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Analysis of Operating Results and Financial Condition September 30, 2011
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ANALYSIS OF OPERATING RESULTS AND FINANCIAL CONDITION FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 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. THIRD QUARTER FACT SHEET (in thousands, except per share amounts) NET OPERATING INCOME 09/30/11 Rental income: Same Park (1) (3) Non-Same Park (2) Total rental income Cost of operations: Same Park (1) Non-Same Park (2) Total cost of operations Net operating income: Same Park (1) (4) Non-Same Park (2) Total net operating income
$
$
For The Three Months Ended 09/30/10 % Change
66,024 $ 10,538 76,562
64,425 5,348 69,773
2.5% 97.0% 9.7%
21,031 3,853 24,884
20,821 1,922 22,743
1.0% 100.5% 9.4%
44,993 6,685 51,678 $
43,604 3,426 47,030
3.2% 95.1% 9.9%
09/30/11 $
For The Nine Months Ended 09/30/10 % Change
193,497 $ 29,630 223,127 63,517 11,288 74,805
$
129,980 18,342 148,322 $
196,757 9,096 205,853
(1.7%) 225.7% 8.4%
63,764 3,196 66,960
(0.4%) 253.2% 11.7%
132,993 5,900 138,893
(2.3%) 210.9% 6.8%
(1) All assets in continuing operations that the Company owned from January 1, 2010 through September 30, 2011. (2) All assets the Company acquired subsequent to January 1, 2010. (3) Amounts include lease buyout income of $2.9 million. Excluding the lease buyout income, rental income decreased 2.0% and 3.1% for the three and nine months ended September 30, 2011, respectively, over the same periods in 2010. (4) Amounts include lease buyout income of $2.9 million. Excluding the lease buyout income, NOI decreased 3.4% and 4.4% for the three and nine months ended September 30, 2011, respectively, over the same periods in 2010.
FUNDS FROM OPERATIONS 09/30/11 FFO allocable to common and dilutive shares - adjusted
For The Three Months Ended 09/30/10 % Change
$
35,949 $
34,100
Non-cash distributions related to the redemption of preferred equity Acquisition transaction costs Gain on repurchase of preferred equity, net of issuance costs Lease buyout income FFO allocable to common and dilutive shares - as reported
$
(52) 2,886 38,783 $
(405) 33,695
FFO per common and dilutive share - adjusted FFO per common and dilutive share - as reported
$ $
1.12 $ 1.21 $
Weighted average common shares outstanding - diluted Weighted average common OP units outstanding Weighted average restricted stock units outstanding Total common and dilutive shares
24,612 7,305 59 31,976
5.4%
09/30/11
For The Nine Months Ended 09/30/10 % Change
$
106,966 $
97,462
(87.2%) 100.0% 15.1%
$
(270) 7,389 2,886 116,971 $
(2,436) (2,309) 92,717
1.06 1.05
5.7% 15.2%
$ $
3.33 $ 3.64 $
24,740 7,305 91 32,136
(0.5%) (35.2%) (0.5%)
24,738 7,305 66 32,109
9.8% (100.0%) (88.3%) 100.0% 100.0% 26.2%
3.04 2.89
9.5% 26.0%
24,663 7,305 99 32,067
0.3% (33.3%) 0.1%
PROPERTY INFORMATION 09/30/11 Total Portfolio (1) Total rentable square footage at period end Weighted average occupancy Annualized realized rent per sq. ft. (2)(5) REVPAF (3)(5) Same Park Portfolio (4) Total rentable square footage at period end Weighted average occupancy Annualized realized rent per sq. ft. (2)(5) REVPAF (3)(5) (1) (2) (3) (4) (5)
For The Three Months Ended 09/30/10 % Change
$ $
21,800 89.1% 15.19 $ 13.53 $
20,879 90.4% 14.86 13.43
4.4% (1.4%) 2.2% 0.7%
$ $
19,248 90.8% 14.45 $ 13.12 $
19,248 91.4% 14.65 13.39
(0.7%) (1.4%) (2.0%)
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 September 30, 2011. Amounts exclude lease buyout income of $2.9 million.
BALANCE SHEET DATA 09/30/11 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
$ $ $ $ $
1,611,697 5,583 176,185 598,546 581,903 24,128 24.12
$
12/31/10 $ $ $ $ $ $
1,621,057 53,418 176,179 598,546 594,982 24,671 24.12
% Change (0.6%) (89.5%) 0.0% (2.2%) (2.2%) -
MARKET VALUE INFORMATION 09/30/11 Market value of common stock and common OP units
$
1,557,217 $
12/31/10 1,781,732
% Change (12.6%)
Total debt
193,850
144,511
34.1%
Total preferred equity
604,129
651,964
(7.3%)
Total market capitalization
$
2,355,196 $
2,578,207
(8.6%)
Stock price at the end of the period
$
49.54 $
55.72
(11.1%)
P
09/30/11
For The Nine Months Ended 09/30/10 % Change
$ $
21,800 89.1% 15.20 $ 13.54 $
20,879 91.0% 15.01 13.66
4.4% (2.1%) 1.3% (0.9%)
$ $
19,248 90.9% 14.53 $ 13.20 $
19,248 91.6% 14.88 13.63
(0.8%) (2.4%) (3.2%)
PS BUSINESS PARKS, INC. ANALYSIS OF FUNDS FROM OPERATIONS (in thousands, except per share amounts)
For The Three Months Ended Increase 09/30/11 09/30/10 (Decrease) % Change
For The Nine Months Ended 09/30/11 09/30/10
Increase (Decrease) % Change
$
15,444 $
9,608 $
5,836
60.7%
$
43,382 $
30,583 $ 12,799
$
(2,717) 21,423 4,597 36 38,783 $
21,200 2,852 35 33,695 $
2,717 223 1,745 1 5,088
100.0% 1.1% 61.2% 2.9% 15.1%
$
(2,717) 63,340 12,858 108 116,971 $
(5,153) (2,436) 58,056 5,284 9,112 3,746 119 (11) 92,717 $ 24,254
(47.3%) 9.1% 41.1% (9.2%) 26.2%
24,543 7,305 59 69 31,976
24,610 7,305 91 130 32,136
24,517 7,305 99 146 32,067
0.5% (33.3%) (37.7%) 0.1%
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
(67) (32) (61) (160)
(0.3%) (35.2%) (46.9%) (0.5%)
24,647 7,305 66 91 32,109
2.89 $
130 (33) (55) 42
41.9%
$
1.21 $
1.05 $
0.16
15.2%
$
3.64 $
0.75
26.0%
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
$
38,783 $
33,695 $
5,088
15.1%
$
116,971 $
92,717 $ 24,254
26.2%
(3,029) (7,245) (1,843) (276) 381 222 (183) -
(2,599) (4,167) (1,141) (73) 517 235 (126) -
430 3,078 702 203 (136) 13 57 -
FAD
$
26,810 $
26,341 $
469
1.8%
$
81,689 $
76,702 $
4,987
6.5%
FAD per common and dilutive share
$
0.84 $
0.82 $
0.02
2.4%
$
2.54 $
2.39 $
0.15
6.3%
$
26,810 $ (10,688) (3,214) (24) (275) 12,609 $
26,341 $ (10,832) (3,214) (35) (270) 11,990 $
469 (144) (11) 5 619
1.8% (1.3%) (31.4%) 1.9% 5.2%
$
81,689 $ (32,430) (9,642) (79) (824) 38,714 $
76,702 $ (32,398) (9,642) (119) (810) 33,733 $
4,987 32 (40) 14 4,981
6.5% 0.1% (33.6%) 1.7% 14.8%
51.9%
53.5%
(1.6%)
(3.0%)
51.6%
55.0%
(3.4%)
(6.2%)
Funds available for distribution (FAD):
16.5% 73.9% 61.5% 278.1% (26.3%) 5.5% 45.2% -
(5,343) (18,393) (4,728) (659) 1,202 643 (615) (7,389)
(5,749) (10,374) (3,204) (718) 1,652 333 (391) 2,436 -
(406) 8,019 1,524 (59) (450) (310) 224 2,436 7,389
(7.1%) 77.3% 47.6% (8.2%) (27.2%) (93.1%) 57.3% 100.0% 100.0%
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 distributions payout ratio
$
Q
$
Adjusted FFO Per Common and Dilutive Share $1.25 $1.20 $1.15
$1.13
$1.13
$1.12
$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⁾
Q2⁽²⁾⁽³⁾
Q4⁽²⁾⁽³⁾
|___________2010___________|
(1) Excludes
(2) Excludes
Q3⁽³⁾
Q1⁽¹⁾
Q2⁽³⁾
Q3⁽³⁾⁽⁴⁾
|_______2011_______|
net gain on repurchase of preferred equity. non-cash distributions related to the redemption/repurchase of preferred equity. (3) Excludes acquisition transaction costs. (4) Excludes lease buyout income of $2.9 million.
R
PS BUSINESS PARKS, INC. CAPITAL STRUCTURE (in thousands)
As of September 30, 2011 % of Total Market WTD Average Total Capitalization Rate
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, repaid October 2011 (includes unamortized premium of $39,000 on $15.5 million mortgage note with stated rate of 7.20%)(1) 5.610% mortgage note, repaid January 2011
$
13,511 9,378 9,402 15,559
$
-
Total mortgage notes payable
13,729 9,572 9,594 15,950 2,666
47,850
2.0%
5.82%
51,511
2.0%
5.81%
Short-term Debt: $100.0 million unsecured credit facility (LIBOR + 1.80%)
146,000
93,000
Total short-term debt
146,000
6.2%
1.35%
93,000
3.6%
2.11%
Total debt
193,850
8.2%
2.45%
144,511
5.6%
3.43%
Preferred Equity 7.000% Series H preferred stock (6,340,776 depositary shares outstanding as of 09/30/11) callable 1/30/09 6.875% Series I preferred stock (2,745,050 depositary share outstanding as of 09/30/11) callable 4/21/09 7.200% Series M preferred stock (3,182,000 depositary shares outstanding as of 09/30/11) callable 5/2/10 7.125% Series N preferred operating partnership units (223,300 units outstanding as of 09/30/11) callable 12/12/10 7.375% Series O preferred stock (3,384,000 depositary shares outstanding as of 09/30/11) callable 6/16/11 6.700% Series P preferred stock (5,290,000 depositary shares outstanding as of 09/30/11) callable 1/17/12 6.875% Series R preferred stock (3,000,000 depositary shares outstanding as of 09/30/11) 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
25.7%
6.98%
651,964
25.3%
7.02%
Total debt and preferred equity
797,979
33.9%
5.88%
796,475
30.9%
6.36%
Common stock (24,128,184 and 24,671,177 shares outstanding as of September 30, 2011 and December 31, 2010, respectively) Common operating partnership units (7,305,355 units outstanding as of September 30, 2011 and December 31, 2010) Total common equity (2) Total market capitalization
$
1,195,310 361,907 1,557,217 2,355,196
66.1%
1,374,678 407,054 1,781,732
69.1%
100.0%
$ 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 was repaid October, 2011. Closing stock price was $49.54 and $55.72 as of September 30, 2011 and December 31, 2010, respectively.
S
75 15,520 67 65 39 15,766
2012
$
$
2013
309 275 272 856
$
$
13,127 9,036 9,065 31,228
2014
$
2015
-
$
$
Thereafter
-
$
-
$
Total
-
$
-
$
-
$
13,511 15,520 9,378 9,402 39 47,850
PS BUSINESS PARKS, INC. CONSOLIDATED BALANCE SHEETS (in thousands)
09/30/11
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
$
3,761
$
5,066
$
(1,305)
(a)
570,521 1,818,525 2,389,046 (828,146) 1,560,900 6,829 1,567,729
562,678 1,773,682 2,336,360 (772,407) 1,563,953 6,671 6,829 1,577,453
7,843 44,843 52,686 55,739 (3,053) (6,671) (9,724)
3,301 22,819 14,087 1,611,697
3,127 22,277 13,134 1,621,057
174 542 953 (9,360)
(d)
2,209 53,000 (3,661)
(f)
$
$
(b) (c)
(e)
(25.8%)
1.4% 2.5% 2.3% 7.2% (0.2%) (100.0%) (0.6%) 5.6% 2.4% 7.3% (0.6%)
LIABILITIES AND EQUITY Accrued and other liabilities Credit Facility 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
55,630 146,000 47,850
53,421 93,000 51,511
249,480
197,932
51,548
26.0%
598,546 240 533,749 859,455 (811,541) 1,180,449
598,546 246 557,882 784,616 (747,762) 1,193,528
(6) (24,133) 74,839 63,779 (13,079)
(2.4%) (4.3%) 9.5% 8.5% (1.1%)
5,583 176,185 181,768
53,418 176,179 229,597
(47,835) 6 (47,829)
(89.5%) 0.0% (20.8%)
1,362,217
1,423,125
(60,908)
(4.3%)
(9,360)
(0.6%)
1,611,697
$
1,621,057
$
$
(g) (h)
4.1% 57.0% (7.1%)
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 Transfer to properties held for dispositions, net Depreciation and amortization Ending balance
5,066 142,558 (51,371) (92,492) 3,761
$ 1,563,953 29,840 2,030 5,343 18,393 4,728 (187) (63,200) $ 1,560,900
(c) Change in properties held for disposition, net: Beginning balance Disposition of real estate Ending balance
$ $
6,671 (6,671) -
(d) Rent receivable consists of: Non-government tenants U.S. Government tenants Allowance for bad debt
09/30/11 $ 1,870 1,831 (400) $ 3,301
12/31/10 $ 1,852 1,675 (400) $ 3,127
Increase (Decrease) $ 18 156 $ 174
(e) Other assets consist of: In-place lease adjustment, net Prepaid property taxes Prepaid insurance Mortgage impounds Lease incentives, net Other
09/30/11 $ 4,872 2,966 1,729 1,428 645 2,446 $ 14,087
12/31/10 $ 5,422 3,107 1,011 823 514 2,257 $ 13,134
Increase (Decrease) $ (550) (141) 718 605 131 189 $ 953
(f)
09/30/11 $ 21,163 10,874 11,528
12/31/10 $ 20,697 4,961 12,778
Increase (Decrease) $ 466 5,913 (1,250)
3,661 8,404 55,630
4,159 10,826 $ 53,421
(498) (2,422) 2,209
Accrued and other liabilities consist of: Security deposits Accrued property taxes Prepaid rent In-place lease adjustment and tenant improvement reimbursements, net Other
$
(g) Change in paid-in capital: Beginning paid-in capital Repurchase of common stock 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
(h) Change in cumulative distributions: Beginning cumulative distributions Distributions to preferred shareholders Distributions to common shareholders Ending cumulative distributions
$
$
$
$
$
U
557,882 (30,246) 10,107 1,050 494 (5,538) 533,749
(747,762) (31,349) (32,430) (811,541)
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts)
For The Three Months Ended 09/30/11 09/30/10 Revenues: Rental income Facility management fees Total operating revenues
$
76,562 170 76,732
$
69,773 165 69,938
Expenses: Cost of operations Depreciation and amortization General and administrative Total operating expenses
24,884 21,423 1,365 47,672
Other income and expenses: Interest and other income Interest expense Total other income and expenses
37 (1,261) (1,224)
Income from continuing operations
27,836
23,456
73 2,717 2,790
103 103
Discontinued operations: Income from discontinued operations Gain on sale of real estate facility Total discontinued operations
Increase (Decrease)
$
22,743 21,093 1,831 45,667
60 (875) (815)
(a)
9.7% 3.0% 9.7%
2,141 330 (466) (b) 2,005
9.4% 1.6% (25.5%) 4.4%
(23) 386 (c) 409
(38.3%) 44.1% 50.2%
6,789 5 6,794
4,380
(30) (d) 2,717 2,687
Net income
$
30,626
$
23,559
$
7,067
Net income allocation: Net income allocable to noncontrolling interests: Noncontrolling interests - common units Noncontrolling interests - preferred units Total net income allocable to noncontrolling interests
$
4,597 99 4,696
$
2,852 984 3,836
$
1,745 (885) 860
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.
15,444 10,450 36 25,930
% Change
9,608 10,080 35 19,723
18.7%
(29.1%) 100.0% 2608.7% 30.0%
61.2% (89.9%) 22.4%
5,836 370 1 6,207
60.7% 3.7% 2.9% 31.5%
$
30,626
$
23,559
$
7,067
30.0%
Net income per common share - basic: Continuing operations Discontinued operations Net Income
$ $ $
0.54 0.09 0.63
$ $ $
0.39 0.39
$ $ $
0.15 0.09 0.24
38.5% 100.0% 61.5%
Net income per common share - diluted: Continuing operations Discontinued operations Net Income
$ $ $
0.54 0.09 0.63
$ $ $
0.39 0.39
$ $ $
0.15 0.09 0.24
38.5% 100.0% 61.5%
(67) (128)
(0.3%) (0.5%)
Weighted average common shares outstanding: Basic Diluted
24,543 24,612
V
24,610 24,740
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 Three Months Ended 09/30/11 09/30/10 $ 66,240 $ 64,664 10,046 5,035 (216) (239) 492 313 $ 76,562 $ 69,773
Increase (Decrease) $ 1,576 5,011 23 179 $ 6,789
(b) General and administrative expenses: Cash and non-cash compensation expense Professional fees Acquisition transaction costs Other
For The Three Months Ended 09/30/11 09/30/10 $ 819 $ 969 186 204 52 405 308 253 $ 1,365 $ 1,831
Increase (Decrease) $ (150) (18) (353) 55 $ (466)
(c) Interest expense: Mortgage notes payable Credit facility Note payable to affiliate Facilities fees & other charges
For The Three Months Ended 09/30/11 09/30/10 $ (704) $ (767) (269) (138) (150) (108) $ (1,261) $ (875)
Increase (Decrease) $ (63) 269 138 42 $ 386
(d) Income from discontinued operations: Rental revenue Operating expenses Depreciation expense
For The Three Months Ended 09/30/11 09/30/10 $ 238 $ 414 (165) (204) (107) $ 73 $ 103
Increase (Decrease) $ (176) 39 107 $ (30)
NM
PS BUSINESS PARKS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts)
For The Nine Months Ended 9/30/2011 9/30/2010 Revenues: Rental income Facility management fees Total operating revenues
$
Expenses: Cost of operations Depreciation and amortization General and administrative Total operating expenses
223,127 517 223,644
$
74,805 63,200 4,683 142,688
205,853 501 206,354
Increase (Decrease)
$
66,960 57,731 6,980 131,671
(a)
8.4% 3.2% 8.4%
7,845 5,469 (2,297) (b) 11,017
11.7% 9.5% (32.9%) 8.4%
17,274 16 17,290
Other income and expenses: Interest and other income Interest expense Total other income and expenses
174 (3,621) (3,447)
260 (2,586) (2,326)
(86) 1,035 1,121
Income from continuing operations
77,509
72,357
5,152
380 2,717 3,097
380 5,153 5,533
Discontinued operations: Income from discontinued operations Gain on sale of real estate facility Total discontinued operations
% Change
(c)
(d) (2,436) (2,436)
(33.1%) 40.0% 48.2% 7.1%
(47.3%) (44.0%)
Net income
$
80,606
$
77,890
$
2,716
Net income allocation: Net income allocable to noncontrolling interests: Noncontrolling interests - common units Noncontrolling interests - preferred units Total net income allocable to noncontrolling interests
$
12,858 (7,091) 5,767
$
9,112 4,118 13,230
$
3,746 (11,209) (7,463)
41.1% (272.2%) (56.4%)
12,799 (2,609) (11) 10,179
41.9% (7.7%) (9.2%) 15.7%
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.
43,382 31,349 108 74,839
30,583 33,958 119 64,660
3.5%
$
80,606
$
77,890
$
2,716
Net income per common share - basic: Continuing operations Discontinued operations Net Income
$ $ $
1.66 0.10 1.76
$ $ $
1.07 0.17 1.25
$ $ $
0.59 (0.07) 0.51
55.1% (41.2%) 40.8%
Net income per common share - diluted: Continuing operations Discontinued operations Net Income
$ $ $
1.66 0.10 1.75
$ $ $
1.07 0.17 1.24
$ $ $
0.59 (0.07) 0.51
55.1% (41.2%) 41.1%
Weighted average common shares outstanding: Basic Diluted
24,647 24,738
NN
24,517 24,663
130 75
3.5%
0.5% 0.3%
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 Nine Months Ended 09/30/11 09/30/10 $ 193,950 $ 196,563 28,518 8,558 (453) 194 1,112 538 $ 223,127 $ 205,853
Increase (Decrease) $ (2,613) 19,960 (647) 574 $ 17,274
(b) General and administrative expenses: Cash and non-cash compensation expense Professional fees Acquisition transaction costs Other
For The Nine Months Ended 09/30/11 09/30/10 $ 2,904 $ 3,041 571 699 270 2,309 938 931 $ 4,683 $ 6,980
Increase (Decrease) $ (137) (128) (2,039) 7 $ (2,297)
(c) Interest expense: Mortgage notes payable Credit Facility Related party debt Facilities fees & other charges
For The Nine Months Ended 09/30/11 09/30/10 $ (2,124) $ (2,302) (470) (664) (363) (284) $ (3,621) $ (2,586)
Increase (Decrease) $ (178) 470 664 79 $ 1,035
(d) Income from discontinued operations: Rental revenue Operating expenses Depreciation expense
For The Nine Months Ended 09/30/11 09/30/10 $ 1,097 $ 1,435 (577) (730) (140) (325) $ 380 $ 380
Increase (Decrease) $ (338) (153) (185) $ -
NO
PS BUSINESS PARKS, INC. Analysis of Capital Expenditures (in thousands, except per square foot data)
Recurring capital expenditures Capital improvements
For The Nine Months Ended
Cost per Weighted
September 30, 2011
Average Square Foot
(1)
(2)
Tenant improvements Lease commissions Total recurring capital expenditures
$5,343
$0.25
18,393
$0.85
4,728
$0.22
$28,464
$1.31
Non-recurring capital expenditures Property renovations and development
$2,030
Total non-recurring capital expenditures
$2,030
(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 $18.0 million or approximately $0.83 per weighted average square foot for the nine months ended September 30, 2011 compared to $15.3 million or approximately $0.76 per weighted average square foot for the nine months ended September 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% 66.7%
65.8%
65.7%
66.0%
64.0%
62.0%
60.0% Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3⁽¹⁾
|___________2009__________||___________2010___________| |______2011______| * Gross margin is computed by dividing property net operating income by rental income for Same Park properties in each period. ⁽¹⁾Excludes leasbuyout income of $2.9 million.
NQ
Change in Same Park Revenue * 0.0% -1.3%
-0.5%
-2.0%
-2.0% -3.1%
-3.3%
-3.4%
-3.5%
-4.1%
-4.0%
-4.0% -5.5%
-4.6%
-6.0% Q1
Q2
Q3
Q4
|____________2009___________|
Q1
Q2
Q3
Q4
|____________2010___________|
Q1
Q2
|______2011______|
* Percentage represents the change over the comparable period in the previous year based on Same Park operating assets as reported in each period. ⁽¹⁾Excludes lease buyout income of $2.9 million.
NR
Q3⁽¹⁾
Change in Same Park NOI * -0.4%
0.0% -1.3%
-2.0% -3.4% -4.3%
-4.0%
-3.4%
-4.5% -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
Q2
|______2011______|
* Percentage represents the change over the comparable period in the previous year based on Same Park operating assets as reported in each period. ⁽¹⁾Excludes lease buyout income of $2.9 million.
NS
Q3⁽¹⁾
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO CONCENTRATION SUMMARY (in thousands) Industry Concentration as of September 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
16.2% 11.9% 11.4% 10.5% 7.5% 6.7% 5.7% 5.7% 4.3% 3.5% 3.2% 2.7% 2.5% 8.2% 100.0%
Top 10 Customers by Total Annual Rental Income as of September 30, 2011
Tenant U.S. Government Lockheed Martin Corporation Kaiser Permanente Wells Fargo Bank Luminex Corporation ATS Corporation AARP Welch Allyn Protocol, Inc. JP Morgan Chase Bank Investorplace Media, LLC Total
Annualized Rental Income (1)
Square Footage 829 176 205 120 149 58 102 103 102 46 1,890
$
$
% of Total Annualized Rental Income
22,457 4,788 3,918 2,225 2,087 1,804 1,761 1,675 1,645 1,524 43,884
(1) - For leases expiring within one year, annualized rental income represents income to be received under existing leases from October 1, 2011 through the date of expiration.
NT
7.4% 1.6% 1.3% 0.7% 0.7% 0.6% 0.6% 0.6% 0.5% 0.5% 14.5%
Total Property Net Operating Income by Region
Three Months Ended September 30, 2011 $51,678 (in thousands)
$742
$1,414
Three Months Ended September 30, 2010 $47,030 (in thousands) S. California (17%)
S. California (21%)
N. California (6%)
N. California (7%)
S. Texas (5%)
S. Texas (5%)
N. Texas (6%)
N. Texas (6%)
Virginia (25%)
Virginia (22%)
Maryland (22%)⁽¹⁾
Maryland (18%)
Oregon (5%)
Oregon (5%)
South Florida (10%)
South Florida (11%)
Arizona (1%)
$750
$1,397
Arizona (2%) Washington (3%)
Washington (3%)
$5,225
$5,144 $8,918 $9,952
$2,489
$2,574 $3,213
$3,291
$2,626
$11,160 $2,822
$2,377
$8,365
$2,749
$13,069 $10,431
⁽¹⁾Includes lease buyout income of $2.9 million.
NU
Total Owned Rentable Square Footage by Region
September 30, 2011 21,800 square feet (in thousands)
September 30, 2010 20,879 square feet (in thousands)
S. California (18%)
S. California (19%) N. California (8%) N. California (9%) S. Texas (7%) S. Texas (7%) N. Texas (8%) N. Texas (8%) Virginia (19%) Virginia (16%) Maryland (11%) Maryland (11%) Oregon (6%) Oregon (6%) South Florida (17%) South Florida (18%)
679
Arizona (3%)
521
679
Washington (3%)
521
Arizona (3%)
3,988
3,988 3,717
Washington (3%)
3,671
1,818
1,818
1,314 1,314 1,557
1,557 2,352
2,352
1,689
1,689 3,290
4,165
NV
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO OVERVIEW (in thousands) Rentable Square Footage of Properties as of September 30, 2011 Primary Markets Northern Virginia Miami 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 2,631 407 231 712 3,981 18.3%
Office 2,218 12 1,382 431 705 31 188 28 4,995 22.9%
Flex 1,947 677 970 980 1,458 911 861 1,491 1,126 768 679 493 397 66 12,824 58.8%
Total 4,165 3,320 2,352 1,818 1,689 1,616 1,604 1,491 1,314 768 679 521 397 66 21,800 100.0%
% of Total 19.1% 15.2% 10.8% 8.3% 7.8% 7.4% 7.4% 6.9% 6.0% 3.5% 3.1% 2.4% 1.8% 0.3% 100.0%
Weighted Average Occupancy Rates by Product Type for the Three Months Ended September 30, 2011 Primary Markets Northern Virginia Miami Maryland Northern California Dallas Orange County Los Angeles County Austin Portland San Diego County Phoenix Seattle Palm Beach Houston Total
Industrial 98.4% 86.6% 100.0% 95.1% 96.7%
Office 74.9% 100.0% 89.4% 92.9% 82.2% 93.3% 84.8% 96.9% 82.1%
Flex 94.2% 90.9% 85.8% 89.1% 90.8% 94.9% 88.5% 91.1% 76.7% 88.5% 89.3% 92.7% 86.3% 75.4% 89.4%
Total 83.9% 96.9% 87.9% 89.4% 92.1% 89.4% 91.6% 91.1% 77.8% 88.5% 89.3% 92.9% 86.3% 75.4% 89.1%
Weighted Average Occupancy Rates by Portfolio Type for the Three Months Ended September 30, 2011 Primary Markets Northern Virginia Miami Maryland Northern California Dallas Orange County Los Angeles County Austin Portland San Diego County Phoenix Seattle Palm Beach Houston Total
Large Tenant
Small Tenant
83.7% 97.1% 88.4% 88.9% 92.5% 90.2% 95.1% 90.0% 77.4% 89.5%
84.2% 95.2% 86.1% 90.0% 90.4% 88.6% 88.7% 96.8% 80.1% 88.5% 89.3% 92.9% 86.3% 75.4% 88.3%
Total 83.9% 96.9% 87.9% 89.4% 92.1% 89.4% 91.6% 91.1% 77.8% 88.5% 89.3% 92.9% 86.3% 75.4% 89.1%
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
PS BUSINESS PARKS, INC. SAME PARK PORTFOLIO OVERVIEW (in thousands) Rentable Square Footage of Properties as of September 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 2,556 407 231 712 3,906 20.3%
Office 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 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%
% of Total 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%
Weighted Average Occupancy Rates by Product Type for the Three Months Ended September 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 98.3% 86.6% 100.0% 95.1% 96.6%
Office 100.0% 88.6% 92.9% 92.4% 82.2% 93.3% 84.8% 96.9% 88.8%
Flex 92.9% 94.2% 89.1% 85.6% 90.8% 94.9% 88.5% 76.7% 91.4% 88.5% 89.3% 92.7% 86.3% 75.4% 89.4%
Total 97.3% 92.2% 89.4% 89.0% 92.1% 89.4% 91.6% 77.8% 91.4% 88.5% 89.3% 92.9% 86.3% 75.4% 90.8%
Weighted Average Occupancy Rates by Portfolio Type for the Three Months Ended September 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
97.5% 92.1% 88.9% 88.7% 92.5% 90.2% 95.1% 77.4% 89.3% 91.3%
95.2% 92.3% 90.0% 91.1% 90.4% 88.6% 88.7% 80.1% 97.6% 88.5% 89.3% 92.9% 86.3% 75.4% 89.9%
Total 97.3% 92.2% 89.4% 89.0% 92.1% 89.4% 91.6% 77.8% 91.4% 88.5% 89.3% 92.9% 86.3% 75.4% 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
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%
89.1%
88.0% Q1
Q2
Q3
Q4
|______________2009___________|
Q1
Q2
Q3
Q4
|______________2010___________|
Q1
Q2
Q3
|_______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%
90.8%
Q2
Q3
89.9%
90.0%
89.5%
89.0%
88.0% Q1
Q2
Q3
Q4
|_____________2009_____________|
Q1
Q2
Q3
Q4
|_____________2010_____________|
Q1
|_______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 SEPTEMBER 30, 2011 (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
Lease Expirations - Flex Annualized Leased Square Footage Rental Income 555 3,378 2,899 1,799 1,166 1,886 11,683
$
7,287 48,279 40,157 26,715 17,988 32,729 173,155
$
Lease Expirations - Office Annualized Leased Square Footage Rental Income 143 1,018 1,074 660 310 1,067 4,272
$
2,940 23,730 27,614 15,197 7,514 31,405 108,400
$
Lease Expirations - Industrial Annualized Leased Square Footage Rental Income 89 841 1,227 869 333 439 3,798
$
770 6,886 9,470 6,618 2,804 4,071 30,619
$
Lease Expirations - Total Portfolio Annualized Leased Square Footage Rental Income 787 5,237 5,200 3,328 1,809 3,392 19,753
$
10,997 78,895 77,241 48,530 28,306 68,205 312,174
$
OQ
% 4.2% 27.9% 23.2% 15.4% 10.4% 18.9% 100.0%
% 2.7% 21.9% 25.5% 14.0% 6.9% 29.0% 100.0%
% 2.5% 22.5% 30.9% 21.6% 9.2% 13.3% 100.0%
% 3.5% 25.3% 24.7% 15.6% 9.1% 21.8% 100.0%
% of Total Annualized Rental Income 2.4% 15.5% 12.9% 8.6% 5.8% 10.5% 55.7%
% of Total Annualized Rental Income 0.9% 7.6% 8.8% 4.9% 2.4% 10.0% 34.6%
% of Total Annualized Rental Income 0.2% 2.2% 3.0% 2.1% 0.9% 1.3% 9.7%
% of Total Annualized Rental Income 3.5% 25.3% 24.7% 15.6% 9.1% 21.8% 100.0%
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO LEASE EXPIRATIONS AS OF SEPTEMBER 30, 2011 (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 293 1,201 953 635 298 190 3,570
Leased Square Footage 70 580 437 262 84 197 1,630
Leased Square Footage 50 223 358 304 303 194 1,432
Leased Square Footage 15 402 472 363 132 216 1,600
Southern California Annualized Rental Income $
4,289 18,490 14,299 10,059 4,875 4,861 56,873
Northern California Annualized Rental Income $
900 6,998 5,608 2,907 1,066 2,372 19,851
$
Southern Texas Annualized Rental Income $
437 2,788 3,918 3,562 4,303 2,272 17,280
$
Northern Texas Annualized Rental Income $
152 4,584 4,331 4,324 1,730 2,919 18,040
$
OR
% 7.5% 32.5% 25.1% 17.7% 8.6% 8.6% 100.0%
% 4.5% 35.3% 28.3% 14.6% 5.4% 11.9% 100.0%
% 2.5% 16.1% 22.7% 20.6% 24.9% 13.2% 100.0%
% 0.8% 25.4% 24.0% 24.0% 9.6% 16.2% 100.0%
% of Total Annualized Rental Income 1.4% 5.9% 4.5% 3.2% 1.6% 1.6% 18.2%
% of Total Annualized Rental Income 0.3% 2.3% 1.8% 0.9% 0.3% 0.8% 6.4%
% of Total Annualized Rental Income 0.1% 0.9% 1.2% 1.1% 1.4% 0.7% 5.4%
% of Total Annualized Rental Income 0.0% 1.5% 1.4% 1.4% 0.6% 0.9% 5.8%
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO LEASE EXPIRATIONS AS OF SEPTEMBER 30, 2011 (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 87 933 1,097 651 299 455 3,522
Leased Square Footage 119 898 834 503 360 959 3,673
Leased Square Footage 36 388 505 275 176 679 2,059
South Florida Annualized Rental Income $
$
Northern Virginia Annualized Rental Income $
2,032 19,693 18,358 11,293 6,750 25,728 83,854
$
Maryland Annualized Rental Income $
747 9,483 13,122 5,502 4,182 17,646 50,682
$
Oregon Annualized Rental Income
Leased Square Footage 50 200 213 175 74 439 1,151
817 8,769 9,522 5,803 2,915 3,976 31,802
$
823 3,114 3,489 2,989 1,457 7,436 19,308
$
OS
% 2.6% 27.6% 29.9% 18.2% 9.2% 12.5% 100.0%
% 2.4% 23.5% 21.9% 13.5% 8.0% 30.7% 100.0%
% 1.5% 18.7% 25.9% 10.9% 8.2% 34.8% 100.0%
% 4.3% 16.1% 18.1% 15.5% 7.5% 38.5% 100.0%
% of Total Annualized Rental Income 0.3% 2.8% 3.1% 1.9% 0.9% 1.3% 10.3%
% of Total Annualized Rental Income 0.6% 6.3% 5.9% 3.6% 2.2% 8.2% 26.8%
% of Total Annualized Rental Income 0.2% 3.0% 4.2% 1.8% 1.3% 5.6% 16.1%
% of Total Annualized Rental Income 0.3% 1.0% 1.1% 1.0% 0.5% 2.4% 6.3%
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO LEASE EXPIRATIONS AS OF SEPTEMBER 30, 2011 (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
Leased Square Footage 40 150 162 49 36 51 488
Leased Square Footage 27 262 169 111 47 12 628
Leased Square Footage 787 5,237 5,200 3,328 1,809 3,392 19,753
Washington Annualized Rental Income $
% 558 2,465 2,999 992 563 849 8,426
$ Arizona Annualized Rental Income $
% 242 2,511 1,595 1,099 465 146 6,058
$ Total Portfolio Annualized Rental Income $
10,997 78,895 77,241 48,530 28,306 68,205 312,174
$
OT
6.6% 29.2% 35.6% 11.8% 6.7% 10.1% 100.0%
4.0% 41.5% 26.3% 18.1% 7.7% 2.4% 100.0%
% 3.5% 25.3% 24.7% 15.6% 9.1% 21.8% 100.0%
% of Total Annualized Rental Income 0.2% 0.8% 1.0% 0.3% 0.2% 0.3% 2.8%
% of Total Annualized Rental Income 0.1% 0.8% 0.5% 0.4% 0.1% 0.0% 1.9%
% of Total Annualized Rental Income 3.5% 25.3% 24.7% 15.6% 9.1% 21.8% 100.0%
PS BUSINESS PARKS, INC. TOTAL PORTFOLIO LEASE EXPIRATIONS AS OF SEPTEMBER 30, 2011 (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
Lease Expirations - Large Tenant Portfolio Annualized Leased Square Footage Rental Income 258 2,614 3,256 2,300 1,227 2,774 12,429
$
3,551 38,645 45,481 30,515 17,512 54,440 190,144
$
Lease Expirations - Small Tenant Portfolio Annualized Leased Square Footage Rental Income 529 2,623 1,944 1,028 582 618 7,324
$
7,446 40,250 31,760 18,015 10,794 13,765 122,030
$
Lease Expirations - Total Portfolio Annualized Leased Square Footage Rental Income 787 5,237 5,200 3,328 1,809 3,392 19,753
$
10,997 78,895 77,241 48,530 28,306 68,205 312,174
$
OU
% 1.9% 20.3% 23.9% 16.1% 9.2% 28.6% 100.0%
% 6.1% 33.0% 26.0% 14.8% 8.8% 11.3% 100.0%
% 3.5% 25.3% 24.7% 15.6% 9.1% 21.8% 100.0%
% of Total Annualized Rental Income 1.1% 12.4% 14.5% 9.8% 5.6% 17.4% 60.8%
% of Total Annualized Rental Income 2.4% 12.9% 10.2% 5.8% 3.5% 4.4% 39.2%
% of Total Annualized Rental Income 3.5% 25.3% 24.7% 15.6% 9.1% 21.8% 100.0%
