $47,956 (in thousands) S. California (20%)
S. California (22%)
N. California (6%)
N. California (7%)
S. Texas (5%)
S. Texas (4%)
N. Texas (5%)
N. Texas (6%)
Virginia (25%)
Virginia (23%)
Maryland (18%)
Maryland (17%)
Oregon (5%)
Oregon (7%)
South Florida (11%)
South Florida (10%)
Arizona (2%)
$721
$1,370
Arizona (1%) Washington (3%)
Washington (3%)
$5,029
$5,228 $9,627
$10,658 $3,120
$2,690 $2,952
$3,240 $2,556 $8,691 $8,376
$1,869
$2,635 $2,690
$12,336
$10,883
NU
Total Owned Rentable Square Footage by Region
June 30, 2011 21,754 square feet (in thousands)
June 30, 2010 20,534 square feet (in thousands)
S. California (18%)
S. California (19%) N. California (8%) N. California (9%) S. Texas (7%) S. Texas (8%) N. Texas (8%) N. Texas (8%) Virginia (19%) Virginia (15%) Maryland (11%) Maryland (11%) Oregon (6%) Oregon (6%) South Florida (17%) South Florida (18%) Arizona (3%)
679
521
Washington (3%)
679
Arizona (3%)
521
Washington (3%)
3,988
3,988 3,671
3,596
1,818 1,818
1,314 1,314 1,557
1,557 2,352 2,352
1,689
1,689 3,020
4,165
NV
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO OVERVIEW (in thousands) Rentable Square Footage of Properties as of June 30, 2011 Primary Markets Miami Northern Virginia Maryland Northern California Dallas Orange County Los Angeles County Austin Portland San Diego County Phoenix Seattle Palm Beach Houston Total Percentage by Product Type
Industrial
Office
2,631 407 231 712 3,981 18.3%
12 2,218 1,382 431 705 31 188 28 4,995 23.0%
Flex 631 1,947 970 980 1,458 911 861 1,491 1,126 768 679 493 397 66 12,778 58.7%
Total
% of Total
3,274 4,165 2,352 1,818 1,689 1,616 1,604 1,491 1,314 768 679 521 397 66 21,754 100.0%
Weighted Average Occupancy Rates by Product Type for the Three Months Ended June 30, 2011 Primary Markets Miami Northern Virginia Maryland Northern California Dallas Orange County Los Angeles County Austin Portland San Diego County Phoenix Seattle Palm Beach Houston Total
Industrial 98.6% 92.6% 100.0% 92.2% 96.9%
Office 100.0% 74.3% 87.0% 93.1% 81.8% 93.7% 88.2% 95.4% 81.4%
Flex 96.4% 93.0% 86.2% 86.6% 89.4% 92.9% 89.0% 90.8% 81.0% 90.4% 89.4% 94.0% 86.1% 68.3% 89.5%
Total 98.2% 83.2% 86.6% 89.5% 90.9% 88.1% 90.5% 90.8% 82.1% 90.4% 89.4% 94.1% 86.1% 68.3% 89.0%
Weighted Average Occupancy Rates by Portfolio Type for the Three Months Ended June 30, 2011 Primary Markets Miami Northern Virginia Maryland Northern California Dallas Orange County Los Angeles County Austin Portland San Diego County Phoenix Seattle Palm Beach Houston Total
Large Tenant
Small Tenant
98.2% 83.7% 87.4% 90.8% 91.3% 88.5% 92.2% 89.6% 81.4% 89.7%
97.6% 82.4% 84.2% 88.2% 89.0% 87.8% 89.2% 97.0% 85.5% 90.4% 89.4% 94.1% 86.1% 68.3% 88.0%
Total 98.2% 83.2% 86.6% 89.5% 90.9% 88.1% 90.5% 90.8% 82.1% 90.4% 89.4% 94.1% 86.1% 68.3% 89.0%
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.
OM
15.1% 19.1% 10.8% 8.4% 7.8% 7.4% 7.4% 6.9% 6.0% 3.5% 3.1% 2.4% 1.8% 0.3% 100.0%
PS BUSINESS PARKS, INC. SAME PARK PORTFOLIO OVERVIEW (in thousands) Rentable Square Footage of Properties as of June 30, 2011 Primary Markets Miami Northern Virginia Northern California Maryland Dallas Orange County Los Angeles County Portland Austin San Diego County Phoenix Seattle Palm Beach Houston Total Percentage by Product Type
Industrial
Office
2,556 407 231 712 3,906 20.3%
12 1,073 431 883 705 31 188 28 3,351 17.4%
Flex 631 1,947 980 887 1,458 911 861 1,126 787 768 679 493 397 66 11,991 62.3%
Total
% of Total
3,199 3,020 1,818 1,770 1,689 1,616 1,604 1,314 787 768 679 521 397 66 19,248 100.0%
Weighted Average Occupancy Rates by Product Type for the Three Months Ended June 30, 2011 Primary Markets Miami Northern Virginia Northern California Maryland Dallas Orange County Los Angeles County Portland Austin San Diego County Phoenix Seattle Palm Beach Houston Total
Industrial 98.7% 92.6% 100.0% 92.2% 97.0%
Office 100.0% 88.8% 93.1% 91.0% 81.8% 93.7% 88.2% 95.4% 88.6%
Flex 96.4% 93.0% 86.6% 86.0% 89.4% 92.9% 89.0% 81.0% 90.3% 90.4% 89.4% 94.0% 86.1% 68.3% 89.4%
Total 98.3% 91.5% 89.5% 88.5% 90.9% 88.1% 90.5% 82.1% 90.3% 90.4% 89.4% 94.1% 86.1% 68.3% 90.8%
Weighted Average Occupancy Rates by Portfolio Type for the Three Months Ended June 30, 2011 Primary Markets Miami Northern Virginia Northern California Maryland Dallas Orange County Los Angeles County Portland Austin San Diego County Phoenix Seattle Palm Beach Houston Total
Large Tenant
Small Tenant
98.3% 91.3% 90.8% 88.4% 91.3% 88.5% 92.2% 81.4% 88.3% 91.4%
97.6% 91.9% 88.2% 89.4% 89.0% 87.8% 89.2% 85.5% 96.3% 90.4% 89.4% 94.1% 86.1% 68.3% 89.9%
Total 98.3% 91.5% 89.5% 88.5% 90.9% 88.1% 90.5% 82.1% 90.3% 90.4% 89.4% 94.1% 86.1% 68.3% 90.8%
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.
ON
16.7% 15.7% 9.4% 9.2% 8.8% 8.4% 8.3% 6.8% 4.1% 4.0% 3.5% 2.7% 2.1% 0.3% 100.0%
Total Owned Portfolio Weighted Average Occupancy * 92.0%
91.4% 91.2%
91.3%
91.3%
91.0%
90.3%
90.2%
89.9%
90.0%
89.5% 89.1% 89.0%
89.0%
88.0% Q1
Q2
Q3
Q4
|______________2009___________|
Q1
Q2
Q3
Q4
|______________2010___________|
Q1
Q2
|__2011__|
* Represents the weighted average occupancy for total owned portfolio held in continuing operations as reported in each period.
OO
Same Park Weighted Average Occupancy * 92.0% 91.7% 91.4%
91.5%
91.4%
91.3%
91.2%
91.0%
91.0%
90.8%
89.9%
90.0%
89.5%
89.0%
88.0% Q1
Q2
Q3
Q4
|_____________2009_____________|
Q1
Q2
Q3
Q4
|_____________2010_____________|
Q1
Q2
|____2011____|
* Represents the weighted average occupancy for total owned portfolio held in continuing operations as reported in each period.
OP
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO LEASE EXPIRATIONS AS OF JUNE 30, 2011 (1) (in thousands)
Year of Lease Expiration
Lease Expirations - Flex Annualized Leased Square Footage Rental Income
2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration
1,253 3,279 2,658 1,687 1,081 1,570 11,528
440 1,001 1,039 561 276 854 4,171
$
$
10,542 23,497 27,128 13,014 6,745 25,118 106,044
$
Lease Expirations - Industrial Annualized Leased Square Footage Rental Income
2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration
17,065 46,802 37,629 25,616 16,701 29,561 173,374
Lease Expirations - Office Annualized Leased Square Footage Rental Income
2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration
$
200 921 1,245 819 301 402 3,888
$
1,614 7,647 9,501 6,228 2,496 3,057 30,543
$
Lease Expirations - Total Portfolio Annualized Leased Square Footage Rental Income
2011 2012 2013 2014 2015 Thereafter Total
1,893 5,201 4,942 3,067 1,658 2,826 19,587
$
29,221 77,946 74,258 44,858 25,942 57,736 309,961
$
⁽¹⁾ Includes all assets held in continuing operations.
OQ
% 9.8% 27.0% 21.7% 14.8% 9.6% 17.1% 100.0%
% 9.9% 22.1% 25.6% 12.3% 6.4% 23.7% 100.0%
% 5.3% 25.0% 31.1% 20.4% 8.2% 10.0% 100.0%
% 9.4% 25.1% 24.0% 14.5% 8.4% 18.6% 100.0%
% of Total Annualized Rental Income 5.5% 15.1% 12.1% 8.3% 5.4% 9.5% 55.9%
% of Total Annualized Rental Income 3.4% 7.6% 8.8% 4.2% 2.2% 8.1% 34.3%
% of Total Annualized Rental Income 0.5% 2.4% 3.1% 2.0% 0.8% 1.0% 9.8%
% of Total Annualized Rental Income 9.4% 25.1% 24.0% 14.5% 8.4% 18.6% 100.0%
PS BUSINESS PARKS, INC. TOTAL OWNED PORTFOLIO ANALYSIS AS OF JUNE 30, 2011 (1) (in thousands)
Year of Lease Expiration 2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration 2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration 2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration 2011 2012 2013 2014 2015 Thereafter Total
Southern California Annualized Leased Square Footage Rental Income 572 1,131 872 564 292 188 3,619
$
8,990 17,557 13,233 9,133 4,754 4,674 58,341
Northern California Annualized Leased Square Footage Rental Income 189 545 380 243 84 179 1,620
Leased Square Footage 74 217 347 311 310 157 1,416
Leased Square Footage 58 401 456 342 113 184 1,554
$
2,440 6,516 4,974 2,654 1,066 2,119 19,769
$
Southern Texas Annualized Rental Income $
704 2,719 3,794 3,625 4,407 1,812 17,061
$
Northern Texas Annualized Rental Income $
568 4,571 4,196 4,178 1,492 2,410 17,415
$
OR
% 15.4% 30.1% 22.7% 15.7% 8.1% 8.0% 100.0%
% 12.3% 33.0% 25.2% 13.4% 5.4% 10.7% 100.0%
% 4.1% 15.9% 22.3% 21.3% 25.8% 10.6% 100.0%
% 3.3% 26.2% 24.1% 24.0% 8.6% 13.8% 100.0%
% of Total Annualized Rental Income 2.9% 5.6% 4.2% 2.9% 1.5% 1.5% 18.6%
% of Total Annualized Rental Income 0.8% 2.1% 1.6% 0.9% 0.3% 0.7% 6.4%
% of Total Annualized Rental Income 0.2% 0.9% 1.2% 1.2% 1.4% 0.6% 5.5%
% of Total Annualized Rental Income 0.2% 1.5% 1.4% 1.3% 0.5% 0.8% 5.7%
PS BUSINESS PARKS, INC. TOTAL OWNED PORTFOLIO ANALYSIS AS OF JUNE 30, 2011 (1) (in thousands)
Year of Lease Expiration 2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration 2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration 2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration 2011 2012 2013 2014 2015 Thereafter Total
Leased Square Footage 213 1,019 1,053 622 246 351 3,504
Leased Square Footage 274 898 833 450 323 783 3,561
Leased Square Footage 194 404 500 257 150 605 2,110
Leased Square Footage 183 192 200 148 68 325 1,116
South Florida Annualized Rental Income $
1,910 9,565 9,225 5,519 2,364 2,840 31,423
$
Northern Virginia Annualized Rental Income $
5,205 19,288 18,245 10,287 6,262 20,956 80,243
$
Maryland Annualized Rental Income $
5,053 9,945 13,003 5,076 3,621 15,659 52,357
$
Oregon Annualized Rental Income $
2,746 3,045 3,358 2,575 1,054 6,399 19,177
$
OS
% 6.1% 30.4% 29.4% 17.6% 7.5% 9.0% 100.0%
% 6.5% 24.0% 22.8% 12.8% 7.8% 26.1% 100.0%
% 9.7% 19.0% 24.8% 9.7% 6.9% 29.9% 100.0%
% 14.3% 15.9% 17.5% 13.4% 5.5% 33.4% 100.0%
% of Total Annualized Rental Income 0.6% 3.1% 3.0% 1.8% 0.8% 0.9% 10.2%
% of Total Annualized Rental Income 1.7% 6.2% 5.9% 3.3% 2.0% 6.8% 25.9%
% of Total Annualized Rental Income 1.6% 3.2% 4.2% 1.7% 1.2% 5.0% 16.9%
% of Total Annualized Rental Income 0.9% 1.0% 1.1% 0.8% 0.4% 2.1% 6.3%
PS BUSINESS PARKS, INC. TOTAL OWNED PORTFOLIO ANALYSIS AS OF JUNE 30, 2011 (1) (in thousands)
Year of Lease Expiration
Leased Square Footage
2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration
74 136 144 47 36 44 481
Leased Square Footage
2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration
62 258 157 83 36 10 606
Leased Square Footage
2011 2012 2013 2014 2015 Thereafter Total
1,893 5,201 4,942 3,067 1,658 2,826 19,587
Washington Annualized Rental Income $
1,041 2,273 2,748 953 563 753 8,331
$
Arizona Annualized Rental Income $
564 2,467 1,482 858 359 114 5,844
$
Total Portfolio Annualized Rental Income $
29,221 77,946 74,258 44,858 25,942 57,736 309,961
$
⁽¹⁾ Includes all assets held in continuing operations.
OT
% 12.5% 27.3% 33.0% 11.4% 6.8% 9.0% 100.0%
% 9.6% 42.2% 25.4% 14.7% 6.1% 0 100.0%
% 9.4% 25.1% 24.0% 14.5% 8.4% 18.6% 100.0%
% of Total Annualized Rental Income 0.3% 0.7% 0.9% 0.3% 0.2% 0.2% 2.6%
% of Total Annualized Rental Income 0.2% 0.8% 0.5% 0.3% 0.1% 1.9%
% of Total Annualized Rental Income 9.4% 25.1% 24.0% 14.5% 8.4% 18.6% 100.0%
PS BUSINESS PARKS, INC. TOTAL OWNED PORTFOLIO ANALYSIS AS OF JUNE 30, 2011 (1) (in thousands)
Year of Lease Expiration
Lease Expirations - Large Tenant Portfolio Annualized Leased Square Footage Rental Income
2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration
815 2,695 3,217 2,164 1,131 2,335 12,357
13,783 38,945 45,096 28,690 16,053 46,506 189,073
$
Lease Expirations - Small Tenant Portfolio Annualized Leased Square Footage Rental Income
2011 2012 2013 2014 2015 Thereafter Total
Year of Lease Expiration
$
1,078 2,506 1,725 903 527 491 7,230
$
15,438 39,001 29,162 16,168 9,889 11,230 120,888
$
Lease Expirations - Total Portfolio Annualized Leased Square Footage Rental Income
2011 2012 2013 2014 2015 Thereafter Total
1,893 5,201 4,942 3,067 1,658 2,826 19,587
$
29,221 77,946 74,258 44,858 25,942 57,736 309,961
$
⁽¹⁾ Includes all assets held in continuing operations.
OU
% 7.3% 20.6% 23.9% 15.1% 8.5% 24.6% 100.0%
% 12.8% 32.2% 24.1% 13.4% 8.2% 9.3% 100.0%
% 9.4% 25.1% 24.0% 14.5% 8.4% 18.6% 100.0%
% of Total Annualized Rental Income 4.4% 12.5% 14.6% 9.3% 5.2% 15.0% 61.0%
% of Total Annualized Rental Income 5.0% 12.6% 9.4% 5.2% 3.2% 3.6% 39.0%
% of Total Annualized Rental Income 9.4% 25.1% 24.0% 14.5% 8.4% 18.6% 100.0%
