UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 18, 2014
PS BUSINESS PARKS, INC.
(Exact name of registrant as specified in its charter)
California | 1-10709 | 95-4300881 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
701 Western Avenue, Glendale, California | 91201-2349 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (818) 244-8080
N/A
(Former name or former address, if changed since last report)
Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition
On February 18, 2014, PS Business Parks reported its results of operations and financial condition for the quarter ended December 31, 2013 and increases quarterly common dividend by 13.6% to $0.50 per share. The full text of the press release is furnished as exhibit 99.1 to this Current Report on Form 8-K. The information in Item 2.02 and Exhibit 99.1 are being furnished in accordance with General Instruction B.2 of Form 8-K and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act) or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit 99.1: | Press release dated February 18, 2014. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PS BUSINESS PARKS, INC. | ||
Date: February 18, 2014 | ||
By: | /s/ Edward A. Stokx | |
Edward A. Stokx | ||
Chief Financial Officer |
INDEX TO EXHIBITS
Exhibit No. |
Description | |
99.1 | PS Business Parks, Inc. Earnings Press Release and Increases Quarterly Common Dividend by 13.6% to $0.50 per share dated February 18, 2014. |
Exhibit 99.1
News Release
PS Business Parks, Inc.
701 Western Avenue
Glendale, CA 91201-2349
www.psbusinessparks.com
For Release: |
Immediately | |||||
Date: |
February 18, 2014 | |||||
Contact: |
Edward A. Stokx | |||||
(818) 244-8080, Ext. 1649 |
PS Business Parks, Inc. Reports Results for the Fourth Quarter Ended December 31, 2013 and
Increases Quarterly Common Dividend by 13.6% to $0.50 Per Share
GLENDALE, California PS Business Parks, Inc. (NYSE:PSB) reported operating results for the fourth quarter ended December 31, 2013.
Funds from operations (FFO) were $41.9 million, or $1.26, as adjusted, per share for the three months ended December 31, 2013, a 1.6% per share increase from the three months ended December 31, 2012 of $39.3 million, or $1.24, as adjusted, per share. FFO was $159.4 million, or $4.95, as adjusted, per share for the year ended December 31, 2013, a 1.9% per share increase from the year ended December 31, 2012 of $154.2 million, or $4.86, as adjusted, per share. The increase in adjusted FFO per share for the three months and year ended December 31, 2013 over the same periods in 2012 was due to the increase in net operating income partially offset by an increase in preferred equity distributions as the Company replaced short-term debt with perpetual preferred equity combined with an increase in share count as a result of the November, 2013 common equity offering.
At the beginning of 2012, the Company put in place a Long-Term Equity Incentive Plan (LTEIP) designed to grant restricted stock units to management based on the Companys ability to achieve certain defined goals over a four-year period. While the Company has continued to see improved operating metrics and delivered strong total shareholder returns over the past two years, the original targets under the LTEIP were based on an assumption of a strong economic recovery starting in 2012. Given the current pace of the economic recovery, management has determined that it is not probable that the targets under the LTEIP will be met. As such, the Company stopped recording amortization as of September 30, 2013 and recorded a reversal of all previously recorded LTEIP amortization of $6.9 million during the three months ended December 31, 2013. Additionally, to present comparative results, the reversal and all amounts originally expensed in prior periods in either cost of operations (for field leadership) or general and administrative expenses (for executive management) have been reflected as adjustments in the FFO and Property Operations tables below.
In order to provide meaningful period-to-period comparisons of FFO derived from the Companys ongoing business operations, the following table reconciles reported FFO to adjusted FFO, which excludes the LTEIP amortization adjustments, certain lease buyout payments, gain on sale of ownership interest in Stor-RE Mutual Insurance Company, Inc. (Stor-RE), acquisition transaction costs and the impact of non-cash distributions related to the redemption of preferred equity for the three months and years ended December 31, 2013 and 2012:
For the Three Months | For the Years | |||||||||||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||||||||||
2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||||
FFO per share, as reported |
$ | 1.54 | $ | 1.25 | 23.2 | % | $ | 5.15 | $ | 4.24 | 21.5 | % | ||||||||||||
LTEIP amortization |
(0.20 | ) | 0.03 | (0.12 | ) | 0.12 | ||||||||||||||||||
Lease buyout payments |
(0.07 | ) | (0.05 | ) | (0.07 | ) | (0.06 | ) | ||||||||||||||||
Gain on sale of ownership interest in Stor-RE |
(0.03 | ) | | (0.04 | ) | | ||||||||||||||||||
Acquisition transaction costs |
0.02 | 0.01 | 0.03 | 0.01 | ||||||||||||||||||||
Non-cash distributions related to the redemption of preferred equity |
| | | 0.55 | ||||||||||||||||||||
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FFO per share, as adjusted |
$ | 1.26 | $ | 1.24 | 1.6 | % | $ | 4.95 | $ | 4.86 | 1.9 | % | ||||||||||||
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The following are adjustments to reconcile adjusted FFO to reported FFO as noted above. The reversal of LTEIP amortization was $6.9 million and $3.9 million for the three months and year ended December 31, 2013, respectively. The $1.0 million and $3.9 million originally expensed for the three months and year ended December 31, 2012, respectively, have been added back for comparative purposes. The excluded lease buyout payments were $2.3 million and $1.8 million for the three months and years ended December 31, 2013 and 2012, respectively. During the three months ended December 31, 2013, the Company sold its ownership interest in Stor-RE, an insurance captive primarily owned by Public Storage, resulting in a gain of $1.1 million. Acquisition transaction costs were $701,000 and $192,000 for the three months ended December 31, 2013 and 2012, respectively, and $854,000 and $350,000 for the years ended December 31, 2013 and 2012, respectively. Non-cash distributions related to the redemption of preferred equity of $17.3 million were included in net income allocable to preferred shareholders for the year ended December 31, 2012.
Excluding the two lease buyout payments noted above, rental income increased $3.7 million, or 4.3%, from $87.4 million for the three months ended December 31, 2012 to $91.2 million for the three months ended December 31, 2013 as a result of a $3.3 million increase in rental income from Non-Same Park facilities, and a $421,000 increase from the Same Park portfolio. Excluding the two lease buyout payments noted above, rental income increased $12.2 million, or 3.5%, from $344.8 million for the year ended December 31, 2012 to $357.0 million for the year ended December 31, 2013 as a result of an $8.8 million increase in rental income from Non-Same Park facilities combined with a $3.5 million increase from the Same Park portfolio. The Same Park increases were due to an increase in occupancy and rental rates while the increases in Non-Same Park were due to a combination of an increase in occupancy and the acquisition of additional parks. In December, 2013, the Company received a net lease buyout payment of $2.3 million in connection with the termination of a 75,000 square foot lease in Beaverton, Oregon. The space was immediately re-leased with no down time.
Net income allocable to common shareholders increased $7.9 million, or 81.2%, from $9.8 million, or $0.40 per share, for the three months ended December 31, 2012 to $17.7 million, or $0.68 per share, for the three months ended December 31, 2013. Net income allocable to common shareholders increased $24.0 million, or 121.4%, from $19.8 million, or $0.81 per share, for the year ended December 31, 2012 to $43.9 million, or $1.77 per share, for the year ended December 31, 2013. These increases were due to the net impact of preferred equity transactions in 2013 and 2012 and the reversal of the LTEIP amortization combined with an increase in net operating income in 2013 and a decrease in interest expense. The three-month increase was also impacted by the gain on the sale of the Companys ownership interest in Stor-RE of $1.1 million.
All per share amounts noted above are presented on a diluted basis.
Property Operations
To evaluate the performance of the Companys portfolio over comparable periods, management analyzes the operating performance of properties owned and operated throughout both periods (herein referred to as Same Park). The Same Park portfolio includes all operating properties owned or acquired prior to January 1, 2011. Operating properties that the Company acquired subsequent to January 1, 2011 are referred to as Non-Same Park. For the three months and years ended December 31, 2013 and 2012, the Same Park facilities constitute 21.4 million rentable square feet, representing 72.0% of the 29.7 million square feet in the Companys portfolio as of December 31, 2013.
2
The following table presents the operating results of the Companys properties for the three months and years ended December 31, 2013 and 2012 in addition to other income and expense items affecting income from continuing operations (unaudited, in thousands, except per square foot amounts):
For the Three Months | For the Years | |||||||||||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||||||||||
2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||||
Rental income: |
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Same Park (21.4 million rentable square feet) |
$ | 75,362 | $ | 74,941 | 0.6 | % | $ | 299,524 | $ | 296,062 | 1.2 | % | ||||||||||||
Non-Same Park (8.3 million rentable square feet) |
15,810 | 12,500 | 26.5 | % | 57,470 | 48,703 | 18.0 | % | ||||||||||||||||
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Total rental income |
91,172 | 87,441 | 4.3 | % | 356,994 | 344,765 | 3.5 | % | ||||||||||||||||
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Cost of operations: |
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Same Park |
23,731 | 24,384 | (2.7 | %) | 97,813 | 97,184 | 0.6 | % | ||||||||||||||||
Non-Same Park |
5,279 | 4,311 | 22.5 | % | 18,259 | 15,683 | 16.4 | % | ||||||||||||||||
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Total cost of operations |
29,010 | 28,695 | 1.1 | % | 116,072 | 112,867 | 2.8 | % | ||||||||||||||||
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Net operating income (1): |
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Same Park |
51,631 | 50,557 | 2.1 | % | 201,711 | 198,878 | 1.4 | % | ||||||||||||||||
Non-Same Park |
10,531 | 8,189 | 28.6 | % | 39,211 | 33,020 | 18.7 | % | ||||||||||||||||
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Total net operating income |
62,162 | 58,746 | 5.8 | % | 240,922 | 231,898 | 3.9 | % | ||||||||||||||||
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Other: |
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Lease buyout payments (2) |
2,252 | 1,783 | 26.3 | % | 2,252 | 1,783 | 26.3 | % | ||||||||||||||||
LTEIP amortization (3): |
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Cost of operations |
2,184 | (287 | ) | (861.0 | %) | 1,241 | (1,241 | ) | (200.0 | %) | ||||||||||||||
General and administrative |
4,695 | (718 | ) | (753.9 | %) | 2,652 | (2,652 | ) | (200.0 | %) | ||||||||||||||
Facility management fees |
162 | 160 | 1.3 | % | 639 | 649 | (1.5 | %) | ||||||||||||||||
Other income and expense |
(2,290 | ) | (4,804 | ) | (52.3 | %) | (14,681 | ) | (20,377 | ) | (28.0 | %) | ||||||||||||
Depreciation and amortization |
(28,730 | ) | (28,072 | ) | 2.3 | % | (108,917 | ) | (109,398 | ) | (0.4 | %) | ||||||||||||
General and administrative |
(1,902 | ) | (1,084 | ) | 75.5 | % | (7,110 | ) | (5,917 | ) | 20.2 | % | ||||||||||||
Acquisition transaction costs |
(701 | ) | (192 | ) | 265.1 | % | (854 | ) | (350 | ) | 144.0 | % | ||||||||||||
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Income from continuing operations |
$ | 37,832 | $ | 25,532 | 48.2 | % | $ | 116,144 | $ | 94,395 | 23.0 | % | ||||||||||||
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Same Park gross margin (4) |
68.5 | % | 67.5 | % | 1.5 | % | 67.3 | % | 67.2 | % | 0.1 | % | ||||||||||||
Same Park weighted average occupancy |
92.0 | % | 92.2 | % | (0.2 | %) | 92.0 | % | 91.7 | % | 0.3 | % | ||||||||||||
Non-Same Park weighted average occupancy |
86.0 | % | 79.4 | % | 8.3 | % | 83.6 | % | 81.0 | % | 3.2 | % | ||||||||||||
Same Park annualized realized rent per square foot (5) |
$ | 15.29 | $ | 15.18 | 0.7 | % | $ | 15.20 | $ | 15.07 | 0.9 | % |
(1) | 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 Companys 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). |
(2) | Represents a lease buyout payment recorded in the fourth quarter of 2013 associated with a 75,000 square foot lease in Oregon which terminated as of December 31, 2013 and a lease buyout payment recorded in the fourth quarter of 2012 associated with a 39,000 square foot lease in Virginia which terminated as of December 25, 2012. |
(3) | Represents the reversal of the LTEIP amortization in 2013 and the amortization originally recorded in 2012. |
(4) | Computed by dividing Same Park NOI by Same Park rental income. |
(5) | Represents the annualized Same Park rental income earned per occupied square foot. |
3
Common Stock Offering
On November 7, 2013, the Company closed the sale of 1,495,000 shares of common stock in a public offering and concurrently sold 950,000 shares of common stock to Public Storage. The aggregate net proceeds were $192.3 million.
Property Acquisitions
On December 20, 2013, the Company acquired Bayshore Corporate Center, an eight-building, 340,000 square foot, office park in San Mateo, California, for $60.5 million. The occupancy for the park was 81.8% at the time of acquisition.
During the fourth quarter, the Company also acquired, in two separate transactions, four multi-tenant flex parks and a four-acre parcel of land aggregating 804,000 square feet of single-story flex buildings located in Dallas, Texas, for a combined purchase price of $40.3 million. The combined occupancy for the parks was 75.6% at the time of acquisition.
Financial Condition
The following are key financial ratios with respect to the Companys leverage at and for the three months ended December 31, 2013:
Ratio of FFO to fixed charges (1) |
17.8x | |
Ratio of FFO to fixed charges and preferred distributions (1) |
3.7x | |
Debt and preferred equity to total market capitalization (based on common stock price of $76.42 at December 31, 2013) |
32.3% | |
Available balance under the $250.0 million unsecured credit facility at December 31, 2013 |
$250.0 million |
(1) | Fixed charges include interest expense and capitalized interest of $3.9 million. |
Distributions Declared
On February 18, 2014, the Board of Directors declared a quarterly dividend of $0.50 per common share, an increase of 13.6%, from $0.44 per common share. 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 March 31, 2014 to shareholders of record on March 14, 2014.
Series |
Dividend Rate | Dividend Declared | ||||||
Series R |
6.875 | % | $ | 0.429688 | ||||
Series S |
6.450 | % | $ | 0.403125 | ||||
Series T |
6.000 | % | $ | 0.375000 | ||||
Series U |
5.750 | % | $ | 0.359375 | ||||
Series V |
5.700 | % | $ | 0.356250 |
4
Company Information
PS Business Parks, Inc., a member of the S&P SmallCap 600, is a self-advised and self-managed real estate investment trust (REIT) that acquires, develops, owns and operates commercial properties, primarily multi-tenant flex, 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 December 31, 2013, the Company wholly owned 29.7 million rentable square feet with approximately 5,050 customers located in eight states, concentrated in California (11.5 million sq. ft.), Texas (4.7 million sq. ft.), Virginia (4.0 million sq. ft.), Florida (3.7 million sq. ft.), Maryland (2.3 million sq. ft.), Washington (1.5 million sq. ft.), Oregon (1.3 million sq. ft.) and Arizona (0.7 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 Companys facilities; the Companys ability to evaluate, finance and integrate acquired and developed properties into the Companys existing operations; the Companys 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 Companys 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 Companys 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 fourth quarter operating results, is available on the Internet. The Companys website is www.psbusinessparks.com.
A conference call is scheduled for Wednesday, February 19, 2014, at 10:00 a.m. (PST) to discuss the fourth quarter results. The toll free number is (888) 299-3246; the conference ID is 31383721. The call will also be available via a live webcast on the Companys website. A replay of the conference call will be available through February 26, 2014 at (855) 859-2056. A replay of the conference call will also be available on the Companys website.
Additional financial data attached.
5
PS BUSINESS PARKS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
December 31, | December 31, | |||||||
2013 | 2012 | |||||||
(Unaudited) |
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ASSETS | ||||||||
Cash and cash equivalents |
$ | 31,481 | $ | 12,883 | ||||
Real estate facilities, at cost: |
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Land |
827,092 | 793,352 | ||||||
Buildings and improvements |
2,346,958 | 2,235,448 | ||||||
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3,174,050 | 3,028,800 | |||||||
Accumulated depreciation |
(1,035,387 | ) | (942,639 | ) | ||||
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2,138,663 | 2,086,161 | |||||||
Land and building held for development |
23,990 | 6,829 | ||||||
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2,162,653 | 2,092,990 | |||||||
Rent receivable |
5,248 | 4,754 | ||||||
Deferred rent receivable |
25,903 | 25,329 | ||||||
Other assets |
13,274 | 15,861 | ||||||
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Total assets |
$ | 2,238,559 | $ | 2,151,817 | ||||
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LIABILITIES AND EQUITY | ||||||||
Accrued and other liabilities |
$ | 73,919 | $ | 69,454 | ||||
Term loan |
| 200,000 | ||||||
Mortgage notes payable |
250,000 | 268,102 | ||||||
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Total liabilities |
323,919 | 537,556 | ||||||
Commitments and contingencies |
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Equity: |
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PS Business Parks, Inc.s shareholders equity: |
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Preferred stock, $0.01 par value, 50,000,000 shares authorized, 39,800 and 35,400 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively |
995,000 | 885,000 | ||||||
Common stock, $0.01 par value, 100,000,000 shares authorized, 26,849,822 and 24,298,475 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively |
267 | 242 | ||||||
Paid-in capital |
699,314 | 537,091 | ||||||
Cumulative net income |
1,070,975 | 967,783 | ||||||
Cumulative distributions |
(1,047,615 | ) | (944,427 | ) | ||||
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Total PS Business Parks, Inc.s shareholders equity |
1,717,941 | 1,445,689 | ||||||
Noncontrolling interests: |
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Common units |
196,699 | 168,572 | ||||||
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Total noncontrolling interests |
196,699 | 168,572 | ||||||
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Total equity |
1,914,640 | 1,614,261 | ||||||
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Total liabilities and equity |
$ | 2,238,559 | $ | 2,151,817 | ||||
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6
PS BUSINESS PARKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share amounts)
For the Three Months | For the Years | |||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenues: |
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Rental income |
$ | 93,424 | $ | 89,224 | $ | 359,246 | $ | 346,548 | ||||||||
Facility management fees |
162 | 160 | 639 | 649 | ||||||||||||
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Total operating revenues |
93,586 | 89,384 | 359,885 | 347,197 | ||||||||||||
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Expenses: |
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Cost of operations |
26,826 | 28,982 | 114,831 | 114,108 | ||||||||||||
Depreciation and amortization |
28,730 | 28,072 | 108,917 | 109,398 | ||||||||||||
General and administrative |
(2,092 | ) | 1,994 | 5,312 | 8,919 | |||||||||||
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Total operating expenses |
53,464 | 59,048 | 229,060 | 232,425 | ||||||||||||
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Other income and (expense): |
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Interest and other income |
1,310 | 81 | 1,485 | 241 | ||||||||||||
Interest and other expense |
(3,600 | ) | (4,885 | ) | (16,166 | ) | (20,618 | ) | ||||||||
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Total other income and (expense) |
(2,290 | ) | (4,804 | ) | (14,681 | ) | (20,377 | ) | ||||||||
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Income from continuing operations |
37,832 | 25,532 | 116,144 | 94,395 | ||||||||||||
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Discontinued operations: |
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Income from discontinued operations |
| 10 | | 42 | ||||||||||||
Gain on sale of real estate facility |
| 935 | | 935 | ||||||||||||
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Total discontinued operations |
| 945 | | 977 | ||||||||||||
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Net income |
$ | 37,832 | $ | 26,477 | $ | 116,144 | $ | 95,372 | ||||||||
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Net income allocation: |
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Net income allocable to noncontrolling interests: |
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Noncontrolling interests common units |
$ | 4,994 | $ | 2,935 | $ | 12,952 | $ | 5,970 | ||||||||
Noncontrolling interests preferred units |
| | | 323 | ||||||||||||
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Total net income allocable to noncontrolling interests |
4,994 | 2,935 | 12,952 | 6,293 | ||||||||||||
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Net income allocable to PS Business Parks, Inc.: |
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Preferred shareholders |
15,122 | 13,750 | 59,216 | 69,136 | ||||||||||||
Restricted stock unit holders |
34 | 32 | 125 | 138 | ||||||||||||
Common shareholders |
17,682 | 9,760 | 43,851 | 19,805 | ||||||||||||
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Total net income allocable to PS Business Parks, Inc. |
32,838 | 23,542 | 103,192 | 89,079 | ||||||||||||
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$ | 37,832 | $ | 26,477 | $ | 116,144 | $ | 95,372 | |||||||||
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Net income per common share basic: |
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Continuing operations |
$ | 0.68 | $ | 0.37 | $ | 1.77 | $ | 0.79 | ||||||||
Discontinued operations |
$ | | $ | 0.03 | $ | | $ | 0.03 | ||||||||
Net income |
$ | 0.68 | $ | 0.40 | $ | 1.77 | $ | 0.82 | ||||||||
Net income per common share diluted: |
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Continuing operations |
$ | 0.68 | $ | 0.37 | $ | 1.77 | $ | 0.78 | ||||||||
Discontinued operations |
$ | | $ | 0.03 | $ | | $ | 0.03 | ||||||||
Net income |
$ | 0.68 | $ | 0.40 | $ | 1.77 | $ | 0.81 | ||||||||
Weighted average common shares outstanding: |
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Basic |
25,864 | 24,288 | 24,732 | 24,234 | ||||||||||||
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Diluted |
25,961 | 24,361 | 24,833 | 24,323 | ||||||||||||
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7
PS BUSINESS PARKS, INC.
Computation of Diluted Funds from Operations (FFO) and Funds Available for Distribution (FAD)
(Unaudited, in thousands, except per share amounts)
For the Three Months | For the Years | |||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Computation of Diluted Funds From Operation (FFO) (1): |
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Net income allocable to common shareholders |
$ | 17,682 | $ | 9,760 | $ | 43,851 | $ | 19,805 | ||||||||
Adjustments: |
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Gain on sale of real estate facility |
| (935 | ) | | (935 | ) | ||||||||||
Depreciation and amortization |
28,730 | 28,072 | 108,917 | 109,494 | ||||||||||||
Net income allocable to noncontrolling interests common units |
4,994 | 2,935 | 12,952 | 5,970 | ||||||||||||
Net income allocable to restricted stock unit holders |
34 | 32 | 125 | 138 | ||||||||||||
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FFO allocable to common and dilutive shares |
$ | 51,440 | $ | 39,864 | $ | 165,845 | $ | 134,472 | ||||||||
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Weighted average common shares outstanding |
25,864 | 24,288 | 24,732 | 24,234 | ||||||||||||
Weighted average common OP units outstanding |
7,305 | 7,305 | 7,305 | 7,305 | ||||||||||||
Weighted average restricted stock units outstanding |
55 | 102 | 51 | 107 | ||||||||||||
Weighted average common share equivalents outstanding |
97 | 73 | 101 | 89 | ||||||||||||
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Total common and dilutive shares |
33,321 | 31,768 | 32,189 | 31,735 | ||||||||||||
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FFO per common and dilutive share |
$ | 1.54 | $ | 1.25 | $ | 5.15 | $ | 4.24 | ||||||||
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Computation of Funds Available for Distribution (FAD) (2): |
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FFO allocable to common and dilutive shares |
$ | 51,440 | $ | 39,864 | $ | 165,845 | $ | 134,472 | ||||||||
Adjustments |
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Recurring capital improvements |
(1,889 | ) | (1,857 | ) | (10,083 | ) | (8,394 | ) | ||||||||
Tenant improvements |
(7,467 | ) | (6,155 | ) | (29,224 | ) | (34,236 | ) | ||||||||
Lease commissions |
(3,744 | ) | (2,258 | ) | (9,850 | ) | (7,244 | ) | ||||||||
Straight-line rent |
(238 | ) | (3 | ) | (1,457 | ) | (2,686 | ) | ||||||||
Non-cash stock compensation expense |
332 | 368 | 1,361 | 1,541 | ||||||||||||
Long-term equity incentive amortization |
(6,879 | ) | 1,005 | (3,893 | ) | 3,893 | ||||||||||
In-place lease adjustment |
(30 | ) | 99 | 118 | 501 | |||||||||||
Tenant improvement reimbursements, net of lease incentives |
(419 | ) | (754 | ) | (1,414 | ) | (1,315 | ) | ||||||||
Capitalized interest |
(359 | ) | | (359 | ) | | ||||||||||
Non-cash distributions related to the redemption of preferred equity |
| | | 17,316 | ||||||||||||
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FAD |
$ | 30,747 | $ | 30,309 | $ | 111,044 | $ | 103,848 | ||||||||
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Distributions to common and dilutive shares |
$ | 15,062 | $ | 13,935 | $ | 56,953 | $ | 55,678 | ||||||||
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Distribution payout ratio |
49.0 | % | 46.0 | % | 51.3 | % | 53.6 | % | ||||||||
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(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, net income allocable to noncontrolling interests common units, net income allocable to restricted stock unit holders, impairment charges 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 Companys properties, which are significant economic costs and could materially impact the Companys results from operations. Other REITs may use different methods for calculating FFO and, accordingly, the Companys 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, in-place lease adjustment, amortization of lease incentives and tenant improvement reimbursements, capitalized interest and the effect of redemption/repurchase of preferred equity. 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. |
8