(Source: Business Wire)
PS Business Parks, Inc. (NYSE:PSB) reported operating results for the
third quarter ended September 30, 2009.
Net income allocable to common shareholders for the three months ended
September 30, 2009 was $8.8 million, or $0.39 per diluted share, on
revenues of $67.7 million compared to $5.3 million, or $0.26 per diluted
share, on revenues of $71.6 million for the same period in 2008. Net
income allocable to common shareholders for the nine months ended
September 30, 2009 was $50.5 million, or $2.37 per diluted share, on
revenues of $205.8 million compared to $13.6 million, or $0.66 per
diluted share, on revenues of $212.6 million for the same period in 2008.
Revenues for the three months ended September 30, 2009 decreased $3.9
million, or 5.5%, over the same period in 2008. Net income allocable to
common shareholders for the three months ended September 30, 2009
increased $3.4million over the same period in 2008 primarily as a
result of a decrease in depreciation expense of $4.9 million and a
decrease in preferred equity distributions of $2.0 million partially
offset by a decrease in net operating income of $2.9 million due to a
decrease in occupancy.
Revenues for the nine months ended September 30, 2009 decreased $6.8
million, or 3.2%, over the same period in 2008. Net income allocable to
common shareholders for the nine months ended September 30, 2009
increased $36.9million over the same period in 2008 primarily as a
result of a net gain of $35.6 million on the repurchase of preferred
equity, a $1.5 million gain on the sale of a parcel of land in Oregon, a
decrease in depreciation expense of $11.6 million and a decrease in
preferred equity distributions of $5.6 million partially offset by an
increase in net income allocable to noncontrolling interests common
units of $12.5 million and a decrease in net operating income of $5.6
million due to a decrease in occupancy.
Supplemental Measures
Funds from operations ("FFO") allocable to common and dilutive shares
for the three months ended September30,2009 and 2008 were $31.5
million, or $1.04 per common and dilutive share, and $32.0 million, or
$1.14 per common and dilutive share, respectively. The decrease in FFO
for the three months ended September30,2009 over the same period in
2008 was primarily due to a decrease in net operating income combined
with the issuance of 3,833,333 shares of common stock during the third
quarter of 2009 partially offset by a decrease in preferred equity
distributions resulting from the repurchase of preferred equity. FFO
allocable to common and dilutive shares for the nine months ended
September 30, 2009 was $130.4 million, or $4.53 per common and dilutive
share, compared to $94.0 million, or $3.35 per common and dilutive
share, for the same period in 2008. The increase in FFO for the nine
months ended September 30, 2009 over the same period in 2008 was
primarily due to a net gain of $35.6 million on the repurchase of
preferred equity combined with a decrease in preferred equity
distributions and a decrease in general and administrative expense
partially offset by a decrease in net operating income and the issuance
of common stock as noted above. Excluding the $35.6 million net gain,
FFO allocable to common and dilutive shares would have been $94.7
million, or $3.30 per common and dilutive share, for the nine months
ended September 30, 2009.
Property Operations
In order to evaluate the performance of the Company's overall portfolio
over two comparable periods, management analyzes the operating
performance of a consistent group of properties owned and operated
throughout both periods (herein referred to as "Same Park"). As the
Company has had no acquisitions or dispositions since January 1, 2008,
for the three and nine months ended September 30, 2009 and 2008, the
Same Park portfolio constitutes 19.6 million rentable square feet, which
includes 100.0% of the assets of the Company.
The Company's property operations account for substantially all of the
net operating income earned by the Company. The following table presents
the operating results of the Company's properties for the three and nine
months ended September 30, 2009 and 2008 in addition to other income and
expense items affecting net income (unaudited, in thousands, except per
square foot amounts):
Exception caught in main.
(1) See above for a definition of Same Park.
(2) Net operating income ("NOI") is an important measurement in the commercial real estate industry for determining the value of the real estate generating the NOI. The Company's calculation of NOI may not be comparable to those of other companies and should not be used as an alternative to measures of performance in accordance with generally accepted accounting principles ("GAAP").
(3) Same Park gross margin is computed by dividing NOI by rental income.
(4) Same Park realized rent per square foot represents the annualized revenues earned per occupied square foot.
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Financial Condition
The following are key financial ratios with respect to the Company's
leverage at and for the three months ended September 30, 2009:
Ratio of FFO to fixed charges ((1)) 51.3x
Ratio of FFO to fixed charges and preferred distributions ((1)) 3.3x
Debt and preferred equity to total market capitalization (based on common stock price of $51.32 at September 30, 2009) 31.6%
Available under line of credit at September 30, 2009 $100.0 million
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(1) Fixed charges include interest expense of $875,000.
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Common Stock Offering
On August 14, 2009, the Company closed the sale of 3,450,000 shares of
common stock in a public offering and concurrently sold 383,333 shares
of common stock to Public Storage. The aggregate net proceeds were
$171.2 million.
Distributions Declared
The Board of Directors declared a quarterly dividend of $0.44 per common
share on November 2, 2009. Distributions were also declared on the
various series of depositary shares, each representing 1/1,000 of a
share of preferred stock listed below. Distributions are payable
December 31, 2009 to shareholders of record on December16, 2009.
Series Dividend Rate Dividend Declared
Series H 7.000% $ 0.437500
Series I 6.875% $ 0.429688
Series K 7.950% $ 0.496875
Series L 7.600% $ 0.475000
Series M 7.200% $ 0.450000
Series O 7.375% $ 0.460938
Series P 6.700% $ 0.418750
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Company Information
PS Business Parks, Inc., a member of the S&P SmallCap 600, is a
self-advised and self-managed equity real estate investment trust
("REIT") that acquires, develops, owns and operates commercial
properties, primarily flex, multi-tenant office and industrial space.
The Company defines "flex" space as buildings that are configured with a
combination of office and warehouse space and can be designed to fit a
number of uses (including office, assembly, showroom, laboratory, light
manufacturing and warehouse space). As of September 30, 2009, PSB wholly
owned 19.6 million rentable square feet with approximately 3,780
customers located in eight states, concentrated in California (5.8
million sq. ft.), Florida (3.6 million sq. ft.), Virginia (3.0 million
sq. ft.), Texas (2.9 million sq. ft.), Maryland (1.8 million sq. ft.),
Oregon (1.3 million sq. ft.), Arizona (0.7 million sq. ft.) and
Washington (0.5 million sq. ft.).
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 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; the impact of general
economic conditions upon rental rates and occupancy levels at the
Company's facilities; 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 third quarter operating results, is available
on the Internet. The Company's website is www.psbusinessparks.com.
A conference call is scheduled for Tuesday, November 3, 2009, at 10:00
a.m. (PST) to discuss the third quarter results. The toll free number is
(888) 299-3246; the conference ID is 35345374. 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 November10,2009 at (800)
642-1687. A replay of the conference call will also be available on the
Company's website.
Additional financial data attached.
PS BUSINESS PARKS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
September 30, December 31,
2009 2008
(Unaudited)
ASSETS
Cash and cash equivalents $ 203,204 $ 55,015
Real estate facilities, at cost:
Land 494,849 494,849
Buildings and equipment 1,533,208 1,517,484
2,028,057 2,012,333
Accumulated depreciation (697,879 ) (637,948 )
1,330,178 1,374,385
Land held for development 6,829 7,869
1,337,007 1,382,254
Rent receivable 1,978 2,055
Deferred rent receivable 21,952 21,633
Other assets 7,180 8,366
Total assets $ 1,571,321 $ 1,469,323
LIABILITIES AND EQUITY
Accrued and other liabilities $ 50,727 $ 46,428
Mortgage notes payable 53,196 59,308
Total liabilities 103,923 105,736
Commitments and contingencies
Equity:
PS Business Parks, Inc.'s shareholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, 25,042 and 28,250 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively 626,046 706,250
Common stock, $0.01 par value, 100,000,000 shares authorized, 24,385,891 and 20,459,916 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively 243 204
Paid-in capital 547,860 363,587
Cumulative net income 679,212 622,113
Cumulative distributions (636,403 ) (571,340 )
Total PS Business Parks, Inc.'s shareholders' equity 1,216,958 1,120,814
Noncontrolling interests:
Preferred units 73,418 94,750
Common units 177,022 148,023
Total noncontrolling interests 250,440 242,773
Total equity 1,467,398 1,363,587
Total liabilities and equity $ 1,571,321 $ 1,469,323
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Exception caught in main.
Exception caught in main.
(1) Funds From Operations ("FFO") is computed in accordance with the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). The White Paper defines FFO as net income, computed in accordance with GAAP, before depreciation, amortization, gains or losses on asset dispositions and nonrecurring items. FFO should be analyzed in conjunction with net income. However, FFO should not be viewed as a substitute for net income as a measure of operating performance or liquidity as it does not reflect depreciation and amortization costs or the level of capital expenditure and leasing costs necessary to maintain the operating performance of the Company's properties, which are significant economic costs and could materially impact the Company's results from operations. Other REITs may use different methods for calculating FFO and, accordingly, the Company's FFO may not be comparable to other real estate companies.
(2) Funds Available for Distribution ("FAD") is computed by adjusting consolidated FFO for recurring capital improvements, which the Company defines as those costs incurred to maintain the assets' value, tenant improvements, lease commissions, straight-line rent, stock compensation expense, impairment charges, amortization of lease incentives and tenant improvement reimbursements, in-place lease adjustment and the impact of EITF Topic D-42. Like FFO, the Company considers FAD to be a useful measure for investors to evaluate the operations and cash flows of a REIT. FAD does not represent net income or cash flow from operations as defined by GAAP.
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