PSB PS Business Parks Inc

PS Business Parks, Inc. (NYSE:PSB), a real estate investment trust (“REIT”), today announced financial and operating results for the quarter ended March 31, 2022.

Financial and Operational Highlights for the Three Months Ended March 31, 2022

• Net income allocable to common stockholders for the three months ended March 31, 2022 was $72.0 million, or $2.60 per diluted common share.
• FFO for the three months ended March 31, 2022 was $1.65 per share, representing a 1.2% decrease from the same period in 2021.
• Core FFO for the three months ended March 31, 2022 was $1.82 per share, representing a 9.0% increase from the same period in 2021.
• Cash NOI for the total portfolio was $78.1 million for the three months ended March 31, 2022, representing a 5.6% increase from the same period in 2021.
• Cash NOI for the Same Park portfolio was $73.7 million for the three months ended March 31, 2022, representing an 8.6% increase from the same period in 2021.
• Weighted average occupancy for the total portfolio was 95.5% during the three months ended March 31, 2022, compared to 93.2% for the same period in 2021.
• Weighted average occupancy for the Same Park portfolio was 96.0% during the three months ended March 31, 2022, compared to 93.3% for the same period in 2021.
• Total portfolio comparable rental rates on 1.7 million square feet of leasing were 23.4% on a GAAP rent growth basis and 10.7% on a cash basis for the three months ended March 31, 2022.
• The Company sold the Royal Tech Business Park, a 702,000 square foot industrial-flex business park located in Irving, Texas, for net sale proceeds of $91.9 million during the three months ended March 31, 2022.

Pending Merger Transaction

On April 24, 2022, the Company and PS Business Parks, L.P. (the “OP”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) whereby affiliates of Blackstone Real Estate (“Blackstone”) will acquire all outstanding shares of the Company’s common stock for $187.50 per share in cash. Subject to the terms and conditions set forth in the Merger Agreement, each share of the Company’s common stock and each common unit of partnership interest of the OP, respectively, will be converted into the right to receive an amount in cash equal to $187.50, without interest. Each share of the Company’s outstanding preferred stock (and each depositary share representing an interest therein) will be unaffected and will remain outstanding in accordance with their respective terms. The merger transaction is expected to close in the third quarter of 2022. However, the merger transaction is subject to customary closing conditions, including approval by the Company’s common stockholders. The Company can provide no assurances regarding whether the merger will close when expected or at all.

Financial Results

Net income allocable to common stockholders for the three months ended March 31, 2022 was $72.0 million, or $2.60 per diluted common share.

FFO for the three months ended March 31, 2022 was $1.65 per share, representing a 1.2% decrease from the same period in 2021. The decrease in FFO per share for the first quarter was due to a one-time cash payment of $6.6 million to the former Chief Executive Officer ("CEO"), for RSUs and a $0.1 million cash payment for COBRA coverage reimbursement, in accordance with his separation agreement, partially offset by $0.6 million non-cash adjustment related to the reversal of stock compensation for the unvested former CEO's shares, net of dividend forfeiture expense. The decrease in FFO was partially offset by lower preferred distributions in the first quarter due to the Series W preferred stock redemption in Q4 2021.

Core FFO for the three months ended March 31, 2022 was $1.82 per share, representing a 9.0% increase from the same period in 2021. Core FFO excludes the impact of the one-time cost associated with the Company's payout of the above-mentioned former CEO compensation expense.

FAD for the quarter ended March 31, 2022 was $50.2 million, representing a 0.1% decrease from the same period in 2021. The decrease in FAD for the quarter ended March 31, 2022 is primarily attributable to higher recurring capital expenditures compared to the same period in the prior year, virtually offset by higher Same Park Cash NOI driven by higher weighted average occupancy combined with higher cash rent growth compared to the same period in the prior year.

Same Park NOI was $74.1 million for the three months ended March 31, 2022, representing a 7.7% increase over the same period in 2021.

The Company also reports NOI on a cash basis, which excludes non-cash rental income such as amortization of deferred rent receivable and other non-cash items. Same Park Cash NOI was $73.7 million for the quarter ended March 31, 2022, representing an 8.6% increase over the same period in 2021. The increase in Same Park Cash NOI for the three months ended March 31, 2022 was primarily driven by higher weighted average occupancy in the first quarter of 2022, which was 96.0% versus 93.3% for the same period in 2021. The Company noted that Same Park Cash Rental Income per occupied square foot increased by 4.6% during the period, from $16.10 in 2021 to $16.84 in 2022.

The following table presents the unaudited details of the change in Same Park rental income for the three months ended March 31, 2022 and 2021 (in thousands):

 

Three Months Ended March 31,

 

 

 

2022

2021

$ Change

% Change

Rental income

 

 

 

 

Base rental income

$

77,002

 

$

71,600

 

$

5,402

 

7.5

%

Expense recovery income

 

26,545

 

 

24,022

 

 

2,523

 

10.5

%

Lease buyout income

 

245

 

 

377

 

 

(132

)

(35.0

)%

Rent receivable recovery/(write-off)

 

(87

)

 

(1

)

 

(86

)

8600.0

%

Abatements

 

(2

)

 

(83

)

 

81

 

(97.6

)%

Deferrals

 

—

 

 

(187

)

 

187

 

(100.0

)%

Deferral repayments, net

 

147

 

 

738

 

 

(591

)

(80.1

)%

Fee Income

 

246

 

 

172

 

 

74

 

43.0

%

Cash Rental Income

 

104,096

 

 

96,638

 

 

7,458

 

7.7

%

Non-Cash Rental Income (1)

 

918

 

 

1,374

 

 

(456

)

(33.2

)%

Total rental income

$

105,014

 

$

98,012

 

$

7,002

 

7.1

%

____________________

(1)

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

The following table presents the unaudited operating results of the Company’s Same Park facilities for the three months ended March 31, 2022 and 2021 (in thousands, except per square foot amounts):

 

Three Months Ended March 31,

 

 

 

2022

2021

$ Change

% Change

Rental income

 

 

 

 

Cash Rental Income (1)

$

104,096

 

$

96,638

 

$

7,458

 

7.7

%

Non-Cash Rental Income (2) (3)

 

918

 

 

1,374

 

 

(456

)

(33.2

)%

Total rental income

 

105,014

 

 

98,012

 

 

7,002

 

7.1

%

 

 

 

 

 

Cost of Operations

 

 

 

 

Property taxes

 

11,788

 

 

11,197

 

 

591

 

5.3

%

Utilities

 

4,637

 

 

4,417

 

 

220

 

5.0

%

Repairs and maintenance

 

5,679

 

 

5,244

 

 

435

 

8.3

%

Compensation

 

5,168

 

 

4,559

 

 

609

 

13.4

%

Snow removal

 

846

 

 

1,002

 

 

(156

)

(15.6

)%

Property insurance

 

1,268

 

 

1,167

 

 

101

 

8.7

%

Other expenses

 

1,514

 

 

1,589

 

 

(75

)

(4.7

)%

Total Cost of Operations (1)

 

30,900

 

 

29,175

 

 

1,725

 

5.9

%

Less: Non-cash stock based compensation in operating costs

 

(496

)

 

(421

)

 

(75

)

17.8

%

Total Cash Cost of Operations

 

30,404

 

 

28,754

 

 

1,650

 

5.7

%

NOI (1)

$

74,114

 

$

68,837

 

$

5,352

 

7.7

%

 

 

 

 

 

Cash NOI (1)

$

73,692

 

$

67,884

 

$

5,808

 

8.6

%

 

 

 

 

 

Selected Statistical Data

 

 

 

 

Square footage at period end

$

25,749

 

$

25,749

 

 

—

 

—

 

NOI margin (1)

 

70.6

%

 

70.2

%

 

0.4

%

Cash NOI margin (1)

 

70.8

%

 

70.2

%

 

0.6

%

Weighted average square foot occupancy

 

96.0

%

 

93.3

%

 

2.7

%

Revenue per Occupied Square Foot (1)

$

16.99

 

$

16.32

 

$

0.67

 

4.1

%

Cash Rental Income per Occupied Square Foot (1)

$

16.84

 

$

16.10

 

$

0.74

 

4.6

%

____________________

(1)

Defined in Definitions/Non-GAAP Discussion.

(2)

Detail of the components of Cash Rental Income can be found in the table presented under financial results above.

(3)

Same Park Non-Cash Rental Income is presented net of deferred rent receivable write-offs of $0.0 and $0.1 million for the three months ended March 31, 2022 and 2021, respectively.

Operating Results

Total portfolio weighted average occupancy was 95.5% during the three months ended March 31, 2022, compared to 93.2% for the same period in 2021.

Leasing Production

During the three months ended March 31, 2022, the Company executed leases on 1.7 million square feet, respectively, compared to 1.9 million for the three months ended March 31, 2021. The table below represents GAAP rent growth (1) and cash rental rate growth by product type for leases executed during the three months ended March 31, 2022.

 

Three Months Ended March 31, 2022

Product type

Leasing volume

 

Cash rental rate growth

 

GAAP rental rate growth

Industrial

1,204,000

 

15.4

%

 

30.9

%

Industrial-flex

318,000

 

5.9

%

 

15.6

%

Office

128,000

 

(6.8

)%

 

(0.1

)%

Total

1,650,000

 

10.7

%

 

23.4

%

The average lease term of the leases executed during the three months ended March 31, 2022 was 3.5 years, with associated average transaction costs (tenant improvements and leasing commissions) of $3.22 per square foot. For comparative purposes, average lease term and transaction costs on leases executed in the same period of 2021 were 3.3 years and $2.58 per square foot, respectively.

(1)

GAAP rent represents average rental payments for the term of a lease on a straight-line basis in accordance with U.S. generally accepted accounting principles (“GAAP”) and excludes operating expense reimbursements.

COVID-19 Pandemic/Rent Collections Update

Since the onset of the COVID-19 pandemic, the Company entered into rent relief agreements consisting of $6.2 million of rent deferrals and $1.6 million of rent abatements. As of March 31, 2022, the 307 current customers that received rent relief account for 9.6% of rental income. Also as of March 31, 2022, the Company had collected $5.4 million of rent deferral repayment, representing 99.8% of the amounts scheduled to be repaid through March 31, 2022. An additional $0.8 million of rent deferral repayment is scheduled to be repaid thereafter.

Acquisition and Dispositions Update

In March 2022, the Company sold the Royal Tech Business Park, a 702,000 square foot industrial-flex business park located in Irving, Texas, for net sale proceeds of $91.9 million.

Distributions Declared

On April 29, 2022, the Company’s Board of Directors declared a quarterly dividend of $1.05 per common share. Distributions were also declared on the various series of depository shares, each representing 1/1,000 of a share of preferred stock. Distributions for both shares of common stock and preferred stock will be payable on June 30, 2022 to stockholders of record on June 15, 2022.

Supplemental Information and Investor Presentation

The Company’s supplemental financial reporting package as well as an updated investor presentation are available on the Company’s investor relations website at www.ir.psbusinessparks.com.

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 space. Located primarily in major coastal markets, PS Business Parks’ 96 properties serve approximately 4,900 tenants in 27.0 million square feet of space as of March 31, 2022. The portfolio also includes 800 residential units (including units in-process).

Additional Information and Where to Find It

In connection with the proposed transaction, the Company will file relevant materials with the U.S. Securities and Exchange Commission (the “SEC”), including the Company’s proxy statement on Schedule 14A (the “Proxy Statement”). This press release is not a substitute for the Proxy Statement or any other document that the Company may file with the SEC or send to its stockholders in connection with the proposed transactions. BEFORE MAKING ANY VOTING DECISION, STOCKHOLDERS OF THE COMPANY ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT, WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain the documents (when available) free of charge at the SEC’s website, http://www.sec.gov. In addition, the documents (when available) may be obtained free of charge by accessing the Investor Relations section of the Company’s website at https://ir.psbusinessparks.com or by contacting the Company’s Investor Relations by email at info@psbusinessparks.com.

Participants in the Solicitation

The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the holders of Company common stock in respect of the proposed transaction. Information about the directors and executive officers of the Company is set forth in the proxy statement for the Company’s 2022 annual meeting of stockholders, which was filed with the SEC on March 25, 2022, in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 22, 2022 and in other documents filed by the Company with the SEC. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the Proxy Statement and other relevant materials to be filed with the SEC in respect of the proposed transaction when they become available. Investors should read the Proxy Statement carefully when it becomes available before making any voting or investment decisions.

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, including but not limited to: (i) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; (ii) the failure to obtain the approval of PSB’s stockholders of the proposed transaction or the failure to satisfy any of the other conditions to the completion of the proposed transaction; (iii) stockholder litigation in connection with the proposed transaction, which may affect the timing or occurrence of the proposed transaction or result in significant costs of defense, indemnification and liability; (iv) the effect of the announcement of the proposed transaction on the ability of PSB to retain and hire key personnel and maintain relationships with its tenants, vendors and others with whom it does business, or on its operating results and businesses generally; (v) risks associated with the disruption of management’s attention from ongoing business operations due to the proposed transaction; (vi) the ability to meet expectations regarding the timing and completion of the proposed transaction; (vii) significant transaction costs, fees, expenses and charges; (viii) the duration and severity of the coronavirus (“COVID-19”) pandemic and its impact on our business and our customers; (ix) changes in general economic and business conditions, including as a result of the economic fallout of the COVID-19 pandemic; (x) potential regulatory actions to close our facilities or limit our ability to evict delinquent customers; (xi) decreases in rental rates or increases in vacancy rates/failure to renew or replace expiring leases; (xii) tenant defaults; (xiii) the effect of the recent credit and financial market conditions; (xiv) our failure to maintain our status as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”); (xv) the economic health of our customers; (xvi) the health of our officers and directors; (xvii) increases in operating costs; (xviii) casualties to our properties not covered by insurance; (xix) the availability and cost of capital; (xx) increases in interest rates and its effect on our stock price; (xxi) security breaches, including ransomware, or a failure of our networks, systems or technology which could adversely impact our operations or our business, customer and employee relationships or result in fraudulent payments; (xxii) the impact of inflation; and (xxiii) other factors discussed 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 first quarter operating results, is available on the Company’s website at psbusinessparks.com.

Definitions/Discussion of Non-GAAP Financial Measures

Cash NOI – We utilize cash NOI to evaluate the cash flow performance of our business parks. Cash NOI represents NOI adjusted to exclude non-cash items included in rental income and non-cash expenses. The non-cash rental income includes amortization of deferred rent receivable (net of write-offs), in-place lease intangible, tenant improvement reimbursements, and lease incentives. The non-cash expense is equal to stock compensation expense for employees whose compensation expense is recorded in GAAP cost of operations in the amount of $0.5 million. We believe that cash NOI assists investors in analyzing cash flow performance of our business parks.

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

Cash Rental Income – Cash rental income represents rental income, excluding non-cash rental income, specifically amortization of deferred rent receivable (net of write-offs), in-place lease intangible, tenant improvement reimbursements, and lease incentives.

Cash Rental Income per Occupied Square Feet – Computed by dividing Cash rental income for the period by weighted average occupied square feet. Cash rental income per occupied square feet for the three month period shown is annualized.

Core Funds from Operations (Core FFO) – We calculate Core FFO by adjusting FFO, as defined below, excluding the impact of (i) charges related to the redemption of preferred stock and (ii) other nonrecurring income or expense items as appropriate. Management believes that Core FFO is a useful supplemental measure as it provides a more meaningful and consistent comparison of operating performance and allows investors to more easily compare the Company’s operating results. Because certain of these adjustments have a real economic impact on our financial condition and results from operations, the utility of Core FFO as a measure of our performance is limited. Other REITs may not calculate Core FFO in a consistent manner. Accordingly, our Core FFO may not be comparable to other REITs’ Core FFO. Core FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.

Cost of Operations under Cash NOI – Cash cost of operations represents cost of operations, excluding non-cash stock compensation expense for employees whose compensation expense is recorded in cost of operations in the amount of $0.5 million, which can vary significantly period to period based upon the performance of the Company.

Funds Available for Distribution (FAD) – FAD is a non-GAAP measure that represents FFO adjusted to (a) deduct recurring capital improvements that maintains the condition of our real estate, tenant improvements and lease commissions and (b) remove certain non-cash rental income or expenses such as amortization of deferred rent receivable and non-cash stock compensation expense, and (c) charges related to the redemption of preferred stock. We believe our presentation of FAD assists investors and analysts in analyzing and comparing our operating and financial performance between reporting periods. FAD is not a substitute for GAAP net cash flow in evaluating our liquidity or ability to pay dividends, because they exclude investing and financing activities presented on our statements of cash flows.

Funds from Operations (FFO) – We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, gains (or losses) from sales of assets incidental to our business, impairment losses of depreciable operating property or assets incidental to our business, real estate related depreciation and amortization (excluding amortization of deferred financing costs and amortization of above/below-market lease intangibles) and after adjustments for unconsolidated joint ventures. Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization, gains and losses from property dispositions, other than temporary impairments of unconsolidated real estate entities, and impairment on our investment in real estate, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of performance used by other REITs, FFO may be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. Other equity REITs may not calculate or interpret FFO in accordance with the NAREIT definition as we do, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. FFO should not be used as a measure of our liquidity and is not indicative of funds available for our cash needs, including our ability to pay dividends. FFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance. A reconciliation of net income, the nearest GAAP equivalent, to FFO is under the additional financial data section.

Net Operating Income (NOI) – We utilize NOI, a non-GAAP financial measure, to evaluate the operating performance of our business parks. We define NOI as rental income less cost of operations. We believe NOI assists investors in analyzing the performance and value of our business parks by excluding (i) corporate overhead (i.e. general and administrative expenses) because it does not relate to the results of our business parks and (ii) depreciation and amortization expense because it does not accurately reflect changes in the fair value of our business parks.

NOI Margin – NOI margin is computed by dividing NOI by rental income.

Revenue Per Occupied Square Foot – Computed by dividing rental income for the period by weighted average occupied for the same period. Revenue per occupied square foot for the three month period shown is annualized.

Same Park – The Company believes that evaluation of the Same Park portfolio, defined as all properties owned and operated as of March 31, 2022 that were acquired prior to January 1, 2020, provides an informative view of how the Company’s portfolio has performed over comparable periods. As of March 31, 2022, the Same Park portfolio consisted of 25.7 million square feet, or 95.3% of the Company’s 27.0 million total square feet, excluding the Company’s 95.0% interest in a 395-unit multifamily property.

PS BUSINESS PARKS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

March 31, 2022

December 31, 2021

 

(unaudited)

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

$

104,204

 

$

27,074

 

 

 

 

Real estate facilities, at cost

 

 

Land

 

865,214

 

 

867,345

 

Buildings and improvements

 

2,244,104

 

 

2,239,137

 

 

 

3,109,318

 

 

3,106,482

 

Accumulated depreciation

 

(1,197,811

)

 

(1,178,397

)

 

 

1,911,507

 

 

1,928,085

 

Properties held for sale, net

 

—

 

 

33,609

 

Land and building held for development, net

 

97,212

 

 

78,990

 

 

 

2,008,719

 

 

2,040,684

 

Rent receivable

 

2,988

 

 

1,621

 

Deferred rent receivable

 

37,484

 

 

37,581

 

Other assets

 

13,176

 

 

16,262

 

Total assets

$

2,166,571

 

$

2,123,222

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

Accrued and other liabilities

$

95,509

 

$

97,151

 

Credit facility

 

20,000

 

 

32,000

 

Total liabilities

 

115,509

 

 

129,151

 

Commitments and contingencies

 

 

Equity

 

 

PS Business Parks, Inc.’s stockholders’ equity

 

 

Preferred stock, $0.01 par value, 50,000,000 shares authorized, 30,200 shares issued and outstanding at March 31, 2022 and December 31, 2021

 

755,000

 

 

755,000

 

Common stock, $0.01 par value, 100,000,000 shares authorized, 27,627,443 and 27,589,807 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

276

 

 

275

 

Paid-in capital

 

754,387

 

 

752,444

 

Accumulated earnings

 

270,243

 

 

226,737

 

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

 

1,779,906

 

 

1,734,456

 

Noncontrolling interests

 

271,156

 

 

259,615

 

Total equity

 

2,051,062

 

 

1,994,071

 

Total liabilities and equity

$

2,166,571

 

$

2,123,222

 

PS BUSINESS PARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in thousands)

 

 

Three Months Ended March 31,

 

2022

2021

Rental income

$

112,840

 

$

108,047

 

 

 

 

Expenses

 

 

Cost of operations

 

34,114

 

 

33,218

 

Depreciation and amortization

 

23,132

 

 

22,985

 

General and administrative

 

11,324

 

 

4,382

 

Total operating expenses

 

68,570

 

 

60,585

 

 

 

 

 

 

 

Interest and other income

 

246

 

 

256

 

Interest and other expense

 

(330

)

 

(211

)

Gain on sale of real estate facilities

 

56,959

 

 

—

 

Net income

 

101,145

 

 

47,507

 

Allocation to noncontrolling interests

 

(19,049

)

 

(7,411

)

Net income allocable to PS Business Parks, Inc.

 

82,096

 

 

40,096

 

Allocation to preferred stockholders based upon distributions

 

(9,580

)

 

(12,046

)

Allocation to restricted stock unit holders

 

(523

)

 

(164

)

Net income allocable to common stockholders

$

71,993

 

$

27,886

 

 

 

 

Net income per share of common stock

 

 

Basic

$

2.61

 

$

1.01

 

Diluted

$

2.60

 

$

1.01

 

 

 

 

Weighted average common stock outstanding

 

 

Basic

 

27,607

 

 

27,495

 

Diluted

 

27,691

 

 

27,594

 

PS BUSINESS PARKS, INC.

Computation of FFO, Core FFO, and FAD

(Unaudited and in thousands, except per share amounts)

 

 

Three Months Ended March 31,

 

2022

2021

Net income allocable to common stockholders

$

71,993

 

$

27,886

 

Adjustments

 

 

Gain on sale of real estate facilities

 

(56,959

)

 

—

 

Depreciation and amortization

 

23,132

 

 

22,985

 

Net income allocable to noncontrolling interests

 

19,049

 

 

7,411

 

Net income allocable to restricted stock unit holders

 

523

 

 

164

 

FFO allocated to joint venture partner

 

(23

)

 

(27

)

FFO allocable to diluted common stock and units (1)

 

57,715

 

 

58,419

 

CEO cash payment for RSUs net of reversal of stock compensation

 

6,108

 

 

—

 

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

$

63,823

 

$

58,419

 

 

 

 

FAD

 

 

FFO allocable to diluted common stock and units (1)

$

57,715

 

$

58,419

 

Adjustments:

 

 

Recurring capital improvements

 

(2,010

)

 

(565

)

Tenant improvements

 

(3,027

)

 

(2,422

)

Capitalized lease commissions

 

(1,304

)

 

(1,784

)

Total recurring capital expenditures for assets sold or held for sale

 

(8

)

 

(634

)

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

 

(931

)

 

(3,197

)

Non-cash rental income (1)

 

(1,157

)

 

(1,307

)

Non-cash stock compensation expense

 

940

 

 

1,780

 

FAD allocable to diluted common stock and units (1)

 

50,218

 

 

50,290

 

 

 

 

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

$

(36,892

)

$

(36,724

)

Distribution payout ratio

 

(73.5

)%

 

(73.0

)%

 

 

 

Reconciliation of Earnings per share to FFO per share

 

 

Net income per common stock—diluted

$

2.60

 

$

1.01

 

Gain on sale of real estate facilities

 

(1.63

)

 

—

 

Depreciation and amortization expense

 

0.66

 

 

0.66

 

Net income allocated to restricted stock unit holders

 

0.02

 

 

—

 

FFO per share (1)

$

1.65

 

$

1.67

 

CEO cash payment for RSUs net of reversal of stock compensation

 

0.17

 

 

—

 

Core FFO per share

$

1.82

 

$

1.67

 

 

 

 

Weighted average outstanding

 

 

Common stock

 

27,607

 

 

27,495

 

Operating partnership units

 

7,305

 

 

7,305

 

Restricted stock units

 

45

 

 

47

 

Common stock equivalents

 

84

 

 

99

 

Total diluted common stock and units

 

35,041

 

 

34,946

 

____________________

(1)

Defined in Definitions/Non-GAAP Discussion.

PS BUSINESS PARKS, INC.

Reconciliation of Selected Non-GAAP Measures to Analogous GAAP Measures

(Unaudited, In thousands)

 

 

Three Months Ended March 31,

 

 

 

2022

2021

$ Change

% Change

Rental income

 

 

 

 

Same Park

$

105,014

 

$

98,012

 

$

7,002

 

7.1

%

Non-Same Park

 

3,348

 

 

1,246

 

 

2,102

 

168.7

%

Multifamily

 

2,369

 

 

2,327

 

 

42

 

1.8

%

Assets sold or held for sale (2)

 

2,109

 

 

6,462

 

 

(4,353

)

(67.4

)%

Total rental income

 

112,840

 

 

108,047

 

 

4,793

 

4.4

%

 

 

 

 

 

Cost of Operations (1)

 

 

 

 

Same Park

 

30,900

 

 

29,175

 

 

1,725

 

5.9

%

Non-Same Park

 

1,060

 

 

422

 

 

638

 

151.2

%

Multifamily

 

1,224

 

 

1,067

 

 

157

 

14.7

%

Assets sold or held for sale (2)

 

930

 

 

2,554

 

 

(1,624

)

(63.6

)%

Total cost of operations

 

34,114

 

 

33,218

 

 

896

 

2.7

%

Stock compensation expense (3)

 

(536

)

 

(456

)

 

(80

)

17.5

%

Total cost of operations excluding stock compensation expense

 

33,578

 

 

32,762

 

 

816

 

2.5

%

 

 

 

 

 

NOI (4)

 

 

 

 

Same Park

 

74,114

 

 

68,837

 

 

5,277

 

7.7

%

Non-Same Park

 

2,288

 

 

824

 

 

1,464

 

177.7

%

Multifamily

 

1,145

 

 

1,260

 

 

(115

)

(9.1

)%

Assets sold or held for sale (2)

 

1,179

 

 

3,908

 

 

(2,729

)

(69.8

)%

Depreciation and amortization expense

 

(23,132

)

 

(22,985

)

 

(147

)

0.6

%

General and administrative expense

 

(11,324

)

 

(4,382

)

 

(6,942

)

158.4

%

Interest and other income

 

246

 

 

256

 

 

(10

)

(3.9

)%

Interest and other expense

 

(330

)

 

(211

)

 

(119

)

56.4

%

Gain on sale of real estate facilities

 

56,959

 

 

—

 

 

56,959

 

100.0

%

Net income

$

101,145

 

$

47,507

 

$

53,638

 

112.9

%

____________________

(1)

Defined in Definitions/Non-GAAP Discussion.

(2)

As of March 31, 2022 and 2021, included in the respective periods are assets sold in 2022 and 2021:

 

•

a 702,000 square foot industrial-flex business park located in Irving, Texas, sold in March 2022.

(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.

(4)

NOI represents rental income less Cost of Operations.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220430005031/en/

Investor Relations: Adeel Khan (818) 244-8080, Ext 8975