Exhibit 99.1

News Release

PS Business Parks, Inc.

701 Western Avenue

Glendale, CA 91201-2349

psbusinessparks.com

 

 

 

  

For Release:    

  

Immediately

  

Date:

  

August 3, 2021

  

Contact:

  

Jeff Hedges

     

(818) 244-8080, Ext. 1649

PS Business Parks, Inc. Reports Results for the Quarter Ended June 30, 2021

GLENDALE, California—PS Business Parks, Inc. (NYSE:PSB) reported operating results for the three and six months ended June 30, 2021.

Operating Results for the Three and Six Months Ended June 30, 2021

Net income allocable to common stockholders for the three and six months ended June 30, 2021 was $45.6 million, or $1.65 per diluted share, and $73.5 million, or $2.66 per diluted share, respectively. Net operating income (“NOI”) attributable to the Company’s Same Park portfolio (defined below) for the three and six months ended June 30, 2021 was $73.2 million and $143.5 million, respectively, representing increases of 9.4% and 4.2% over the same periods in 2020.

The Company also reports NOI, a measure that is not defined in accordance with U.S. generally accepted accounting principles (“GAAP”), on a cash basis, which excludes non-cash rental income such as amortization of deferred rent receivable and other non-cash items, and also excludes rents that have been deferred or abated during the period. Same Park Cash NOI was $73.1 million and $143.0 million for the three and six months ended June 30, 2021, respectively, representing increases of 13.5% and 6.4% over the same periods in 2020. The increases in Same Park Cash NOI for the three and six months ended June 30, 2021 were driven by cash rental income growth of 10.7% and 5.8%, respectively, partially offset by growth in adjusted cost of operations of 4.2% and 4.4%, over the same periods in 2020.

The following table details the change in Same Park rental income for the three and six months ended June 30, 2021 and 2020 (in thousands):

 

     For the Three Months           For the Six Months        
     Ended June 30,           Ended June 30,        
     2021     2020       Change       2021     2020       Change    

Rental income

            

Base rental income

   $ 75,930   $ 74,268   $ 1,662   $ 149,590   $ 148,290   $ 1,300

Expense recovery income

     24,701     22,607     2,094     49,594     46,429     3,165

Lease buyout income

     316     257     59     693     514     179

Rent receivable write-off

     38     (1,148     1,186     29     (1,202     1,231

Abatements

     (110     (863     753     (207     (863     656

Deferrals

     (78     (3,638     3,560     (287     (3,638     3,351

Deferral repayments

     499     —         499     1,264     —         1,264

Fee Income

     175     155     20     353     485     (132
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash Rental Income

     101,471     91,638     9,833     201,029     190,015     11,014

Non-Cash Rental Income (1)

     30     2,440     (2,410     467     3,193     (2,726
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total rental income

   $ 101,501   $ 94,078   $ 7,423   $ 201,496   $ 193,208   $ 8,288
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Non-cash rental income includes amortization of deferred rent receivable (net of write-offs), in-place lease intangible, tenant improvement reimbursements, and lease incentives.

Weighted average occupancy for the Company’s Same Park portfolio during the three and six months ended June 30, 2021 was 92.9% and 92.7%, respectively, compared to 92.2% and 92.5% for the same periods in 2020. Total portfolio weighted average occupancy was 92.9% and 92.6% during the three and six months ended June 30, 2021, respectively, compared to 91.6% and 92.3% for the same periods in 2020.

Additional detail on Same Park NOI and Same Park Cash NOI for the three and six months ended June 30, 2021 is provided in the Property Operations–Same Park Portfolio section below.

 

1


Funds from Operations (“FFO”), Core FFO, and Funds Available for Distribution (“FAD”)

FFO for the three and six months ended June 30, 2021 was $1.75 per share and $3.43 per share, respectively, representing increases of 10.7% and 3.8% from the same periods in 2020. The increases in FFO per share were the result of higher NOI as described above partially offset by higher general and administrative expense primarily driven by stock compensation expense and professional fees related to the reincorporation of PSB from the state of California to the state of Maryland during the second quarter of 2021.

FFO is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts and generally represents GAAP net income before (i) real estate depreciation and amortization expense, (ii) gains or losses on sales of operating properties, and (iii) land and impairment charges on real estate assets.

Core FFO, which the Company defines as FFO excluding the impact of (i) charges related to the redemption of preferred stock and (ii) other nonrecurring income or expense items as appropriate, was $1.77 per share and $3.44 per share for the three and six months ended June 30, 2021, respectively, representing increases of 11.7% and 4.3% from the same periods in 2020. For the three and six months ended June 30, 2021, the Company excluded in its presentation of Core FFO the one-time costs associated with the Company’s reincorporation as a Maryland corporation of $0.5 million. Core FFO per share was equal to FFO per share for the three and six months ended June 30, 2020.

FAD for the three and six months ended June 30, 2021 was $54.5 million and $104.8 million, respectively, representing increases of 22.2% and 11.6% from the same periods in 2020. The increases in FAD for the three and six months ended June 30, 2021 were attributable to higher Same Park Cash NOI and lower recurring capital expenditures. FAD is a non-GAAP measure that represents Core FFO adjusted to (i) deduct recurring capital improvements and capitalized tenant improvements and lease commissions and (ii) remove certain non-cash income or expenses, such as amortization of deferred rent receivable and stock compensation expense.

FFO, Core FFO, and FAD are not substitutes for GAAP net income. Other real estate investment trusts (“REITs”) may compute FFO, Core FFO, and FAD differently, which could inhibit comparability. The Company believes its presentation of FFO, Core FFO, and FAD assists investors and analysts in analyzing and comparing the operating and financial performance between reporting periods. Additional information about these measures is included on the Company’s quarterly report on Form 10-Q.

Leasing Production 1

During the three and six months ended June 30, 2021, the Company executed leases on 1.9 million and 3.9 million square feet, respectively, compared to 1.8 million and 3.6 million square feet for the three and six months ended June 30, 2020, respectively. Weighted average cash rental rate growth on leases executed during the three and six months ended June 30, 2021 was 3.1% and 4.4%, respectively, while average net effective rent2 growth was 10.6% and 12.7% for the same periods. The average lease term of all leases executed during the three months ended June 30, 2021 was 3.3 years, with associated average transaction costs (tenant improvements and leasing commissions) of $2.77 per square foot. For comparative purposes, average lease term and transaction costs on leases executed during the three months ended June 30, 2020 were 3.2 years and $2.30 per square foot, respectively.

Property Operations–Same Park Portfolio

The Company believes that evaluation of the Same Park portfolio, defined as all properties owned and operated as of June 30, 2021 that were acquired prior to January 1, 2019, provides an informative view of how the Company’s portfolio has performed over comparable periods. As of June 30, 2021, the Same Park portfolio consisted of 26.3 million rentable square feet, or 95.3% of the Company’s 27.6 million total rentable square feet, excluding the Company’s 95.0% interest in a 395-unit multifamily property. For the three and six months ended June 30, 2021 and for all comparative periods presented herein, the Company has excluded a 244,000 square foot office park located in Herndon, Virginia, which was held for sale as of June 30, 2021. The Company also excluded a 198,000 square foot office oriented flex business park located in Chantilly, Virginia, which sold in June 2021.

 

 

1 

Leasing Production excludes assets held for sale as of June 30, 2021.

2 

Net effective rent represents average rental payments for the term of a lease on a straight-line basis in accordance with GAAP and excludes operating expense reimbursements.

 

2


The following table presents the unaudited operating results of the Company’s Same Park portfolio for the three and six months ended June 30, 2021 and 2020 (in thousands, except per square foot amounts):

 

     For the Three Months           For the Six Months        
     Ended June 30,           Ended June 30,        
     2021     2020     Change     2021     2020     Change  

Rental income

            

Cash Rental Income (1)

   $ 101,471   $ 91,638     10.7   $ 201,029   $ 190,015     5.8

Non-Cash Rental Income (2)

     30     2,440     (98.8 %)      467     3,193     (85.4 %) 
  

 

 

   

 

 

     

 

 

   

 

 

   

Total rental income

     101,501     94,078     7.9     201,496     193,208     4.3

Adjusted Cost of Operations (3)

            

Property taxes

     11,155     11,102     0.5     22,579     22,158     1.9

Utilities

     4,323     4,027     7.4     8,960     8,999     (0.4 %) 

Repairs and maintenance

     5,805     5,586     3.9     11,274     10,950     3.0

Compensation

     4,114     3,886     5.9     8,394     8,156     2.9

Snow removal

     9     —         100.0     1,028     71     1,347.9

Property insurance

     1,171     856     36.8     2,349     1,735     35.4

Other expenses

     1,753     1,724     1.7     3,430     3,492     (1.8 %) 
  

 

 

   

 

 

     

 

 

   

 

 

   

Total Adjusted Cost of Operations

     28,330     27,181     4.2     58,014     55,561     4.4
  

 

 

   

 

 

     

 

 

   

 

 

   

NOI (4)

   $ 73,171   $ 66,897     9.4   $ 143,482   $ 137,647     4.2
  

 

 

   

 

 

     

 

 

   

 

 

   

Cash NOI (5)

   $ 73,141   $ 64,457     13.5   $ 143,015   $ 134,454     6.4
            

Selected Statistical Data

            

Rentable square footage at period end

     26,271     26,271     —         26,271     26,271     —    

NOI margin (6)

     72.1     71.1     1.4     71.2     71.2     —    

Cash NOI margin (7)

     72.1     70.3     2.6     71.1     70.8     0.4

Weighted average square foot occupancy

     92.9     92.2     0.8     92.7     92.5     0.2

Revenue per occupied square foot (8)

   $ 16.63   $ 15.53     7.1   $ 16.55   $ 15.90     4.1

Revenue per available foot (RevPAF) (9)

   $ 15.45   $ 14.32     7.9   $ 15.34   $ 14.71     4.3

Cash Rental Income per occupied square foot (10)

   $ 16.63   $ 15.13     9.9   $ 16.52   $ 15.64     5.6

Cash Rental Income per available foot (11)

   $ 15.45   $ 13.95     10.8   $ 15.30   $ 14.47     5.7

 

(1)

Cash Rental Income represents rental income excluding Non-Cash Rental Income (defined below). Detail of the components of Cash Rental Income can be found in the table presented under operating results above.

(2)

Non-Cash Rental Income represents amortization of deferred rent receivable (net of write-offs), in-place lease intangible, tenant improvement reimbursements, and lease incentives. Same Park Non-Cash Rental Income is presented net of deferred rent receivable write-offs of $0.1 million and $2.4 million for the three months ended June 30, 2021 and 2020, respectively, and $0.2 million and $2.4 million for the six months ended June 30, 2021 and 2020, respectively.

(3)

Adjusted Cost of Operations, as presented above, excludes stock compensation expense for employees whose compensation expense is recorded in cost of operations, which can vary significantly period to period based upon the performance of the Company.

(4)

The Company utilizes NOI, a non-GAAP financial measure, to evaluate the operating performance of its properties. The Company defines NOI as rental income less Adjusted Cost of Operations. The Company believes NOI assists investors in analyzing the performance of its real estate by excluding (i) corporate overhead (i.e., general and administrative expense) because it does not relate to the direct operating performance of the real estate, (ii) depreciation and amortization expense because it does not accurately reflect changes in the fair value of the real estate, and (iii) stock compensation expense because this expense item can vary significantly from period to period and thus impact comparability across periods.

(5)

The Company utilizes Cash NOI, a non-GAAP financial measure, to evaluate the cash flow performance of its properties and believes investors utilize this metric for the same purpose. The Company defines Cash NOI as Cash Rental Income less Adjusted Cost of Operations.

(6)

NOI margin is computed by dividing NOI by rental income.

(7)

Cash NOI margin is computed by dividing Cash NOI by Cash Rental Income.

(8)

Revenue per occupied square foot is computed by dividing rental income for the period by weighted average occupied square feet for the same period. Revenue per occupied square foot for the three and six month periods shown is annualized.

(9)

Revenue per Available Square Foot (RevPAF) is computed by dividing rental income for the period by weighted average available square feet for the same period. RevPAF for the three and six month periods shown is annualized.

(10)

Cash Rental Income per occupied square foot is computed by dividing Cash Rental Income for the period by weighted average occupied square feet for the same period. Cash rental income per occupied square foot for the three and six month periods shown is annualized.

(11)

Cash Rental Income per Available Square Foot is computed by dividing Cash Rental Income for the period by weighted average available square feet for the same period. Cash rental income per available square foot for the three and six month periods shown is annualized.

 

3


The following table summarizes unaudited selected quarterly financial data with respect to the Same Park portfolio (in thousands, except per square foot amounts):

 

    For the Three Months Ended  
            March 31                     June 30                     September 30             December 31  

Rental income

       

2021

  $ 99,995   $ 101,501   $ —       $ —    

2020

  $ 99,130   $ 94,078   $ 97,893   $ 97,937

Adjusted Cost of Operations (1)

       

2021

  $ 29,684   $ 28,330   $ —       $ —    

2020

  $ 28,380   $ 27,181   $ 29,142   $ 28,624

NOI (1)

       

2021

  $ 70,311   $ 73,171   $ —       $ —    

2020

  $ 70,750   $ 66,897   $ 68,751   $ 69,313

Weighted average square foot occupancy

       

2021

    92.4     92.9     —         —    

2020

    92.8     92.2     92.3     92.0

Revenue per occupied square foot (1)

       

2021

  $ 16.47   $ 16.63   $ —       $ —    

2020

  $ 16.27   $ 15.53   $ 16.15   $ 16.21

RevPAF (1)

       

2021

  $ 15.23   $ 15.45   $ —       $ —    

2020

  $ 15.09   $ 14.32   $ 14.91   $ 14.91

 

(1)

Defined in Property Operations–Same Park Portfolio table.

COVID-19 Pandemic/Rent Collections Update

The COVID-19 pandemic has had and is expected to continue to have an impact on our operations and capital plans. During the three months ended June 30, 2021, the Company granted $0.1 million of rent deferral and $0.1 million of rent abatement, which was significantly lower than $3.8 million of rent deferral and $0.9 million of abatement granted at the initial onset of the COVID-19 pandemic during the three months ended June 30, 2020. During the six months ended June 30, 2021, the Company granted $0.3 million of rent deferral and $0.2 million of rent abatement. Since the onset of the COVID-19 pandemic, the Company entered into rent relief agreements consisting of $5.9 million of rent deferrals and $1.5 million of rent abatements. As of June 30, 2021, the 352 current customers that received rent relief account for 10.4% of rental income. As of June 30, 2021, the Company collected $4.3 million of rent deferral repayment, representing 99.2% of the amounts scheduled to be repaid through June 2021. An additional $0.6 million of rent deferral repayment is scheduled to be repaid by customers between July 1, 2021 and December 31, 2021, with another $0.8 million thereafter.

As of August 2, 2021, the Company had collected 99.4% of revenue billed during the six months ended June 30, 2021. The Company noted that the second quarter of 2021 marked the fourth consecutive quarter of normal accounts receivable write-off activity. During the three and six months ended June 30, 2021, the Company wrote off $0.0 of accounts receivable, net of recoveries, compared to $1.2 million written off during both the three and six months ended June 30, 2020. During the three and six months ended June 30, 2021, the Company wrote off $0.1 million and $0.2 million of deferred rent receivable, respectively, which is significantly lower than the $2.4 million written off during both the three and six months ended June 30, 2020.

As of August 2, 2021, the Company had open rent relief requests from approximately 1% of its customers. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Certain Factors that May Impact Future Results–Impact of COVID-19 Pandemic” in our Form 10-Q for the quarter ended June 30, 2021 for more information.

 

4


Dispositions Update

On June 17, 2021, the Company sold a 198,000 square foot office oriented flex business park located in Chantilly, Virginia, for net proceeds of $32.6 million. Subsequent to June 30, 2021, the Company completed the sale of a 244,000 square foot office business park located in Herndon, Virginia, for a gross sales price of $41.3 million. Both properties were reclassified as held for sale as of December 31, 2020. The Company noted that these dispositions are consistent with its strategy to opportunistically divest certain non-strategic assets.

The Company also announced that it is separately marketing for sale a 371,000 square foot flex park located in San Diego, California, and 267,000 square feet of flex properties located in Irving, Texas. The Company noted that it is not committed to, or required to, sell these assets and will evaluate the prospect of a sale based on market interest. Due to the uncertainty of these potential dispositions, the properties remain as held for use in the consolidated financial statements as of June 30, 2021 and for all comparable periods.

Distributions Declared

On July 27, 2021, the Board of Directors declared a quarterly dividend of $1.05 per share of common stock. Distributions were also declared on the various series of depositary shares, each representing 1/1,000 of a share of preferred stock. Distributions for both common stock and preferred stock will be payable on September 30, 2021 to stockholders of record on September 15, 2021.

Company Information

PS Business Parks, Inc. (NYSE:PSB), a S&P MidCap 400 company, is a REIT that acquires, develops, owns, and operates commercial properties, predominantly multi-tenant industrial, industrial-flex, and low-rise suburban office. Located primarily in major coastal markets, PS Business Parks’ 96 properties serve approximately 5,000 tenants in 27 million square feet of space as of August 3, 2021. The portfolio also includes 800 residential units (including units in-process).

Forward-Looking Statements

When used within this press release, the words “may,” “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” “intends,” and similar expressions are intended to identify “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results and performance of the Company to be materially different from those expressed or implied in the forward-looking statements. Such factors include the duration and severity of the COVID-19 pandemic and its impact on our business and our customers; the impact of competition from new and existing commercial facilities which could impact rents and occupancy levels at the Company’s facilities; the Company’s ability to evaluate, finance, and integrate acquired and developed properties into the Company’s existing operations; the Company’s ability to effectively compete in the markets that it does business in; the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing REITs; security breaches, including ransomware, or a failure of the Company’s networks, systems or technology, which could adversely impact the Company’s operations or its business, customer and employee relationships or result in fraudulent payments; the impact of general economic and business conditions, including as a result of the economic fallout of the COVID-19 pandemic; rental rates and occupancy levels at the Company’s facilities; and changes in these conditions as a result of the COVID-19 pandemic, the availability of permanent capital at attractive rates, the outlook and actions of rating agencies and risks detailed from time to time in the Company’s SEC reports, including quarterly reports on Form 10-Q, reports on Form 8-K, and annual reports on Form 10-K.

Additional information about PS Business Parks, Inc., including more financial analysis of the second quarter operating results, is available on the Company’s website at psbusinessparks.com.

A conference call is scheduled for Wednesday, August 4, 2021, at 10:00 a.m. PDT (1:00 p.m. EDT) to discuss second quarter results. The toll free number is (877) 876-9176; the conference ID is PSBQ221. The call will also be available via a live webcast on the Company’s website. A replay of the conference call will be available through August 18, 2021 at (800) 839-4018, as well as via webcast on the Company’s website.

Additional financial data attached.

 

5


PS BUSINESS PARKS, INC.

CONSOLIDATED BALANCE SHEETS

(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
  

 

 

   

 

 

 

 

6


PS BUSINESS PARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(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 

 

7


PS BUSINESS PARKS, INC.

Computation of Funds from Operations (“FFO”), Core FFO, and Funds Available for Distribution (“FAD”)

(In thousands, except per share amounts)

(Unaudited)

 

     For the Three Months      For the Six Months  
     Ended June 30,      Ended June 30,  
     2021      2020      2021      2020  

Net income allocable to common stockholders

   $ 45,595     $ 25,522     $ 73,481    $ 67,137

Adjustments

           

Gain on sale of real estate facility

     (19,193)               (19,193)        (19,621)  

Depreciation and amortization expense

     22,514       22,963       45,499       49,582 

Net income allocated to noncontrolling interests

     12,094       6,795       19,505       17,887 

Net income allocated to restricted stock unit holders

     314       119       478       394 

FFO allocated to joint venture partner

     (18)        (38)        (45)        (81)  
  

 

 

    

 

 

    

 

 

    

 

 

 

FFO allocable to diluted common stock and units (1)

     61,306       55,361       119,725       115,298 

Maryland reincorporation costs

     510              510        
  

 

 

    

 

 

    

 

 

    

 

 

 

Core FFO allocable to diluted common stock and units (1)

     61,816       55,361       120,235       115,298 

Adjustments

           

Recurring capital improvements

     (3,788)        (3,565)        (4,436)        (4,788)  

Tenant improvements

     (4,115)        (4,155)        (7,024)        (7,701)  

Capitalized lease commissions

     (1,556)        (1,254)        (3,404)        (3,336)  

Non-cash rental income (2)

     (183)        (2,746)        (1,490)        (3,810)  

Non-cash stock compensation expense

     2,301       931       4,081       1,873 

Cash paid for taxes in lieu of stock upon vesting of restricted stock units

     (5)        (5)        (3,202)        (3,660)  
  

 

 

    

 

 

    

 

 

    

 

 

 

FAD allocable to diluted common stock and units (1)

   $ 54,470     $ 44,567     $ 104,760     $ 93,876 
  

 

 

    

 

 

    

 

 

    

 

 

 

Distributions to common stockholders, noncontrolling interests, and restricted stock unit holders

   $ 36,813     $ 36,698     $ 73,537     $ 73,406 

Distribution payout ratio

     67.6%        82.3%        70.2%        78.2%  

Reconciliation of earnings per share to FFO per share

           

Net income per share of common stock—diluted

   $ 1.65     $ 0.93     $ 2.66     $ 2.44 

Gain on sale of real estate facility

     (0.54)               (0.54)        (0.56)  

Depreciation and amortization expense

     0.64       0.66       1.31       1.42 
  

 

 

    

 

 

    

 

 

    

 

 

 

FFO per share (1)

     1.75       1.59       3.43       3.30 

Maryland reincorporation costs

     0.01              0.01        
  

 

 

    

 

 

    

 

 

    

 

 

 

Core FFO per share (1)

   $ 1.77     $ 1.59     $ 3.44     $ 3.30 
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average outstanding

           

Common stock

     27,531       27,479       27,513       27,464 

Common operating partnership units

     7,305       7,305       7,305       7,305 

Restricted stock units

     32       43       35       65 

Common stock equivalents

     101       81       98       93 
  

 

 

    

 

 

    

 

 

    

 

 

 

Total diluted common stock and units

     34,969       34,908       34,951       34,927 
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Defined in Funds from Operations (“FFO”), Core FFO, and Funds Available for Distribution (“FAD”).

(2)

Non-cash rental income includes amortization of deferred rent receivable, in-place lease intangible, tenant improvement reimbursements, and lease incentives.

 

8


PS BUSINESS PARKS, INC.

Reconciliation of Selected Non-GAAP Measures to Analogous GAAP Measures

(Unaudited, in thousands)

 

     For the Three Months             For the Six Months         
     Ended June 30,             Ended June 30,         
     2021      2020      Change      2021      2020      Change  

Rental income

                 

Same Park

   $ 101,501    $ 94,078      7.9%      $ 201,496    $ 193,208      4.3%  

Non-Same Park

     3,926      2,067      89.9%        7,695      4,488      71.5%  

Multifamily

     2,248      2,488      (9.6%)        4,575      5,048      (9.4%)  

Assets sold or held for sale (1)

     1,689      1,926      (12.3%)        3,645      4,031      (9.6%)  
  

 

 

    

 

 

       

 

 

    

 

 

    

Total rental income

     109,364      100,559      8.8%        217,411      206,775      5.1%  
  

 

 

    

 

 

       

 

 

    

 

 

    

Cost of operations

                 

Adjusted Cost of Operations (2)

                 

Same Park

     28,330       27,181       4.2%        58,014       55,561       4.4%  

Non-Same Park

     1,187       878       35.2%        2,340       1,707       37.1%  

Multifamily

     1,177       1,002       17.5%        2,244       2,018       11.2%  

Assets sold or held for sale (1)

     674       804       (16.2%)        1,532       1,568       (2.3%)  

Stock compensation expense (3)

     481       266       80.8%        937       540       73.5%  
  

 

 

    

 

 

       

 

 

    

 

 

    

Total cost of operations

     31,849       30,131       5.7%        65,067       61,394       6.0%  
  

 

 

    

 

 

       

 

 

    

 

 

    

Net operating income (2)

                 

Same Park

     73,171       66,897       9.4%        143,482       137,647       4.2%  

Non-Same Park

     2,739       1,189       130.4%        5,355       2,781       92.6%  

Multifamily

     1,071       1,486       (27.9%)        2,331       3,030       (23.1%)  

Assets sold or held for sale (1)

     1,015       1,122       (9.5%)        2,113       2,463       (14.2%)  

Stock compensation expense (3)

     (481)        (266)        80.8%        (937)        (540)        73.5%  

Depreciation and amortization expense

     (22,514)        (22,963)        (2.0%)        (45,499)        (49,582)        (8.2%)  

General and administrative expense

     (4,799)        (3,004)        59.8%        (9,181)        (6,327)        45.1%  

Interest and other income

     923       225       310.2%        1,179       782       50.8%  

Interest and other expense

     (268)        (203)        32.0%        (479)        (364)        31.6%  

Gain on sale of real estate facility

     19,193              100.0%        19,193       19,621       (2.2%)  
  

 

 

    

 

 

       

 

 

    

 

 

    

Net income

   $
 
 
70,050 
 
   $ 44,483       57.5%      $ 117,557     $ 109,511       7.3%  
  

 

 

    

 

 

       

 

 

    

 

 

    

 

(1)

Amounts shown for the three and six months ended June 30, 2021 include operating results attributable to assets held for sale comprising 244,000 square feet (subsequently sold in July 2021) and an asset sold in June 2021 comprising 198,000 square feet. Amounts shown for the three months ended June 30, 2020 include operating results attributable to assets held for sale comprising 244,000 square feet, the asset sold in June 2021 comprising 198,000 square feet, and an asset sold in September 2020 comprising 40,000 square feet. Amounts shown for the six months ended June 30, 2020 include operating results attributable to assets held for sale comprising 244,000 square feet, the asset sold in June 2021 comprising 198,000 square feet, the asset sold in September 2020 comprising 40,000 square feet, and an asset sold in January 2020 comprising 113,000 square feet.

(2)

Defined in Property Operations–Same Park Portfolio table.

(3)

Stock compensation expense, as shown here, represents stock compensation expense for employees whose compensation expense is recorded in cost of operations. Note that stock compensation expense attributable to the executive management team (including divisional vice presidents) and other corporate employees is recorded within general and administrative expense.

 

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