On January 3, 2023, PS Business Parks, Inc. (“PSB” or the “Company”) filed a Form 25 with the Securities and Exchange Commission (the ~~latest practicable date): 27,441,071.~~

~~DOCUMENTS INCORPORATED BY REFERENCE~~

~~Portions~~“Commission”) to delist the Company’s (i) Depositary Shares each representing 1/1,000 of a Share of 5.250% Cumulative Preferred Stock, Series X of the ~~definitive proxy statement to be filed in connection~~Company (“Series X Preferred Shares”), (ii) Depositary Shares each representing 1/1,000 of a Share of 5.200% Cumulative Preferred Stock, Series Y of the Company (“Series Y Preferred Shares”) and (iii) Depositary Shares each representing 1/1,000 of a Share of 4.875% Cumulative Preferred Stock, Series Z of the Company (“Series Z Preferred Shares” and, collectively with the Series X Preferred Shares and the Series Y Preferred Shares, the “Preferred Shares”). On January 13, 2023, the Preferred Shares ceased trading on the New York Stock Exchange and PSB filed a certification and notification of termination of registration under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on Form 15 with the Commission. The filing of the Form 15 immediately suspended PSB’s filing obligations under Section 12(g) of the Exchange Act. However, because PSB had Securities Act registration statements that were deemed to have been declared effective upon the filing of its Annual ~~Meeting~~Report on Form 10-K for the fiscal year ended December 31, 2021, its reporting obligations under Section 15(d) became operative upon the suspension of ~~Shareholders~~its Section 12(g) reporting obligations with respect to ~~be held in 2020~~fiscal year 2022.

As a result of the foregoing, we are ~~incorporated by reference into Part III of~~filing this Annual Report on Form 10-K for the fiscal year ended December 31, 2022 to satisfy our remaining reporting obligation under Section 15(d) for fiscal year 2022. We do not expect that we will be required to file current or periodic reports with the SEC following the filing of this Form 10-K.

2

~~Table of Contents~~

PART I

~~ITEM~~

(dollars in thousands, except share data)

Item 1. ~~BUSINESS~~

Business

Forward-Looking Statements

Forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, are made throughout this Annual Report on Form 10-K. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “may,” “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” “intends” and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the results of the Company to differ materially from those indicated by such forward-looking statements, including but not limited to ~~(i)~~ the following:

•our significant exposure to real estate risk;

•changes in general economic and business ~~conditions; (ii) decreases in rental rates or increases in vacancy rates/failure to renew or replace expiring leases; (iii) tenant defaults; (iv) the effect~~conditions, including as a result of the ~~recent credit~~economic fallout of the COVID-19 pandemic;

•risks related to our property acquisition strategies and ~~financial market conditions; (v) our failure~~operations;

•new or changing government regulations and legal challenges;

•information technology failures and data security breaches;

•ceasing to maintain our status as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”); ~~(vi) the economic health~~

•changes in tax laws;

•our dependence on external sources of capital to grow our ~~customers; (vii) increases in operating costs; (viii) casualties~~Company;

•risks related to our ~~properties not covered by insurance; (ix) the availability~~significant indebtedness; and ~~cost of capital; (x) increases in interest rates~~

•our dependence on, and relationship with, Blackstone and its ~~effect on our stock price; (xi) security breaches or a failure~~affiliates, which may have interests that conflict with ours.

This list of ~~our networks, systems or technology could adversely impact our business, customer and employee relationships; and (xii) other~~risks is not exhaustive. Additional information regarding risk factors that may affect us is discussed under the heading “Part I, Item ~~1A, “Risk~~1A. Risk Factors.” In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Moreover, we assume no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements, except as required by law.

The Company

~~PS Business Parks, Inc. (“PSB”)~~

The Company is a ~~fully-integrated, self-advised and self-managed REIT~~real estate investment trust (“REIT”) that owns, operates, acquires and develops commercial properties, primarily multi-tenant industrial, ~~flex~~industrial-flex and low-rise suburban office space. ~~Substantially all~~As of ~~PSB’s assets are held,~~December 31, 2022, the Company owned 471 buildings and one land parcel in six states representing 20,656,858 of our gross leasable area (“GLA”).

Recent Company Developments

Merger

On July 20, 2022 (the “Acquisition Date”), pursuant to the terms and subject to the conditions set forth in an Agreement and Plan of Merger, dated as of April 24, 2022 (the “Merger Agreement”), a merger (the “Merger”) was completed between PSB and a direct subsidiary of Sequoia Parent LP, a Delaware limited partnership (“Parent”), with the Company surviving. As a result of the Merger, the Company became a subsidiary of Parent and certain of its ~~business is conducted, through~~affiliates, and PS Business Parks, ~~L.P.~~L.P (the ~~“OP”~~“Partnership”), remained a ~~California limited partnership. PSB has full, exclusive, and complete control~~subsidiary of the ~~OP as the sole general partner and, as~~Company. The Parent is an affiliate of ~~December 31, 2019, owned 79.0%~~Blackstone Real Estate Partners IX, L.P., which is an affiliate of Blackstone Inc. (“Blackstone”). The common stock of the ~~common partnership units, with Public Storage (“PS”) owning~~Company is wholly owned by the ~~remainder. PS also owns 7.2 million common shares~~Parent and ~~assuming issuance~~certain of ~~PSB common stock upon redemption~~its affiliates

3

and is not publicly traded. The Preferred Shares of the ~~common partnership units held by PS, PS would own 41.6% (or 14.5 million shares)~~Company were publicly listed until January 13, 2023. Refer to Note 2 — Summary of ~~the outstanding shares~~Significant Accounting Policies for additional information on basis of ~~the Company’s common stock.~~

~~Unless otherwise indicated or unless the context requires otherwise, all references to “the Company,” “we,” “us,” “our” and similar references mean PS Business Parks, Inc.~~presentation.

PSB and its subsidiaries, including the OPPartnership and its consolidated joint ventures, are collectively referred to as the “Company,” “we,” “us,” or “our.”

Public Storage Operating Partnership Interests

Pursuant to the terms and conditions of the Merger Agreement, upon the Closing each partnership unit of the Partnership (a “Partnership Unit”) that was issued and outstanding prior to the effective time of the Merger (the “Partnership Merger Effective Time”) (other than units held by the Company, Parent, or any of their respective wholly owned subsidiaries) was automatically cancelled and converted into the right to receive an amount in cash equal to $182.25 (the “Per Company Share Merger Consideration”), less any applicable withholding taxes, which represented $187.50 per share of Common Stock as reduced by a $5.25 per share cash dividend paid in connection with the Closing (the “Closing Cash Dividend”) in accordance with the terms of the Merger Agreement. At the Partnership Merger Effective Time, each Partnership Unit owned by the Company or any of its subsidiaries immediately prior to the Partnership Merger Effective Time remained outstanding as a Partnership Unit of the Partnership held by the Company or the relevant subsidiary.

As a result of the completion of the Merger, an aggregate of approximately 21% of the Partnership’s issued and outstanding limited partnership interests were directly owned by Parent and certain of its affiliates (other than the Company) (the “Parent Partners”). Pursuant to a Distribution and Contribution Agreement, immediately following the completion of the Merger, the Partnership redeemed all of such limited partnership units in exchange for the distribution (the “Redemption and Distribution”) to the Parent Partners of certain subsidiaries of the Partnership which held assets comprised of 58 properties located in California, Washington and Virginia (the “Non-Core Portfolio”). As a result of the Redemption and Distribution, the Company (directly or indirectly) owns 100% of the Partnership.

Dispositions

We continuously evaluate opportunities with respect to our portfolio and may from time to time sell individual real estate facilities and land parcels or groups of facilities and land parcels based on market conditions, fit with our existing portfolio, evaluation of long-term potential returns of markets or product types, or other reasons. The size of such sales may be significant to us.

The timing of any potential future dispositions or strategic venture transactions will depend on market conditions and other factors, including but not limited to our capital needs, the availability of financing for potential buyers and our ~~consolidated joint venture.~~

As of December 31, 2019, we owned and operated 27.6 million rentable square feet of commercial space, comprising 97 business parks, in California, Texas, Virginia, Florida, Maryland and Washington. The Company focuses on owning concentrated business parks which provide the Company with the greatest flexibilityability to ~~meet the needs of its customers. Along with the commercial space, we also have a 95.0% interest in a 395-unit apartment complex. The Company also manages 438,000 rentable square feet on behalf of PS.~~

~~History~~defer some or all of the ~~Company:~~ ~~The Company was formed~~taxable gains on the sales. We cannot assure that we will dispose of any additional properties, enter into any additional strategic ventures, or that we will be able to identify and complete the acquisition of a suitable replacement property to effect a Section 1031 Exchange or be able to use other tax deferred structures in ~~1990 as~~connection with our strategy.

Developments

We believe that a ~~California corporation. Through a series~~portion of transactions between January, 1997 and March, 1998, the Company was renamed “PS Business Parks, Inc.” and became a publicly held, fully integrated, self-advised and self-managed REIT having interests in commercial real estate held through our ~~OP.~~

~~Principal Business Activities~~

We are in the commercial property business, with 97 business parks consisting of multi-tenant industrial, flex and office space. The Company owns 18.1 million square feet of industrial space that has characteristics similarlong-term future growth will continue to the warehouse component of the flex space as well as ample dock access. We own 6.2 million square feet of flex space, representing industrial buildings that are configured with a combination of warehouse and office space and can be designed to fit a wide variety of uses. The warehouse component of the flex space has a number of uses including light manufacturing and assembly, storage and warehousing, showroom, laboratory, distribution and research and development activities. The office component of flex space is complementary to the warehouse component by enabling businesses to accommodate management and production staff in the same facility. In addition, the Company

2

~~Table of Contents~~

~~owns 3.2 million square feet of low-rise office space, generally either in business parks that combine office and flex space or in submarkets where the market demand is more office focused.~~

We generally seek to own and operate multi-tenant buildings in multi-building business parks which accommodate various businesses and uses. Our business parks average 14 buildings and 800,000 rentable square feet per park, located on parcels of various sizes, ranging from one to 49 buildings and 12,000 to 3.5 million square feet of rentable space. Parking is generally open but in some instances is covered. The ratio of parking spaces to rentable square feet generally ranges from two to six per thousand square feet depending upon the use of the property and its location. Office space generally requires a greater parking ratio than most industrial uses.

The customer base for our facilities is diverse. The portfolio can be bifurcated into those facilities that service small to medium-sized businesses and those that service larger businesses. Approximately 36.8% of in-place rentscome from the portfolio are derived from facilities that generally serve small to medium-sized businesses. A property in this facility type is typically divided into units under 5,000 square feet and leases generally range from one to three years. The remaining 63.2%completion of in-place rents from the portfolio are generally derived from facilities that serve larger businesses, with units 5,000 square feet and larger. The Company also has several customers that lease space in multiple buildings and locations. As of December 31, 2019, the U.S. Government is the largest customer with multiple leases encompassing approximately 521,000 square feet and 3.1% of the Company’s annualized rental income.

~~We operate in six states and we may expand~~ our operations to other states or reduce the number of states in which we operate. However, we have no current plans to expand into additional markets or exit existing markets. Properties are acquired for both income and capital appreciation potential; we place no limitation on the amount that can be invested in any specific property.

The Company owns approximately 14.0 acres and 6.4 acres of land in Dallas and Northern Virginia, respectively, which are reflected on our consolidated balance sheets as land and building held for development. The Company will seek to develop these parcels and possibly seek redevelopment of other assets in the future.

~~See “Objectives and Strategies” below for further information.~~

Our principal executive offices are located at 701 Western Avenue, Glendale, California 91201-2349, and our telephone number is (818) 244-8080. We maintain a website with the address www.psbusinessparks.com. The information contained on our website is not a part of, or incorporated by reference into, this Annual Report on Form 10-K. We make available free of charge through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file or furnish such material to the Securities and Exchange Commission (the “SEC”).

~~Recent Company Developments~~

~~Acquisition of Real Estate Facilities:~~Subsequent to December 31, 2019, we acquired a multi-tenant industrial park comprised of approximately 73,000 rentable square feet in La Mirada, California, for a total purchase price of $13.5 million, inclusive of capitalized transaction costs. ~~The park consists of five buildings and was 100.0% occupied at acquisition with suites ranging from 1,200 to 3,000 square feet.~~

On December 20, 2019, we acquired a multi-tenant flex park comprised of approximately 79,000 rentable square feet in Santa Clara, California, for a total purchase price of $16.8 million, inclusive of capitalized transaction costs. ~~The park consists of nine buildings and was 95.6% occupied at acquisition with suites ranging from 200 to 3,500 square feet.~~

On September 5, 2019, we acquired a multi-tenant industrial park comprised of approximately 543,000 rentable square feet in Santa Fe Springs, California, for a total purchase price of $104.3 million, inclusive of capitalized transaction costs. The park consists of ten buildings and was 100.0% occupied at acquisition ~~with suites ranging from 5,000 to 288,000 square feet~~.

On April 18, 2019, we acquired a multi-tenant industrial park comprised of approximately 74,000 rentable square feet in Signal Hill, California, for a total purchase price of $13.8 million, inclusive of capitalized transaction costs. The park consists of eight buildings and was 98.4% occupied at acquisition ~~with suites ranging from 1,200 to 8,000 square feet~~. ~~The~~ ~~eight buildings~~ ~~are located in the~~ ~~Signal Hill industrial submarket where~~ ~~we already own~~ ~~five industrial parks totaling 268,000 square feet.~~

3

~~Table of Contents~~

~~Development of Multifamily Real Estate:~~ In 2019, we successfully rezoned our 628,000 square foot office park known as The Mile in Tysons, Virginia. The rezoning will allow us to develop, at our election, up to 3,000 additional multifamily units and approximately 500,000 square feet of other commercial uses. We leveraged the expertise of a well-regarded local developer and operator of multifamily real estate to develop our first multifamily development at The Mile which completed in 2017, a 395-unit multifamily property known as Highgate. We are currently seeking to demolish a 123,000 square foot vacant office building in order to construct our second multifamily property, for which we will likely enter into a similar joint venture with the same well-regarded local developer. There could be several phases of the development at The Mile beyond that, but the scope, timing and construction of all future phases of development of The Mile are subject to a variety of contingencies, including site plan approvals and building permits. See “Objectives and Strategies” below for further information regarding ourin-process development and redevelopment ~~activities.~~

~~Sales~~projects and, subject to market conditions, executing on future potential development or redevelopment projects on existing sites. In addition to ground-up development, we expect to redevelop existing assets in our portfolio and target acquisitions where our development expertise can add value to the asset and Company cash flow growth with a focus on in-fill submarkets of ~~Real Estate Facilities:~~ ~~On October 8, 2019, we sold~~ ~~three business parks located in Montgomery County, Maryland: Metro Park North, Meadow Business Park and WesTech Business Park. The parks, consisting of 28 buildings totaling approximately~~ ~~1.3 million rentable square feet, sold for net sale proceeds of $144.6 million, which resulted in a gain of $16.6 million.~~

Also subsequent to December 31, 2019, the Company completed the sale of a single-tenant building totaling 113,000 square feet in Montgomery County, Maryland, for a gross sales price of $30.0 million. The building had been marketed previously as part of a broader portfolio of suburban Maryland office properties sold in 2019, but was excluded from the 1.3 million square foot sale which closed October 8, 2019 and as such was the Company’s only remaining office asset at Metro Park North.

key U.S. distribution markets.

Tax and Corporate Structure

For all periods presented herein, we have elected REIT status under the Code. AsFor each taxable year in which we qualify for taxation as a REIT, we generally dowill not ~~incur~~be subject to U.S. federal corporate income tax ~~if we distribute substantially all of~~on our “REIT taxable income” (generally, taxable income subject to specified adjustments, including a deduction for dividends paid and excluding our net rents and gains from real property, dividends, and interest) each year, and if we meet certain organizational and operational requirements. To the extent that we continue to qualify as a REIT, we will not be taxed, with certain limited exceptions, on the “REIT taxable income”capital gain) that is distributed to our ~~shareholders.~~stockholders. This, along with the nature of the operations of its operating properties, resulted in no provision for federal income taxes at the Company level. In addition, the Partnership generally is not liable for federal income taxes as the partners recognize their allocable share of income or loss in their tax returns; therefore, no provision

4

for federal income taxes has been made at the Partnership level. We believe we have met these requirements in all periods presented ~~herein,~~herein.

The Company has elected taxable REIT subsidiary (“TRS”) status for certain of its corporate subsidiaries and, ~~we expect to continue to elect and qualify~~ as a ~~REIT.~~

~~PSB is structured~~result, these entities will incur both federal and state income taxes on any taxable income of such entities after consideration of any net operating losses.

Executive Officers of PS Business Parks, Inc.

Name

Age

Office

Luke Petherbridge

43

Chief Executive Officer and Secretary

Matthew L. Ostrower

52

Chief Financial Officer, Vice President and Treasurer

Nicholas Pell

45

President and Chief Investment Officer

Luke Petherbridge has served as ~~an umbrella partnership REIT (“UPREIT”),~~our Chief Executive Officer and Secretary since July 2022. Mr. Petherbridge has been Link Logistics’ Chief Executive Officer since September 2020, responsible for Link Logistics’ overall strategic direction with ~~substantially all~~a particular focus on driving profitability and building a winning corporate culture. Mr. Petherbridge has over 15 years of ~~our activities conducted through~~financial and global real estate management experience, most recently serving as the ~~OP. We acquired interests in certain~~chief executive officer of Shopcore from May 2016 to September 2020 and LivCor properties from ~~PS during PSB’s initial formation~~July 2019 to September 2020. Mr. Petherbridge previously held the positions of chief financial officer and treasurer of DDR Corporation from December 2011 to May 2016, one of the largest owners of shopping centers in ~~exchange~~the United States. While at DDR, Mr. Petherbridge served in various roles and held responsibilities including capital raising activities, balance sheet management, lender relations and execution of various corporate-level transactions. Before DDR, Mr. Petherbridge served as chief executive officer and a director of shopping center owner EDT Retail Trust (formerly Macquarie DDR Trust) from April 2008 to September 2010 and as director of transactions with Rubicon Asset Management from June 2003 to April 2008, where he oversaw approximately $5 billion of transactions across real estate and real estate structured finance markets in the United States, Europe and Japan. Mr. Petherbridge received a Bachelor of Commerce degree from Macquarie University. Mr. Petherbridge is a trustee and member of the Executive Board for ~~operating partnership units,~~the International Council of Shopping Centers (ICSC), and he also serves as a board member of World Business Chicago, Chicago’s public-private economic development agency. In addition, Mr. Petherbridge is co-founder and chairman of CoreGiving, an organization that seeks to fight childhood hunger and food insecurity.

Matthew L. Ostrower has served as our Chief Financial Officer, Vice President and Treasurer since July 2022. Mr. Ostrower is Link Logistics’ Chief Financial Officer, responsible for all aspects of corporate finance, including treasury, cash management, financial planning and analysis, accounting and tax. Prior to joining Link Logistics in 2019, Mr. Ostrower served as Chief Financial Officer of various REITs, including SITE Centers, which ~~allowed PS to defer~~invests in shopping centers; Retail Value Inc., among the ~~recognition~~largest owners and managers of ~~a tax gain on the contributed properties. We have the ability to offer similar tax-efficient transactions to potential sellers of~~value-oriented retail real estate in the ~~future.~~

~~We are~~U.S.; and Equity One, an owner of coastal shopping centers, which merged with Regency Centers in 2015. Mr. Ostrower has also held the ~~sole general partner~~positions of managing director and associate director of Research at Morgan Stanley and served as a member of the ~~OP, which~~Board of Directors of Ramco-Gershenson Properties Trust, a publicly traded retail REIT, from 2010 to 2015. Mr. Ostrower received a Bachelor of Arts degree in American History from Tufts University and a dual Master of Science degree in Real Estate and City Planning from Massachusetts Institute of Technology.

Nicholas Pell has ~~equity in the form of common partnership units and preferred partnership units that are identical as to terms, coupon rates, and liquidation amounts~~served as our ~~preferred shares outstanding. As of December 31, 2019, we owned 79.0% of the common partnership units of the OP~~President since July 2022. Mr. Pell is Link Logistics’ President and ~~100% of the preferred partnership units. The remainder of the common partnership units are owned by PS. The common units owned by PS may be redeemed, subject to certain limitations,~~Chief Investment Officer, responsible for ~~shares of our common stock~~portfolio management, including all capital deployment and disposition activities with a focus on ~~a one-for-one basis or, at our option, an equivalent value in cash.~~

The Company’s interest in the OP entitles it to share in cash distributions from, and the profits and losses of, the OP in proportion to the Company’s economic interest in the OP (apart from tax allocations of profits and losses to take into account pre-contribution property appreciation or depreciation). The Company, since 1998, has paid per share dividends on its common and preferred stock that track, on a one-for-one basis, the amount of per unit cash distributions the Company receives from the OP in respect of the common and preferred partnership units in the OP that are owned by the Company.

~~As the general partner of the OP,~~ensuring the Company has the ~~exclusive responsibility under~~best portfolio to service the ~~Operating Partnership Agreement~~needs of its customers. Prior to ~~manage~~joining Link Logistics in 2019, Mr. Pell served as chief investment officer at Gramercy Property Trust from 2016 to 2018, an investor in and ~~conduct~~asset manager of industrial and office real estate. Mr. Pell played an integral role on the ~~business of the OP. The OP is responsible for, and pays when due, its share of all administrative and operating expenses of the properties it owns.~~

~~Common Officers and Directors with PS~~

~~Ronald L. Havner, Jr., Chairman of~~leadership team that grew the Company isfrom an enterprise value of approximately $200 million to over 80 million square feet of real estate before it was acquired by Blackstone in 2018. Mr. Pell has also served as a director in the ~~Chairman of the Board of Trustees of PS. Joseph D. Russell, Jr. is~~Investment Department at W. P. Carey & Co., as a director of Business Development at Sony Pictures Entertainment and as an analyst at J.P. Morgan & Co. Mr. Pell is a National Association of Industrial and Office Properties and Urban Land Institute member and he also serves on the ~~Company and also President and Chief Executive Officer of PS. Gary E. Pruitt, an independent director~~board of the ~~Company, is also~~Newport Festivals Foundation, which produces both the Newport Folk and Newport Jazz Festivals. Mr. Pell received a ~~trustee~~Bachelor of ~~PS. Other employees~~Arts degree in Economics from Duke University and a Master of ~~PS render services to the Company pursuant to a cost sharing and administrative services agreement.~~

Business Administration degree from Harvard Business School.

4

~~Table of Contents~~

~~Services Provided to and by PS~~

We manage industrial, office, and retail facilities in the United States for PS under either the “Public Storage” or “PS Business Parks” names (the “PS Management Agreement”). Under PS’s supervision, we coordinate and assist in rental and marketing activities, property maintenance and other operational activities, including the selection of vendors, suppliers, employees and independent contractors. Management fee revenue derived from the PS Management Agreement totaled $287,000, $407,000 and $506,000 for the years ended December 31, 2019, 2018 and 2017, respectively. These amounts are included in “interest and other income” on our consolidated statements of income

PS also provides property management services for the self-storage component of two assets owned by the Company. Management fee expenses under the contract were $98,000, $96,000 and $92,000 for the years ended December 31, 2019, 2018 and 2017, respectively. These amounts are included under “cost of operations” on our consolidated statements of income.

Pursuant to a cost sharing agreement, we share certain administrative services, corporate office space, and certain other third party costs with PS which are allocated based upon fair and reasonable estimates of the cost of the services expected to be provided. We reimbursed PS $1.2 million, $1.2 million and $1.3 million, respectively, in the years ended December 31, 2019, 2018 and 2017 for costs paid on our behalf, while PS reimbursed us $39,000, $38,000 and $31,000 for costs we incurred on their behalf for the years ended December 31, 2019, 2018 and 2017, respectively.

~~Management~~

Maria R. Hawthorne, President and Chief Executive Officer of the Company, leads the Company’s senior management team. The Company’s senior management includes: John W. Petersen, Executive Vice President and Chief Operating Officer; Jeffrey D. Hedges, Executive Vice President and Chief Financial Officer; Trenton A. Groves, Senior Vice President and Chief Accounting Officer; Coby A. Holley, Vice President, Investments; Christopher M. Auth, Vice President (Washington Metro Division); Stuart H. Hutchison, Vice President (Southern California and Pacific Northwest Divisions); Richard E. Scott, Vice President (Northern California Division); David A. Vicars, Vice President (Texas Division); Rich Guertin, Vice President (Florida Division); and Eugene Uhlman, Vice President, Construction Management.

Competition

Our properties compete for tenants with ~~similar~~comparable properties located in our markets primarily on the basis of location, ~~rent charged,~~rental rate, services provided and the design and condition of improvements. Competition in the market areas we operate in is significant

5

and has from time to time negatively impacted occupancy levels and rental rates of, and increased the operating expenses of, certain of our properties. ~~Competition may be accelerated by any increase in availability of funds for investment in real estate, because barriers to entry can be relatively low for those with the necessary capital.~~ The demand for space in our markets is impacted by general economic conditions, which can affect the local competition for tenants. Sublease space and unleased developments have from time to time created competition among operators in certain markets in which the Company ~~operates. We also compete for property acquisitions with entities that have greater financial resources than the Company.~~operates

.

We believe we possess several distinguishing characteristics and strategies, some of which are described below under “Objectives and Strategies,” that enable us to compete effectively. In addition, we believe our personnel are among the most experienced in our real estate markets. The Company’s facilities are part of a comprehensive system encompassing standardized procedures and integrated reporting and information networks.

We believe that the significant operating and financial experience of our executive officers and directors combined with the Company’s capital structure, national investment scope, geographic diversity, financial stability, and economies of scale should enable us to compete effectively.

Objectives and Strategies

Our primary objective is to grow ~~shareholder~~stockholder value in a risk appropriate and stable manner by maximizing ~~the~~ net cash flow generated by our existing ~~properties, as well as prudently seeking growth through acquisitions and development that generate attractive returns on invested capital.~~

properties.

We seek to ~~optimize the~~maximize net cash flow of our existing properties by ~~maximizing~~optimizing occupancy levels and rental rates, while ~~minimizing~~investing strategically in capital expenditures ~~and leasehold improvements.~~that generate appropriate risk adjusted returns. Below are the primary elements of our strategy:

5

~~Table of Contents~~

Concentration in favorable ~~markets~~markets:: We believe that our properties generally are located in markets that have favorable characteristics such as above average population, job, and income growth, as well as high education levels. In addition, we believe our ~~business parks~~properties are generally in markets with higher ~~barrier~~than average barriers to entry ~~markets~~ that are close to critical infrastructure, middle to high income housing or universities and have easy access to major transportation arteries. We believe that these characteristics contribute to ~~favorable~~property operating cash flow stability and growth.

Standard build outs and ~~finishes~~finishes:: We generally seek to configure our ~~rentable~~leasable space with standard ~~buildouts~~build outs and finishes that meet the needs of a wide variety of tenants, minimizing the need for specialized and costly tenant improvements and enabling space to be “move-in ready” quickly upon vacancy. We believe this makes our space more attractive to potential tenants, allows tenants to move in ~~more~~ quickly and seamlessly, and reduces the cost of capital improvements, relative to real estate operators that offer specialized finishes or build outs. Also, such flexibility facilitates our ability to offer diverse sizes and configurations to meet potential customer’s needs, as well as to change space sizes for existing customers when their needs change.

Large, Diverse ~~Parks~~Parks:: Our ~~business parks~~properties are generally concentrated in large complexes of diverse buildings, with a variety of available space sizes and configurations that we can offer to tenants. We believe that this allows us to attract a greater number of potential tenants to our parks and minimizes the loss of existing customers when their space requirements change.

Smaller tenants and diverse tenant base with shorter-term leases: By concentrating on smaller spaces, we seek to reach a large number of smaller tenants in the market. We believe this focus gives us a competitive edge as most institutional owners focus primarily on large users. Small users perceive more incremental value from the level of customer service that we offer. We also believe having smaller tenants improves our diversity of tenants across industries, which improves the stability of our cash flows. In addition, our lease term tends to be ~~shorter, generally an average of three and a half years,~~short, which we believe allows us to ~~more~~ quickly capture increases in market rents in our high-growth markets. At December 31, 2019, our average suite size was approximately 5,000 rentable square feet, and no individual customer, other than the U.S. Government, represents more than 1% of our annualized rental income.

~~Decentralized operating strategy~~: Our local market management is empowered, within a prescribed decision and metrics framework, to make many leasing rate, capital, and lease term decisions in a manner which we believe maximizes the return on investment on leasing transactions. We believe this decentralized approach allows us to be more nimble and efficient in our decision making, and more effectively price and market our space, relative to a more centralized approach.

Superior Service to Customers: We seek to provide a superior level of service to our customers in order to maintain occupancy and increase rental rates, as well as minimize customer turnover. The Company’s property management offices are located on-site, helping the Company maintain its properties and providing customers with convenient access to management, while conveying a sense of quality, order and security. We believe that ~~our personnel~~Link’s property management teams are ~~among~~comprised of the most experienced and effective ~~in the~~ real estate ~~industry~~professionals in our markets. The Company has ~~significant~~extensive experience in acquiring properties managed by others and thereafter improving customer satisfaction, occupancy levels, retention rates and rental income by implementing established customer service programs.

~~In addition, we seek to expand through acquisitions or development activities that generate attractive returns on invested capital, as follows:~~

~~Acquire facilities in targeted markets at prudent price levels:~~ We have a disciplined capital allocation approach, seeking to purchase properties at prices that are not in excess of the cost to develop similar facilities, which we believe reduces our risk and maximizes long term returns. We seek generally to acquire in our existing markets, which we believe have favorable growth characteristics. We also believe acquiring in our existing markets leverages our operating efficiencies. We would consider expanding to additional markets with similar favorable characteristics of our existing markets, if we could acquire sufficient scale (generally at least 2 million rentable square feet); however, we have no current plans or immediate prospects to do so.

Redevelop existing real estate ~~facilities~~facilities: : Certain of our existing ~~business parks~~properties were developed in or near areas that have been undergoing gentrification ~~and~~with an influx of residential development, and, as a result, certain buildings in our ~~business parks~~properties may have higher and better ~~uses as residential space. While residential space is generally not a core asset class for us, we~~uses. We will seek to identify potential candidates for redevelopment inwithin our portfolio, and ~~plan to~~where appropriate will leverage the expertise and scale of existing operators and developers should we pursue redevelopment of any of our properties. ~~For example, at The Mile in Tysons, Virginia, we demolished an existing building and developed Highgate, a 395~~-~~unit apartment building, with a joint venture partner. We also have successfully rezoned our 628,000 square foot office~~

‎

6

~~Table of Contents~~

park located within The Mile and are able to pursue the development of additional multifamily and mixed use projects. There can be no assurance as to the level of conversion opportunities throughout our portfolio in the future.

~~Financing Strategy~~

~~Overview of financing strategy and sources of capital~~: As a REIT, we generally distribute substantially all of our “REIT taxable income” to our shareholders which, relative to a taxable C corporation, limits the amount of cash flow from operations that we can retain for investment purposes. As a result, in order to expand our asset base, access to capital is important.

Our financial profile is characterized by strong credit metrics, including low leverage relative to our total capitalization and operating cash flows. Our credit profile and ratings enable us to effectively access both the public and private capital markets to raise capital. We will seek to maintain our credit profile and ratings.

Sources of capital available to us include retained cash flow, the issuance of preferred and common equity, the issuance of medium and long-term debt, joint venture financing, the sale of properties, and our revolving line of credit.

~~Historically, we have financed our cash investment activities primarily with retained operating cash flow and the issuance of preferred equity.~~

We select from the sources of capital available to us based upon relative cost, availability and the desire for leverage, nature of the investment opportunities for which the capital will be used, as well as intangible factors such as the impact of covenants in the case of debt.

~~Retained Operating Cash Flow:~~ Although we are required to generally distribute substantially all of our “REIT taxable income” to our shareholders, we have nonetheless been able to retain operating cash flow to the extent that our tax depreciation exceeds our maintenance capital expenditures. In recent years, we have retained approximately $40 to $60 million in operating cash flow per year.

~~Preferred Equity:~~ We view preferred equity as an important source of capital over the long term, because it reduces interest rate and refinancing risks as the dividend rate is fixed and there are no refinancing requirements. In addition, the consequences of defaulting on required preferred distributions are less severe than with debt. However, rates and market conditions for the issuance of preferred securities can be volatile or inefficient from time to time. The preferred shareholders may elect two additional directors if six quarterly distributions go unpaid, whether or not consecutive. As of December 31, 2019, we have $944.8 million in preferred securities outstanding with an average coupon rate of 5.10%.

~~Medium or long-term debt:~~ We have broad powers to borrow in furtherance of our objectives. We may consider the public issuance or private placement of senior unsecured debt in the future in an effort to diversify our sources of capital.

~~Common equity:~~ ~~We believe that the market for our common equity is liquid and, as a result, common equity is a viable potential source of capital.~~

~~Tax advantaged equity~~: As noted above, we have the ability to offer common or preferred operating partnership units with economic characteristics that are similar to our common and preferred stock, but provide the seller the opportunity to defer the recognition of a tax gain.

~~Credit Facility~~: We have a $250.0 million unsecured revolving line of credit (the “Credit Facility”), which we use as necessary as temporary financing, along with short-term bank loans, until we are able to raise longer-term capital. As of December 31, 2019, there were no borrowings outstanding on our Credit Facility and we had no short-term bank loans.

~~Investments in Real Estate Facilities~~

As of December 31, 2019, the Company owned and operated 27.6 million rentable square feet comprised of 97 business parks in six states compared to 28.2 million rentable square feet comprised of 96 business parks in six states as of December 31, 2018. The Company also held a 95.0% interest in a 395-unit multifamily apartment complex as of December 31, 2019 and 2018.

Insurance

7

~~Table of Contents~~

~~Restrictions on Transactions with Affiliates~~

The Company’s Restated Bylaws provide that the Company may engage in transactions with affiliates provided that a purchase or sale transaction with an affiliate is (i) approved by a majority of the Company’s independent directors and (ii) fair to the Company based on an independent appraisal or fairness opinion.

~~Employees~~

~~As of December 31, 2019, the Company employed 155 individuals, comprised primarily of personnel engaged in property operations.~~

~~Insurance~~

The Company believes that its properties are adequately insured. Facilities operated by the Company ~~have historically been~~are covered by comprehensive insurance, including fire, earthquake, wind damage and liability coverage from ~~nationally recognized~~ carriers, subject to customary deductibles.

6

~~Environmental Matters~~

Compliance with Government Regulations

We are subject to various laws, ordinances, and regulations, including various federal, state, and local regulations that apply generally to the ownership of real property and the operation of such properties. These include various laws and government regulations concerning environmental matters, labor matters and employee safety and health matters. Refer to Item 1A, “Risk Factors” below for a discussion of certain risks related to such government regulations, including risks related to compliance with (i) the Americans with Disabilities Act and with related regulations, (ii) laws and regulations adopted in response to the COVID-19 pandemic and similar public health emergencies, government, (iii) federal or state privacy laws, including the California Consumer Privacy Act (“CCPA”), (iv) environmental remediation requirements, and (v) laws and regulations relating to ~~the protection~~real property ownership, including property taxes and zoning changes or violations. Except for regulations discussed therein, we are not aware of ~~the environment, including those regarding the discharge of material into the environment, has not~~any government regulations that have resulted or that we expect will result in compliance costs that had ~~any~~or will have a material effect ~~upon the~~on our capital expenditures, earnings, or competitive ~~position~~position.

Human Capital

We have no employees. We have entered into a Master Services Agreement with Link Logistics Real Estate Holdco LLC (together with its subsidiaries, “Link”), a portfolio company owned by Blackstone-advised investment vehicles, to provide, as applicable, corporate support services (including, without limitation, accounting, legal, tax, treasury, valuation services, information technology and data management), loan management, management services, operational services, property management services, and transaction support services to the Company.

Website Disclosure

Our website address is www.psbusinessparks.com. We make available free of charge through our Internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the ~~Company.~~

~~Substantially all~~Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the ~~Company’s properties have received Phase I environmental reviews. Such reviews have not revealed, and management~~SEC. Information contained on our website is not aware of, any probable or reasonably possible environmental costs that management believes would have a material adverse effect on the Company’s business, assets or results of operations, nor is the Company aware of any potentially material environmental liability. See incorporated by reference in this report.

Item ~~1A, “Risk Factors” for additional information.~~

~~ITEM~~ 1A. ~~RISK FACTORS~~

Risk Factors

In addition to the other information in our Annual Report on ~~Form~~From 10-K, you should consider the risks described below that we ~~believe~~believed may be material to investors in evaluating the Company. This section contains forward-looking statements, and in considering these statements, you should refer to the qualifications and ~~limitations~~limitation on our forward-looking statements that are described in Item 1,1. “Business ~~— Forward-Looking~~- Forward -Looking Statements.”

Risks Related to Our Business

We have significant exposure to real estate risk.

Since our business consists primarily of acquiring, developing, and operating real estate, we are subject to risks related to the ownership and operation of real estate that can adversely impact our business and financial condition. Certain significant costs, such as mortgage payments, real estate taxes, insurance, and maintenance, generally are not reduced even when a property’s rental income is reduced. In addition, environmental and tax laws, interest rate levels, the availability of financing and other factors may affect real estate values and property income. Furthermore, the supply of commercial space fluctuates with market conditions.

Since we derive substantially all our income from real estate operations, we are subject to the following general risks of acquiring and owning real estate related assets that could result in reduced revenues, increased expenses, increased capital expenditures, or increased borrowings, which could negatively impact our operating results and, cash flow available for distribution or ~~reinvestment and our stock price:~~

reinvestment:

•changes in the national, state, and local economic climate and real estate conditions, such as oversupply of or reduced demand for commercial real estate space and changes in market rental rates;

•how prospective tenants perceive the attractiveness, convenience, and safety of our properties;

•difficulties in consummating and financing acquisitions and developments on advantageous terms and the failure of acquisitions and developments to perform as expected;

•our ability to provide adequate management, maintenance, and insurance;

8

7

~~Table of Contents~~

•natural disasters, such as earthquakes, fires, hurricanes, and floods, which could exceed the aggregate limits of our insurance coverage;

•the consequences of changes in climate, including severe weather events, and the steps taken to prevent climate change, could result in increased capital expenditures and ~~expenses~~expenses;

•the expense of periodically renovating, repairing, and re-letting spaces;

•the impact of environmental protection laws;

•compliance with federal, state, and local laws and regulations;

•increasing operating and maintenance costs, including property taxes, insurance, and utilities, if these increased costs cannot be passed through to customers;

•the result of a ~~potential November 2020~~future California statewide ballot initiative (or similar legislative or regulatory actions) that could remove the property tax protections of Proposition 13 with respect to our California real estate and result in substantial increases in our California property tax bills;

•adverse changes in tax, real estate and zoning (particularly the rezoning of areas where our properties are located) laws and regulations;

•increasing competition from other commercial properties in our market;

•tenant defaults and bankruptcies;

•tenants’ right to sublease space; and

•concentration of properties leased to non-rated private companies with uncertain financial strength.

There is significant competition among commercial property operators:Other commercial properties compete with our properties for tenants. Some of the competing properties may be newer and better located than our properties. Competition in the market areas in which many of our properties are located is significant and has affected our occupancy levels, rental rates, and operating expenses. We also expect that new properties will be built in our markets. ~~In addition, we compete with other buyers, some of which are larger than us, for attractive commercial properties. Therefore, we may not be able to grow as rapidly as we would like.~~

We may encounter significant delays and expense in re-letting vacant space,or we may not be able to re-let space at existing rates, in each case resultingin losses of income:When leases expire, we may incur expenses in retrofitting space and we may not be able to re-lease the space on the same terms. Certain leases provide customers with the right to terminate early if they pay a fee. As of December 31, 2019, excluding the asset sold in January, 2020, 2,074 leases, representing 6.5 million, or 24.9%, of the leased square footage of our total portfolio, or 22.7% of annualized rental income, are scheduled to expire in 2020. While we have estimated our cost of renewing leases that expire in 2020, our estimates could be wrong. If we are unable to re-lease space promptly, if the terms are significantly less favorable than anticipated or if the costs are higher, our operating results and cash available for distribution or reinvestment ~~and stock price~~ could be negatively impacted.

Tenant defaults and bankruptcies may reduce our cash flow and distributions: ~~distributions:~~ We may have difficulty collecting from customers in default, particularly if they declare bankruptcy. Since many of our customers are non-rated private companies, this risk may be enhanced. There is inherent uncertainty in a customer’s ability to continue paying rent if they are in bankruptcy. This could negatively affect our operating results and cash available for distribution or ~~reinvestment and stock price.~~reinvestment.

Natural disasters or terrorist attacks could cause damage to our facilities that is not covered by insurance, and could increase costs, reduce revenues, and otherwise impair our operating results:While we maintain insurance coverage for the losses caused by earthquakes, fire, or hurricanes, we could suffer uninsured losses or losses in excess of our insurance policy limits for such occurrences. ~~Approximately 40.7% of our properties are located in California and are generally in areas that are subject to risks of earthquake-related damage.~~ In the event of an earthquake, fire, hurricane, or other natural disaster, we would remain liable on any mortgage debt or other unsatisfied obligations related to that property. In addition, we may not have sufficient insurance coverage for losses caused by a terrorist attack, or such insurance may not be available or cost-effective. Significant natural disasters, terrorist attacks, threats of future terrorist attacks, or resulting wider armed conflict could have negative impacts on the U.S. economy, reducing

9

~~Table of Contents~~

demand for our rental space and impairing our operating results, even if our specific losses were covered. This could negatively affect our operating results and cash available for distribution or ~~reinvestment and stock price.~~reinvestment.

Consequences of climate change, including severe weather events, and the steps taken to prevent climate change, could result in increased capital expenditures, increased expenses, and reduced revenues: Direct and indirect impacts of climate change, such as increased destructive weather events, floods, fires, ~~reduced lifespans~~ and ~~population reduction, reduced natural habitats, water, food, arable land, and other resources, as well as resulting armed conflicts,~~droughts could result in significant damage to our facilities, increase our ~~costs.~~costs, including our property insurance costs, or reduce demand for our facilities. Governmental, political, and societal pressure could (i) require costly changes to future newly developed facilities, or require retrofitting of our existing facilities, to reduce carbon emissions through multiple avenues including changes to insulation, space configuration, lighting, heating, and air

8

conditioning, and (ii) increase energy costs as a result of switching to less carbon-intensive, but more expensive, sources of energy to operate our facilities.

The illiquidity of our real estate investments may prevent us fromadjusting our portfolio to respond to market changes:There may be delays and difficulties in selling real estate. Therefore, we cannot easily change our portfolio when economic conditions change. In addition, when we sell properties at significant gains upon sale, it can increase our distribution requirements, thus making it difficult to retain and reinvest the sales proceeds. Also, REIT tax laws may impose negative consequences if we sell properties held for less than two years.

We may be adversely affected by changes in ~~laws:~~ laws and regulations:Increases in income and service taxes may reduce our cash flow and ability to make expected distributions to our ~~shareholders.~~stockholders. Additionally, any changes in the tax law applicable to REITs may adversely affect taxation of us and/or our ~~shareholders.~~stockholders. Our properties are also subject to various federal, state, and local regulatory requirements, such as state and local fire and safety ~~codes. If~~codes, that may be changed in ways that require significant costs to maintain compliance. Our properties are subject to state and local zoning requirements. We are and in the future we ~~fail~~may be subject to ~~comply with these~~government initiatives to change the zoning requirements ~~governmental authorities could fine us or courts could award damages against us. We believe~~in places where our properties ~~comply with all significant legal requirements. However,~~are located, and if such efforts are successful, the value of impacted properties may be materially reduced. There is no assurance that we will be compensated for economic losses in these ~~requirements could change in a way that could negatively affect our operating results, cash available for distribution or reinvestment and stock price.~~cases.

We may incur significant environmental remediation costs:As an owner and operator of real properties, under various federal, state, and local environmental laws, we are required to clean up spills or other releases of hazardous or toxic substances on or from our properties. Certain environmental laws impose liability whether or not the owner or buyer knew of, or was responsible for, the presence of the hazardous or toxic substances. In some cases, liability may not be limited to the value of the property. The presence of these substances, or the failure to properly remediate any resulting contamination, whether from environmental or microbial issues, also may adversely affect our ability to sell, lease, operate, or encumber our facilities.

We have conducted preliminary environmental assessments of most of our properties (and conduct these assessments in connection with property acquisitions) to evaluate the environmental condition of, and potential environmental liabilities associated with, our properties. These assessments generally consist of an investigation of environmental conditions at the property (including soil or groundwater sampling or analysis if appropriate), as well as a review of available information regarding the site and publicly available data regarding conditions at other sites in the vicinity. In connection with these property assessments, our operations and recent property acquisitions, we have become aware that prior operations or activities at some properties or from nearby locations have or may have resulted in contamination to the soil or groundwater at these properties. In circumstances where our environmental assessments disclose potential or actual contamination, we may attempt to obtain indemnifications and, in appropriate circumstances, we obtain limited environmental insurance in connection with the properties acquired, but we cannot assure you that such protections will be sufficient to cover actual future liabilities nor that our assessments have identified all such risks. Although we cannot provide any assurance, based on the preliminary environmental assessments, we are not aware of any environmental contamination of our facilities material to our overall business, financial condition, or results of operations.

There has been an increasing number of claims and litigation against owners and managers of rental properties relating to moisture infiltration, which can result in mold or other property damage. When we receive a complaint concerning moisture infiltration, condensation, or mold problems and/or become aware that an air quality concern exists, we implement corrective measures in accordance with guidelines and protocols we have developed with the assistance of outside experts. We seek to work proactively with our customers to resolve moisture infiltration and mold-related issues, subject to our contractual limitations on liability for such claims. However, we can give no assurance that material legal claims relating to moisture infiltration and the presence of, or exposure to, mold will not arise in the future.

Any such environmental remediation costs or issues, including any potential ongoing impacts on rent or operating expenses, could negatively impact our operating results and cash flow available for distribution or ~~reinvestment and our stock price.~~

reinvestment.

10

~~Table of Contents~~

Operating costs, including property taxes, could increase:We could be subject to increases in insurance premiums, property ~~and~~or other taxes, repair and maintenance costs, ~~payroll,~~corporate support services, utility costs, ~~workers compensation,~~management fees, and other operating expenses due to ~~various~~numerous factors such as inflation, labor shortages, commodity and energy price increases, weather, changes to governmental safety and real estate use limitations, as well as other governmental actions. Our property tax expense ~~which totaled $45.9 million during the year ended December 31, 2019,~~ generally depends upon the assessed value of our real estate facilities as determined by assessors and government agencies, and accordingly could be subject to substantial increases if such agencies changed their valuation approaches or opinions or if new laws are enacted, especially if new approaches are adopted or laws are enacted that result in increased property tax assessments in states or municipalities where we have a high concentration of facilities.

9

We have exposure to increased property tax in California:~~Approximately $126.3 million of our 2019 net operating income is from our properties in California, and we incurred approximately $15.1 million in related property tax expense.~~ Due to the impact of Proposition 13, which generally limits increases in assessed values to 2% per year, the assessed value and resulting property tax we pay is significantly less than it would be if the properties were assessed at current values. From time to time proposals have been made to reduce the beneficial impact of Proposition 13, particularly with respect to commercial and industrial (non-residential) real estate. In late 2018, an initiative qualified for California’s November 2020 statewide ballot that would create a “split roll,” generally making Proposition 13’s protections only applicable to residential real estate. We cannot predict whether the initiative will actually be on the ballot in 2020, or what the prospects for passage might be, or whether other changes to Proposition 13 may be proposed or adopted. If the initiative or a similar proposal were to be adopted, it would end the beneficial effect of Proposition 13 for our properties, and ourOur property tax expense could increase substantially, which would adversely ~~affecting~~affect our cash flow from operations and net income.

We must comply with the Americans with Disabilities Act, fire and safety regulations and zoning requirements, which can require significant expenditures:All of our properties must comply with the Americans with Disabilities Act and with related regulations (the “ADA”). The ADA has separate compliance requirements for “public accommodations” and “commercial facilities,” but generally requires that buildings be made accessible to persons with disabilities. Various state laws impose similar requirements. A failure to comply with the ADA or similar state laws could lead to government imposed fines on us and/or litigation, which could also involve an award of damages to individuals affected by the non-compliance. In addition, we must operate our properties in compliance with numerous local fire and safety regulations, building codes, zoning requirements and other land use regulations, all of which are subject to change and could become more costly to comply with in the future. The cost of compliance with these requirements can be substantial, and could reduce cash otherwise available for distribution to ~~shareholders.~~stockholders. Failure to comply with these requirements could also affect the marketability and rentability of our real estate facilities.

We incur liability from customer ~~and employment-related~~ claims:From time to time we have to make monetary settlements or defend actions or arbitration to resolve ~~customer or employment-related~~customer-related claims and disputes. Settling any such liabilities could negatively impact our earnings and cash available for distribution to ~~shareholders,~~stockholders, and could also adversely affect our ability to sell, lease, operate, or encumber affected facilities.

Our development of real estate can subject us to certain risks:As of December 31, 2019, we have a 95% interest in a 395-unit multifamily apartment complex with an aggregate cost of $115.4 million, including the fair value of the land. We also have successfully rezoned our 628,000 square foot office park within The Mile and are able to pursue the development of additional multifamily and mixed use projects. We are ~~also considering the potential redevelopment of other facilities~~engaged in ~~our portfolio.~~significant real estate development. Development or redevelopment of facilities are subject to a number of risks, including construction delays, complications in obtaining necessary zoning, occupancy and other governmental permits, cost overruns, failures of our development partners, financing risks, and the possible inability to meet expected occupancy and rent levels. ~~In addition, we do not have experience in multifamily development and are relying to some degree on the experience of our joint venture partner.~~ As a result of these risks, our development projects may be worth less or may generate less revenue than we believed at the time of development. Any of the foregoing risks could negatively impact our operating results and cash flow available for distribution or ~~reinvestment and our stock price.~~reinvestment. In addition, we may be unable to successfully integrate and effectively manage the properties we develop, which could adversely affect our results of operations.

We are subject to risks from the COVID-19 pandemic and we may in the future be subject to risks from other public health crises.

Beginning in 2020, the COVID-19 pandemic has spread globally, including to every state in the United States, adversely affecting public health and economic activity. Our business is subject to risks from the COVID-19 pandemic, including, among others:

•

~~Global~~illness or death of Link personnel or customers, negative impacts to the economic environment and to our customers which could reduce the demand for commercial property space or reduce our ability to collect rent, or potential regulatory action to close certain of our facilities that were determined not to be an “essential business” or for other reasons, limit our ability to complete development and redevelopment projects;

•risk that future waves of infection, including those resulting from new variants, or from additional pandemics, could result in new or reinstituted government restrictions or requirements;

•risk that the economic effects of the COVID-19 pandemic could reduce consumer confidence and result in an elevated level of move-outs of our long-term customers, resulting in a reduction in rental income due to occupancy reductions and increased “rent roll down” due to new customers having lower rental rates than departing customers;

•potential changes in customer behavior, such as the continued social acceptance, desirability and perceived economic benefits of work-from-home arrangements, resulting from the COVID-19 pandemic, which could materially and negatively impact the future demand for office space, resulting in slower overall leasing and an adverse impact to our operations and the valuation of our investments; and

•risk of negative impacts on the cost and availability of debt and equity capital as a result of the COVID-19 pandemic, which could have a material impact upon our capital and growth plans.

We believe that the degree to which the COVID-19 pandemic adversely impacts our business, operating results, cash flows and/or financial condition will be driven primarily by the duration, spread and severity of the pandemic itself, the speed and effectiveness of vaccine and treatment developments and distribution, including against variants, public adoption rates of vaccines, including booster shots, the duration of indirect economic impacts such as recession, dislocation in capital markets, and job loss, and potential longer term changes in consumer behavior, all of which are uncertain and difficult to predict. Although a number of

10

vaccines for COVID-19 are currently available to the general public in the United States and in many countries around the world, it will take time for the distribution of vaccines to materially affect the spread of COVID-19 and the ultimate effectiveness of the vaccination effort is subject to significant uncertainty. The length and severity of the pandemic may be worsened to the extent that a significant portion of the population, in the United States and globally, is reluctant to be vaccinated, fails to complete required multi-step vaccination protocol or is unable to become vaccinated due to shortages in vaccine supply or suspensions in the distribution of vaccines due to safety concerns or other issues. The length of the pandemic is also dependent upon the degree to which more contagious variants of the virus continue to spread, particularly among areas of the country in which overall full vaccination rates are relatively low, and overall rates of new COVID-19 cases continue to rise. Further, new and worsening outbreaks of COVID-19 in other countries may impact global vaccine supplies and lead to the emergence of new variants of the virus which are more contagious, more deadly or against which currently available vaccines are less effective. As a result, we are not able at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material. Future pandemics or public health crises could have similar impacts.

Economic conditions can adversely affect our business, financial condition, growth, and access to capital.

Economic conditions in the areas we operate, capital markets, global economic conditions, and other events or factors could adversely affect rental demand for our real estate, our ability to grow our business and acquire new facilities, to access capital, as well as the value of our real estate. Such conditions, which could negatively impact our operating results and cash flow available for distribution or reinvestment, ~~and our stock price,~~ include the following:

11

~~Table of Contents~~

Commercial credit markets: Our results of operations ~~and share price~~ are sensitive to volatility in the credit markets. From time to time, the commercial real estate debt markets experience volatility as a result of ~~various~~numerous factors, including changing underwriting standards by lenders and credit rating agencies. This may result in lenders increasing the cost for debt financing, which could affect the economic viability of any acquisition or development activities we may undertake or otherwise increase our costs of borrowing. Conversely, to the extent that debt becomes cheaper or underwriting terms become more favorable, it could increase the overall amount of capital being invested in real estate, allowing more competitors to bid for facilities that we may wish to acquire, reducing the potential yield from acquisitions or preventing us from acquiring assets we might otherwise wish to acquire.

Capital ~~markets~~markets:: The issuance of perpetual preferred securities historically has been a significant source of capital to grow our business, and we have considered issuing unsecured debt publicly or in private transactions. We also consider issuance of our common equity a potential source of capital. Our ability to access ~~these~~ sources of capital can be adversely affected by challenging market conditions, ~~which can increase the cost of issuance of preferred equity and debt, and reduce the value of our common shares,~~ making ~~such~~various sources of capital less attractive or not feasible. We believe that we have sufficient working capital ~~and capacity under our credit facilities~~ and our retained cash flow from operations to continue to operate our business as usual and meet our current obligations. However, if we were unable to ~~issue public equity or~~ borrow at reasonable rates, that could limit the earnings growth that might otherwise result from the acquisition and development of real estate facilities.

Asset valuations: Market volatility makes the valuation of our properties difficult. There may be significant uncertainty in the valuation, or in the stability of the value, of our properties, which could result in a substantial decrease in the value of our properties. As a result, we may not be able to recover the carrying amount of our properties, which may require us to recognize an impairment charge in ~~earnings~~earnings.~~. Reductions in the value of our assets could result in a reduction in the value of our common shares.~~

Potential negative impacts upon demand for our space and customers’ ability to ~~pay~~pay:: We believe that our current and prospective customers are susceptible to global and local economic conditions as well as the impact of capital markets, asset valuations, and commercial credit markets, which could result in an impairment of our customers’ existing business operations or curtail plans for growth. Such impairment could reduce demand for our rental space, or make it difficult for customers to fulfill their obligations to us under their leases.

The acquisition of existing properties is a significant component of our long-term growth strategy, and acquisitions of existing properties are subject to risks that may adversely affect our growth and financial results.

We acquire existing properties, either in individual transactions or portfolios offered by other commercial real estate owners. In addition to the general risks related to real estate described above, we are also subject to the following risks associated with the acquisition of real estate facilities which could negatively impact our operating results, cash flow available for distribution or reinvestment and our stock price:

~~Due diligence could be insufficient:~~ Failure to identify all significant circumstances or conditions that affect the value, rentability, or costs of operation of an acquired facility, such as unidentified structural, environmental, zoning, or marketability issues, could jeopardize realization of anticipated earnings from an acquisition and negatively impact our operating results.

~~We could fail to successfully integrate acquired properties into our platform~~: Failures to integrate acquired properties into our operating platform, such as a failure to maintain existing relationships with customers due to changes in processes, standards, customer service, could temporarily or permanently impair our operating results.

~~We compete with other real estate operators for facilities~~: We face significant competition for suitable acquisition properties from other real estate investors, including other publicly traded real estate investment trusts and private institutional investors. As a result, we may be unable to acquire additional properties we desire or the purchase price for desirable properties may be significantly increased, reducing potential yields from acquisitions.

~~Acquired properties are subject to property tax reappraisals, which occur following the acquisition and can be difficult to estimate:~~ Facilities that we acquire are subject to property tax reappraisal, which can substantially increase ongoing property taxes. The reappraisal process is subject to a significant degree of uncertainty, because it involves the judgment of governmental agencies regarding real estate values and other factors. In connection with underwriting future or recent acquisitions of properties, if our estimates of property taxes following reappraisal are too low, we may not realize anticipated earnings from an acquisition.

12

~~Table of Contents~~

~~We would incur adverse tax consequences if we fail to qualify as a REIT.~~

We believe that we have qualified as a REIT and intend to continue to maintain our REIT status. However, there can be no assurance that we qualify or will continue to qualify as a REIT, because of the highly technical nature of the REIT rules, the ongoing importance of factual determinations, the possibility of unidentified issues in prior periods or changes in our circumstances, as well as share ownership limits in our articles of incorporation that do not necessarily ensure that our shareholder base is sufficiently diverse for us to qualify as a REIT. For any year we fail to qualify as a REIT, unless certain relief provisions apply, we would not be allowed a deduction for dividends paid, we would be subject to corporate tax on our taxable income, and generally we would not be allowed to elect REIT status until the fifth year after such a disqualification. Any taxes, interest, and penalties incurred would reduce our cash available for distributions to shareholders and could negatively affect our stock price. However, for years in which we failed to qualify as a REIT, we would not be subject to REIT rules which require us to distribute substantially all of our taxable income to our shareholders.

~~We may need to borrow funds to meet our REIT distribution requirements.~~

As a REIT, we must distribute substantially all of our “REIT taxable income” to our shareholders. Our income consists primarily of our share of our OP’s income. We intend to make sufficient distributions to qualify as a REIT and otherwise avoid corporate tax. However, differences in timing between income and expenses and the need to make nondeductible expenditures such as capital improvements and principal payments on debt could force us to borrow funds to make necessary shareholder distributions. Future dividend levels are not determinable at this time.

~~Changes in tax laws could negatively impact us.~~

The United States Treasury Department and Congress frequently review U.S. federal income tax legislation, regulations and other guidance. We cannot predict whether, when or to what extent new U.S. federal tax laws, regulations, interpretations or rulings will be adopted. Any legislative action may prospectively modify our tax treatment and, therefore, may adversely affect taxation of us or our shareholders.

~~PS has significant influence over us.~~

As of December 31, 2019, PS owned 7.2 million shares of the Company’s common stock and 7.3 million common units of the OP (100.0% of the common units not owned by the Company). Assuming issuance of the Company’s common stock upon redemption of its partnership units, PS would own 41.6% (or 14.5 million shares) of the outstanding shares of the Company’s common stock at December 31, 2019. In addition, the PS Business Parks name and logo are owned by PS and licensed to the Company under a non-exclusive, royalty-free license agreement. The license can be terminated by either party for any reason with six months written notice. Ronald L. Havner, Jr., the Company’s chairman, is also Chairman of Trustees of PS. Joseph D. Russell, Jr. is a director and former Chief Executive Officer of the Company and also President and Chief Executive Officer of PS. Gary E. Pruitt, an independent director of the Company, is also a trustee of PS. Consequently, PS has the ability to significantly influence all matters submitted to a vote of our shareholders, including electing directors, changing our articles of incorporation, dissolving and approving other extraordinary transactions such as mergers, and all matters requiring the consent of the limited partners of the OP. PS’s interest in such matters may differ from other shareholders. In addition, PS’s ownership may make it more difficult for another party to take over or acquire our Company without PS’s approval, even if favorable to our public shareholders.

~~Provisions in our organizational documents may prevent changes in control.~~

~~Our articles generally prohibit any person from owning more than 7% of our shares:~~ Our articles of incorporation restrict the number of shares that may be owned by any “person,” and the partnership agreement of our OP contains an anti-takeover provision. No shareholder (other than PS and certain other specified shareholders) may own more than 7% of the outstanding shares of our common stock, unless our Board of Directors of the Company (the “Board”) waives this limitation. We imposed this limitation to avoid, to the extent possible, a concentration of ownership that might jeopardize our ability to qualify as a REIT. This limitation, however, also makes a change of control much more difficult (if not impossible). These provisions will prevent future takeover attempts not supported by PS even if a majority of our public shareholders consider it to be in their best interests, such as to receive a premium for their shares over market value or for other reasons.

~~Our Board can set the terms of certain securities without shareholderapproval:~~ Our Board is authorized, without shareholder approval, to issue up to 50.0 million shares of preferred stock and up to 100.0 million shares of equity stock, in each case in one or more series. Our Board has the right to set the terms of each of these series of stock.

13

~~Table of Contents~~

Consequently, the Board could set the terms of a series of stock that could make it difficult (if not impossible) for another party to take over our Company even if it might be favorable to our public shareholders. Our articles of incorporation also contain other provisions that could have the same effect. We can also cause our OP to issue additional interests for cash or in exchange for property.

~~The partnership agreement of our OP restricts our ability to enter into mergers:~~ The partnership agreement of our OP generally provides that we may not merge or engage in a similar transaction unless either the limited partners of our OP are entitled to receive the same proportionate consideration as our shareholders, or 60% of the OP’s limited partners approve the merger. In addition, we may not consummate a merger unless the matter is approved by a vote of the OP’s partners, with our interests in the OP voted in proportion to the manner in which our shareholders voted to approve the merger. These provisions have the effect of increasing PS’s influence over us due to PS’s ownership of operating partnership units. These provisions may make it more difficult for us to merge with another entity.

~~The interests of limited partners of our OP may conflict with the interests of our common stockholders.~~

Limited partners of our OP, including PS, have the right to vote on certain changes to the partnership agreement. They may vote in a way that is against the interests of our shareholders. Also, as general partner of our OP, we are required to protect the interests of the limited partners of the OP. The interests of the limited partners and of our shareholders may differ.

~~We depend on external sources of capital to grow our Company.~~

We are generally required under the Code to annually distribute at least 90% of our “REIT taxable income.” Because of this distribution requirement, we may not be able to fund future capital needs, including any necessary building and tenant improvements, from operating cash flow. Consequently, we may need to rely on third-party sources of capital to fund our capital needs. We may not be able to obtain the financing on favorable terms or at all. Access to third-party sources of capital depends, in part, on general market conditions, the market’s perception of our growth potential, our current and expected future earnings, our cash flow, and the market price per share of our common stock. If we cannot obtain capital from third-party sources, we may not be able to acquire properties when strategic opportunities exist, satisfy any debt service obligations, or make cash distributions to shareholders.

We are subject to laws and governmental regulations and actions that affect our operating results and financial condition.

Our business is subject to regulation under a wide variety of U.S. federal, state and local laws, regulations and policies including those applicable to our status as a REIT, ~~and those imposed by the SEC, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the New York Stock Exchange (the “NYSE”),~~ as well as applicable local, state, and national labor laws. Although we have policies and procedures designed to comply with applicable laws and regulations, failure to comply with the various laws and regulations may result in civil and criminal liability, fines and penalties, and increased costs of compliance ~~and restatement of our financial statements~~ and could also affect the marketability of our real estate facilities.

In response to current economic conditions or the current political environment or otherwise, laws and regulations could be implemented or changed in ways that adversely affect our operating results and financial condition, such as legislation that could otherwise increase operating costs. Such changes could also adversely affect the operations of our customers, which could affect the price and demand for our space as well as our ~~customer’s~~customers’ ability to pay their rent. For example, certain states within the United States have passed laws that require companies to meet specific requirements regarding the handling of personal data. We collect internal and customer data for a variety of important business purposes. We could be exposed to fines, penalties,

11

~~The California Consumer Privacy Act (the “CCPA”) went into effect~~

restrictions, litigation, reputational harm or other expenses, or other adverse effects on ~~January 1, 2020. The CCPA requires, among~~our business, due to failure to protect personal data and other ~~things, companies that collect personal~~sensitive information ~~about California residents~~or failure to ~~make new disclosures to those residents about their~~maintain compliance with the various data collection ~~use~~ and ~~sharing practices, allows residents~~privacy laws or other applicable data security standards.

In addition, certain U.S. states and the federal government have enacted additional laws and regulations to ~~opt out~~protect consumers against identity theft. These laws and similar laws in other jurisdictions have increased the costs of ~~certain data sharing with third parties,~~doing business, and ~~provides a new cause~~failure on our part to implement appropriate safeguards or to detect and provide prompt notice of ~~action for data breaches.~~ However, regulations from the California Attorney General have not been finalized, and it is expected that additional amendments to the CCPA will be introduced in 2020. It therefore remains unclear what, if any, modifications will be made to the CCPA or how it will be interpreted. ~~While we believe we have developed processes to comply with CCPA requirements, a regulatory agency may not agree with certain~~unauthorized access as required by some of ~~our implementation decisions, which~~these laws could subject us to ~~litigation, regulatory actions~~potential claims for damages and other remedies. If we were required to pay any significant amounts in satisfaction of claims under these laws, or ~~changes~~if we were forced to cease our business ~~practices that could increase costs or reduce revenues.~~ ~~Other states have also considered or are considering privacy laws similar to the CCPA.~~ ~~Similar laws may be implemented in other jurisdictions that we do business in and in ways that may be more restrictive than the CCPA, increasing the cost~~operations for any length of ~~compliance,~~time as ~~well as the risk of noncompliance, on our business.~~

14

~~Table of Contents~~

~~Holders of depositary shares, each representing 1/1,000 of~~ a ~~share~~result of our ~~outstanding preferred stock, have dividend, liquidation~~inability to comply fully with any such law, our business, operating results and ~~other rights that are senior to the rights of the holders of shares of our common stock.~~

~~Holders of our shares of preferred stock are entitled to cumulative dividends before any dividends may~~financial condition could be declared or set aside on our common stock. Upon liquidation, before any payment is made to holders of our common stock, shares of our preferred stock are entitled to receive a liquidation preference of $25,000 per share (or $25.00 per depositary share) plus any accrued and unpaid distributions before any payment is made to the common shareholders. These preferences may limit the amount received by our common shareholders for ongoing distributions or upon liquidation. In addition, our preferred stockholders have the right to elect two additional directors to our Board whenever dividends are in arrears in an aggregate amount equivalent to six or more quarterly dividends, whether or not consecutive.

~~Preferred Shareholders are subject to certain risks.~~

Holders of our preferred shares have preference rights over our common shareholders with respect to liquidation and distributions, which gives them some assurance of continued payment of their stated dividend rate, and receipt of their principal upon liquidation of the Company or redemption of their securities. However, holders of our preferred shares should consider the following risks:

The Company has in the past, and could in the future, issue or assume additional debt. Preferred shareholders would be subordinated to the interest and principal payments of such debt, which would increase the risk that there would not be sufficient funds to pay distributions or liquidation amounts to the preferred shareholders.

The Company has in the past, and could in the future, issue additional preferred shares that, while pari passu to the existing preferred shares, increases the risk that there would not be sufficient funds to pay distributions to the preferred shareholders.

While the Company has no plans to do so, if the Company were to lose its REIT status or no longer elect REIT status, it would no longer be required to distribute its taxable income to maintain REIT status. If, in such a circumstance, the Company ceased paying dividends, unpaid distributions to the preferred shareholders would continue to accumulate. While the preferred shareholders would have the ability to elect two additional members to serve on our Board until the arrearage was cured. The preferred shareholders would not receive any compensation (such as interest) for the delay in the receipt of distributions, and it is possible that the arrearage could accumulate indefinitely.

adversely affected.

We rely on technology in our operations and failures, inadequacies or interruptions to our service could harm our business.

The execution of our business strategy is heavily dependent on the use of technologies and systems, including the Internet, to access, store, transmit, deliver, and manage information and processes. We rely extensively on third-party vendors to retain data, process transactions, and provide other systems services. The failure, damage, or interruption of these systems, including as a result of power outages, computer and telecommunications failures, hackers, computer worms, viruses and other destructive or disruptive security breaches, natural disasters, terrorist attacks, and other catastrophic events could significantly and have a material adverse effect on our business.

If our confidential information is compromised or corrupted, including as a result of a cybersecurity breach, our reputation and business relationships could be damaged, which could adversely affect our financial condition and operating results.

In the ordinary course of our business we acquire and store sensitive data, including personally identifiable information of our prospective and current customers and our employees. The secure processing and maintenance of this information is critical to our operations and business strategy. Although we believe we have taken commercially reasonable steps to protect the security of our confidential information, information security risks have generally increased in recent years due to the rise in ~~new~~modern technologies and the increased sophistication and activities of perpetrators of cyberattacks. Despite our security measures, we have experienced security breaches due to cyberattacks and additional breaches could occur in the future. ~~When we experience security breaches~~In these cases, our information technology and infrastructure iscould be vulnerable and ~~our or~~ our customers’ or employees’ confidential information could be compromised or misappropriated. Any such breach could result in serious and harmful consequences for ~~us.~~

us or our customers.

Our confidential information may also be compromised due to programming or human error or malfeasance. We must continually evaluate and adapt our systems and processes to address the evolving threat landscape, and therefore

15

~~Table of Contents~~

there is no guarantee that they will be adequate to safeguard against all data security breaches or misuses of data. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and changing requirements applicable to our business from multiple regulatory agencies at the local, state, federal, or international level, compliance with those requirement could also result in additional costs, or we could fail to comply with those requirements due to ~~various~~several reasons such as not being aware of them.

Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption to our operations and the services we provide to customers or damage our reputation, any of which could adversely affect our results of operations, reputation, and competitive position. In addition, our customers could lose confidence in our ability to protect their personal information, which could cause them to discontinue leasing our facilities. Such events could lead to lost future revenues and adversely affect our results of operations and could result in remedial and other costs, fines, or lawsuits, which could be in excess of any available insurance that we have procured.

Risks Related to Our Ownership, Organization and Structure

We would incur adverse tax consequences if we cease to qualify as a REIT and we would have to pay substantial U.S. federal corporate income taxes.

REITs are subject to a range of complex organizational and operational requirements. A qualifying REIT does not generally incur U.S. federal corporate income tax on its “REIT taxable income” (generally, taxable income subject to specified adjustments,

12

including a deduction for dividends paid and excluding net capital gain) that it distributes to its stockholders. We believe we have qualified as a REIT in all periods presented herein.

However, there can be no assurance that we qualify or will continue to qualify as a REIT, because of the highly technical nature of the REIT rules, the ongoing importance of factual determinations, the possibility of unidentified issues in prior periods, or changes in our circumstances, as well as share ownership limits in our articles of incorporation that do not necessarily ensure that our stockholder base is sufficiently diverse for us to qualify as a REIT. For any year we cease to qualify as a REIT, unless certain relief provisions apply (the granting of such relief could nonetheless result in significant excise or penalty taxes), we would not be allowed a deduction for dividends paid, we would be subject to U.S. federal corporate income tax on our taxable income, and generally we would not be allowed to elect REIT status until the fifth year after such a disqualification. Any taxes, interest, and penalties incurred would reduce our cash available for distributions to stockholders. However, for years in which we ceased to qualify as a REIT, we would not be subject to REIT rules that require us to distribute substantially all of our taxable income to our stockholders.

Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.

Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state, and local taxes, including payroll taxes, taxes on any undistributed income, taxes on income from some activities conducted as a result of a foreclosure, a 100% excise tax on any transactions with a Taxable REIT Subsidiary (“TRS”) that are not conducted on an arm’s-length basis, and state or local income, franchise, property, and transfer taxes. Moreover, if we have net income from the sale of properties that are “dealer” properties (a “prohibited transaction” under the Code), that income will be subject to a 100% penalty tax. In addition, our TRSs will be subject to U.S. federal, state, and local corporate income taxes on their net taxable income, if any. Any of these taxes would reduce our cash available for distributions to stockholders.

We may need to borrow funds to meet our REIT distribution requirements.

As a REIT, we are required to distribute at least 90% of our “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains) to our stockholders each year. Our income consists primarily of our share of our OP’s income. We intend to make sufficient distributions to qualify as a REIT and otherwise avoid corporate tax. However, differences in timing between income and expenses and the need to make nondeductible expenditures such as capital improvements and principal payments on debt could force us to borrow funds to make necessary stockholder distributions. Future dividend levels are not determinable at this time.

Changes in tax laws could negatively impact us.

The United States Treasury Department and Congress frequently review U.S. federal income tax legislation, regulations, and other guidance. We cannot predict whether, when or to what extent new U.S. federal tax laws, regulations, interpretations, or rulings will be adopted. Any legislative action may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect taxation of us or our stockholders.

We depend on external sources of capital to grow our Company.

As a REIT, we are required to distribute at least 90% of our “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains) to our stockholders each year. Because of this distribution requirement, we may not be able to fund future capital needs, including any necessary building and tenant improvements, from operating cash flow. Consequently, we may need to rely on third-party sources of capital to fund our capital needs. We may not be able to obtain the financing on favorable terms or at all. Access to third-party sources of capital depends, in part, on general market conditions, the market’s perception of our growth potential, our current and expected future earnings, and our cash flow. If we cannot obtain capital from third-party sources, we may not be able to acquire properties when strategic opportunities exist, satisfy any debt service obligations, or make cash distributions to stockholders.

Risks Related to Our Preferred Stock

Holders of depositary shares, each representing 1/1,000 of a share of our outstanding preferred stock, have dividend, liquidation and other rights that are senior to the rights of the holders of shares of our common stock.

Holders of our shares of preferred stock are entitled to cumulative dividends before any dividends may be declared or set aside on our common stock. Upon liquidation, before any payment is made to holders of our common stock, shares of our preferred stock

13

are entitled to receive a liquidation preference of $25,000 per share (or $25.00 per depositary share) plus any accrued and unpaid distributions before any payment is made to the common stockholders. These preferences may limit the amount received by our common stockholders for ongoing distributions or upon liquidation. In addition, our preferred stockholders have the right to elect two additional directors to our Board whenever dividends are in arrears in an aggregate amount equivalent to six or more quarterly dividends, whether or not consecutive.

Preferred Stockholders are subject to certain risks.

Holders of our preferred stock have preference rights over our common stockholders with respect to liquidation and distributions, which give them some assurance of continued payment of their stated dividend rate, and receipt of their principal upon liquidation of the Company or redemption of their securities. However, holders of our preferred stock should consider the following risks:

~~ITEM~~•The Company has in the past, and could in the future, issue or assume additional debt. Preferred stockholders would be subordinated to the interest and principal payments of such debt, which would increase the risk that there would not be sufficient funds to pay distributions or liquidation amounts to the preferred stockholders.

•The Company has in the past, and could in the future, issue additional preferred stock that, while pari passu to the existing preferred stock, increases the risk that there would not be sufficient funds to pay distributions to the preferred stockholders.

•If the Company were to lose its REIT status or no longer elect REIT status, it would no longer be required to distribute its taxable income to maintain REIT status. If, in such a circumstance, the Company ceased paying dividends, unpaid distributions to the preferred stockholders would continue to accumulate. The preferred stockholders would have the ability to elect two additional members to serve on our Board until the arrearage was cured. The preferred stockholders would not receive any compensation (such as interest) for the delay in the receipt of distributions, and it is possible that the arrearage could accumulate indefinitely.

Following the completion of the Tender Offer (as defined below), the Company delisted the Preferred Securities. As a result, preferred stockholders will not have the same protections afforded to stockholders of companies that are subject to NYSE requirements.

Following the completion of the Tender Offer, the Company delisted the Preferred Securities. Accordingly, preferred stockholders will not have the same protections afforded to stockholders of companies that are subject to the listing rules and corporate governance requirements of the NYSE.

We have delisted the Preferred Stock from the NYSE and deregistered the Preferred Stock under the Exchange Act, which could negatively affect the liquidity and trading prices of our Preferred Stock and will result in less disclosure about the Company.

We have delisted the Preferred Stock from the NYSE and deregistered the Preferred Stock under the Exchange Act. By delisting and deregistering, our obligation to file reports with the SEC (including periodic reports, proxy statements, and tender offer statements) has been suspended and we expect the liquidity of the Preferred Stock to be impaired. Although the Preferred Stock may be quoted on OTC Pink Market, we can provide no assurance that trading in the Preferred Stock will continue in the OTC Pink Market or in any other forum.Following the completion of the deregistration process, we ceased to be subject to the provisions of the Sarbanes-Oxley Act or the liability provisions of the Exchange Act. In addition, we are no longer required to meet the reporting requirements set forth under the Exchange Act.

Risks Related to Our Indebtedness

Our significant amount of debt may subject us to increased risk of loss and could adversely affect our results of operations and financial condition.

We currently have a significant amount of outstanding indebtedness, including the Mortgage Loans incurred in connection with the Merger, and, subject to market conditions and availability, we may incur a significant amount of additional debt. The type and percentage of leverage we employ will vary depending on our available capital, our ability to obtain and access financing arrangements with lenders or other debt financing sources, the type of assets we are funding, whether the financing is recourse or non-recourse, debt restrictions contained in those financing arrangements and the lenders’ and rating agencies’ estimate of the stability of our investment portfolio’s cash flow. We may significantly increase the amount of leverage we utilize at any time. In

14

addition, we may leverage individual assets at substantially higher levels. Incurring substantial debt could subject us to many risks that, if realized, would materially and adversely affect us, including the risk that:

•our cash flow from operations may be insufficient to make required payments of principal of and interest on our debt or we may fail to comply with covenants contained in our debt agreements, which is likely to result in (i) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision) in accordance with the terms and conditions of our financing arrangements, which we then may be unable to repay from internal funds or to refinance on favorable terms, or at all, (ii) our inability to borrow undrawn amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, which would result in a decrease in our liquidity, and/or (iii) the loss of some or all of our collateral assets to foreclosure or sale;

•our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase in an amount sufficient to offset the higher financing costs;

•we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions or other purposes; and

•we may not be able to refinance any debt that matures prior to the maturity (or realization) of an underlying investment it was used to finance on favorable terms or at all.

There can be no assurance that our leverage strategy will be successful, and such strategy may subject us to increased risk of loss, harm our liquidity and could adversely affect our results of operations and financial condition.

Our secured debt agreements governing the Mortgage Loans impose, and additional lending facilities may impose, restrictive covenants, which may restrict our flexibility to determine our operating policies and investment strategy.

The documents that govern our Mortgage Loans contain, and additional lending may contain, customary affirmative and negative covenants, including financial covenants applicable to us that may restrict our flexibility to determine our operating policies and investment strategy. In particular, these agreements may require us to maintain specified minimum levels of capacity under our credit facilities and cash. As a result, we may not be able to leverage our assets as fully as we would otherwise choose, which could reduce our return on assets. If we are unable to meet these collateral obligations, our financial condition and prospects could deteriorate significantly. If we fail to meet or satisfy any of these covenants beyond any applicable notice and/or cure periods pursuant to the terms of our financing arrangements, we may be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their interests against existing collateral. We may also be subject to cross-default and acceleration rights in our other debt arrangements. Further, this could also make it difficult for us to satisfy the distribution requirements necessary to maintain our qualification as a REIT for U.S. federal income tax purposes.

Risks Related to Our Organization and Structure

We are controlled by Blackstone and its interests may conflict with ours or yours in the future.

Following the Merger, affiliates of Blackstone beneficially own all outstanding shares of our common stock. Accordingly, Blackstone has significant influence with respect to our management, business plans and policies, including the election and removal of our officers and directors. Blackstone and its affiliates engage in a broad spectrum of activities, including investments in real estate generally. In the ordinary course of their business activities, Blackstone and its affiliates may engage in activities where their interests conflict with our interests or those of our stockholders. Blackstone also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. In addition, Blackstone may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to stockholders.

Risks Related to Conflicts of Interest

Various potential and actual conflicts of interest will arise, and these conflicts may not be identified or resolved in a manner favorable to us.

Blackstone has conflicts of interest, or conflicting loyalties, as a result of the numerous activities and relationships of Blackstone and its affiliates, partners, members, shareholders, officers, directors and employees, some of which are described herein. However, not all potential, apparent and actual conflicts of interest are included herein, and additional conflicts of interest could arise as a result of new activities, transactions or relationships commenced in the future. If any matter arises that we and our

15

affiliates determine in our good faith judgment constitutes an actual and material conflict of interest, we and our affiliates will take such actions as we determine appropriate to mitigate the conflict. There can be no assurance that our board of directors or Blackstone will identify or resolve all conflicts of interest in a manner that is favorable to us.

We depend on Link and its personnel for our success. We may not find a suitable replacement for Link if our Master Services Agreement is terminated, or if key personnel cease to be employed by Link or Blackstone otherwise become unavailable to us.

Pursuant to a Master Services Agreement (the “Services Agreement”), we have engaged Link, a portfolio company owned by Blackstone-advised investment vehicles, to provide, as applicable, corporate support services (including, without limitation, accounting, legal, tax, treasury, valuation services, information technology and data management), loan management, management services, operational services, property management and transaction support services (the “Services”). Pursuant to the Services Agreement, the Company pays Link for such services on a break-even or cost-reimbursement basis as determined in accordance with the terms of the Services Agreement. Pursuant to the Services Agreement, Link Logistics Real Estate Management LLC, a subsidiary of Link, has been engaged by certain of our subsidiaries to perform management services with respect to our properties.

Accordingly, our success depends to a significant extent upon the efforts, experience, diligence, skill, and network of business contacts of the officers and key personnel of Link and its affiliates, as well as the persons and firms Link retains to provide services on our behalf. We can offer no assurance that Link will continue to provide such Services or that we will continue to have access to Link’s officers and key personnel. The current term of the Services Agreement extends to December 31, 2023 and may be renewed for additional one-year terms thereafter; provided, however, that the Services Agreement may be terminated at any time upon prior written notice by either Link or the Company. If the Services Agreement is terminated and no suitable replacement is found to manage us, we may not be able to execute our business plan. Furthermore, we may incur certain costs in connection with a termination of the Services Agreement.

The personnel of Link are not required to dedicate a specific portion of their time to the management of our business.

Neither Link nor any other Blackstone affiliate is obligated to dedicate any specific personnel exclusively to us, nor are they or their personnel obligated to dedicate any specific portion of their time to the management of our business. In addition, pursuant to the terms of the Services Agreement, Link retains, for and on our behalf and at our expense, the services of certain other persons and firms as Link deems necessary or advisable in connection with managing our operations. Certain of these providers currently include affiliates of Blackstone and its portfolio companies and may include additional affiliates in the future. As a result, we cannot provide any assurances regarding the amount of time Link or its affiliates will dedicate to the management of our business and Link may have conflicts in allocating its time, resources and services among our business and any other investment vehicles and accounts Link (or its personnel) may manage and expenses allocable to us may increase where third parties are retained to provide services to us. Each of our officers is also an employee of Link or another Blackstone affiliate, who has now or may be expected to have significant responsibilities for other investment vehicles currently managed by Blackstone and its affiliates. Consequently, we may not receive the level of support and assistance that we otherwise might receive if we were internally managed. Link and its affiliates are not restricted from entering into other advisory relationships or from engaging in other business activities.

We and the Blackstone Vehicles have and in the future will likely compete with or enter into transactions with existing and future private and public investment vehicles established and/or managed by Blackstone or its affiliates, which may present various conflicts of interest that restrict our ability to pursue certain investment opportunities or take other actions that are beneficial to our business and/or result in decisions that are not in the best interests of our stockholders.

We are subject to conflicts of interest arising out of our relationship with Blackstone, including Link and its affiliates. Certain Blackstone employees serve on our board of directors. In addition, our chief executive officer, chief financial officer and president are also employees of Link, a Blackstone affiliate. If any matter arises that Blackstone determines in its good faith judgment constitutes an actual and material conflict of interest, Blackstone and relevant affiliates will take the actions they determine appropriate to mitigate the conflict. There is no guarantee that the policies and procedures adopted by us, or the policies and procedures adopted by Link, Blackstone and their affiliates, will enable us to identify, adequately address or mitigate these conflicts of interest in a way that is favorable to us. Some examples of conflicts of interest that may arise by virtue of our relationship with Link and Blackstone include:

•Broad and Wide-Ranging Activities. Link, Blackstone and their affiliates engage in a broad spectrum of activities, including a broad range of activities relating to investments in the real estate industry, and have invested or committed billions of dollars in capital through various investment funds, managed accounts and other vehicles affiliated with Blackstone. In the ordinary course of their business activities, Link, Blackstone and their affiliates may engage in

16

activities where the interests of certain divisions of Blackstone and its affiliates, including Link, or the interests of their clients may conflict with the interests of our stockholders. Certain of these divisions and entities affiliated with Link have or may have an investment strategy similar to our investment strategy and therefore will likely compete with us.

•Blackstone’s Policies and Procedures. Specified policies and procedures implemented by Blackstone and its affiliates, including Link, to mitigate potential conflicts of interest and address certain regulatory requirements and contractual restrictions may reduce the advantages across Blackstone’s and its affiliates’ various businesses that Blackstone expects to draw on for purposes of pursuing attractive investment opportunities. Because Blackstone has many different businesses, it is subject to a number of actual and potential conflicts of interest, greater regulatory oversight and more legal and contractual restrictions than that to which it would otherwise be subject if it had just one line of business. In addressing these conflicts and regulatory, legal and contractual requirements across its various businesses, Blackstone has implemented certain policies and procedures (e.g., information walls) that may reduce the benefits that Blackstone could otherwise expect to utilize for Link for purposes of identifying and managing our real estate investments. For example, Blackstone may come into possession of material non-public information with respect to companies that are clients of Blackstone or its affiliates, in which Link may be considering making an investment. As a consequence, that information, which could be of benefit to Link, might become restricted to those other businesses and otherwise be unavailable to Link, and could also restrict Link’s activities. Additionally, the terms of confidentiality or other agreements with or related to companies in which any investment vehicle of Blackstone has or has considered making an investment or which is otherwise a client of Blackstone and its affiliates may restrict or otherwise limit the ability of Blackstone or its affiliates, including Link, to engage in businesses or activities competitive with such companies.

•Assignment and Sharing or Limitation of Rights. We may in the future invest alongside other Blackstone Vehicles and in connection therewith have and may, for legal, tax, regulatory or other reasons which may be unrelated to us, share with or assign to such other Blackstone Vehicles certain of our rights, in whole or in part, or to limit our rights, including certain control- and/or foreclosure-related rights with respect to such shared investments and/or otherwise agree to implement certain procedures to mitigate conflicts of interest which typically involve maintaining a noncontrolling interest in any such investment and a forbearance of our rights, including certain non-economic rights (including following the vote of other third party lenders generally or otherwise being recused with respect to certain decisions, including with respect to both normal course ongoing matters (such as consent rights with respect to loan modifications in intercreditor agreements) and also defaults, foreclosures, workouts, restructurings and/or exit opportunities), subject to certain limitations. While it is expected that our participation in connection with any such investments and transactions would be negotiated by third parties on market prices, such investments and transactions will give rise to potential or actual conflicts of interest. We cannot make assurances that any such conflict will be resolved in our favor. To the extent we hold an interest in a loan or security that is different (including with respect to their relative seniority) than those held by such other Blackstone Vehicles (and vice versa), Link and its affiliates may be presented and/or may have limited or no rights with respect to decisions when the interests of the funds/vehicles are in conflict. Such sharing or assignment of rights could make it more difficult for us to protect our interests and could give rise to a conflict (which may be exacerbated in the case of financial distress) and could result in another Blackstone Vehicle exercising such rights in a way adverse to us.

•Entering into Financing Transactions with Other Blackstone Vehicles. In connection with the closing of the Merger, in lieu of distributing all of the proceeds from the Mortgage Loans to fund the consideration for the Merger, certain amounts were loaned to the Parent Partners (the “Parent Partners Loans”). The Parent Partners Loans are evidenced by promissory notes, bear interest at 4.16253% per annum and mature in July 2027. The aggregate principal amount of the Parent Partners Loans is $1,285,575.We may from time to time engage in further financing transactions with Blackstone Vehicles. We and/or Blackstone may face conflicts of interest in connection with any borrowings or disputes related to such financing agreement(s) which may adversely impact us.

•Pursuit of Differing Strategies. At times, the investment professionals employed by Link or its affiliates and other investment vehicles affiliated with Link and/or Blackstone may determine that an investment opportunity may be appropriate for only some of the accounts, clients, entities, funds and/or investment vehicles for which he or she exercises investment responsibility, or may decide that certain of the accounts, clients, entities, funds and/or investment vehicles should take differing positions with respect to a particular investment. In these cases, the investment professionals may place separate transactions for one or more accounts, clients, entities, funds and/or investment vehicles which may affect the market price of an investment or the execution of the transaction, or both, to the detriment or benefit of one or more other accounts, clients, entities, funds and/or investment vehicles.

17

•Underwriting, Advisory and Other Relationships. As part of its regular business, Blackstone provides a broad range of underwriting, investment banking, placement agent services and other services. In connection with selling investments by way of a public offering, a Blackstone broker-dealer may act as the managing underwriter or a member of the underwriting syndicate on a firm commitment basis and purchase securities on that basis. Blackstone may retain any commissions, remuneration, or other profits and receive compensation from such underwriting activities, which have the potential to create conflicts of interest. Blackstone may also participate in underwriting syndicates from time to time with respect to us or portfolio companies/entities of Blackstone Vehicles, or may otherwise be involved in the private placement of debt or equity securities issued by us or such portfolio companies/entities, or otherwise in arranging financings with respect thereto or advising on such transactions. Subject to applicable law, Blackstone may receive underwriting fees, placement commissions, or other compensation with respect to such activities, which will not be shared with us or our stockholders.

In the regular course of its investment banking business, Blackstone represents potential purchasers, sellers and other involved parties, including corporations, financial buyers, management, shareholders and institutions, with respect to assets that are suitable for investment by us. In such case, Blackstone’s client would typically require Blackstone to act exclusively on its behalf, thereby precluding us from acquiring such assets. Blackstone is under no obligation to decline any such engagement to make the investment opportunity available to us.

Blackstone has long-term relationships with a significant number of corporations and their senior management. In determining whether to invest in a particular transaction on our behalf, Link may consider those relationships, which may result in certain transactions that Link will not undertake on our behalf in view of such relationships.

•Service Providers. Certain of our service providers, or their affiliates (including accountants, administrators, lenders, brokers, attorneys, consultants, title agents, loan servicing and administration providers, property managers and investment banking or commercial banking firms) also provide goods or services to or have business, personal or other relationships with Blackstone. For example, Blackstone may hold equity or other investments in companies or businesses in the real estate related information technology and other industries that may provide products or services to or otherwise contract with us or other Blackstone Vehicles. In connection with any such investment, Blackstone or other Blackstone Vehicles (or their respective portfolio companies/entities) may make referrals or introductions to other portfolio companies/entities in an effort, in part, to increase the customer base of such companies or businesses, and therefore the value of the investment, or because such referrals or introductions may result in financial incentives (including additional equity ownership) and/or milestones benefiting the referring or introducing party that are tied or related to participation by portfolio companies/entities. We will not share in any fees, economics or equity accruing to Blackstone or such other Blackstone Vehicles as a result of these relationships. In addition, we may enter into agreements regarding group procurement (such as a group purchasing organization), benefits management, purchase of title and/or other insurance policies (which will from time to time be pooled and discounted due to scale) from a third party or a Blackstone affiliate, and other similar operational, administrative, or management related initiatives that result in commissions, discounts or similar payments to Blackstone or its affiliates (including personnel), including related to a portion of the savings achieved. Such service providers may be sources of investment opportunities or co-investors or commercial counterparties. Such relationships may influence Link in deciding whether to select such service provider. In certain circumstances, service providers, or their affiliates, may charge different rates (including below-market rates or at no cost) or have different arrangements for services provided to Blackstone or its affiliates as compared to services provided to us, which in certain circumstances may result in more favorable rates or arrangements than those payable by us.

In addition, certain advisors and service providers (including law firms) may temporarily provide their personnel to Blackstone, us or other Blackstone Vehicles or their portfolio companies pursuant to various arrangements including at cost or at no cost. While often we and such other Blackstone-advised funds and their portfolio companies are the beneficiaries of these types of arrangements, Blackstone is from time to time a beneficiary of these arrangements as well, including in circumstances where the advisor or service provider also provides services to us in the ordinary course. Such personnel may provide services in respect of multiple matters, including in respect of matters related to Blackstone, its affiliates and/or portfolio companies and any costs of such personnel may be allocated accordingly.

For example, Lexington National Land Services, or LNLS, is a Blackstone affiliate that (i) acts as a title agent in facilitating and issuing title insurance, (ii) provides title support services for title insurance underwriters and (iii) acts as escrow agent in connection with investments by us, other Blackstone Vehicles and their portfolio entities, affiliates and related parties, and third parties, including, from time to time, our borrowers. In exchange for such services LNLS earns fees which would have otherwise been paid to third parties. If LNLS is involved in a transaction in which we participate, Blackstone will benchmark the relevant

18

costs to the extent market data is available except when LNLS is providing such services in a state where the insurance premium or escrow fee, as applicable, is regulated by the state or when LNLS is part of a syndicate of title insurance companies where the insurance premium is negotiated by other title insurance underwriters or their agents.

Gryphon Mutual Captive Insurance, or Gryphon, is a captive insurance company owned by funds and accounts managed by Blackstone. A Blackstone affiliate provides oversight and management services to the captive and receives fees based on a percentage of premiums retained by it. The fees and expenses of the captive, including fees paid to its manager, are borne by its participants (including Blackstone-managed funds and accounts) pro rata based on estimates of insurance premiums that would have been payable for each party’s respective properties, as benchmarked by third parties, and will be paid by each participant annually. Participants pool their risk through Gryphon, with a $50 million shared deductible, resulting in lower expenses than insurance procured through brokers and other traditional means. We reimburse the pro rata amount of costs and expenses incurred by Blackstone-advised funds arising out of the indirect participation (through such funds) by the Company of risk pooling through Gryphon.

•Material, Non-Public Information. We, directly or through Blackstone, Link or certain of their respective affiliates may come into possession of material non-public information. Disclosure of such information to the personnel responsible for management of our business may be on a need-to-know basis only, and we may not be free to act upon any such information. Therefore, we and/or Link may not have access to material non-public information in the possession of Blackstone which might be relevant to an investment decision to be made by Link on our behalf, and Link may initiate a transaction or purchase or sell an investment which, if such information had been known to it, may not have been undertaken. Due to these restrictions, Link may not be able to initiate a transaction on our behalf that it otherwise might have initiated and may not be able to purchase or sell an investment that it otherwise might have purchased or sold, which could negatively affect our operations.

•Possible Future Activities. Link and its affiliates may expand the range of services that they provide over time. Link and its affiliates will generally not be restricted in the scope of its business or in the performance of any such services (whether now offered or undertaken in the future) even if such activities could give rise to conflicts of interest, and whether or not such conflicts are described herein. Link, Blackstone and their affiliates continue to develop relationships with a significant number of companies, financial sponsors and their senior managers, including relationships with clients who may hold or may have held investments similar to those intended to be made by us. These clients may themselves represent appropriate investment opportunities for us or may compete with us for investment opportunities.In addition, Blackstone may enter into one or more strategic relationships in certain regions or with respect to certain types of investments that, although intended to provide greater opportunities for us, may require us to share such opportunities or otherwise limit the amount of an opportunity we can otherwise take.

•Transactions with Blackstone Vehicles. From time to time, we may enter into purchase and sale transactions with Blackstone Vehicles. Such transactions will be conducted in accordance with, our internal corporate policies and applicable laws and regulations.

•Family Relationships. Certain personnel and other professionals of Blackstone have family members or relatives that are actively involved in the industries and sectors in which we invest and/or have business, personal, financial or other relationships with companies in the real estate industry, which gives rise to potential or actual conflicts of interest. For example, such family members or relatives might be officers, directors, personnel or owners of companies or assets which are actual or potential investments of us or our other counterparties. Moreover, in certain instances, we may transact with companies that are owned by such family members or relatives or in respect of which such family members or relatives have other involvement. In most such circumstances, we will not be precluded from undertaking any of these investment activities or transactions. To the extent Blackstone determines appropriate, it may put in place conflict mitigation strategies with respect to a particular circumstance, such as internal information barriers or recusal, disclosure or other steps determined appropriate by Blackstone or Link.

19

Link’s liability is limited under our Services Agreement and we have agreed to indemnify Link against certain liabilities.

Under the terms of the Services Agreement, Link and its affiliates are not liable to us for any acts or omissions performed in accordance with and pursuant to the Services Agreement, except by reason of (i) any acts of Link or of any its direct and indirect partners, stockholders, members, employees, agents, officers, directors, successors and assigns (collectively, the “Link Related Parties”) beyond the scope of its authority under the Services Agreement, (ii) any material breach by Link under the Services Agreement, and (iii) any fraudulent or grossly negligent act or omission or any act or omission that constitutes willful misconduct of Link or the Link Related Parties. We have agreed to indemnify Link and its affiliates with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts or omissions of Link within the scope of the Services Agreement other than for (i) any acts of Link or the Link Related Parties beyond the scope of its authority under the Services Agreement, (ii) any material breach by Link under the Services Agreement, and (iii) any fraudulent or grossly negligent act or omission or any act or omission that constitutes willful misconduct of Link or the Link Related Parties. As a result, we could experience poor performance or losses for which Link would not be liable.

Item 1B. Unresolved Staff Comments

None.

20

~~UNRESOLVED STAFF COMMENTS~~

~~None.~~

~~ITEM~~

Item 2. ~~PROPERTIES~~

Properties

As of December 31, ~~2019,~~2022, we owned ~~97 business parks comprising of~~471 buildings and one land parcel in a geographically diverse portfolio of ~~27.6 million rentable~~20,656,858 gross leasable square feet of commercial real estate which consists of ~~18.1 million~~6,900,881 square feet of ~~industrial~~business park space, ~~6.2 million~~12,351,476 square feet of ~~flex~~industrial-flex space, ~~and 3.2 million~~1,061,870 square feet of low-rise suburban office ~~space. The weighted average occupancy rate for these assets throughout 2019 was 94.2%~~space, and ~~the realized rent per~~342,631 square ~~foot was $15.71.~~

feet of specialty space.

The following table reflects the geographical diversification of the ~~97 business parks~~471 buildings and one land parcel owned by the Company as of December 31, ~~2019,~~2022, the type of ~~the rentable~~gross leasable square footage ~~and the weighted average occupancy rates~~ throughout ~~2019~~2022 (except as set forth below, all of the properties are held fee simple):


		Leasable Square Footage
Region	Number of Buildings	Business Park	Industrial	Office	Specialty1	Total
California	216	2,910,577	5,810,658	340,214	—	9,061,449
Texas2	137	2,923,457	2,077,578	—	—	5,001,035
Florida	74	455,383	3,411,046	—	—	3,866,429
Washington	28	270,165	1,052,194	—	—	1,322,359
Maryland	15	341,299	—	721,656	—	1,062,955
Virginia	1	—	—	—	342,631	342,631


Total	471	6,900,881	12,351,476	1,061,870	342,631	20,656,858

____________________________

1 The Company has a 95.0% interest in ~~fee simple interest)~~ (a joint venture that owns Highgate at The Mile, a 395-unit multifamily apartment complex located in ~~thousands, except number of business parks)~~Tysons, Virginia (“The Mile”).

:

Weighted
Number of
Average
Business
Rentable Square Footage
Occupancy
Region
Parks
Industrial
Flex
Office
Total
Rate
Northern California
30
6,391
593
340
7,324
96.1%
Southern California
16
2,916
953
31
3,900
95.3%
Dallas ⁽¹⁾
12
1,300
1,587
—
2,887
92.4%
Austin
9
755
1,208
—
1,963
91.8%
Northern Virginia
19
1,564
1,440
1,970
4,974
92.1%
South Florida
3
3,728
126
12
3,866
95.4%
Suburban Maryland
4
394
—
751
1,145
89.3%
Seattle
3
1,092
270
28
1,390
96.2%
Total
96
18,140
6,177
3,132
27,449
94.2%
Asset held for sale
1
—
—
113
113
100.0%
Total
97
18,140
6,177
3,245
27,562
94.2%

~~____________________________~~

⁽¹⁾2 The Company owns two properties ~~comprised of~~comprising 231,000 square feet that are subject to ground leases in Irving, Texas. These leases expire in 2029 and 2030.

~~Along with the 27.6 million rentable square feet of commercial space, we also have a 95.0% interest in a 395-unit apartment complex.~~

We currently anticipate that each of our properties will continue to be used for its current ~~purpose, other than the one property held for development.~~purpose. However, we will from time to time evaluate our properties from a highest and best use perspective, and may identify higher and better uses for our real estate. We renovate our properties in connection with the re-leasing of space to customers and expect to fund the costs of such renovations generally from rental income.

‎

16

~~Table of Contents~~

Competition exists in each of the market areas in which ~~these~~our properties are located, and we have risks that customers could default on leases and declare bankruptcy. We believe these risks are mitigated in part through the Company’s geographic diversity and our diverse customer base.

Please refer to Item 7 ~~“Management’s~~— Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations for portfolio information with respect to lease expirations and operating ~~results in 2019, 2018 and 2017 by region and by type of rentable space.~~

~~ITEM~~result.

Item 3. ~~LEGAL PROCEEDINGS~~

Legal Proceedings

We are not ~~presently subject to~~involved in any material litigation nor, to our knowledge, is any material litigation threatened against ~~us, other than routine actions, claims and administrative~~us. We are party to a variety of legal proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance or third party indemnifications and all of which collectively are not expected to have a materially adverse effect on our financial condition, results of operations, or liquidity.

~~ITEM~~business.

Item 4. ~~MINE SAFETY DISCLOSURES~~

Mine Safety Disclosures

Not ~~applicable.~~Applicable.

21

PART II

~~ITEM~~

(dollars in thousands, except share data)

Item 5. ~~MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIES~~

Market for ~~the~~ Registrant’s Common ~~Equity:~~

~~The~~Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information and Holders

Our common stock ~~of the Company trades~~is not listed on ~~the NYSE under the symbol PSB.~~

~~Holders:~~

Asa securities exchange. The number of ~~February 14, 2020, there were 277~~ holders of record of ~~the common stock.~~

~~Dividends:~~

~~Holders of~~our common stock ~~are entitled to receive distributions when~~as of February 23, 2023 was three.

Unregistered Sale of Equity Securities and ~~if declared by our Board out~~Use of ~~any funds legally available for that purpose. As a REIT, we do not incur federal income tax if we distribute substantially all~~Proceeds

None.

Issuer Purchases of our “REIT taxable income” each year, and if we meet certain organizational and operational requirements. We believe we have met these REIT requirements in all periods presented herein, and we expect to continue to elect and qualify as a REIT.Equity Securities


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (Dollars in Thousands)1
Oct. 1 – Oct. 31, 2022	—	$	—	—	$	—
Nov. 1 – Nov. 30, 2022	—	$	—	—	$	—
Dec. 1 – Dec. 31, 2022	21,439,277	$	14.87	21,439,277	$	—

____________________________

1

~~The Board has established a distribution policy intended to maximize the retention of operating cash flow and distribute the amount required for~~ On November 22, 2022, the Company commenced offers to ~~maintain its tax status as a REIT.~~

~~Issuer Repurchases of Equity Securities:~~

purchase for cash any and all outstanding Series X Preferred Shares, at $15.29 per share, Series Y Preferred Shares, at $15.33 per share, and Series Z Preferred Shares, at $14.34 per share. The ~~Board has authorized~~Company accepted for purchase 5,953,898 Series X Preferred Shares, 5,756,691 Series Y Preferred Shares and 9,728,688 Series Z Preferred Shares. The offers were completed on December 23, 2022 and the repurchase, from time to time, of up to 6.5 million shares of the Company’s common stock on the open market or in privately negotiated transactions. During the three months ended December 31, 2019, therePreferred Shares purchased were no shares of the Company’s common stock repurchased. As of December 31, 2019, the Company has 1,614,721 shares available for repurchase under the program. The program does not expire. Purchases will be made subject to market conditions and other investment opportunities available tocancelled by the Company.

~~Securities Authorized for Issuance Under Equity Compensation Plans:~~

~~Information related to the Company’s equity compensation plan is provided in~~

Item ~~12, “Security Ownership~~6. Reserved

Item 7. Management’s Discussion and Analysis of ~~Certain Beneficial Owners~~Financial Condition and ~~Management and Related Stockholder Matters.”~~

‎

Results of Operations

17

~~Table of Contents~~

ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth selected consolidated financial and operating information of the Company. The following information should be read in conjunction with the consolidated financial statements and notes thereto of the Company included in this Form 10-K.

For The Years Ended December 31,
2019
2018
2017
2016
2015
(In thousands, except per share data)
Rental income
$
429,846
$
413,516
$
402,179
$
386,871
$
373,135
Expenses
Cost of operations
128,343
124,630
122,348
120,518
118,469
Depreciation and amortization
104,249
99,242
94,270
99,486
105,394
General and administrative
13,761
12,072
12,671
17,452
16,337
Total operating expenses
246,353
235,944
229,289
237,456
240,200
Interest and other income
4,492
1,510
942
1,233
1,130
Interest and other expense
(657)
(665)
(1,285)
(5,664)
(13,330)
Equity in loss of unconsolidated joint venture
—
—
(805)
—
—
Gain on sale of real estate facilities
16,644
93,484
1,209
—
28,235
Gain on sale of development rights
—
—
6,365
—
—
Net income
203,972
271,901
179,316
144,984
148,970
Allocation to noncontrolling interests
(29,006)
(45,199)
(24,279)
(16,955)
(18,495)
Net income allocable to PS Business Parks, Inc.
174,966
226,702
155,037
128,029
130,475
Allocation to preferred shareholders based upon
Distributions
(54,346)
(51,880)
(52,873)
(57,276)
(59,398)
Redemptions
(11,007)
—
(10,978)
(7,312)
(2,487)
Allocation to restricted stock unit holders
(910)
(1,923)
(761)
(569)
(299)
Net income allocable to common shareholders
$
108,703
$
172,899
$
90,425
$
62,872
$
68,291
Per Common Share:
Cash Distributions
$
4.20
$
3.80
$
3.40
$
3.00
$
2.20
Net income — basic
$
3.96
$
6.33
$
3.32
$
2.32
$
2.53
Net income — diluted
$
3.95
$
6.31
$
3.30
$
2.31
$
2.52
Weighted average common shares — basic
27,418
27,321
27,207
27,089
26,973
Weighted average common shares — diluted
27,526
27,422
27,412
27,179
27,051

‎

18

~~Table of Contents~~

As Of And For The Years Ended December 31,
2019
2018
2017
2016
2015
(In thousands, except per square foot data)
Balance Sheet Data
Total assets
$
2,046,443
$
2,068,594
$
2,100,159
$
2,119,371
$
2,186,658
Total debt
$
—
$
—
$
—
$
—
$
250,000
Preferred stock called for redemption
$
—
$
—
$
130,000
$
230,000
$
—
Equity
PS Business Parks, Inc.'s shareholders' equity
Preferred stock
$
944,750
$
959,750
$
959,750
$
879,750
$
920,000
Common stock
$
800,926
$
805,612
$
733,561
$
733,509
$
740,496
Noncontrolling interests
$
216,135
$
218,091
$
196,625
$
197,455
$
200,103
Other Data
Net cash provided by operating activities
$
290,595
$
276,153
$
271,614
$
250,507
$
238,839
Net cash (used in) provided by
investing activities
$
(34,322)
$
(36,066)
$
(79,237)
$
(85,008)
$
3,131
Net cash used in financing activities
$
(230,866)
$
(317,590)
$
(205,036)
$
(225,782)
$
(205,525)
Square footage owned at the end of period
27,562
28,186
28,028
28,072
27,969
Weighted average occupancy rate
94.2%
94.2%
93.8%
94.0%
92.8%
Revenue per occupied square foot
$
15.71
$
15.34
$
15.30
$
14.61
$
14.27

‎

19

~~Table of Contents~~

~~ITEM 7.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS~~

The following discussion and analysis of the results of operations and financial condition should be read in conjunction with the selected financial data and the Company’s consolidated financial statements and notes thereto included in this Form 10-K.

Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP.”) The preparation of these financial statements in conformity with GAAP requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. We base these estimates, judgments, and assumptions on historical experience, current trends, and various other factors that we believe to be reasonable under the circumstances.

We continually evaluate the estimates, judgments, and assumptions we use to prepare our consolidated financial statements. Changes in estimates, judgments, or assumptions could affect our financial position and our results of operations, which are used by our stockholders, potential investors, industry analysts, and lenders in their evaluation of our performance.

Critical Accounting ~~Policies~~Estimates

Our critical accounting estimates are defined as accounting estimates or assumptions made in accordance with GAAP, which involve a significant level of estimation uncertainty or subjectivity and ~~Estimates:~~

have had or are reasonably likely to have a material impact on our financial condition or results of operations. Our significant accounting policies, which utilize these critical accounting estimates, are described in Note 2 — Summary of Significant Accounting Policies to ~~the~~our consolidated financial statements ~~included~~under Item 15 in this annual report on Form 10-K. ~~We believe our~~Our critical accounting policies relate to income tax expense, accounting for acquired real estate facilities, accounting for customer receivable balances, including deferred rent receivable balances, impairment of long-lived assets, and accrual for uncertain and contingent liabilities, each of whichestimates are ~~more fully discussed~~described below.

~~Income Tax Expense:~~ We have elected to be treated as a REIT, as defined in the Code. As a REIT, we do not incur federal income tax on our “REIT taxable income” that is fully distributed each year (for this purpose, certain distributions paid in a subsequent year may be considered), and if we meet certain organizational and operational requirements. We believe we have met these REIT requirements for all periods presented herein. Accordingly, we have recorded no federal income tax expense related to our “REIT taxable income.”

Our evaluation that we have met the REIT requirements could be incorrect, because compliance with the tax rules requires factual determinations, and circumstances we have not identified could result in noncompliance with the tax requirements in current or prior years. For any taxable year that we fail to qualify as a REIT and for which applicable statutory relief provisions did not apply, we would be taxed at the regular corporate rates on all of our taxable income for at least that year and the ensuing four years, we could be subject to penalties and interest, and our net income would be materially different from the amounts shown in our consolidated financial statements.

Accounting for ~~Acquired Real Estate Facilities:~~Business Combinations: ~~We estimate~~The Merger was accounted for as a business combination because substantially all of the fair value of ~~land, buildings, intangible~~the gross assets acquired was not concentrated in a single identifiable asset or group of similar identifiable assets. The Parent elected to apply pushdown accounting. Accordingly, the purchase price of the Merger has been allocated to the Company’s assets and ~~intangible~~ liabilities ~~for purposes of allocating purchase price.~~ based upon their estimated fair values at the Acquisition Date in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations.

22

Such estimates, which are determined with the assistance of third-party valuation specialists where appropriate, are based upon many assumptions and judgments, including, but not limited ~~to, (i)~~ to:

•market rates of return and capitalization rates on real estate and intangible ~~assets, (ii)~~ assets;

•building and material cost ~~levels, (iii)~~ levels;

•estimated market rent ~~levels, (iv)~~ levels;

•future revenue growth ~~rates, (v)~~ rates;

•future cash flows from the real estate and the existing customer ~~base~~base; and ~~(vi)~~

•comparisons of the acquired underlying land parcels to recent land transactions. ~~Others could come~~

There was one business combination that occurred during the periods presented which was the Merger. For additional information on this transaction refer to ~~materially different conclusions as to the estimated fair values, which could result in different depreciation~~Note 1 — Description of Business and ~~amortization expense, rental income, gains and losses on sale~~Note 2 — Summary of ~~real estate assets, and real estate and intangible assets.~~

Significant Accounting ~~for Customer Receivable Balances, including Deferred Rent Receivable Balances:~~ Customer receivables consist primarily of amounts due for contractual lease payments, reimbursements of common area maintenance expenses, property taxes and other expenses recoverable from customers. Deferred rent receivables represent the amount that the cumulative straight-line rental income recorded to date exceeds cash rents billed to date under the lease agreement. Policies.

Executive Summary

Business Overview

The Company writes off uncollectible customer receivable balances, including deferred rent receivable balances, in the period such receivable balances are deemed uncollectible. Significant bad debt losses could materially impact our net income.

~~Impairment of Long-Lived Assets:~~ ~~The analysis of impairment of our long-lived assets involves identification of indicators of impairment, projections of future operating cash flows~~is a REIT that owns, operates, acquires and estimates of fair values or selling prices, all of which require significant judgment and subjectivity. Others could come to materially different conclusions. In addition, we may not have identified all current facts and circumstances that may affect impairment. Any unidentified impairment loss, or change in conclusions, could have a material adverse impact on our net income.

~~Accrual for Uncertain and Contingent Liabilities:~~ We accrue for certain contingent and other liabilities that have significant uncertain elements, such as property taxes, performance bonuses and other operating expenses, as well as other legal claims and disputes involving customers, employees, governmental agencies and other third parties. We estimate such liabilities based upon many factors such as past trends and our evaluation of likely outcomes. However, the estimates of known liabilities could be incorrect or we may not be aware of all such liabilities, in which case our accrued liabilities and net income could be materially different.

20

~~Table of Contents~~

~~Business Overview~~

~~Our overall operating results are impacted primarily by the performance of our existing real estate facilities, which at December 31, 2019 were comprised of 27.6 million rentable square feet of~~develops commercial properties, primarily multi-tenant industrial, ~~flex~~industrial-flex, and low rise-suburban office ~~properties concentrated~~space. As of December 31, 2022, the Company owned 471 buildings and one land parcel in six states representing 20,656,858 gross leasable square feet. As of December 31, 2022, our largest markets included California, Texas, Florida, Washington, Maryland, and ~~a 95.0% interest~~Virginia. We have and intend to continue to allocate capital to these and other key population and distribution markets in a 395-unit multifamily apartment complex. Our portfolio of multi-tenant commercial properties are located in markets that have experienced long-term economic growth with a particular concentration on small- and medium-size customers. Accordingly, a significant degree of management attention is paid to maximizing the ~~cash flow from our existing real estate portfolio. Also, our strong and conservative capital structure allows us the flexibility to use debt and equity capital prudently to fund our growth,~~U.S. which ~~allows us to acquire properties~~ we believe will ~~create long-term value. From time to time we sell properties which no longer fit the Company’s strategic objectives.~~

~~Existing Real Estate Facilities:~~maximize risk-adjusted growth for our portfolio cash flows.

The operating results of our ~~existing~~ real estate facilities are substantially influenced by demand for rental space within our properties and our markets, which impacts occupancy, rental rates, and capital expenditure requirements. We strive to maintain high occupancy levels while increasing rental rates and ~~minimizing~~investing in capital expenditures when market conditions ~~allow,~~indicate favorable return on investment, although the Company may decrease rental rates in markets where conditions require. Management’s initiatives and strategies with respect to our existing real estate facilities, which include incentivizing ~~our~~Link personnel to maximize the return on investment for each lease transaction and ~~providing~~provide a superior level of service to our customers.

~~Acquisitions~~

As a result of ~~Real Estate Facilities:~~ ~~We seek to grow our portfolio through acquisitions of facilities generally consistent with~~ the ~~Company’s focus on owning concentrated business parks with easily configurable space and in markets and product types with favorable long-term return potential.~~

Subsequent to December 31, 2019, we acquired a multi-tenant industrial park comprised of approximately 73,000 rentable square feet in La Mirada, California, for a total purchase price of $13.5 million, inclusive of capitalized transaction costs. ~~The park consists of five buildings and was 100.0% occupied at acquisition with suites ranging from 1,200 to 3,000 square feet.~~

On December 20, 2019, we acquired a multi-tenant flex park comprised of approximately 79,000 rentable square feet in Santa Clara, California, for a total purchase price of $16.8 million, inclusive of capitalized transaction costs. ~~The park consists of nine buildings and was 95.6% occupied at acquisition with suites ranging from 200 to 3,500 square feet.~~

On September 5, 2019, we acquired a multi-tenant industrial park comprised of approximately 543,000 rentable square feet in Santa Fe Springs, California, for a total purchase price of $104.3 million, inclusive of capitalized transaction costs. The park consists of ten buildings and was 100.0% occupied at acquisition ~~with suites ranging from 5,000 to 288,000 square feet~~.

On April 18, 2019, we acquired a multi-tenant industrial park comprised of approximately 74,000 rentable square feet in Signal Hill, California, for a total purchase price of $13.8 million, inclusive of capitalized transaction costs. The park consists of eight buildings and was 98.4% occupied at acquisition ~~with suites ranging from 1,200 to 8,000 square feet~~. ~~The~~ ~~eight buildings~~ ~~are located in the~~ ~~Signal Hill industrial submarket where~~ ~~we already own~~ ~~five industrial parks totaling 268,000 square feet.~~

~~On June 8, 2018, we acquired two multi-tenant industrial parks aggregating 1.1 million rentable square feet in Springfield, Virginia, for a total purchase price of $143.8 million, inclusive of capitalized transaction costs~~. The portfolio consists of 19 buildings and was 76.1% occupied at acquisition with suites ranging from 100 to 32,000 square feet. The 19 buildings are located in the Springfield/Newington industrial submarket where we already own three industrial parks totaling 606,000 square feet.

We continue to seek to acquire additional facilities in our existing markets and generally in close proximity to our existing facilities; however, there can be no assurance that we will acquire additional facilities that meet our risk-adjusted return and underwriting requirements.

~~Development or Redevelopment of Real Estate Facilities:~~ We may seek to redevelop our existing real estate. We own a large contiguous block of real estate (628,000 rentable square feet on 44.5 acres of land) located within an area known as The Mile in Tysons, Virginia. In 2015, we demolished one of our existing office buildings at The Mile and built Highgate, a 395-unit apartment complex, at a cost, including the estimated fair value of existing land, of $115.4 million.

21

~~Table of Contents~~

~~While multifamily real estate was not a core asset class for us, we determined that multifamily real estate represented a unique opportunity~~Merger and the ~~highest and best use~~application of ~~that parcel. We have partnered through a joint venture with a local developer and operator~~pushdown accounting, the periods presented are not necessarily comparable.

Completed Merger Transaction: Refer to Note 1 — Description of multifamily properties in order to leverage their development and operational experience. See “Analysis of Net Income – Multifamily”, “Analysis of Net Income – Equity in loss of unconsolidated joint venture” below and Notes 3 and 4Business to our consolidated financial statements under Item 15 in this annual report on Form 10-K, for ~~more~~ information regarding the merger agreement the Company entered into on ~~Highgate.~~April 24, 2022 (the merger described therein, the “Merger”).

Dispositions:

~~On January 1, 2018, we began~~We continually evaluate opportunities with respect to ~~consolidate the joint venture due to changes to the joint venture agreement that gave us control of the joint venture. Prior to January 1, 2018, we accounted for~~ our ~~investment in the joint venture using the equity method~~portfolio and ~~accordingly, reflected our share of net loss under “equity in loss of unconsolidated joint venture.”~~

In 2019, we successfully rezoned our 628,000 square foot office park located at The Mile in Tysons, Virginia. The rezoning will allow us to develop, at our election, up to 3,000 additional multifamily units and approximately 500,000 square feet of other commercial uses. In 2017, we completed Highgate at The Mile, a 395-unit multifamily property which is owned by a joint venture that we consolidate. We are currently seeking to demolish a 123,000 square foot vacant office building in order to construct another multifamily property on the parcel. This parcel is reflected on our consolidated balance sheets as land and building held for development. The scope and timing of the future phases of development of The Mile are subject to a variety of contingencies, including site plan approvals and building permits. We expect that commencement of the next phase of redevelopment will commence in mid-2020.

~~Sales of Real Estate Facilities: We~~ may from time to time sell individual real estate facilities and land parcels or groups of facilities and land parcels based on market conditions, fit with our existing portfolio, evaluation of long-term potential returns of markets or product types, or other reasons. The size of such sales may be significant to us. Refer to Note 3 — Investments in Real Estate to our consolidated financial statements under Item 15 in this annual report on Form 10-K for a discussion of our recently completed dispositions.

23

~~Subsequent to~~

Developments:

The following table presents the Company’s development pipeline at December 31, ~~2019,~~2022:


	Number of Projects	Estimated Square Feet	Estimated Project Cost1		Estimated Stabilization/In Service Date2




Development/redevelopment under construction	3	472,825	$	199,147	1Q23 - 4Q23

____________________________

1 Estimated project cost includes the ~~Company completed~~initial purchase price allocation. See Note 3 — Investments in Real Estate to our Consolidated Financial Statements under Item 15 in this annual report on Form 10-K.

2 Estimated stabilization/in service date is typically defined as the ~~sale~~earlier of ~~a single-tenant building totaling 113,000 square feet~~12 months post completion or 90% occupancy.

Refer to Note 3 — Investments in ~~Montgomery County, Maryland,~~Real Estate to our consolidated financial statements under Item 15 in this annual report on Form 10-K for a ~~gross sales price~~discussion of ~~$30.0 million. The building had been marketed previously as part~~our recently completed developments.

Factors that Affect Our Results of ~~a broader portfolio~~Operations and Financial Condition

Our results of ~~suburban Maryland office properties~~operations and financial condition are affected by numerous factors, many of which are beyond our control. See Part I. Item 1A. “Risk Factors” in ~~2019, but was excluded from the 1.3 million square feet~~this Annual Report on Form 10-K, for more information regarding factors that could materially adversely affect our results of ~~flex~~operations and ~~office business parks sale which closed October 8, 2019~~financial condition. Key factors that impact our results of operations and ~~as such was the Company’s only remaining office asset at Metro Park North. The asset sold~~financial condition include rental rates and occupancy levels, rollover, acquisitions, dispositions, and development. Sensitivity to many of these factors has been ~~classified~~heightened as ~~held for sale for~~a result of the ~~year ended December 31, 2019~~ongoing and ~~all comparable periods.~~

~~On October 8, 2019, we sold~~ ~~three business parks located in Montgomery County, Maryland: Metro Park North, Meadow Business Park and WesTech Business Park. The parks, consisting~~numerous adverse impacts of ~~28 buildings totaling approximately~~ ~~1.3 million rentable square feet sold for net sale proceeds of $144.6 million, which resulted in a gain of $16.6 million.~~

On March 5, 2018, we sold Corporate Pointe Business Park, a park consisting of five multi-tenant office buildings totaling 161,000 square feet located in Orange County, California, for net sale proceeds of $41.7 million, which resulted in a gain of $26.8 million. On April 18, 2018, we sold Orange County Business Center, a park consisting of five multi-tenant office buildings totaling 437,000 square feet located in Orange County, California, for net sale proceeds of $73.3 million, which resulted in a gain of $50.6 million. On April 30, 2018, we sold Northgate Business Park, a park consisting of seven multi-tenant flex buildings totaling 194,000 square feet located in Dallas, Texas, for net sale proceeds of $11.8 million, which resulted in a gain of $7.9 million. On October 31, 2018, we sold Orangewood Office Park, a park consisting of two multi-tenant office buildings totaling 107,000 square feet located in Orange County, California, for net sale proceeds of $18.3 million, which resulted in a gain of $8.2 million.

On May 1, 2017, we sold Empire Commerce, a two-building single-story office park comprising 44,000 square feet, located in Dallas, Texas, for net sale proceeds of $2.1 million, which resulted in a net gain of $1.2 million.

~~The operations of these facilities are presented below under “assets sold or held for sale.”~~

~~Certain Factors that May Impact Future Results~~

COVID-19.

Impact of Inflation:~~Although inflation~~ Inflation has ~~not been significant in recent years, an~~significantly increased recently and a continued increase in inflation could adversely impact our future results, including as a result of adverse impacts to our tenants and to the economy generally. The Company continues to seek ways to mitigate its potential impact. A substantial portion of the Company’s leases require customers to pay operating expenses, including real estate taxes, utilities, and insurance, as well as increases in common area expenses, which should partially ~~reducing~~reduce the Company’s exposure to ~~inflation during each lease’s respective lease period.~~inflation.

~~Regional Concentration:~~ ~~Our portfolio is concentrated in eight regions, in six states. We have chosen to concentrate in these regions because we believe they have characteristics which enable them to be competitive~~

22

~~Table of Contents~~

economically, such as above average population growth, job growth, higher education levels and personal income. Changes in economic conditions in these regions in the future could impact our future results.

~~Industry and Customer~~Customer Concentrations: We seek to minimize the risk of industry or customer concentrations. AsNo significant tenant concentrations existed as of December 31, ~~2019, excluding~~2022.

24

Results of Operations

Comparison of the ~~asset held for sale, industry concentration that represented more than 10% of our annualized rental income comes~~period from business services, warehouse, distribution, transportation and logistics and computer hardware software and related services. No other industry group represents more than 10% of our annualized rental income as depicted in the following table.



		~~Percent of~~
		~~Annualized~~
~~Industry~~		~~Rental Income~~
~~Business services~~		~~19.0%~~
~~Warehouse, distribution, transportation and logistics~~		~~12.5%~~
~~Computer hardware, software and related services~~		~~10.8%~~
~~Retail, food, and automotive~~		~~7.9%~~
~~Health services~~		~~7.8%~~
~~Engineering and construction~~		~~7.7%~~
~~Government~~		~~6.1%~~
~~Insurance and financial services~~		~~3.2%~~
~~Electronics~~		~~2.9%~~
~~Home furnishings~~		~~2.6%~~
~~Communications~~		~~1.9%~~
~~Aerospace/defense products and services~~		~~1.8%~~
~~Educational services~~		~~1.0%~~
~~Other~~		~~14.8%~~
~~Total~~		~~100.0%~~

~~As of~~July 20, 2022 through December 31, ~~2019, excluding~~2022 (Successor) and the asset held for sale, leases from our top 10 customers comprised 8.6% of our annualized rental income, with only one customer, the U.S. Government (3.1%), representing more than 1% as depicted in the following table ~~(in thousands)~~.

Percent of
Annualized
Annualized
Customers
Square Footage
Rental Income ⁽¹⁾
Rental Income
U.S. Government
521,000
$
12,806
3.1%
Luminex Corporation
199,000
4,348
1.0%
Amazon Inc.
213,000
2,718
0.7%
KZ Kitchen Cabinet & Stone
191,000
2,599
0.6%
Lockheed Martin Corporation
124,000
2,554
0.6%
CentralColo, LLC
96,000
2,313
0.6%
Applied Materials, Inc.
162,000
2,313
0.6%
Carbel, LLC
207,000
2,143
0.5%
Quanta Computer Inc.
179,000
1,874
0.5%
ECS Federal, LLC
81,000
1,840
0.4%
Total
1,973,000
$
35,508
8.6%

~~____________________________~~

⁽¹⁾~~For leases expiring prior to December 31, 2020, annualized rental income represents income to be received under existing leases~~period from January 1, ~~2020~~2022 through ~~the date of expiration.~~

~~Customer credit risk:~~ We have historically experienced a low level of write-offs of uncollectible rents, with less than 0.5% of rental income written off in any year over the last eight years. However, there can be no assurance that write-offs may not increase because there is inherent uncertainty in a customer’s ability to continue paying rent and meet its full lease obligation. As of February 17, 2020, we did not have any customers that are protected by Chapter 11 of the U.S. Bankruptcy Code. From time to time, customers contact us, requesting early termination of their lease, reductions in space leased, or rent deferment or abatement, which we are not obligated to grant but will consider under certain circumstances.

‎

23

~~Table of Contents~~

~~Net Operating Income~~

We utilize net operating income (“NOI”), a measure that is not defined in accordance with U.S. generally accepted accounting principles (“GAAP”), to evaluate the operating performance of our real estate. We define NOI as rental income less adjusted cost of operations. Adjusted cost of operations represents cost of operations, excluding stock compensation, which can vary significantly period to period based upon the performance of the company.

~~We believe NOI assists investors in analyzing the performance of our real estate by excluding (i) corporate overhead (i.e., general and administrative expense) because it does not relate~~July 19, 2022 (Predecessor) compared to the direct operating performance of our real estate, (ii) depreciation and amortization expense because it does not accurately reflect changes in the fair value of our real estate and (iii) stock compensation expense because this expense item can vary significantly from period to period and thus impact comparability across periods. The Company’s calculation of NOI may not be comparable to those of other companies and should not be used as an alternative to performance measures calculated in accordance with GAAP.

Beginning January 1, 2019, the Company has recorded our divisional vice presidents’ compensation costs within general and administrative expense, as we determined that the nature of these individuals’ responsibilities is more consistent with corporate oversight as opposed to direct property operations. As a result of this change, we have reclassified our divisional vice presidents’ compensation costs totaling $1.9 millionyear ended December 31, 2021


	Successor		Predecessor
	Period from July 20, 2022 through December 31, 2022		Period from January 1, 2022 through July 19, 2022		Year Ended December 31, 2021
Revenue:
Rental revenue	$	174,225	$	246,175	$	439,154

Total revenue	$	174,225	$	246,175	$	439,154

Revenue: Rental revenue decreased by $18,754 or 4.3%, for the year ended December 31, ~~2018,~~ ~~consisting of $1.3 million of compensation costs~~2022, including the successor and ~~$617,000 of stock compensation expense,~~predecessor periods, as compared to the year ended ~~and compensation costs totaling $3.0 million~~December 31, 2021 primarily due to the distribution of the Company’s interest in 58 properties included in the Non-Core Portfolio (refer to Note 1 — Description of Business to our Consolidated Financial Statements under Item 15 in this Annual Report on Form 10-K).


	Successor		Predecessor
	Period from July 20, 2022 through December 31, 2022		Period from January 1, 2022 through July 19, 2022		Year Ended December 31, 2021
Expenses:
Property expenses	$	39,956	$	74,848	$	130,941
Depreciation and amortization	225,472		50,557		93,486
General and administrative	7,578		19,079		19,327
Merger costs	33,255		100,952		—

Total expenses	$	306,261	$	245,436	$	243,754


Other income (expense):
Gain on sale of real estate, net	$	—	$	157,022	$	359,875
Interest expense	(43,189)		(615)		(728)


Other income	235		2,044		2,085
Total other income (expense)	$	(42,954)	$	158,451	$	361,232

Expenses: Total expenses increased by $307,943, or 126.3%, for the year ended December 31, ~~2017, consisting of $1.6 million of compensation costs~~2022, including the successor and $1.4 million of stock compensation expense, from cost of operations into general and administrative expense on our consolidated statements of income in the years ended December 31, 2018 and 2017 in orderpredecessor periods, as compared to ~~conform to the current periods’ presentation.~~

~~See “Analysis of net income” below for reconciliations of each of these measures to their closest analogous GAAP measure from our consolidated statements of income.~~

~~Results of Operations~~

~~Operating Results for 2019 and 2018~~

~~For~~ the year endedDecember 31, ~~2019, net income allocable~~2021, primarily due to ~~common shareholders was $108.7 million or $3.95 per diluted share, compared to $172.9 million or $6.31 per diluted share~~the following:

Depreciation and amortization increased by $182,543 for the year ended December 31, ~~2018.~~ ~~The decrease was mainly due~~2022, including the successor and predecessor periods, as compared to higher gain on sale of real estate facilities sold in 2018 than 2019, and the charge related to the redemption of preferred stock incurred during 2019 that did not occur in 2018, partially offset by an increase in NOI with respect to the Company’s real estate facilities. The increase in NOI includes a $12.7 million, or 4.9%, increase attributable to Same Park facilities (defined below) driven by an increase in rental rates, combined with increased NOI from Non-Same Park and multifamily assets, partially offset by reduced NOI from facilities sold in 2018 and 2019.

~~Operating Results for 2018 and 2017~~

~~For~~ the year ended December 31, ~~2018, net income allocable~~2021, primarily due to ~~common shareholders was $172.9 million or $6.31 per diluted share, compared~~the step-up in basis of the real estate assets acquired and intangibles assumed in connection with the Merger (refer to ~~$90.4 million or $3.30 per diluted share~~Note 2 — Summary of Significant Accounting Policies to our Consolidated Financial Statements under Item 15 in this Annual Report on Form 10-K).

General and administrative expenses increased by $7,330 for the year ended December 31, ~~2017.~~ ~~The increase was mainly~~2022, including the successor and predecessor periods, as compared to the year ended December 31, 2021, primarily due to ~~the gain on the sale~~a one-time cash payment of ~~three office parks in Orange County, California, and an industrial park in Dallas, Texas, during 2018, charges related~~$6,734 to the ~~redemption~~former CEO in the first quarter of ~~preferred stock~~2022, which consisted of a $6,643 cash payment for RSUs (refer to Note 11 — Incentive Compensation to our Consolidated Financial Statements under Item 15 in this Annual Report on Form 10-K), and a $91 cash payment for COBRA coverage reimbursement in accordance with his separation agreement.

Merger costs of $134,207 during the year ended December 31, 2022 are comprised primarily of legal and other professional fees incurred in ~~2017 that did not recur in 2018 and an increase in NOI~~connection with ~~respect to~~ the ~~Company’s real estate facilities. The increase in NOI includes a $9.1 million increase from our Same-Park facilities due primarily to~~Merger discussed herein. These increases in ~~occupancy and rental rates combined with increased NOI from our Non-Same Park and multifamily assets,~~expenses were partially offset by ~~reduced NOI from facilities we sold~~a decrease in ~~2018.~~

~~Analysis of Net Income~~

~~Our net income is comprised primarily~~property expenses of our real estate operations, depreciation and amortization expense, general and administrative expense, interest and other income, interest and other expenses and gain on sale of real estate facilities and development rights.

We segregate our real estate activities into (i) same park operations, representing all operating properties acquired prior to January 1, 2017, comprising 25.7 million rentable square feet of our 27.6 million in rentable square feet at

24

~~Table of Contents~~

December 31, 2019 (the “Same Park” facilities), (ii) non-same park operations, representing those facilities we own that were acquired after January 1, 2017 (the “Non-Same Park” facilities), (iii) multifamily operations and (iv) assets sold or held for sale, representing a 113,000 square foot asset held for sale as of December 31, 2019, operating results related to 1.3 million square feet of assets sold in 2019, 899,000 square feet of assets sold in 2018, and 44,000 square feet of assets sold during 2017.

~~The table below sets forth the various components of our net income~~ ~~(in thousands)~~:

For the Years
For the Years
Ended December 31,
Ended December 31,
2019
2018
Variance
2018
2017
Variance
Rental income
Same Park ⁽¹⁾
$
382,823
$
364,811
$
18,012
$
364,811
$
354,393
$
10,418
Non-Same Park
14,276
5,532
8,744
5,532
—
5,532
Multifamily
10,075
7,353
2,722
7,353
—
7,353
Assets sold or held for sale ⁽²⁾
22,672
35,820
(13,148)
35,820
47,786
(11,966)
Total rental income
429,846
413,516
16,330
413,516
402,179
11,337
Cost of operations ⁽³⁾
Adjusted cost of operations ⁽⁴⁾
Same Park
109,708
104,380
5,328
104,380
103,038
1,342
Non-Same Park
4,899
1,884
3,015
1,884
—
1,884
Multifamily
4,137
4,054
83
4,054
—
4,054
Assets sold or held for sale ⁽²⁾
8,465
12,866
(4,401)
12,866
17,679
(4,813)
Stock compensation expense ⁽⁵⁾
1,134
1,446
(312)
1,446
1,631
(185)
Total cost of operations
128,343
124,630
3,713
124,630
122,348
2,282
NOI ⁽⁶⁾
Same Park
273,115
260,431
12,684
260,431
251,355
9,076
Non-Same Park
9,377
3,648
5,729
3,648
—
3,648
Multifamily
5,938
3,299
2,639
3,299
—
3,299
Assets sold or held for sale ^{(2) (7)}
14,207
22,954
(8,747)
22,954
30,107
(7,153)
Stock compensation expense ⁽⁵⁾
(1,134)
(1,446)
312
(1,446)
(1,631)
185
Depreciation and amortization expense
(104,249)
(99,242)
(5,007)
(99,242)
(94,270)
(4,972)
General and administrative expense ⁽³⁾
(13,761)
(12,072)
(1,689)
(12,072)
(12,671)
599
Interest and other income
4,492
1,510
2,982
1,510
942
568
Interest and other expense
(657)
(665)
8
(665)
(1,285)
620
Equity in loss of unconsolidated joint venture
—
—
—
—
(805)
805
Gain on sale of real estate facilities
16,644
93,484
(76,840)
93,484
1,209
92,275
Gain on sale of development rights
—
—
—
—
6,365
(6,365)
Net income
$
203,972
$
271,901
$
(67,929)
$
271,901
$
179,316
$
92,585

~~____________________________~~

⁽¹⁾~~Same Park rental income includes lease buyout income of $1.4 million, $583,000 and $939,000 for the years ended December 31, 2019, 2018 and 2017, respectively.~~

⁽²⁾~~Amounts~~$16,137 for the year ended December 31, ~~2019 reflect~~2022, including the ~~operating results related~~successor and predecessor periods, as compared to ~~1.3 million square feet of assets sold in 2019 and a 113,000 square foot building held for sale as of~~the year ended December 31, ~~2019; amounts shown~~2021, primarily due to the distribution of the Company’s interest in 58 properties included in the Non-Core Portfolio (refer to Note 1 — Description of Business to our Consolidated Financial Statements under Item 15 in this Annual Report on Form 10-K).

25

Other Income (Expense): Total other income (expense) for the year ended December 31, ~~2018 reflect~~2022, including the ~~operating results related~~successor and predecessor periods, was $115,497 as compared to ~~1.3 million square feet~~total other income (expense) of ~~assets sold in 2019, a 113,000 square foot building held for sale as of December 31, 2019, and 899,000 square feet of assets sold in 2018; amounts shown~~$361,232 for the year ended December 31, 2017 reflect the operating results related to 1.3 million square feet of assets sold in 2019, a 113,000 square foot building held for sale as of December 31, 2019, 899,000 square feet of assets sold in 2018, and 44~~,000 square feet of assets sold in 2017.~~

⁽³⁾We have reclassified our divisional vice presidents’ compensation costs totaling $1.9 million and $3.0 million for the years ended December 30, 2018 and 2017, respectively, from cost of operations into general and administrative expense on our consolidated statements of income in the years ended December 31, 2018 and 2017 in order to conform2021, primarily due to the current periods’ presentation. Of this amount, $617,000 and $1.4 million of stock compensation expense for the years ended December 31, 2018 and 2017, respectively, had previously been excluded from NOI.following:

⁽⁴⁾~~Adjusted cost of operations excludes the impact of~~ ~~stock compensation expense.~~

⁽⁵⁾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 our executive management team (including divisional vice presidents) and other corporate employees is recorded within general and administrative expense.

⁽⁶⁾~~NOI represents rental income less adjusted cost of operations.~~

25

~~Table of Contents~~

⁽⁷⁾NOI from assets sold and held for sale in 2019 was $14.2 million, $19.9 million and $20.5 million for the years ended December 31, 2019, 2018 and 2017, respectively. The remaining amounts in 2018 and 2017 relate to assets sold during 2018 and 2017.

Rental income increased $16.3 million in 2019 compared to 2018 and by $11.3 million in 2018 compared to 2017 due primarily to increases in rental income at our Same Park and Non-Same Park facilities and an increase in rental income from our multifamily asset, offset partially by rental income from assets sold. The increase in rental income at our Same Park facilities in 2019 was due primarily to higher revenue per occupied square foot, while the 2018 increase was due primarily to higher revenue per occupied square foot and increased occupancy.

Cost of operations increased $3.7 million in 2019 compared to 2018 and by $2.3 million in 2018 compared to 2017 due primarily to increases in adjusted cost of operations for our Same Park and Non-Same Park facilities, offset partially by adjusted costs of operations from assets sold. The 2018 increase was also attributable to an increase in cost of operations from our multifamily asset. The 2019 and 2018 increases in adjusted cost of operations were partially offset by lower stock compensation expense.

~~Net income decreased $67.9 million in 2019 compared to 2018 and increased by $92.6 million in 2018 compared to 2017. The 2019 decrease~~ ~~was mainly due to higher gain~~Gain on sale of real estate, ~~facilities sold in 2018 than 2019 combined with~~ ~~higher depreciation and amortization expense and higher general and administrative expense~~ ~~partially offset by~~ ~~higher NOI. The 2018 increase in~~ net ~~income was primarily due to~~ the gain on the sale of three office parks in Orange County, California, and an industrial park in Dallas, Texas, during 2018 combined with higher NOI partially offset by higher depreciation and amortization expense.

~~Same Park Facilities~~

~~We believe that evaluation of the Same Park facilities~~ ~~provide an informative view of how the Company’s portfolio has performed over comparable periods. We believe that investors and analysts use Same Park information in a similar manner.~~

~~The following table summarizes the historical operating results of these facilities and certain statistical information related to leasing activity in 2019, 2018 and 2017~~ ~~(in thousands, except per square foot data)~~:

For the Years
For the Years
Ended December 31,
Ended December 31,
2019
2018
Variance
2018
2017
Variance
Rental income ⁽¹⁾
$
382,823
$
364,811
4.9%
$
364,811
$
354,393
2.9%
Adjusted cost of operations ⁽²⁾
Property taxes
40,061
38,076
5.2%
38,076
36,969
3.0%
Utilities
19,521
19,535
(0.1%)
19,535
19,043
2.6%
Repairs and maintenance
23,521
21,693
8.4%
21,693
22,470
(3.5%)
Snow removal
1,046
713
46.7%
713
400
78.3%
Other expenses
25,559
24,363
4.9%
24,363
24,156
0.9%
Total
109,708
104,380
5.1%
104,380
103,038
1.3%
NOI
$
273,115
$
260,431
4.9%
$
260,431
$
251,355
3.6%
Selected Statistical Data
NOI margin ⁽³⁾
71.3%
71.4%
(0.1%)
71.4%
70.9%
0.7%
Weighted average square foot occupancy
94.5%
94.9%
(0.4%)
94.9%
94.0%
1.0%
Revenue per occupied square foot ⁽⁴⁾
$
15.76
$
14.96
5.3%
$
14.96
$
14.67
2.0%
Revenue per available foot (RevPAF) ⁽⁵⁾
$
14.90
$
14.20
4.9%
$
14.20
$
13.79
3.0%

~~____________________________~~

⁽¹⁾~~Same Park rental income includes lease buyout income of $1.4 million, $583,000 and $939,000 for the years ended December 31, 2019, 2018 and 2017, respectively.~~

⁽²⁾We have reclassified divisional vice presidents’ compensation costs totaling $1.2 million and $1.5 million for the years ended December 31, 2018 and 2017, respectively, from adjusted cost of operations into general and administrative expense in order to conform to the current periods’ presentation. Stock compensation expense for our divisional vice presidents, which totaled $585,000 and $1.3 million for the years ended December 31, 2018 and 2017, respectively, had previously been excluded from adjusted cost of operations.

⁽³⁾~~NOI margin is computed by dividing NOI by rental income.~~

26

~~Table of Contents~~

⁽⁴⁾~~Revenue per occupied square foot is computed by dividing rental income during the period by weighted average occupied square feet during the same period.~~

⁽⁵⁾~~Revenue per available square foot is computed by dividing rental income during the period by weighted average available square feet.~~

~~Analysis of Same Park Rental Income~~

Rental income generated by our Same Park facilities increased 4.9% in 2019 compared to 2018 and by 2.9% in 2018 compared to 2017. The 2019 increase was due primarily to higher rental rates, as revenue per occupied square foot increased 5.3%, partially offset by a 0.4% decrease in weighted average occupancy in 2019 compared to the year prior. The 2018 increase was due primarily to higher rental rates combined with higher occupancy. Revenue per occupied square foot and weighted average occupancy increased 2.0% and 1.0%, respectively, in 2018 compared to the year prior.

~~We believe that high occupancy levels help maximize our rental income. Accordingly, we seek to maintain a weighted average occupancy over 90%.~~

During 2019 and 2018, most markets continued to reflect conditions favorable to landlords allowing for stable occupancy as well as increasing cash rental rates. With the exception of Northern Virginia and Suburban Maryland markets, new cash rental rates for the Company improved over expiring cash rental rates on executed leases as economic conditions and tenant demand remained robust.

Our future revenue growth will come primarily from contractual rental increases as well as from potential increases in market rents allowing us to increase rent levels when leases are either renewed with existing customers or re-leased to new customers. The following table sets forth the expirations of existing leases in our Same Park portfolio over the next 10 years based on lease data at December 31, 2019 ~~(dollars and square feet in thousands)~~:

Percent of
Rentable Square
Percent of
Annualized Rental
Annualized Rental
Number of
Footage Subject to
Total Leased
Income Under
Income Represented
Year of Lease Expiration
Customers
Expiring Leases
Square Footage
Expiring Leases
by Expiring Leases
2020
1,916
5,787
23.8%
$
92,159
22.0%
2021
1,356
4,916
20.2%
84,293
20.1%
2022
699
4,567
18.7%
82,052
19.5%
2023
346
3,004
12.3%
51,254
12.2%
2024
290
2,467
10.1%
43,628
10.4%
2025
54
1,802
7.3%
31,854
7.5%
2026
23
677
2.8%
11,539
2.8%
2027
14
134
0.6%
3,311
0.8%
2028
7
388
1.6%
6,703
1.6%
2029
10
287
1.2%
6,953
1.7%
Thereafter
6
334
1.4%
5,833
1.4%
Total
4,721
24,363
100.0%
$
419,579
100.0%

During the year ended December 31, 2019, we leased approximately 7.1 million in rentable square feet to new and existing customers at an average 8.3% increase in cash rental rates over the previous rates. Renewals of leases with existing customers represented 64.3% of our leasing activity for the year ended December 31, ~~2019. See “Analysis of Same Park Market Trends” below for further analysis of such data on a by-market basis.~~

~~Our ability to re-lease space as leases expire in a way that minimizes vacancy~~2022, including the successor and predecessor periods, ~~and maximizes market rental rates will depend upon market conditions in the specific submarkets in~~was $157,022, which ~~each of our properties are located.~~

~~Analysis of Same Park Adjusted Cost of Operations~~

Adjusted cost of operations for our Same Park facilities increased 5.1% in 2019 compared to 2018 due to higher property tax expense, higher repairs and maintenance costs, higher other expenses and an increase in snow removal costs. Adjusted costs of operations increased by 1.3% in 2018 compared to 2017 due primarily to increased property taxes, higher utility costs and snow removal costs, partially offset by lower repairs and maintenance expense.

Property taxes increased 5.2% in 2019 compared to 2018 and by 3.0% in 2018 compared to 2017 due to higher assessed values. We expect property tax growth in the future due primarily to higher assessed values.

27

~~Table of Contents~~

Utilities are dependent upon energy prices and usage levels. Changes in usage levels are driven primarily by weather and temperature. Utilities decreased 0.1% in 2019 compared to 2018 and increased 2.6% in 2018 compared to 2017. It is difficult to estimate future utility costs, because weather, temperature and energy prices are volatile and not predictable. However, based upon current trends and expectations regarding commercial electricity rates, we expect inflationary increases in rates in the future.

Repairs and maintenance increased 8.4% in 2019 resulting from higher roof and landscaping repairs compared to 2018 and decreased by 3.5% in 2018 compared to 2017 due to incremental costs in 2017 relating to Hurricane Irma. Repairs and maintenance costs are dependent upon many factors including weather conditions, which can impact repair and maintenance needs, inflation in material and labor costs and random events, and as a result are not readily predictable.

~~Snow removal increased 46.7% in 2019 compared to 2018 and increased by 78.3% in 2018 compared to 2017. Snow removal costs are weather dependent and therefore not predictable.~~

Other expenses increased 4.9% in 2019 compared to 2018 and 0.9% in 2018 compared to 2017. Other expenses are comprised of on-site and supervisory personnel, property insurance and other expenses incurred in the operation of our properties. The increase in 2019 was primarily due to an increase in our property insurance premium for the policy period, June 2019 to May 2020, and higher than average professional fees related to ordinary course tenant related matters. We expect increases in other expenses to be similar to the increases in prior years.

~~Same Park Quarterly Trends~~

~~The following table sets forth historical quarterly data~~ related to the ~~operations~~sale of ~~our Same Park facilities for rental income, adjusted cost of operations, occupancies, annualized revenue per occupied square foot, and RevPaf~~ ~~(in thousands, except per square foot data)~~:

For the Three Months Ended
March 31
June 30
September 30
December 31
Full Year
Rental income
2019
$
94,813
$
95,016
$
95,358
$
97,636
$
382,823
2018
$
90,821
$
90,980
$
91,446
$
91,564
$
364,811
2017
$
88,178
$
87,707
$
88,628
$
89,880
$
354,393
Adjusted cost of operations ⁽¹⁾
2019
$
28,177
$
26,727
$
27,494
$
27,310
$
109,708
2018
$
26,954
$
26,140
$
26,033
$
25,253
$
104,380
2017
$
25,471
$
25,045
$
25,796
$
26,726
$
103,038
NOI ⁽¹⁾
2019
$
66,636
$
68,289
$
67,864
$
70,326
$
273,115
2018
$
63,867
$
64,840
$
65,413
$
66,311
$
260,431
2017
$
62,707
$
62,662
$
62,832
$
63,154
$
251,355
Weighted average square foot occupancy
2019
94.7%
94.2%
94.7%
94.4%
94.5%
2018
94.5%
94.5%
95.1%
95.4%
94.9%
2017
94.2%
93.2%
93.7%
94.8%
94.0%
Annualized revenue per occupied square foot
2019
$
15.58
$
15.69
$
15.67
$
16.10
$
15.76
2018
$
14.97
$
14.99
$
14.97
$
14.94
$
14.96
2017
$
14.56
$
14.64
$
14.73
$
14.76
$
14.67
RevPAF
2019
$
14.76
$
14.79
$
14.84
$
15.20
$
14.90
2018
$
14.14
$
14.16
$
14.24
$
14.25
$
14.20
2017
$
13.73
$
13.65
$
13.80
$
13.99
$
13.79

~~____________________________~~

⁽¹⁾~~To conform to current period presentation, we have reclassified divisional vice presidents’ compensation costs totaling $364,000, $288,000, $280,000 and $280,000 for each~~40 buildings excluding assets distributed as part of the ~~three months ended March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018, respectively, and $386,000~~Merger for ~~each~~no gain or loss. Refer to Note 1 for additional details. Gain on sale of the three months ended March 31, 2017, June 30, 2017, September 30, 2017 and December 31, 2017 from adjusted cost of operations into general and administrative expense. Stock compensation expense for our divisional vice presidents had previously been excluded from adjusted cost of operations.
‎

28

~~Table of Contents~~

~~Analysis of Same Park Market Trends~~

~~The following tables set forth rental income, adjusted cost of operations, weighted average occupancy, revenue per occupied square foot, and RevPaf data in our Same Park facilities~~ ~~(in thousands, except per square foot data)~~:

For the Years
For the Years
Ended December 31,
Ended December 31,
Region
2019
2018
Variance
2018
2017
Variance
Geographic Data on Same Park
Rental income
Northern California (7.2 million feet)
$
108,046
$
99,610
8.5%
$
99,610
$
93,032
7.1%
Southern California (3.3 million feet)
55,080
52,873
4.2%
52,873
50,269
5.2%
Dallas (2.9 million feet)
33,789
30,899
9.4%
30,899
31,398
(1.6%)
Austin (2.0 million feet)
30,679
29,608
3.6%
29,608
29,240
1.3%
Northern Virginia (3.9 million feet)
73,734
73,818
(0.1%)
73,818
75,590
(2.3%)
South Florida (3.9 million feet)
43,601
41,824
4.2%
41,824
41,082
1.8%
Suburban Maryland (1.1 million feet)
19,876
18,975
4.7%
18,975
17,631
7.6%
Seattle (1.4 million feet)
18,018
17,204
4.7%
17,204
16,151
6.5%
Total Same Park (25.7 million feet)
382,823
364,811
4.9%
364,811
354,393
2.9%
Adjusted cost of operations
Northern California
24,313
22,653
7.3%
22,653
22,988
(1.5%)
Southern California
14,215
13,349
6.5%
13,349
13,025
2.5%
Dallas
11,488
10,896
5.4%
10,896
10,435
4.4%
Austin
10,843
10,352
4.7%
10,352
9,734
6.3%
Northern Virginia
25,488
25,128
1.4%
25,128
24,672
1.8%
South Florida
11,977
10,733
11.6%
10,733
11,043
(2.8%)
Suburban Maryland
7,126
6,989
2.0%
6,989
7,178
(2.6%)
Seattle
4,258
4,280
(0.5%)
4,280
3,963
8.0%
Total Same Park
109,708
104,380
5.1%
104,380
103,038
1.3%
Net operating income
Northern California
83,733
76,957
8.8%
76,957
70,044
9.9%
Southern California
40,865
39,524
3.4%
39,524
37,244
6.1%
Dallas
22,301
20,003
11.5%
20,003
20,963
(4.6%)
Austin
19,836
19,256
3.0%
19,256
19,506
(1.3%)
Northern Virginia
48,246
48,690
(0.9%)
48,690
50,918
(4.4%)
South Florida
31,624
31,091
1.7%
31,091
30,039
3.5%
Suburban Maryland
12,750
11,986
6.4%
11,986
10,453
14.7%
Seattle
13,760
12,924
6.5%
12,924
12,188
6.0%
Total Same Park
$
273,115
$
260,431
4.9%
$
260,431
$
251,355
3.6%
Weighted average square foot occupancy
Northern California
96.1%
97.8%
(1.7%)
97.8%
95.9%
2.0%
Southern California
95.0%
97.6%
(2.7%)
97.6%
96.4%
1.2%
Dallas
92.4%
89.7%
3.0%
89.7%
90.3%
(0.7%)
Austin
91.8%
92.5%
(0.8%)
92.5%
94.9%
(2.5%)
Northern Virginia
94.1%
92.8%
1.4%
92.8%
91.4%
1.5%
South Florida
95.4%
96.4%
(1.0%)
96.4%
97.5%
(1.1%)
Suburban Maryland
89.3%
83.1%
7.5%
83.1%
74.5%
11.6%
Seattle
96.2%
98.2%
(2.0%)
98.2%
98.1%
0.1%
Total Same Park
94.5%
94.9%
(0.4%)
94.9%
94.0%
1.0%
Revenue per occupied square foot
Northern California
$
15.52
$
14.06
10.4%
$
14.06
$
13.39
5.0%
Southern California
$
17.67
$
16.50
7.1%
$
16.50
$
15.90
3.8%
Dallas
$
12.66
$
11.92
6.2%
$
11.92
$
12.03
(0.9%)
Austin
$
17.02
$
16.29
4.5%
$
16.29
$
15.69
3.8%
Northern Virginia
$
20.01
$
20.31
(1.5%)
$
20.31
$
21.10
(3.7%)
South Florida
$
11.82
$
11.23
5.3%
$
11.23
$
10.90
3.0%
Suburban Maryland
$
19.39
$
19.89
(2.5%)
$
19.89
$
20.62
(3.5%)
Seattle
$
13.49
$
12.60
7.1%
$
12.60
$
11.84
6.4%
Total Same Park
$
15.76
$
14.96
5.3%
$
14.96
$
14.67
2.0%
RevPAF
Northern California
$
14.91
$
13.75
8.4%
$
13.75
$
12.84
7.1%
Southern California
$
16.78
$
16.11
4.2%
$
16.11
$
15.31
5.2%
Dallas
$
11.70
$
10.70
9.3%
$
10.70
$
10.88
(1.7%)
Austin
$
15.63
$
15.08
3.6%
$
15.08
$
14.90
1.2%
Northern Virginia
$
18.82
$
18.85
(0.2%)
$
18.85
$
19.30
(2.3%)
South Florida
$
11.28
$
10.82
4.3%
$
10.82
$
10.63
1.8%
Suburban Maryland
$
17.36
$
16.57
4.8%
$
16.57
$
15.40
7.6%
Seattle
$
12.96
$
12.38
4.7%
$
12.38
$
11.62
6.5%
Total Same Park
$
14.90
$
14.20
4.9%
$
14.20
$
13.79
3.0%

29

~~Table of Contents~~

~~Supplemental Same Park Data by Product Type~~

~~The following supplemental tables provide further detail of our Same Park rental income, adjusted cost of operations and~~real estate, net ~~operating income by region, further segregated by industrial, flex and office for each of the three years ended December 31, 2019, 2018 and 2017.~~

For the Year Ended December 31, 2019
For the Year Ended December 31, 2018
For the Year Ended December 31, 2017
Industrial
Flex
Office
Total
Industrial
Flex
Office
Total
Industrial
Flex
Office
Total
In thousands
Rental Income:
Northern California
$
86,088
$
9,801
$
12,157
$
108,046
$
78,721
$
9,442
$
11,447
$
99,610
$
72,878
$
9,364
$
10,790
$
93,032
Southern California
35,387
18,932
761
55,080
34,272
17,954
647
52,873
32,516
17,083
670
50,269
Dallas
12,412
21,377
—
33,789
11,566
19,333
—
30,899
11,406
19,992
—
31,398
Austin
8,317
22,362
—
30,679
7,863
21,745
—
29,608
7,316
21,924
—
29,240
Northern Virginia
7,468
24,620
41,646
73,734
7,350
24,755
41,713
73,818
6,978
25,715
42,897
75,590
South Florida
41,543
1,916
142
43,601
39,810
1,931
83
41,824
38,963
1,911
208
41,082
Suburban Maryland
4,396
—
15,480
19,876
4,464
—
14,511
18,975
4,528
—
13,103
17,631
Seattle
10,950
6,342
726
18,018
10,474
6,003
727
17,204
9,901
5,675
575
16,151
Total
206,561
105,350
70,912
382,823
194,520
101,163
69,128
364,811
184,486
101,664
68,243
354,393
Adjusted Cost of Operations:
Northern California
18,526
2,602
3,185
24,313
17,207
2,512
2,934
22,653
17,680
2,440
2,868
22,988
Southern California
8,869
5,063
283
14,215
8,397
4,685
267
13,349
8,132
4,627
266
13,025
Dallas
3,702
7,786
—
11,488
3,666
7,230
—
10,896
3,446
6,989
—
10,435
Austin
2,778
8,065
—
10,843
2,637
7,715
—
10,352
2,485
7,249
—
9,734
Northern Virginia
2,104
7,557
15,827
25,488
1,998
7,314
15,816
25,128
1,936
7,148
15,588
24,672
South Florida
11,262
602
113
11,977
10,162
509
62
10,733
10,401
576
66
11,043
Suburban Maryland
1,427
—
5,699
7,126
1,349
—
5,640
6,989
1,446
—
5,732
7,178
Seattle
2,566
1,492
200
4,258
2,612
1,446
222
4,280
2,308
1,468
187
3,963
Total
51,234
33,167
25,307
109,708
48,028
31,411
24,941
104,380
47,834
30,497
24,707
103,038
NOI:
Northern California
67,562
7,199
8,972
83,733
61,514
6,930
8,513
76,957
55,198
6,924
7,922
70,044
Southern California
26,518
13,869
478
40,865
25,875
13,269
380
39,524
24,384
12,456
404
37,244
Dallas
8,710
13,591
—
22,301
7,900
12,103
—
20,003
7,960
13,003
—
20,963
Austin
5,539
14,297
—
19,836
5,226
14,030
—
19,256
4,831
14,675
—
19,506
Northern Virginia
5,364
17,063
25,819
48,246
5,352
17,441
25,897
48,690
5,042
18,567
27,309
50,918
South Florida
30,281
1,314
29
31,624
29,648
1,422
21
31,091
28,562
1,335
142
30,039
Suburban Maryland
2,969
—
9,781
12,750
3,115
—
8,871
11,986
3,082
—
7,371
10,453
Seattle
8,384
4,850
526
13,760
7,862
4,557
505
12,924
7,593
4,207
388
12,188
Total
$
155,327
$
72,183
$
45,605
$
273,115
$
146,492
$
69,752
$
44,187
$
260,431
$
136,652
$
71,167
$
43,536
$
251,355

30

~~Table of Contents~~

As noted above, our past revenue growth has come from contractual annual rent increases, as well as re-leasing of space at rates above outgoing rental rates. We believe the percentage difference between outgoing cash rent inclusive of estimated expense recoveries and incoming cash rent inclusive of estimated expense recoveries for leases executed (the “Cash Rental Rate Change”) is useful in understanding trends in current market rates relative to our existing lease rates. The following table summarizes the Cash Rental Rate Change and other key statistical information with respect to the Company’s leasing production for its Same Park facilities, on a regional basis, for the year ended December 31, ~~2019~~ ~~(square feet~~2021 was $359,875, which was related to the sale of 22 buildings. Refer to Note 3 — Investments in ~~thousands)~~:

For the Year Ended December 31, 2019
Square
Transaction
Footage
Customer
Costs per
Rental
Regions
Leased
Retention
Executed Foot
Rate Change ⁽¹⁾
Northern California
1,777
64.6%
$
2.43
18.3%
Southern California
1,214
69.2%
$
1.83
8.1%
Dallas
838
60.9%
$
4.97
5.7%
Austin
529
77.5%
$
5.49
5.6%
Northern Virginia
1,154
75.0%
$
8.04
(2.8%)
South Florida
941
49.7%
$
1.67
12.7%
Suburban Maryland
216
73.9%
$
6.40
(3.5%)
Seattle
382
64.9%
$
1.22
15.8%
Total
7,051
65.8%
$
3.73
8.3%

~~____________________________~~

⁽¹⁾Cash Rental Rate Change is computed by taking the percentage difference between the incoming initial billed monthly cash rental rates inclusive of estimated expense recoveries (excluding the impact of certain items such as concessions or future escalators)Real Estate to our Consolidated Financial Statements under Item 15 in this Annual Report on new leases or extensions executed in the period, and the outgoing monthly cash rental rates inclusive of estimated expense recoveries last billed on the previous lease for that space. Leases executed on spaces vacantForm 10-K for more ~~than the preceding twelve months have been excluded from this measure.~~

During 2019 and 2018, most markets, with the exception of Northern Virginia and Suburban Maryland, continued to reflect favorable conditions allowing for stable occupancy as well as increasing cash rental rates. In Northern Virginia and Suburban Maryland, cash rental rates on executed leases declined 2.8% and 3.5%, respectively,information regarding our dispositions.

Interest expense increased $43,076 for the year ended December 31, ~~2019, reflecting continued soft market conditions that have persisted for several years due~~2022, including the successor and predecessor periods, as compared to ~~among other factors, federal government downsizing. To the extent that such trends continue in these markets, which comprised 24.5% of our Same Park rental income for~~ the year ended December 31, ~~2019 and 19.2% of square feet expiring through December 31, 2020, we may continue to face reduced rental income in these markets.~~

~~Non-Same Park facilities:~~ ~~The table below reflects the assets comprising our Non-Same Park facilities~~ ~~(in thousands):~~

Purchase
Square
Occupancy at
Occupancy at
Property
Date Acquired
Location
Price
Feet
Acquisition
December 31, 2019
San Tomas Business Center
December, 2019
Santa Clara, CA
$
16,787
79
95.6%
95.6%
Hathaway Industrial Park
September, 2019
Santa Fe Springs, CA
104,330
543
100.0%
100.0%
Walnut Avenue Business Park
April, 2019
Signal Hill, CA
13,824
74
98.4%
96.7%
Northern Virginia and Fullerton
June, 2018
Lorton and Springfield,
Road Industrial Parks
VA
143,766
1,057
76.1%
91.3%
Total
$
278,707
1,753
85.4%
94.4%

NOI from the Non-Same Park facilities included $1.7 million of NOI from the 2019 acquisitions for the year ended December 31, 2019. Excluding the results from the 2019 acquisitions, the NOI increase from prior year2021. There was ~~tied to~~(i) an increase in ~~occupancy at~~interest expense on our ~~2018 acquisition.~~

~~We believe that our management and operating infrastructure typically allows us to generate higher NOI from newly acquired real estate facilities than was achieved by~~outstanding debt of $107,055, (ii) a $7,332 realized loss during the previous owners. However, it can take 24 or more months for us to fully achieve higher NOI, and the ultimate levels of NOI to be achieved can be affected by changes in general economic conditions. As a result, there can be no assurance that we will achieve our expectations with respect to newly acquired real estate facilities.

~~Multifamily:~~ ~~As of December 31, 2019, we have a 95.0% interest in Highgate, a 395-unit apartment complex. On January 1, 2018, we began to consolidate the joint venture~~current year period due to changes toin fair value on our ~~joint venture agreement that gave the~~

31

~~Table~~interest rate derivatives, and (iii) amortization of ~~Contents~~

~~Company control~~financing costs of the joint venture. Prior to January 1, 2018, we accounted for our investment in the joint venture using the equity method and accordingly, reflected our share of net loss under “equity in loss of unconsolidated joint venture.”

~~Highgate began leasing activities~~$11,042 during the ~~second quarter of 2017. During the~~current year ended December 31, 2019, Highgate generated $5.9 million of NOI, consisting of $10.1 million in rental income and $4.1 million in cost of operations compared to $3.3 million of NOI, consisting of $7.4 million in rental income and $4.1 million in cost of operations for the same period in 2018.

~~The following table summarizes certain statistics for Highgate as of December 31, 2019:~~

As of December 31, 2019
Weighted Average Occupancy
Apartment
Total Costs ⁽¹⁾
Physical
Average Rent
For the years ended December 31,
Units
(in thousands)
Occupancy
per Unit ⁽²⁾
2019
2018
395
$
115,426
94.7%
$
2,133
95.4%
78.2%

~~____________________________~~

⁽¹⁾~~The project cost for Highgate includes the underlying land at its assigned contribution value upon formation of the joint venture of $27.0 million, which includes~~period. This was partially offset by an unrealized ~~land appreciation of $6.0 million that is not recorded on our balance sheet.~~

⁽²⁾Average rent per unit is defined as the total potential monthly rental revenue (actual rent for occupied apartment units plus market rent for vacant apartment units) divided by the total number of rentable apartment units.

~~Assets sold or held for sale:~~ These amounts include historical operating results with respect to properties that we sold or intend to sell. Amounts for the year ended December 31, 2019 reflect the operating results related to 1.3 million square feet of assets sold in 2019 and a 113,000 square foot building held for sale as of December 31, 2019; amounts for the year ended December 31, 2018 reflect the operating results related to 1.3 million square feet of assets sold during 2019, a 113,000 square foot building held for sale as of December 31, 2019 and 899,000 square feet of assets sold in 2018; amounts shown for the year ended December 31, 2017 reflect the operating results related to 1.3 million square feet of assets sold in 2019, a 113,000 square foot building held for sale as of December 31, 2019, 899,000 square feet of assets sold in 2018 and 44,000 square feet of assets sold in 2017.

~~Depreciation and Amortization Expense:~~ Depreciation and amortization expense increased 5.0% in 2019 compared to 2018 and increased by 5.3% in 2018 compared to 2017. The increase in 2019 over 2018 was primarily due to depreciation and amortization expense from the Non-Same Park facilities combined with depreciation expense related to the building held for development. The increase in 2018 over 2017 was primarily due to depreciation and amortization expense of our multifamily asset as we consolidated its operations effective January 1, 2018 in addition to depreciation and amortization expense from the 2018 acquisition.

~~General and Administrative Expense:~~ General and administrative expense primarily represents executive and other compensation, audit and tax fees, legal expenses and other costs associated with being a public company. General and administrative expense increased $1.7 million, or 14.0%, in 2019 compared to 2018 and decreased $599,000, or 4.7%, in 2018 compared to 2017. The increase in 2019 over 2018 was primarily due to an increase in stock compensation expense tied to ~~a modification of the Director Retirement Plan~~ during 2019 as well as an increase in compensation costs relating to the chief financial officer who started during the latter half of 2018. The decrease in 2018 over 2017 was primarily due to a decrease in compensation costs relating to the chief financial officer position being filled during the latter half of 2018.

~~Equity loss from investment in and advances to unconsolidated joint venture:~~ Prior to January 1, 2018, we accounted for our joint venture investment using the equity method and recorded our pro-rata share of the net loss in the joint venture. The Company recorded an equity loss in the unconsolidated joint venture of $805,000, comprised of our proportionate share of $1.8 million in revenue, $1.5 million in cost of operations, and $1.2 million in depreciation expense for the year ended December 31, 2017.

~~Gain on sale of real estate facilities and~~ gain on ~~sale~~interest rate swaps of ~~development rights: Subsequent to December 31, 2019, we sold a 113,000 square foot building located in Rockville, Maryland for a gross sales price of $30.0 million. We expect to record a gain on the sale of real estate~~$83,607 in connection with the ~~sale~~interest rate contracts entered into during the ~~first quarter of 2020.~~

~~On October 8, 2019, we sold 1.3 million rentable square feet located in Rockville and Silver Spring, Maryland, for net sale proceeds of $144.6 million, which resulted in a gain of $16.6 million.~~

On March 5, 2018, we sold Corporate Pointe Business Park, a park consisting of five multi-tenant office buildings totaling 161,000 square feet located in Orange County, California, for net sale proceeds of $41.7 million, which resulted in a gain of $26.8 million. On April 18, 2018, we sold Orange County Business Center, a park consisting of

32

~~Table of Contents~~

five multi-tenant office buildings totaling 437,000 square feet located in Orange County, California, for net sale proceeds of $73.3 million, which resulted in a gain of $50.6 million. On April 30, 2018, we sold Northgate Business Park, a park consisting of seven multi-tenant flex buildings totaling 194,000 square feet located in Dallas, Texas, for net sale proceeds of $11.8 million, which resulted in a gain of $7.9 million. On October 31, 2018, we sold Orangewood Office Park, a park consisting of two multi-tenant office buildings totaling 107,000 square feet located in Orange County, California, for net sale proceeds of $18.3 million, which resulted in a gain of $8.2 million.

On May 1, 2017, we sold Empire Commerce, a two-building single-story office park comprising 44,000 square feet, located in Dallas, Texas, for net sale proceeds of $2.1 million, which resulted in a net gain of $1.2 million.

~~On March 31, 2017, we sold development rights we held~~current year period (refer to ~~build medical office buildings on land adjacent~~Note 6 — Derivative Financial Instruments to our ~~Westech Business Park~~Consolidated Financial Statements under Item 15 in ~~Silver Spring, Maryland for $6.5 million. We received net sale proceeds~~this Annual Report on Form 10-K). Subsequent to the Merger, we obtained two mortgage loans and terminated the unsecured revolving line of ~~$6.4 million, of which $4.9 million was received~~credit (refer to Note 5 — Debt to our Consolidated Financial Statements under Item 15 in ~~2017~~this Annual Report on Form 10-K).

Liquidity and ~~$1.5 million was received in prior years. We recorded a net gain of $6.4 million for the year ended December 31, 2017.~~

Capital Resources

~~Liquidity and Capital Resources~~

This section should be read in conjunction with our ~~consolidated statements~~Consolidated Statements of ~~cash flows for the years ended December 31, 2019, 2018~~Cash Flows; and ~~2017~~Note 5 — Debt, Note 6 — Derivative Financial Instruments, and ~~the notes~~Note 13 — Commitments and Contingencies to our ~~consolidated financial statements, which set forth~~Consolidated Financial Statements under Item 15 in this Annual Report on Form 10-K for additional details on the major components of our historical liquidity and capital resources. The discussion below sets forth the factors which we expect will affect our future liquidity and capital resources or which may vary substantially from historical levels.

Cash Requirements:

~~Capital Raising Strategy:~~Contractual Commitments: ~~As a REIT, we generally distribute substantially all~~Our significant short-term liquidity requirements over the next 12 months following December 31, 2022 includes:

•Interest expense: payment of interest expense on outstanding indebtedness, including approximately $296,280 due within the next 12 months;

•Development costs: funding development costs for three ongoing projects, including $17,570 scheduled to be funded within the next 12 months;

•Funding capital expenditures for tenant improvements and leasing commissions of $3,106;

•Ground lease obligations: Our contractual payment requirements under various operating leases as of December 31, 2022 are approximately $199 for 2023 and $1,173 thereafter;

•Preferred stock dividends: We paid $38,346 to preferred stockholders during the year ended ended December 31, 2022, including successor and predecessor periods. Dividends on preferred equity are paid when and if declared by our ~~“REIT taxable income”~~Board of Directors (the "Board") and accumulate if not paid (refer to Note 10 — Stockholders' Equity to our ~~shareholders,~~Consolidated Financial Statements under Item 15 in this Annual Report on Form 10-K), and

•other normal recurring operating and capital expenses.

We intend to satisfy our short-term liquidity requirements through our existing cash and cash equivalents, which ~~relative~~totaled $51,608 as of December 31, 2022, and cash flow from operating activities. We may also satisfy our liquidity needs by:

•proceeds from dispositions of properties and/or land parcels, and

•our ability to ~~a taxable C corporation, limits~~obtain new financings, draw on existing financings, and exercise our option to extend the ~~amount~~maturity dates on existing financings.

Our long-term liquidity needs consist primarily of funds necessary to pay for non-recurring capital expenditures for our properties, development or redevelopment activities, principal and interest payments on our indebtedness, and payment of distributions and dividends to our equity investors. We may satisfy our long-term liquidity needs through our cash flow from operations, ~~that we can retain for investment purposes. As a result, in order to grow our asset base, access to capital is important.~~

~~Our financial profile is characterized by strong credit metrics, including low leverage relative to our total capitalization~~long-term secured and operating cash flows. We are a highly rated REIT, as determined by Moody’s and Standard & Poor’s. Our corporate credit rating by Standard and Poor’s is A-, while our preferred shares are rated BBB by Standard and Poor’s and Baa2 by Moody’s. We believe our credit profile and ratings will enable us to efficiently access both the public and private capital markets to raise capital, as necessary.

In order to maintain access to the capital markets, we target a minimum ratio of FFO (as defined below) to combined fixed charges and preferred distributions of 3.0 to 1.0. Fixed charges include interest expense, capitalized interest and preferred distributions paid to preferred shareholders. For the year ended December 31, 2019, the ratio to FFO to combined fixed charges and preferred distributions paid was 5.3 to 1.0.

We have a $250.0 million revolving Credit Facility that can be expanded to $400.0 million which expires in January, 2022. We can use the Credit Facility as necessary as temporary financing until we are able to raise longer term capital. Historically we have funded our long-term capital requirements with retained operating cash flow and proceeds fromunsecured borrowings, the issuance of ~~common~~debt and ~~preferred securities. We will select among these sources of capital based upon availability, relative cost, the impact of constraints~~equity securities, property and/or land parcel dispositions, cash contributions from our Parent, our option to draw on available shared capacity on our ~~operations (such as covenants), as well as the desire for leverage.~~

~~Short-term Liquidity and Capital Resource Analysis:~~ We believe that our net cash provided by our operating activities will continue to be sufficient to enable us to meet our ongoing requirements for debt service, capital expenditures and distributions to our shareholders for the foreseeable future.

As of December 31, 2019, we had $62.8 million in unrestricted cash. In the last five years, we have retained approximately $40 to $60 million in operating cash flow per year. Retained operating cash flow represents cash flow provided by operating activities, less shareholder and unit holder distributions and capital expenditures.

~~Required Debt Repayment: As of December 31, 2019, we have no debt outstanding on our Credit Facility. We are in compliance with all~~existing loans or through repayment of the ~~covenants and other requirements of our Credit Facility.~~

~~Capital Expenditures:~~ We define recurring capital expenditures as those necessary to maintain and operate our real estate at its current economic value. Nonrecurring capital improvements generally are related to property renovations and expenditures related to repositioning asset acquisitions. The following table sets forth our commercial capital expenditures paid for in the years ended December 31, 2019, 2018 and 2017 on an aggregate and per square foot basis:

Parent Partner Loans.

26

33

~~Table of Contents~~

For the Years Ended December 31,
2019
2018
2017
2019
2018
2017
Commercial Real Estate
(in thousands)
(per total weighted average square foot)
Recurring capital expenditures
Capital improvements ⁽¹⁾
$
11,224
$
10,738
$
10,069
$
0.40
$
0.38
$
0.36
Tenant improvements
17,360
18,688
28,294
0.62
0.67
1.01
Lease commissions
8,267
8,048
7,477
0.29
0.29
0.27
Total commercial recurring
capital expenditures ⁽¹⁾
36,851
37,474
45,840
1.31
1.34
1.64
Nonrecurring capital improvements
2,494
1,176
4,379
0.09
0.05
0.16
Total commercial capital
expenditures ⁽¹⁾
$
39,345
$
38,650
$
50,219
$
1.40
$
1.39
$
1.80

~~____________________________~~

⁽¹⁾~~Excludes $20,000 and $13,000 of recurring capital improvements on our multifamily asset in 2019 and 2018, respectively.~~

The following table summarizes Same Park, Non-Same Park, multifamily and assets sold or held for sale recurring capital expenditures paid and the related percentage of NOI by region for the years ended December 31, 2019, 2018 and 2017 ~~(in thousands)~~:

For the Years Ended December 31,
Recurring Capital Expenditures
Recurring Capital Expenditures
as a Percentage of NOI
Region
2019
2018
Change
2018
2017
Change
2019
2018
2017
Same Park
Northern California
$
4,411
$
3,602
22.5%
$
3,602
$
3,642
(1.1%)
5.3%
4.7%
5.2%
Southern California
4,514
3,167
42.5%
3,167
3,025
4.7%
11.0%
8.0%
8.1%
Dallas
4,623
5,027
(8.0%)
5,027
3,813
31.8%
20.7%
25.1%
18.2%
Austin
4,539
2,362
92.2%
2,362
1,726
36.8%
22.9%
12.3%
8.8%
Northern Virginia
10,366
10,810
(4.1%)
10,810
13,379
(19.2%)
21.5%
22.2%
26.3%
South Florida
2,191
3,149
(30.4%)
3,149
2,055
53.2%
6.9%
10.1%
6.8%
Suburban Maryland
2,051
2,714
(24.4%)
2,714
8,474
(68.0%)
16.1%
22.6%
81.1%
Seattle
927
968
(4.2%)
968
763
26.9%
6.7%
7.5%
6.3%
Total Same Park
33,622
31,799
5.7%
31,799
36,877
(13.8%)
12.3%
12.2%
14.7%
Non-Same Park
Southern California
54
—
100.0%
—
—
—
—
—
—
Northern Virginia
2,154
615
250.2%
615
—
100.0%
—
—
—
Total Non-Same Park
2,208
615
259.0%
615
—
100.0%
—
—
—
Assets sold or held
for sale
1,021
5,060
(79.8%)
5,060
8,963
(43.5%)
7.2%
22.0%
29.8%
Total commercial
recurring capital
expenditures
36,851
37,474
(1.7%)
37,474
45,840
(18.3%)
—
—
—
Multifamily
20
13
53.8%
13
—
100.0%
—
—
—
Total
$
36,871
$
37,487
(1.6%)
$
37,487
$
45,840
(18.2%)
12.2%
12.9%
16.3%

~~In the last five years, our recurring capital expenditures have averaged generally between $1.10 and $1.64 per square foot, and 11.5% and 16.3% as a percentage of NOI.~~

Redemption of Preferred Stock: Shares of preferred stock (other than our Series A Preferred Stock) are redeemable by the Company five years after issuance or in order to preserve its status as a REIT, but shares of preferred stock are never redeemable at the option of the holder. Shares of Series A Preferred Stock with a coupon rate of 12.00%, are redeemable at any time or from time to time, for cash at a redemption price equal to $4,000 per share plus an amount equal to all accrued and unpaid dividends thereon to and including the date fixed for redemption.~~Historically, we have reduced~~

Future redemptions of preferred stock will depend upon many factors, including available cash and our cost of ~~capital by refinancing higher coupon~~capital. Refer to Note 10 — Stockholders' Equity to our Consolidated Financial Statements under Item 15 in this Annual Report on Form 10-K for more information on our preferred ~~securities with lower coupon preferred securities.~~ stock.

On ~~December 30, 2019, we completed~~November 22, 2022, the ~~redemption of our 5.75% Cumulative~~Company commenced offers (the “Offers”) to purchase for cash any and all outstanding Series X Preferred ~~Stock,~~Shares, at $15.29 per share, Series U,Y Preferred Shares, at ~~par of $230.0 million as well as our 5.70% Cumulative Preferred Stock, Series V, at par of $110.0 million using funds received from our 4.875%~~$15.33 per share, and Series Z Preferred Shares, at $14.34 per share. The Company accepted for purchase 5,953,898 Series X Preferred Shares, 5,756,691 Series Y Preferred Shares and 9,728,688 Series Z Preferred Shares. The offers were completed on December 23, 2022 and the Preferred Shares purchased were cancelled by the Company.

On November 2, 2022, the board of directors of the Company (the “Board of Directors”) authorized a quarterly dividend on each series of the Company’s preferred stock ~~issued during November, 2019, which effectively lowered~~underlying the ~~Company’s weighted average coupon rate from 5.40% to 5.10%.~~

~~Acquisitions of real estate facilities:~~ ~~Subsequent to~~Preferred Shares payable on December 31, ~~2019,~~2022 (the “December Dividend”) to holders of record of such underlying preferred stock at the close of business on December 15, 2022 for distribution to the holders of the Preferred Shares. All holders of the Preferred Shares at the close of business on the December 15, 2022 record date received the December Dividend for the applicable series of Preferred Shares regardless of whether they participated in the Offers since the December 15, 2022 record date occurred prior to the consummation of the Offers.

As market conditions warrant, we ~~acquired a multi-tenant industrial park comprised~~and our majority equity holders, Blackstone and its affiliates, may from time to time seek to repurchase the remaining outstanding Preferred Shares in open market or privately negotiated purchases, by tender offer or otherwise or to redeem our preferred stock pursuant to the terms of ~~approximately 73,000 rentable square feet in La Mirada, California, for a total purchase~~their respective governing documents. The size of such repurchases may be material and may impact the liquidity and trading price of $13.5 million, inclusive of capitalized transaction costs. On December 20, 2019, we acquired a multi-tenant flex park comprised of approximately 79,000 rentable square feet in Santa Clara, California, for a total purchase price of $16.8 million, inclusive of capitalized transaction costs. On September 5, 2019, we acquired a multi-tenant industrial park comprised of approximately 543,000 rentable square feet in Santa Fe Springs, California, for a total purchase price of

such preferred stock.

34

~~Table of Contents~~

~~$104.3 million, inclusive of capitalized transaction costs.~~ ~~On April 18~~, 2019, we acquired a multi-tenant industrial park comprised of approximately 74,000 rentable square feet in Signal Hill, California, for a total purchase price of $13.8 million, inclusive of capitalized transaction costs. ~~On June 8, 2018, we acquired two multi-tenant industrial parks aggregating 1.1 million rentable square feet in Springfield, Virginia, for a total purchase price of $143.8 million,~~ ~~inclusive of capitalized transaction costs~~. We continue to seek to acquire additional real estate facilities; however, there is significant competition to acquire existing facilities and there can be no assurance as to the volume of future acquisition activity.

~~Sale of real estate:~~ Subsequent to December 31, 2019, we sold a 113,000 square foot building located at Metro Park North in Rockville, Maryland, that was held for sale as of December 31, 2019, for a gross sales price of $30.0 million. During the year ended December 31, 2019, we sold 1.3 million rentable square feet of flex and office business parks located in Rockville and Silver Spring, Maryland, for net sale proceeds of $144.6 million, which resulted in a gain of $16.6 million. During the year ended December 31, 2018, we sold 899,000 rentable square feet of real estate facilities located in Orange County, California, and Dallas, Texas, for net sale proceeds of $145.1 million, which resulted in a gain of $93.5 million. On May 1, 2017, we sold a two-building single-story office park comprising 44,000 square feet, located in Dallas, Texas, for net sale proceeds of $2.1 million, which resulted in a net gain of $1.2 million.

~~Development of real estate facilities:~~ As noted above, we have a 123,000 square foot vacant building located within The Mile that we are seeking to redevelop into a multifamily property. There can be no assurance as to the timing or amount of any investment that may occur; however, we expect to incur any significant development costs on this potential project any earlier than mid-2020.

~~Repurchase of Common Stock:~~ No shares of common stock were repurchased under the board-approved common stock repurchase program during the years ended December 31, 2019, 2018 and 2017. As of December 31, 2019, management has the authorization to repurchase an additional 1,614,721 shares.

Requirement to Pay Distributions: Our election to be taxed as a REIT, as defined by the Code, applies to all periods presented herein. As a REIT, we do not incur U.S. federal corporate income tax on our “REIT taxable income” that is distributed each year (for this purpose, certain distributions paid in a subsequent year may be considered), and we continue to meet certain organizational and operational requirements. We believe we have met these requirements in all periods presented ~~herein, and we expect we will continue to qualify as a REIT in future periods.~~herein.

We paid REIT qualifying distributions of ~~$169.5 million~~$359,804 ($~~54.3 million~~38,346 to preferred ~~shareholders~~stockholders and ~~$115.2 million~~$321,458 to common ~~shareholders)~~stockholders) during the year ended December 31, ~~2019.~~

~~We estimate the annual distribution requirements with respect to our preferred shares outstanding at December 31, 2019 to be $48.2 million per year.~~

2022.

Our consistent, long-term dividend policy has been to set dividend distribution amounts based on our taxable income. Future quarterly distributions with respect to common ~~shares~~stock will continue to be determined based upon our REIT distribution requirements and, ~~after taking into consideration~~along with distributions to ~~the~~ preferred ~~shareholders,~~stockholders, we expect will be funded with cash provided by operating activities.

27

~~Funds from Operations, Core Funds from Operations and Funds Available for Distribution~~

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

~~Funds from Operations (“FFO”) is~~

We may be exposed to interest rate changes primarily as a ~~non-GAAP measure defined by the National Association~~result of ~~Real Estate Investment Trusts (“NAREIT”)~~long-term debt used to maintain liquidity and ~~is considered a helpful measure~~fund capital expenditures and expansion of ~~REIT performance by REITs and many REIT analysts. FFO represents GAAP net income before~~our real estate ~~depreciation~~investment portfolio and ~~amortization expense, gains or losses on sales of operating properties and land and impairment charges on real estate assets~~.

~~We also present Core FFO and Funds Available for Distribution (“FAD”). Core FFO,~~ ~~which~~operations. Our interest rate risk management objectives are to limit the ~~Company defines as~~ ~~FFO excluding the net~~ impact of ~~(i) income allocated~~interest rate changes on earnings and cash flows and to ~~preferred shareholders~~lower our overall borrowing costs. To achieve our objectives, we borrow primarily at fixed rates or variable rates with the lowest margins available.

With regard to ~~the extent redemption value exceeds the related carrying value (a “Preferred Redemption Allocation”)~~variable rate financing, we assess interest rate cash flow risk by continually identifying and ~~(ii) other nonrecurring income or expense items as appropriate.~~ ~~FAD, a non-GAAP measure, represents Core FFO adjusted~~monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. We maintain risk management control systems to ~~(i) deduct recurring capital improvements~~monitor interest rate cash flow risk attributable to both our outstanding and ~~capitalized tenant improvements and lease commissions and (ii) remove certain non-cash income or expenses such as straight-line rent and stock compensation expense.~~

‎

35

~~Table of Contents~~

~~The following table reconciles net income allocable to common shareholders to FFO, Core FFO and FAD~~forecasted debt obligations as well as ~~net income per share~~our potential offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to ~~FFO per share~~estimate the expected impact of changes in interest rates on our future cash flows.

We may use additional derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our properties or unsecured debt obligations. To the extent we do we are exposed to market and ~~Core FFO per share~~ ~~(amounts in thousands, except per share data)~~:

For The Years Ended December 31,
2019
2018
2017
2016
2015
Net income allocable to common shareholders
$
108,703
$
172,899
$
90,425
$
62,872
$
68,291
Adjustments
Gain on sale of land, real estate facilities and
development rights
(16,644)
(93,484)
(7,574)
—
(28,235)
Depreciation and amortization expense
104,249
99,242
94,270
99,486
105,394
Depreciation from unconsolidated joint venture
—
—
1,180
—
—
Net income allocated to noncontrolling interests
29,006
45,199
24,279
16,955
18,495
Net income allocated to restricted stock
unit holders
910
1,923
761
569
299
FFO allocated to joint venture partner
(149)
(13)
—
—
—
FFO allocable to diluted common shares and units
226,075
225,766
203,341
179,882
164,244
Preferred Redemption Allocation
11,007
—
10,978
7,312
2,487
Other nonrecurring income or expense items
—
—
(414)
1,818
—
Core FFO allocable to diluted common shares
and units
$
237,082
$
225,766
$
213,905
$
189,012
$
166,731
Recurring capital expenditures
(36,871)
(37,487)
(45,840)
(30,952)
(39,846)
Cash paid for taxes in lieu of shares upon vesting
of restricted stock units
(6,350)
(4,981)
(3,865)
(1,940)
(767)
Non-cash items
1,020
(1,056)
174
4,276
1,909
FAD allocable to diluted common shares and units
$
194,881
$
182,242
$
164,374
$
160,396
$
128,027
Weighted average outstanding
Common shares
27,418
27,321
27,207
27,089
26,973
Common operating partnership units
7,305
7,305
7,305
7,305
7,305
Restricted stock units
124
182
187
290
130
Common share equivalents
108
101
205
90
78
Total diluted common shares and units
34,955
34,909
34,904
34,774
34,486
Net income per common share — diluted
$
3.95
$
6.31
$
3.30
$
2.31
$
2.52
Gain on sale of land, real estate facilities
and development rights
(0.47)
(2.68)
(0.21)
—
(0.82)
Depreciation and amortization expense, including
amounts from investments in unconsolidated
joint venture
2.99
2.84
2.74
2.86
3.06
FFO per share
6.47
6.47
5.83
5.17
4.76
Preferred Redemption Allocation
0.31
—
0.31
0.21
0.07
Other nonrecurring income or expense items
—
—
(0.01)
0.06
—
Core FFO per share
$
6.78
$
6.47
$
6.13
$
5.44
$
4.83

~~We believe FFO, Core FFO and FAD assist investors in analyzing and comparing~~credit risk. Market risk is the ~~operating and financial performance of~~ ~~a company’s real estate between periods.~~ ~~FFO, Core FFO and FAD are not substitutes for GAAP net income. In addition, other REITs may compute FFO, Core FFO, and FAD differently, which could inhibit comparability.~~

~~Off-Balance Sheet Arrangements:~~ ~~The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material~~adverse effect on the ~~Company’s~~value of the financial ~~condition, results~~instrument that result a change in interest rates. The market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of ~~operations, liquidity, capital expenditures or capital resources.~~

~~Contractual Obligations:~~ market risk that may be undertaken. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value derivative contract is positive, the counterparty owes us, which creates credit risk to us. We will minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties.

As of December 31, ~~2019,~~2022, we ~~expect to pay quarterly distributions~~had $3,904,395 of ~~$12.0 million to our preferred shareholders for the foreseeable future or until such time as there is a change in the amount or composition~~outstanding floating rate debt, of our series of preferred equity outstanding. Dividends on preferred equity are paid when and if declared by the Company’s Board and accumulate if not paid. Shares of preferred equity are redeemable by the Company in order to preserve its status as a REIT and are also redeemable five years after issuance, but are not redeemable at the option of the holder.

‎

36

~~Table of Contents~~

~~Our significant contractual obligations as of December 31, 2019 and their impact on our cash flow and liquidity are summarized below~~ ~~(in thousands)~~:

Payments Due by Period
Contractual Obligations
Total
Less than 1 year
1 - 3 years
4 - 5 years
More than 5 years
Transaction costs ⁽¹⁾
$
9,604
$
9,604
$
—
$
—
$
—
Ground lease obligations ⁽²⁾
1,965
196
596
397
776
Total
$
11,569
$
9,800
$
596
$
397
$
776

~~____________________________~~

⁽¹⁾~~Represents transaction costs, including tenant improvements and lease commissions,~~ which ~~we are committed to under the terms of executed leases.~~

⁽²⁾~~Represents future contractual payments on land under various operating leases.~~

~~ITEM 7A.~~ ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

To limit the Company’s exposure to market risk, the Company principally finances its operations and growth with permanent equity capital consisting of either common or preferred stock. The Company had no debt outstanding as of as of December 31, 2019.

~~Our exposure to market risk for changes in interest rates relates primarily to the Credit Facility, which~~$3,592,215 is subject to interest rate cap and swap agreements, which effectively limits the interest rate risk. Our variable-rate borrowings bear interest at one month SOFR plus an applicable spread. If market rates of interest on our variable rate debt increased by 1%, the increase in annual interest ~~rates. See Notes 2~~expense on our variable rate debt would decrease future earnings and ~~6 to~~cash flows by $3,122. This estimate considers the ~~consolidated financial statements included in this Form 10-K for additional information regarding~~impact of our interest rate swap agreements and is calculated utilizing the ~~terms, valuations~~interest rates on our debt at December 31, 2022.

Item 8. Financial Statements and approximate principal maturities of the Company’s indebtedness, including the Credit Facility. Based on borrowing rates currently available to the Company, the difference between the carrying amount of debt and its fair value is insignificant.

~~ITEM 8.~~ ~~FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA~~

Supplementary Data

The financial statements ~~of the Company at December 31, 2019~~ and ~~2018 and for the years ended December 31, 2019, 2018 and 2017 and the report of Ernst & Young LLP, independent registered public accounting firm, thereon and the related financial statement schedule,~~supplementary data are included ~~elsewhere herein. Reference is made to the Index to Consolidated~~under Item 15 of this Report and are incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial ~~Statements~~Disclosure

None.

Item 9A. Controls and ~~Schedules in Item 15.~~

~~ITEM 9.~~ ~~CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE~~

~~None.~~

~~ITEM 9A.~~ ~~CONTROLS AND PROCEDURES~~

~~Conclusion Regarding the Effectiveness~~Procedures

Evaluation of Disclosure Controls and Procedures

The ~~Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s~~Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) ~~as of December 31, 2019. These controls and procedures have been~~that are designed to ensure that information required ~~for disclosure~~to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the ~~requisite~~ time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to ~~management. Management recognizes that any~~the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving ~~their objectives~~the desired controls objectives. Our management has evaluated, under the supervision and ~~management necessarily applies its judgment in evaluating~~with the ~~cost-benefit relationship~~participation of ~~possible controls~~our Chief Executive Officer and ~~procedures. Based on~~Chief Financial Officer, the ~~evaluation~~effectiveness of ~~the Company’s~~our disclosure controls and procedures as of December 31, ~~2019, the Company’s~~2022. Based upon that evaluation, our Chief Executive Officer and Chief Financial ~~Officer~~officer have concluded that, as of ~~such date, the Company’s~~December 31, 2022, our disclosure controls and procedures were effective atto accomplish their objectives as the reasonable assurance level.

‎

37

~~Table of Contents~~

Management’s Annual Report on Internal Control ~~over~~Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as ~~such term is~~ defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and

28

fairly reflect the transactions and dispositions of the assets of the Company, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and the Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting ~~based on~~using the ~~framework in~~ ~~Internal Control-Integrated Framework~~ ~~issued~~criteria set forth by the Committee onof Sponsoring Organizations of the Treadway Commission ~~(2013 Framework)~~(COSO) in Internal Control-Integrated Framework (2013). Based on ~~that~~its evaluation, our management concluded that our internal control over financial reporting was effective as of ~~December 31, 2019.~~

~~The effectiveness~~the end of the ~~Company’s internal control over financial reporting as of December 31, 2019 has been audited~~fiscal year covered by ~~Ernst & Young LLP, an independent registered public accounting firm, as stated in their attestation report which is included herein.~~

this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

There ~~have not been any~~were no changes in our internal control over financial reporting ~~(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)~~ during the ~~fourth~~ quarter ~~of 2019~~ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

(dollars in thousands, except share data)

Item 10. Directors, Executive Officers and Corporate Governance

The following sets forth the names, ages and certain biographical information of our non-executive directors as of February 28, 2023:

Timothy J. Beaudin, 64, was the Chairman of the Board of P3 Logistics Parks, a long-term owner, developer and manager of European logistics properties from 2018 until 2019, and Chief Executive Officer of P3 Logistics Parks from 2019 to 2021. Before that Mr. Beaudin was the President and Chief Executive Officer of IndCor Properties from 2011 until 2015, was with Apartment Investment and Management Company (“Aimco”) from 2005 to 2010, departing as Chief Operating Officer and was Executive Vice President of Catellus Development. Mr. Beaudin has also worked for multiple companies, such as KPMG and CBRE, in various financial services roles. He previously served as an advisor to each of Link and LivCor, both of which are wholly-owned by Blackstone-managed real estate funds. Mr. Beaudin earned his B.A. in Economics and Business from Westmont College.

38

29

~~Table~~

Justin Brown, 39, is a Managing Director in Blackstone’s Real Estate Group. Mr. Brown is involved in the asset management of ~~Contents~~Blackstone’s Life Science platform BioMed Realty and fund management of BPP Life Sciences. Before joining Blackstone in November 2021, Mr. Brown worked in Green Street’s Advisory Group from July 2013 until October 2021, which provides strategic and capital markets advisory services to commercial real estate companies and served on the board of LatAm Logistic Properties. Mr. Brown began his career at Prudential Real Estate Investors where he focused on asset management and dispositions. Mr. Brown received a B.B.A with a focus on Real Estate from University of Wisconsin and an MBA in Finance from Stern School of Business at New York University.

Andrea Drasites, 40, is a Managing Director in Blackstone’s Real Estate Group, and she is involved in the asset management of U.S. retail and gaming investments, including ShopCore and Edens, and retail projects inside of the Cosmopolitan of Las Vegas and other Blackstone assets. Since joining Blackstone in 2012, Ms. Drasites has been involved with several notable transactions including the IPO of Brixmor (formerly Centro), Edens, Excel Trust and RioCan. Prior to joining Blackstone, Ms. Drasites worked at Equity One, Inc., a publicly traded shopping center REIT, where she was responsible for asset management as well as acquisitions and dispositions across the U.S. Prior to Equity One, Inc., Ms. Drasites also worked for Woolbright Development, a shopping center owner and developer based in Boca Raton, Florida. She is an active member of the Urban Land Institute, International Council of Shopping Centers and is a Founding Member of the annual Rally Against Lupus fundraiser in New York and is actively involved in the Alliance for Lupus Research. Ms. Drasites is a member of the University of Florida’s Real Estate Advisory Board. Ms. Drasites received a BA in International Business from Rollins College and an MBA from the University of Florida.

Ernest M. Freedman, 52, has served as Executive Vice President and Chief Financial Officer of Invitation Homes since October 2015. Mr. Freedman previously served as Executive Vice President and Chief Financial Officer of Aimco from 2009 to 2015. Mr. Freedman joined Aimco in 2007 as Senior Vice President of Financial Planning and Analysis and served as Senior Vice President of Finance from February 2009 to November 2009, where he was responsible for financial planning, tax, accounting and related areas. From 2004 to 2007, Mr. Freedman served as Chief Financial Officer of HEI Hotels and Resorts. From 2000 to 2004, Mr. Freedman was at GE Real Estate in a number of capacities, including operations controller and finance manager for investments and acquisitions. From 1993 to 2000, Mr. Freedman was with Ernst & Young, LLP, including one year as a senior manager in the real estate practice. He is a member of the board of directors of CA Student Living, a student housing developer and investment management company, where he serves as the Chair of the Audit Committee and a member of the Compensation Committee. Mr. Freedman earned a Bachelor’s Degree from the University of Virginia. Mr. Freedman is a certified public accountant.

Ryan Ingle, 37, is a Managing Director in Blackstone’s Real Estate Group. Since joining Blackstone in 2010, Mr. Ingle has been involved in analyzing and managing real estate investments across several property sectors. Mr. Ingle currently leads asset management for Blackstone’s U.S. industrial portfolio which spans more than 400 million square feet. Mr. Ingle has been involved in other notable investments including BioMed, IndCor, Motel 6, La Quinta and Extended Stay. Before joining Blackstone, Mr. Ingle worked in Citi’s real estate investment banking group. Mr. Ingle received a BS in Finance and a BA in Spanish from the University of Kansas where he graduated with highest distinction and was a member of Phi Beta Kappa.

David Levine, 34, is Co-Head of Americas Acquisitions for Blackstone Real Estate. Since joining Blackstone in 2010, Mr. Levine has been involved in more than $100 billion of real estate investments across several property sectors and has worked on various transactions, including the acquisition of Gramercy Property Trust, Pure Industrial, WPT Industrial REIT, BioMed Realty and the creation and growth of Blackstone’s 450+ million square foot industrial platform, Link Logistics. He also serves on the board of Reading Partners New York. Mr. Levine graduated from Northwestern University, where he received a BA in Economics.

Samantha Wallack, 47, is a Partner and Real Estate Practice Co-Chair at Blank Rome LLP, a national law firm that provides a full range of legal and advocacy services. Ms. Wallack was appointed Real Estate Practice Co-Chair in January 2020, and under her leadership the group currently represents a multi-billion dollar annual portfolio of client transactions. She oversees a national team of more than sixty real estate attorneys throughout the firm’s thirteen offices who provide legal counsel to public companies, private equity funds, developers, REITs, family businesses, insurance companies, and realty advisers. Ms. Wallack joined Blank Rome in 2000 and was named partner in 2009. She was the firm’s first female real estate partner and became the firm’s first female Real Estate Practice Co-Chair in 2020. She is a member of Blank Rome’s Diversity & Inclusion Committee, former Co-Chair of Blank Rome’s Women’s Forum, a founding member of the firm’s Women Who Lead initiative and serves as pro bono counsel for 1-866-Our Vote and NYAGRA (New York Association for Gender Rights Advocacy). Ms. Wallack holds a BA from the University of Wisconsin and a JD, cum laude, from Benjamin N. Cardozo School of Law.

Director Independence

Our board of directors has affirmatively determined that each of Messrs. Freedman and Beaudin and Ms. Wallack qualify as independent directors under NYSE listing standards.

30

Background and Experience of Directors

When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable our board of directors to satisfy its oversight responsibilities effectively in light of our business and structure, the board of directors focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth above.

Audit Committee

Our board of directors has established an audit committee that operates under a written charter, which is available on our website under https://ir.psbusinessparks.com/corporate-governance/governance-documents. The composition and responsibilities of the audit committee are described below.

Our audit committee consists of Messrs. Freedman and Beaudin and Ms. Wallack, with Mr. Freedman serving as chairman. Each member of the audit committee has sufficient knowledge in financial and auditing matters to serve on the audit committee. In addition, Messrs. Freedman and Beaudin qualify as “audit committee financial experts” under the SEC rules. Our audit committee is responsible for, among other things:

•selecting and hiring our independent auditors, and approving the audit and non-audit services to be performed by our independent auditors;

•assisting the board of directors in evaluating the qualifications, performance and independence of our independent auditors;

•assisting the board of directors in monitoring the quality and integrity of our financial statements and our accounting and financial reporting;

•assisting the board of directors in monitoring our compliance with legal and regulatory requirements; and

•assessing the effectiveness of the Company’s risk management processes, particularly with respect to financial risk exposure reviewing the adequacy and effectiveness of our internal control over financial reporting processes.

Each member of the Audit Committee has been affirmatively determined by our board of directors to qualify as an independent director under the NYSE listing standards and the independence standards of Rule 10A-3 of the Exchange Act.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our board of directors or compensation committee.

Code of Ethics

We have a Code of Conduct that applies to all of our officers, directors and employees (if any), including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions, which is posted on our website. Our Code of Conduct is a “code of ethics,” as defined in Item 406(b) of Regulation S-K. The information contained on, or accessible from, our website is not part of this report by reference or otherwise.

The executive officers of PS Business Parks, Inc are currently comprised of the following three individuals:

Executive Officers of PS Business Parks, Inc.

Name

Age

Office

Luke Petherbridge

43

Chief Executive Officer and Secretary

Matthew L. Ostrower

52

Chief Financial Officer, Vice President and Treasurer

Nicholas Pell

45

President and Chief Investment Officer

Refer to “Business Overview—Executive Officers of PS Business Parks, Inc.” above for biographical information regarding the Company’s executive officers.

31

Item 11. Executive Compensation

We do not have any employees. All of our executive officers are employees of an affiliate of Blackstone and do not receive compensation from us or from any of our subsidiaries for serving as our executive officers. Accordingly, we do not have employment agreements with our executive officers, we do not provide pension or retirement benefits, perquisites or other personal benefits to our executive officers and we do not have arrangements to make payments to our executive officers upon their termination or in the event of a change in control of the Company.

Additionally, our executive officers are not required to dedicate a specific amount of time to us. Accordingly, we cannot identify the portion of the compensation awarded to our executive officers that relates solely to their services to us, as our executive officers are not compensated specifically for such services.

Because our executive officers do not receive compensation from us or from any of our subsidiaries and because we cannot identify the portion of the compensation awarded to our executive officers that relates solely to their services to us, we do not provide executive compensation disclosure pursuant to Item 402 of Regulation S-K.

Director Compensation

Director Compensation for 2022

Following the Merger, the Board approved payment of an annual retainer for each of our independent directors of $150. Freedman and Beaudin and Ms. Wallack received a retainer of $75 representing the pro rata portion of their annual retainer based on their service during the year.Our non-independent directors do not receive additional compensation for their service as a director.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Our Parent and certain of its affiliates own 100% of our issued and outstanding common stock, the Company’s voting securities. None of our executive officers or directors beneficially owns any equity securities of the Company.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Master Services Agreement

On July 20, 2022, the Company entered into a Master Services Agreement with Link Logistics Real Estate Holdco LLC (together with its subsidiaries, “Link”), a portfolio company owned by Blackstone-advised investment vehicles, to provide, as applicable, corporate support services (including, without limitation, accounting, legal, tax, treasury, valuation services, information technology and data management), loan management, management services, operational services, property management services, and transaction support services to the Company. During the period from July 20, 2022 through December 31, 2022, we paid Link total fees of $25,366 pursuant to the terms of the Master Services Agreement. The current term of the Master Services Agreement extends to December 31, 2023, and may be renewed for additional one-year terms thereafter; provided, however, that the Master Services Agreement may be terminated at any time upon prior written notice by either Link or the Company.

32

Parent Partners Loans

In connection with the closing of the Merger, in lieu of distributing all of the proceeds from the Mortgage Loans to fund the consideration for the Merger, certain amounts were loaned to the Parent Partners (the “Parent Partners Loans”). The Parent Partners Loans are evidenced by promissory notes, bear interest at 4.16% per annum and mature in July 2027. The aggregate principal amount of the Parent Partners Loans is $1,285,575, and is recorded within Accumulated earnings (deficit) on the Consolidated Balance Sheets. The amount of interest due to the Company as of December 31, 2022 related to the Parent Partner Loans is $1,275.

Other

Gryphon Mutual Insurance Company (“GMUC”), an affiliate of the Company, is a captive insurance company that began providing insurance coverage to the Company in July 2022. During the period from July 20, 2022 through December 31, 2022, the Company incurred $2,314 for insurance premiums recognized in Property operating expenses in the Consolidated Statements of Operations. The fees paid are in place of insurance premiums and fees that would otherwise be paid to third party insurance companies, and are equivalent or less than the rate third-party insurance companies would charge for such services. There were $— amounts payable to GMUC as of December 31, 2022.

Simply Storage Management, LLC (“Simply Storage”), an affiliate of the Company, is a management company that began providing management services to the Company in October 2022. During the period from July 20, 2022 through December 31, 2022, the Company incurred $19 for management fees recognized in the line item Property operating expenses in the Consolidated Statements of Operations.

In October 2022, the Brentford Joint Venture entered into an agreement to receive proceeds of a $110,000 borrowing obtained under a revolving credit facility. Refer to Note 5 — Debt for additional details.

33

Item 14. Principal Accountant Fees and Services

In July 2022, following the Merger, the Audit Committee of the Board approved the dismissal of Ernst & Young LLP (“EY”) as the Company’s independent registered public accounting firm. In July 2022, the Audit Committee approved the appointment of Deloitte & Touche LLP (“Deloitte”) as the Company’s new independent registered public accounting firm.

The following table presents the aggregate fees billed for professional services rendered by Deloitte for the fiscal year December 31, 2022:


	Year Ended December 31, 2022
Fee Category
Audit Fees	$	635
Audit-Related Fees	—
Tax Fees	—
All Other fees	—
Total fees	$	635

Audit fees. Audit fees represent fees for professional services provided in connection with the audit of the Company’s annual financial statements and internal control over financial reporting, review of the quarterly financial statements included in the Company’s quarterly reports on Form 10-Q, and services in connection with the Company’s registration statements.

Audit-related fees. These are fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements. Such services including accounting consultations, internal control reviews, audits in connection with acquisitions, attest services related to financial reporting that are not required by statute or regulation and required agreed-upon procedure engagements.

Tax fees. This category relates to general tax services.

Audit Committee Pre-Approval Policies and Procedures. Our policy is that all audit and non-audit services provided by the independent registered public accounting firm must be pre-approved by the Audit Committee. The authority to grant pre-approvals of services may be delegated to one or more of the audit committee’s members, but the decision must be reported to the full audit committee at its next scheduled meeting. All of such services and fees were pre-approved during the fiscal year ended December 31, 2022.

34

PART IV

Item 15. Exhibits and Financial Statement Schedule

The following documents are filed as a part of this report:

(a) Financial Statements and Schedule:

1. Financial Statements:

The following Consolidated Financial Statements, together with the Reports of Independent Registered Public Accounting Firm are listed below:

Report s of Independent Registered Public Accounting Firm (PCAOB ID No. 34)

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42)

Consolidated Balance Sheets

Consolidated Statements of Operations

C o nsolidated Statements of Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

2. Financial Statement Schedule:

Schedule III — Real Estate and Accumulated Depreciation

All other schedules have been omitted since the required information is presented in the Consolidated Financial Statements and the related notes or is not applicable.

(b) Exhibits: The Exhibits required by Item 601 of Regulation S-K are listed in the Index to the Exhibits on pages 79 of this report, which is incorporated herein by reference.

35

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors ~~and Shareholders~~ of

PS Business Parks, Inc.

Opinion on Internal Control over Financial Reporting

We have audited ~~PS Business Parks, Inc.’s~~the internal control over financial reporting of PS Business Parks, Inc. (the “Company”) as of December 31, ~~2019,~~2022, based on criteria established in Internal ~~Control—~~Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ~~(2013 framework) (the COSO criteria)~~(COSO). In our opinion, ~~PS Business Parks, Inc. (the Company)~~the Company maintained, in all material ~~aspects,~~respects, effective internal control over financial reporting as of December 31, ~~2019,~~2022, based on ~~the COSO criteria.~~

criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also ~~have~~ audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated ~~balance sheets of PS Business Parks, Inc.~~financial statements as of December 31, ~~2019~~2022 (successor) and ~~2018,~~for the ~~related consolidated statements of income, equity~~periods from July 20,2022 through December 31, 2022 (successor) and ~~cash flows for each~~January 1, 2022 through July 19, 2022 (predecessor) of the ~~three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a)~~Company and our report dated February ~~19, 2020~~28, 2023, expressed an unqualified opinion ~~thereon.~~

on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control ~~Over~~over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the ~~Security~~Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control ~~Over~~over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


	~~/s/ Ernst & Young~~/s/Deloitte & Touche LLP

~~Los Angeles, California~~

New York, NY

February ~~19, 2020~~

‎

28, 2023

39

36

~~Table of Contents~~

~~ITEM 9B.~~ ~~OTHER INFORMATION~~

~~None.~~

~~PART III~~

~~ITEM 10.~~ ~~DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE~~

The information required by this item with respect to directors is hereby incorporated by reference to the material appearing in the Company’s definitive proxy statement to be filed in connection with the annual shareholders’ meeting to be held in 2020 (the “Proxy Statement”) under the caption “Election of Directors.”

~~The following is a biographical summary of the executive officers of the Company:~~

Maria R. Hawthorne, age 60, has served as Chief Executive Officer and President of the Company since July 2016 and August 2015, respectively. In addition, Ms. Hawthorne also served as the Company's acting Chief Financial Officer (CFO) from September 2017 to September 2018. Ms. Hawthorne was also elected as a member of our Board in July 2016. Ms. Hawthorne previously served as Executive Vice President, Chief Administrative Officer of the Company from July 2013 to August 2015. Prior to that, Ms. Hawthorne served as the Company's Executive Vice President, East Coast, from February 2011 to July 2013. Ms. Hawthorne served as the Company's Senior Vice President from March 2004 to February 2011, with responsibility for property operations on the East Coast, including Northern Virginia, Maryland, and South Florida. From June 2001 through March 2004, Ms. Hawthorne was a Vice President of the Company, responsible for property operations in Virginia. From July 1994 to June 2001, Ms. Hawthorne was a Regional Manager of the Company in Virginia. From August, 1988 to July, 1994, Ms. Hawthorne was a General Manager, Leasing Director, and Property Manager for American Office Park Properties. Ms. Hawthorne also serves as director on the Executive Board of NAREIT. Ms. Hawthorne earned a Bachelor of Arts Degree in International Relations from Pomona College.

John W. Petersen, age 56, has been Executive Vice President and Chief Operating Officer since he joined the Company in December, 2004. Prior to joining the Company, Mr. Petersen was Senior Vice President, San Jose Region, for Equity Office Properties (“EOP”) from July, 2001 to December, 2004, responsible for 11.3 million square feet of multi-tenant office, industrial and R&D space in Silicon Valley. Prior to EOP, Mr. Petersen was Senior Vice President with Spieker Properties, from 1995 to 2001 overseeing the growth of that company’s portfolio in San Jose, through acquisition and development of nearly three million square feet. Mr. Petersen is a graduate of The Colorado College in Colorado Springs, Colorado, and was formerly the President of National Association of Industrial and Office Parks, Silicon Valley Chapter.

Jeffrey D. Hedges, age 37, joined the Company as Executive Vice President, Chief Financial Officer, Secretary, and principal financial officer on September 17, 2018. Prior to joining the Company, Mr. Hedges served as Senior Vice President, Accounting and Reporting from 2015 at Invitation Homes (NYSE:INVH) (formerly known as Starwood Waypoint Homes and prior to that Colony Starwood Homes), a publicly traded single-family REIT that owns and operates single-family rental homes in the United States. Prior to that, Mr. Hedges was a Senior Manager in the Transaction Advisory Services and Assurance (Audit) groups at Ernst & Young from 2006 to 2015. Mr. Hedges is a certified public accountant and holds a Bachelor of Science from the W.P. Carey School of Business, Arizona State University, and a Master of Business Administration from the Wharton School, University of Pennsylvania.

Trenton Groves, age 47, has served as the Company’s Senior Vice President, Chief Accounting Officer, Assistant Secretary, and principal accounting officer since September 2018. Mr. Groves joined the Company as Corporate Controller in 2004 and has served as Vice President, Finance, and Corporate Controller since 2007. Prior to joining the Company, Mr. Groves was in public accounting, serving as a Manager in the Assurance (Audit) group at Ernst & Young from 2002 to 2004 and as Manager at Arthur Anderson from 1998 to 2002. Mr. Groves is a certified public accountant and holds a Bachelor of Science in accounting from California State University, Northridge.

Information required by this item with respect to the nominating process, the audit committee and the audit committee financial expert is hereby incorporated by reference to the material appearing in the Proxy Statement under the caption “Corporate Governance and Board Matters.”

‎

40

~~Table of Contents~~

Information required by this item with respect to a code of ethics is hereby incorporated by reference to the material appearing in the Proxy Statement under the caption “Corporate Governance and Board Matters.” We have adopted a code of ethics that applies to our principal executive officer, principal financial officer and principal accounting officer, which is available on our website at www.psbusinessparks.com. The information contained on the Company’s website is not a part of, or incorporated by reference into, this Annual Report on Form 10-K. Any amendments to or waivers of the code of ethics granted to the Company’s executive officers or the controller will be published promptly on our website or by other appropriate means in accordance with SEC rules.

Information required by this item with respect to the compliance with Section 16(a) of the Exchange Act is hereby incorporated by reference to the material appearing in the Proxy Statement under the caption “Section 16(a) Beneficial Ownership Reporting Compliance.”

~~ITEM 11.~~ ~~EXECUTIVE COMPENSATION~~

The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the captions “Compensation Committee Interlocks and Insider Participation,” “Compensation of Directors,” Compensation Discussion and Analysis (CD&A),” “Executive Compensation Tables,” “Compensation Committee Report,” and “Pay Ratio Disclosure.”

~~ITEM 12.~~ ~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND RELATED STOCKHOLDER MATTERS~~

The information required by this item with respect to security ownership of certain beneficial owners and management is hereby incorporated by reference to the material appearing in the Proxy Statement under the caption “Stock Ownership of Certain Beneficial Owners and Management.”

~~The following table sets forth information as of December 31, 2019 on the Company’s equity compensation plans:~~

(a)
(b)
(c)
Number of
Weighted
Number of Securities
Securities to be
Average
Remaining Available for
Issued Upon
Exercise Price of
Future Issuance under
Exercise of
Outstanding
Equity Compensation
Outstanding
Options,
Plans (Excluding
Options, Warrants
Warrants and
Securities Reflected in
Plan Category
and Rights
Rights
Column (a))
Equity compensation plans approved by security holders
308,678
$
103.62
813,400
Equity compensation plans not approved by security holders
—
—
—
Total
308,678
*
$
103.62
*
813,400
*

~~____________________________~~

*~~Amounts include restricted stock units.~~

~~ITEM 13.~~ ~~CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE~~

The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the captions “Corporate Governance and Board Matters” and “Certain Relationships and Related Transactions.”

~~ITEM 14.~~ ~~PRINCIPAL ACCOUNTANT FEES AND SERVICES~~

The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement under the caption “Ratification of Independent Registered Public Accountants.”

‎

41

~~Table of Contents~~

~~PART IV~~

~~ITEM 15.~~ ~~EXHIBITS AND FINANCIAL STATEMENT SCHEDULES~~

a.~~1. Financial Statements~~

~~The financial statements listed in the accompanying Index to Consolidated Financial Statements and Schedules are filed as part of this report.~~

2.~~Financial Statements Schedule~~

~~The financial statements schedule listed in the accompanying Index to Consolidated Financial Statements and Schedules are filed as part of this report.~~

3.~~Exhibits~~

~~The exhibits listed in the Exhibit Index immediately preceding such exhibits are filed with or incorporated by reference in this report.~~

b.~~Exhibits~~

~~The exhibits listed in the Exhibit Index immediately preceding such exhibits are filed with or incorporated by reference in this report.~~

c.~~Financial Statement Schedules~~

~~Not applicable.~~

~~ITEM 16.~~ ~~FORM 10-K SUMMARY~~

~~None.~~

‎

42

~~Table of Contents~~

~~PS BUSINESS PARKS, INC.~~

~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES~~

~~(Item 15(a)(1) and Item 15(a)(2))~~



	~~Page~~
~~Report of Independent Registered Public Accounting Firm~~	44
~~Consolidated balance sheets as of December 31, 2019 and 2018~~	46
~~Consolidated statements of income for the years ended December 31, 2019, 2018 and 2017~~	47
~~Consolidated statements of equity for the years ended December 31, 2019, 2018 and 2017~~	48
~~Consolidated statements of cash flows for the years ended December 31, 2019, 2018 and 2017~~	49
~~Notes to consolidated financial statements~~	51
~~Schedule:~~
~~III — Real estate and accumulated depreciation~~	68

All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or notes thereto.

43

~~Table of Contents~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors ~~and Shareholders~~ of

PS Business Parks, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance ~~sheets~~sheet of PS Business Parks, Inc. (the ~~Company)~~"Company") as of December 31, ~~2019 and 2018, and~~2022 (successor), the related consolidated statements of ~~income,~~operations, equity, and cash flows for ~~each of~~ the ~~three years in the period ended~~periods from July 20, 2022 through December 31, ~~2019,~~2022 (successor) and January 1, 2022 through July 19, 2022 (predecessor), and the related notes and ~~financial statement schedule listed in the Index at Item 15(a)~~Schedule III (collectively referred to as the ~~“consolidated financial statements”~~"financial statements"). In our opinion, the ~~consolidated~~ financial statements ~~referred to above~~ present fairly, in all material respects, the financial position of the Company atas of December 31, ~~2019 and 2018,~~2022, and the results of its operations and its cash flows for ~~each of~~ the ~~three years in the period ended~~periods from July 20, 2022 through December 31, ~~2019,~~2022 (successor) and January 1, 2022 through July 19, 2022 (predecessor), in conformity with ~~U.S.~~accounting principles generally accepted ~~accounting principles.~~

in the United States of America.

We have also ~~have~~ audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the ~~Company’s~~Company's internal control over financial reporting as of December 31, ~~2019,~~2022, based on criteria established in Internal ~~Control-Integrated~~Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ~~(2013 framework),~~ and our report dated February ~~19, 2020~~28, 2023, expressed an unqualified opinion ~~thereon.~~

on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the ~~Company’s~~Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the ~~Security~~Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures ~~include~~included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Net Tangible and Intangible Assets Acquired and Liabilities Assumed in Connection with Business Combination – Refer to Note 2 to the financial statements

Critical Audit Matter Description

The Company, PS Business Parks Inc., was acquired (“The Merger”) on July 19, 2022. The Merger was accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. The total purchase price was allocated to the net tangible and intangible assets acquired and liabilities assumed in connection with the Merger based on their estimated fair values at the time of the transaction, and the purchase price was pushed down to the Company’s financial statements. When using the push-down basis of accounting, the acquired company’s separate financial statements reflect the new accounting basis recorded by the acquiring company, and the assets acquired, and liabilities assumed are recorded at fair value through adjustments to additional paid in capital at the acquisition date.

The determination of the fair value of the net tangible and intangible assets acquired and liabilities assumed in connection with a business combination requires management to make significant estimates related to assumptions such as future cash flows, discount rates, costs during hypothetical lease-up periods, projected rental revenue, and current market interest rates. Performing audit procedures to evaluate the reasonableness of these assumptions required a higher degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

37

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to accounting treatment of the push down accounting related to the Business Combination included the following, among others:

•We evaluated management’s assessment of the business combination conclusions.

•We tested the effectiveness of controls over the push-down accounting, including management’s controls over the identification of real estate assets, and the valuation methodology for estimating the fair value of assets acquired and liabilities assumed.

•With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) current market data, (3) cost to replace certain assets, and (4) assumptions used in the discounted cash flows, including testing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing our estimates to those used by management.

•We assessed the reasonableness of management’s projections of cash flows by comparing the assumptions used in the projections to external market sources, historical data, and results from other areas of the audit.

•We evaluated whether the financial statement presentation and footnote disclosures are appropriate

/s/Deloitte & Touche LLP

New York, NY

February 28, 2023

We have served as the Company's auditor since 2022.

38

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of PS Business Parks, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of PS Business Parks, Inc. (the Company) as of December 31, 2021, and the related consolidated statements of operations, equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Purchase price accounting

~~Purchase price accounting~~

Description of the Matter

As described in Note 3 to the consolidated financial statements, the Company completed ~~three~~two acquisitions during ~~2019~~2021 for consideration of ~~$134.9~~approximately $149 million. As explained in Note 3 to the consolidated financial statements, the transactions were accounted for as asset acquisitions, and as such, are recorded at the price to acquire the real estate property, including acquisition costs. The purchase price is allocated to land, building, and acquired lease intangible assets and/or liabilities based upon the relative fair value of the acquired tangible and intangible lease assets and liabilities. The relative fair value of the acquired tangible and intangible lease assets and

~~See accompanying notes.~~

48

~~Table of Contents~~

On July 20, 2022 (the “Acquisition Date”), pursuant to the terms and subject to the conditions set forth in ~~1990.~~an Agreement and Plan of Merger, dated as of April 24, 2022 (the “Merger Agreement”), a merger (the “Merger”) was completed between PSB and a direct subsidiary of Sequoia Parent LP, a Delaware limited partnership (“Parent”), with the Company surviving. As ~~of December 31, 2019, PSB owned 79.0%~~a result of the ~~common partnership units~~Merger, the Company became a subsidiary of Parent and certain of its affiliates, and PS Business Parks, ~~L.P.~~L.P (the ~~“OP”~~“Partnership”) remained a subsidiary of the Company. The Parent is an affiliate of Blackstone Real Estate Partners IX, L.P., which is an affiliate of Blackstone Inc. (“Blackstone”). The ~~remaining~~ common ~~partnership units are~~stock of the Company is wholly owned by ~~Public Storage (“PS”). PS’s interest in~~ the OPParent and certain of its affiliates and is ~~referred to as~~not publicly traded. The depositary shares representing the ~~“PS OP Interests.” PSB, as the sole general partner~~preferred stock of the ~~OP, has full, exclusive and complete responsibility and discretion in managing and controlling the OP.~~ Company are publicly traded. Refer to Note 2 — Summary of Significant Accounting Policies for additional information on basis of presentation.

PSB and its subsidiaries, including the OPPartnership and ~~our~~its consolidated joint ~~venture that owns a 395-unit multifamily apartment complex in Tysons, Virginia,~~ventures, are collectively referred to as the “Company,” “we,” “us,” or “our.” ~~PS also owns 7.2 million common shares~~

Pursuant to the terms and ~~would own 41.6% (or 14.5 million shares)~~conditions of the ~~outstanding shares~~Merger Agreement, upon the Closing each partnership unit of the ~~Company’s common stock if it~~Partnership (a “Partnership Unit”) that was issued and outstanding prior to the effective time of the Merger (the “Partnership Merger Effective Time”) (other than units held by the Company, Parent, or any of their respective wholly owned subsidiaries) was automatically cancelled and converted into the right to receive an amount in cash equal to $182.25 (the “Per Company Share Merger Consideration”), less any applicable withholding taxes, which represented $187.50 per share of Common Stock as reduced by a $5.25 per share cash dividend paid in connection with the Closing (the “Closing Cash Dividend”) in accordance with the terms of the Merger Agreement. At the Partnership Merger Effective Time, each Partnership Unit owned by the Company or any of its subsidiaries immediately prior to the Partnership Merger Effective Time remained outstanding as a Partnership Unit of the Partnership held by the Company or the relevant subsidiary.

As a result of the completion of the Merger, an aggregate of approximately 21% of the Partnership’s issued and outstanding limited partnership interests were directly owned by Parent and certain of its affiliates (other than the Company) (the “Parent Partners”). Pursuant to a Distribution and Contribution Agreement, immediately following the completion of the Merger, the Partnership redeemed ~~its common~~all of such limited partnership units in exchange for ~~common shares.~~

the distribution (the “Redemption and Distribution”) to the Parent Partners of certain subsidiaries of the Partnership which held assets comprised of 58 properties located in California, Washington and Virginia (the “Non-Core Portfolio”). As a result of the Redemption and Distribution, the Company (directly or indirectly) owns 100% of the Partnership. Total consideration for the exchange was $1,295,217, which represents the fair values as determined between us and our Parent Partners, a related party, on the transaction date. No gain or loss was recognized in connection with this transaction. We accounted for this transaction as a non-cash equity distribution in the Consolidated Financial Statements.

The Company is a ~~fully-integrated, self-advised and self-managed~~ real estate investment trust (“REIT”) that owns, operates, acquires and develops commercial properties, primarily multi-tenant industrial, ~~flex~~industrial-flex and low-rise suburban office space. As of December 31, ~~2019,~~2022 and December 31, 2021, the Company owned 471 buildings and ~~operated 27.6 million rentable~~one land parcel in six states with 20,656,858 gross leasable square feet ~~of commercial space~~and 666 buildings in 6six states ~~and held a 95.0% interest in a 395-unit multifamily apartment complex in Tysons, Virginia. The Company also manages for a fee approximately 438,000 rentable~~with 27,716,719 gross leasable square feet, ~~on behalf of PS.~~

respectively.

References herein to the number of properties, buildings, apartment units or square footage are unaudited and outside the scope of the Company’s independent registered public accounting ~~firm's audit~~firm’s review of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).

The accompanying ~~consolidated financial statements include the accounts of PSB and its subsidiaries, including the OP and our consolidated joint venture. All significant inter-company balances and transactions~~Consolidated Financial Statements have been ~~eliminated~~prepared in ~~the consolidated financial statements. The financial statements are presented on an accrual basis in accordance~~conformity with U.S. generally accepted accounting principles (“GAAP”) as established by the Financial Accounting Standards Board (“FASB”) including modifications issued under Accounting Standards Updates (“ASUs”).

~~Consolidation~~ In the opinion of management, all adjustments (consisting of normal and ~~equity method~~recurring adjustments) necessary for a fair presentation have been included.

Upon acquisition of a rental property that is accounted for as a business combination, the Company allocates the purchase price, of each acquired property based upon the fair value of the individual assets acquired and liabilities assumed, which generally include tangible assets, consisting of land, building, building improvements, tenant improvements, and identified intangible assets and liabilities, generally consisting of above-and below-market leases, in-place leases, and origination costs associated with in-place leases. In estimating the fair value of tangible and intangible assets and liabilities acquired, the Company considers information obtained about the property during its due diligence and marketing and leasing activities, and utilizes appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. The values of above-and below-market leases are recorded to Prepaid expenses and other assets and Accounts payable, accrued expenses and other liabilities, respectively, in the Consolidated Balance Sheets and are amortized as either a decrease (in the case of above-market leases) or an increase (in the case of below-market leases) to rental revenue over the remaining term of the associated tenant lease. The values associated with in-place leases are recorded in Prepaid expenses and other assets in the Consolidated Balance Sheets and are amortized to depreciation and amortization expense over the remaining lease term.

In a business combination, the initial allocation of the purchase price is considered preliminary and may change upon final determination of the fair values of the assets acquired and liabilities assumed. The final determination must occur within one year of the acquisition date.

The Company performs the following procedures for properties it acquires:

As a result of the Merger discussed in Note 1 — Description of Business and the election to apply pushdown accounting, the Company also aligned its accounting policies with that of the Parent. Accordingly, certain prior year amounts in the consolidated financial statements have ~~insufficient equity~~been reclassified to ~~finance their activities without additional subordinated~~conform to the current year presentation. As of December 31, 2021, the reclassifications represent changes to aggregation and presentation of financial ~~support provided by~~information and resulted in zero changes to total assets and zero changes to total liabilities. For the years ended December 31, 2021 and December 31, 2020, it resulted in $451 and $12 changes to total revenue, $315 and $524 changes in total expenses, and $3,467 and $512 changes in total other ~~parties, or~~income (expense), respectively. There was no change to net income as historically reported.

The Company’s policy is to consolidate all entities in which it owns more than 50% of the ~~equity holders as a group do~~outstanding voting interest unless it does not ~~have a controlling financial interest. A limited partnership~~control the entity. It is also ~~generally considered a VIE if~~ the ~~limited partners do not participate in operating decisions. We~~Company’s policy to consolidate ~~VIEs when we are~~any variable interest entity (“VIE”) for which the Company is the primary beneficiary, ~~generally~~as defined ~~as having~~by GAAP. The Company is deemed to be the primary beneficiary when it has (i) the power to direct the activities that most significantly ~~impacting~~impact the economic performance of the entity, and (ii) ~~either~~ the obligation (or right) to absorb losses or(or receive benefits) of the ~~right~~entity that could potentially be significant.

Investments in entities in which the Company does not control but which it has the ability to ~~receive benefits from~~exercise significant influence over operating and financial policies are presented under the ~~VIE.~~

~~We account for investments~~equity method. Investments in entities that ~~are~~the Company does not ~~VIEs that we have~~control and over which it does not exercise significant influence are carried at the lower of cost or fair value, as appropriate. The Company’s ability to correctly assess control over ~~but do~~an entity affects the presentation of these investments in the Consolidated

Financial Statements. The portions of consolidated entities not control, using the equity method of accounting and for investment in entities that we control, we consolidate. On January 1, 2018, we began to consolidate our joint venture due to changes to the joint venture agreement that gaveowned by the Company ~~control~~are presented as noncontrolling interests as of and during the ~~joint venture. See Note 4 for more information on this entity.~~

~~PS, the sole limited partner in the OP, has no power to direct the activities of the OP. We are the primary beneficiary of the OP. Accordingly, we consider the OP a VIE~~periods presented. All intercompany transactions and ~~consolidate it. Substantially all of our assets and liabilities are held by the OP.~~

balances have been eliminated.

The preparation of the ~~consolidated financial statements~~Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported inamounts of revenue and expenses during the ~~consolidated financial statements and accompanying notes. Actual results could differ from these estimates.~~

~~Financial instruments~~

~~The methods~~reporting period. Significant estimates, judgments and assumptions ~~used~~are required in a number of areas, including, but not limited to, ~~estimate~~evaluating the impairment of long-lived assets and investments, allocating the purchase price of acquired properties, determining the fair value of ~~financial instruments~~debt and incentive compensation. These estimates, judgments and assumptions are ~~described below.~~based on historical experience and various other factors that the Company believes to be reasonable under the circumstances. Actual results may differ from those estimates.

Property and improvements, including interest and other costs capitalized during construction and development, are included in Investments in real estate, net and are stated at cost. Property and improvements, excluding land, are depreciated over their estimated useful lives using the straight-line method. The estimated useful lives by asset category are as follows:

Expenditures for ordinary repairs and maintenance are expensed as incurred. Renovations and improvements, which improve or extend the useful life of the assets, are capitalized.

During the land development and construction periods of qualifying projects, the Company capitalizes interest costs, insurance, real estate taxes and general and administrative costs of the personnel performing the development, renovation and rehabilitation if such costs are incremental and identifiable to a specific activity to ready the asset for its intended use. The Company ~~has estimated~~capitalizes transaction costs related to the acquisition of land for future development and operating properties that qualify as asset acquisitions. The Company capitalizes incremental costs incurred to successfully originate a lease that result directly from obtaining a lease and would also not have been incurred if the lease had not been obtained. In assessing the amount of direct and indirect costs to be capitalized, allocations are made based on estimates of the actual amount of time spent in each activity. The Company does not capitalize any costs attributable to downtime or to unsuccessful projects.

In accordance with the guidance for business combinations, the Company determines whether a transaction or other event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the assets acquired are not a business, the Company would account for the transaction or other event as an asset acquisition. The Company’s acquisitions of investment properties are typically accounted for as asset acquisitions, as substantially all of the fair value of ~~financial instruments using~~the gross assets acquired is typically concentrated in a single identifiable asset or a group of similar identifiable assets. When acquisitions are treated as asset acquisitions, the related transaction costs are capitalized.

The Company assesses whether a property is considered held for sale based on the criteria in ASC 360 Property, Plant, and Equipment (“ASC 360”). The Company generally classifies certain properties and related assets and liabilities as held for sale when the sale of an asset has been duly approved by management, a legally enforceable contract has been executed and the buyer’s due diligence period, if any, has expired and a non-refundable deposit has been received. If a property is considered held for sale, a provision for loss is recognized if the fair value of the property less the estimated cost to sell is less than its carrying amount. Depreciation and amortization expense cease once a property is considered held for sale. As of December 31, 2022 and December 31, 2021, zero and 12 properties were classified as held for sale, respectively.

The Company’s sales of real estate are generally considered to be sales to non-customers, requiring the Company to identify each distinct non-financial asset promised to the buyer. The Company determines whether the buyer obtains control of the non-financial assets, achieved through the transfer of the risks and rewards of ownership of the non-financial assets.

The Company recognizes gains on the disposition of real estate when the recognition criteria have been met, generally at the time the risks and rewards and title have transferred, and we no longer have substantial continuing involvement with the real estate sold. The Company recognizes gains or losses from the disposition of real estate when known as Gain (loss) on sale of real estate, net in the Consolidated Statement of Operations.

The Company periodically assesses whether there are any indicators that the value of its real estate may be impaired. When impairment indicators exist, the Company’s properties are evaluated for impairment. A property’s value is considered impaired if the sum of expected future cash flows (on an undiscounted basis) over the anticipated holding period is less than the property’s carrying value. Upon determination that an impairment exists, properties are reduced to their fair value.

The evaluation of future cash flows is highly subjective and is based in part on the Company’s assumptions regarding future occupancy, rental rates, capital requirements, and holding periods. These assumptions could differ materially from actual results in future periods. Should circumstances change, and the Company shortens the expected holding period for an asset or group of assets, an impairment loss may be recognized, and such loss could be material. During the periods presented, no impairment was recognized in the Consolidated Financial Statements.

A property is classified as held for sale when all of the accounting criteria for a plan of sale have been met. Upon classification as held for sale, the Company recognizes an impairment charge, if necessary, to lower the carrying amount of the real estate asset to its estimated fair value less cost to sell. The determination of fair value can involve significant judgments and assumptions. The Company develops key assumptions based on the contractual sales price. If this information is not available, ~~market information~~the Company uses estimated replacement costs or estimated cash flow projections that utilize estimated discount and ~~appropriate valuation methodologies. Considerable~~capitalization rates. These estimates are subject to uncertainty and therefore require significant judgment ~~is required~~by the Company. The Company reviews all assets held for sale each reporting period to determine whether the existing carrying amounts are fully recoverable in ~~interpreting market data~~comparison to ~~develop estimates of market value. Accordingly,~~their estimated fair values less costs to sell.

Deferred leasing costs consist primarily of costs incurred to execute new and renewal tenant leases, primarily costs paid to third parties. Deferred leasing costs are ~~not necessarily indicative~~amortized on a straight-line basis over the terms of the ~~amounts that could be realized~~respective leases. The amortization of deferred leasing costs is included in ~~current market exchanges.~~ the line item Depreciation and amortization in the Consolidated Statement of Operations.

The Company defers fees and direct costs incurred to obtain financing, which is reflected as a component of Debt, net within the accompanying Consolidated Balance Sheets. Deferred financing costs are amortized to interest expense using the effective rate method, which approximates the effective interest method, over the term of the debt to which they apply. Unamortized deferred financing costs are charged to interest expense when the related financing is repaid prior to its scheduled maturity date.

The Company leases its operating properties to customers under agreements that are classified as operating leases. Rental revenue primarily consists of base rent arising from tenant leases and tenant reimbursements of property operating expenses related to common area maintenance, real estate taxes, and other recoverable costs included in lease agreements.

The Company begins to recognize revenue for leases that are assumed upon the acquisition of the related property or when a tenant takes possession of the leased space for a new lease.

If a lease provides for tenant reimbursement of building operating expenses, the Company recognizes revenue associated with the recovery of those building operating expenses as those expenses are incurred.

The Company records rental revenue on a straight-line basis as it is earned during the lease term. Certain leases provide for tenant occupancy during periods for which no rent is due or where minimum rent payments change during the lease term. Accordingly, a receivable is recorded representing the difference between the straight-line rent and the rent that is contractually due from the tenant over the contractual lease term. These amounts are classified as Tenant and other receivables in the Consolidated Balance Sheets. When a property is acquired, the terms of existing leases are considered to commence as of the acquisition date for purposes of this calculation. As a result of the election of pushdown accounting for the Merger, the Acquisition Date was used as commencement date for purposes of active leases that existed as of that date.

Noncontrolling interests represent the share of consolidated entities owned by third parties. The Company recognizes each noncontrolling holder’s respective share of the estimated fair value of the net assets at the date of formation or acquisition. Noncontrolling interests are subsequently adjusted for the noncontrolling holder’s share of additional contributions, distributions and their share of the net earnings or losses of each respective consolidated entity. The Company allocates net income or loss to noncontrolling interests based on the weighted average ownership interest during the period. The net income or loss that is not attributable to the Company is reflected in the line item Net (income) loss attributable to noncontrolling interests within the Consolidated Statements of Operations. As of the Acquisition Date, noncontrolling interest was stepped up to fair value as a result of pushdown accounting.

The Company provides for potentially uncollectible accounts on tenant and other receivables based on analysis of the risk of loss on specific accounts. The analysis places particular emphasis on past due accounts and considers information such as the nature and age of the receivable, the payment history of the tenant or other debtor, the financial condition of the tenant and the Company’s assessment of its ability to meet its lease obligations, the basis for any disputes, and the status of related lease negotiations.

The Company’s determination of the adequacy of its allowances for tenant receivables includes a binary assessment of whether or not the amounts due under a tenant’s lease agreement are probable of collection. For such amounts that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term. For such amounts that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectability determination.

Cash and cash equivalents represent cash held in banks, cash on hand, and liquid investments with maturities at date of purchase of three months or less.

Restricted cash primarily consists of reserves for certain capital improvements, leasing, interest and real estate tax and insurance payments as required by certain debt obligations.

The Company has elected to be taxed as a REIT. This, along with the nature of the operations of its operating properties, resulted in no provision for federal income taxes at the Company level. In addition, the Partnership generally is not liable for federal income taxes as the partners recognize their allocable share of income or loss in their tax returns; therefore no provision for federal income taxes has been made at the Partnership level. The Company generally only incurs certain state and local income, excise and franchise taxes. The Company has elected taxable REIT subsidiary (“TRS”) status for certain of its corporate subsidiaries and, as a result, these entities will incur both federal and state income taxes on any taxable income of such entities after consideration of any net operating losses.

The Company accounts for deferred income taxes using the asset and liability method and recognizes deferred tax assets and liabilities ~~utilizing a hierarchy~~for the expected future tax consequences of ~~valuation techniques~~events that have been included in the Company’s Consolidated Financial Statements or tax returns. Under this method, the Company determines deferred tax assets and liabilities based on ~~whether~~ the ~~inputs~~differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Any increase or decrease in the deferred tax liability that results from a change in circumstances, and that causes management to change its judgment about expected future tax consequences of events, is included in the tax provision when such changes occur. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. A valuation allowance is provided if the Company believes it is more likely than not that all or some portion of the deferred tax asset will not be realized. Any increase or decrease in the valuation allowance that results from a change in circumstances, and that causes management to change its judgment about the realizability of the related deferred tax asset, is included in the tax provision when such changes occur.

The Company recognizes the tax benefit from an uncertain tax position claimed or expected to be claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the Consolidated Financial Statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties, if applicable, related to uncertain tax positions as part of income tax benefit or expense.

The Company buys or sells derivative financial instruments to limit exposure to changes in interest rates on variable rate debt. The Company does not use derivative instruments for speculative or trading purposes. None of the Company’s interest rate caps or swaps are currently or have been designated as hedges for accounting purposes. The Company’s derivative financial instruments are recorded at fair value ~~measurement~~and are ~~considered to be observable or unobservable~~recorded in ~~a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. This hierarchy requires~~ the ~~use of observable market data when available. The following is~~line items Prepaid expenses and other assets and Accounts payable, accrued expenses and other liabilities in the Consolidated Balance Sheets.

Changes in the fair value ~~hierarchy:~~

of our derivative financial instruments are marked to market through earnings each quarter and are reflected in Interest expense in the Consolidated Statements of Operations.

Notional principal amounts are used to express the volume of these transactions, but the cash requirements and amounts subject to credit risk are substantially less. Parties to interest rate cap or swap agreements are subject to market risk for changes in interest rates and credit risk in the event of nonperformance by the counterparty. The Company does not require any collateral under these agreements but deals only with highly rated institutional counterparties and expects that they will meet their obligations.

Various inputs are used in determining the fair value of derivative instruments presented in the Consolidated Financial Statements. The Company classifies the inputs as follows:

Level 1~~—quoted~~1—Quoted unadjusted prices for identical instruments in active ~~markets;~~

markets to which the Company has access at the date of measurement.

Level 2~~—quoted~~2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active ~~markets; and~~

markets. Level 3~~—fair value measurements~~2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.

Level 3—Model derived ~~from valuation techniques~~valuations in which one or more significant inputs or significant value drivers are unobservable.

~~Financial assets~~ Unobservable inputs are those inputs that reflect the Company’s own assumptions that market participants would use to price the asset or liability based on the best available information.

The fair value of the Company’s derivatives was determined by management, based on valuation information prepared by an independent third party. Their fair value model incorporates credit risk and changes in credit risk to determine a credit valuation adjustment. This model is based on the applicable forward curve as a reflection of the market’s current expectation of payments discounted at market factors. The Company classifies these valuations within the Level 2 fair value hierarchy.

Under interest rate cap agreements, the Company makes initial premium payments to the counterparties in exchange for the right to receive payments from them if interest rates exceed specified levels during the agreement period. Notional principal amounts are ~~exposed~~used to express the volume of these transactions, but the cash requirements and amounts subject to credit risk ~~consist primarily~~are substantially less. Parties to interest rate cap agreements are subject to market risk for changes in interest rates and credit risk in the event of ~~cash equivalents and receivables.~~nonperformance by the counterparty. The Company ~~considers all highly liquid investments~~does not require any collateral under these agreements but deals only with ~~a remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash~~highly-rated institutional counterparties and cash equivalents, which consist primarily of money market investments, are only invested in entities with an investment grade rating. Receivables are comprised of balances due from various customers. Balancesexpects that they will meet their obligations.

The Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy. Although the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company ~~expects to become uncollectible~~and its counterparties, the Company assesses the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are ~~written off. Due~~not significant to the ~~short period to maturity~~overall valuation of ~~the Company’s cash and cash equivalents, accounts receivable, other~~its derivatives.

Acquired lease intangible assets: The Company estimated the fair value of its ~~original form~~above-market and ~~likely that it will be developed to an alternate use. Property held for sale are not depreciated.~~

~~Intangible assets/liabilities~~

~~When we acquire real estate facilities, an intangible asset is recorded as other assets for~~below-market in-place leases ~~where the in-place rent is higher than market rents, and an intangible liability is recorded as other liabilities where the market rents are higher than the in-place rents. The amounts recorded are~~ based ~~upon~~on the present value (using a discount rate ~~which~~that reflects the ~~risks~~risk associated with the leases acquired) of ~~such differences~~the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over the ~~lease~~remaining non-cancelable term and such amounts are amortized to rental income over the respective remaining lease term. As of December 31, 2019, the value of above-market in-place rents resulted in net intangible assets of $1.2 million, net of $10.6 million of accumulated amortization and the value of below-market in-place rents resulted in net intangible liabilities of $2.4 million, net of $11.4 million of accumulated amortization. As of December 31, 2018, the value of above-market in-place rents resulted in net intangible assets of $1.8 million, net of $10.0 million of accumulated amortization and the value of below-market in-place rents resulted in net intangible liabilities of $1.8 million, net of $10.8 million of accumulated amortization.

Additionally, when we acquire real estate facilities, the value of in-place leases (i.e., customer lease-up costs) is recorded as other assets and is amortized to depreciation and amortization expense over the respective remaining lease term. As of December 31, 2019, the value of acquired in-place leases resulted in net intangible assets of $5.7 million, net of $4.1 million of accumulated amortization. As of December 31, 2018, the value of acquired in-place leases resulted in net intangible assets of $4.7 million, net of $1.3 million of accumulated amortization.

~~Evaluation of asset impairment~~

~~We evaluate our real estate and finite-lived intangible assets for impairment each quarter. If there are indicators of impairment and we determine that the carrying value~~ of the asset is not recoverable from estimated future undiscounted cash flows to be received through the asset’s remaining life (or, if earlier, the expected disposal date), we record an impairment charge to the extent the carrying amount exceeds the asset’s estimated fair value or net proceeds from expected disposal.

~~NaN impairment charges were recorded in any period presented herein.~~

‎

In-place lease liabilities: The Company estimated the ~~beginning of the service period. See Note 10.~~

~~Accrued and other liabilities~~

Accrued and other liabilities consist primarily of rents prepaid by our customers, trade payables, property tax accruals, accrued payroll and contingent loss accruals when probable and estimable, as well as the intangible liabilities discussed above. We disclose the nature of significant unaccrued losses that are reasonably possible of occurring and, if estimable, a range of exposure. The fair value of ~~accrued~~its in-place leases using independent and ~~other liabilities approximate book~~internal sources, which are methods similar to those used by independent appraisers. Factors we consider in our analysis include an estimate of costs to execute similar leases including tenant improvements, leasing commissions and foregone costs and rent received during the estimated lease-up period as if the space was vacant. This valuation methodology is based on Level 3 inputs in the fair value ~~due to~~hierarchy.

Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the ~~aggregate rent~~chief operating decision maker (“CODM”) in deciding how to ~~be collected (including~~allocate resources and in assessing performance. Under the ~~impact~~provision of ~~escalators~~ASC 280, Segment Reporting, we have determined that we have one reportable segment, which includes the acquisition, leasing, and ~~concessions) under leases ratably throughout the non-cancellable lease term on a “straight-line” basis, commencing when the customer takes control~~ownership of ~~the leased space. Cumulative straight-line rent recognized in excess of amounts billed per the lease term~~logistics properties. There is presented as “deferred rent receivable” on our consolidated balance sheets. The Company presents reimbursements from customers for real estate taxes and other recoverable operating expenses under a single lease component presentation as the timing and pattern of transfer of such reimbursements are the same as base rent, and the combined single component of such leases are classified as operating leases. Accordingly, the Company recognizes such variable lease payments resulting from the reimbursements from customers for real estate taxes and other recoverable operating expenses as rental income in the period the applicable costs are incurred.

~~The Company monitors the collectability of its receivable balances, including deferred rent receivable balances, on~~ an ongoing basis. The Company writes off uncollectible customer receivable balances, including deferred rent receivable balances, in the period such receivable balances are deemed uncollectible. Therefore, recognition of rental income is limited to the lesser of theimmaterial amount of ~~cash collected or rental income reflected on a “straight-line” basis, plus any accruable variable lease payments for those customer receivable balances deemed uncollectible.~~

~~Property management fees are recognized in the period earned as other income.~~

~~Sales of real estate facilities~~

Sales of real estate facilities are not part of our ordinary activities, and as a result, we consider such sales as contracts with non-customers. We recognize sales of real estate when we have collected payment and the attributes of ownership such as possession and control of the asset have been transferred to the buyer. If a contract for sale includes obligations to provide

The Company has ~~elected the impairment model approach~~equity interests in certain entities that primarily own and operate properties or hold land for development. The Company consolidates those entities that are considered to account for its uncollectible customer receivable balances and deferred rent receivable balances. The Company’s uncollectible receivable balances policy is consistent with the impairment model approach asbe VIEs where the Company ~~writes off uncollectible receivable balances~~is the primary beneficiary. The Company (i) evaluates the sufficiency of the total equity investment at risk, (ii) reviews the voting rights and decision- making authority of the equity investment holders as a group and whether there are limited partners (or similar owning entities) that lack substantive participating or kick out rights, guaranteed returns, protection against losses, or capping of residual returns within the group and (iii) establishes whether activities within the entities are on behalf of an investor with disproportionately few voting rights in making this VIE determination.

To the extent that the Company owns interests in a VIE and (i) has the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) has the obligation or rights to absorb losses or receive benefits that could potentially be significant to the VIE, then the Company would be determined to be the primary beneficiary and would consolidate the VIE. At each reporting period, the ~~amounts are deemed uncollectible. Therefore, our rental income is limited~~Company re-assesses the conclusions as to ~~the lesser of the amount of cash collected or rental income reflected on a “straight-line” basis, plus~~which, if any, ~~accruable variable lease payments for those customer receivable balances deemed uncollectible.~~

~~Costs to execute leases~~

The Lease Standard also provides updated guidance on the requirements for the capitalization of the incremental costs incurred in executing leases, such as legal fees and commissions. Under the Lease Standard, any costs that would have been incurred regardless of successful lease execution, such as allocated costs of internal personnel, are to be expensed and may not be capitalized. As we have historically not capitalized any such costs, the adoption of the Lease Standard did not result in a material impact to our consolidated financial statements.

59

~~Table of Contents~~

The following table presents a summary of financial data of the consolidated VIE included in the Company’s Consolidated Balance Sheets:

The Company evaluated recently issued accounting standards or pronouncements and determined such standards or pronouncements are either not relevant to the Company ~~control~~or not expected to have a material effect on the Company’s Consolidated Financial Statements.

The following comprise the Company’s real estate investments:

Depreciation expense of investments in real estate was $141,027, $48,884, $90,176, and $93,265 for the ~~joint venture.~~

~~Prior to~~period from July 20, 2022 through December 31, 2022, the period from January 1, 2018, the Company accounted its investment in the joint venture using the equity method. The Company reflected the aggregate cost of the contributed site and improvements, its equity contributions and loan advances, as well as capitalized third party interest incurred as investment in and advances to unconsolidated joint venture. For2022 through July 19, 2022, the year ended December 31, ~~2017, the Company made loan advances of $34.1 million~~2021, and ~~capitalized $506,000 of interest.~~

~~During~~ the year ended December 31, ~~2017, the Company recorded an equity loss in the unconsolidated joint venture of $805,000, comprised of net operating income of $375,000 and depreciation expense of $1.2 million.~~

~~5. Leasing activity~~

~~The Company leases space in its commercial real estate facilities to customers primarily under non-cancelable leases generally ranging from~~ ~~one~~ ~~to 10 years. Future minimum rental income, excluding recovery of operating expenses that may be collectable under these leases, is as follows as of December 31, 2019~~ ~~(in thousands)~~:

‎

2020, respectively.

Transaction costs of $—, $—, $370, and $446 were capitalized and included within the allocated purchase price for the period from July 20, 2022 through December 31, ~~2019 and 2018, respectively. Distributions of $134,000 were paid to~~2022, the ~~JV during~~period from January 1, 2022 through July 19, 2022, the year ended December 31, ~~2019~~2021, and ~~NaN were paid during 2018.~~

~~8. Related party transactions~~

~~We manage certain industrial, office and retail facilities in~~ the United States for PS under either the “Public Storage” or “PS Business Parks” names (the “PS Management Agreement”). Under PS’s supervision, we coordinate and assist in rental and marketing activities, property maintenance and other operational activities, including the selection of vendors, suppliers, employees and independent contractors. We receive a management fee based upon a percentage of revenues, which is included in “interest and other income” on our consolidated statements of income. Management fee revenues were $287,000, $407,000 and $506,000 for the yearsyear ended December 31, ~~2019, 2018~~2020, respectively.

The following table provides the weighted-average amortization period as of December 31, 2022 for intangible assets and liabilities and the projected amortization expense for the ~~years ended December 31, 2019, 2018~~next five years:

In connection with the completion of the Merger, certain indirect subsidiaries of the Partnership and ~~2017, respectively.~~

certain subsidiaries of Blackstone Real Estate Partners IX, L.P within the Non-Core Portfolio (collectively, the “Loan A Mortgage Borrowers”) obtained a $2,733,620 mortgage loan (the “Loan A Mortgage Loan”) on July 20, 2022 from Bank of America, N.A., Citi Real Estate Funding Inc., Barclays Capital Real Estate Inc., Morgan Stanley Bank, N.A., and Societe Generale Financial Corporation (together with its successors and assigns, the “Loan A Lenders”), and certain other indirect subsidiaries of the Partnership and certain subsidiaries of Blackstone Real Estate Partners IX, L.P within the Non-Core Portfolio (collectively, the “Loan B Mortgage Borrowers” and, together with the Loan A Mortgage Borrowers, the “Mortgage Borrowers”) obtained a $1,960,000 mortgage loan with an additional $96,000 future funding option (the “Loan B Mortgage Loan” and, together with the Loan A Mortgage Loan, the “Mortgage Loans”) on July 20, 2022 from Citibank, N.A., as administrative agent and the other lenders party thereto (together with the Loan B Lenders, the “Lenders”). On August 5, 2022, the Loan A Mortgage Loan was securitized as evidenced by that certain Offering Circular by BX Trust 2022-PSB, as the issuing entity, Bank of America Merrill Lynch Large Loan, Inc., as depositor, and Bank of America, National Association, Barclays Capital Real Estate Inc., Citi Real Estate Funding Inc., Morgan Stanley Mortgage Capital Holdings LLC and Societe Generale Financial Corporation, as mortgage loan sellers.

The ~~PS Business Parks name~~Loan A Mortgage Loan is secured by first-priority, cross-collateralized mortgage liens on certain of the Company’s properties located in California, Florida, Maryland, Texas, Washington and ~~logo~~Virginia, as well as other properties comprising the Non-Core Portfolio that are owned by ~~PS and licensed to us under a non-exclusive, royalty-free license agreement. The license can be terminated by either party for any reason with six months written notice.~~

~~PS provides us property management services for the self-storage component~~affiliated entities outside of ~~2 assets we own and operates them under the “Public Storage” name. Either~~ the Company ~~or PS can cancel~~(the Non-Core Affiliates”), all related personal property, reserves, a pledge of all income received by the ~~property~~Loan A Mortgage Borrowers with respect to such properties and a security interest in a cash management contract upon 60 days’ notice. Under our supervision, PS coordinates and assists in rental and marketing activities, and property maintenance and other operational activities, including the selection of vendors, suppliers, employees and independent contractors. Management fee expenses were $98,000, $96,000 and $92,000 for the years ended December 31, 2019, 2018 and 2017, respectively. Additionally, PS allocatedaccount. The Loan B Mortgage Loan is secured by first-priority, cross-collateralized mortgage liens on certain operating expenses to us related to the management of these properties totaling $75,000, $65,000 and $61,000 for the three years ended December 31, 2019, 2018 and 2017, respectively. These amounts are included under “cost of operations” on our consolidated statements of income.

Pursuant to a cost sharing agreement, we share certain administrative services, corporate office space, and certain other third party costs with PS which are allocated based upon fair and reasonable estimates of the ~~cost of the services expected to be provided. We reimbursed PS $1.2 million, $1.2 million~~Company’s properties located in California, Florida, Texas, Washington and $1.3 million, respectively, for costs PS incurred on our behalf for the years ended December 31, 2019, 2018 and 2017. PS reimbursed us $39,000, $38,000 and $31,000 costs we incurred on their behalf for the years ended December 31, 2019, 2018 and 2017, respectively.

~~The Company had net amounts due to PS of $106,000 at December 31, 2019 and due from PS of $43,000 at December 31, 2018 for these contracts,~~Virginia, as well as ~~certain operating expenses paid~~other properties comprising the Non-Core Portfolio that are owned by the Non-Core Affiliates, all related personal property, reserves, a pledge of all income received by the Loan B Mortgage Borrowers with respect to such properties and a security interest in a cash management account.

The Company and the Non-Core Affiliates are jointly and severally liable for the debt but are allocated debt and related interest based on ~~behalf~~allocated loan amounts. The Company recorded the interest and principal obligation of ~~PS.~~

its portion of the Mortgage Loans on its Consolidated Balance Sheets. The Company does not expect to pay interest and principal on the portion of the Mortgage Loans allocated to the Non-Core Affiliates and therefore have not recorded any liability related to their share of the debt. Principal balances relating to the Company’s allocated amount of these loans are further outlined in the table below. Transaction costs related to loan issuances have been capitalized, deducted from the loan liabilities, and are amortized over the life of each respective loan. The Company used the proceeds from the Mortgage Loans, among other things, to (i) fund the consideration for the Merger, (ii) pay for certain costs and expenses relating to (a) the transactions in connection with the Merger and incurred in connection with the closing of the Mortgage Loans, and (b) the operation of the properties (including, without limitation, carrying costs with respect to the properties and funding working capital requirements of the properties), (iii) establish reserves, including certain reserves required to be established under the terms of the Mortgage Loans, and (iv) other general corporate purposes. General corporate purposes may include, but are not limited to, the repayment of other debt and selective development, redevelopment, or acquisition of properties.

The Mortgage Loans are scheduled to mature on August 9, 2024, with an option for the Mortgage Borrowers to extend the initial term for three one-year extension terms, subject to certain conditions.

The Company’s debt includes various representations and warranties, as well as a series of financial and other covenants that the Company has to comply with in order to borrow under them. The Company was in compliance with all representations and warranties, as well the covenants under the various debt facilities as of December 31, 2022 and December 31, 2021, as required and applicable.

The Company uses derivative financial instruments to manage interest rate risk on its floating rate debt.

In connection with the mortgages obtained on the date of the Merger, as further described in Note 5 — Debt, the Company entered into interest rate derivative contracts to limit its exposure of interest rate risk. The following is a summary of the Company’s derivative financial instruments:

There were no derivative instruments as of December 31, 2021 or for the period from January 1, 2022 through July 19, 2022.

The Company did not have any transfers within the fair value hierarchy during the periods presented. The Company’s Level 3 inputs are model-derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Company’s own assumptions that market participants would use to price the asset or liability based on the best available information. In evaluating the fair value information, judgment is required to interpret the market data used to develop the estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions and/or different valuation techniques could result in materially different fair value estimates.

The carrying amounts of cash and cash equivalents, restricted cash, tenant and other receivables, prepaid expenses and other assets, accounts payable, accrued expenses and other liabilities reasonably approximates fair value, in management’s judgment, because of their short-term nature.

Assets measured at fair value on a nonrecurring basis generally consist of real estate acquired, investments in unconsolidated joint ventures, and assets the Company expects to sell that were subject to impairment charges in connection with the Company’s change of intent to sell the investments and through its recoverability analysis. Refer to Note 2 — Summary of Significant Accounting Policies for more information regarding the fair value measurement of the assets acquired and liabilities assumed in connection with the Merger. The Company estimates fair value based on expected sales prices in the market (Level 2) or by applying the income approach methodology using a discounted cash flow analysis (Level 3). During the periods presented, the Company did not record any impairment losses.

The Company’s rental revenue primarily consists of rent earned from operating leases at the Company’s real estate properties. Leases generally include both a fixed base rent and variable component. The variable component of the leases primarily consists of the reimbursement of operating expenses such as real estate taxes, insurance, management fees, and common area maintenance costs. Leases are generally shorter term and may contain extension and termination options at the lessee’s election.

The following table presents the future minimum rents the Company expects to receive for their properties for each year through the period ended December 31, 2027, and thereafter:

No significant tenant concentrations existed at December 31, 2022.

On July 20, 2022, the Company entered into a Master Services Agreement with Link Logistics Real Estate Holdco LLC (together with its subsidiaries, “Link”), a portfolio company owned by Blackstone-advised investment vehicles, to provide, as applicable, corporate support services (including, without limitation, accounting, legal, tax, treasury, valuation services, information technology and data management), loan management, management services, operational services, property management services, and transaction support services to the Company. During the period from July 20, 2022 through December 31, 2022, total fees of $5,446, were recognized in the line item General and administrative in the Consolidated Statements of Operations. During the period from July 20, 2022 through December 31, 2022, total fees of $4,132 were recognized in the line item Property operating expenses in the Consolidated Statements of Operations. As of December 31, 2022, the Company had $4,267 due to Link recorded in the line item Due to affiliates in the Consolidated Balance Sheets and $666 due from Link recorded in the line item Due from affiliates in the Consolidated Balance Sheets. The current term of the Master Services Agreement extends to December 31, 2023, and may be renewed for additional one-year terms thereafter; provided, however, that the Master Services Agreement may be terminated at any time upon prior written notice by either Link or the Company.

During the period from July 20, 2022 through December 31, 2022, the Company incurred expenses in connection with the Merger totaling $15,788, for services rendered by Link. Such expenses are recorded in the line item Merger costs in the Consolidated Statements of Operations.

Gryphon Mutual Insurance Company (“GMUC”), an affiliate of the Company, is a captive insurance company that began providing insurance coverage to the Company in July 2022. During the period from July 20, 2022 through December 31, 2022, the Company incurred $2,314 for insurance premiums recognized in Property operating expenses in the Consolidated Statements of Operations. The fees paid are in place of insurance premiums and fees that would otherwise be paid to third party insurance companies, and are equivalent or less than the rate third-party insurance companies would charge for such services. There were $— amounts payable to GMUC as of December 31, 2022.

Simply Storage Management, LLC (“Simply Storage”), an affiliate of the Company, is a management company that began providing management services to the Company in October 2022. During the period from July 20, 2022 through December 31, 2022, the Company incurred $19 for management fees recognized in the line item Property operating expenses in the Consolidated Statements of Operations.

In October 2022, the Brentford Joint Venture entered into an agreement with Blackstone Real Estate Partners IX, L.P, an affiliate, to borrow $110,000. Refer to Note 5 — Debt for additional details.

On July 21, 2022, the Company issued 125 shares of preferred stock, par value $0.01 per share, designated as the 12% Series A Redeemable Preferred Stock (the “Series A Preferred Stock”), for an aggregate cash amount of $500. The issuance of the Series A Preferred Stock was made in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

As of December 31, 2022 and December 31, 2021, the Company had the following series of preferred stock outstanding:

On ~~December 30, 2019,~~November 22, 2022, the Company ~~completed the redemption of its 5.75% Cumulative~~commenced offers (the “Offers”) to purchase for cash any and all outstanding Series X Preferred ~~Stock,~~Shares, at $15.29 per share, Series U,Y Preferred Shares, at ~~par of $230.0 million as well as its 5.70% Cumulative~~$15.33 per share, and Series Z Preferred ~~Stock, Series V,~~Shares, at ~~par of $110.0 million.~~$14.34 per share. The Company accepted for purchase 5,953,898 Series X Preferred Shares, 5,756,691 Series Y Preferred Shares and 9,728,688 Series Z Preferred Shares (the shares repurchased being Depository shares each representing 1/1000 of a Share of the respective Preferred Share counts included in the above table detailing preferred stock activity). The offers were completed on December 23, 2022 and the Preferred Shares purchased were cancelled by the Company. As a result of the Preferred Shares repurchase, we recorded a gain of $76,459, recorded in the line item Preferred ~~Redemption Allocation~~securities redemption in the Consolidated Statements of ~~$11.0 million~~Operations, representing the Preferred Shares carrying value of $399,174 less the Preferred Shares offer price of $318,795 and transaction costs of $3,920.

On November 2, 2022, the board of directors of the Company (the “Board of Directors”) authorized a quarterly dividend on each series of the Company’s preferred stock underlying the Preferred Shares payable on December 31, 2022 (the “December Dividend”) to holders of record of such underlying preferred stock at the close of business on December 15, 2022 for distribution to the holders of the Preferred Shares. All holders of the Preferred Shares at the close of business on the December 15, 2022

record date received the December Dividend for the applicable series of Preferred Shares regardless of whether they participated in the Offers since the December 15, 2022 record date occurred prior to the consummation of the Offers.

The Company paid $19,186, $19,160, $46,624, and $48,186 in distributions to its preferred stockholders for the period from July 20, 2022 through December 31, 2022, the period from January 1, 2022 through July 19, 2022, the year ended December 31, ~~2019.~~

On November 4, 2019, we issued $325.0 million or 13,000,000 depositary shares representing interests in our 4.875% Cumulative Preferred Stock, Series Z, at $25.00 per depositary share. The 4.875% Series Z Cumulative Redeemable Preferred Units are non-callable for five years2021, and ~~have 0 mandatory redemption. We received $316.0 million in net issuance proceeds.~~

~~On January 3, 2018, we completed the redemption of our remaining 6.00% Cumulative Preferred Stock, Series T, at par of $130.0 million. We recorded a Preferred Redemption Allocation of $4.1 million in~~ the year ended December 31, ~~2017 and reclassified the shares from equity to “preferred stock called for redemption” on our consolidated balance sheets at December 31, 2017.~~

On December 7, 2017, we issued $200.0 million or 8,000,000 depositary shares representing interests in our 5.20% Cumulative Preferred Stock, Series Y, at $25.00 per depositary share. The 5.20% Series Y Cumulative Redeemable Preferred Units are non-callable for five years and have 0 mandatory redemption. We received $193.6 million in net issuance proceeds.

On October 30, 2017, we completed a partial redemption of 8,800,000 of our outstanding 14,000,000 depositary shares representing interests in our 6.0% Cumulative Preferred Stock, Series T, at par of $220.0 million. We recorded a Preferred Redemption Allocation of $6.9 million for the year ended December 31, 2017.

On September 21, 2017, we issued $230.0 million or 9,200,000 depositary shares representing interests in our 5.25% Cumulative Preferred Stock, Series X, at $25.00 per depositary share. The 5.25% Series X Cumulative Redeemable Preferred Units are non-callable for five years and have 0 mandatory redemption. We received $222.2 million in net issuance proceeds.

~~We paid $54.3 million, $52.6 million and $52.2 million in distributions to our preferred shareholders for the years ended December 31, 2019, 2018 and 2017,~~2020, respectively.

Except under certain conditions relating to the Company’s qualification as a REIT, the Company’s preferred stock is not redeemable prior to the redemption dates noted above. On or after the respective redemption dates, the respective series of preferred

Pursuant to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Company Merger Effective Time”), each share of the 5.250% Series X Cumulative Preferred Stock of the Company, par value $0.01 per share, 5.200% Series Y Cumulative Preferred Stock of the Company, par value $0.01 per share, and 4.875% Series Z Cumulative Preferred Stock of the Company, par value $0.01 per share (collectively, the “Existing Preferred Stock”), issued and outstanding immediately prior to the Company Merger Effective Time and each depositary share issued pursuant to the deposit agreements for the Existing Preferred Stock, representing one-thousandth of one share of Existing Preferred Stock issued and outstanding immediately prior to the Company Merger Effective Time, was unaffected by the Merger and remained outstanding in accordance with their respective terms.

The following table summarizes the Company’s distributions to ~~our~~ common ~~shareholders for the years ended December 31, 2019, 2018~~stockholders and ~~2017, respectively. We paid $30.7 million ($4.20 per common unit), $27.8 million ($3.80 per common unit), and $24.8 million ($3.40 per common unit) in distributions to our~~ common unit ~~holders for~~holders:

Prior to the ~~years ended December 31, 2019, 2018 and 2017, respectively. The percentages in the two preceding sentences are unaudited.~~

During the three months ended June 30, 2018, the Board increased our quarterly dividend from $0.85 per common share to $1.05 per common share. During the three months ended March 31, 2017, the Board increased our quarterly dividend from $0.75 per common share to $0.85 per common share.

~~Equity stock~~

The Company is authorized to issue 100.0 million shares of Equity Stock. The Articles of Incorporation provide that Equity Stock may be issued from time to time in one or more series and give the Board broad authority to fix the dividend and distribution rights, conversion and voting rights, redemption provisions and liquidation rights of each series of Equity Stock. As of December 31, 2019 and 2018, 0 equity stock had been issued.

~~10. Stock compensation~~

~~Under~~Merger, under various share-based compensation plans, PSB ~~grants~~granted non-qualified options to purchase the Company’s common ~~shares~~stock at a price not less than fair value on the date of grant, as well as RSUs, to certain directors, officers and key employees.

~~The service period for stock options and RSUs begins when (i)~~

Prior to the Company and the recipient reach a mutual understanding of the key terms of the award, (ii) the award has been authorized, (iii) the recipient is affected by changes in the market price of our stock and (iv) it is probable that any performance conditions will be met, and ends when the stock options or RSUs vest.

~~We amortize~~Merger, we amortized the fair value of awards starting at the beginning of the service period as compensation expense. For awards that are earned solely upon the passage of time and continued service, the entire cost of the award iswas amortized on a straight-line basis over the service period. For awards with performance conditions, the individual cost of each vesting iswas amortized separately over each individual service period (the “accelerated attribution” method).

We ~~account~~accounted for forfeitures of share-based payments as they ~~occur~~occurred by reversing previously amortized share-based compensation expense with respect to unvested grants that ~~are~~were forfeited in the period the employee terminates employment.

Pursuant to the terms and conditions of the Merger Agreement, at or immediately prior to, as applicable, the Company Merger Effective Time, each 2022 Equity Incentive Plan award approved under the Company’s 2022 Equity Incentive Plan Awards Program was cancelled in exchange for a specific cash payment, less any applicable withholding taxes.

In connection with the separation agreement with our former President and Chief Executive Officer (“CEO”), who stepped down from his positions with the Company for health reasons effective March 23, 2022, the Company paid a lump sum payment of $6,643 in exchange for 41,186 restricted stock units owned by the former CEO, which represents the market value of the Company common stock underlying such units as of March 18, 2022.

Pursuant to the terms and conditions of the Merger Agreement, at or immediately prior to, as applicable, the Company Merger Effective Time, each stock option to purchase shares of Common Stock (each, a “Company Option”) outstanding immediately prior to the Company Merger Effective Time was automatically cancelled in exchange for a cash payment in an amount in cash equal to (1) the number of shares of Common Stock subject to the Company Option immediately prior to the Company Merger Effective Time multiplied by (2) the excess of the Per Company Share Merger Consideration over the per share exercise price applicable to the Company Option, less any applicable withholding taxes.

Stock options expire 1010.0 years after the grant date and the exercise price is equal to the closing trading price of our common ~~shares~~stock on the grant date. ~~Employees~~Stock option holders cannot require the Company to settle their award in cash. We use the Black-Scholes option valuation model to estimate the fair value of our stock options on the date of grant.

‎

Pursuant to the terms and conditions of the Merger Agreement, at or immediately prior to, as applicable, the Company Merger Effective Time, each Company RSU award of restricted stock units covering shares of Common Stock granted under a Company equity plan and each award of deferred stock units governed under the Company’s retirement plan for non-employee directors that were outstanding immediately prior to the Company Merger Effective Time was cancelled in exchange for a cash payment in an amount in cash equal to (1) the number of shares of Common Stock subject to the Company RSU Award immediately prior to the Company Merger Effective Time multiplied by (2) the Per Company Share Merger Consideration, less any applicable withholding taxes.

In addition, each Company RSU Award and vested Company Deferred Stock Unit Award (as of July 19, 2022) was additionally entitled, pursuant to the terms of each award, to a dividend equivalent payment in respect of the Pro Rata Dividend. Each holder of a Company RSU Award, Company Deferred Stock Unit Award and/or Company Option received an aggregate payment with respect to such award inclusive of the aggregate Closing Cash Dividend that such holder would have received had such Company RSU Award or Company Deferred Stock Unit Award been settled in Company Common Stock or Company Option been exercised, in each case, immediately prior to the close of business on July 19, 2022.

Weighted
Number of
Average Grant
Restricted Stock Units:
Units
Date Fair Value
Nonvested at December 31, 2016
144,693
$
12,346
Granted
113,750
10,748
Vested
(76,994)
(6,597)
Forfeited
(16,366)
(1,381)
Nonvested at December 31, 2017
165,083
15,116
Granted
194,450
18,431
Vested
(106,103)
(9,256)
Forfeited
(10,140)
(905)
Nonvested at December 31, 2018
243,290
23,386
Granted
6,400
1,137
Vested
(95,500)
(8,753)
Forfeited
(3,342)
(345)
Nonvested at December 31, 2019
150,848
$
15,425

For the ~~Company amended~~predecessor period, under the Retirement Plan for Non-Employee Directors (the “Director Retirement Plan”), ~~to increase~~ the ~~maximum~~Company granted 1,000 shares ~~issued upon retirement~~of common stock for each year served as a director ~~from 8,000 shares~~up to a maximum of 10,000 shares ~~of common stock. The Company recognizes compensation expense with regard to grants to be~~ issued inupon retirement.

The Company presents both basic and ~~2017.~~

~~11. Supplementary quarterly financial data (unaudited, in thousands, except~~diluted earnings per share ~~data):~~

(“EPS”). Basic earnings per share is based on the weighted average number of shares of common shares outstanding during the period. Diluted earnings per share is based on the weighted average number of shares outstanding combined with the incremental weighted average effect from all outstanding potentially dilutive instruments.

Three Months Ended
March 31, 2019
June 30, 2019
September 30, 2019
December 31, 2019
Rental income
$
107,825
$
107,782
$
108,064
$
106,175
Cost of operations
$
33,593
$
31,460
$
32,468
$
30,822
Net income allocable to
common shareholders
$
26,321
$
28,579
$
26,312
$
27,491
Net income per share
Basic
$
0.96
$
1.04
$
0.96
$
1.00
Diluted
$
0.96
$
1.04
$
0.96
$
1.00
Three Months Ended
March 31, 2018
June 30, 2018
September 30, 2018
December 31, 2018
Rental income
$
103,759
$
101,824
$
103,808
$
104,125
Cost of operations
$
32,456
$
30,796
$
31,197
$
30,181
Net income allocable to
common shareholders
$
46,048
$
70,221
$
25,131
$
31,499
Net income per share
Basic
$
1.69
$
2.57
$
0.92
$
1.15
Diluted
$
1.69
$
2.56
$
0.92
$
1.15
The computation of our basic and diluted earnings per share and unit were as follows:

The following table represents supplemental cash flow disclosures:

Management has evaluated events occurring subsequent to December 31, 2022. On January 3, 2023, the Company filed a Form 25 with the Commission to delist the Preferred Shares. On January 13, 2023, the Preferred Shares ceased trading on the New York Stock Exchange and the Company filed a certification and notification of ~~Contents~~termination of registration under Section 12(g) of the Exchange Act, on Form 15 with the Commission. The filing of the Form 15 immediately suspended the Company’s filing obligations under Section 12(g) of the Exchange Act. No additional material subsequent events have occurred since December 31, 2022 that require recognition or disclosure in the Company’s Consolidated Financial Statements.

None.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	~~For the fiscal year ended December 31, 2019.~~
		or
£	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~
	~~For the transition period from to~~

	~~95-4300881~~
Maryland		95-4300881
(State or ~~other jurisdiction~~Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
~~incorporation or organization)~~
345 Park Avenue, New York, New York		10154
(Address of Principal Executive Offices)		(Zip Code)


~~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~~ ~~5.200% 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~~
~~Depositary Shares Each Representing 1/1,000 of a~~ ~~4.875% Cum Pref Stock, Series Z, $0.01 par value~~	~~PSBPrZ~~	~~New York Stock Exchange~~


	Successor		Predecessor
	December 31, 2022		December 31, 2021
ASSETS
Assets:
Investments in real estate, net	$	5,556,795	$	2,005,868
Assets held for sale	—		33,609

Cash and cash equivalents	51,608		27,074
Restricted cash	636		1,088
Tenant and other receivables	14,888		39,202


Prepaid expenses and other assets	380,469		16,381
Due from affiliates	666		—
Total assets1	$	6,005,062	$	2,123,222


LIABILITIES AND EQUITY
Liabilities:
Debt, net	$	3,865,553	$	32,000
Accounts payable, accrued expenses and other liabilities	300,691		97,080



Due to affiliates	4,266		71
Total liabilities1	4,170,510		129,151
Commitments and contingencies (Note 13)
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, 8,886 and 30,200 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively	164,352		755,000
Common stock, $0.01 par value, 200,000,000 shares authorized, 100 shares issued and outstanding as of December 31, 2022; 100,000,000 shares authorized, 27,589,807 shares issued and outstanding as of December 31, 2021	—		275
Paid-in capital	3,174,135		752,444
Accumulated earnings (deficit)	(1,515,405)		226,737
Total PS Business Parks, Inc.'s stockholders' equity	1,823,082		1,734,456

Noncontrolling interest	11,470		259,615
Total equity	1,834,552		1,994,071
Total liabilities and equity	$	6,005,062	$	2,123,222


	Successor		Predecessor
	Period from July 20, 2022 through December 31, 2022		Period from January 1, 2022 through July 19, 2022		Year Ended December 31, 2021		Year Ended December 31, 2020
Operating activities:
Net income (loss)	$	(175,018)	$	159,190	$	553,029	$	206,705
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	225,472		50,557		93,486		96,314
Gain on interest rate derivatives	(76,275)		—		—		—

Straight-line rents and amortization of above and below market leases	(26,178)		(2,276)		(2,800)		(4,713)
Amortization of deferred financing costs	11,042		488		725		548


Incentive compensation expense	—		3,335		8,495		5,648

Gain on sale of real estate, net	—		(157,022)		(359,875)		(27,273)

(Increase) decrease in tenant and other receivables, lease right-of-use assets, net, prepaid expenses and other assets, and due from affiliates	(1,734)		3,020		(971)		1,156
Increase (decrease) in accounts payable, accrued expenses and other liabilities, lease liabilities, and due to affiliates	(7,091)		59,096		10,148		(1,410)
Net cash provided by (used in) operating activities	(49,782)		116,388		302,237		276,975

Investing activities:

Acquisitions of real estate	—		—		(147,702)		(60,019)

Proceeds from sales of investments in real estate	—		236,230		400,955		40,674


Capital expenditures	(36,228)		(57,964)		(83,887)		(52,474)
Net cash provided by (used in) investing activities	(36,228)		178,266		169,366		(71,819)

Financing activities:
Proceeds from debt	3,866,828		20,000		32,000		—
Repayments on debt	(1,535)		(52,000)		—		—
Payment of deferred financing costs	(10,782)		(198)		(2,494)		(335)
Proceeds from issuance of preferred stock	500		—		—		—
Exercise of stock options	—		2,101		5,012		258
Payment of issuance costs	—		176		(105)		—
Cash paid for taxes in lieu of shares upon vesting of restricted stock units	—		(1,318)		(3,940)		(4,216)
Cash paid to restricted stock unit holders	—		(328)		(1,498)		(654)
Contributions from noncontrolling interests	257		492		746		493
Distributions to noncontrolling interests	(1,980)		(55,358)		(64,364)		(30,823)
Distribution to preferred stockholders	(19,186)		(19,160)		(46,624)		(48,186)
Distribution to common stockholders	(112,379)		(209,079)		(242,595)		(115,396)
Redemption of preferred stock	(322,715)		—		(189,750)		—
Blackstone contributions	3,174,135		—		—		—
Redemption of common shares and related costs	(5,141,856)		—		—		—
Parent Partners Loans	(1,285,575)		—		—		—
Derivative premium paid	(32,758)		—		—		—
Derivative premium received	25,300		—		—		—

Net cash provided by (used in) financing activities	138,254		(314,672)		(513,612)		(198,859)

Net increase (decrease) in Cash and cash equivalents and restricted cash	52,244		(20,018)		(42,009)		6,297
Cash and cash equivalents and restricted cash - beginning of period	—		28,162		70,171		63,874
Cash and cash equivalents and restricted cash - end of period	$	52,244	$	8,144	$	28,162	$	70,171

	~~ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



PART I		3
Item 1.	Business	3
Item 1A.	Risk Factors	7
Item 2.	Properties	21
Item 3.	Legal Proceedings	21
Item 4.	Mine Safety Disclosures	21

PART II		22
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6.	Reserved	22
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 8.	Financial Statements and Supplementary Data	28
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	28
Item 9A.	Controls and Procedures	28
Item 9B.	Other Information	29
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	29

PART III		29
Item 10.	Directors, Executive Officers and Corporate Governance	29
Item 11.	Executive Compensation	32
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	32
Item 13.	Certain Relationships and Related Transactions, and Director Independence	32
Item 14.	Principal Accounting Fees and Services	34

PART IV		35
Item 15.	Exhibits and Financial Statement Schedule	35








Item 16.	Form 10-K Summary	80

SIGNATURES		81



						Weighted
	Number of					Average
	Business	Rentable Square Footage				Occupancy
Region	Parks	Industrial	Flex	Office	Total	Rate
Northern California	30	6,391	593	340	7,324	96.1%
Southern California	16	2,916	953	31	3,900	95.3%
Dallas ⁽¹⁾	12	1,300	1,587	—	2,887	92.4%
Austin	9	755	1,208	—	1,963	91.8%
Northern Virginia	19	1,564	1,440	1,970	4,974	92.1%
South Florida	3	3,728	126	12	3,866	95.4%
Suburban Maryland	4	394	—	751	1,145	89.3%
Seattle	3	1,092	270	28	1,390	96.2%
Total	96	18,140	6,177	3,132	27,449	94.2%
Asset held for sale	1	—	—	113	113	100.0%
Total	97	18,140	6,177	3,245	27,562	94.2%



	For The Years Ended December 31,
	2019		2018		2017		2016		2015
	(In thousands, except per share data)
Rental income	$	429,846	$	413,516	$	402,179	$	386,871	$	373,135

Expenses
Cost of operations		128,343		124,630		122,348		120,518		118,469
Depreciation and amortization		104,249		99,242		94,270		99,486		105,394
General and administrative		13,761		12,072		12,671		17,452		16,337
Total operating expenses		246,353		235,944		229,289		237,456		240,200

Interest and other income		4,492		1,510		942		1,233		1,130
Interest and other expense		(657)		(665)		(1,285)		(5,664)		(13,330)
Equity in loss of unconsolidated joint venture		—		—		(805)		—		—
Gain on sale of real estate facilities		16,644		93,484		1,209		—		28,235
Gain on sale of development rights		—		—		6,365		—		—
Net income		203,972		271,901		179,316		144,984		148,970
Allocation to noncontrolling interests		(29,006)		(45,199)		(24,279)		(16,955)		(18,495)
Net income allocable to PS Business Parks, Inc.		174,966		226,702		155,037		128,029		130,475
Allocation to preferred shareholders based upon
Distributions		(54,346)		(51,880)		(52,873)		(57,276)		(59,398)
Redemptions		(11,007)		—		(10,978)		(7,312)		(2,487)
Allocation to restricted stock unit holders		(910)		(1,923)		(761)		(569)		(299)
Net income allocable to common shareholders	$	108,703	$	172,899	$	90,425	$	62,872	$	68,291

Per Common Share:
Cash Distributions	$	4.20	$	3.80	$	3.40	$	3.00	$	2.20
Net income — basic	$	3.96	$	6.33	$	3.32	$	2.32	$	2.53
Net income — diluted	$	3.95	$	6.31	$	3.30	$	2.31	$	2.52
Weighted average common shares — basic		27,418		27,321		27,207		27,089		26,973
Weighted average common shares — diluted		27,526		27,422		27,412		27,179		27,051



				Percent of
		Annualized		Annualized
Customers	Square Footage	Rental Income ⁽¹⁾		Rental Income
U.S. Government	521,000	$	12,806	3.1%
Luminex Corporation	199,000		4,348	1.0%
Amazon Inc.	213,000		2,718	0.7%
KZ Kitchen Cabinet & Stone	191,000		2,599	0.6%
Lockheed Martin Corporation	124,000		2,554	0.6%
CentralColo, LLC	96,000		2,313	0.6%
Applied Materials, Inc.	162,000		2,313	0.6%
Carbel, LLC	207,000		2,143	0.5%
Quanta Computer Inc.	179,000		1,874	0.5%
ECS Federal, LLC	81,000		1,840	0.4%
Total	1,973,000	$	35,508	8.6%



	For the Years						For the Years
	Ended December 31,						Ended December 31,
	2019		2018			Variance	2018		2017			Variance
Rental income
Same Park ⁽¹⁾	$	382,823	$	364,811	$	18,012	$	364,811	$	354,393	$	10,418
Non-Same Park		14,276		5,532		8,744		5,532		—		5,532
Multifamily		10,075		7,353		2,722		7,353		—		7,353
Assets sold or held for sale ⁽²⁾		22,672		35,820		(13,148)		35,820		47,786		(11,966)
Total rental income		429,846		413,516		16,330		413,516		402,179		11,337

Cost of operations ⁽³⁾
Adjusted cost of operations ⁽⁴⁾
Same Park		109,708		104,380		5,328		104,380		103,038		1,342
Non-Same Park		4,899		1,884		3,015		1,884		—		1,884
Multifamily		4,137		4,054		83		4,054		—		4,054
Assets sold or held for sale ⁽²⁾		8,465		12,866		(4,401)		12,866		17,679		(4,813)
Stock compensation expense ⁽⁵⁾		1,134		1,446		(312)		1,446		1,631		(185)
Total cost of operations		128,343		124,630		3,713		124,630		122,348		2,282

NOI ⁽⁶⁾
Same Park		273,115		260,431		12,684		260,431		251,355		9,076
Non-Same Park		9,377		3,648		5,729		3,648		—		3,648
Multifamily		5,938		3,299		2,639		3,299		—		3,299
Assets sold or held for sale ^{(2) (7)}		14,207		22,954		(8,747)		22,954		30,107		(7,153)
Stock compensation expense ⁽⁵⁾		(1,134)		(1,446)		312		(1,446)		(1,631)		185
Depreciation and amortization expense		(104,249)		(99,242)		(5,007)		(99,242)		(94,270)		(4,972)
General and administrative expense ⁽³⁾		(13,761)		(12,072)		(1,689)		(12,072)		(12,671)		599
Interest and other income		4,492		1,510		2,982		1,510		942		568
Interest and other expense		(657)		(665)		8		(665)		(1,285)		620
Equity in loss of unconsolidated joint venture		—		—		—		—		(805)		805
Gain on sale of real estate facilities		16,644		93,484		(76,840)		93,484		1,209		92,275
Gain on sale of development rights		—		—		—		—		6,365		(6,365)
Net income	$	203,972	$	271,901	$	(67,929)	$	271,901	$	179,316	$	92,585



								Percent of
			Rentable Square		Percent of	Annualized Rental		Annualized Rental
	Number of		Footage Subject to		Total Leased	Income Under		Income Represented
Year of Lease Expiration	Customers		Expiring Leases		Square Footage	Expiring Leases		by Expiring Leases
2020		1,916		5,787	23.8%	$	92,159		22.0%
2021		1,356		4,916	20.2%		84,293		20.1%
2022		699		4,567	18.7%		82,052		19.5%
2023		346		3,004	12.3%		51,254		12.2%
2024		290		2,467	10.1%		43,628		10.4%
2025		54		1,802	7.3%		31,854		7.5%
2026		23		677	2.8%		11,539		2.8%
2027		14		134	0.6%		3,311		0.8%
2028		7		388	1.6%		6,703		1.6%
2029		10		287	1.2%		6,953		1.7%
Thereafter		6		334	1.4%		5,833		1.4%
Total		4,721		24,363	100.0%	$	419,579		100.0%



	For the Three Months Ended
	March 31		June 30		September 30		December 31			Full Year
Rental income
2019	$	94,813	$	95,016	$	95,358	$	97,636	$	382,823
2018	$	90,821	$	90,980	$	91,446	$	91,564	$	364,811
2017	$	88,178	$	87,707	$	88,628	$	89,880	$	354,393

Adjusted cost of operations ⁽¹⁾
2019	$	28,177	$	26,727	$	27,494	$	27,310	$	109,708
2018	$	26,954	$	26,140	$	26,033	$	25,253	$	104,380
2017	$	25,471	$	25,045	$	25,796	$	26,726	$	103,038

NOI ⁽¹⁾
2019	$	66,636	$	68,289	$	67,864	$	70,326	$	273,115
2018	$	63,867	$	64,840	$	65,413	$	66,311	$	260,431
2017	$	62,707	$	62,662	$	62,832	$	63,154	$	251,355

Weighted average square foot occupancy
2019		94.7%		94.2%		94.7%		94.4%		94.5%
2018		94.5%		94.5%		95.1%		95.4%		94.9%
2017		94.2%		93.2%		93.7%		94.8%		94.0%

Annualized revenue per occupied square foot
2019	$	15.58	$	15.69	$	15.67	$	16.10	$	15.76
2018	$	14.97	$	14.99	$	14.97	$	14.94	$	14.96
2017	$	14.56	$	14.64	$	14.73	$	14.76	$	14.67

RevPAF
2019	$	14.76	$	14.79	$	14.84	$	15.20	$	14.90
2018	$	14.14	$	14.16	$	14.24	$	14.25	$	14.20
2017	$	13.73	$	13.65	$	13.80	$	13.99	$	13.79



	For the Year Ended December 31, 2019								For the Year Ended December 31, 2018								For the Year Ended December 31, 2017
	Industrial		Flex		Office		Total		Industrial		Flex		Office		Total		Industrial		Flex		Office		Total
	In thousands
Rental Income:
Northern California	$	86,088	$	9,801	$	12,157	$	108,046	$	78,721	$	9,442	$	11,447	$	99,610	$	72,878	$	9,364	$	10,790	$	93,032
Southern California		35,387		18,932		761		55,080		34,272		17,954		647		52,873		32,516		17,083		670		50,269
Dallas		12,412		21,377		—		33,789		11,566		19,333		—		30,899		11,406		19,992		—		31,398
Austin		8,317		22,362		—		30,679		7,863		21,745		—		29,608		7,316		21,924		—		29,240
Northern Virginia		7,468		24,620		41,646		73,734		7,350		24,755		41,713		73,818		6,978		25,715		42,897		75,590
South Florida		41,543		1,916		142		43,601		39,810		1,931		83		41,824		38,963		1,911		208		41,082
Suburban Maryland		4,396		—		15,480		19,876		4,464		—		14,511		18,975		4,528		—		13,103		17,631
Seattle		10,950		6,342		726		18,018		10,474		6,003		727		17,204		9,901		5,675		575		16,151
Total		206,561		105,350		70,912		382,823		194,520		101,163		69,128		364,811		184,486		101,664		68,243		354,393
Adjusted Cost of Operations:
Northern California		18,526		2,602		3,185		24,313		17,207		2,512		2,934		22,653		17,680		2,440		2,868		22,988
Southern California		8,869		5,063		283		14,215		8,397		4,685		267		13,349		8,132		4,627		266		13,025
Dallas		3,702		7,786		—		11,488		3,666		7,230		—		10,896		3,446		6,989		—		10,435
Austin		2,778		8,065		—		10,843		2,637		7,715		—		10,352		2,485		7,249		—		9,734
Northern Virginia		2,104		7,557		15,827		25,488		1,998		7,314		15,816		25,128		1,936		7,148		15,588		24,672
South Florida		11,262		602		113		11,977		10,162		509		62		10,733		10,401		576		66		11,043
Suburban Maryland		1,427		—		5,699		7,126		1,349		—		5,640		6,989		1,446		—		5,732		7,178
Seattle		2,566		1,492		200		4,258		2,612		1,446		222		4,280		2,308		1,468		187		3,963
Total		51,234		33,167		25,307		109,708		48,028		31,411		24,941		104,380		47,834		30,497		24,707		103,038
NOI:
Northern California		67,562		7,199		8,972		83,733		61,514		6,930		8,513		76,957		55,198		6,924		7,922		70,044
Southern California		26,518		13,869		478		40,865		25,875		13,269		380		39,524		24,384		12,456		404		37,244
Dallas		8,710		13,591		—		22,301		7,900		12,103		—		20,003		7,960		13,003		—		20,963
Austin		5,539		14,297		—		19,836		5,226		14,030		—		19,256		4,831		14,675		—		19,506
Northern Virginia		5,364		17,063		25,819		48,246		5,352		17,441		25,897		48,690		5,042		18,567		27,309		50,918
South Florida		30,281		1,314		29		31,624		29,648		1,422		21		31,091		28,562		1,335		142		30,039
Suburban Maryland		2,969		—		9,781		12,750		3,115		—		8,871		11,986		3,082		—		7,371		10,453
Seattle		8,384		4,850		526		13,760		7,862		4,557		505		12,924		7,593		4,207		388		12,188
Total	$	155,327	$	72,183	$	45,605	$	273,115	$	146,492	$	69,752	$	44,187	$	260,431	$	136,652	$	71,167	$	43,536	$	251,355



	For the Year Ended December 31, 2019
	Square			Transaction
	Footage	Customer		Costs per	Rental
Regions	Leased	Retention		Executed Foot	Rate Change ⁽¹⁾
Northern California	1,777	64.6%	$	2.43	18.3%
Southern California	1,214	69.2%	$	1.83	8.1%
Dallas	838	60.9%	$	4.97	5.7%
Austin	529	77.5%	$	5.49	5.6%
Northern Virginia	1,154	75.0%	$	8.04	(2.8%)
South Florida	941	49.7%	$	1.67	12.7%
Suburban Maryland	216	73.9%	$	6.40	(3.5%)
Seattle	382	64.9%	$	1.22	15.8%
Total	7,051	65.8%	$	3.73	8.3%


~~California~~



			Purchase		Square	Occupancy at	Occupancy at
Property	Date Acquired	Location	Price		Feet	Acquisition	December 31, 2019
San Tomas Business Center	December, 2019	Santa Clara, CA	$	16,787	79	95.6%	95.6%
Hathaway Industrial Park	September, 2019	Santa Fe Springs, CA		104,330	543	100.0%	100.0%
Walnut Avenue Business Park	April, 2019	Signal Hill, CA		13,824	74	98.4%	96.7%
Northern Virginia and Fullerton	June, 2018	Lorton and Springfield,
Road Industrial Parks		VA		143,766	1,057	76.1%	91.3%
Total			$	278,707	1,753	85.4%	94.4%



			As of December 31, 2019			Weighted Average Occupancy
Apartment	Total Costs ⁽¹⁾		Physical	Average Rent		For the years ended December 31,
Units	(in thousands)		Occupancy	per Unit ⁽²⁾		2019	2018
395	$	115,426	94.7%	$	2,133	95.4%	78.2%



	For the Years Ended December 31,
											Recurring Capital Expenditures
	Recurring Capital Expenditures										as a Percentage of NOI
Region		2019		2018	Change		2018		2017	Change	2019		2018		2017
Same Park
Northern California	$	4,411	$	3,602	22.5%	$	3,602	$	3,642	(1.1%)		5.3%		4.7%		5.2%
Southern California		4,514		3,167	42.5%		3,167		3,025	4.7%		11.0%		8.0%		8.1%
Dallas		4,623		5,027	(8.0%)		5,027		3,813	31.8%		20.7%		25.1%		18.2%
Austin		4,539		2,362	92.2%		2,362		1,726	36.8%		22.9%		12.3%		8.8%
Northern Virginia		10,366		10,810	(4.1%)		10,810		13,379	(19.2%)		21.5%		22.2%		26.3%
South Florida		2,191		3,149	(30.4%)		3,149		2,055	53.2%		6.9%		10.1%		6.8%
Suburban Maryland		2,051		2,714	(24.4%)		2,714		8,474	(68.0%)		16.1%		22.6%		81.1%
Seattle		927		968	(4.2%)		968		763	26.9%		6.7%		7.5%		6.3%
Total Same Park		33,622		31,799	5.7%		31,799		36,877	(13.8%)		12.3%		12.2%		14.7%
Non-Same Park
Southern California		54		—	100.0%		—		—	—		—		—		—
Northern Virginia		2,154		615	250.2%		615		—	100.0%		—		—		—
Total Non-Same Park		2,208		615	259.0%		615		—	100.0%		—		—		—
Assets sold or held
for sale		1,021		5,060	(79.8%)		5,060		8,963	(43.5%)		7.2%		22.0%		29.8%
Total commercial
recurring capital
expenditures		36,851		37,474	(1.7%)		37,474		45,840	(18.3%)		—		—		—
Multifamily		20		13	53.8%		13		—	100.0%		—		—		—
Total	$	36,871	$	37,487	(1.6%)	$	37,487	$	45,840	(18.2%)		12.2%		12.9%		16.3%



	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1 - 3 years		4 - 5 years		More than 5 years
Transaction costs ⁽¹⁾	$	9,604	$	9,604	$	—	$	—	$	—
Ground lease obligations ⁽²⁾		1,965		196		596		397		776
Total	$	11,569	$	9,800	$	596	$	397	$	776



	(a)			(b)		(c)
	Number of			Weighted		Number of Securities
	Securities to be			Average		Remaining Available for
	Issued Upon			Exercise Price of		Future Issuance under
	Exercise of			Outstanding		Equity Compensation
	Outstanding			Options,		Plans (Excluding
	Options, Warrants			Warrants and		Securities Reflected in
Plan Category	and Rights			Rights		Column (a))
Equity compensation plans approved by security holders	308,678		$	103.62		813,400
Equity compensation plans not approved by security holders	—			—		—
Total	308,678	*	$	103.62	*	813,400	*

	liabilities were determined by the Company and its valuation specialist utilizing available market information.

			Auditing the Company’s accounting for its acquisitions was complex due to the significant estimation required by management in determining the fair values of the acquired land, building, and intangible lease assets and liabilities. The significant estimation was primarily due to the judgmental nature of the inputs to the valuation models used to measure the fair value of the tangible and intangible lease assets and liabilities as well as the sensitivity of the respective fair values to the significant underlying assumptions. The Company utilized the sales comparison approach to measure the fair value of the acquired land and a combination of the discounted cash flow ~~method~~and replacement costs methods to measure the fair value of the remaining acquired tangible and intangible assets and liabilities. The more significant assumptions utilized included revenue growth rates, discount rates, market rental rates, and capitalization rates. These significant assumptions are forward-looking and could be affected by future economic and market conditions.


How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over management’s accounting for acquired real estate properties, including controls over the Company’s review of the assumptions underlying the purchase price allocation, the cash flow projections, and the accuracy of the underlying data used. For example, we tested controls over the determination of the fair value of the land, building and intangible lease assets and liabilities, including the controls over the review of the valuation models and the underlying assumptions used to develop such estimates.

			For each of the Company’s real estate property acquisitions, we read the purchase and sale agreements, and evaluated whether the Company had appropriately determined whether the transaction was a business combination or asset acquisition. We also evaluated the significant assumptions and methods used in developing the fair value estimates of the tangible assets and intangible lease assets acquired and liabilities assumed. To test the estimated fair value of the land, building and intangible lease assets and liabilities, we performed audit procedures that included, among other procedures, evaluating the Company’s use of the income approach and testing the significant assumptions used in the discounted cash flow model, and testing the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. For example, we agreed the contractual rents used in the determination of the in-place and above/below market lease intangible assets and liabilities to tenant leases and ~~compared certain property operating expenses, such as real estate property taxes, used in the income approach to historical operating results adjusted for the transaction.~~market information. We also involved our valuation specialists to assist in the assessment of the methodology utilized by the Company, performed procedures to corroborate the reasonableness of the significant assumptions utilized in the developing the fair value estimates, and performed corroborative calculations to assess the reasonableness of the acquired building asset. For example, our valuation specialists (i) used independently identified data sources to evaluate the appropriateness of management’s selected comparable land sales, (ii) ~~calculated~~recalculated the ~~building value using the replacement cost approach~~asset values and ~~reconciled it to the recorded value,~~performed comparative calculations assuming a combination of some or all of management’s assumptions and our independently verified assumptions, and (iii) obtained market specific information for the revenue growth rates, discount rates, market rental rates, and capitalization rates to corroborate the market information utilized by the Company.


	Successor
Period from July 20, 2022 through December 31, 2022	Preferred Stock			Common Stock			Paid-in Capital		Accumulated Earnings (Deficit)		Total PS Business Parks, Inc.'s Stockholders' Equity		Noncontrolling Interest		Total Equity
	Shares	Amount		Shares	Amount
Balance at July 20, 2022 - pre-merger	—	$	—	—	$	—	$	—	$	—	$	—	$	—	$	—
Total Blackstone purchase and contribution	—	—		—	—		2,847,170		—		2,847,170		—		2,847,170
Redemption of common shares	—	—		(27,631,499)	(276)		(756,431)		(4,279,134)		(5,035,841)		—		(5,035,841)
Application of purchase accounting	30,200	563,026		27,631,499	276		756,431		4,279,134		5,598,867		1,308,704		6,907,571
Distribution of assets	—	—		—	—		—		—		—		(1,295,217)		(1,295,217)
Parent Partners Loans receivable	—	—		—	—		—		(1,285,575)		(1,285,575)		—		(1,285,575)
Balance at July 20, 2022 - post-merger	30,200	563,026		—	—		2,847,170		(1,285,575)		2,124,621		13,487		2,138,108
Issuance of stock, net of costs	125	500		100	—		—		—		500		—		500
Redemption of preferred stock and related contribution	(21,439)	(399,174)		—	—		322,607		76,459		(108)		—		(108)
Blackstone contribution	—	—		—	—		4,358		—		4,358		—		4,358
Noncontrolling interests - contribution	—	—		—	—		—		—		—		289		289
Distributions
Preferred stock	—	—		—	—		—		(19,186)		(19,186)		—		(19,186)
Blackstone	—	—		—	—		—		(112,379)		(112,379)		—		(112,379)
Noncontrolling interest	—	—		—	—		—		—		—		(2,012)		(2,012)
Net income (loss)	—	—		—	—		—		(174,724)		(174,724)		(294)		(175,018)
Balance at December 31, 2022	8,886	$	164,352	100	$	—	$	3,174,135	$	(1,515,405)	$	1,823,082	$	11,470	$	1,834,552



	December 31,
	2019		2018
ASSETS

Cash and cash equivalents	$	62,786	$	37,379

Real estate facilities, at cost
Land		846,635		758,542
Buildings and improvements		2,206,134		2,138,659
		3,052,769		2,897,201
Accumulated depreciation		(1,159,769)		(1,087,102)
		1,893,000		1,810,099
Properties held for sale, net		11,502		140,384
Land and building held for development, net		28,110		30,848
		1,932,612		1,981,331
Rent receivable		1,392		1,403
Deferred rent receivable		32,993		33,308
Other assets		16,660		15,173
Total assets	$	2,046,443	$	2,068,594

LIABILITIES AND EQUITY

Accrued and other liabilities	$	84,632	$	85,141
Total liabilities		84,632		85,141
Commitments and contingencies
Equity
PS Business Parks, Inc.’s shareholders’ equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized,
37,790 and 38,390 shares issued and outstanding at
December 31, 2019 and 2018, respectively,
at liquidation preference		944,750		959,750
Common stock, $0.01 par value, 100,000,000 shares authorized,
27,440,953 and 27,362,101 shares issued and outstanding at
December 31, 2019 and 2018, respectively		274		274
Paid-in capital		736,986		736,131
Accumulated earnings (deficit)		63,666		69,207
Total PS Business Parks, Inc.’s shareholders’ equity		1,745,676		1,765,362
Noncontrolling interests		216,135		218,091
Total equity		1,961,811		1,983,453
Total liabilities and equity	$	2,046,443	$	2,068,594



											Total PS
											Business Parks,
	Preferred Stock			Common Stock			Paid-in		Accumulated		Inc.’s Shareholders’		Noncontrolling		Total
	Shares	Amount		Shares	Amount		Capital		Earnings (Deficit)		Equity		Interests		Equity
Balances at December 31, 2016	35,190	$	879,750	27,138,138	$	271	$	733,671	$	(433)	$	1,613,259	$	197,455	$	1,810,714
Issuance of preferred stock,
net of issuance costs	17,200		430,000	—		—		(14,221)		—		415,779		—		415,779
Redemption of preferred stock,
net of issuance costs	(14,000)		(350,000)	—		—		10,978		(10,978)		(350,000)		—		(350,000)
Issuance of common stock in connection
with stock-based compensation	—		—	116,469		1		4,217		—		4,218		—		4,218
Stock compensation, net	—		—	—		—		4,016		—		4,016		—		4,016
Cash paid for taxes in lieu of shares upon
vesting of restricted stock units	—		—	—		—		(3,865)		—		(3,865)		—		(3,865)
Net income	—		—	—		—		—		155,037		155,037		24,279		179,316
Distributions
Preferred stock (Note 9)	—		—	—		—		—		(52,873)		(52,873)		—		(52,873)
Common stock ($3.40)	—		—	—		—		—		(92,531)		(92,531)		—		(92,531)
Noncontrolling interests—common units	—		—	—		—		—		—		—		(24,838)		(24,838)
Adjustment to noncontrolling interests—
common units in the OP	—		—	—		—		271		—		271		(271)		—
Balances at December 31, 2017	38,390		959,750	27,254,607		272		735,067		(1,778)		1,693,311		196,625		1,889,936
Issuance of common stock in connection
with stock-based compensation	—		—	107,494		2		3,008		—		3,010		—		3,010
Stock compensation, net	—		—	—		—		3,032		—		3,032		—		3,032
Cash paid for taxes in lieu of shares upon
vesting of restricted stock units	—		—	—		—		(4,981)		—		(4,981)		—		(4,981)
Consolidation of joint venture (see Note 3)	—		—	—		—		—		—		—		4,032		4,032
Net income	—		—	—		—		—		226,702		226,702		45,199		271,901
Distributions
Preferred stock (Note 9)	—		—	—		—		—		(51,880)		(51,880)		—		(51,880)
Common stock ($3.80)	—		—	—		—		—		(103,837)		(103,837)		—		(103,837)
Noncontrolling interests—common units	—		—	—		—		—		—		—		(27,760)		(27,760)
Adjustment to noncontrolling interests—
common units in the OP	—		—	—		—		5		—		5		(5)		—
Balances at December 31, 2018	38,390		959,750	27,362,101		274		736,131		69,207		1,765,362		218,091		1,983,453
Issuance of preferred stock,
net of issuance costs	13,000		325,000	—		—		(8,962)		—		316,038		—		316,038
Redemption of preferred stock,
net of issuance costs	(13,600)		(340,000)	—		—		11,007		(11,007)		(340,000)		—		(340,000)
Issuance of common stock in connection
with stock-based compensation	—		—	78,852		—		969		—		969		—		969
Stock compensation, net	—		—	—		—		4,046		—		4,046		—		4,046
Cash paid for taxes in lieu of shares upon
vesting of restricted stock units	—		—	—		—		(6,350)		—		(6,350)		—		(6,350)
Net income	—		—	—		—		—		174,966		174,966		29,006		203,972
Distributions
Preferred stock (Note 9)	—		—	—		—		—		(54,346)		(54,346)		—		(54,346)
Common stock ($4.20)	—		—	—		—		—		(115,154)		(115,154)		—		(115,154)
Noncontrolling interests—
Common units	—		—	—		—		—		—		—		(30,683)		(30,683)
Joint Venture	—		—	—		—		—		—		—		(134)		(134)
Adjustment to noncontrolling interests—
common units in the OP	—		—	—		—		145		—		145		(145)		—
Balances at December 31, 2019	37,790	$	944,750	27,440,953	$	274	$	736,986	$	63,666	$	1,745,676	$	216,135	$	1,961,811

WASHINGTON,

FORM 10-K

ITEM 6. SELECTED FINANCIAL DATA


	July 20, 2022
Building	$	3,336,409
Site improvements	177,159

Land	1,921,093
Tenant improvements	72,886
Development in progress	150,977
In-place lease intangibles	242,551
Above market lease assets	7,888
Below market lease liabilities	(172,109)
Other assets1	146,194


Acquired noncontrolling interest at fair value	(13,481)
Acquired preferred shares at fair value	(563,026)
Net assets acquired	$	5,306,541

Funded by:
Total Blackstone contribution, net of parent partner loan distributed	$	(1,561,595)
Debt issued	(3,744,946)


Total consideration and merger contributions	$	(5,306,541)


			Estimated useful life
Buildings			10-40 years
Building equipment and fixtures			5-10 years
Land and building improvements			10-15 years
Tenant improvements			Shorter of the asset's useful life or the noncancelable term of lease



			Buildings and		Accumulated
	Land		Improvements		Depreciation		Total
Balances at December 31, 2016	$	710,922	$	1,893,520	$	(943,156)	$	1,661,286
Capital expenditures		—		51,909		—		51,909
Disposals ⁽¹⁾		—		(13,919)		13,919		—
Depreciation and amortization expense		—		—		(94,270)		(94,270)
Transfer to properties held for sale		—		(7,351)		9,650		2,299
Balances at December 31, 2017		710,922		1,924,159		(1,013,857)		1,621,224
Acquisition of real estate facilities		25,806		112,230		—		138,036
Consolidation of joint venture		21,814		84,903		—		106,717
Capital expenditures		—		38,904		—		38,904
Disposals ⁽¹⁾		—		(17,345)		17,345		—
Depreciation and amortization expense		—		—		(96,732)		(96,732)
Transfer to properties held for sale		—		(4,192)		6,142		1,950
Balances at December 31, 2018		758,542		2,138,659		(1,087,102)		1,810,099
Acquisition of real estate facilities		88,093		44,313		—		132,406
Capital expenditures		—		40,092		—		40,092
Disposals ⁽¹⁾		—		(15,796)		15,796		—
Depreciation and amortization expense		—		—		(93,416)		(93,416)
Transfer to properties held for sale		—		(1,134)		4,953		3,819
Balances at December 31, 2019 ⁽²⁾	$	846,635	$	2,206,134	$	(1,159,769)	$	1,893,000



~~Land~~	$	~~21,814~~
~~Buildings and improvements~~		~~84,903~~
~~Other assets (in-place lease value)~~		~~1,199~~
~~Total consolidated joint venture~~		~~107,916~~
~~Noncontrolling interest in consolidated joint venture~~		~~(4,032)~~
~~Net book value of joint venture at consolidation~~	$	~~103,884~~



2020	$	285,207
2021		228,542
2022		162,259
2023		111,511
2024		76,000
Thereafter		109,991
Total ⁽¹⁾	$	973,510


	Successor		Predecessor
	2022 Acquisitions		2022 Acquisitions		2021 Acquisitions		2020 Acquisitions
Building	$	—	$	—	$	111,412	$	24,868
Site improvements	—		—		8,670		1,075

Land	—		—		22,591		30,261
Tenant improvements	—		—		3,629		1,225




Other	—		—		1,400		2,590
Allocated purchase price	$	—	$	—	$	147,702	$	60,019


	Successor
	December 31, 2022
Intangible assets:
Lease-related intangibles, net:
In-place leases, net of accumulated amortization of $70,178	$	221,660
Above market lease assets, net of accumulated amortization of $1,177	6,711

Total lease-related intangible assets, net1	$	228,371

Intangible liabilities:
Below market lease liabilities, net:
Below market lease liabilities, net of accumulated amortization of $21,376	$	149,883
Total lease-related intangible liabilities, net2	$	149,883


	Successor
	Period from July 20, 2022 through December 31, 2022
In-place leases	$	84,405


	Successor
	Period from July 20, 2022 through December 31, 2022
Above market leases	$	(1,177)
Below market leases	$	22,226


	Weighted-average amortization period (years)	2023		2024		2025		2026		2027		Thereafter
In-place leases	2.6	$	107,651	$	54,204	$	27,290	$	15,679	$	7,212	$	9,624

Total to be included in depreciation and amortization expense		$	107,651	$	54,204	$	27,290	$	15,679	$	7,212	$	9,624

Above-market lease assets	3.3	$	2,576	$	1,739	$	1,083	$	620	$	288	$	405
Below-market lease liabilities	4.2	(45,803)		(33,630)		(22,013)		(14,710)		(11,812)		(21,915)
Total to be included in rental revenue		$	(43,227)	$	(31,891)	$	(20,930)	$	(14,090)	$	(11,524)	$	(21,510)