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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 September 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 October 27, 2021, the number of shares of the registrant’s common stock, $0.01 par value per share, outstanding was 27,550,595.


Table of Contents

PS BUSINESS PARKS, INC.

INDEX

Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

3

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

4

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

5

Consolidated statements of cash flows (unaudited) for the nine months ended September 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

23

Item 3. Quantitative and Qualitative Disclosures About Market Risk

46

Item 4. Controls and Procedures

46

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

46

Item 1A. Risk Factors

46

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

47

Item 6. Exhibits

48


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PS BUSINESS PARKS, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

September 30,

December 31,

2021

2020

(Unaudited)

ASSETS

Cash and cash equivalents

$

46,594 

$

69,083 

Real estate facilities, at cost

Land

865,062 

843,765 

Buildings and improvements

2,207,095 

2,080,895 

3,072,157 

2,924,660 

Accumulated depreciation

(1,157,947)

(1,101,739)

1,914,210 

1,822,921 

Properties held for sale, net

46,811 

75,138 

Land and building held for development, net

62,467 

37,922 

2,023,488 

1,935,981 

Rent receivable

2,427 

1,519 

Deferred rent receivable

37,078 

36,788 

Other assets

18,891 

14,334 

Total assets

$

2,128,478 

$

2,057,705 

LIABILITIES AND EQUITY

Accrued and other liabilities

$

99,208 

$

82,065 

Total liabilities

99,208 

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) September 30, 2021

and December 31, 2020

944,750 

944,750 

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

27,546,153 and 27,488,547 shares issued and outstanding at

September 30, 2021 and December 31, 2020, respectively

275 

274 

Paid-in capital

741,032 

738,022 

Accumulated earnings

113,444 

73,631 

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

1,799,501 

1,756,677 

Noncontrolling interests

229,769 

218,963 

Total equity

2,029,270 

1,975,640 

Total liabilities and equity

$

2,128,478 

$

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 Nine Months

Ended September 30,

Ended September 30,

2021

2020

2021

2020

Rental income

$

110,448 

$

103,760 

$

327,859 

$

310,535 

Expenses

Cost of operations

33,091 

32,096 

98,158 

93,490 

Depreciation and amortization

23,857 

23,064 

69,356 

72,646 

General and administrative

5,148 

5,047 

14,329 

11,374 

Total operating expenses

62,096 

60,207 

181,843 

177,510 

Interest and other income

411 

230 

1,590 

1,012 

Interest and other expense

(224)

(536)

(703)

(900)

Gain on sale of real estate facilities

29,924 

7,652 

49,117 

27,273 

Net income

78,463 

50,899 

196,020 

160,410 

Allocation to noncontrolling interests

(13,850)

(8,124)

(33,355)

(26,011)

Net income allocable to PS Business Parks, Inc.

64,613 

42,775 

162,665 

134,399 

Allocation to preferred stockholders

(12,046)

(12,046)

(36,139)

(36,139)

Allocation to restricted stock unit holders

(350)

(149)

(828)

(543)

Net income allocable to common stockholders

$

52,217 

$

30,580 

$

125,698 

$

97,717 

Net income per share of common stock

Basic

$

1.90 

$

1.11 

$

4.57 

$

3.56 

Diluted

$

1.89 

$

1.11 

$

4.55 

$

3.55 

Weighted average common stock outstanding

Basic

27,543 

27,483 

27,523 

27,470 

Diluted

27,635 

27,565 

27,623 

27,560 

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

September 30, 2021

Shares

Amount

Shares

Amount

Capital

Earnings

Equity

Interests

Equity

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

Issuance of common stock in

connection with share-based

compensation

4,689

Stock compensation, net

2,174

2,174

2,174

Cash paid for taxes in lieu of

stock upon vesting of

restricted stock units

(478)

(478)

(478)

Capital contribution from noncontrolling

interests—joint venture

236

236

Net income

64,613

64,613

13,850

78,463

Distributions

Preferred stock (Note 9)

(12,046)

(12,046)

(12,046)

Common stock ($1.05 per share)

(28,923)

(28,923)

(28,923)

Noncontrolling interests—

Common units

(7,671)

(7,671)

Joint venture

(20)

(20)

Balances at September 30, 2021

37,790

$

944,750

27,546,153

$

275

$

741,032

$

113,444

$

1,799,501

$

229,769

$

2,029,270

For the three months ended

September 30, 2020

Balances at June 30, 2020

37,790

$

944,750

27,481,486

$

274

$

735,129

$

73,524

$

1,753,677