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Table of Contents

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, 2021

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)

Maryland

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

S

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 August 2, 2021, the number of shares of the registrant’s common stock, $0.01 par value per share, outstanding was 27,542,562.


Table of Contents

PS BUSINESS PARKS, INC.

INDEX

Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated balance sheets as of June 30, 2021 (unaudited) and December 31, 2020

3

Consolidated statements of income (unaudited) for the three and six months ended June 30, 2021 and 2020

4

Consolidated statements of equity (unaudited) for the three and six months ended June 30, 2021 and 2020

5

Consolidated statements of cash flows (unaudited) for the six months ended June 30, 2021 and 2020

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

42

Item 4. Controls and Procedures

42

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

43

Item 1A. Risk Factors

43

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

43

Item 6. Exhibits

44


Table of Contents

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,

2021

2020

(Unaudited)

ASSETS

Cash and cash equivalents

$

115,965 

$

69,083 

Real estate facilities, at cost

Land

865,081 

864,092 

Buildings and improvements

2,204,461 

2,186,621 

3,069,542 

3,050,713 

Accumulated depreciation

(1,219,040)

(1,181,402)

1,850,502 

1,869,311 

Properties held for sale, net

12,871 

26,273 

Land and building held for development, net

52,529 

40,397 

1,915,902 

1,935,981 

Rent receivable

1,903 

1,519 

Deferred rent receivable

37,589 

36,788 

Other assets

15,165 

14,334 

Total assets

$

2,086,524 

$

2,057,705 

LIABILITIES AND EQUITY

Accrued and other liabilities

$

88,989 

$

82,065 

Total liabilities

88,989 

82,065 

Commitments and contingencies

 

 

Equity

PS Business Parks, Inc.’s stockholders’ 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, 2021

and December 31, 2020

944,750 

944,750 

Common stock, $0.01 par value, 100,000,000 shares authorized,

27,541,464 and 27,488,547 shares issued and outstanding at

June 30, 2021 and December 31, 2020, respectively

275 

274 

Paid-in capital

739,336 

738,022 

Accumulated earnings

89,800 

73,631 

Total PS Business Parks, Inc.’s stockholders’ equity

1,774,161 

1,756,677 

Noncontrolling interests

223,374 

218,963 

Total equity

1,997,535 

1,975,640 

Total liabilities and equity

$

2,086,524 

$

2,057,705 

See accompanying notes.

3


Table of Contents

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,

2021

2020

2021

2020

Rental income

$

109,364 

$

100,559 

$

217,411 

$

206,775 

Expenses

Cost of operations

31,849 

30,131 

65,067 

61,394 

Depreciation and amortization

22,514 

22,963 

45,499 

49,582 

General and administrative

4,799 

3,004 

9,181 

6,327 

Total operating expenses

59,162 

56,098 

119,747 

117,303 

Interest and other income

923 

225 

1,179 

782 

Interest and other expense

(268)

(203)

(479)

(364)

Gain on sale of real estate facility

19,193 

19,193 

19,621 

Net income

70,050 

44,483 

117,557 

109,511 

Allocation to noncontrolling interests

(12,094)

(6,795)

(19,505)

(17,887)

Net income allocable to PS Business Parks, Inc.

57,956 

37,688 

98,052 

91,624 

Allocation to preferred stockholders

(12,047)

(12,047)

(24,093)

(24,093)

Allocation to restricted stock unit holders

(314)

(119)

(478)

(394)

Net income allocable to common stockholders

$

45,595 

$

25,522 

$

73,481 

$

67,137 

Net income per share of common stock

Basic

$

1.66 

$

0.93 

$

2.67 

$

2.44 

Diluted

$

1.65 

$

0.93 

$

2.66 

$

2.44 

Weighted average common stock outstanding

Basic

27,531 

27,479 

27,513 

27,464 

Diluted

27,632 

27,560 

27,611 

27,557 

See accompanying notes.

4


Table of Contents

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 Stockholders’

Noncontrolling

Total

June 30, 2021

Shares

Amount

Shares

Amount

Capital

Earnings

Equity

Interests

Equity

Balances at March 31, 2021

37,790

$

944,750

27,516,939

$

274

$

736,336

$

72,809

$

1,754,169

$

218,845

$

1,973,014

Issuance of common stock in

connection with share-based

compensation

24,525

1

906

907

907

Stock compensation, net

2,099

2,099

2,099

Cash paid for taxes in lieu of

stock upon vesting of

restricted stock units

(5)

(5)

(5)

Capital contribution from noncontrolling

interests—joint venture

128

128

Net income

57,956

57,956

12,094

70,050

Distributions

Preferred stock (Note 9)

(12,047)

(12,047)

(12,047)

Common stock ($1.05 per share)

(28,918)

(28,918)

(28,918)

Noncontrolling interests—

Common units

(7,670)

(7,670)

Joint venture

(23)

(23)

Balances at June 30, 2021

37,790

$

944,750

27,541,464

$

275

$

739,336

$

89,800

$

1,774,161

$

223,374

$

1,997,535

For the three months ended

June 30, 2020

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