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 June 30, 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 July 31, 2020, the number of shares of the registrant’s common stock, $0.01 par value per share, outstanding was 27,482,494.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PS BUSINESS PARKS, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)



	June 30,		December 31,
	2020		2019
	(Unaudited)
ASSETS

Cash and cash equivalents	$	98,841	$	62,786

Real estate facilities, at cost
Land		855,542		844,419
Buildings and improvements		2,220,562		2,203,308
		3,076,104		3,047,727
Accumulated depreciation		(1,201,821)		(1,158,489)
		1,874,283		1,889,238
Properties held for sale, net		3,716		15,264
Land and building held for development, net		29,899		28,110
		1,907,898		1,932,612
Rent receivable		2,779		1,392
Deferred rent receivable		36,204		32,993
Other assets		10,758		16,660
Total assets	$	2,056,480	$	2,046,443

LIABILITIES AND EQUITY

Accrued and other liabilities	$	84,185	$	84,632
Total liabilities		84,185		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) June 30, 2020
and December 31, 2019		944,750		944,750
Common stock, $0.01 par value, 100,000,000 shares authorized,
27,481,486 and 27,440,953 shares issued and outstanding at
June 30, 2020 and December 31, 2019, respectively		274		274
Paid-in capital		735,129		736,986
Accumulated earnings		73,524		63,666
Total PS Business Parks, Inc.’s shareholders’ equity		1,753,677		1,745,676
Noncontrolling interests		218,618		216,135
Total equity		1,972,295		1,961,811
Total liabilities and equity	$	2,056,480	$	2,046,443

PS BUSINESS PARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

(Unaudited)



	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2020		2019		2020		2019

Rental income	$	100,559	$	107,782	$	206,775	$	215,607

Expenses
Cost of operations		30,131		31,460		61,394		65,053
Depreciation and amortization		22,963		24,768		49,582		49,643
General and administrative		3,004		2,827		6,327		6,060
Total operating expenses		56,098		59,055		117,303		120,756

Interest and other income		225		764		782		1,382
Interest and other expense		(203)		(118)		(364)		(285)
Gain on sale of real estate facility		—		—		19,621		—
Net income		44,483		49,373		109,511		95,948
Allocation to noncontrolling interests		(6,795)		(7,623)		(17,887)		(14,650)
Net income allocable to PS Business Parks, Inc.		37,688		41,750		91,624		81,298
Allocation to preferred shareholders		(12,047)		(12,959)		(24,093)		(25,918)
Allocation to restricted stock unit holders		(119)		(212)		(394)		(480)
Net income allocable to common shareholders	$	25,522	$	28,579	$	67,137	$	54,900

Net income per common share
Basic	$	0.93	$	1.04	$	2.44	$	2.00
Diluted	$	0.93	$	1.04	$	2.44	$	2.00

Weighted average common shares outstanding
Basic		27,479		27,426		27,464		27,400
Diluted		27,560		27,532		27,557		27,505

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
June 30, 2020	Shares	Amount		Shares	Amount		Capital		Earnings		Equity		Interests		Equity
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
Issuance of common stock in
connection with stock-based
compensation	—		—	4,183		—		259		—		259		—		259
Stock compensation, net	—		—	—		—		784		—		784		—		784
Cash paid for taxes in lieu of
shares upon vesting of
restricted stock units	—		—	—		—		(5)		—		(5)		—		(5)
Net income	—		—	—		—		—		37,688		37,688		6,795		44,483
Distributions
Preferred stock (Note 8)	—		—	—		—		—		(12,047)		(12,047)		—		(12,047)
Common stock ($1.05 per share)	—		—	—		—		—		(28,856)		(28,856)		—		(28,856)
Noncontrolling interests—
Common Units	—		—	—		—		—		—		—		(7,670)		(7,670)
Joint Venture	—		—	—		—		—		—		—		(25)		(25)
Balances at June 30, 2020	37,790	$	944,750	27,481,486	$	274	$	735,129	$	73,524	$	1,753,677	$	218,618	$	1,972,295

For the three months ended
June 30, 2019
Balances at March 31, 2019	38,390	$	959,750	27,417,909	$	274	$	732,955	$	67,059	$	1,760,038	$	216,237	$	1,976,275
Issuance of common stock in
connection with stock-based
compensation	—		—	11,847		—		304		—		304		—		304
Stock compensation, net	—		—	—		—		706		—



	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets as of June 30, 2020 (unaudited) and December 31, 2019	3
Consolidated statements of income (unaudited) for the three and six months ended June 30, 2020 and 2019	4
Consolidated statements of equity (unaudited) for the three and six months ended June 30, 2020 and 2019	5
Consolidated statements of cash flows (unaudited) for the six months ended June 30, 2020 and 2019	7
Notes to consolidated financial statements (unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	41
Item 4. Controls and Procedures	41
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	41
Item 1A. Risk Factors	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 6. Exhibits	43