UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


S	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2020
	or
£	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from to

Commission File Number 1-10709

PS BUSINESS PARKS, INC.

(Exact name of registrant as specified in its charter)

California	95-4300881
(State or Other Jurisdiction	(I.R.S. Employer
of Incorporation)	Identification Number)

701 Western Avenue, Glendale, California 91201-2349

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (818) 244-8080

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Ticker Symbol	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value per share	PSB	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.200% Cum Pref Stock, Series W, $0.01 par value	PSBPrW	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.250% Cum Pref Stock, Series X, $0.01 par value	PSBPrX	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.200% Cum Pref Stock, Series Y, $0.01 par value	PSBPrY	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 4.875% Cum Pref Stock, Series Z, $0.01 par value	PSBPrZ	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes S No £

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes S No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £ No S

As of April 27, 2020, the number of shares of the registrant’s common stock, $0.01 par value per share, outstanding was 27,479,439.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PS BUSINESS PARKS, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)



	March 31,		December 31,
	2020		2019
	(Unaudited)
ASSETS

Cash and cash equivalents	$	87,874	$	62,786

Real estate facilities, at cost
Land		857,758		846,635
Buildings and improvements		2,214,861		2,206,134
		3,072,619		3,052,769
Accumulated depreciation		(1,181,660)		(1,159,769)
		1,890,959		1,893,000
Properties held for sale, net		—		11,502
Land and building held for development, net		26,216		28,110
		1,917,175		1,932,612
Rent receivable		2,903		1,392
Deferred rent receivable		33,747		32,993
Other assets		12,317		16,660
Total assets	$	2,054,016	$	2,046,443

LIABILITIES AND EQUITY

Accrued and other liabilities	$	78,644	$	84,632
Total liabilities		78,644		84,632
Commitments and contingencies
Equity
PS Business Parks, Inc.’s shareholders’ equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized,
37,790 shares issued and outstanding at ($944,750 aggregate
liquidation preference) at March 31, 2020
and December 31, 2019		944,750		944,750
Common stock, $0.01 par value, 100,000,000 shares authorized,
27,477,303 and 27,440,953 shares issued and outstanding at
March 31, 2020 and December 31, 2019, respectively		274		274
Paid-in capital		734,091		736,986
Accumulated earnings		76,739		63,666
Total PS Business Parks, Inc.’s shareholders’ equity		1,755,854		1,745,676
Noncontrolling interests		219,518		216,135
Total equity		1,975,372		1,961,811
Total liabilities and equity	$	2,054,016	$	2,046,443

PS BUSINESS PARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

(Unaudited)



	For The Three Months
	Ended March 31,
	2020		2019

Rental income	$	106,216	$	107,825

Expenses
Cost of operations		31,263		33,593
Depreciation and amortization		26,619		24,875
General and administrative		3,323		3,233
Total operating expenses		61,205		61,701

Interest and other income		557		618
Interest and other expense		(161)		(167)
Gain on sale of real estate facility		19,621		—
Net income		65,028		46,575
Allocation to noncontrolling interests		(11,092)		(7,027)
Net income allocable to PS Business Parks, Inc.		53,936		39,548
Allocation to preferred shareholders		(12,046)		(12,959)
Allocation to restricted stock unit holders		(275)		(268)
Net income allocable to common shareholders	$	41,615	$	26,321

Net income per common share
Basic	$	1.52	$	0.96
Diluted	$	1.51	$	0.96

Weighted average common shares outstanding
Basic		27,448		27,373
Diluted		27,550		27,479

PS BUSINESS PARKS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Amounts in thousands, except share data)

(Unaudited)



											Total PS
											Business Parks,
For the three months ended	Preferred Stock			Common Stock			Paid-in		Accumulated		Inc.’s Shareholders’		Noncontrolling		Total
March 31, 2020	Shares	Amount		Shares	Amount		Capital		Earnings		Equity		Interests		Equity
Balances at December 31, 2019	37,790	$	944,750	27,440,953	$	274	$	736,986	$	63,666	$	1,745,676	$	216,135	$	1,961,811
Issuance of common stock in
connection with stock-based
compensation	—		—	36,350		—		—		—		—		—		—
Stock compensation, net	—		—	—		—		760		—		760		—		760
Cash paid for taxes in lieu of
shares upon vesting of
restricted stock units	—		—	—		—		(3,655)		—		(3,655)		—		(3,655)
Net income	—		—	—		—		—		53,936		53,936		11,092		65,028
Distributions
Preferred stock (Note 8)	—		—	—		—		—		(12,046)		(12,046)		—		(12,046)
Common stock ($1.05 per share)	—		—	—		—		—		(28,817)		(28,817)		—		(28,817)
Noncontrolling interests—
Common Units	—		—	—		—		—		—		—		(7,671)		(7,671)
Joint Venture	—		—	—		—		—		—		—		(38)		(38)
Balances at March 31, 2020	37,790	$	944,750	27,477,303	$	274	$	734,091	$	76,739	$	1,755,854	$	219,518	$	1,975,372

For the three months ended
March 31, 2019
Balances at December 31, 2018	38,390	$	959,750	27,362,101	$	274	$	736,131	$	69,207	$	1,765,362	$	218,091	$	1,983,453
Issuance of common stock in
connection with stock-based
compensation	—		—	55,808		—		405		—		405		—		405
Stock compensation, net	—		—	—		—		703		—		703		—		703
Cash paid for taxes in lieu of
shares upon vesting of
restricted stock units	—		—	—		—		(5,494)		—		(5,494)		—		(5,494)
Net income	—		—	—		—		—		39,548		39,548		7,027		46,575
Distributions
Preferred stock (Note 8)	—		—	—		—		—		(12,959)		(12,959)		—		(12,959)
Common stock ($1.05 per share)	—		—	—		—		—		(28,737)		(28,737)		—		(28,737)
Noncontrolling interests—
Common Units	—		—	—		—		—		—		—		(7,671)		(7,671)
Adjustment to noncontrolling interests—



	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets as of March 31, 2020 (unaudited) and December 31, 2019	3
Consolidated statements of income (unaudited) for the three months ended March 31, 2020 and 2019	4
Consolidated statements of equity (unaudited) for the three months ended March 31, 2020 and 2019	5
Consolidated statements of cash flows (unaudited) for the three months ended March 31, 2020 and 2019	6
Notes to consolidated financial statements (unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures About Market Risk	36
Item 4. Controls and Procedures	36
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	36
Item 1A. Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 6. Exhibits	38