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, 2019
	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 5.750% Cum Pref Stock, Series U, $0.01 par value	PSBPrU	New York Stock Exchange
Depositary Shares Each Representing 1/1,000 of a 5.700% Cum Pref Stock, Series V, $0.01 par value	PSBPrV	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

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 October 21, 2019, the number of shares of the registrant’s common stock, $0.01 par value per share, outstanding was 27,436,547.

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,
	2019		2018
	(Unaudited)
ASSETS

Cash and cash equivalents	$	6,749	$	37,379

Real estate facilities, at cost
Land		837,891		762,731
Buildings and improvements		2,212,166		2,157,407
		3,050,057		2,920,138
Accumulated depreciation		(1,152,946)		(1,097,748)
		1,897,111		1,822,390
Properties held for sale, net		124,937		128,093
Land and building held for development		30,515		30,848
		2,052,563		1,981,331
Rent receivable		1,752		1,403
Deferred rent receivable		35,548		33,308
Other assets		21,122		15,173
Total assets	$	2,117,734	$	2,068,594

LIABILITIES AND EQUITY

Accrued and other liabilities	$	92,252	$	85,141
Credit facility		50,000		—
Total liabilities		142,252		85,141
Commitments and contingencies
Equity
PS Business Parks, Inc.’s shareholders’ equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized,
38,390 shares issued and outstanding at
September 30, 2019 and December 31, 2018,
at liquidation preference		959,750		959,750
Common stock, $0.01 par value, 100,000,000 shares authorized,
27,435,139 and 27,362,101 shares issued and outstanding at
September 30, 2019 and December 31, 2018, respectively		274		274
Paid-in capital		734,760		736,131
Accumulated earnings		64,775		69,207
Total PS Business Parks, Inc.’s shareholders’ equity		1,759,559		1,765,362
Noncontrolling interests		215,923		218,091
Total equity		1,975,482		1,983,453
Total liabilities and equity	$	2,117,734	$	2,068,594

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,
	2019		2018		2019		2018

Rental income	$	108,064	$	103,808	$	323,671	$	309,391

Expenses
Cost of operations		32,468		31,197		97,521		94,449
Depreciation and amortization		26,220		25,207		75,863		73,505
General and administrative		4,051		2,882		10,111		8,560
Total operating expenses		62,739		59,286		183,495		176,514

Interest and other income		1,384		488		2,766		1,066
Interest and other expense		(199)		(167)		(484)		(499)
Gain on sale of real estate facilities		—		—		—		85,283
Net income		46,510		44,843		142,458		218,727
Allocation to noncontrolling interests		(7,020)		(6,514)		(21,670)		(36,814)
Net income allocable to PS Business Parks, Inc.		39,490		38,329		120,788		181,913
Allocation to preferred shareholders		(12,959)		(12,959)		(38,877)		(38,921)
Allocation to restricted stock unit holders		(219)		(239)		(699)		(1,592)
Net income allocable to common shareholders	$	26,312	$	25,131	$	81,212	$	141,400

Net income per common share
Basic	$	0.96	$	0.92	$	2.96	$	5.18
Diluted	$	0.96	$	0.92	$	2.95	$	5.16

Weighted average common shares outstanding
Basic		27,432		27,339		27,411		27,310
Diluted		27,543		27,442		27,512		27,412

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
September 30, 2019	Shares	Amount		Shares	Amount		Capital		Earnings (Deficit)		Equity		Interests		Equity
Balances at June 30, 2019	38,390	$	959,750	27,429,756	$	274	$	733,777	$	67,049	$	1,760,850	$	216,327	$	1,977,177
Issuance of common stock in
connection with stock-based
compensation	—		—	5,383		—		—		—		—		—		—
Stock compensation, net	—		—	—		—		1,883		—		1,883		—		1,883
Cash paid for taxes in lieu of
shares upon vesting of
restricted stock units	—		—	—		—		(620)		—		(620)		—		(620)
Net income	—		—	—		—		—		39,490		39,490		7,020		46,510
Distributions
Preferred stock (Note 8)	—		—	—		—		—		(12,959)		(12,959)		—		(12,959)
Common stock ($1.05 per share)	—		—	—		—		—		(28,805)		(28,805)		—		(28,805)
Noncontrolling interests—
Common Units	—		—	—		—		—		—		—		(7,671)		(7,671)
Joint Venture	—		—	—		—		—		—		—		(33)		(33)
Adjustment to noncontrolling interests—
common units in the OP	—		—	—		—		(280)		—		(280)		280		—
Balances at September 30, 2019	38,390	$	959,750	27,435,139	$	274	$	734,760	$	64,775	$	1,759,559	$	215,923	$	1,975,482

For the three months ended
September 30, 2018
Balances at June 30, 2018	38,390	$	959,750	27,331,834	$	272	$	733,617	$	69,448	$	1,763,087	$	217,932	$	1,981,019
Issuance of common stock in
connection with stock-based
compensation	—		—	14,728		1	<



	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets as of September 30, 2019 (unaudited) and December 31, 2018	3
Consolidated statements of income (unaudited) for the three and nine months ended September 30, 2019 and 2018	4
Consolidated statements of equity (unaudited) for the three and nine months ended September 30, 2019 and 2018	5
Consolidated statements of cash flows (unaudited) for the nine months ended September 30, 2019 and 2018	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	40
Item 4. Controls and Procedures	40
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	40
Item 1A. Risk Factors	41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6. Exhibits	42